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RONALD S. ABRIGO, ANABELLA G.R. No. 253117

S. ALTUNA, RYAN JAMES V.
AYSON, FLORENDO B. BATASIN,
JR., LEONOR C. CLEOFAS, ALL Present:
OF WHOM WERE OFFICERS AND
EMPLOYEES OF METROPOLITAN GESMUNDO, CJ,
WATERWORKS AND SEWERAGE PERLAS-BERNABE,
SYSTEM CORPORATE OFFICE LEONEN,
[MWSS-CO], CAGUIOA,
HERNANDO,
Petitioners, LAZARO-JAVIER,
INTING,
ZALAMEDA,
- versus - LOPEZ, M.,
GAERLAN,
ROSARIO,
COMMISSION ON AUDIT (COA)-
LOPEZ, J.,
COMMISSION PROPER; RUFINA
DIMAAMPAO,
S. LAQUINDANUM, DIRECTOR IV,
MARQUEZ, and
CORPORATE GOVERNMENT
KHO, JR., JJ.
SECTOR CLUSTER 3-PUBLJC
UTILITIES; EYREN MARANAN-
YULDE, IN HER CAPACITY AS
MWSS-CO RESIDENT COA
Promulgated:
AUDITOR; AND ANGELA B.
BULOS, AUDIT TEAM LEADER, March 29, 2022

Respondents.
X------------------------------------

DECISION

ZALAMEDA, J.:

This petition for certiorari1 under Rule 64, in relation to Rule 65, of the
Rules of Court seeks to reverse and set aside the Decision No. 2019-019 2 dated

1
Rollo, pp. 3-49.
2
Id. at 50-54; penned by Chairperson Michael G. Aguinaldo and Commissioners Jose A. Fabia and
Decision 2 G.R. No. 253117

20 February 2019 and Resolution No. 2020-038 3 dated 21 January 2020 of

respondent Commission on Audit (COA) Proper, upholding the disallowance of
the meal allowances granted to officials and employees of the Metropolitan
Waterworks and Sewerage System (MWSS)-Corporate Office (CO) for
calendar years 2012 and 2013 in the aggregate amount of P8,l 73,730.00.

Antecedents

Petitioners are current and former employees and officials of the MWSS-
CO.4 In 2012 and 2013, they approved and/or received varying amounts
representing meal allowances, purportedly granted pursuant to board
resolutions of the MWSS Board of Trustees (MWSS Board). 5

Subsequently, the Audit Team Leader and Supervising Auditor of the

COA issued four notices of disallowance (NDs) against said payments. 6 The
details of the NDs are summarized as follows:

ND No. and Date Particulars Amount

ND No. 14-005-05-(12) Meal allowance paid to P2,142,850.00
dated 30 June 2014 incumbents as of 30 June
1989 for the year 2012
ND No. 14-006-05-(12) Meal aVowance paid to P2,033,200.00
dated 30 June 2014 non-incumbents as of 30
June 1989 ror the year
2012
ND No. 14-007-05-(13) Meal allowance paid to P2,086,800.00
dated 30 June 2014 incumbents as of 30 June
1989 for the year 2013
ND No. 14-008-05-(13) Meal allowance paid to Pl,910,880.00
dated 30 June 2014 non-incumbents as of 30
June 1989 for the year
2013
Total PS,173,730.00

The NDs stated that the payment and increase of meal allowances had no
legal basis. As to the meal allowance given to incumbents as of 30 June 1989,
the COA noted that the amounts paid were in excess of the meal allowance of
P66.00 per month, as authorized in the Corporate Operating Budget (COB)

Roland C. Pondoc.
Id. at 62-63.
4
Id. at 5.
5
Id. at 172-184 (Resolution No. 48-80 dated 06 March 1980, granting a meal allowance of P3 .00 per day
for a maximum of 22 days a month; Resolution No. 187-91 dated 26 September 1991, increasing the
meal allowance to P25.00 per day; Board Resolution No. 140-92 dated 09 July 1992, authorizing the
continued grant of meal allowance of P25.00 per day; and Resolution No. 2007-134 dated 05 July 2007,
approving the Collective Negotiation Agreement, which provides for a meal allowance of Pl50.00 per
day).
6
Id.at77-169.
Decision 3 G.R. No. 253117

approved by the Department of Budget and Management (DBM). 7 Thus, only

P66.00 per month was allowed in audit: As to non-incumbents of positions as
of 30 June 1989, the COA emphasized that they are not entitled to any meal
allowance. The P66.00 meal allowance in the DBM-approved COB was only
for MWSS employees who were incumbents as of 30 June 1989. 8 Hence, the
full amount of the meal allowance granted to non-incumbents was disallowed.

The persons held liable by the COA under the NDs were the payees of
the disallowed amounts and the signatories who authorized the disbursements. 9
Petitioners, totaling 81 current and former MWSS employees 10, were either
passive payees or both recipients and approving/certifying officers.''

Aggrieved, petitioners appealed 12 to the Office of the Cluster Director of

the COA's Corporate Government Sector, Cluster 3 (Public Utilities). They
argued that the MWSS Charter13 vests the MWSS Board of Trustees with the

1
Id. at 30 and 129.
8
· Id. at 105 and 152.
9
Id.at77-169.
10
Id. at 22-25.
11
Id. at 77-169.
12
Id. at 64-76.
13
See Republic Act No. 6234, as amended, Secs. 4 and 13.

Section 4. The Board of Trustees, composition; qualification; appointment; tenure. The

corporate powers and functions of the System shall be vested in and exercised by a Board
of Trustees composed of a Chairman, the General Manager as ex-officio Vice-Chairman
and three members, one of whom shall be nominated by the Labor Union representing the
majority of the rank and file of the employees in the System. They shall possess any one or
a combination of the following qualifications; duly licensed professional of recognized
competence in civil engineering and/or sanitary engineering, business management and
finance, and law, or recognized labor leader within the ranks with sufficient training,
particularly in the field of labor-management relations or corporate practice, all of good
moral character with at least five (5) years of actual and distinguished experience in their
respective fields of expertise.

The Chairman and the three members of the Board shall be appointed by the President of
the Philippines with the consent of the Commission on Appointments. The Chairman and
the three members of the Board shall hold office for a period of three years, except that the
members initially appointed shall serve, as designated in their appointments, one for one
year, one for two years and one for three years: Provided, That, any person chosen to fill a
vacancy shall serve only for the unexpired term of the member whom he succeeds:
Provided, further, That the term of the member nominated by labor maybe terminated
sooner than as above provided if so requested by the nominating union in which case the
President of the Philippines shall appoint a replacement who shall similarly be nominated
by said union.

xxxx

Section 13. Disposition ofincome. The income of the System shall be dispose of according
to the following priorities:

First, to pay its contractual and statutory obligations and to meet its essential current
operating expenses;

Second, to serve at least fifty per cent (50%) of the balance exclusively for the expansion,
development and improvement of the System; and
Decision 4 G.R. No. 253117

requisite power and autonomy to grant employee benefits. 14 Specific to the

meal allowance, its grant preceded the standardization of government salaries
and benefits, as evinced by the Concession Agreements executed by MWSS. 15
In Exhibit "F" of the Concession Agreements, meal allowance was enumerated
as among the existing MWSS fringe benefits, and the Concession Agreements
were approved by the President. 16 Hence, meal allowance should continue to be
granted, lest there be diminution of salaries and benefits. 17 Petitioners further
emphasized that MWSS-CO is exempt from the compensation and position
classification system. 18

Ruling of the COA Cluster Director

In its Decision No. 2016-08 19 dated 29 March 2016, the COA Cluster
Director affirmed the NDs. 20 The COA Cluster Director ruled that the appeal
was filed beyond the reglementary period, but nonetheless passed upon the
merits. It held that the payment of meal allowance to non-incumbents had no
legal basis because there was no prior Presidential approval, as required by
prevailing regulations. 21 The grant of meal allowance in the Concession
Agreement only applies to MWSS employees who were absorbed by the
concessionaire and, thus, are considered private employees. Petitioners, as
government employees, are not similarly situated and are governed by laws
specifically applicable to government personnel. 22

The COA Cluster Director further highlighted that the non-grant of a

meal allowance to non-incumbents does not result in diminution of pay. The
standardized salaries under RA 6758 23 integrated all allowances and benefits. 24

In any case, since there is no legal basis for the grant of the allowance, it
cannot be said that there was any impairment of vested rights. An illegal act
cannot result in a vested right. 25 Bence, pursuant to the principle of solutio
indebiti, the disputed amount shoutd be returned, even assuming that

Third, to allocate the residue enhancing the efficient operation and maintenance of the
System which include increases of administrative expenses or increases or adjustment of
salaries and other benefits of the employees.
14
Rollo, pp. 66-68.
15
Id. at 69-70.
i6 Id.
17
Id.at68.
is Id.
19
Id. at 56-61; penned by Director IV Rufina S. Laquindanum, Commission on Audit, Corporate
Government Sector Cluster 3 - Public Utilities, Quezon City.
20
Id. at 59.
21
Id. at 60.
22 Id.
23
RA 6758 - AN ACT PRESCRJBING A REVISED COMPENSATION AND POSITION
CLASSIFICATION SYSTEM IN THE GOVERNMENT AND FOR OTHER PURPOSES, otherwise
known as the "Compensation and Postion Classification Act of 1989, Approved: August 21, 1989
24
Rollo, p. 60.
25 Id.
Decision 5 G.R. No. 253117

petitioners acted in good faith. 26

Petitioners then elevated the matter to the COA Proper via a petition for
review. 27

Ruling of the COA Proper

In its Decision No. 2019-09 28 dated 20 February 2019, the COA Proper
denied the petition for review and sustained the NDs, thus:

WHEREFORE, premises considered, the Petition for Review is

hereby DENIED for having been filed out of time and for lack of merit.
Accordingly, Commission on Audit Corporate Government Sector-Cluster 3
Decision No, 2016-08 dated March 31, 2016, which affirmed Notice of
Disallowance Nos. 14-005-05-(12), 14-006-05-(12), 14-007-05-(13), and 14-
008-05-(13), all dated June 30, 2014, on the payment to the officials and
employees of Metropolitan Waterworks and Sewerage System of meal
allowance for calendar years 2012 and 2013, in the total amount of
P8,173,730.00, is FINAL and EXECUTORY. 29

The COA Proper ruled that the NDs had become final and executory
for petitioners' failure to file an appeal within the six (6)-month reglementary
period prescribed in Section 48 30 of Presidential Decree No. (PD) 1445. 31
Relatedly, laches had already set in due to petitioners' delayed action. 32

In any case, the COA Proper found that the appeal should still be denied
even if it were to be decided on the merits. The power of the MWSS Board is
not absolute, and must be exercised in accordance with the standards laid down
by law. 33 Pursuant to Section 12 34 RA 6758, the grant of meal allowance is

26
Id. at 61.
27
Id. at 293-303.
28
Supra note 2.
29
Rollo, p. 54.
30
Section 48 of PD 1445, reads:
SECTION 48. Appeal from Decision of Auditors. Any person aggrieved by
the decision of an auditor of any government agency in the settlement of an account or
claim may within six months from receipt of a copy of the decision appeal in writing to
the Commission.
31
ORDAINING AND INSTITUTING A GOVERNMENT AUDITING CODE OF THE PHILIPPINES,
otherwise known - as the "Government Auditing Code of the Philippines."
32
Rollo, p. 52.
33 Id.
34
Section 12 of RA 6758 reads:
SECTION ! 2. Consolidation of Allowances and Compensation. -All aUowances.
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 service personnel stationed abroad;
and such other additional compensation vot 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 l, 1989 not integrated into the standardized salary rates
shall continue to be authorized.
Decision 6 G.R. No. 253117

allowed to be continued only for qualified incumbents. 35 In the absence of the

appropriate authorization, meal allowance may not be granted or increased. 36
Prior to the issuance of the NDs subject of this case, several NDs had already
been issued pertaining to various allowances and incentives granted to MWSS
employees. Given the statements in the COB and the prior NDs on other
benefits, MWSS officials and employees cannot claim good faith. 37

Petitioners moved for reconsideration, 38 but this was denied by the

Commission Proper in Resolution No. 2020-038 39 dated 21 January 2020.

Hence, this petition.

Issues

The focal issue for the Court's resolution is whether the COA Proper
committed grave abuse of discretion in denying petitioners' appeal for having
been filed out of time and for lack of merit.

Before passing upon the substantive issues, We will pass upon the
timeliness of this petition.

Ruling of fhe Court

The petition is partly granted.

The petition was filed out of time;

nevertheless, substantive justice
demands a relaxation of the rules

Section 3,40 Rule 64 of the Rules of Court provides for a thirty (30)-day
period to assail the COA Proper Decision. The filing of a motion for
reconsideration shall interrupt the reglementary period, but the movant shall not
be granted a fresh period of thirty (30) days. Instead, if the motion for
reconsideration is denied, the petition for certiorari must be filed within the

Existing additional compensation of any national government official or

employee paid from local funds of a local government unit shall be absorbed into the basic
salary of said official or employee and shall be paid by the National Government.
35
Rollo, p. 53.
36 Id.
37
Id. at 53-54.
38
Id. at 463-475.
39
Id. at 62-63.
40
Section 3, Rule 64 of the Rules of Court reads:
SECTION 3. Time to File Petition. TI1e 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.
Decision 7 G.R. No. 253117

.
remaining period, which shall not be less than five (5) days in any event.

In this case, petitioners received the COA Proper Decision on 20 March

41
2019. They filed a motion for reconsideration on the 26 th day, or on 15 April
2019. 42 Thus, upon receipt of the COA Resolution on 18 August 2020,
petitioners only had five (5).days, or until 24 August 2020,43 to file the petition
before the Court. However, they only filed the petition on 11 September 2020,
or eighteen ( 18) days late.

Petitioners admit this procedural lapse, but they plead for leniency. They
cite the current pandemic as an excuse, arguing that the restrictions rendered
coordination and collation of documents very difficult.44 They also claim that
they only received the COA Resolution through the MWSS' finance
department, which supposedly added to the delay in the preparation of this
petition.

Admittedly, the reasons proffered by petitioners do not ordinarily

warrant a relaxation of the rules. We have repeatedly emphasized that
procedural rules should be treated with utmost regard and respect, because they
are designed to facilitate the adjudication of cases and de-clog our already
crowded dockets. 45

Nonetheless, where strong considerations of substantive justice are

manifest in the petition, the Court may relax the strict application of the rules of
procedure in the exercise of its legal jurisdiction. 46 The Court has allowed some
meritorious cases to proceed despite inherent procedural defects and lapses.
This is in keeping with the principle that rules of procedure are mere tools
designed to facilitate the attainment of justice, and that strict and rigid
application of rules which should result in technicalities that tend to frustrate
rather than promote substantial justice must always be avoided. 47

The merits of this petition impel Us to resolve the substantive issues

elevated before the Court. The disallowed amount is substantial, and would .
greatly affect the MWSS officers and employees. It would not be judicious to
simply dismiss the petition, seeing that some of the petitioners should be
absolved from liability. Moreover, while the pandemic may not be casually
invoked as an excuse, We are aware that this petition involves 81 petitioners.

41
Rollo, p. 8.
42 Id.
43
The last day of the period, 23 August 2020, fell on a Sunday. Pursuant to Section 1, Rule 22 of the 2019
AMENDMENTS TO THE 1997 RULES OF CIVIL PROCEDURE, petitioners had until the next
working day, 24 August 2020, to file the petition.
44
Rollo, p. 9.
45
The Officers and Employees ofJloilo Provincial Government v. Commission on Audit, G.R. No. 218383,
05 January 2021.
46
Osmefia v. Commission on Audit, 665 Phil. 116 (2011).
47
City of Lapu-Lapu v. Phil. Economic Zone Authority, 748 Phil. 473 (2014), citing Municipality of
Pateros v. Court of Appeals, 607 PhiL 104 (2009).
Decision 8 G.R. No. 253117

Surely, this number resulted in logistical difficulties occasioned by quarantine

restrictions. Taken together, these circumstances move Us to finally settle the
controversy.

For the same reasons, We would pass upon the merits even if the appeals
before the COA Cluster Director and the COA Proper were belatedly filed. 48

Indeed, petitioners filed their appeal beyond the six (6)-month period
prescribed under The 2009 Revised Rules of Procedure of the COA, 49 in
relation to Sections 48 and 51 of PD 1445.50 Nonetheless, We have ruled that
such belated appeal would not preclude Us from reviewing a case on the
merits, where stubborn obedience to the Rules would defeat rather than serve
the ends of justice.51 The Court has the prerogative to relax the rule on finality
of judgments when there are special or compelling circumstances, or when the
case is meritorious. 52

Here, since the rendition of the assailed Decision, jurisp1udence has

taken a trajectory that is more faithful to civil law and administrative law
principles. We have since revisited the rules on return and the basis for
imposing liability on approving/certifying officers. As such, We deem it
prudent to resolve the substantive issues of the case.

Grave abuse of discretion requires proof of capricious and whimsical

exercise of judgment as is equivalent to lack of jurisdiction. Mere reversible
error or abuse of discretion is not enough. The abuse of discretion must be
grave as where the power is exercised in an arbitrary or despotic manner by
reason of passion or personal hostility and must be so patent and gross as to
amount to an evasion of positive duty or to a virtual refusal to perform the duty
enjoined by or to act at all in contemplation of law. 53

In this case, petitioners failed to show that the COA gravely abused its
discretion in affirming the NDs. However, We modify the dates in the NDs and
the liability of the approving/certifying officers enumerated therein, in

48
S'ee id.
49
Rule V, Sec. 4 and Rule VII, Sec. 3.
SECTION 4. When Appeal Taken - An Appeal must be filed within six (6)
months after receipt of the decision appealed from.

SECTION 3.Period of Appeal. The appeal shall be taken within the time
remaining of the six (6) months period under Section 4, Rule V, taking into account the
suspension of the running thereof w1der Section 5 of the same Rule in case of appeals
from the Director's decision, or under Sections 9 and 10 of Rule VI in case of decision of
theASB.
50
Presidential Decree 1445, Sec. 48, supra note 30, and Sec. 51 reads:
SECTION 51. Finality of Decisions of the Commission or Any Auditor. A
decision of the Commission or of any auditor upon any matter within its or his
jurisdiction, if not appealed as herein provided, shall be final and executory.
51
Subic Bay Metropolitan Authority v. Commission on Audit, G.R. No. 230566. 22 January 20191.
52
See Bigler v. People, 782 Phil. 158 (2016).
53
Estalilla v. Commission on Audit, G.R. No. 217448, 10 September 2019.
 Decision 9 G.R. No. 253117

conformance with prevailing jurisprudence.

The COA Proper did not gravely abuse

its discretion in sustaining the
disallowances; the authority of the
MWSS Board is circumscribed by
prevailing laws and regulations, on
salaries and benefits

The arguments raised by petitioners had already been passed upon and
threshed out by the Court in Metropolitan Waterworks and Sewerage System v.
Commission on Audit (MWSS). 54 In said case, the Court ruled that the MWSS is
covered by RA 6758, which repealed all charters exempting agencies from the
coverage of the compensation and position classification system. As such, the
grant of additional benefits by the MWSS Board is an ultra vires act:

COA rightly submits that the grant by the Board of Trustees of the
MWSS of the benefits constituted an ultra vires act. Verily, what is ultra vires
or beyond the power of the MWSS to do must also be ultra vires or beyond
the power of its Board of Trustees to undertake. The powers of the Board of
Trustees, who under the law were authorized to exercise the corporate
powers, were necessarily limited by restrictions imposed by law on the
MWSS itself, considering that Board of Trustees only acted in behalf of the
latter. Upon the effective repeal of the MWSS Charter, the Board of Trustees
could no longer fix salaries, pay rates or allowances of its officials and
employees upon the effectivity ofR.A. No. 6758. 55

The Court further held that, under Section 12 of RA 6758, all allowances
are deemed included in the standardized salary, unless excluded by law or by a
DBM issuance:

SECTION 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 service 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.

Existing additional compensation of any national government official

or employee paid from local funds of a local government unit shall be
absorbed into the basic salary of said official or employee and shall be paid by
the National Government.

Thus, the benefits granted to MWSS employees were not excluded from,

54
821 Phil. 117.
55
Id. at 132.
Decision 10 G.R. No. 253117

but integrated into, the standardized salaries. The receipt of the disallowed
benefits and allowances amounted to double compensation. The requirement of
prior Presidential approval was also reiterated in MWSS, where We emphasized
that additional allowances and other fringe benefits could only be granted to
government employees upon approval of the President, applying PD 985, as
amended by PD 1597. 56

As to petitioners' reliance on the Concession Agreements, both as a

source of a right and to satisfy the requirement of prior Presidential approval,
this argument had also been rebuffed by the Court in }vfWSS, thus:

The MWSS relies primarily on Exhibit F of the Concession

Agreement captioned "Existing MWSS Fringe Benefits" to support the Board
of Trustees' grant of the questioned allowances. It must be noted, however,
that it was not the 1997 Concession Agreement that authorized the release or
grant of the allowances, as borne by the records, but the resolutions of the
Board of Trustees, which were done contrary to the express mandate of R.A.
No. 6758. We cannot subscribe to the M\VSS's argument that the allowances
already bore the imprimatur of the Office of the President through Secretary
Vigilar of the DPWH on the basis of the latter's signing of the Concession
Agreement because such part of .the agreement contravened R.A. No. 6758;
hence, the same was invalid. Under Section 16.13 of the Concession
Agreement, any invalid or unenforceable portion or provision should be
deemed severed from the agreement. Accordingly, Exhibit F of the
Concession Agreement, being contrary to R.A. No. 6758, could not be made a
source of any right or authority to release the precluded allowances.
Moreover, the law is clear that it should be DBM, not the DPWH, that must
determine the other additional compensation not specified under the law. 57

All told, petitioners in this case may no longer invoke the MWSS
Charter58 and the Concession Agreements in challenging the NDs. As it stands,
MWSS officials and employees are covered by RA 6758, PD 985, 59 PD 1597,
and their implementing regulations.

As such, following Section 12 of RA 6758, allowances that have not

been integrated into the standardized salary are allowed to be continued only
for incumbents of positions as of O1 July 1989 who were actually receiving the
allowances as of such date. 60 This is consistent with the policy of non-
diminution of pay adopted by the legislature to protect the interest of
employees who were already receiving certain allowances when the law was
enacted. 61 Upon the effectivity of RA 6758, additional allowances may be
granted or increased only upon the approval of the President. 62

56
FURTHER RATIONALIZING THE SYSTEM OF COMPENSATION AND POSITION
CLASSIFICATION IN THE NATIONAL GOVERNMENT. Dated: 11 June 1978.
57
Supra note 54, page 135-136.
58
See Republic Act No. 6234, Secs. 4 (c) and 13.
59
PD No. 985 or the Budgetary Reform Decree on Compensation and Position Classification of 1976.
60
Metropolitan Waterworks and Sewerage System v. Commission on Audit, supra.
61
Hagonoy Water District v. Commission on Audit, G.R. No. 247228, 02 March 2021.
62
Presidential Decree 1597, Sec. 5.
Decision 11 G.R. No. 253117

In this case, meal allowance is one of the non-integrated benefits allowed

to be continuously granted to qualified incumbents. 63 Thus, officers and
employees incumbent as of 0 1 July 1989, and who were actually receiving
meal allowance as of said date, may continue receiving the allowance. Letter of
Implementation No. 97 fixed the amount of meal allowance at P3.00 per
working day, while MWSS Resolution No. 48-80 imposed a cap of 22 days a
month. 64 Hence, for incumbents as of 01 July 1989, the maximum meal
allowance is P66.00 per month. This amount may only be increased upon
approval of the President. Relatedly, in the absence of Presidential approval,
meal allowance may not be given to non-incumbents as of 01 July 1989.

Applying the foregoing, the COA correctly disallowed the amount

exceeding P66.00 granted to qualified incumbents. Similarly, the disallowance
of the benefit to non-incumbents is warranted. Both were not preceded by the
requisite Presidential approval and, thus., lacked legal basis.

On this score, there is a need to modify the qualifying date specified in

the NDs. The NDs used 30 June 1989 as the date for reckoning incumbency.
However, as clarified by the Court in MWSS, We have consistently prescribed
01 July 1989 as the qualifying date to detennine whether or not an employee
was an incumbent entitled to the continued grant of an allowance. This is in
keeping with the express text of RA 6758 and its date of effectivity. 65

The use of30 June 1989, instead of0l July 1989, is a plain error that the
Court may correct, notwithstanding its non-assignment as an error. 66 The
modification would not affect the substance of the controversy, as both the
COA Proper and COA Cluster Director relied on Section 12 of RA 6758 in
resolving the petition. 67 The correction would merely rectify the ambiguity in
the dates used and make the dates consistent with the express text of the cited
law.

Thus, it is hereby clarified that ftie reckoning date for the incumbency
requirement in the NDs should be 01 July 1989, and not 30 June 1989. All

SECTION 5. Allowances, Honoraria, and Other Fringe Benefits. Allowances,

honoraria and other fringe benefits which may be granted to government employees,
whether payable by their respective offices or by other agencies of government, shall be
subject to the approval of the President upon recommendation of the Commissioner of the
Budget. For this purpose, the Budget Commission shall review on a continuing basis and
shall prepare, for the consideration and approval of the President, policies and levels of
allowances and other fringe benefits applicable to government personnel, including
honoraria or other forms of compensation for participation in projects which are
authorized to pay additional compensation.
63
DBM Corporate Compensation Circular No. 10, Sec. 5.5; See also Public Estates Authority v.
Commission on Audit, 541 PhiL 412 (2007); Metropolitan Waterworks and Sewerage System v.
Commission on Audit, supra.
64
Rollo, pp. 172-173.
65
See also Hagonoy Water District v. Commission on Audit, supra.
66
See C.F Sharp & Co., Inc. v. Northwest Airlines, Inc., 431 Phil. 11 (2002).
67
Rollo, pp. 53 and 58; See Locsin v. Paredes, 63 Phil. 87 (1936).
Decision 12 G.R. No. 253117

other unaffected portions of the ND stand. The COA should revise the NDs to
reflect the correct cut-off date and make the necessary changes on the
disallowed payments and amounts, if any.

The payees are required to return the

amounts they received pursuant to the
principle of solutio indebiti

In MWSS, the Court absolved both the payee-recipients and the MWSS
officials from returning the disallowed amounts. The Court ruled that the
payees received the benefits in good faith, while the MWSS officials merely
implemented the board resolutions approving the allowances.

Notwithstanding the similarities between this case and MWSS, We only

deem instructive the Court's previous disquisition on the propriety of the NDs.
We cannot arrive at a similar conclusion regarding petitioners' liability to
return. MWSS involved a different set of allowances and NDs. Accordingly, the
actions of the approving/certifying officers, as well as the possible bases of
their good faith, vary. Also, the civil liability of petitioners in MWSS was
adjudged under a different framework. As mentioned, jurisprudence had since
evolved to clarify the rules on return.

Specifically, in Madera v. Commission on Audit (Madera), 68 the Court

harmonized conflicting rulings on the liability to return disallowed amounts
(Madera Rules), thus:

1 If a Notice of Disallowance is set aside by the Court, no return shall

be required from any of the persons held liable therein.

2. If a Notice of Disallowance is upheld, the rules on return are as

follows:

a. Approving and certifying officers who acted in good faith, in

regular performance of official functions, and with the
diligence of a good father of the family are not civilly liable to
return consistent with Section 38 of the Administrative Code
of 1987.

b. Approving and certifying officers who are clearly shown to

have acted in bad faith, malice, or gross negligence are,
pursuant to Section 43 of the Administrative Code of 1987,
solidarily liable to return only the net disallowed amount
which, as discussed herein, excludes amounts excused under
the following sections 2c and 2d.

c. Recipients whether approving or certifying officers or

mere passive recipients are liable to return the disallowed
amounts respectively received by them, unless they are able to

68
G.R. No. 244128, 08 September.2020.
Decision 13 G.R. No. 253117

show that the amounts they received were genuinely given in

consideration of services rendered.
d. The Court may likewise excuse the return of recipients based
on undue prejudice, social justice considerations, and
other bona fide exceptions as it may determine on a case to
case basis.

In Abellanosa v. Commission on Audit, 69 the Court further clarified the

requisites to be excused from return, as provided in Rule 2 (c) of the Madera
Rules:

(a) the personnel incentive or benefit has proper basis in law but is only
disallowed due to irregularities that are merely procedural in nature;
and

(b) the personnel incentive or benefit must have a clear, direct, and
reasonable connection to the actual performance of the payee-
recipient's official work and functions for which the benefit or
incentive was intended as further compensation.

Hence, regardless of their good faith, the payee-recipients, including the

certifying/approving officers who also received the meal allowance, are
individually liable for the disallowed amounts they respectively received. This
is pursuant to the principle of solutio indebiti, which imposes an obligation to
return what has been received in error. 70 · ·· ·

None of the exceptions in Rules 2 (c) and 2 (d) are present in this case.
The grant of the meal allowance to those not entitled thereto had no legal basis.
The defect in payment was not merely procedural. Hence, refund cannot be
excused under Rule 2 (c). ·

Refund cannot also be excused under Rule 2 (d). Unlike in Madera

where the exception in Rule 2 ( d) was applied, the disallowed amounts were
not meant to aid the employees amidst an extraordinary and unique
circumstance, similar to the onslaught of Typhoon Yolanda. No compelling
humanitarian considerations exist in this case. Indeed, the exception in Rule 2
(d) should only be applied in highly exceptional circumstances, lest the Madera
Rules be diluted into insignificance. As there are no grounds to excuse the
return of the disallowed amounts, the payee-recipients should return the
amounts they respectively received.

Those who only certified on · the

completeness of supporting documents.
and the availability of funds are
excused from solidary liability; the rest
of the approving and certifying qfficers

69
G.R. No. 185806, 17 November 2020.
70
Philippine Health Insurance Corp. v. Commission on Audit, G.R. No. 222129, 02 February 2021.
Decision 14 G.R. No. 253117

are solidarity liable for the disallowed

amounts

The approving at1d ce11ifying officers in the NDs were classified into
four (4): (a) those who certified that the expenses/advances are necessary,
lawful, and incurred .under direct supervision; (b) those who certified that the
supporting documents are complete and proper and that cash is available; (c)
those who approved the payments; and (d) those who approved the COB, or the
MWSS Board. 71 MWSS officers and employees falling under (a), (c)/':and (d)
are solidarily liable . for the disallowed amounts, while those whose only
participation pertained to (b) are absolved from liability.

We emphasize that, notwithstanding board resolutions authorizing the

grant of meal allowance, approving and certifying officers may still be held
solidarily liable for the disallowed amounts. Petitioners cannot simply seek
refuge in the board resolutions authorizing the payments. While the power to
approve the grant of allowances is indeed vested in the MWSS Board, 72
petitioners are nevertheless part of the disbursement process. Thus, they are
still considered approving and cert1fying officers for return purposes. This was
emphasized by Associate Justice Inting· in his Concurring Opinion in Madera,
where he classified approving/certifying officers according to their authority:
(i) the authority to direct or instruct the payment of a disbursement per se; (ii)
the authority to act on these instructions/directives and approve documents to
effect payment thereof (i.e., vouchers, checks, etc.); and (iii) the authority to
certify that funds are available for the disbursement and that the allotment
therefor may be charged accordingly. 73

The MWSS Board falls under the first category, while petitioners herein
are in the second and third categories. In several cases, 74 We held liable those
who signed off on the disallowed disbursements, despite board resolutions or
ordinances authorizing the grant of allowances and benefits. These cases show
that other persons who participated in the disbursement process are considered
approving and certifying officers under the law, even if the authority to approve
allowances is vested on a board or sanggunian.

Nonetheless, the liability of these officers should be based on the extent

of their certifications and their specific participation. 75 The basis of the

71
Rollo,pp. 101,128, 151,and 169.
72
See Republic Act No. 6234, Sec. 4.
73
See Concurring Opinion of J. Inting in Madera le Commission on Audit, supra.
74
Small Business Corp.· v. Commission ·on Audit, G .R. No. 251178, 27 April 2021; The Officers and
Employees of Iloi/o Provincial Government v. Commission on Audit, G.R. No. 218383, 05 January
2021; Paguio v. Commission on Audit, G.R. No. 223547, 27 April 2021; Philippine Charity
Sweepstakes Office v. Pulido-Tan, 785 Phil. 266 (2016).
75
See Celeste v. Commission on Audit, G.R. No. 237843, 15 June 2021; Madera v. Commission on Audit,
supra; Sec. 16. L2 of COA Circular No. 006-09: "Public officers who certify as to the necessity, legality
and availability of fund5 or adequacy of documents shall be liable according to their respective
certifications." · ··
Decision 15 G.R. No. 253117

disallowances should also be looked into to pinpoint the specific basis for
liability.

In Celeste v. Commission on Audit, 76 the Court ruled that those

performing ministerial duties may be excused from the solidary liability to
return. Specifically, the ·. duty to certify the availability of funds and the
completeness of signatures and supporting documents prior to payment is
merely ministerial. There is no room to refuse to perform these duties if the
documents were indeed complete and cash was available. The Court ruled,
thus:

Hence, insofar as the disallowances in this case are anchored on the

illegality of granting CNAI to managerial employees and not on the
availability of funds nor adeq1;1acy of documents during the subject
periods, Buted and De Leon acted in good faith and cannot be held liable for
the amounts disallowed. 77 •

Similarly, in this case, the basis for the disallowance is the illegality of
granting meal allowance, and not the unavailability of funds or the inadequacy
of supporting documents. Hence, officers who fall under (b ), i.e., those who
certified that the supporting documents are complete and proper and that cash
is available, may be excused from returning the specific payments they
certified.

Meanwhile, those who fall under (a), (c), and (d) are solidarily liable.
These officers ·either certified that the disbursements are lawful, or approved
the payments. Under (d) is the MWSS Board, which authorized the grant of
meal allowance through board resolutions and prepared the COB. Before
certifying that the payment is lawful and approving the release of funds, they
should have ascertained the legal basis for the disbursement. Given the nature
of their functions, these officers are expected to know the relevant rules and
regulations. They should have ensured that the pertinent approval, particularly
that from the President, through the DBM, is first secured.

The COA correctly ruled that these approving and certifying officials did
not act in good faith. As noted by the COA, the MWSS officials had already
been apprised of the· limits of the MWSS Board's authority to approve the
benefit. Yet, they still continued to grant the meal allowance.

Telling is the text of one of the board resolutions being cited by

petitioners as basis for the grant. This board resolution was issued in 1992
following an increase in the meal allowance from P3.00 to P25.00 per day, the
appropriation for which was disallowed by the Office of the President in
MWSS' 1992 COB, thus:

--------
76 Celeste v. Commission on Audit, supra.
77
Emphasis in the original.
Decision 16 G.R. No. 253117

WHEREAS, the MWSS Board of Trustees approved the meal

allowance increase to P25 per day under Board Resolution No. 187-91 dated
September 26, 1991 for officials and employees hired before October 31,
1989;

WHEREAS, in its approval of the CY 1992 Corporate Operating

Budget of the MWSS, the Office of the President upon the
recommendation of the Department of Budget and Management (DBM)
disallowed a portion of the appropriation for the increase in meal
allowance amounting to P16.07 million for lack of legal basis;

XJ\1X

WHEREAS, the fourteen (14) heads of the IUG-GOCCs signed a

letter to DBM requesting authority to implement a maximum of P25 per day ·
meal allowance subject to availability of funds;

WHEREAS, in. a meeting with the MWSS-COA Auditor, 90 days

is given as a period within which the approval of the DBM must be
sought, meanwhile, the benefit may be given due course considering the
reasonableness of the amount as compared to the P50 per day of the
PAGCOR;

NOW THEREFORE IT IS RESOLVED~ AS .IT IS HEREBY

RESOLVED, that the implementation of the P25 per day meal allowance
be continued effective October 1, 1991 subject to post-audit and refund if
later on found not in order by higher authorities. 78

The board resolution itself shows that petitioners continued the payment
of meal allowance, knowing that it has questionable legal basis and may be
disapproved again. It was not shown tl}at the requisite approval was obtained.
The payments continued beyond the specified 90-day period, and persisted for
more than ten (10) years. It is no surprise then, that the DBM excluded anew
provisions for meal allowance in MWSS' 2012 COB for lack of legal basis. 79
Despite DBM's action on the 2012 COB, which came in January 2013, 80
petitioners continu~d to. grant meal allowances for the rest of 2013.

We have consistently held that palpable disregard of laws, prevailing

jurisprudence, and other applicable directives amounts to gross negligence,
which betrays the presumption of good faith and regularity in the performance
of official functions enjoyed by public officers. 81 Petitioners' actions manifestly
show gross ignorance, if not willful violation of pertinent rules. Sheer reliance
upon a board resolution does not satisfy the standard of good faith and
diligence required by law. 82 This is especially the case when the very board
resolution relied upon reveals the impropriety of the benefits given.

78
Rollo, p. 175; emphasis supplied.
79
Id.at186
80
Id. at 187. ·
81
Paguio v. Commission o,n Audit, G.R. No. 27,3547, n April 2021.
8
' Hagonoy Water Distr~iol v. Commission on Audit, G.R No. 247228, 02 March 2021.
Decision 17 G.R. No. 253117

As such, the COA correctly imposed solidary liability for the disallowed
amounts. We reiterate, however, that only those falling under (a), (c), and (d)
should be held solidarily - liable: · (a) those who certified that the
expenses/advances are necessary, lawful, and incurred under direct supervision;
(c) those who approved the payments; and (d) the MWSS Board. Those under
(b ), whose certifications . pertained ·to the completeness of supporting
documents and the availability of funds, are absolved from liability.

In payments where the officer under (b) also made certifications under
(a), or also approved the payment under (c), the officer shall still be held liable
for their participation under (a) and/or (c). Otherwise put, the absolution shall
be applied to those whose only participation in the specific payment falls under
(b).

WHEREFORE, the petition is PARTLY GRANTED. The Decision

No. 2019-09 dated 20 February 2019 and Resolution No. 2020-038 dated 21
January 2020 of the Commission on Audit Proper is AFFIRMED with
MODIFICATIONS, in that:

(1) For purposes of determining incumbency, the cut-off date used in Notice
of Disallowance Nos. 14-005-05-(12), 14-006-05-(12), 14-007-05-(13),
and 14-008-05-(13) should be MODIFIED from 30 June 1989 to 01
July 1989, as provided under Section 12 of Republic Act No. 6758; and

(2) Officers who only certified the completeness of supporting documents

and the availability of funds, or those classified as (b) under the Notices
of Disallowance, are EXONERATED from their solidary liability to
return the disallowed amounts. AU 0th.er approving/certifying officers, or
those classified as ( a), (c), and (d) under the Notices of Disallowance,
are solidarily liable for the disallowed amounts. All passive recipients,
including the approving/certifying officers who had received the
disallowed amounts in their capacity as payees, are liable only for the
amounts they received.

The Commission on Audit is DIRECTED to determine the final list of

disallowed amounts and persons liable based on the abovementioned
guidelines.

SO ORDERED.
Decision 18 G.R. No. 253117

WE CONCUR:

-~
. £AS-BERNABE
Associate Justice

N S. CAGillOA R~~Oo
Associate Justice

AM/4~~-JAVIER HEN
Associate Justice

Associate Justice

RICA JJIOSE~PEZ
Associate Justice

'

Associate Justice
J~1:;~
u::~ciate Justice

~KH:o~
Associate Justic: "'·~""· ~
Decision 19 G.R. No. 253117

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that

the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Court.