1',epublic of tbe ~btlipptnes

~upreme QC:ourt
;!!Nantla
EN BANC

FAUSTINO A. SILANG, G.R. No. 213189

VE NE RANDO R. REA,
LUZVIMINDA B. CUADRA, Present:
MARIA CIELITO V. ZETA,
ESTELITO M. QUERUBIN,
SERENO, C.J.,
LYKA MONIKA J. OABEL,
CARPIO,
GINALYN CELESTINO,
VELASCO, JR.,
GENER B. ABORDO, JOY 0.
LEONARDO-DE CASTRO,
TAGUILASO, GERMAN L.
BRION,
JAMILANO, ROLANDO P.
PERALTA,
BORROMEO, RENATO
BERSAMIN,
TABERNILLA, ROMEO G.
DEL CASTILLO,
CARIAGA, ROMEO 0.
VILLARAMA, JR.,
GAMBOA, ADELMO M.
PEREZ,
ABESAl\'IIS, ROEL 0.
MENDOZA,
TADIOSA, RUPERTO R. REYES*
ZARSAGA, JOSELITO C. '
PERLAS-BERNABE,
TALABONG, EMMANUEL L.
LEONEN, and
AVERILLA, MARIO G.
JARDELEZA, JJ.
QUESEA, , FELIX T.
MARQUEZ, ROLANDO Z.
OLIVAR, MARCELITO R.
AYALA, DIONISIO N.
Promulgated:
SOMBRERO, REYNALDO J ..
September 8, 2015
MADERAL, CARLOS G.
ABANTO, ESMERALDO Z. ~~~"'~~
RIVERE, REGALADO 0.
ROMERO, ROMEO S.
BOMBANI, MARCELINO U.
CONTRERAS, EDMERLITO P.
YBARDOLAZA, SR., MANUEL
S. ABRAGON, GERARDO S.
EDRESA, ESMERALDO V.
MADRONIO, TEODORO V.
RIVADENERA, RODRIGO A.
MAGTIBAY, MARVIN
JACELA, MICHAEL
CASTILLO, ROBERTO S.

On leave.

~
Decision 2 G.R. No. 213189

VILLA, ALEXANDER A.
OLIVAR, ODILON O.
PINEDA, RUFINO N.
CABULA, RIZALYN Z.
ESPEDIDO, ARLENE O.
AYALA, ROSELLE Y.
VILLAVERDE, LORNA S.
BOMBANI, JOSEFINA O.
PEREZ, MARY JANE Z.
CALUPIG, NECIAS C.
PATAUNIA, AILEEN R.
RANERA, MARIO C. REYES,
JR., ERMELO A. ESCOBIAS,
ENRICO T. NAEZ,
RIZALINO O. AGUAS,
ANTONIO Z. SALVAN,
MAIDE D. JADER, ISADORA
G. REYES, DALMACIA
AIZELE P. RAFA, RONALDO
Q. CARILLO, NANCY N.
BABLES, ESPERANZA E.
CABRIGA, LUISA ROSAN B.
ABULENCIA, AMELIA F.
BABIERRA, MARILOU D.
VILLANUEVA, SONIA C.
TABI, MELANIE C.
TALABONG, MA. CECILIA R.
POTESTADES, REMEDIOS A.
VILLORIA, ARMANDO
TABERNILLA, CELINA B.
OABEL, BENILDA O. DE
GUZMAN, NARCISO P.
RAMALLOSA, CRISTINO V.
ZAGALA, AUREA S. RESARE,
ROY Z. SUMINISTRADO, PAZ
V. JAVAL, GALLARDO N.
EBINA, BRENDA B.
SUMALABE, ERLITO A.
OBDIANELA, HECTOR D.
OABEL, NELSON V.
COLADILLA, FABIAN
JABALLA, EVANGELINA L.
LAVADIA, MANOLO G.
ROMERO, SUSANA V.
AONUEVO, DR. CESAR
ANTHONY ORIAS, CRISTETA
O. BAJAR, ERLINDA C.
TAGULINAO, ROSITA M.
AMOYO, MERCEDITA C.
Decision 3 G.R. No. 213189

REYES, LETECIA B.
SANDOVAL, ISABEL S.
CARANDANG, MARIAN JOY
INES N. ABADILLA, LAARNI
Q. LUNA, LORENA D. PADUA,
MAROCHELLE S. ABAS, MA.
VERONICA C. NACA,
LORENZO GUAO, AVELINA
S. MARINAY, IRMA C.
ILOCARIO, VENERACION R.
SAN JUAN, MARIDEL C.
BALLARD, LILIA D.
LACORTE, REMEDIOS Z.
JUACALLA, JOSEFINA N.
MANTES, DELIA S.
TABERNILLA, JOCELYN S.
CADAVIDO, FLORENCE O.
CAGAUAN, CONCEPCION C.
CABRIGA, LEOVINA C.
FLORES, HERMINIA V.
LADINES, ROMMEL N.
ABUYAN, ABNER A.
ZUBIETA, DANIEL A.
LAVADO, MIGUEL O.
QUINSANOS, RUELITO O.
AOSO, RADITO C. LABITA,
RODEL M. CADEMIA,
ELADIO V. MANZANO, JR.,
GILBERT T. OABEL, EFREN
A. ZARSUELO, RUBEN S.
ABLAA, ILUMINADA R.
CUEVAS, VIRGILIO A.
CABAAS, RENATO M.
MANLULU, RAMON M.
VALDEAVILLA, FLORENCIA
E. REMOLONA, VERONICA
N. GARCIA, ALLAN C.
ZAGALA, RAYMUNDO L.
CONSTANTINO, ISAGANI C.
REQUISO, ARNEL V.
RATUISTE, FREDIE R.
FLORES, LORD R. QUINTO,
WARREN A. OBEA, and
BELEN D. PANDEZ,
Petitioners,**

**
Petitioners names indicated as it appears from the Verification and Certification of Non-Forum
Shopping attached to the petition. See rollo, pp. 52-56.
Decision 4 G.R. No. 213189

- versus -

COMMISSION ON AUDIT,
Respondent.

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

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for certiorari1 under Rule 64 in relation to

Rule 65 of the Rules of Court are the Decision2 dated December 21, 2012
and the Resolution3 dated March 13, 2014 rendered by the Commission on
Audit (COA) En Banc, which upheld Notices of Disallowance (ND) Nos.
2009-001-101-(08) and 2009-002-101-(09) both dated March 6, 2009 in the
amounts of 9,230,434.20 and 19,933,510.00 as 2008 and 2009
Collective Negotiation Agreement (CNA) Incentives, respectively, paid to
the rank-and-file employees of the local government unit (LGU) of Tayabas,
Quezon.

The Facts

On November 13, 20074 and February 4, 2008,5 the LGU of Tayabas,

Quezon entered into CNAs with the Unyon ng mga Kawani ng
Pamahalaang Lokal ng Tayabas (UNGKAT),6 an employees organization
of the LGU of Tayabas, Quezon duly registered with the Department of
Labor and Employment (DOLE) and the Civil Service Commission (CSC),
per Certificate of Registration No. 8277 dated June 14, 2001, which
conferred upon it the right to be certified as the sole representative of the
LGU of Tayabas, Quezons rank-and-file employees.8

Thereafter, or on February 11, 2008, the local Sanggunian, whose

members include herein petitioners Venerando R. Rea, Luzviminda B.
Cuadra, Maria Cielito V. Zeta, Estelito M. Querubin, and Lyka Monika J.
Oabel,9 (local Sanggunian members) passed City Ordinance No. 08-0310
1
Id. at 20-51.
2
Id. at 7-13. Signed by Chairperson Ma. Gracia M. Pulido Tan, Commissioner Juanito G. Espino, Jr.
and Commissioner Heidi L. Mendoza.
3
Id. at 14. Issued by Director IV Nilda B. Plaras.
4
Id. at 73-82-A.
5
Id. at 83-94.
6
Id. at 7.
7
Id. at 72.
8
See id. at 24.
9
Id. at 21.
10
Id. at 99-103.
Decision 5 G.R. No. 213189

appropriating the amount of 9,230,434.49 for the payment of the 2008

CNA Incentive to the rank-and-file employees of Tayabas, Quezon to be
sourced from the LGUs Maintenance and Other Operating Expenses
(MOOE) savings for 2007.11 However, for failure to submit the required
documents, the Office of the Auditor of COA, Province of Quezon (Office
of the Auditor) issued Notice of Suspension (NS) No. 2008-001-101(08)12
dated December 17, 2008, anchored on the non-registration of the CNA with
the CSC and the absence of cost-cutting measures therein.13

Disputing the suspension, petitioner Faustino A. Silang (Silang), City

Mayor of Tayabas, Quezon, through a letter14 dated February 9, 2009,
submitted the letter15 dated January 28, 2009 of then UNGKAT President
petitioner Enrico T. Naez (Naez).16 In the letter, Naez argued that the
non-registration of the CNA with the CSC was not a bar to the payment of
the 2008 CNA Incentive and that the cost-cutting measures were provided in
the Minutes of the Meeting dated September 26, 2007, prior to the CNA-
signing on November 13, 2007.17 However, the Office of the Auditor
maintained that: (a) prior registration of the CNA with the CSC; (b)
accreditation by CSC of UNGKAT as the sole and exclusive negotiating
agent of the LGU concerned, and (c) the identification of cost-cutting
measures in the CNA itself are indispensable requisites for the validity of
payment of the 2008 CNA Incentive.18 Consequently, the Office of the
Auditor issued Notice of Disallowance (ND) No. 2009-001-101-(08)19 dated
March 6, 2009 disallowing the amount of 9,230,434.20 representing the
2008 CNA Incentive paid to 156 rank-and-file employees of the LGU of
Tayabas, Quezon.20

Meanwhile, on February 11, 2009, the local Sanggunian passed

Ordinance No. 09-0121 appropriating the amount of 39,867,161.00 for the
payment of the 2009 CNA Incentive to be sourced from the LGUs MOOE
savings for 2008.22 As the 2009 CNA Incentive was suffering from the same
infirmities as the 2008 CNA Incentive, among them, the fact that UNGKAT
was not accredited by CSC at the time of the execution of the CNA, the
Office of the Auditor issued ND No. 2009-002-101-(09)23 dated March 6,

11
Id. at 7.
12
Id. at 106-108.
13
Id. at 7-8.
14
Id. at 109.
15
Id. at 110-112.
16
Id. at 159.
17
Id. at 111. See also id. at 8.
18
Id. at 8.
19
Id. at 118-120. See also Amended Notice of Disallowance No. 2009-001-101-(08) dated March 3,
2011; id. at197-201-A.
20
Id. at 8 and 159.
21
Id. at 113-117.
22
Id. at 8.
23
Id. at 121-123. See also Amended Notice of Disallowance No. 2009-002-101-(09) dated March 3,
2011; id. at 202-207.
Decision 6 G.R. No. 213189

2009 disallowing the amount of 19,933,510.00 representing the 2009 CNA

Incentive.24

Aggrieved, the LGU of Tayabas, Quezon, as represented by Silang,

appealed25 the NDs to the Regional Director, COA Regional Office No.
IV.26

The Ruling of the COA Regional Director

In a Decision27 dated November 9, 2010, the COA Regional Director

(RD) denied the appeal and sustained the assailed NDs on the grounds,
among others, that UNGKAT was not accredited with the CSC at the time of
the signing of the CNAs,28 and non-compliance with the requirement that the
savings from which the payment of the 2008 and 2009 CNA Incentives are
to be sourced must be reckoned from the date of the signing of the CNAs.29
The COA RD found that while UNGKAT was registered with DOLE and
CSC as of June 14, 2001, such registration did not confer upon it the right to
negotiate with management on behalf of its members.30 Certificate of
Registration No. 827 merely conferred upon it the right to be certified,
subject to the conditions prescribed in [Executive Order No. 180] and
Implementing Rules, as the sole representative of the rank-and-file
employees to negotiate for them.31 This simply means that after registration,
UNGKAT may seek accreditation as the sole negotiating representative of
the LGU personnel. As UNGKAT was not accredited with the CSC at the
time of the signing of the CNA, as in fact it was only accredited with the CSC
on January 14, 2009 under CSC Resolution No. 090087,32 the COA RD
concluded that the 2008 and 2009 CNA Incentives were properly disallowed
in view of the requirement under Item No. 5.1 of the Department of Budget
and Management (DBM) Budget Circular No. 2006-01,33 which provides:

5.0 Policy Guidelines

5.1 The CNA Incentive in the form of cash may be granted to

employees covered by this Circular, if provided for in the
CNAs or in the supplements thereto, executed between the
representatives of management and the employees
organization accredited by the CSC as the sole and
exclusive negotiating agent for the purpose of collective
negotiations with the management of an organizational unit

24
Id. at 8.
25
See Appeal Memorandum dated September 11, 2009; id. at 126-157.
26
See Notice of Appeal dated May 7, 2009 and Minute Resolution No. 09-51 dated May 4, 2009
authorizing the City Mayor to file an Appeal before the COA RD; id. at 124-125-A.
27
Id. at 158-165. Issued by Regional Director Leonardo J. Jamoralin.
28
Id. at 162.
29
Id. at 163.
30
Id. at 162.
31
Id. at 72; italics and underscoring supplied.
32
Id. at 272.
33
Re: Grant of Collective Negotiation Agreement (CNA) Incentive dated February 1, 2006.
Decision 7 G.R. No. 213189

listed in Annex A of PSLMC Resolution No. 01, s. 2002

and as updated.

Moreover, Item 7.0 of the same DBM Circular states:

7.0 Funding Source

7.1 The CNA Incentive shall be sourced solely from savings from
released [MOOE] allotments for the year under review, still
valid for obligation during the year of payment of the CNA,
subject to the following conditions:

7.1.1 Such savings were generated out of the cost-cutting

measures identified in the CNAs and supplements
thereto;

7.1.2 Such savings shall be reckoned from the date of

signing of the CNA and supplements thereto;

xxxx

Further, as the first CNA in this case was signed only on November
13, 2007, the computation of the amount of the actual MOOE savings should
commence only from that date. Since the MOOE savings to be used for the
2008 CNA Incentive amounting to 11,538,043.1234 was saved from
September 2007 to December 2007, the said CNA Incentive cannot therefore
be allowed, in violation of Item No. 7.1.2 as above-quoted.

Dissatisfied, the LGU of Tayabas, Quezon, as represented by Silang,

elevated35 the case to the COA En Banc, which resolved the issue of the
legality of the CNA Incentives.

The Ruling of the COA En Banc

In a Decision36 dated December 21, 2012, the COA En Banc affirmed

the RD November 9, 2010 Decision disallowing the payments for the 2008
and 2009 CNA Incentives. It echoed the RDs finding that at the time of the
execution of the CNA, UNGKAT had no CSC accreditation as required in
DBM Budget Circular No. 2006-01, as in fact, it was accredited with the
CSC only on January 14, 2009.37 With regard to the reckoning date and
computation of savings from which the 2008 CNA Incentive may be
sourced, since the same was computed from September 2007, or two (2)
months before the first CNA was signed on November 13, 2007, the same

34
Rollo, p. 98.
35
See Petition filed before the COA on February 18, 2011; id. at 166-196.
36
Id. at 7-13.
37
Id. at 11.
Decision 8 G.R. No. 213189

cannot be allowed, as the said DBM Circular requires that the savings be
reckoned from the date of the signing of the CNA.38

The LGU of Tayabas, Quezons motion for reconsideration was

denied by the COA En Banc in the Resolution39 dated March 13, 2014;
hence, this petition.

The Issues Before the Court

The issues advanced for the Courts resolution are whether or not the
COA En Banc committed grave abuse of discretion when it: (a) affirmed the
disallowance of the 2008 and 2009 CNA Incentives on the ground that
UNGKAT was not accredited with the CSC; (b) ruled that the LGU of
Tayabas, Quezons savings, to be considered as CNA Incentives, shall be
reckoned from the date of signing of the CNAs; and (c) failed to consider
good faith on the part of the management and the union in the granting of the
2008 and 2009 CNA Incentives.

The Courts Ruling

The petition is partly meritorious.

Item No. 5.1 of DBM Budget Circular No. 2006-01 clearly requires
accreditation with the CSC for the purpose of collective negotiations prior to
the grant of CNA Incentives, to wit:

5.0 Policy Guidelines

5.1 The CNA Incentive in the form of cash may be granted to

employees covered by this Circular, if provided for in the
CNAs or in the supplements thereto, executed between the
representatives of management and the employees
organization accredited by the CSC as the sole and
exclusive negotiating agent for the purpose of collective
negotiations with the management of an organizational unit
listed in Annex A of PSLMC Resolution No. 01, s. 2002
and as updated.

In this case, records show that UNGKAT, the rank-and-file

employees organization of the LGU of Tayabas, Quezon, had no CSC
accreditation when the CNAs were executed on November 13, 2007 and
February 4, 2008. In fact, it was accredited with the CSC only on January
14, 2009, as evidenced by CSC Resolution No. 09008740 of even date, which
states, inter alia:
38
Id. at 12.
39
Id. at 14.
40
Id. at 272.
Decision 9 G.R. No. 213189

NOW, THEREFORE, the Commission hereby resolves to accredit

the Unyon ng mga Kawani ng Pamahalaang Lokal ng Tayabas
(UNGKAT). Accordingly, it is declared as the sole and exclusive
representative of the rank-and-file employees of the City Government of
Tayabas, City Hall, Tayabas City, Quezon for purposes of collective
negotiations with management on terms and conditions of employment not
fixed by law.41

As such, the 2008 and 2009 CNA Incentives granted to UNGKAT

under the CNAs executed on November 13, 2007 and February 4, 2008 must
clearly be disallowed for UNGKATs lack of CSC accreditation at that time.

Moreover, as the MOOE savings from which the CNA Incentives may
be sourced was computed from September 2007, or two (2) months before
the first CNA was signed on November 13, 2007, the 2008 CNA Incentive
cannot be granted in view of Item 7.1.2 of DBM Budget Circular No. 2006-
01 which requires that the savings be reckoned from the date of the signing
of the CNA, to wit:

7.0 Funding Source

7.1 The CNA Incentive shall be sourced solely from savings from
released [MOOE] allotments for the year under review, still
valid for obligation during the year of payment of the CNA,
subject to the following conditions:

7.1.1 Such savings were generated out of the cost-cutting

measures identified in the CNAs and supplements
thereto;

7.1.2 Such savings shall be reckoned from the date of

signing of the CNA and supplements thereto;

x x x x (emphasis supplied)

With respect to the issue of good faith in the allowance and receipt of
the 2008 and 2009 CNA Incentives, the Court finds petitioners contention
partly meritorious.

As a general rule, public officials who are directly responsible for the
any illegal expenditure of public funds are personally liable therefor. This
mandate is consistently stated in the following provisions of law:

41
Id.
Decision 10 G.R. No. 213189

(a) Section 52, Chapter 9, entitled Accountability and

Responsibility for Government Funds and Property, Title I, Subtitle B,
Book V of Executive Order No. 292, Series of 1987, otherwise known as
the Administrative Code of 198742 (Administrative Code):

Section 52. General Liability for Unlawful Expenditures.Expenditures

of government funds or uses of government property in violation of law or
regulations shall be a personal liability of the official or employee found
to be directly responsible therefor. (Emphasis supplied)

(b) Section 351, Chapter IV, entitled Expenditures,

Disbursements, Accounting and Accountability, Title V, Book II of
Republic Act No. 7160, otherwise known as the Local Government
Code 199143 (LGC):

Section 351. General Liability for Unlawful Expenditures. - Expenditures of funds

or use of property in violation of this Title and other laws shall be a personal
liability of the official or employee responsible therefor. (Emphasis supplied)

(c) Section 103, Chapter 5, entitled Accountability and

Responsibility for Government Funds and Property of Presidential
Decree No. 1445, otherwise known as the Government Auditing Code
of the Philippines44 (Auditing Code):

Section 103. General liability for unlawful expenditures. Expenditures of

government funds or uses of government property in violation of law or
regulations shall be a personal liability of the official or employee found
to be directly responsible therefor. (Emphasis supplied)

Section 43, Chapter 5, entitled Budget Execution, Book VI of

the Administrative Code likewise states that every official or employee
authorizing or making an illegal payment, or taking part therein, and every
person receiving such payment shall be jointly and severally liable to the
Government for the full amount so paid or received:

Section 43. Liability for Illegal Expenditures.Every expenditure or

obligation authorized or incurred in violation of the provisions of this
Code or of the general and special provisions contained in the annual
General or other Appropriations Act shall be void. Every payment made
in violation of said provisions shall be illegal and every official or
employee authorizing or making such payment, or taking part
therein, and every person receiving such payment shall be jointly and
severally liable to the Government for the full amount so paid or
received.

42
Approved on July 25, 1987.
43
Approved on October 10, 1991.
44
Approved on June 11, 1978.
Decision 11 G.R. No. 213189

Any official or employee of the Government knowingly incurring any

obligation, or authorizing any expenditure in violation of the provisions
herein, or taking part therein, shall be dismissed from the service, after due
notice and hearing by the duly authorized appointing official. If the
appointing official is other than the President and should he fail to remove
such official or employee, the President may exercise the power of
removal. (Emphasis supplied)

In similar vein, Section 342, Chapter IV, Title V, Book II of the

LGC states that the superior officer directing, or the department head
participating in the illegal or improper use or application or deposit of
government funds or property, shall be jointly and severally liable with the
local treasurer, accountant, budget officer, or other accountable officer for
the sum or property so illegally or improperly used, applied or deposited.

Section 342. Liability for Acts Done Upon Direction of Superior Officer,
or Upon Participation of Other Department Heads or Officers of
Equivalent Rank. Unless he registers his objection in writing, the local
treasurer, accountant, budget officer, or other accountable officer shall not
be relieved of liability for illegal or improper use or application or deposit
of government funds or property by reason of his having acted upon the
direction of a superior officer, elective or appointive, or upon participation
of other department heads or officers of equivalent rank. The superior
officer directing, or the department head participating in such illegal
or improper use or application or deposit of government funds or
property, shall be jointly and severally liable with the local treasurer,
accountant, budget officer, or other accountable officer for the sum or
property so illegally or improperly used, applied or deposited.
(Emphasis supplied)

Meanwhile, Section 104, Chapter 5 of the Auditing Code provides

that the treasurer of the local government unit shall exercise the diligence of
a good father of a family in supervising the accountable officers under him;
otherwise, he shall be jointly and solidarily liable with them for the loss of
government funds or property under their control:

Section 104. Records and reports required by primarily responsible

officers. The head of any agency or instrumentality of the national
government or any government-owned or controlled corporation and any
other self-governing board or commission of the government shall
exercise the diligence of a good father of a family in supervising
accountable officers under his control to prevent the incurrence of loss of
government funds or property, otherwise he shall be jointly and solidarily
liable with the person primarily accountable therefor. The treasurer of
the local government unit shall likewise exercise the same degree of
supervision over accountable officers under his supervision otherwise,
he shall be jointly and solidarily liable with them for the loss of
government funds or property under their control. (Emphasis
supplied)

Clearly, therefore, public officials who are directly responsible for, or

participated in making the illegal expenditures, as well as those who actually
Decision 12 G.R. No. 213189

received the amounts therefrom in this case, the disallowed CNA

Incentives shall be solidarily liable for their reimbursement.

By way of exception, however, passive recipients or payees of

disallowed salaries, emoluments, benefits, and other allowances need not
refund such disallowed amounts if they received the same in good faith.45
Stated otherwise, government officials and employees who unwittingly
received disallowed benefits or allowances are not liable for their
reimbursement if there is no finding of bad faith.46 In Lumayna v. COA,47 the
Court declared that notwithstanding the disallowance of benefits by COA,
the affected personnel who received the said benefits in good faith should
not be ordered to refund the disallowed benefits. Similarly, in Querubin v.
Regional Cluster Director, Legal and Adjudication Office, COA Regional
Office VI, Pavia, Iloilo City,48 the Court held:

Considering, however, that all the parties here acted in

good faith, we cannot countenance the refund of subject
incentive benefits for the year 1992, which amounts the
petitioners have already received. Indeed, no indicia of bad faith
can be detected under the attendant facts and circumstances. The
officials and chiefs of offices concerned disbursed such incentive
benefits in the honest belief that the amounts given were due to
the recipients and the latter accept the same with gratitude,
confident that they richly deserve such benefits.

x x x Thus, being in good faith, petitioners need not refund the

allowances and bonuses they received but disallowed by the COA.49

In this case, the majority of the petitioners are the LGU of Tayabas,
Quezons rank-and-file employees and bona fide members of UNGKAT
(named-below)50 who received the 2008 and 2009 CNA Incentives on the

45
See Mendoza v. COA, G.R. No. 195395, September 10, 2013, 705 SCRA 306; Agra v. COA, 677 Phil.
608 (2011); Veloso v. COA, 672 Phil. 419 (2011); Singson v. COA, 641 Phil. 154 (2010); Lumayna v.
COA, 616 Phil. 929 (2009); Bases Conversion and Development Authority v. Commission on Audit,
599 Phil. 455 (2009); Barbo v. COA, 589 Phil. 289 (2008); Magno v. COA, 558 Phil. 76 (2007);
Benguet State University v. Commission on Audit, 551 Phil. 878 (2007); Public Estates Authority v.
COA, 541 Phil. 412 (2007); Abanilla v. COA, 505 Phil. 202 (2005); Home Development Mutual Fund
v. COA, 483 Phil. 666 (2004); Kapisanan ng mga Manggagawa sa Government Service Insurance
System v. COA, 480 Phil. 861 (2004); Blaquera v. Alcala, 356 Phil. 678 (1998).
46
See Justice Arturo J. Brions Concurring and Dissenting Opinion in Technical Education and Skills
Development Authority v. COA, G.R. No. 204869, March 11, 2014, 718 SCRA 402, 441-443.
47
616 Phil. 929, 945 (2009).
48
477 Phil. 919 (2004).
49
Id. at 924-925, citing Blaquera v. Alcala, supra note 45, at 765-766.
50
Namely: Ginalyn Celestino, Gener B. Abordo, German L. Jamilano, Rolando P. Borromeo, Renato
Tabernilla, Romeo G. Cariaga, Romeo O. Gamboa, Adelmo m. Abesamis, Roel O. Tadiosa, Ruperto
R. Zarsaga, Joselito C. Talabong, Emmanuel L. Averilla, Mario G. Quesea, Felix T. Marquez,
Marcelito R. Ayala, Dionisio N. Sombrero, Reynaldo J. Maderal, Carlos G. Abanto, Esmeraldo Z.
Rivere, Regalado O. Romero, Romeo S. Bombani, Marcelino U. Contreras, Manuel S. Abragon,
Gerardo S. Edresa, Esmeraldo V. Madronio, Teodoro V. Rivadenera, Rodrigo A. Magtibay, Michael
Castillo, Roberto S. Villa, Alexander A. Olivar, Odilon O. Pineda, Rufino N. Cabula, Arlene O. Ayala,
Lorna S. Bombani, Josefina O. Perez, Necias C. Pataunia, Ermelo A. Escobias, Rizalino O. Aguas,
Antonio Z. Salvan, Maide D. Jader, Isadora G. Reyes, Dalmacia Aizele P. Rafa, Ronaldo Q. Carillo,
Nancy N. Bables, Esperanza E. Cabriga, Luisa Rosan B. Abulencia, Marilou D. Villanueva, Sonia C.
Tabi, Melanie C. Talabong, Ma. Cecilia R. Potestades, Remedios A. Villoria, Armando Tabernilla,
Benilda O. De Guzman, Narciso P. Ramallosa, Cristino V. Zagala, Roy Z. Suministrado, Paz V. Javal,
Decision 13 G.R. No. 213189

honest belief that UNGKAT was fully clothed with the authority to represent
them in the CNA negotiations. As the records bear out, there was no
indication that these rank-and-file employees, except the UNGKAT officers
or members of its Board of Directors named below, had participated in any
of the negotiations or were, in any manner, privy to the internal workings
related to the approval of said incentives; hence, under such limitation, the
reasonable conclusion is that they were mere passive recipients who cannot
be charged with knowledge of any irregularity attending the disallowed
disbursement. Verily, good faith is anchored on an honest belief that one is
legally entitled to the benefit,51 as said employees did so believe in this case.
Therefore, said petitioners should not be held liable to refund what they had
unwittingly received.

With respect, however, to the other petitioners who, apart from being
rank-and-file employees of the LGU of Tayabas, Quezon, were also
UNGKAT officers at the time, and who directly participated in the
negotiations pertaining to the disallowed CNA incentives, namely,
petitioners Naez, Dr. Cesar Anthony Orias, Aurea S. Resare, Roselle Y.
Villaverde, Celina B. Oabel, Aileen R. Ranera, Veronica N. Garcia, Allan C.
Zagala, Nelson V. Coladilla, Mary Jane Z. Calupig, Irma C. Ilocario, as well
as the members of the Board of Directors of UNGKAT, namely, Raymundo
L. Constantino, Edmerlito P. Ybardolaza, Sr., Rolando Z. Olivar, Mario C.
Reyes, Jr., Amelia F. Babierra, Nonilon Reyes, Rizalyn Z. Espedido, Marvin
Jacela, Joy O. Taguilaso, and Fabian Jaballa,52 they cannot be deemed to
have acted in good faith. Considering that prior accreditation as sole
negotiating agent was required under DBM Budget Circular No. 2006-01,
the UNGKAT officers and Board of Directors ought to have known that they
were bereft of authority to enter into negotiations on behalf of the rank-and-
file employees with respect to the CNA Incentives.

Similarly, such finding of good faith cannot be made to apply to

Silang, who, as City Mayor, approved the allowances, as well as the local
Sanggunian members, who enacted the ordinances authorizing the payment
of the subject CNA Incentives. As City Mayor and members of the local
Sanggunian, they are presumed to be acquainted with and, in fact, even
duty bound to have full knowledge of the requirements under the
Gallardo N. Ebina, Brenda B. Sumalabe, Erlito A. Obdianela, Hector D. Oabel, Evangelina L. Lavadia,
Manolo G. Romero, Susana V. Aonuevo, Cristeta O. Bajar, Erlinda C. Tagulinao, Rosita M. Amoyo,
Mercedita C. Reyes, Letecia B. Sandoval, Isabel S. Carandang, Marian Joy Ines N. Abadilla, Laarni Q.
Luna, Lorena D. Padua, Marochelle S. Abas, Ma. Veronica C. Naca, Lorenzo Guao, Avelina S.
Marinay, Veneracion R. San Juan, Maridel C. Ballard, Lilia D. Lacorte, Remedios Z. Juacalla, Josefina
N. Mantes, Delia S. Tabernilla, Jocelyn S. Cadavido, Florence O. Cagauan, Concepcion C. Cabriga,
Leovina C. Flores, Herminia V. Ladines, Rommel N. Abuyan, Abner A. Zubieta, Daniel A. Lavado,
Miguel O. Quinsanos, Ruelito O. Aoso, Radito C. Labita, Rodel M. Cademia, Eladio V. Manzano, Jr.,
Gilbert T. Oabel, Efren A. Zarsuelo, Ruben S. Ablaa, Iluminada R. Cuevas, Virgilio A. Cabaas,
Renato M. Manlulu, Ramon M. Valdeavilla, Florencia E. Remolona, Isagani C. Requiso, Arnel V.
Ratuiste, Fredie R. Flores, Lord R. Quinto, Warren A. Obea, and Belen D. Pandez.
51
Manila International Airport Authority v. COA, 681 Phil. 644, 669 (2012).
52
See Minutes of the Meeting dated September 26, 2007, rollo, pp. 276-278. Note that while Arlene
Rodillas and Nonilon Reyes also appears as directors, they were not, however, impleaded in this case.
Decision 14 G.R. No. 213189

applicable policies for the valid grant of CNA Incentives, i.e., the requisite
accreditation of UNGKAT with the CSC at the time of the signing of the
CNA as required under DBM Budget Circular No. 2006-01. Indeed,
knowledge of basic procedure is part and parcel of their shared fiscal
responsibility under Section 305 (1), Chapter I, Title V, Book II of the LGC,
to wit:

Section 305. Fundamental Principles. The financial affairs, transactions,

and operations of local government units shall be governed by the
following fundamental principles:

xxxx

(1) Fiscal responsibility shall be shared by all those exercising authority

over the financial affairs, transactions, and operations of the local
government units; x x x.53

Their unexplained failure in this wise, therefore, goes against their

claim of good faith in the allowance and payments of the CNA Incentives,
especially since the 2008 CNA Incentive had already been disallowed even
prior to the approval of Ordinance No. 09-01 authorizing the release of the
2009 CNA Incentive. That they did not receive any amount54 from the
disallowed benefits does not exculpate them from personal and solidary
liability for reimbursement therefor, under the legal provisions above-
quoted, as receipt of the disallowed benefits is inconsequential, absent
any showing of good faith. As aptly pointed out by Associate Justice
Arturo D. Brion during the deliberations on this case, the receipt or non-
receipt of illegally disbursed funds is immaterial to the solidary liability of
the government officials directly responsible therefor, as in the case of
Maritime Industry Authority v. COA,55 where the Court held the approving
officers therein who acted in bad faith as solidarily liable to return the
disallowed funds, even if they never got hold of them.

In fine, Silang, the City Mayor, as well as the local Sanggunian

members, as the approving authority, together with the UNGKAT officers
and members of the Board of Directors who actively participated in the
negotiations for the approval of the disallowed incentives despite knowledge
of UNGKATs non-accreditation at the time, are solidarily liable to refund
the disallowed benefits in this case, without prejudice to any further finding of
administrative liability as a consequence of their actions. This pronouncement is
also without prejudice to any finding pertaining to any other public official or
person who may be held liable for the return of such illegal disbursement but
were not impleaded in this case.

53
See Garcia, Jr. v. Ombudsman, G.R. No. 197567, November 19, 2014.
54
See Schedule 2, Schedule of Payees, Amended Notice of Disallowance No. 2009-001-101-(08), rollo,
pp. 199-201-A; and Schedule 2, Schedule of Payees, Amended Notice of Disallowance No. 2009-001-
101-(09), id. at 204-207.
55
See G.R. No. 185812, January 13, 2015.
 Decision 15 G.R. No. 213189

WHEREFORE, the petition is PARTLY GRANTED. The Decision

dated December 21, 2012 and the Resolution dated March 13, 2014 of the
Commission on Audit En Banc are hereby AFFIRMED with
MODIFICATION in that the petitioners who are rank-and-file employees
of the local government unit of Tayabas, Quezon need not refund the
disallowed amounts of P9,230,434.20 and Pl9,933,510.00 as 2008 and 2009
Collective Negotiation Agreement Incentives (CNA), respectively.
However, petitioners Faustino A. Silang, Venerando R. Rea, Luzviminda B.
Cuadra, Maria Cielito V. Zeta, Estelito M. Querubin, and Lyka Monika J.
Oabel, as approving officers; Enrico T. Nafiez, Dr. Cesar Anthony Orias,
Aurea S. Resare, Roselle Y. Villaverde, Celina B. Oabel, Aileen R. Ranera,
Veronica N. Garcia, Allan C. Zagala, Nelson V. Coladilla, Mary Jane Z.
Calupig, Irma C. Ilocario, as officers of the Unyon ng mga Kawani ng
Pamahalaang Lokal ng Tayabas (UNGKAT); and Raymundo L.
Constantino, Edmerlito P. Ybardolaza, Sr., Rolando Z. Olivar, Mario C.
Reyes, Jr.~ Amelia F. Babierra, Rizalyn Z. Espedido, Marvin Jacela, Joy 0.
Taguilaso, and Fabian Jaballa, as members of UNGKAT'S Board of
Directors, are solidarily liable to refund the disallowed amounts, without
prejudice to: (a) any finding of administrative liability for the grant of the
disallowed 2008 and 2009 CNA Incentives; and (b) any finding pertaining to
any other public official or person who may be held liable for the return of
such illegal disbursement but were not impleaded in this case.

SO ORDERED.

AAa.W
ESTELA 1\1: 'VERLAS-BERNABE
~

Associate Justice

WE CONCUR:

MARIA LOURDES P.A. SERENO

Chief Justice

QC_
ANTONIO T. CA J. VELASCO, JR.
Associate Justice ciate Justice

~~~~
TERESITA J. LEONARDO-DE CASTRO ARTURO D. BRION
Associate Justice Associate Justice
 Decision 16 G.R. No. 213189

--
~~
Associate Justice

J REZ
. "

On Leave
BIENVENIDO L. REYES / MARVIC M. V. F. LEONEN
Associate Justice Associate Justice

Associate Justice

CERTIFICATION

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.

MARIA LOURDES P. A. SERENO

Chief Justice