PHILIPPINE CHARITY SWEEPSTAKES OFFICE (PCSO), REMELIZA JOVITA M. GABUYO, ESTRELLA P. ABASOLO, EDNA M. TEOXON, ROWENA E. VILLESPIN, ERIC D. BASIT, ELA C. PEÑA, ALL PCSO EMPLOYEES…

Philippine Charity Sweepstakes Office versus Commission on Audit

The Case

This is a petition for certiorari under Rule 64 in relation to Rule 65 of the Rules of Court, brought by the Philippine Charity Sweepstakes Office, several of its officers, and its employees in the Camarines Norte Provincial District Office against the Commission on Audit, Commission Proper. The petitioners assail the Commission's resolution affirming notices of disallowance that struck down hazard pay, rice allowance, Christmas bonus, staple food allowance, grocery allowance, educational assistance, anniversary bonus, signing bonus, and revenue performance incentive pay granted under a collective negotiation agreement for calendar year 2009, in the total amount of 2,020,452 pesos and 40 centavos. The case matters because it is the Court's latest word in the long series of PCSO disallowance cases, and it settles two questions every bar candidate must know: whether a belated presidential approval can validate benefits that violate compensation laws, and how liability is apportioned among approving officers and payees who claim good faith.

Procedural History

The Audit Team assigned to the Philippine Charity Sweepstakes Office first issued notices of suspension, which matured into notices of disallowance in February 2011. The Philippine Charity Sweepstakes Office appealed to the Office of the Regional Director of the Commission on Audit Regional Office Number Five. The Regional Director partially granted the appeal, modifying only the disallowance covering the anniversary bonus by reducing it from 125,000 pesos to 110,000 pesos. The case then went to the Commission on Audit, Commission Proper on automatic review under its 2009 Revised Rules of Procedure. The Commission Proper affirmed the Regional Director with further modifications, excusing passive recipients who received the amounts in good faith but holding approving officers solidarily liable. The Philippine Charity Sweepstakes Office moved for reconsideration, submitting a letter of the Executive Secretary as supposed post facto presidential approval. The Commission Proper denied reconsideration in its assailed resolution dated January 28, 2022. Hence this petition for certiorari before the Supreme Court.

Facts

On March 4, 2008, the Philippine Charity Sweepstakes Office and the Sweepstakes Employees Union entered into a collective negotiation agreement valid for three years, authorizing the payment of several economic benefits to employees. In calendar year 2009, these benefits were paid to the individual petitioners, who were union members in the Camarines Norte Provincial District Office.

In 2010, the audit team issued notices of suspension, which in February 2011 became notices of disallowance. Hazard pay was disallowed for failure to submit a certification from the Secretary of National Defense that the area is strife-torn or embattled, as required by the General Appropriations Act of 2009. Rice allowance, staple food allowance, grocery allowance, educational assistance, anniversary and signing bonus, and revenue performance incentive pay were disallowed for failure to submit a favorable review by the Department of Budget and Management and the approval of the President. The Christmas bonus was disallowed because the law authorizes only one month's salary plus a 5,000 peso cash gift, while the Philippine Charity Sweepstakes Office paid the equivalent of three months' salary. The anniversary bonus exceeded the 3,000 peso maximum, and the performance incentive exceeded the 2,500 peso cap.

To defeat the disallowances, the petitioners relied on a letter signed by former Executive Secretary Paquito N. Ochoa, Junior, stating that the Office of the President approves and confirms the grant of benefits prior to the effectivity of Executive Order No. 7. The Commission Proper held that this supposed post facto approval does not validate benefits that violate compensation laws.

Issues

• Whether or not the Commission on Audit gravely abused its discretion in disallowing the payment of the various collective negotiation agreement benefits and allowances.
• Whether or not the letter of the Executive Secretary constitutes a valid post facto presidential approval that validates the disallowed benefits.
• Whether or not the approving and certifying officers may be held solidarily liable despite their claim of good faith.

Applicable Provisions

Section 3 of Rule 58 of the Rules of Court provides:

A preliminary injunction may be granted when the following are established: (a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission or continuance of the act or acts complained of, or in requiring the performance of an act or acts, either for a limited period or perpetually; (b) That the commission, continuance or non-performance of the act or acts complained of during the litigation would probably work injustice to the applicant; or (c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the subject of the action or proceeding, and tending to render the judgment ineffectual.

This governs the petitioners' prayer for a temporary restraining order, which the Court denied for failure to establish entitlement to the relief.

Section 2 of Presidential Decree No. 985, which the petitioners invoked, states:

Notwithstanding a standardized salary system established for all employees, additional financial incentives may be established by government corporation and financial institutions for their employees to be supported fully from their corporate funds and for such technical positions as may be approved by the President in critical government agencies.

The Court noted that this provision itself requires presidential approval, and that it had already been expressly repealed by the Compensation and Position Classification Act of 1989 at the time the benefits were disbursed.

Ruling

On the first issue, the Court held that the disallowance was proper. The benefits violated express provisions of law and administrative rules. Hazard pay required a defense certification that was never submitted. The Christmas bonus exceeded the statutory maximum. The anniversary bonus and performance incentive exceeded the amounts fixed by administrative orders. The Court stressed that the Board's discretion to fix compensation is not absolute and is subject to pertinent civil service and compensation laws under the PCSO charter. The petition was also procedurally defective, having been filed one day late and suffering from a defective verification and lack of an affidavit of service, but the Court relaxed the rules to prevent a miscarriage of justice.

On the second issue, the Court held that the Executive Secretary's letter cannot defeat the disallowances. The letter did not identify which benefits were approved, and it itself directed strict compliance with the moratoria. The Court quoted its earlier ruling:

Where there is an express provision of the law prohibiting the grant of certain benefits, the law must be enforced even if it prejudices certain parties on account of an error committed by public officials in granting the benefit. An executive act shall be valid only when it is not contrary to the laws or the Constitution.

On the third issue, the Court held that approving and certifying officers are liable to the extent of their participation, while payees who received the amounts in good faith are excused from refunding.

Doctrine

First, where an express provision of law prohibits the grant of certain benefits, the law must be enforced even if it prejudices parties on account of an error committed by public officials in granting the benefit. An executive act is valid only when it is not contrary to the laws or the Constitution. Second, a vague, across-the-board presidential approval that does not identify the specific benefits approved cannot be a source of rights and cannot validate disallowed disbursements. Third, the discretion of a government-owned or controlled corporation's board to fix compensation is not absolute; it is subject to pertinent civil service and compensation laws under its charter. Fourth, approving and certifying officers are solidarily liable for the net disallowed amount, but passive recipients who acted in good faith need not refund.

Disposition

The petition was partially granted, the assailed resolution was modified, and the disallowances were affirmed, with approving and certifying officers held solidarily liable while good faith payees were excused from refund.

Remember This

Memorize the line: where the law expressly prohibits a benefit, it must be enforced even if it prejudices parties because of a public official's error, and an executive act contrary to law is void. Examiners use this case to test the limits of a government corporation's fiscal autonomy and the good faith defense in disallowance cases.