DBP v. COA

DBP, WITH ALFREDO C. ANTONIO, ET AL. VS. COMMISSION ON AUDIT

G.R. NO. 216538/G.R. NO. 216954

April 18, 2017

FACTS:

On February 9, 1990, the Monetary Board, through Board Resolution No. 132, approved the Rules and Regulations for the Implementation of the Motor Vehicle Lease-Purchase Plan (RR-MVLPP) for Government Financial Institution (GFI) officers as part of the fringe benefits.

The RR-MVLPP involved the acquisition of motor vehicles to be leased or sold to qualified officers of GFIs. Under the plan, the GFI concerned was to constitute a fund sourced from the appropriation in such amount necessary to finance the acquisition of brand-new motor vehicles to be leased or sold to the GFI’s eligible officers. The officers availing themselves of the benefits under the plan were required to execute a Lease Purchase Agreement with maximum periods of 10 years, and the aggregate monthly rentals for one year of not exceeding 10% of the acquisition cost of each motor vehicle would be payable through salary deduction.

On July 20, 1992, the Office of the President approved with certain modifications the RR-MVLPP, which applied to GFI officers occupying positions with salary grades (SG) of not lower than SG-25.

Among the GFIs covered by the RR-MVLPP was Development Bank of the Philippines. On July 30, 1992, DBP issued Circular No. 25 to establish the conditions for the plan consistent with the RR-MVLPP, including the maximum loan period of 10 years and annual rental equivalent to 10% of the acquisition cost of the vehicle payable through salary deduction. However, five years later, DBP’s Board of Directors adopted Board Resolution No. 0246 dated June 13, 1997 constituting the MVLPP Fund. As a matter of fact the said Board Resolution No. 0246 was formulated in order to cater for their own benefits.

With the existence of Board Resolution No. 0246, DBP implemented its separate scheme of MVLPP. On the other hand, on April 12, 2007, the supervising auditor of the COA assigned to DBP issued Audit Observation Memorandum No. HO-HRM (PF)-MVLPP-AOM-20006-005 to the effect that what had been duly approved by the Office of the President through the RR-MVLPP was for DBP to advance the money to pay for the acquisition of the vehicles and for the officers-availees to pay in full the cost of the vehicle. The supervising auditor opined that because the Board Resolution No. 0246 ran contrary to the RR-MVLPP, DBP should cease its practice of requiring officers-availees to pay only 50% of the cost of the vehicle; and the DBP should oblige all its officers-availees to pay the remaining 50% cost of their vehicles.

On May 20, 2007, the supervising auditor issued a Notice of Disallowance relative to the subsidy granted by DBP to its officer who had availed themselves of the MVLPP benefits amounting to 50% of the acquisition costs of the motor vehicles, or totalling Php64,436,931.61. The Notice of Disallowance declared the Members of the Board of Directors, Certify payroll/HRM, Accountant, and Cashier of DBP liable based on their respective participation in the subject transaction.

And so, the DBP filed its appeal with the Corporate Government Sector (CGS) Cluster A of the COA. In the meantime, on July 22, 2010, during the pendency of the appeal, it also filed its manifestation and motion alleging that President Gloria Arroyo upon the request of DBP, had confirmed the power and authority of its Board of Directors to approve and implement the Compensation Plan from 1999 onwards, including the implementation of the MVLPP.

However, on February 10, 2011, the Director of the CGS-Cluster A of COA denied the appeal through CGS-A Decision No. 2011-001 and affirmed the Notice of Disallowance.

DBP further appealed to seek the reversal and setting aside of CGS-A Decision No. 2011-001.

On December 28, 2012, the COA Commission Proper rendered the assailed Decision No. 2012-269 denying DBP’s petition for review.

On February 8, 2013, DBP filed its motion for reconsideration of the COA’s Decision No. 2012-269.

A few month later, or in June 2013, Alfredo C. Antonio, Ruben O. Fruto and Cesar M. Drillon, Jr., who are the petitioners in G.R. No. 216954, were informed about the Decision No. 2012-269 by a concerned employee of DBP. Being the former Members of the Board of Directors of DBP thereby affected, they immediately submitted a letter-request for reconsideration on June 6, 2013 taking issue against the decision for lack of notice to them, and claiming good faith on the subject matter thereof, among others.

On December 4, 2014, the COA Commission Proper En Banc issued the assailed Resolution denying DBP’s motion for reconsideration and the supplemental motions for reconsideration of the petitioners in G.R. No. 216954 for lack of merit.

Hence, the petitioners have all come to the Court via separate petitions under Rule 64, in relation to Rule 65, of the Rules of Court.

On May 19, 2015, the Office of the Solicitor General, as counsel of the COA moved to consolidate the petitions in G.R. No. 216538 and G.R. No. 216954. Accordingly, on July 7, 2015, the SC ordered the consolidation of G.R. No. 216538 and G.R. No. 216954.

ISSUES:

a.       Whether or not the constitutional rights to due process and speedy disposition of cases of the petitioners in G.R. No. 216954 were violated;

b.      Whether or not DBP had the authority to grant multi-purpose loans and special dividends from the MVLPP car funds;

c.       Whether or not the COA was estopped from disallowing DBP’s disbursement from its MVLPP; and

d.      Whether or not the persons identified by the COA as liable should be ordered to refund the total amounts disallowed by the COA.

RULING OF THE COURT:

With regards to the first issue, the Court disagreed with the assertions of the petitioners in G.R. No. 216954. Under Section 7, Rule IV of the 2009 Revised Rules of Procedure of the COA, DBP has the duty to serve the copies of the Notice of Disallowance, orders and/or decisions of the COA on the individuals to be held liable especially when there were several payees, to wit: “Section 7. Service of Copies of ND/NC/NS, Order or Decision- The ND, NC, NS, order, or decision shall be served to each of the persons liable/responsible by the Auditor, through personal service, or if not practicable through registered mail. In case there are several payees, as in the case of a disallowed payroll, service to the accountant who shall be responsible for informing all payees concerned, shall constitute constructive service to all payees listed in the payroll.

In the second issue, the COA counters that DBP violated the RR-MVLPP in granting interest-free multi-purpose loans and in distributing dividends out of the car funds that had been specifically intended for the acquisition of motor vehicles to be leased or sold to qualified officers; that unlawful diversion of the car funds resulted in damage and losses to the Government,; that the grant of multi-purpose loans and the distribution of the income of the car funds were in violation of the salary standardization law; and that the confirmation by President Arroyo of the authority of DBP to continue the implementation of the plan pursuant to Resolution No. 0246 was without force and effect.

The petitioners’ arguments are bereft of merit.

The COA also congently observed in the assailed decision, to wit:

The Director, CGS-Cluster A, this Commission, correctly singled out the fact that nothing in the RR-MVLPP authorizes the transmutation of the authorized car loan from the Car Fund into a multi-purpose loan, as implemented under DBP Board Resolution No. 0246. On face value, a multi-purpose loan can fund any endeavor or luxury desired by the availee other than a car. The singular purpose of the RR-MVLPP and the Fund that it authorizes to create is the provision of a loan for a car. The expansion of the purpose of the loan is absolutely unwarranted under the RR-MVLPP.

DBP’s use of the MVLPP funds for purposes outside the specified scope of the RR-MVLPP ran contrary to the policy declared in Presidential Decree No. 1445 (Government Auditing Code of the Philippines), as follows:

Section 2. Declaration of Policy. It is the declared policy of the State that all resources of the government shall be managed, expended or utilized in accordance with law and regulations, and safeguarded against loss or wastage through illegal or improper disposition, with a view to ensuring efficiency, economy and effectiveness in the operations of government. The responsibility to take care that such policy is faithfully adhered to rest directly with the chief or head of the government agency concerned.

It is also notable that the MVLPP car funds were trust funds, in that they came officially into the possession of DBP as an agency of the Government, or of the public officer as trustee, agent, or administrator, or were received for the fulfilment of some obligation. Pursuant to Section 4 of PD No. 1445, “trust funds shall be available and may be spent only for the specific purpose for which the trust was created of the funds received. Their nature as trust funds constituted a limitation on their use or application.

Still, DBP justifies the granting of multi-purpose loans and special dividends out of the MVLPP funds by arguing that such granting was a form of benefit authorized under DBP’s Charter. It submits that DBP’s Board of Directors was granted the power to create and establish a Provident Fund for the purpose of the payment of benefits; and that the funds managed under the Provident Funds were for paying benefits to its officers or employees under terms and conditions that its Board of Directors might fix. The justification is unacceptable.

In the third issue, the petitioners in G.R. No. 216954 argued that the COA was already estopped from disallowing the transactions involving the MVLPP in view of the prior audits by the COA’s auditors not finding any irregularity in the transactions under the MVLPP. This argument finds support in the presumption that official duty had been regularly performed by the past auditors.

The fact that the assailed Notice of Disallowance was issued only after 15 years from the implementation of Circular No. 25, and only after 10 years from the implementation of Resolution No. 0246 did not preclude the COA from acting as it did. The general rule is that the Government is never estopped by the mistake or error of its agents. If that were not so, the Government would be tied down the mistakes and blunders of its agents and the public would unavoidably suffer. Neither the erroneous application nor the erroneous enforcement of the statute by public officers can preclude the subsequent corrective application of the statute. Exceptions to the general rule of non-estoppel may be allowed only in rare and unusual circumstances in which interests of justice clearly require the application of estoppel. For one, estoppel may not be invoked if its application will operate to defeat the effective implementation of a policy adopted to protect the public.

Here, however, no exceptional circumstance existed that warranted the application of estoppel against the COA. Accordingly, the Court cannot declare the disallowance invalid on that basis.

The fourth and last issue is whether or not the persons identified by the COA as liable should be ordered to refund the total amounts disallowed by the COA.

The COA counters that the circumstances surrounding the availment of the car loans revealed a scheme that clearly contravened the RR-MVLPP; that such scheme was enough to debunk the claim of lack of bad faith in the part of the officers-availees; that accordingly, there could be no condonation of the obligation to refund pursuant to the Notice of Disallowance; that the assailed decision and resolution specified the necessary factual and legal basis for holding the individual petitioners personally liable; and that the pronouncement of the petitioners liability under the Notice of Disallowance should be read together with the body of the Notice of Disallowance as well as the attached schedule of the payees who were liable.

Without any evidence being presented by the COA to show that the individual beneficiaries and the approving officers had acted in bad faith and with gross negligence in the performance of their duties in relation to the MVLPP, the persons identified by the COA to be liable for the disallowances should not be ordered to refund the amounts or restitute the benefits disallowed by the COA. Digested by jsg.