ALELI C. ALMADOVAR, GENERAL MANAGER ISAWAD, ISABELA CITY, BASILAN PROVINCE, PETITIONER, VS. CHAIRPERSON MA. GRACIA M. PULIDO-TAN, COMMISSION ON AUDIT, RESPONDENT.

Almadovar versus Commission on Audit

The Case

This is a petition for certiorari under Rule 64 of the Revised Rules of Court, filed by Aleli Almadovar, the General Manager of the Isabela Water District, against the Commission on Audit. She asks the Supreme Court to reverse the Commission's decision and resolution, which affirmed notices of disallowance issued against several disbursements of the water district. The case matters because it settles two questions every local water district must confront: whether the Salary Standardization Law covers the compensation of a general manager, and when the erring officer must refund a disallowed amount. It is, in short, a case about the limits of a water district's fiscal autonomy and the reach of the good faith defense.

Procedural History

The audit trail began with the Audit Team Leader of the Isabela Water District, who issued the notices of disallowance in January 2007. Almadovar appealed to the Regional Cluster Director, and the appeal was indorsed to the Commission on Audit Regional Office. In October 2010, the Regional Office affirmed the notices with modification, reducing one disallowed amount after finding that part of the private lawyer's retainer was properly covered. The case was then automatically elevated for review to the Commission on Audit proper, which in December 2011 affirmed the Regional Office. Almadovar's motion for reconsideration was denied by the Commission en banc in April 2014. She then came to the Supreme Court by petition for certiorari under Rule 64, the special remedy for judgments of constitutional commissions.

Facts

The Isabela Water District is a government owned or controlled corporation created under the Provincial Water Utilities Act of 1973, as amended by Republic Act Number 9286. Almadovar served as its General Manager. In January 2007, the audit team leader issued four notices of disallowance covering payments made in 2005: an increase in the General Manager's salary from 20,823 pesos to 35,574 pesos per month, a legal retainer's fee paid to a private lawyer, an honorarium paid to a lawyer of the Office of the Government Corporate Counsel, and representation and transportation allowances paid to the General Manager above the authorized rate.

Almadovar insisted that the salary increase and the allowances were authorized by Republic Act Number 9286, and that the engagements of the two lawyers followed the procedure set by law. The Regional Office disagreed in part, holding that the compensation of general managers of local water districts remained subject to the Salary Standardization Law, and that the allowances exceeded the allowable rates. It reduced the disallowed retainer's fee because the private lawyer's services from November to December 2005 were covered by a contract duly approved by the Government Corporate Counsel and concurred in by the Commission on Audit.

The Commission on Audit affirmed. It stressed that before a private lawyer may be hired, the written conformity of the Government Corporate Counsel and the written concurrence of the Commission must first be secured, and that this requirement applies to renewals as well. Almadovar moved for reconsideration, was denied, and brought the matter to the Supreme Court.

Issues

• Whether or not the disbursements covered by the notices of disallowance were improper.
• Whether or not, in the event the disbursements were improper, Almadovar is liable to refund the same.

Applicable Provisions

Section 23 of Presidential Decree Number 198, as amended, defines the powers of the board of directors of a water district. The Court quotes it in describing the board's authority over the general manager:

Section 23 was amended to emphasize that the general manager shall not be removed from office, except for cause and after due process.

This provision is the anchor of Almadovar's argument that the board may freely fix her salary, and the Court's answer is that the power to fix compensation is not the power to exempt from the Salary Standardization Law.

Republic Act Number 6758, the Salary Standardization Law, is the statute the Court applies to the salary increase. The Court restates its rule of coverage in these words:

The Salary Standardization Law applies to all government positions, including those in government-owned or controlled corporations, without qualification. The exception to this rule is when the government-owned or controlled corporation's charter specifically exempts the corporation from the coverage of the Salary Standardization Law.

Because the water district's charter contains no such exemption clause, the salary increase was correctly disallowed.

Commission on Audit Circular Number 95-011 governs the engagement of private lawyers, and the Court states its requirement thus:

In the event that the need for the legal services of a private lawyer cannot be avoided or is justified under extraordinary or exceptional circumstances, the written conformity and acquiescence of the OGCC and the written concurrence of the COA shall first be secured.

This is the provision that dooms the payments to the private lawyer for the period lacking the Commission's written concurrence.

Ruling

On the first issue, the Court held that the disbursements were improper. On the salary increase, it ruled that Republic Act Number 9286 did not repeal the Salary Standardization Law, expressly or impliedly, because repeal by implication is not favored and is resorted to only upon irreconcilable inconsistency. The board of directors has full discretion in fixing the general manager's salary, but that discretion is always subject to the limits under the Salary Standardization Law unless the charter exempts the water district. On the allowances, the Court found that the amounts exceeded the rates fixed by the applicable budget circulars.

On the lawyers' fees, the Court held that each renewal of a retainership contract constituted a new hiring, so each renewal required the written concurrence of the Commission on Audit. The retainer for the period from November 2004 lacked that concurrence, and the letter of the Government Corporate Counsel itself reminded the water district to seek it. As for the honorarium paid to the government corporate counsel's lawyer, his authority to serve the water district was issued only in July 2006, so he had no authority when the services were rendered and was not entitled to the honorarium. The Court rejected the plea of unjust enrichment, because the notices directed the responsible officers, not the lawyers, to refund.

On the second issue, the Court distinguished among the disbursements. It excused Almadovar from refunding the salary increase, quoting its earlier ruling in the Mendoza case:

Pursuant to de Jesus v. Commission on Audit, petitioner Mendoza received the disallowed salaries in good faith. He need not refund the disallowed amount.

The Court found the same good faith here: the increase was computed under a scale prepared by the association of water districts, which itself erroneously opined that the later law repealed the Salary Standardization Law, and no categorical pronouncement on the coverage question had yet been issued when the disbursement was made. Good faith, however, could not be appreciated for the other disbursements. Almadovar knowingly approved the payments to the two lawyers despite the absence of the required approvals, and her belated cessation of the excessive allowances did not show good faith, because the allowable rates were already fixed by the circulars at the time. Finally, the Court denied injunctive relief, because the right sought to be protected must be clear and unmistakable, and here the disbursements had no legal basis.

Doctrine

First, the Salary Standardization Law applies to all government positions, including those in government owned or controlled corporations, without qualification. The only exception is a charter that specifically exempts the corporation. The power of a water district's board to fix the general manager's compensation is real, but it must be exercised within the limits of the Salary Standardization Law.

Second, a later law does not impliedly repeal an earlier one unless the two are irreconcilably inconsistent, because repeal by implication is not favored. Republic Act Number 9286 and the Salary Standardization Law can stand together.

Third, the engagement of a private lawyer by a government owned or controlled corporation requires, before the engagement, the written conformity of the Government Corporate Counsel and the written concurrence of the Commission on Audit. Each renewal of a retainership is a new hiring and requires the same concurrence.

Fourth, the good faith defense excuses refund of a disallowed salary where the officer had no hand in fixing the amount and no categorical ruling yet declared the law applicable. Good faith does not excuse disbursements knowingly made without the required approvals, nor compliance ignored where the governing circulars already fixed the limits.

Disposition

The petition was denied in the main, and the decision of the Commission on Audit was affirmed with modification, absolving Almadovar from refunding the amount paid as an increase in her salary.

Remember This

Memorize this line: the Salary Standardization Law covers local water districts unless the charter expressly exempts them, and the board's power to fix the general manager's salary is always subject to its limits. Examiners use this case to test implied repeal, the requisites for engaging private counsel in a government owned or controlled corporation, and the good faith exception to refund under the Mendoza doctrine.