Gonzaga v. Coa

MELPIN A. GONZAGA, FOR HIMSELF, AND ON BEHALF OF ELOISA A.
LIM,
SHIRLEY S. ONG, SOCORRO R. QUIRINO, ARACELI E. VILLANUEVA, RUBY C.
TUASON, VICTORIA C. BERCILES AND ANTONIO A. BERNARDO, PETITIONERS,
VS. COMMISSION ON AUDIT, RESPONDENTS
G.R. No. 244816, June 29, 2021
Lopez, J. – En Banc
NATURE OF THE ACTION:
Petition for Certiorari assailing the Decision and Resolution of the Commission on Audit-
Commission Proper.
FACTS:
Petitioners, during their term as directors of Philippine International Convention Center,

Inc., received the following benefits and allowances from January 2010 up to January 2011: 1)
Representation Allowance; 2) Medical Reimbursement; 3) Christmas Bonus; and 4) Anniversary
Bonus. On March 22, 2013, the Supervising Auditor (SA) and the Audit Team Leader issued an
Audit Observation Memorandum No. PICCI-2012-04, which flagged the grant of Representation
Allowance, Medical Reimbursement, Christmas Bonus, and Anniversary Bonus to petitioners as
irregular because it contravened Section 30 of the Corporation Code, which states, "in no case,
shall the total yearly compensation of directors, as such directors, exceed ten (10%) percent of
the net income before income tax of the corporation during the preceding year." Consequently,
the SA and ATL disallowed the payment of the benefits aforesaid to the petitioners.
Petitioners appealed before the Office of the Cluster Director of the Corporate
Government Sector-Cluster 1 where they argued that the disallowed benefits should be permitted
because the disallowed benefits were received in good faith, hence, they need not refund the
same.
The COA Director found the disallowance to be proper. The COA-CP affirmed the ruling
of the COA Director. Petitioners claimed that the ruling in Singson will not negate their claim of
good faith because the case was decided based on PICCI's old By-Laws, which did not allow the
grant of allowances to directors. Meanwhile, the subject benefits and allowances were given to
petitioners pursuant to PICCI's Amended By-Laws, which already allowed for the grant of
allowances to the members of the Board of Directors, so long as it is approved by the Monetary
Board. Thus, it cannot be said that petitioners were in bad faith in receiving the pertinent
allowances and benefits despite the Court's ruling in Singson. Likewise, petitioners should not be
made solidarily liable to reimburse the disallowed amount since they acted in good faith.
ISSUE:
Whether or not petitioners should be solidarily liable for the return of the amount in
question.
RULING:
The Petition is PARTIALLY GRANTED.

In Madera v. Commission on Audit, the Court laid down a clear set of rules on the refund
of amounts disallowed by the COA for a just and equitable outcome among persons liable for
disallowances.
For approving officers, on one hand, they are made solidarily liable with the recipients if
they acted in bad faith, malice, or gross negligence under Sections 38, 39, and 43 of the
Administrative Code. To be exonerated from liability therefor, such approving officers must
demonstrate due diligence, as may be indicated: (1) by Certificates of Availability of Funds
pursuant to Section 40 of the Administrative Code, (2) by In-house or Department of Justice
legal opinion, (3) that there is no precedent allowing a similar case in jurisprudence, (4) that it is
traditionally practiced within the agency and no prior disallowance has been issued, [or] (5) with
regard the question of law, that there is a reasonable textual interpretation on its legality.
Recipients, on the other hand, are liable to refund, regardless of good faith, on the basis
of solutio indebiti and unjust enrichment. The metamorphosis of the rules governing
accountability for disallowances, especially payee liability for the amount actually received,
strives to create a harmonious interplay of the provisions of the Administrative Code, the
principles of unjust enrichment and solutio indebiti under the Civil Code, and the policy of social
justice in disallowance cases.
To be sure, a government instrumentality's disbursement of salaries that contravenes the

law is a payment through error or mistake. A person who receives such erroneous payment has
the quasi-contractual obligation to return it because no one shall be unjustly enriched at the
expense of another, especially if public funds are at stake. The law constitutes the person
receiving money through mistake a trustee of a constructive trust for the benefit of the person
from whom the property comes, which, in this case, is the government.
In so holding, the Court has returned to the basic premise that the responsibility to return
is a civil obligation to which fundamental civil law principles, such as unjust enrichment and
solutio indebiti, apply regardless of the good faith of passive recipients.

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MELPIN A. GONZAGA, FOR HIMSELF, AND ON BEHALF OF ELOISA A.

G.R. No. 244816, June 29, 2021

NATURE OF THE ACTION:

Petitioners, during their term as directors of Philippine International Convention Center,

The Petition is PARTIALLY GRANTED.

To be sure, a government instrumentality's disbursement of salaries that contravenes the

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