Source: http://lawlibrary.chanrobles.com/index.php?option=com_content&view=article&id=53067:gr-185001-2009&catid=1522&Itemid=566
Timestamp: 2019-04-26 12:05:21+00:00

Document:
RONNIE H. LUMAYNA, ROMEO O. CHULANA, HELEN A. BONHAON, PETER G. LAHINA, JR., JUANITO O. LICHNACHAN, JR., SAMMY C. CHANG-AGAN, BONIFACIO L. BAICHON, REYNALDO B. UCHAYAN, JOHN L. MARTIN, AUGUSTA C. PANITO, ROSENDO P. BONGYO, JR., KLARISA MAE C. CHAWANA, Petitioners, v. COMMISSION ON AUDIT, Respondent.
Assailed in this Petition for Certiorari under Rule 64 in relation to Rule 65 of the Rules of Court is the Decision No. 2005-0711 dated 29 December 2005 of the Commission on Audit (COA) affirming the Notice of Disallowance2 of the 5% salary increase of the municipal personnel of the Municipality of Mayoyao, Ifugao covering the period 15 February to 30 September 2002, in the amount of P895,891.50, and requiring petitioners to refund the same. Also assailed is the COA Decision No. 2007-0403 dated 25 October 2007 denying the Motion for Reconsideration.
On 15 June 2001, the Department of Budget and Management (DBM) issued Local Budget Circular No. 744 (LBC No. 74), authorizing the grant of a maximum of 5% salary adjustment to personnel in the Local Government Units (LGUs) effective 1 July 2001, pursuant to Republic Act No. 91375 dated 8 June 2001.
On 12 July 2002, DBM issued Local Budget Circular No. 7512 (LBC No. 75) providing guidelines on personal services limitation, pursuant to Section 325(a) of the Local Government Code of 1991 (LGC).
On 16 December 2002, the Sangguniang Bayan through Resolution No. 144, s. 2002, approved the 2003 Annual Municipal Budget stated in Appropriation Ordinance No. 03.13 This was reviewed by the Sangguniang Panlalawigan and approved on 10 February 2003 via Resolution No. 2003-808.14 The Sangguniang Panlalawigan, however, disallowed the 5% salary increase and the re-alignment of funds pursuant to Resolution No. 94, s. 2002, of the Sangguniang Bayan on the ground that the re-alignment is not sufficient in form to implement a salary increase.
On 9 June 2003, the Sangguniang Bayan enacted Resolution No. 73, s. 2003,15 earnestly requesting the Sangguniang Panlalawigan to reconsider its Resolution.16 Finding good faith on the part of the officials of the municipality, the Sangguniang Panlalawigan in its Resolution No. 2004-1185 reconsidered its earlier position. Thus, the Sangguniang Panlalawigan allowed the adoption of a first class salary schedule and the 5% salary increase of the Municipality of Mayoyao, Ifugao.
Petitioners requested a reconsideration, which was denied on 5 August 2003 by the RLAO-COA-CAR.17 Thus, petitioners filed a Notice of Appeal before the Director, LAO-Local of COA but it was denied on 10 November 2003 in Decision No. 2003-104.
Hence, petitioners filed a Petition for Review before respondent COA assailing LAO-Local Decision No. 2003-104.
After a careful evaluation, this Commission answers in the negative subject to the extended discussions hereunder.
Anent the first assignment of error, the same has been judiciously passed upon in LAO-Local Decision No. 2003-104. While the Municipality of Mayoyao may grant salary increases pursuant to LBC No. 74, such grant should comply with the limitations provided by law, specifically Section 325 (a) of R.A. No. 7160. There is no doubt that in the grant of the 5% salary increase to the officials and employees of the Municipality of Mayoyao, the limitation for PS in the annual budget of said Municipality had been exceeded. In fact, in a recomputation made Ms. Virginia B. Farro, Provincial Budget Officer of Ifugao, as embodied in her letter dated July 04, 2003, it was revealed that the Annual Budget of the Municipality exceeded the PS limit by P3,944,568.05. Furthermore, Mr. Julian L. Pacificador, Jr., Regional Director, DBM-CAR, in his letter dated December 3, 3003 asserted that the grant of the increase through the adoption of higher salary class schedule is not included in the list of items and activities whereby PS limitation may be waived under LBC No. 75. It must also be noted that the Municipality's budget adopted the salary rates under LBC No. 69 and not the salary rates under LBC No. 74.
Anent the second assignment of error, the same will not suffice to over-turn the other grounds for the audit disallowance. The fact remains that the grant of the 5% salary increase contravened the limitation of the law as explicitly provided under item (a) of section 325 of R.A. No. 7160.
Anent the third assignment of error, while the Sanggguniang Panlalawigan of Ifugao, in its resolution No. 2002-556, has declared operative the 2002 Annual Budget of Mayoyao, the review of said Sanggunian was only limited to the provisions stated in the said budget which contained, among others, provisions for the funding of the 17 newly created positions and not the salary increases. Thus, the declaration of the Sangguniang Panlalawigan of Ifugao that the 2002 annual budget was operative did not include the grant of the 5% salary increase because the same was not actually contained in the said budget but in SB Resolution No. 66, series of 2002.
1. RESOLUTION NO. 66, S. 2002 ADOPTING A 5% INCREASE IN THE SALARY OF THE PERSONNEL OF LGU MAYOYAO PURSUANT TO DBM LBC 74, AND RESOLUTION NO. 94, S. 2002 PROVIDING THE FUND TO IMPLEMENT THE FORMER ARE VALID EXERCISES OF LOCAL LEGISLATIVE PREROGATIVE BY THE SANGGUNIANG BAYAN OF MAYOYAO, IFUGAO. THERE IS SUFFICIENT PROOF THAT THE BUDGET OF THE MUNICIPALITY OF MAYOYAO FOR 2002 DID NOT EXCEED THE PS LIMITATIONS FOR THAT PARTICULAR YEAR. IN THE SAME MANNER, THE REALIGNMENT OF FUNDS PURSUANT TO RESOLUTION NO. 94, S. 2002 DID NOT CREATE ANY INCREASE IN THE PERSONAL SERVICES ALLOCATION OF THE AFORESAID MUNICIPALITY FOR THAT PARTICULAR YEAR BECAUSE THE REALIGNMENT PERTAINS TO A REALIGNMENT OF AN EXISTING PERSONAL SERVICES FUND PARTICULARLY THE AMOUNT ORIGINALLY INTENDED FOR THE SEVENTEEN POSITIONS WHICH WERE VACATED AND/OR ABOLISHED, TO FUND THE SALARY INCREASE WHICH IN ITSELF IS A PERSONAL SERVICE EXPENDITURE. THE HONORABLE COMMISSION ON AUDIT, THEREFORE, GRAVELY ABUSED ITS DISCRETION WHEN IT HELD THAT THE REALIGNMENT PURSUANT TO RESOLUTION NO. 94, S. 2002 CAUSED THE LGU OF MAYOYAO TO EXCEED THE PS LIMITATIONS FOR 2002 AS PRESCRIBED BY LAW AND CONSEQUENTLY DECLARING AS INVALID RESOLUTION NO. 66 S. 2002 OF THE SANGGUNIANG BAYAN OF MAYOYAO, IFUGAO.
2. THE PERSONAL SERVICES ALLOCATION FOR THE MUNICIPALITY OF MAYOYAO, IFUGAO FOR FY 2002 WAS COMPUTED IN ACCORDANCE WITH DBM LBC 74 IN RELATION TO DBM LBC 69 WHICH WERE THE CIRCULARS IN EFFECT AT THE TIME THE BUDGET OF THE LGU FOR FY 2002 WAS REVIEWED, APPROVED AND DECLARED OPERATIVE BY THE SANGGUNIANG PANLALAWIGAN OF THE PROVINCE OF IFUGAO THROUGH RESOLUTION NO. 2002-556. SOON THEREAFTER DBM LBC 75 WAS ISSUED WITH A CLEAR EFFECTIVITY CLAUSE EXEMPTING FROM ITS OPERATION BUDGETS WHICH HAVE ALREADY BEEN REVIEWED PRIOR TO ITS ISSUANCE. NOTICE OF DISALLOWANCE (ND) NO. 03-006 DATED MAY 16, 2003 IS PREMISED ON A RECOMPUTATION OF THE ALLOWABLE PS LIMITATION OF THE LGU BASED ON RATES STATED IN DBM LBC 75 CONTRARY TO THE CLEAR LANGUAGE OF ITS EFFECTIVITY CLAUSE. THE HONORABLE COMMISSION, THEREFORE, GRAVELY ABUSED ITS DISCRETION WHEN IT UPHELD THE NOTICE OF DISALLOWANCE (ND) NO. 03-007 WHICH DIRECTED THE HEREIN PETITIONERS TO REFUND THE AMOUNT DISALLOWED THEREIN.
The foregoing boils down to the core issue of whether the COA committed grave abuse of discretion in affirming the disallowance of the amount of P895,891.50, representing the 5% salary increase of the personnel of the municipality of Mayoyao for the period 15 February to 30 September 2002, and in ordering petitioners to refund the same.
We first dispense with the procedural issue of whether the petition was timely filed.
Petitioners' contention has merit. Records show that COA gave due course to the Motion for Reconsideration without stating in its Decision No. 2007-04026 that it was filed out of time. For this reason, we find that the issue of whether the petitioners timely filed the Motion for Reconsideration has become moot.
Going now to the merits of the case, petitioners contend that Resolution Nos. 66 and 94, s. 2002, are valid exercise of legislative prerogative in accordance with DBM LBC No. 74, which gave them the authority to grant a maximum of 5% salary adjustment to personnel in the LGU effective 1 July 2001. Petitioners cite as basis Resolution No. 2002-556 of the Sangguniang Panlalawigan which declared as operative the 2002 Annual Budget of the Municipality of Mayoyao, Ifugao on 10 June 2002.
Petitioners also claim that the amount allocated in the 2002 municipal budget for personal services is within the allowable limits prescribed by law. In declaring that the municipality exceeded the personal services limitation set by law, respondent COA based its finding on a computation using the rates prescribed in LBC No. 75, and not LBC No. 74, in relation to LBC No. 69, on which the municipality based its computation. Petitioners further explain that when the municipality enacted Resolution No. 94, s. 2002, re-aligning the amount appropriated for the 17 newly created positions to the 5% salary increase of the municipal personnel, it did so with the understanding that the 17 newly created positions were vacated and/or abolished. Thus, the re-alignment of the aforesaid amount was done without decreasing the whole amount originally earmarked for personal services.
Claiming good faith, petitioners insist that Resolution No. 66, s. 2002 was enacted on 2 July 2002, while LBC No. 75 was issued by DBM on 12 July 2002 and was received by them at a much later date; that Notice of Disallowance No. 03-006 was issued only on 16 May 2003, after the municipality had already implemented the 5% salary increase pursuant to Resolution Nos. 66 and 94, s. 2002; and that the Sangguniang Panlalawigan recognized the good faith of the municipality when it enacted Resolution No. 2004-1185 where it reconsidered its earlier Resolution No. 2003-808.
We PARTIALLY GRANT the petition.
We find that the COA correctly affirmed the disallowance of the amount of P895,891.50.
However, we find that petitioners should not be ordered to refund the disallowed amount because they acted in good faith.
In Abanilla v. Commission on Audit,33 the Board of Directors of the Metropolitan Cebu Water District (MCWD) issued several resolutions giving benefits and privileges to its personnel which included hospitalization privileges, monetization of leave credits, Christmas bonus, and longevity allowance. MCWD likewise entered into a collective bargaining agreement (CBA) with the employees' union providing for benefits, such as cash advances, 13th month pay, mid-year bonus, Christmas bonus, vacation and leave credits, hospitalization, medicare, uniform privileges and water allowance.
However, the COA disallowed the amount of P12,221,120.86 representing hospitalization benefits, mid-year bonus, 13th month pay, Christmas bonus and longevity pay on the ground that the compensation package of MCWD personnel may no longer be subject of a CBA, as its officers and employees were covered by the Civil Service laws, and not by the Labor Code.
While we sustain the disallowance of the above benefits by respondent COA, however, we find that the MCWD affected personnel who received the above mentioned benefits and privileges acted in good faith under the honest belief that the CBA authorized such payment. Consequently, they need not refund them.
"Considering, however, that all the parties here acted in good faith, we cannot countenance the refund of subject incentive benefits for the year 1992, which amounts the petitioners have already received. Indeed, no indicia of bad faith can be detected under the attendant facts and circumstances. The officials and chiefs of offices concerned disbursed such incentive benefits in the honest belief that the amounts given were due to the recipients and the latter accept the same with gratitude, confident that they richly deserve such benefits.
Consequently, all agencies that authorized the payment of productivity incentive benefits for the year 1992 in excess of P1,000.00 were directed to immediately cause the return/refund of the excess amount. Thus, respondents therein caused the deduction, from petitioners' salaries or allowances, of the amounts needed to cover the alleged overpayments.
Untenable is petitioners' contention that the herein respondents be held personally responsible for the refund in question. Absent a showing of bad faith or malice, public officers are not personally liable for damages resulting from the performance of official duties.
Every public official is entitled to the presumption of good faith in the discharge of official duties. Absent any showing of bad faith and malice, there is likewise a presumption of regularity in the performance of official duties.
In upholding the constitutionality of AO 268 and AO 29, the Court reiterates the well-entrenched doctrine that "in interpreting statutes, that which will avoid a finding of unconstitutionality is to be preferred."
Furthermore, granting arguendo that the municipality's budget adopted the incorrect salary rates, this error or mistake was not in any way indicative of bad faith. Under prevailing jurisprudence, mistakes committed by a public officer are not actionable, absent a clear showing that he was motivated by malice or gross negligence amounting to bad faith. It does not simply connote bad moral judgment or negligence. Rather, there must be some dishonest purpose or some moral obliquity and conscious doing of a wrong, a breach of a sworn duty through some motive or intent, or ill will. It partakes of the nature of fraud and contemplates a state of mind affirmatively operating with furtive design or some motive of self-interest or ill will for ulterior purposes.40 As we see it, the disbursement of the 5% salary increase was done in good faith. Accordingly, petitioners need not refund the disallowed disbursement in the amount of P895,891.50.
WHEREFORE, the instant Petition is PARTIALLY GRANTED. The Decision of the Commission on Audit No. 2005-071 dated 29 December 2005 and its Decision No. 2007-040 dated 25 October 2007 affirming the disallowance of the 5% salary increase of the municipal personnel of Mayoyao, Ifugao, covering the period 15 February to 30 September 2002 in the amount of P895,891.50, are AFFIRMED with MODIFICATION that petitioners need not refund the said disallowed amount of P895,891.50.
** Acting Chief Justice per Special Order No. 706 dated September 17, 2009.
2 Annex "K", id. at 54.
5 An Act Appropriating The Sum of Ten Billion Nine Hundred Million Pesos (P10,900,000,000.00) As Supplemental Appropriation For FY 2001 And For Other Purposes.
8 See Resolution No. 2002-556; id. at 40.
10 This includes the P1,590,376.00 appropriated for the 17 newly created positions and 5% salary increase of all officials and employees of the Municipality of Mayoyao, Ifugao.
21 Id. at 3-63, with Annexes.
Time to file petition. - The petition shall be filed within thirty (30) days from notice of the judgment or final order or resolution sought to be reviewed. The filing of a motion for new trial or reconsideration of said judgment or final order or resolution, if allowed under the procedural rules of the Commission concerned, shall interrupt the period herein fixed. If the motion is denied, the aggrieved party may file the petition within the remaining period, but which shall not be less than five (5) days in any event, reckoned from notice of denial.
(a) The total appropriations, whether annual or supplemental, for personal services of a local government unit for one (1) fiscal year shall not exceed forty-five percent (45%) in the case of the first to third class provinces, cities, and municipalities, and fifty-five percent (55%) in the case of fourth class or lower, of the total annual income from regular sources realized in the next preceding fiscal year. The appropriations for salaries, wages, representation and transportation allowances of officials and employees of the public utilities and economic enterprises owned, operated, and maintained by the local government unit concerned shall not be included in the annual budget or in the computation of the maximum amount of personal services. The appropriations for the personal services of such economic enterprises shall be charged to their respective budgets.
31 Ocampo v. Commission on Elections, G.R. NOS. 136282 &137470, February 15, 2000, 325 SCRA 636, 645.
32 VMC Rural Electric Service Cooperative, Inc. v. Court of Appeals, G.R. No. 153144, October 16, 2006, 504 SCRA 336, 350.
33 G.R. No. 142347, August 25, 2005, 468 SCRA 87.
35 G.R. NOS. 109406, 110642, 111494, 112056 & 119597, September 11, 1998, 295 SCRA 366.
37 De Jesus v. Commission on Audit, G.R. No. 149154, 40, June 10, 2003, 403 SCRA 666; Querubin v. Regional Cluster Director, Legal and Adjudication Office, COA Regional Office VI, Pavia, Iloilo City, G.R. No. 159299, July 7, 2004, 433 SCRA 769; Kapisanan ng mga Manggagawa sa Government Service Insurance System (KMG) v. Commission on Audit, G.R. No. 150769, August 31, 2004, 437 SCRA 371; Home Development Mutual Fund v. Commission on Audit, G.R. No. 157001, October 19, 2004, 440 SCRA 643; Philippine Ports Authority v. Commission on Audit, G.R. No. 159200, February 16, 2006, 482 SCRA 490; and Barbo v. Commission on Audit, G.R. No. 157542, October 10, 2008.
40 Presidential Ad Hoc Fact-Finding Committee on Behest Loans v. Desierto, G.R. No. 145184, March 14, 2008, 548 SCRA 295.

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