PHILIPPINE PORTS AUTHORITY AND ROGELIO A. DAYAN, RUFILO L. TAN, NORA A. BUENVIAJE, FOR THEIR OWN AND IN BEHALF OF SOME 289 PPA OFFICIALS AND SUPERVISORS, PETITIONERS, VS. COMMIS…

Philippine Ports Authority versus Commission on Audit

The Case

This is a petition for certiorari brought by the Philippine Ports Authority and a group of its officials and supervisors against the Commission on Audit. The Ports Authority had paid representation and transportation allowance, which lawyers and auditors call RATA, to two groups of its officials at rates fixed under a letter of implementation issued in 1979. The corporate auditor of the Commission on Audit disallowed those payments upon post-audit, and the Commission itself sustained the disallowance. The case matters because it fixes the meaning of the cut-off date of July 1, 1989 in the compensation standardization law, and it tells us who may keep an allowance granted by an older issuance and who may not.

Procedural History

The payments were disallowed in audit by the corporate auditor of the Commission on Audit, who directed the Ports Authority to settle the disallowance immediately. The Ports Authority brought its case before the Commission on Audit itself. The Commission denied the motion for reconsideration and sustained the disallowance, holding that the earlier letter of implementation had been repealed by the compensation standardization law and that the interpretation of the executive department charged with implementing the law deserves controlling weight. The Ports Authority, joined by all the affected officials whose allowances and allowance differentials were disallowed, then came to the Supreme Court on a petition for certiorari.

Facts

The Philippine Ports Authority is a government-owned and controlled corporation in charge of port administration and operation. In 1976 a presidential decree was issued to standardize the compensation of government officials and employees, including those in government-owned and controlled corporations. Pursuant to that decree, a letter of implementation dated August 31, 1979 authorized standard compensation plans for the infrastructure and utilities group of such corporations, and its Section 5(g) allowed representation and transportation allowances for managerial and supervisory positions, subject to the approval of the Ministry of the Budget, not exceeding 40 percent of basic pay. Acting on this, the Ports Authority issued a memorandum circular in October 1987 granting officials in managerial and supervisory positions an allowance equivalent to 40 percent of basic salary. These officials are the first category.

On August 9, 1989, Congress passed the compensation standardization law, Republic Act No. 6758, which took effect on July 1, 1989 and which applies to all positions in the government, including government-owned and controlled corporations. In October 1989 the Ports Authority issued another circular granting a monthly allowance equivalent to 20 percent of basic salary to section chiefs, terminal supervisors, and senior personnel with salary grades of 17 and above, with a retroactive grant from June 1, 1989. A later circular raised this to 40 percent of standardized salary effective January 1, 1990. These officials are the second category.

Pursuant to these circulars, the Ports Authority paid allowance differentials to the first category officials for the period July 1989 to August 1990 amounting to 826,131.60 pesos, the increase in salary due to standardization having raised the basis of the allowance. It also paid 246,456.14 pesos to the second category officials for the period June 1 to October 30, 1989. The corporate auditor disallowed both payments, relying on memoranda of the Commission on Audit stating that any increase in allowances after June 30, 1989 is irregular and shall be disallowed, and that the letter of implementation was repealed by Section 16 of the standardization law.

Issues

• Whether or not the officials of the Philippine Ports Authority are still entitled to the representation and transportation allowance provided under the letter of implementation, or whether that issuance was repealed by the compensation standardization law.
• Whether or not the second category officials, who were incumbents on July 1, 1989 but were not then receiving the allowance under the letter of implementation, may receive it after that date.
• Whether or not the date July 1, 1989 serves as a cut-off date fixing the maximum amount of the allowance that the first category officials may continue to receive.

Applicable Provisions

Section 12, first paragraph, of Republic Act No. 6758 provides:

SEC. 12. Consolidation of Allowances and Compensation. – All allowances, except for representation and transportation allowances; clothing and laundry allowances; subsistence allowance of marine officers and crew on board government vessels and hospital personnel; hazard pay; allowances of foreign services personnel stationed abroad; and such other additional compensation not otherwise specified herein as may be determined by the DBM, shall be deemed included in the standardized salary rates herein prescribed. Such other additional compensation, whether in cash or in kind, being received by incumbents only as of July 1, 1989 not integrated into the standardized salary rates shall continue to be authorized.

This is the provision on which the whole case turns, because its second sentence decides who may keep the allowance and in what amount.

Section 16 of the same law provides:

SEC. 16. Repeal of Special Salary Laws and Regulations. - All laws, decrees, executive orders, corporate charters, and other issuances or parts thereof, that exempt agencies from the coverage of the System, or that authorize and fix position classification, salaries, pay rates or allowances of specified positions, or groups of officials and employees or of agencies, which are inconsistent with the System, including the proviso under Section 2, and Section 16 of Presidential Decree No. 985 are hereby repealed.

This is the repealing clause that the Commission on Audit invoked against the letter of implementation.

Section 17 of the same law provides:

SEC. 17. Salaries of Incumbents. - Incumbents of positions presently receiving salaries and additional compensation/fringe benefits including those absorbed from local government units and other emoluments, the aggregate of which exceeds the standardized salary rate as herein prescribed, shall continue to receive such excess compensation, which shall be referred to as transition allowance. The transition allowance shall be reduced by the amount of salary adjustment that the incumbent shall receive in the future.

This provision shows the legislature's parallel policy of not diminishing the pay of those already in office when the law took effect.

Ruling

On the first issue, the Court held that the letter of implementation was not entirely repealed. The first sentence of Section 12 expressly excludes representation and transportation allowances from the standardized salary, because they are flexible in nature and are given only to special positions, and because they serve to defray the expenses of an official in the pursuit of his official functions. But the Court held that the second sentence of Section 12 amended the letter of implementation to this extent: the allowance continues to be authorized only if it was being received by incumbents as of July 1, 1989. Congress thereby manifested its intent to gradually phase out the privilege without upsetting its policy of non-diminution of pay.

On the second issue, the Court ruled that only the first category officials are entitled to the continued benefit. The first category officials were incumbents on July 1, 1989 and were actually receiving the allowance on that date. The second category officials were incumbents on that date but were not receiving the allowance then. The letter of implementation did not create a vested right in their favor, because the grant was still discretionary on the part of management; a vested right is one which is absolute, complete and unconditional, to the exercise of which no obstacle exists, and which is immediate and perfect in itself and not dependent upon a contingency. When management finally authorized the grant, it was no longer allowed by the standardization law. The retroactive grant to June 1, 1989 could have had no other purpose than to circumvent Section 12. The Court added that the repeal of the proviso in Section 2 of the earlier presidential decree meant that after July 1, 1989 additional financial incentives such as this allowance may no longer be given by government-owned and controlled corporations, except those authorized to be continued under Section 12.

On the third issue, the Court ruled for the petitioners. The date July 1, 1989 is not a cut-off date with respect to the amount of the allowance. It becomes crucial only to determine that as of that date the officer was an incumbent and was receiving the allowance, for purposes of entitling him to its continued grant. It should not be interpreted as fixing the maximum amount he may receive.

Doctrine

First, representation and transportation allowances are not integrated into the standardized salary rates under Section 12 of Republic Act No. 6758, but the continued grant of such allowances is limited to incumbents who were actually receiving them as of July 1, 1989. Second, the date July 1, 1989 is a qualifying date, not a ceiling: it determines entitlement by reason of incumbency and actual receipt, but it does not freeze the amount at the level received on that date. Third, a grant that remains discretionary on the part of management creates no vested right, so it may be withdrawn or disallowed before it is perfected. Fourth, Section 16 of the law repealed issuances that exempt agencies from the compensation system or that authorize and fix allowances inconsistent with it, so additional financial incentives may no longer be granted by government-owned and controlled corporations after July 1, 1989, save those continued under Section 12.

Disposition

The petition was partly granted: the disallowance of 826,131.60 pesos in allowance differentials to the first category officials was set aside, while the disallowance of 246,456.14 pesos paid to the second category officials was affirmed.

Remember This

Memorize the line that July 1, 1989 is not a cut-off date as to amount but only a qualifying date as to incumbency and actual receipt. Examiners use this case on the non-integration of representation and transportation allowances, on vested rights in discretionary grants, and on repeals by implication in the compensation standardization law.