Philippine Supreme Court Jurisprudence > Year 2021 > June 2021 Decisions > G.R. No. 231391 - SOCIAL SECURITY SYSTEM, Petitioner, v. COMMISSION ON AUDIT, Respondent. :

Before the Court is a Petition for Review on Certiorari¹ under Rule 64 of the Rules of Court seeking to annul and set aside Decision No. 2015-280² dated November 23, 2015 and Notice No. 2017-014³ dated April 11, 2017 of the Commission on Audit (COA) Proper which affirmed the Notice of Disallowance No. (ND) 2010-004 (2006-2009)⁴ dated October 11, 2010 amounting to P2,108,213.36 against the Social Security System (SSS) officials and employees who are not members of the collective negotiation unit.⁵

The Antecedents

The Social Security Commission (SSC) passed Resolution No. 259 dated July 6, 2005 granting the following: first, Collective Negotiation Agreement (CNA) incentives to each member of Alert and Concerned Employees for Better SSS (ACCESS), the collective negotiation unit representing the rank and file employees of the SSS; and second, Counterpart CNA Incentives to other SSS officers and employees, including: (a) confidential, coterminous, and contractual employees; (b) lawyers; (c) executives; and (d) members of the SSC.⁶

Pursuant to this resolution, the SSS paid Counterpart CNA Incentives from 2006 to 2009 amounting to P2,108,213.36. Subsequently, in ND 2010-004 dated October 11, 2010, the COA Supervising Auditor disallowed the payment for being contrary to Section 3(b)⁷ of Administrative Order No. (AO) 103,⁸viz.:

SECTION 3. All NGAs, SUCs, GOCCs, GFIs and OGCEs, whether exempt from the Salary Standardization Law or not, are hereby directed to:

x x x

(b) Suspend the grant of new or additional benefits to full-time officials and employees and officials, except for (i) Collective Negotiation Agreement (CNA) Incentives which are agreed to be given in strict compliance with the provisions of the Public Sector Labor-Management Council [PSLMC] Resolutions No. 04, s. 2002 and No. 2, s. 2003; and (ii) those expressly provided by presidential issuance;

x x x x

AO 103 allowed the grant of CNA Incentives, as an exception to the executive directive suspending the grant/payment of additional benefits to GOCC officials in view of the government's adoption of austerity measures, provided that the grant complies with the relevant PSLMC resolutions.

The payees thereof were held liable for the disallowance.⁹

This prompted petitioner to appeal the disallowance in behalf of the payees to the COA Corporate Government Sector Cluster A � Financial (COA-CGS).

It argued that the subject payment (a) was made pursuant to the SSC's power to fix the compensation of SSS personnel,¹⁰ as provided under Section 3(c) of Republic Act No. (RA) 1161,¹¹ and (b) was merely denominated as Counterpart CNA Incentives. However, these were not CNA Incentives per se borne out of a CNA. Thus, AO 103 does not apply.¹² Further, having acted in good faith, the recipients of the subject payment cannot be made liable for the disallowance.¹³

Ruling of the COA Director

In its Decision No. 2012-15¹⁴ dated September 24, 2012, Angelina B. Villanueva, Director IV, COA-CGS, upheld the disallowance.

AO 103 only allowed the grant of CNA Incentives to the extent that these complied with PSLMC Resolutions Nos. 04, S. 2002, and 02, S. 2003. However, SSC granted and paid the subject CNA Incentives to confidential, coterminous and contractual employees, lawyers, executives, and SSC members, who were also not members of the negotiating unit (non-rank and file employees and non-ACCESS members). This directly contravened applicable laws, rules, and regulations,¹⁵ particularly PSLMC Resolution No. 02, S. 2003, which provide that only rank and file employees are entitled to CNA Incentives.¹⁶

The Director rejected the assertion of the SSS that the payments represented Counterpart CNA Incentives, not CNA Incentives per se. This showed that SSC had known that payments of CNA Incentives to non-rank and file employees (such as the recipients of the disallowed amount) are clearly prohibited.¹⁷

Further, she explained that while the SSC is empowered to fix reasonable compensation, allowances, and other benefits of its personnel,¹⁸ this authority does not exempt the SSC from complying with relevant administrative issuances, such as Presidential Decree No. (PD) 1597, and AO 103,¹⁹ which "prescribed the approval of the President of the Philippines, before [certain] benefits x x x may be given." Citing Intia, Jr. v. COA²⁰(Intia) and Phil. Retirement Authority (PRA) v. Bu�ag²¹ (Bu�ag), she stressed that prior executive approval under these issuances is a condition precedent to the grant of certain benefits,^[22 including the Counterpart CNA Incentives.

Finally, the Director did not find merit in the SSS's defense of good faith. She pointed out that the COA already disallowed similar Counterpart CNA Incentives paid in previous years. "It would have been more prudent for SSS management to suspend the granting of the questioned benefits x x x."²³

Aggrieved, petitioner elevated the matter to the COA Proper.

Ruling of the COA Proper

In the assailed Decision No. 2015-280, the COA Proper affirmed the Director's ruling.²⁴ It also denied petitioner's subsequent motion for reconsideration.²⁵

Hence, petitioner filed the present petition.

In compliance with the Resolution²⁶ dated August 8, 2017 of the Court, respondent filed its Comment [re: Petition for Certiorari dated May 19, 2017].²⁷ Petitioner filed its Reply to Comment dated October 23, 2017.²⁸

Issues

In deciding whether or not the COA Proper committed grave abuse of discretion in upholding the subject disallowance, We shall consider the following questions:

(a) Are payments denominated as Counterpart CNA Incentives the same as CNA Incentives granted as a result of a valid CNA?

(b) Is the SSC's authority to fix the compensation of SSS personnel absolute?

Our Ruling

The petition lacks merit.

Prefatorily, the Court's review of COA decisions via Rule 64 petitions is limited to jurisdictional errors or grave abuse of discretion.²⁹ To be sure, the Court's intervention is justified only when it is clearly shown that the COA acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction.³⁰ There is grave abuse of discretion when there is an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law or to act in contemplation of law, such as when the assailed decision or resolution rendered is not based on law and the evidence but on caprice, whim and despotism.³¹

In the present case, petitioner failed to prove that respondent committed grave abuse of discretion. For reference, petitioner relies on the following grounds for the allowance of the present action:

THE GRANT OF COUNTERPART INCENTIVE TO SSS OFFICIALS IS VALID AS AUTHORIZED UNDER SEC. 3(C) OF THE SS LAW, AS AMENDED³²

RESPONDENT'S RELIANCE ON THE CASES OF IRENEO V INTIA, JR. VS. COMMISSION ON AUDIT X X X AND PHILIPPINE RETIREMENT AUTHORITY (PRA) VS. BUNAG X X X AS BASIS FOR ITS DECISION IS INCORRECT³³

PETITIONER, A [GOCC], WAS ALREADY IDENTIFIED AS A DISTINCT CLASS AMONG GOVERNMENT AGENCIES. PETITIONER IS GOVERNED BY THE LAW CREATING IT.³⁴

RESPONDENT FAILED TO CONSIDER THE FAILURE OF ND NO. 2010-004 (2006-2009) TO CONFORM TO THE REGULATIONS ON THE SETTLEMENT OF ACCOUNTS (RRSA) OF COA.³⁵

ASSUMING EX GRATIA ARGUMENTI THAT THE GRANT OF THE COUNTERPART CNA INCENTIVE IS UNLAWFUL, PETITIONER'S NCR OFFICIALS ACTED IN GOOD FAITH IN RECEIVING THE BENEFITS, THUS CANNOT BE HELD LIABLE FOR ITS REIMBURSEMENT.³⁶

These contentions are a reiteration of those raised before and passed upon by the COA Proper. More significantly, at best, these arguments raise mere errors of judgment, which the Court cannot review via certiorari.³⁷The petition is dismissible on this score alone.

At any rate, even if We excuse the insufficiency of petitioner's allegations, We still uphold the COA Proper's ruling.

To recall, the disallowance was grounded on the following: first, that the disbursement constituted a grant of CNA Incentives to non-rank and file employees, in contravention of Section 3(b)(i) of AO 103, in relation to PSLMC Resolution Nos. 04, S. 2002, and 02, S. 2003; Second, that the disbursement was paid without the requisite executive approval Section 3(b)(ii) of AO 103, in relation to PD 1597.

The disallowance was proper. While Section 3(b)(i) of AO 103 does not apply to the subject Counterpart CNA Incentives, it is not supported by an executive issuance, as required under Section 3(b)(ii).

The subject payment is not a CNA
Incentive within the meaning of
Section 3(b)(i) of AG 103

Significantly, in the Resolution No. 259 dated July 6, 2005, the SSC granted two incentives, viz.: (1) CNA Incentives, paid to the members of ACCESS, and (2) Counterpart CNA Incentives, paid to SSS personnel who were not members of the negotiating unit and subject of the present controversy.

We must pay closer attention to the use of the word "counterpart" to designate the second incentive. It reveals an intention to create a category of incentives separate from but that closely resembles CNA Incentives. The resulting distinction is crucial.

Splitting the incentives into two categories was necessary for the following reasons: first, to accommodate two classes of employees: (a) SSS rank and file employees and ACCESS members who shall receive CNA Incentives per se, and (b) non-rank and file employees and non-ACCESS members who shall receive Counterpart CNA Incentives instead; and second, to distinguish between the legal bases sought to justify the grant of each category.

On the one hand, the first category consisted of incentives granted by virtue of a subsisting CNA between SSS and ACCESS. Certainly, benefits may only be regarded as valid CNA Incentives if these arose from an agreement "entered into between the accredited employees' organization as the negotiating unit and the employer or management."³⁸

In contrast, it is not disputed that SSC granted the second category of incentives to non-rank and file employees and non-ACCESS members. Thus, even a valid and subsisting CNA could not have justified the Counterpart CNA Incentives, having been granted in favor of individuals who were not parties to the agreement.

As keenly observed by the COA, SSC had been aware that incentives under the CNA are for the exclusive benefit of rank and file employees and ACCESS members. Thus, the SSC instead invoked its own power to fix employee compensation under Section 3(c) of RA 1161 to justify the grant of Counterpart CNA Incentives.

Since Counterpart CNA Incentives are not a product of a valid and subsisting CNA, these cannot be regarded as CNA Incentives within the contemplation of Section 3(b)(i) of AO 103. This notwithstanding, the subject payment contravenes the requirement under Section 3(b)(ii) thereof.

The subject payment does not carry
the requisite executive approval under
Section 3(b)(ii)

Petitioner repeatedly invokes that the SSC's independent power to fix employee compensation. However, as correctly held by the COA, this authority does not exempt the SSC from seeking the requisite executive approval prior to granting benefits to SSS personnel.

In this regard, the COA Director cited PD 1597, viz:

SECTION 6. Exemptions from OCPC Rules and Regulations. � Agencies positions, or groups of officials and employees of the national government, including government owned or controlled corporations, who are hereafter exempted by law from OCPC coverage, shall observe such guidelines and policies as may be issued by the President governing position classification, salary rates, levels of allowances, project and other honoraria, overtime rates, and other forms of compensation and fringe benefits. Exemptions notwithstanding, agencies shall report to the President, through the Budget Commission, on their position classification and compensation plans, policies, rates and other related details following such specifications as may be prescribed by the President. (Italics supplied.)

In Intia and Bu�ag, the Court explained that the above-cited provision applies without qualification to government agencies that are otherwise exempted from the Salary Standardization Law (SSL). The Court elucidated in Intia:

x x x It must be stressed that the Board's discretion on the, matter of personnel compensation is not absolute as the same must be exercised in accordance with the standard laid down by law, that is, its compensation system, including the allowances granted by the Board to PPC employees, must strictly conform with that provided for other government agencies under R.A. No. 6758 (Salary Standardization Law) in relation to the General Appropriations Act. To ensure such compliance, the resolutions of the Board affecting such matters should first be reviewed and approved by the Department of Budget and Management pursuant to Section 6 of PD. No. 1597.³⁹ (Italics Supplied)

More importantly, the Court already pronounced that the SSC's power to fix employee compensation is not absolute, viz:

The SSS cannot rely on Sections 3(c) and 25 of the SS Law either. A harmonious reading of the said provisions discloses that the SSC may merely fix the compensation, benefits and allowances of SSS appointive employees within the limits prescribed by the SS Law. Nothing in the aforementioned provisions authorizes the SSS to grant additional benefits to its members.⁴⁰

SSS is a mere trustee of funds held for the benefit of workers and employees in the private sector.⁴¹ Hence, its power to fix employee compensation must be exercised in accordance with the standards laid down by the law,⁴² such as the presidential approval required under Section 3(b)(ii) of AO 103.

Clearly, the subject payment is not supported by any such executive approval. It is already settled that a benefit, such as the subject Counterpart CNA Incentives, that is "neither a CNA incentive nor authorized by a presidential issuance x x x is devoid of any legal basis."⁴³

Liability for the disallowance

The COA Proper held the payees of the Counterpart CNA Incentives liable to pay the disallowance amounting to P2,108,213.36.

Petitioner claims that payees acted in good faith and cannot be held personally liable for its reimbursement. However, good faith in receiving the subject incentives is irrelevant in the case.

The COA proper correctly ordered the payees to return the disallowed amount. The basic rule is a civil servant who received compensation and benefits by mistake has the quasi-contractual obligation to return it to the government.⁴⁴ In the recent case of Madera v. COA,⁴⁵ if a disallowance is upheld, the recipients are liable to return the disallowed amount respectively received by them, unless they are able to show that the amounts they received were genuinely given in consideration of the services rendered, or the Court excuses them based on undue prejudice, social justice considerations, or the bona fide exceptions.⁴⁶

WHEREFORE, the petition is DISMISSED. The Commission on Audit Decision No. 2015-280 dated November 23, 2015 and the Notice No. 2017-014 dated April 11, 2017 of the Commission on Audit are AFFIRMED. All the recipients of the disallowed amount are liable to return them through salary deduction or any other mode which the Commission on Audit may deem just and proper. This pronouncement is without prejudice to any other administrative or criminal liabilities of the officials responsible for the illegal disbursement.chanroblesvirtualawlibrary

SO ORDERED.

Gesmundo, C.J., Perlas-Bernabe, Caguioa, Hernando, Carandang, Lazaro-Javier, Zalameda, M. Lopez, Delos Santos, Gaerlan, Rosario, and J. Lopez, JJ., concur.
Leonen, J., on official leave.

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NOTICE OF JUDGMENT

Sirs/Mesdames:

Please take notice that on June 22, 2021 a Decision, copy attached herewith, was rendered by the Supreme Court in the above-entitled case, the original of which was received by this Office on September 20, 2021 at 10:35 a.m.

Endnotes:

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¹Rollo, pp. 3-19.

²Id. at 21-25; signed by Chairperson Michael G. Aguinaldo and Commissioners Heidi L. Mendoza and Jose A. Fabia; and attested by Director III and Commission Secretariat Bresilo R. Sabaldan.

³Id. at 26.

⁴Id. at 38-39.

⁵ Amount not indicated in the notice of disallowance. See Decision dated November 23, 2015 of the Commission on Audit (COA.), id. at 24; Decision dated September 24, 2012 of the COA, id. at 36.

⁶Id. at 38, 56.

⁷ Section. 3 of Administrative Order No. (AO) 103, Series of 2004 provides:
SECTION 3. All NGAs, SUCs, GOCCs, GFIs and OGCEs, whether exempt from the Salary Standardization Law or not, are hereby directed to:chanroblesvirtualawlibrary

x x x
(b) Suspend the grant of new or additional benefits to full-time officials and employees and officials, except for (i) Collective Negotiation Agreement (CNA) Incentives which are agreed to be given in strict compliance with the provisions of the Public Sector Labor-Management Council Resolutions No. 04, s. 2002 and No. 2, s. 2003, and (ii) those expressly provided by presidential issuance;
x x x x

⁸ Entitled, "Directing the Continued Adoption of Austerity Measures in the Government," approved on August 31, 2004.

⁹ See Notice of Disallowance No. 2010-004 (2006-2009), rollo, pp. 38-39.

¹⁰Id. at 32.

¹¹ Social Security Act of 1954, approved on June 18, 1954.

¹²Rollo, p. 32.

¹³Id.

¹⁴Id. at 31-36; penned by Director IV Angelina B. Villanueva.

¹⁵E.g., Section 2 of AO 135,2 Department of Budget and Management (DBM) Budget Circular No. 2006-13 dated February 1, 2006, and Section 14 of PSLMC Resolution No. 02, S. 2003.

¹⁶Rollo, pp. 33-34.

¹⁷Id. at 34.

¹⁸ Section 3(c), Republic Act No. 1161 provides:chanroblesvirtualawlibrary

SECTION 3. Social Security System. � x x x x
(c) The Commission, upon the recommendation of the Administrator shall appoint an actuary, medical director, and such other personnel as may be deemed necessary; shall fix their compensation; prescribe their duties and establish such methods and procedures as may insure the efficient, honest and economical administration of the provisions and purposes of this Act.

¹⁹Rollo, p. 35.

²⁰ 366 Phil. 273 (1999).

²¹ 444 Phil. 859 (2003).

²² Other than those allowed under relevant government issuances.

²³Rollo, p. 36.

²⁴Id. at 24.

²⁵Id. at 26.

²⁶Id. at 47-48.

²⁷Id. at 56-70.

²⁸Id. at 82-91.

²⁹ See Fontanilla v. The Commissioner Proper, COA, 787 Phil. 713 (2016).

³⁰ See Miralles v. Commission on Audit, 818 Phil. 380 (2017).

³¹Id. at 389-390.

³²Rollo, p. 7.

³³Id. at 10.

³⁴Id. at 13.

³⁵Id. at 14.

³⁶Id. at 15.

³⁷ Fontanilla v. The Commissioner Proper, COA, supra note 29.

³⁸Dubongco v. Commission on Audit, G.R. No. 237813, March 5, 2019, 895 SCRA 53, 73.

³⁹Intia, Jr. v. COA, supra note 20 at 293.

⁴⁰Social Security System v. Commission on Audit, 794 Phil. 387, 407 (2016).

⁴¹Id. at 399-400.

⁴² See Phil. Retirement Authority (PRA) v. Bu�ag, supra note 21.

⁴³De Guzman v. Commission on Audit, G.R. No. 245274, October 13, 2020.

⁴⁴ See National Transmission Corp. v. Commission on Audit, G.R. No. 232199, December 1, 2020.

⁴⁵ G.R. No. 244128, September 8, 2020.

⁴⁶ See Abellanosa v. Commission on Audit, G.R. No. 185806, November 17, 2020.cralawredlibrary