G.R. No.

232272, July 24, 2018 - SECRETARY

MARIO G. MONTEJO, IN HIS CAPACITY AS
SECRETARY OF THE DEPARTMENT OF SCIENCE
AND TECHNOLOGY (DOST), Petitioner, v.
COMMISSION ON AUDIT (COA), AND THE
DIRECTOR, NATIONAL GOVERNMENT SECTOR,
CLUSTER B - GENERAL PUBLIC SERVICES II
AND DEFENSE, COMMISSION ON AUDIT,
Respondents.

EN BANC
G.R. No. 232272, July 24, 2018
SECRETARY MARIO G. MONTEJO, IN HIS
CAPACITY AS SECRETARY OF THE
DEPARTMENT OF SCIENCE AND
TECHNOLOGY
(DOST), Petitioner, v. COMMISSION ON
AUDIT (COA), AND THE DIRECTOR,
NATIONAL GOVERNMENT SECTOR,
CLUSTER B - GENERAL PUBLIC SERVICES
II AND DEFENSE, COMMISSION ON
AUDIT, Respondents.
 DECISION
PERALTA, J.:
For this Court's resolution is the Petition for
Review1 on Certiorari under Rule 64 of the
Revised Rules of Civil Procedure assailing the
Decision2 dated September 26, 2016 and the
Resolution3 dated February 27, 2017 of the
Commission on Audit (COA), which affirmed
Notice of Disallowance No. 2011-021-101-(11)
dated November 17, 2011 and Notice of
Disallowance No. 2011-022-101-(11) dated
November 18, 2011 issued by the Office of
the Auditor, COA, Taguig City disallowing the
grant/release of Collective Negotiation
Agreement Incentives (CNA Incentives) to the
officials and employees of the Department of
Science and Technology (DOST).

The facts follow.

During the Calendar Year 2010, petitioner

released CNA Incentives in the total amount
of Five Million Eight Hundred Seventy
Thousand Eight Hundred Eighty-Three Pesos
and Seventy-Nine Centavos (P5,870,883.79)
to the DOST employees, covered by the
following reference documents and
particulars:

Check
Date Payee Amount
No.
May 25, Mario P.
530803 P25,000.00
2010 Bravo
DOST
May 25, Officers
307423 P2,575,000.00
2010 and
Employees
May 28, Lilibeth O.
530888 P25,000.00
2010 Furoc
December Mario G.
534033 P25,000.00
16, 2010 Montejo
December Marilyn M.
534034 P25,000.00
16, 2010 Yap
December Mario P.
534035 P25,000.00
16, 2010 Bravo
DOST
December Officers
307547 P3,166,667.12
22, 2010 and
Employees
December Maxima M. 534285 P4,166.67
29, 2010 Taparan
TOTAL P5,870,883.79

Thereafter, on July 5, 2011, petitioner

received an Audit Observation Memorandum
(AOM) dated June 27, 2011 from the Audit
Team Leader of the Office of Auditor, COA,
noting various alleged deficiencies in the
grant of CNA Incentives by petitioner to its
employees, such as:
1. The payment of the CNA Incentive was not
supported with written resolution by the DOST
Management and SIKAT; DBM approved level
of operating expenses; Certificate issued by
the Head of the Agency; Detailed computation
of unencumbered savings; Proof of the
planned program; List of bonafide SIKAT
members and application for registration;

2. The cost-cutting measures and specific

systems improvement to be jointly
undertaken by DOST Management and the
employees' organization to achieve effective
service delivery and agency targets a lesser
cost were not identified in the CNA contrary to
Section 3 of Administrative Order No. 135;
3. The amount of CNA Incentive was
predetermined in the Collective Negotiation
Agreement signed by SIKAT and DOST
Management contrary to paragraph 5.6.1 of
Budget Circular No. 2006-1;

4. Mid-year CNA Incentive amounting to

P25,000.00 each was paid to DOST officers
and employees contrary to Section 5.7 of
Budget Circular No. 2006-1;

5. Officers or DOST Managerial employees

were granted the CNA Incentive contrary to
Section 2 of Administrative Order No. 135,
DBM Budget Circular No. 2006-1, PSLM
Resolution No. 4, s. 2002 and Section 5.7 of
the Collective Negotiation Agreement.4
On July 14, 2011, petitioner filed his Letter-
Reply5 dated July 11, 2011 and submitted the
required documents, certifications, detailed
computations and justifications as required by
the Office of the Auditor.

State Auditor IV Flordeliza A. Ares and State

Auditor V Myrna K. Sebial issued Notice of
Disallowance No. 2011-021-101-(11)6 dated
November 17, 2011 disallowing petitioner's
grant of CNA Incentives to DOST employees in
the total amount of P5,870,883.79 on the
alleged ground that it is violative of the
provisions of Public Sector Labor Management
Council (PSLMC) Resolution No. 4 dated
November 14, 2002, Budget Circular No.
2006-1 dated February 1, 2006 and
Administrative Order No. 135 dated
December 27, 2005.

Then in CY 2011, petitioner also released to

DOST employees CNA Incentives in the total
amount of Four Million Seven Hundred
Seventy-Three Thousand Eight Hundred
Twenty-One Pesos and Forty-Nine Centavos
(P4,773,821.49).

Thereafter, State Auditor IV Ares and State

Auditor V Sebial issued Notice of Disallowance
No. 2011-022-101-(11) dated November 18,
20117 disallowing petitioner's grant of CNA
Incentives to its employees, covered by the
following reference documents and
particulars:

Date Payee Check Amount

 No.
DOST
May 31, Officers
360753 P4,557,800.00
2011 and
Employees
May 31, Mario G.
582737 P40,000.00
2011 Montejo
May 31, Rodel A.
582740 P40,000.00
2011 Lara
December Wilhelmina
582742 P40,000.00
31, 2011 R. Mercado
December Marilyn M.
582739 P40,000.00
31, 2011 Yap
December Mario P.
582738 P40,000.00
31, 2011 Bravo
December Floramel E.
382741 P9,354.83
31, 2011 Gaerlan
December Corazon M.
582743 P6,666.66
31, 2011 Garcia
TOTAL P4,773,821.49

Petitioner appealed to the National

Government Sector (NGS), Cluster B-General
Services II and Defense, COA, the two Notices
of Disallowance issued by the Office of
Auditor.

The NGS rendered its Decision dated October

4, 2012, affirming the two Notices of
Disallowance, the dispositive portion of which
states:
WHEREFORE, premises considered, the
instant appeal is hereby DENIED and the
Notices of Disallowance Nos. 2011-021-101-
(11) dated November 17, 2011 and 2011-022-
101-(11) dated November 18, 2011 in the
amount of P5,870,883.79 and P4,773,821.49,
respectively, are AFFIRMED. This decision is
without prejudice to a further appeal that the
parties may deem proper.8
Petitioner filed a Petition for Review with
respondent COA, assailing the NGS Decision
dated October 4, 2012 which affirmed the
Notices of Disallowances. On October 18,
2016, the COA En Banc rendered its Decision,
the dispositive portion of which states:
WHEREFORE, premises considered, the
petition for review of secretary Mario G.
Montejo, Department of Science and
Technology (DOST), of National Government
Sector Cluster B Decision No. 2012-013 dated
October 4, 2012, is hereby DENIED for lack of
merit. Accordingly, Notice of Disallowance
Nos. 2011-021-101-(11) dated November 17,
2011 and 2011-022-101-(11) dated November
18, 2011, on the payment of Collective
Negotiation Agreement Incentives for
calendar years 2010 and 2011 to DOST
Central Office officials and employees in the
total amount of P10,644,705.28 are
AFFIRMED.9
According to the COA En Banc, the grant of
CNA Incentives by petitioner violated Sections
5.7, 7.1 and 7.1.1 of DBM Budget Circular No.
2006-1, since petitioner paid the CNA
Incentives during the middle of CY 2010 and
2011 and at the end of CY 2010. The COA En
Banc also found that petitioner failed to
submit proof that the grant of CNA incentives
was sourced from the savings generated from
the cost-cutting measures through a
comparative statement of DBM-approved
level of operating expenses and actual
operating expenses. Furthermore, the COA En
Banc held that the officers who approved the
grant of CNA Incentives should be solidarily
liable for the total disbursement and that the
payees should be held liable for the amount
they received pursuant to the principle
of solutio indebiti.

Hence, the present petition after the COA En

Banc denied petitioner's motion for
reconsideration.

Petitioner raises the following grounds for the

allowance of the present petition:
Respondent COA gravely erred in affirming
the 17 and 18 November 2011 Notices of
Disallowance Nos. 2011-021-101-(11) and
2011-022-101-(11), which disallowed the
payment of Collective Negotiation Agreement
Incentives (CNAI) for calendar years 2010 and
2011 to DOST Central Office employees in the
total amount of P10,644,705.28 because:
a) Petitioner's grant of CNAI was based on
identified cost-cutting measures;
b) Petitioner's grant of CNAI was sourced from
the savings generated from the cost-
cutting measures through a comparative
statement of DBM approved level of
operating expenses and actual operating
expenses;
c) Petitioner's grant of CNAI substantially
 complied with the requirements under DBM
Circular No. 2006-1; and
d) The payment of CNAI was done in good
faith, hence, no liability attaches
therefrom.10
Petitioner argues that the grant of CNA
Incentive was based on duly identified and
approved cost-cutting measures and systems
improvement. He also claims that its grant of
the CNA Incentive was sourced from the
savings generated from the cost-cutting
measures through a comparative statement
of DBM-approved level of operating expenses
and actual operating expenses. Petitioner
further avers that the grant of CNA Incentive
substantially complied with the requirement
of DBM Circular No. 2006-1 and that the
payment of CNA Incentives was made in good
faith, hence, no liability attaches therefrom.

In its Comment11 dated August 30, 2017,

respondent claims that it did not commit
grave abuse of discretion amounting to lack
or excess of jurisdiction in rendering the
assailed decision as the same is in
consonance with prevailing laws, rules and
regulations and established jurisprudence.
Respondent also argues that it correctly
disallowed petitioner's grant of CNA
Incentives to DOST officials and employees
and that the employees and officials of
petitioner agency are not excused from
refunding the amounts unduly disbursed to
them.

The petition is partly meritorious.

This Court finds that the COA did not err in

disallowing petitioner's grant of CNA
Incentives to DOST officials and employees.

As aptly found by the COA, several provisions

of DBNI BC No. 2006-1, particularly Items 5.7
and 7.1, have been violated in the release of
the CNA Incentives. The said provisions read
as follows:
5.7 The CNA Incentive for the year shall be
paid as a one-time benefit after the end
of the year, provided that the planned
programs/activities/projects have been
implemented and completed in accordance
with the performance targets for the year.

xxx
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 CNA and supplements thereto; x x x12
In this case, the DOST paid or granted the
CNA Incentive during the middle of CY 2010
and CY 2011, and again at the end of the
same year in 2010. Petitioner, however,
claims that the DOST substantially complied
with the requirement of DBM BC No. 2006-1 in
its grant of the CNA Incentives. According to
petitioner, while the DBM Circular provides
that the grant of the CNA Incentives should be
granted after the end of the year, it was
qualified by a provision that the grant shall be
released only after the
planned/activities/projects of the concerned
agency have been implemented in
accordance with the performance targets for
the year. Petitioner adds that the DOST has
repeatedly submitted documents proving that
the proposed program or planned activities
for the particular month have been achieved
and savings were generated following the
DOST Internal Guidelines, thus, while the CNA
Incentives was released in the middle of the
year, the grant was nevertheless compliant
with the condition that it should be anchored
on savings actually generated for a particular
year.

Petitioners reasoning is flawed. The above-

provisions of DBM BC No. 2006-1 is clear and
self-explanatory. As correctly ruled by the
COA En Banc, petitioner did not comply with
the directive of the DBM Circular, thus:
x x x It is clear from the aforecited provisions
that the payment of CNA incentive should be
a one-time benefit after the end of the year,
when the planned programs/activities/projects
have already been implemented and
completed in accordance with the
performance targets for the year. DOST did
not comply with this directive as it made a
mid-year payment of CNA incentive. While the
savings could be possibly determinable by
then, it is mandated that
programs/activities/projects should have
already been implemented and completed to
determine whether such activities generated
savings from which CNA incentive can be
sourced.

Likewise, DOST could have easily proven that

the payment of CNA incentive was solely
sourced from the savings generated from the
cost-cutting measures conducted by showing
a comparative statement of DBM approved
level of operating expenses. But DOST failed
to submit proof to that effect, thus, payment
of CNA incentive should be disallowed.13
COA's interpretation of its own auditing rules
and regulations, as enunciated in its
decisions, should be accorded great weight
and respect, as expounded in Espinas, et al.
v. COA,14 thus:
The CoA's audit power is among the
constitutional mechanisms that gives life to
the check-and-balance system inherent in our
system of government.15 As an essential
complement, the CoA has been vested with
the exclusive authority to 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. This is found in Section 2,
Article IX-D of the 1987 Philippine Constitution
which provides that:
Sec. 2. x x x.

(2) The Commission shall have 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.
As an independent constitutional body
conferred with such power, it reasonably
follows that the CoA's interpretation of its own
auditing rules and regulations, as enunciated
in its decisions, should be accorded great
weight and respect. In the recent case
of Delos Santos v. CoA,16 the Court explained
the general policy of the Court towards CoA
decisions reviewed
under certiorari17 parameters:18
[T]he CoA is endowed with enough latitude to
determine, prevent, and disallow irregular,
unnecessary, excessive, extravagant or
unconscionable expenditures of government
funds. It is tasked to be vigilant and
conscientious in safeguarding the proper use
of the government's, and ultimately, the
people's property. The exercise of its general
audit power is among the constitutional
mechanisms that gives life to the check and
balance system inherent in our form of
government.

x x x [I]t is the general policy of the Court to

sustain the decisions of administrative
authorities, especially one which is
constitutionally-created, such as the CoA, not
only on the basis of the doctrine of separation
of powers but also for their presumed
expertise in the laws they are entrusted to
enforce. Findings of administrative agencies
are accorded not only respect but also finality
when the decision and order are not tainted
with unfairness or arbitrariness that would
amount to grave abuse of discretion. It is only
when the CoA has acted without or in excess
of jurisdiction, or with grave abuse of
discretion amounting to lack or excess of
jurisdiction, that this Court entertains a
petition questioning its rulings. x x x.
The concept is well-entrenched: grave abuse
of discretion exists 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 as when the judgment
rendered is not based on law and evidence
but on caprice, whim, and despotism.19 Not
every error in the proceedings, or every
erroneous conclusion of law or fact,
constitutes grave abuse of discretion. The
abuse of discretion to be qualified as "grave"
must be so patent or gross as to constitute an
evasion of a positive duty or a virtual refusal
to perform the duty or to act at all in
contemplation of law.20
Nevertheless, in cases involving the
disallowance of salaries, emoluments,
benefits, and allowances due to government
employees, jurisprudence21 has settled that
recipients or payees in good faith need not
refund these disallowed amounts.22 For as
long as there is no showing of ill intent and
the disbursement was made in good faith,
public officers and employees who receive
subsequently disallowed benefits. or
allowances may keep the amounts disbursed
to them.23 Good faith has always been a valid
defense of public officials that has been
considered by this Court in several cases.24

In PEZA v. Commission on Audit, et al.,25 this

Court applied good faith as a valid reason to
absolve the responsible officers from liability
from refund, thus:
The question to be resolved is: To what extent
may accountability and responsibility be
ascribed to public officials who may have
acted in good faith, and in accordance with
their understanding of their authority which
did not appear clearly to be in conflict with
other laws? Otherwise put, should public
officials be held financially accountable for the
adoption of certain policies or programs which
are found to be not in accordance with the
understanding by the Commission on Audit
several years after the fact, which
understanding is only one of several ways of
looking at the legal provisions?
Good faith has always been a valid defense of
public officials that has been considered by
this Court in several cases. Good faith is a
state of mind. denoting honesty of intention,
and freedom from knowledge of
circumstances which ought to put the holder
upon inquiry; an honest intention to abstain
from taking any unconscientious advantage of
another, even though technicalities of law,
together with absence of all information,
notice, or benefit or belief of facts which
render transaction unconscientious.

In Arias v. Sandiganbayan, this Court placed

significance on the good faith of heads of
offices having to rely to a reasonable extent
on their subordinates and on the good faith of
those who prepare bids, purchase supplies or
enter into negotiations, thus:
There is no question about the need to ferret
out and convict public officers whose acts
have made the bidding out and construction
of public works and highways synonymous
with graft or criminal inefficiency in the public
eye. However, the remedy is not to indict and
jail every person who may have ordered the
project, who signed a document incident to its
construction, or who had a hand somewhere
in its implementation. The careless use of the
conspiracy theory may sweep into jail even
innocent persons who may have been made
unwitting tools by the criminal minds who
engineered the defraudation.

xxxx

We would be setting a bad precedent if a

head of office plagued by all too common
problems - dishonest or negligent
subordinates, overwork, multiple assignments
or positions, or plain incompetence - is
suddenly swept into a conspiracy conviction
simply because he did not personally examine
every single detail, painstakingly trace every
step from inception, and investigate the
motives of every person involved in a
transaction before affixing his signature as
the final approving authority.

xxxx

We can, in retrospect, argue that Arias should

have probed records, inspected documents,
received procedures, and questioned persons.
It is doubtful if any auditor for a fairly sized
office could personally do all these things in
all vouchers presented for his signature. The
Court would be asking for the impossible. All
heads of offices have to rely to a reasonable
extent on their subordinates and on the good
faith of those who prepare bids, purchase
supplies or enter into negotiations. x x x.
Similarly, good faith has also been
appreciated in Sistoza v. Desierto, thus:
There is no question on the need to ferret out
and expel public officers whose acts make
bureaucracy synonymous with graft in the
public eye, and to eliminate systems of
government acquisition procedures which
covertly ease corrupt practices. But the
remedy is not to indict and jail every person
who happens to have signed a piece of
document or had a hand in implementing
routine government procurement, nor does
the solution fester in the indiscriminate use of
the conspiracy theory which may sweep into
jail even the most innocent ones. To say the
least, this response is excessive and would
simply engender catastrophic consequences
since prosecution will likely not end with just
one civil servant but must, logically, include
like an unsteady streak of dominoes the
department secretary, bureau chief,
commission chairman, agency head, and all
chief auditors who, if the flawed reasoning
were followed, are equally culpable for every
crime arising from disbursements they
sanction.

Stretching the argument further, if a public

officer were to personally examine every
single detail, painstakingly trace every step
from inception, and investigate the motives of
every person involved in a transaction before
affixing his signature as the final approving
authority, if only to avoid prosecution, our
bureaucracy would end up with public
managers, doing nothing else but
superintending minute details in the acts of
their subordinates.

Stated otherwise, in situations of fallible

discretion, good faith is nonetheless
appreciated when the document relied upon
and signed shows no palpable nor patent, no
definite nor certain defects or when the public
officer's trust and confidence in his
subordinates upon whom the duty primarily
lies are within parameters of tolerable
judgment and permissible margins of error. As
we have consistently held, evidence of guilt
must be premised upon a more knowing,
personal and deliberate participation of each
individual who is charged with others as part
of a conspiracy.
And recently in Social Security System v.
Commission on Audit, this Court ruled that
good faith absolves liable officers from refund,
thus:
Notwithstanding the disallowance of the
questioned disbursements, the Court rules
that the responsible officers under the ND
need not refund the same on the basis of
good faith. In relation to the requirement of
refund of disallowed benefits or allowances,
good faith is a state of mind denoting honesty
of intention, and freedom from knowledge of
circumstances which ought to put the holder
upon inquiry; an honest intention to abstain
from taking any unconscientious advantage of
another, even though technicalities of law,
together with absence of all information,
notice, or benefit or belief of facts which
render transaction unconscientious.
xxxx

x x x In Mendoza v. COA, the Court held that

the lack of a similar ruling is a basis of good
faith. There is yet to be jurisprudence or
ruling that the benefits which may be
received by members of the SSC are limited
to those enumerated under Section 3 (a) of
the SS Law.
It is the same good faith, therefore, that will
absolve the responsible officers of PEZA from
liability from refund.
Similarly, in Development Bank of the
Philippines v. Commission on Audit,26 good
faith was also appreciated, thus:
Good faith is a state of mind denoting
"honesty of intention, and freedom from
knowledge of circumstances which ought to
put the holder upon inquiry; an honest
intention to abstain from taking any
unconscientious advantage of another, even
through technicalities of law, together with
absence of all information, notice or benefit or
belief of facts which render transaction
unconscientious."

In Zamboanga City Water District v. COA, the

Court held that approving officers could be
absolved from refunding the disallowed
amount if there was a showing of good faith,
to wit:
Further, a thorough [reading] of Mendoza and
the cases cited therein would lead to the
conclusion that ZCWD officers who approved
the increase of GM Bucoy's are also not
obliged either to refund the same. In de Jesus
v. Commission on Audit, the Court absolved
the petitioner therein from refunding the
disallowed amount on the basis of good faith,
pursuant to de Jesus and the Interim Board of
Directors, Catbalogan Water District v.
Commission on Audit. In the latter case, the
Court absolved the Board of Directors from
refunding the allowances they received
because at the time they were disbursed, no
ruling from the Court prohibiting the same
had been made. Applying the ruling
in Blaquera v. Alcala (Blaquera), the Court
reasoned that the Board of Directors need not
make a refund on the basis of good faith,
because they had no knowledge that the
payment was without a legal basis.

In Blaquera, the Court did not require

government officials who approved the
disallowed disbursements to refund the same
on the basis of good faith, to wit:
Untenable is petitioners' contention that the
herein respondents be held personally liable
for the refund in question. Absent a showing
of bad faith or malice, public officers are not
personally liable for damages resulting from
the performance of official duties.

Every public official is entitled to the

presumption of good faith in the discharge of
official duties. Absent any showing of bad
faith or malice, there is likewise a
presumption of regularity in the performance
of official duties.

xxxx

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 accepted the same with gratitude,
confident that they richly deserve such
benefits.

A careful reading of the above-cited

jurisprudence shows that even approving
officers may be excused from being
personally liable to refund the amounts
disallowed in a COA audit, provided that they
had acted in good faith. Moreover, lack of
knowledge of a similar ruling by this Court
prohibiting a particular disbursement is a
badge of good faith.
In Mendoza v. COA, the Court held that the
lack of a similar ruling disallowing a certain
expenditure is a basis of good faith. At the
time that the disallowed disbursement was
made, there was yet to be a jurisprudence or
ruling that the benefits which may be
received by members of the commission were
limited to those enumerated under the law.

By the same token, in SSS v. COA, the Court

pronounced that good faith may be
appreciated because the approving officers
did not have knowledge of any circumstance
or information which would render the
disallowed expenditure illegal or
unconscientious. The Board members therein
could also not be deemed grossly negligent as
they believed they could disburse the said
amounts on the basis of the provisions of the
R.A. No. 8282 to create their own budget.

On the other hand, in Silang v. COA, the Court

ordered the approving officers to refund the
disbursed CNA incentives because they were
found to be in bad faith as the disallowed
incentives were negotiated by the collective
bargaining representative in spite of non-
accreditation
with the CSC.

In MWSS v. COA, the Court affirmed the

disallowance of the grant of mid-year
financial, bigay-pala bonus, productivity
bonus and year-end financial assistance to
MWSS officials and employees. It also ruled
therein that the MWSS Board members did
not act in good faith and may be held liable
for refund because they approved the said
benefits even though these patently
contravened R.A. No. 6758, which clearly and
unequivocally stated that governing boards of
the GOCCs can no longer fix compensation
and allowances of their officials or employees.

Based on the foregoing cases, good faith may

be appreciated in favor of the responsible
officers under the ND provided they comply
with the following requisites: (1) that they
acted in good faith believing that they could
disburse the disallowed amounts based on the
provisions of the law; and (2) that they lacked
knowledge of facts or circumstances which
would render the disbursements illegal, such
when there is no similar ruling by this Court
prohibiting a particular disbursement or when
there is no clear and unequivocal law or
administrative order barring the same.

Here, the DBP believed in good faith that they

could grant additional benefits to the Board
members based on Section 8 of the DBP
Charter. When the Board issued DBP
Resolution Nos. 0121 and 0037, they honestly
believed they were entitled to the said
compensation. More so, the DBP claimed that
the additional benefits had the imprimatur of
President Arroyo.

Likewise, at the time of the issuance of the

said DBP resolutions on March 29, 2006 and
August 23, 2006, there was still no existing
jurisprudence or administrative order or
regulation expressly prohibiting the
disbursement of benefits and compensation
to the DBP Board members aside from per
diems. It was only on February 26, 2009 that
the Court promulgated BCDA v. COA
prohibiting the grant of compensation other
than per diems to Board members.

Certainly, it is only in the present case that

the Court is given the opportunity to construe
Section 8 of the DBP Charter. The said
provision has to be categorically interpreted
by Court in order to conclude that the Board
members are not entitled to benefits other
than per diems and that the phrase "[u]nless
otherwise set by the Board and approved by
the President of the Philippines" solely refers
to per diems. Thus, the Board members and
the accountable officers cannot be faulted for
their flawed interpretation of the law.
The Court reached a similar conclusion
in BCDA v. COA where it held that while the
grant of benefits was disallowed, the Board
members acted in good faith and were not
required to refund the same due to the
following reasons: the BCDA Charter
authorized its Board to adopt their own
compensation and benefit scheme; there was
no express prohibition against Board
members from receiving benefits other than
the per diem; and President Ramos approved
the said benefits.

Further, in DBP v. COA, the Court affirmed the

disallowance of the subsidy granted by DBP to
its officers who availed themselves of the
Motor Vehicle Lease-Purchase Plan (MVLPP)
benefits amounting to 50% of the acquisition
cost of the motor vehicles. It found that the
RR-MVLPP did not permit the use of the car
funds in granting multi-purpose loans or for
investment instruments. Nonetheless, the
officers of DBP, including its Board members,
were absolved from liability in good faith
because there was no specific provision in the
RR-MVLPP that prohibited the manner in
which DBP implemented the plan and there
was no showing that the officers abused the
MVLPP benefits.

In fine, the responsible officers of the DBP in

this case have sufficiently established their
defense of good faith, thus, they cannot be
held liable to refund the additional benefits
granted to the Board members. To reiterate,
good faith may be appreciated because the
approving officers were without knowledge of
any circumstance or information which would
render the transaction illegal or
unconscientious. Likewise, they had the belief
that the President approved their
expenditure. Neither could they be deemed
grossly negligent as they also believed they
could disburse the said amounts on the basis
of the provisions of the DBP Charter.
This Court also ruled, in Veloso, et al. v.
COA,27 that refund is not required as long as
all the parties acted in good faith, thus:
However, in line with existing jurisprudence,
we need not require the refund of the
disallowed amount because all the parties
acted in good faith. In this case, the
questioned disbursement was made pursuant
to an ordinance enacted as early as
December 7, 2000 although deemed
approved only on August 22, 2002. The city
officials disbursed the retirement and gratuity
pay remuneration in the honest belief that the
amounts given were due to the recipients and
the latter accepted the same with gratitude,
confident that they richly deserve such
reward.
Petitioner's erroneous interpretation of the
DBM circular aside, the action of petitioner
was indicative of good faith because he acted
in an honest belief that the grant of the CNA
Incentives had legal bases. It is unfair to
penalize public officials based on overly
stretched and strained interpretations of rules
which were not that readily capable of being
understood at the time such functionaries
acted in good faith.28 If there is any ambiguity,
which is actually clarified years later, then it
should only be applied prospectively.29 A
contrary rule would be counterproductive.30

Thus, although this Court considers the

questioned Notices of Disallowance valid, this
Court also considers it to be in the better
interest of justice and prudence that
petitioner, other officials concerned and the
employees who benefited from the CNA
Incentives be relieved of any personal liability
to refund the disallowed amount.

WHEREFORE, the Petition for Review

on Certiorari dated June 6, 2016 of petitioner
Secretary Mario G. Montejo is DISMISSED.
Consequently, the Decision dated September
26, 2016 and the Resolution dated February
27, 2017 of the Commission on Audit, which
affirmed Notice of Disallowance No. 2011-021-
101-(11) dated November 17, 2011 and
Notice of Disallowance No. 2011-022-101-(11)
dated November 18, 2011 issued by the
Office of the Auditor, Commission on Audit,
Taguig City disallowing the payment of
Collective Negotiation Agreement Incentives
are AFFIRMED. However, the petitioner, the
other officers concerned and the DOST
employees are absolved from refunding the
amount covered by the same notices of
disallowance.

SO ORDERED.

Carpio, (Senior Associate Justice), Velasco, Jr.,

Leonardo-De Castro, Bersamin, Del Castillo,
Perlas-Bernabe, Leonen, Jardeleza, Caguioa,
Martires, Tijam, Reyes, Jr., and Gesmundo, JJ.,
concur.

NOTICE OF JUDGMENT

Sirs/Mesdames:

Please take notice that on July 24, 2018 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 3, 2018
at 3:15 p.m.

Very truly yours,

(SGD)
EDGAR O. ARICHETA
Clerk of Court