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Sirs/Mesdames:

3Republic of tbe Jlbtlippines ~upremc QCourt

Jfilanila

ENBANC

NOTICE

Please take notice that the Court en bane issued a Resolution dated SEPTEMBER 15, 2020 which reads as follows:

"G.R. No. 224288 (Land Bank of the Philippines v. Commission on Audit and Rodulfo J. Ariesga, Director IV, Corporate Government Sector, Cluster I - Banking and Credit)

x----------------------------------------------------------------------------------------x

RESOLUTION

This Petition for Certiorari1 under Rule 64 of the Rules of Court seeks to nullify and set aside the Decision No. 2015-45 I 2 dated December 29, 2015 of the Commission on Audit (COA), Commission Proper, in COA Case No. 214-337, which dismissed the Land Bank of the Philippines' (LBP) petition for review, and thereby affirming Notice of Disallowance (ND) No. 2010-001-(06) dated October 12, 2010 (First ND) and ND No. GDT-2011-001-(10) dated December 15, 2011 (Second ND).

Factual Antecedents

On October 12, 2010, the First ND was issued, disallowing in audit the payment of additional compensation to the Ex-Officio Chairman and Members (ex-officio. and regular) of the Board of Directors of the LBP in 2006, which includes fringe benefits other than per di ems received on board meetings, namely: gasoline allowances; Business Development Expenses (BDE); Extraordinary and Nliscellaneous Expense Fund (EMEF); honoraria; mid-year bonus; one~time financia~assistance; Christmas Gift Package; and travelling expenses, charged to the Fringe Benefits-Directors, Representation and Entertainment, Travelling Expenses and Directors' Fees accounts, in the aggregate amount of PS,155,273.69. The recipients and respective amounts -~ received were enumerated therein as follows: 3 l

Rollo, pp. 3-27 2 Id. at 28-31.

Id. at 5-7.

Notice of Resolution - 2 - G.R. No. 224288 September 15, 2020

Name Position/Designation Total Amount Margarito B. Teves Chairman, Ex-Officio-DOF P650,000.00 Albert C. Balingit Regular Member-Private P704,455.07

i Sector Romeo B. Taruc Regular Member-DAR P835,378.52 Ananias F. Loza Regular Member-DAR P762,639.05 George J. Regalado Regular Member-Private P499,984.58

Sector Domingo F. Panganiban Member, Ex-Officio-DA P771,923.64 Arthur C. Yap Member, Ex-Officio-DA Pl00,514.24 Patricia A. Sto. Tomas Member, Ex-Officio-DOLE P276,978.59 Nasser C. Pangandaman Member, Ex-Officio-DLR P553,40O.00

Total PS,155,273.69

According to the· ND, the foregoing are expenses in violation of Republic Act (R.A.) ·No. 3844, as amended by R.A. No. 7907, particularly Section 5 thereof, which states:

SEC. 5. Sec. 86 of the same Act relating to the Membership of its Board of Directors, as amended, is hereby further amended to read as follows:

Sec. 86. The Board of Directors; Membership; Per Diem. - The affairs and business of the Bank shall be directed and its property managed and preserve (sic) by a Board of Directors consisting of nine (9) members XXX.

xxxx

The Chainnan and the members· of the Board shall receive a per. diem of One Thousand Five Hundred Pesos (Pl,500) for each session of the Board attended but in no case not to exceed Seven Thousand Five Hundred (P7,500) a month..

The grant of said benefits and allowances further violates Section 3 ( c) of the Office of the President (OP) Administrative Order (A.O.) No. 103 dated August 31, 2004, which states:

SEC 3. All NGAs, SU Cs, GOCCs, GFis and OGCEs, whether exempt from t.½.e Salary Standardization Law or not, are hereby directed to:

xxxx

(c) For other non full-time officials and employees, including members of their govemmg boards, t

•.

Notice of Resolution - 3 - ,G.R. No. 224288 September 15, 2020

committees, and commissions: (i) suspend the grant of new or additional benefits, such as but not limited to per diems, honoraria, housing and miscellaneous allowances, or car plans; and (ii) in the case of those receiving per diems, honoraria and other fringe benefits in excess of Twenty Thousand Pesos (P20,000.00) per month, reduce the combined total of said per diems, honoraria and benefits to a maximum of Twenty Thousand Pesos (P20,0Q0.00) per month.

On December 15, 2011, the Seco_nd ND was issued, disallowing in audit LBP funds disbursed for the payment of Extraordinary Miscellaneous and Emergency (EME) expenses in the aggregate amount of Pl,037,228.05 and honoraria in the aggregate amount of P219,000.00 in favor of the exofficio Members of the Board of Directors for the calendar year 2010 for being irregular expenses under COA Circular No. 85-55-A dated September 8, 1985. The specific. amounts disallowed and the corresponding recipient board member are as follows: 4

Name I Position/ Mother· Benefit Amount Designation Agency

Proceso J. Alcala Member DA EME P60,000.00 Rosalinda D. Baldoz Member DOLE EME P60,000.00 Bernie G. Fondevilla Member DA EME Pl20,000.00 Nasser C. Member DAR EME P210,000.00 Pangandaman Cesar V. Purisima Chairman DOF EME P14,999.25 Mariani to D. Roque l\,1ember DOLE EME P210,000.00 Margarito V. Teves Chairman DOF EME P270,000.00 Arthur C. Yap Member DA EME P90,000.00 Virgilio De Los Reyes Member DAR EME P2,228.80 Jeremias N. Paul, Jr. Alternate DOF Honorarium P93,000.00 Antonio A. Fleta Alternate DA Honorarium P9,000.00 Anthony N. Parungao Alternate DAR Honorarium P21,000.00 Ma. Patricia Rualo- Alternate DAR Honorarium P42,000.00 Belo Romeo C. Lagman Alternate DOLE Honorarium P42,000.00 Eduardo C. Nolasco Alternate DA Honorarium Pl2,000.00

Total Pl,256,228.05.

LBP alleged in this Petition that it received the original copies of the First ND and the Second .ND on October 13, 2011 and December 19, 2011, respectively.5 J

4

5 Id. at 7-8. Id. at 4-5.

Notice of Resolution -4- G.R. No. 224288 September 15, 2020

Separate appeals were then filed to question said NDs before the Office of the Director for Corporate Government Sector (CGS), Cluster 1 -Banking and Credit. For the First ND, appeal was filed on April 5, 2012, while for the Second ND, appeal was filed on June 5, 2012.6

In separate Answers dated July 10, 2012 and July 16, 2012, the COA Supervising Auditor averred that LBP's Charter fixed the limit of the compensation of its Members of the Board of Directors. Hence, any form of compensation beyond what was provided therein is considered irregular.7

In a Joint Decision dated May 27, 2014, or Decision No. 2014-02, the CGS Director affirmed the questioned NDs, ruling as follows:

6

7

From the above cited provisions of law and jurisprudence[,] it is clear that the arguments propounded by the [LBP] are without merit. LBP' s Charter does not authorize its Board of Directors to grant to themselves additional compensation, on the contrary, it had limited the same to [per diems] with the further limitation that the same should not exceed P7,500.00 a month.

Although COA Circular No. 2006-001 dated 03 January 2006 provides for the guidelines on disbursement of EME and other similar expenses in GOCCs/government financial institutions (GFI) and their subsidiarie[s], this, however, does not in any way may be the basis for granting the same. It is merely a guide or rule applicable in instances where the respective governing boards of an agency are legally authorized to receive EMEs and similar benefits, which as discussed earlier is not in the case ofLBP.

The prohibition against the receipt of the aforesaid benefits is especially true in this instant case considering that most of the recipients are holding ex-officio positions or are alternates of the former.

In COA Decision No. 2010-048 dated 23 March 2010, the Commission had the opportunity to deliberate on the application of the aforesaid COA Circular. It was ruled therein that:

With regard to the grant of EMEs to the exofficio member of the Monetary Board, the same is deemed irregular. While EMEs are not compensation or remuneration, but are official expenses incurred in the performance of official functions for which the official is to be reimbursed, it must be stressed that the ex-officio member of the x x x Board is not an organic or line personnel thereof. In fact, the ex-officio membership• of the cabinet member in the x x x does ~

I Id. at 5. Id. at 8 and 216.


not comprise "another office" but rather annexed to or is required by the primary functions of his or her official position as cabinet member. Of equal significance, too, is that the ex-officio member of the x x x Board already receives separate appropriations under the [Government Appropriations Act] GAA for EMEs, he or she being a member of the cabinet. Being such, it is highly irregular that the said ex-officio member of the x x x Board, who performs only additional duties by virtue of his or her primary functions, will be provided with additional EMEs, which, in this case, appear much higher than his or her appropriations for the same expenses under the GAA as a cabinet member. Such additional compensation is prohibited by the Constitution. In the case of the National Amnesty Commission [v.J COA, G.R. No. 156982, 08 September 2004, the SC declared that "in the attendance of the x x x meetings, the ex-officio members · were not entitled to, and were in fact prohibited from, collecting extra compensation x x x. 8

The CGS Director, therefore ruled:

WHEREFORE, premises considered, ND No. 2010-001(06) and ND No. GDT-2011-001-(10) [are] hereby AFFIRMED.9

LBP averred that it received this Joint Decision on June 19, 2014. 10

Not satisfied with the Director's disposition, the LBP filed a petition for review before the Commission Proper. According to LBP, it filed said petition for review on July 3, 2014.

In a Decision dated December 29, 2015, the Commission Proper dismissed LBP's petition for review for being filed out of time, thereby declaring the questioned NDs final and executory .. The dispositive portion thereof reads:

8

9

WHEREFORE, premises considered, the petition for review of Ms. Gilda E. Pico, President and Chief Executive Officer, [ et al.], Land Bank of the Philippines, Manila is hereby DISMISSED for having been filed out of time. Accordingly, Commission on Audit Corporate Government Sector-I Decision No. 2014-02 dated May 27, 2014, affirming Notice of Disallowance Nos. 2010-001-(06) dated October 12, 2010 and GDT-2011-001-(10) dated December l 15, 2011, is FINAL AND EXECUTORY. 11

Id. at217-219. Id. at 219.

10 Id. at 5. 11 Id. at 30.


LBP averred that it received said unfavorable Decision on April 14, 2016. 12 Hence, it filed the instant Petition for Certiorari to question the same before the Court on May 16, 2016.13

Issue

Did the COA Commission Proper gravely abuse its discretion m dismissing LBP's petition for review for being filed out of time?

The Court's Ruling

The Petition has no merit.

Time and again, the Court has been guided by the following principles in resolving cases involving the COA' s exercise of its general auditing authority. The COA is an independent constitutional body mandated to safeguard the proper use of the government's, and ultimately, the people's property. 14 In the discharge of such mandate, Article IX-D, Section 2(2) thereof vests upon the COA the widest latitude by granting it the "exclusive authority, subject to the limitations in this Article, to define the scope of its audit and examination, establish the techniques and methods· required therefor, and promulgate accounting and auditing rules and regulations, including those for the prevention and disallowance of irregular, unnecessary, excessive, extravagant, or unconscionable expenditures or uses of government funds and properties." 15

Mindful of such constitutional mandate, as well as the COA' s special knowledge and expertise over matters falling under its jurisdiction, it has been the Court's general policy to sustain its decisions and accord not only respect, but finality thereto, as long as they are supported by substantial evidence and not tainted with unfairness, arbitrariness that would amount to grave abuse of discretion. 16

Verily, it is only when the COA acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, that the Court entertains a petition questioning its rulings. For this purpose, grave abuse of discretion means that there is on the part of COA an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law or to act in contemplation oflaw, such as when the assailed I 12 Id. at 5. 13 Id. 14 1987 CONSTITUTION, Article IX-D, Section 2(1) provides that the COA has "the power, authority, and

duty to examine, audit, and settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and property, owned or held in tmst by, or pertaining to, the Government, or any of its subdivisions, agencies, or instrumentalities, including government-owned or controlled corporations with original charters, and on a post-audit basis[.]"

15 Paraiso-Aban v. Commission on Audit, 777 Phil. 730, 736 (2016). 16 Delos Santos v. Commission on Audit, 716 Phil. 322,333 (2013).


decision or resolution is not based on law and the evidence but on caprice, whim and despotism. 17

In such petitions, the burden is on the part of the party ascribing grave abuse of discretion upon the public respondent, which issued the questioned order, to prove not only reversible error but grave abuse of discretion. It is important to emphasize that mere abuse of discretion is not sufficient - it must be grave. 18

Having these principles in mind, we now proceed to resolve.

The Petition for Review before the Commission Proper was filed beyond the reglementary period.

The relevant provisions of the COA 2009 Revised Rules of Procedure are as follows:

RULEY PROCEEDINGS BEFORE THE DIRECTOR

Section 4. When Appeal Taken. - An Appeal must be filed within six (6) months after receipt of the decision appealed from.

Section 5. Interruption of Time to Appeal. - The receipt by the Director of the Appeal Memorandum shall stop the running of the period to appeal which shall resume to run upon receipt by the appellant of the Director's decision.

RULE VII PETITION FOR REVIEW TO THE COMMISSION PROPER

Section 3. Period to 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 under Section 5 of the same Rule in case of appeals from the Director's decision, x x x.

In this case, the LBP claims that it received the First ND on October 13, 2011. It then filed its appeal to the CGS Director on April 5, 2012, which interrupted the running of the period to appeal. In effect, from the receipt of the First ND to the filing of the appeal to the director, LBP already consumed 175 days of the 180-day appeal period. Consequently, LBP was left with only five days to file a petition for review to the Commission

11 Id. 18 Metropolitan Waterworks and Sewerage System v. Commission on Audit, 821 Phil. 117 (2017).

d I v


Proper. LBP also claims that it received the CGS Director's Joint Decision on June 19, 2014, which is when the running of the period to file an appeal resumed. LBP filed its petition for review before the Commission Proper on July 3, 2014 or 14 days after its receipt of the Director's Joint Decision. Simply put, the petition for review was filed beyond the five days left for LBP to file an appeal to the Commission Proper.

The LBP avers that it received the Second ND on December 19, 2011. It filed its appeal to the CGS Director on June 5, 2012. In effect, LBP already consumed 169 days of the 180-day appeal period, and was thus left with 11 days to file an appeal to the Commission Proper. Again, LBP filed its petition for review before the Commission proper on July 3, 2014 or 14 days after its receipt of the Director's Joint Decision on June 19, 2014. The petition for review was, thus, filed beyond the 11 days left for LBP to file an appeal to the Commission Proper.

In both cases, the petition for review was clearly filed beyond the 180-day period to file an appeal. The COA Commission Proper, therefore, did not err, much less commit grave abuse of discretion, in dismissing LBP's appeal on the ground that the six-month period within which to file an appeal from the NDs had already lapsed when LBP filed its petition for review on July 3, 2014.

Neither did the COA Commission Proper err nor did it gravely abuse its discretion in declaring that the NDs had already attained finality upon the lapse of said period without filing an appeal. In no ambiguous language did Section 51 of Presidential Decree No. 1445 state that "[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."

Well-settled is the rule that the perfection of an appeal in the manner and within the period permitted by law is not only mandatory but also jurisdictional, and the failure to perfect the appeal renders the questioned judgment final and executory. This is in line with the doctrine of immutability of judgment under which a decision that has acquired finality becomes immutable and unalterable, and may no longer be modified in any respect, even if the modification is meant to correct erroneous conclusions of fact and law. 19 This basic doctrine of finality of judgment is grounded upon the fundamental principle of public policy and sound practice that, at the risk of occasional error, the judgment of courts and quasi-judicial agencies must become final at sonie definite date fixed by law.20 f

I

19 Orlina v. Ventura, G.R. No. 227033, December 3, 2018. 20 Team Pacific Corporation v. Daza, 690 Phil. 427, .441 (2012).


To be sure, the Court is not unaware that, like any other rule, the doctrine of immutability of judgment has exceptions, 21 but none of them applies in this case.

At any rate, the Court sustains the finding of the COA in disallowing the payment of additional compensation/benefits to the LBP Board of Directors.

The subject disbursements were properly disallowed

. The LBP, in the main, posits that the disallowed amounts do not pertlfin to "adtlitional compensation." Rather, they are in the nature of "reimbursable expenses" incurred by the Board of Directors in the exercise of th;,eir usual duties and the ordinary functions of their office. The LBP then proceeded to justify such grant of allowances by the "importance and complexity of the present functions of the LBP Board of Directors," in relation to the "unique and specialized functions of the LBP as a government fina~cial institution (GFI)." The LBP went further to point out its success in 2006 when it attained a net income of P3 .5 Billion, which is 6% higher than its targeted net income , of P3 .3 Billion, and then argues that such accomplishment was brought about by the effective performance of its Board of Directors of their functions, which "more than justifies a reasonable adjustment in the compensation/benefits that they should receive."

The Court is not persuaded.

At the outset, it is important to point out that the LBP Board of Directors is composed of regular members or those appointed to the position, and ex-officio members or those designated to serve by virtue of their office.22 In the First ND, five out of the nine recipients of the disallowed benefits are ex-officio members, while only four are regular members. On the other hand, in the Second ND, all of the 15 recipients of the disallowed benefits are ex-officio members.

The difference in. the nature of the position held is significant. Being a regular member means being selected by the proper authority to exercise the functions of an office. On the other hand, being designated as an exofficio member connotes merely the imposition of additional duties, upon a person already in the public service by virtue of an earlier appointment or election. The ex-officio position being actually and in legal contemplation i 21

22

(1) the correction of clerical errors; (2) the so-called nunc pro tune entries which cause no prejudice to any party; (3) void judgments; and (4) whenever circumstances transpire after the finality of the decision rendering its execution unjust and inequitable." Philippine Health Insurance Corporation v. Commission on Audit, G.R.. No. 222710, September 10, 2019. R.A. No. 7907, Section 5.


part of the principal office, it follows that the official concerned has no right to receive any other form of additional compensation or benefits for his services in the ex-officio position. To rule otherwise would run counter with the constitutional prohibitions against holding multiple positions in the government and receiving additional or double compensation.23

This issue is not novel. In the recent case of Philhealth v. Commission on Audit,24 the Court, citing Civil Liberties Union v. The Executive Secretary,25 explained:

The reason is that these services are already paid for and covered by the compensation attached to his principal office. It should be obvious that if, say, the Secretary of Finance attends a meeting of the Monetary Board as an ex-officio member thereof, he is actually and in legal contemplation performing the primary function of his principal office in defining policy in monetary and banking matters, which come under the jurisdiction of his department. For such attendance, therefore, he is not entitled to collect any extra compensation, whether it be in the form of a per diem or an honorarium or an allowance, or some other such euphemism. By whatever name it is designated, such additional compensation is prohibited by the Constitution. (Emphasis supplied)

Undoubtedly, the disallowance of the fringe benefits in the First ND and the El\1E and honoraria in the Second ND received by the Members of the LBP Board of Directors serving in an ex-officio capacity is warranted. To be sure, these members were already receiving allowances from their respective agencies in the form of EME and as appropriated in the GAA. It would be improper, therefore, to allow them to doubly receive emoluments from their respective principal agencies and the LBP.

The disallowance of benefits, or "reimbursable expenses" as referred to by the LBP, received by the regular members as stated in the First ND is likewise proper.

The LBP Charter - R.A. No. 3844, as amended by R.A. No. 7907, does not authorize the grant of additional allowances to the Board of Directors beyond per diems. Specifically, Section 86 of R.A. No. 3844, as amended, provides for the entitlement of the Chairman and the Members of the Board of Directors to a per diem of Pl,500.00 for each Board meeting attended, but the same must not exceed P7,500.00 every month. Significantly, the LBP Charter provides for nothing more than per diems, to which regular/appointive Members of the Board of Directors are entitled· to ~

for each Board session. /

23 Civil Liberties Union v. The Executive Secretary, 272 Phil. 14 7 (1991 ). 24 G.R. 222838, September 4, 2018. 25 Supra note 23.


The Court has been consistent in emphatically explaining that the power of governing Boards of Government Owned and Controlled Corporation ( GOCCs) and GFis, or any other corporation created by a special law to adopt a compensation and benefit scheme is limited to the specifications indicated in the legislative act.26 The above-cited provision is clear enough and needs no interpretation. Expressio unius est exclusion alterius - a basic rule of construction that means the express mention of one thing excludes all others. Likewise relevant is the Latin maxim casus omissus pro omisso habendus est or a thing omitted must have been omitted intentionally.27 Indeed, had legislature intended to give the LBP the authority to grant allowances to its Board of Directors other than per diems, then it would have expressly provided it. Thus, as Section 86 of the LBP Charter, as amended, only mentions per diems as the Board's compensation, hence, all other compensations, in whatever form or whatever they may .be referred to as, are excluded.28

Neither will the alleged success in profits justify the. adjustment of compensation/benefits received by the LBP Board of Directors. For this matter, it is imperative to take significance of the purpose of the LBP's creation, which again, can be gleaned from its Charter. The LBP was

. created as a body corporate and government instrumentality to provide timely and adequate financial support in all phases involved in the execution of needed agrarian reform. 29 It was created specifically for the purpose of providing adequate financial support to the agrarian reform program as well as to grant loans to farmers' cooperative/associations, and to finance and/or guarantee the acquisition of farm lots transferred to tenant-farmers. Its clientele consists primarily of agrarian reform beneficiaries, landowners affected by agrarian reform and LBP bond-holders.30 As such, its funds should rightly so be primarily devoted to its primary purpose of fulfilling its social mandate and to maintain its financial viability, rather than to the grant of additional emoluments to its Board of Directors. 31

The LBP also maintains that COA Circular No. 2006-00 l dated January 3, 2006, authorizes the grant of EMEs to the governing boards of GOCCs and GFis, considering that said Circular provides guidelines t? said governing Boards on the disbursement of El\1Es and other similar expenses.

Further, the LBP contends that while the authority of its Board of Directors to grant to themselves reasonable compensation/benefits to cover their related expenses in the performance of their duties is not expressly

26 See Phi/health v. Commission on Audit, supra note 24. TI Id. . 28 Id. and Development Bank of the Philippines v. Commission on Audit, G.R. No. 221706, March 13,

2018. 29 Land Bank of the Philippines v. Commission on Audit, 268 Phil. 162, 166 (1990); Section 74, R.A.

No. 3844, as amended. 30 Id. at 167. 31 See Phi/health v. Commission on Audit, supra note 24; and Social Security System v. Commission on

Audit, 794 Phil. 387 (2016).


granted in its Charter, such authority is• inherent and/or incidental or necessary in itself as the governing body of a corporate entity. For the LBP, the Board's act of granting additional compensation or benefits to themselves is "in direct and immediate furtherance of its business, fairly incident to the express powers and reasonably necessary to their exercise."

It is improper to argue that COA Circular No. 2006-001 authorizes the governing Boards of GOCCs/GFis to grant additional compensation and/or benefits to themselves, merely because said circular provides guidelines on the disbursement of EMEs and other similar expenses in GOCCs/GFis and their subsidiaries. Said Circular clearly states that it merely provides guidelines, applicable to governing Boards of agencies authorized by their Charters to receive such additional compensation and/or benefits. To be sure, the COA is not vested with authority to empower governing Boards of GOCCs/GFis to grant any compensation or benefits to themselves, which were otherwise not granted by the legislative. The consistent rule is that the organic law must expressly provide the allowances and benefits due to the Board of Directors; entitlement thereto can never be implied.32

~

For the same reas~n, it is likewise erroneous to argue that, while there is no express conferment of authority to grant to themselves compensation/benefits to cover related expenses in the performance of their duties, such authority is inherent and/or incidental or necessary to their function as the governing body of a corporate entity. To emphasize, as a GFI governed by a special law, its powers and functions are limited by said legislative act. To adopt this view of the LBP would result in unbridled grant of benefits to the Board Members as the mere act of accomplishing their usual duties would justify such grant considering that, naturally, they are performing their functions for the furtherance of the business.

The LBP then proceeded to assert that the grant of such additional allowances/benefits finds support from the Corporation Code, which according to LBP, may supplement the provisions of any corporation created by a special law or charter. Specifically, LBP points out Section 30 of the Corporation Code, which authorizes the grant of compensation to the Members of the Board other than the reasonable per diems.

Reliance upon Section 30 of Batas Pambansa (B.P.) Blg. 68 or the Corporation Code of the Philippines, as amended, which provides for rules on the grant of additional compensation to directors beyond per diems, is likewise misplaced. Section 4 of said Code provides that "[ c ]orporations created by special laws or charters shall _be governed primarily by the provisions of the special law or charter creating them or applicable to them[.] xx x" The Corporation Code merely supplements said special laws or charters insofar as they are applicable to them. Needless to say, R.A. 1 32 Id.


3 844, as amended, which provides specifically for the creation of the LBP is a special law, whereas B.P. Blg. 68, which applies to any corporation in general, is a general law. It is a canon of statutory construction that a special law prevails over· a general law. 33

In another attempt to justify the grant of additional allowances to its Board of Directors, the LBP loosely cites the GAA as sufficient legal basis therefor. According to the LBP under the GAA, the increase in the EME for the individual Members of the Board of Directors is warranted provided that the same is on reimbursement basis and in the context of the extraordinary and unusual services rendered by said Members outside of their regular functions and duties.

The Court is baffled by the fact that the LBP insists that the disallowed benefits are not "additional compensation" but are in the nature of "reimbursable expenses" incurred by the Board of Directors in the exercise of their usual duties and ordinary functions of their office, and at the same time asserts that the same are in the context of extraordinary and unusual services rendered by the Members outside of their regular functions and duties to find justification from the GAA. At any rate, while the GAA may have authorized the grant of extraordinary exp,enses to specific officials, the COA found no valid argument, mucp. less proof, adduced to show that the recipient officials herein are entitled to such benefits. We do not find support from the LBP's arguments, as well as in the records of this case, to deviate from such factual findings.

The LBP likewise posits that, contrary to the conclusion in the questioned NDs, Section 3( c) of OP A.O. No. I 03 actually recognizes the authority of the LBP Board of Directors to receive honoraria and other forms of allowances in addition to the per diems prescribed under its Charter. Said provision merely directs the governing boards of GOCCs/GFis like the LBP to limit the grant of honoraria and other forms of allowances without necessarily prohibiting any adjustment thereto. In relation to this, it is LBP's theory that OP Executive Order (E.O.) No. 24, "now officially allows compensation in the form of per diems, performance-based incentives and other salaries, allowances, benefits and other bonuses subject to the approval of the President and must be within the limits under Section s9 and 10 of said E.O." The LBP cited its Letter-Request dated February 8, 2010, approved by then President Gloria Macapagal-Arroyo, with regard to its compensation plan for its officers and employees.

This position likewise deserves scant consideration. Without doubt, these presidential issuances apply only to GOCCs/GFis or such agencies with a Charter, which allows their governing Boards to grant additional compensation/benefits to its Members. Considering that the LBP Charter [

33 Mayor Lopez, Jr. v. Civil Service Commission, 273 Phil. 147, 152 (1991); and Manila Railroad Company v. Rafferty, 40 Phil. 224, 228 (1919).


does not allow its Board to grant additional compensation/benefits unto themselves, the invoked presidential issuances are irrelevant and immaterial. In Bases Conversion Development Authority (BCDA) v. Commission on Audit,34 then President Fidel V. Ramos already approved the questioned compensation and benefit scheme, but the Court still affirmed the disallowance of additional benefits because the BCDA Charter only allowed per diems as compensation of its Board Members. Similarly, the Court arrived at the same conclusion in the case of Development Bank of the Philippines (DBP) v. Commission on Audit,35 as the DBP Charter does not allow the grant of additional benefits to the DBP Board Members other than per diems.

There being no legal basis for the additional compensation/benefits or honoraria for the LBP Board of Directors, the COA did not commit grave abuse of discretion in upholding the disallowances.

The return. of the disallowed additional compensation or benefits is proper.

The LBP's defense that its Board of Directors received the disallowed benefits in good faith and, therefore, must not be required to refund the same, is unacceptable.

In the matter of refunding disallowed compensation or benefits, the Court has applied several legal and equitable principles. The good faith or bad faith of the responsible officer and/or the recipient is one of them. For the LBP, this is the prevailing doctrine at the time its Board of Directors received the disallowed compensation/benefits citing the case of Blaquera v. Hon. Alcala. 36

Good faith is a state of mind denoting honesty of intention and freedom from knowledge of circumstances which ought to put a reasonable and conscientious mind upon inquiry.37 On several occasions, the Court has allowed public officials and employees to keep disallowed benefits and allowances that they had already received on the. basis of their good faith. 38

Being an abstract concept, however, good faith is determined by taking into consideration certain actions and circumstances manifesting the same on a case to case basis.

In this case, the Court cannot extend the doctrine of good faith to the LBP Board of Directors for the folloVving reasons: (l) the LBP Board of

34 599 Phil. 455 (2009). 35 Development Bank of the Philippines v. Commission on Audit, supra note 28. 36 356 Phil. 678 (1998) 37 Phi/health v. Commission on Audit, supra note 24. 38 See Rotoras v. Commission on Audit, G.R. No. 211999, August 20, 2019.

;:


Directors' act of approving the grant of additional compensation/benefits or honoraria unto themselves is self-serving. The LBP .Charter is unambiguous on the emoluments to which its Board of Directors are entitled, i.e., specific amounts of per diems only; (2) as found by the COA, the LBP Board of Directors failed to adduce a valid argument, much less proof, to justify entitlement to the additional compensation/benefits or "reimbursable expenses" that they granted among themselves apart from its own allegation that the expenses were used in the performance of their usual duties and ordinary functions; and (3) most importantly, for the recipients who held exofficio positions, the irregularity of giving additional compensation or allowances to ex-officio members has long been a settled jurisprudence at the time they received the subject benefits.

Such patent disregard of its own Charter, case laws on the matter, COA issuances, and the Constitution cannot be considered as a mere lapse of judgment. The LBP governing Board, which notably, is comprised mostly of cabinet members who must be aware of the.extent of the benefits they are entitled to, 39 should have exercised the highest degree of responsibility in inquiring about the validity of granting the subject compensation/benefits unto themselves.

At any rate, in the recent case of Rotoras v. Commission on Audit,40

the Court held that it will be unjust enrichment to allow the members of the governing boards to retain additional honoraria that they themselves approved and received. The statutory basis for unjust enrichment is found in Article 22 of the New Civil Code, which provides that "[ e ]very person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him." It was further explained that if the recipient of the disallowed benefits has no valid claim thereto such as when the same was granted contrary to. law or entitlement thereto was not proven, such enrichment is without just or legal ground. Thus, as in Rotoras, since no legal basis for the grant of additional honoraria, or any benefits for that matter, has been established; it would be an unjust enrichment to allow the members of the governing board to retain what they received.

Consistently, paragraph 2.b of the rules on return pronounced by the Court in the recent case of Madera v. Commission on Audit,41 states that "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, solidarily liable to return only the net disallowed

39 See Phi!Health v. Commission on Audit, supra note 24. 40 Supra note 38. 41 G.R. No. 244128, September 8, 2020.

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amount42 x x x." Relevantly, paragraph 2.c of said rules states that "[r]ecipients - 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 show ·that the amounts they received were genuinely given in consideration of services rendered.43

Here, not only are the additional compensation or benefits granted and received by the LBP Board of Directors contrary to law, as found by the COA, entitlement to such disallowed additional compensation or benefits are likewise not proven. No error or grave abuse of discretion can, therefore, be imputed against the COA in ordering such refund.

WHEREFORE, the Petition for Certiorari is DISMISSED. The Decision No. 2015-451 dated December 29, 2015 of the Commission on Audit in COA Case No. 214-337 is hereby AFFIRMED." Baltazar-Padilla, J., on leave. (86)

By authority of the C.ourt:

42 Net disallowed amount is the extent of the arum.int to be refunded, which excludes the amount received by those absolved of liability pursuant to paragraphs 2.c and 2.d of the rules on return laid down in Madera, id.

43 Id.

Notice of Resolution

ATTYS. RODERICK P. SACRO and BIENVENIDO L. GARING, JR. (reg) Legal Services Group Litigation Department Land Bank of the Philippines Counsel for Petitioner Land Bank 1598 M.H. Del Pilar Street corner Dr. J. Quintas St. Malate, Manila

JUDICIAL RECORDS OFFICE (x) JUDGMENT DIVISION (x) PUBLIC INFORMATION OFFICE (x) LIBRARY SERVICES (x) Supreme Court [For uploading pursuant to A.M. No. 12-7-1-SCJ

G.R. No. 224288 kat 9/15/20 (URes86) 12/14/20

-17- G.R. No. 224288 September 15, 2020

THE INCUMBENT DIRECTOR IV (reg) Commission on Audit, Corporate Government Sector Cluster I - Banking and Credit Commission on Audit Central Office Commonwealth Avenue, Quezon City

THE CHAIRPERSON (reg) Commission on Audit Commonwealth Avenue, Quezon City

THE SOLICITOR GENERAL (reg) 134 Amorsolo St., Legaspi Village Makati City

3republic of tbe jlbtlippines ~upremc qcourt

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