34

November 29, 2016
G.R. No. 218406
PHILIPPINE CONSTITUTION ASSOCIATION (PHILCONSA), represented by its President

Ferdinand Martin G. Romualdez, FRANCISCO S. TATAD, ARCHBISHOP RAMON C.
ARGUELLES, ARCHBISHOP ROMULO T. DE LA CRUZ, ARCHBISHOP FERNANDO R.
CAPALLA, and NORBERTO B. GONZALES, Petitioners
vs.
PHILIPPINE GOVERNMENT (GPH), represented by MARVIC M.V.F. LEONEN, and MIRIAM
CORONEL FERRER, MORO ISLAMIC LIBERATION FRONT, FLORENCIO B. ABAD, and
COMMISSION ON AUDIT, Respondents
x-----------------------x
G.R. No. 218761
TANGGULANG DEMOKRASYA (TAN DEM), INC., represented by its President TERESITA

DAZA BALTAZAR, PILAR L. CALDERON, RIZALITO YAP DAVID, ROSITA K. IMPERIAL, MA.
SALOME A. MABLE, SERAFIN G. OCAMPO, and ELENA SAN AGUSTIN, Petitioners,
vs.
PHILIPPINE GOVERNMENT (GPH), represented by MARVIC M.V.F. LEONEN and MIRIAM
CORONEL FERRER, and MORO ISLAMIC LIBERATION FRONT, represented by Mohagher
Iqbal, Respondents.
x-----------------------x
G.R. No. 204355
REV. VICENTE LIBRADORES AQUINO, REV. MERCIDITA S. REDOBLE, and INTERNATIONAL

MINISTRIES FOR PERFECTION AND PARTY AGAINST COMMUNISM AND TERRORISM, INC.
represented by its President, Petitioners,
vs.
GPH PEACE PANEL CHIEF NEGOTIATOR ATTY. MARVIC M.V.F. LEONEN, HON. SECRETARY
TERESITA QUINTOS-DELES, PRESIDENTIAL ADVISER ON THE PEACE PROCESS, HON.
PAQUITO L. OCHOA, EXECUTIVE SECRETARY, and MEMBERS OF THE GPH PEACE
PANEL, Respondents.
x-----------------------x
G.R. No. 218407
JACINTO V. PARAS, Petitioner,

vs.
MIRIAM CORONEL FERRER, SENEN C. BACANI, YASMIN BUSRAN-LAO, MEHOL K. SADAIN,
and TERESITA DELES, Respondents.
x-----------------------x
G.R. No. 204354

REV. ELLY VELEZ PAMATONG, ESQ., Petitioner,
vs.
GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES PEACE PANEL ON BANGSAMORO,
REPRESENTED BY ITS NEGOTIATORS, MARVIC M.V.F. LEONEN, and PRESIDENT BENIGNO
S. AQUINO III, Respondents.
DECISION
CARPIO, J.:
The Case
Before the Court are consolidated petitions1 challenging the constitutionality and validity of
the Comprehensive Agreement on the Bangsamoro (CAB) and the Framework Agreement on
the Bangsamoro (FAB) entered into between the Government of the Philippines and the Moro
Islamic Liberation Front (MILF) on 27 March 2014 and 12 October 2012, respectively.
In G.R. No. 218406, petitioners Philippine Constitution Association (Philconsa), represented

by its President Ferdinand Martin G. Romualdez, Francisco S. Tatad, Archbishop Ramon C.
Arguelles, Archbishop Fernando R. Capalla, Archbishop Romulo T. de la Cruz, and Norberto
B. Gonzales contend that the provisions of the CAB and the F AB violate the Constitution and
existing laws. They argue that the conduct of the peace process was defective since the
Government of the Republic of the Philippines (GRP) Peace Panel negotiated only with the
MILF and not with the other rebel groups. Hence, respondents violated Section 3(e) and (g) of
Republic Act No. 30192 in giving unwarranted advantages to the MILF. Petitioners further
argue that respondents committed grave abuse of discretion when they "committed to cause
the amendment of the Constitution and existing laws to conform to the FAB and CAB x x x." 3
In G.R. No. 218761, petitioners Tanggulang Demokrasya (TAN DEM), Inc., represented by its
President Teresita Daza Baltazar, Pilar L. Calderon, Rizalito Yap David, Rosita K. Imperial, Ma.
Salome A. Mable, Serfin G. Ocampo, and Elena San Agustin claim that the CAB and the FAB
are unconstitutional since the agreements seek to create a virtual sub-state known as the
Bangsamoro Political Entity (BPE) to replace the Autonomous Region of Muslim Mindanao
(ARMM), and guarantee to make amendments to the Constitution to shift from the present
unitary state to a new federal state which is beyond the GRP Peace Panel's power and
authority to commit.
In G.R. No. 204355, petitioners Rev. Vicente Libradores Aquino, Rev. Mercidita S. Redoble,
and International Ministries for Perfection and Party Against Communism and Terrorism, Inc.
(IMPPACT, Inc.) argue that the GRP Peace Panel usurped the power of Congress to enact,
amend, or repeal laws since it bound Congress to agree to the provisions of the F AB and
abolish the ARMM. Petitioners add that the FAB provisions are replete with ambiguities,
violative of the provisions of the Constitution, and inconsistent with Republic Act No. 9054. 4
In G.R. No. 218407, petitioner Jacinto V. Paras argues that the CAB and the FAB violate the
provisions of the Constitution, as well as the consultation requirement under Executive Order
(EO) No. 3 and Memorandum of Instructions of the President. Petitioner further contends that
respondents exceeded their authority when they guaranteed the amendment of certain
provisions of the Constitution to conform to the CAB and the FAB.
In G.R. No. 204354, petitioner Rev. Elly Velez Pamatong claims that the constitutionally infirm
MOA-AD of 2008 and the FAB are substantially the same since they are both aimed at
creating a "fully independent Islamic State" covering Mindanao, Palawan, and
Sulu.5 Petitioner argues, among others, that there were no consultations regarding the FAB.
Petitioner further contends that the doctrine of res judicata applies since the MOA-AD and
the FAB are similar. Consequently, the decision in the MOA-AD case is applicable. In
addition, petitioner argues that the FAB is void for being unconstitutional since (1) under
Section 18, Article X of the Constitution, an autonomous region can only be created by
Congress and the President does not have the power to establish the Bangsamoro with the
rebel group MILF; (2) the FAB is not a peace agreement but allegedly a conspiracy to
establish an independent Bangsamoro Republic under Malaysian tutelage; and (3) the FAB
guarantees constitutional amendments, which act is contrary to the mechanisms set forth in
the Constitution itself.
Essentially, the petitions commonly seek to declare the CAB and the FAB unconstitutional
for being similar to the void MOA-AD, which was struck down by the Court for violating,
among others, the constitutional provisions on constitutional amendments.
The Facts
On 15 September 1993, President Fidel V. Ramos issued EO No. 125 6 creating the Office of
the Presidential Adviser on the Peace Process and calling for a "comprehensive, integrated
and holistic peace process with Muslim rebels" in Mindanao. On 28 February 2001, President
Gloria Macapagal-Arroyo issued. EO .No. 37 which amended EO No. 125 to reaffirm the
government's commitment to achieve just and lasting peace in the Philippines through a
comprehensive peace process.
Pursuant to EO No. 3, the Government Peace Negotiating Panel (GPNP) held negotiations
with the MILF, an armed, revolutionary Muslim separatist group based in Mindanao seeking
separation of the Muslim people from the central government. The negotiations eventually
led to the preparation of the Memorandum of Agreement on Ancestral Domain (MOA-AD) on
27 July 2008. However, on 14 October 2008, in the case of Province of North Cotabato v.
Government of the Republic of the Philippines Peace Panel on Ancestral Domain, 8 the Court
declared the MOA-AD unconstitutional.
During the administration of President Benigno S. Aquino III, the government resumed peace
negotiations with the MILF. Marvic M.V.F. Leonen 9 headed the GPNP and became the
government's chief peace negotiator with the MILF in July 2010.
On 15 October 2012, a preliminary peace agreement called the FAB 10 was signed between the
government and the MILF. The F AB called for the creation of an autonomous political entity
named Bangsamoro, replacing the ARMM.
After further negotiations, the following Annexes and Addendum to the FAB were also signed
in Kuala Lumpur, Malaysia:
a) Annex on Transitional Arrangements and Modalities; 11
b) Annex on Revenue Generation and Wealth Sharing; 12
c) Annex on Power Sharing;13
d) Annex on Normalization;14 and

e) On the Bangsamoro Waters and Zones of Joint Cooperation Addendum to the Annex on
Revenue Generation and Wealth Sharing and the Annex on Power Sharing. 15
The Annexes and Addendum discussed the following:
a) The Annex on Transitional Arrangements and Modalities, signed on 27 February 2013,

established the transitional process for the establishment of the Bangsamoro and detailed
the creation of the Bangsamoro Transition Commission, the Bangsamoro Basic Law and the
Bangsamoro Transition Authority.
b) The Annex on Revenue Generation and Wealth Sharing, signed on 13 July 2013,
enumerated the creation of sources of revenues for the Bangsamoro government and its
power to levy taxes, fees and charges.
c) The Annex on Power Sharing, signed on 8 December 2013, discussed intergovernmental

relations of the central government, the Bangsamoro government and the constituent units
under the Bangsamoro.
d) The Annex on Normalization, signed on 25 January 2014, outlined the laying down of
weapons of MILF members and their transition to civilian life.
e) The Addendum on the Bangsamoro Waters and Zones of Joint Cooperation, signed on 25
January 2014, detailed the scope of waters under the territorial jurisdiction of the
Bangsamoro (12 nautical miles from the coast) and Zones of Joint Cooperation in the Sulu
Sea and the Moro Gulf.
On 7 December 2012, Miriam Coronel-Ferrer succeeded Marvic M.V.F. Leonen as GPNP

Chairperson.
On 17 December 2012, President Benigno S. Aquino III issued EO No. 120, 16 constituting the
Bangsamoro Transition Commission, tasked, among others, to (1) draft the proposed
Bangsamoro Basic Law with provisions consistent with the FAB, and (2) recommend to
Congress or the people proposed amendments to the 1987 Philippine Constitution. 17 Under
Section 5 of the same EO, the Bangsamoro Transition Commission shall cease to operate
upon the enactment by Congress of the Bangsamoro Basic Law.
On 27 March 2014, the Philippine Government, represented by GPNP Chairperson Miriam

Coronel-Ferrer, signed the CAB,18 which was an integration of the FAB, the Annexes and the
other agreements19 previously executed by the government and the MILF.
On 10 September 2014, a draft of the Bangsamoro Basic Law, referred to as House Bill (HB)
No. 4994,20 was presented by President Aquino to the 16th Congress. On 27 May 2015, in
Committee Report No. 747, the Ad Hoc Committee on the Basic Bangsamoro Law of the
House of Representatives substituted said bill and passed another version known as House
Bill No. 5811.21 In the Senate, a revised version of the Bangsamoro Basic Law, known as the
Basic Law for the Bangsamoro Autonomous Region or Senate Bill No. 2894, 22 was presented
on 10 August 2015. However, on 6 June 2016, the 16 th Congress adjourned23 without passing
the proposed Bangsamoro Basic Law.
Meanwhile, several petitions were filed with this Court assailing the constitutionality of the
CAB, including the FAB, and its Annexes. G.R. Nos. 204354 and 204355, which were both
filed in 2012, were consolidated pursuant to a Resolution 24 dated 11 December 2012.
Likewise, in a Resolution25 dated 23 June 2015, G.R. Nos. 218406 and 218407 were
consolidated. In a Resolution26 dated 12 January 2016, the Court granted the consolidation of
G.R. No. 218761 with G.R. Nos. 218406 and 218407. In a Resolution dated 22 November 2016,
all five petitions were consolidated.
On 7 November 2016, President Rodrigo Roa Duterte issued EO No. 08 27 expanding the
membership and functions of the Bangsamoro Transition Commission. EO No. 08 expands
the number of members of the Bangsamoro Transition Commission from 15 to 21. Section 3
of EO No. 120, as amended by EO No. 08, provides for the functions of the Bangsamoro
Transition Commission, which include drafting proposals for a Bangsamoro Basic Law, to be
submitted to the Office of the President for submission to Congress, and recommending to
Congress or the people proposed amendments to the 1987 Philippine Constitution.
The Issue
The threshold issue in this case is whether the CAB, including the FAB, is constitutional.
The Court's Ruling
We dismiss the petitions.
Not ripe for adjudication due to non-enactment of

the Bangsamoro Basic Law
Section 1, Article VIII of the Constitution spells out what judicial power is, to wit:
Section 1. The judicial power shall be vested in one Supreme Court and in such lower courts
as may be established by law.
Judicial power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to determine whether or
not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on
the part of any branch or instrumentality of the Government.
Pursuant to this constitutional provision, it is clear that the Court's judicial review power is
limited to actual cases or controversies. The Court generally declines to issue advisory
opinions or to resolve hypothetical or feigned problems, or mere academic questions. The
limitation of the power of judicial review to actual cases and controversies assures that the
courts will not intrude into areas specifically confined to the other branches of government. 28
An actual case or controversy involves a conflict of legal rights, an assertion of opposite

legal claims, susceptible of judicial resolution as distinguished from a hypothetical or
abstract difference or dispute.29 There must be a contrast of legal rights that can be
interpreted and enforced on the basis of existing law and jurisprudence. 30 The Court can
decide the constitutionality of an act, either by the Executive or Legislative, only when an
actual case between opposing parties is submitted for judicial determination. 31
Closely linked to the requirement of an actual case or controversy is the requirement of

ripeness. A question is ripe for adjudication when the act being challenged has had a direct
adverse effect on the individual or entity challenging it. 32 For a case to be considered ripe for
adjudication, it is a prerequisite that an act had then been accomplished or performed by
either branch of government before a court may interfere, and the petitioner must allege the
existence of an immediate or threatened injury to himself as a result of the challenged
action.33 Petitioner must show that he has sustained or is immediately in danger of sustaining
some direct injury as a result of the act complained of. 34
In Province of North Cotabato v. GRP (MOA-AD case),35 which involved the Memorandum of
Agreement on the Ancestral Domain Aspect of the GRP-MILF Tripoli Agreement on Peace of
2001, the Court faced the same issue of ripeness. There, the Court explained the limits of the
power of judicial review and the prerequisites for the judicial determination of a case.
In the MO A-AD case, the Court rejected the argument of the Solicitor General that there was
no justiciable controversy that was ripe for adjudication. The Court disagreed with the
Solicitor General's contention that the initialed but "unsigned MOA-AD is simply a list of
consensus points subject to further negotiations and legislative enactments as well as
constitutional processes aimed at attaining a final peaceful agreement. x x x [T]he MOA-AD
remains to be a proposal that does not automatically create legally demandable rights and
obligations until the list of operative acts required have been duly complied with." 36 The
Court ruled that "[w]hen an act of a branch of government is seriously alleged to have
infringed the Constitution, it becomes not only the right but in fact the duty of the judiciary to
settle the dispute."37 Moreover, in the MOA-AD case, the Executive was about to sign the
initialed MOA-AD with the MILF in Kuala Lumpur, Malaysia in the presence of representatives
of foreign states. Only the prompt issuance by this Court of a temporary restraining order
stopped the signing, averting the implications that such signing would have caused.
In the present case, however, the Court agrees with the Solicitor General that there is no
actual case or controversy requiring a full-blown resolution of the principal issue presented
by petitioners.
Unlike the unconstitutional MOA-AD, the CAB, including the FAB, mandates the enactment of
the Bangsamoro Basic Law in order for such peace agreements to be implemented. In the
MOA-AD case, there was nothing in the MOA-AD which required the passage of any statute to
implement the provisions of the MOA-AD, which in essence would have resulted in
dramatically dismembering the Philippines by placing the provinces and areas covered by
the MOA-AD under the control and jurisdiction of a Bangsamoro Juridical Entity. 38
The MOA-AD as an agreement did not provide for the enactment of subsequent legislation to
implement its provisions. In fact, its provisions were immediately implementable after its
signing warranting the timely intervention by this Court to rule on its constitutionality.
Further, under the MOA-AD, the Executive branch assumed the mandatory obligation to
amend the Constitution to conform to the MOAAD.1âwphi1 The Executive branch guaranteed
to the MILF that the Constitution would be drastically overhauled to conform to the MOA-AD.
In effect, the Executive branch usurped the sole discretionary power of Congress to propose
amendments to the Constitution as well as the exclusive power of the sovereign people to
approve· or disapprove such proposed amendments. 39 Thus, this Court struck down the
MOA-AD as unconstitutional since such ultra vires commitment by the Executive branch
constituted grave abuse of discretion amounting to lack or excess of jurisdiction.
In the present case, there is no such guarantee when the CAB and the FAB were signed. The
government gives no commitment, express or implied, that the Constitution will be amended
or that a law will be passed comprising all the provisions indicated in the CAB and the FAB.
Thus, contrary to the imagined fear of petitioners, the CAB and the FAB are not mere
reincarnations or disguises of the infirm MOA-AD.
The CAB and the FAB require the enactment of the Bangsamoro Basic Law for their
implementation. It is a fundamental constitutional principle that Congress has full discretion
to enact the kind of Bangsamoro Basic Law that Congress, in its wisdom, deems necessary
and proper to promote peace and development in Muslim areas in Mindanao. Congress is
expected to seriously consider the CAB and the FAB but Congress is not bound by the CAB
and the FAB. Congress is separate, independent, and co-equal of the Executive branch that
alone entered into the CAB and the FAB. The Executive branch cannot compel Congress to
adopt the CAB and the FAB. Neither can Congress dictate on Congress the contents of the
Bangsamoro Basic Law, or the proposed amendments to the Constitution that Congress
should submit to the people for ratification.
The CAB and the FAB cannot be implemented without the passage of the Bangsamoro Basic
Law. The CAB and the FAB remain peace agreements whose provisions cannot be enforced
and given any legal effect unless the Bangsamoro Basic Law is duly passed by Congress and
subsequently ratified in accordance with the Constitution. The CAB and the FAB are
preparatory documents that can "trigger a series of acts"40 that may lead to the exercise by
Congress of its power to enact an organic act for an autonomous region under Section 18,
Article X41 of the Constitution. The CAB and the FAB do not purport to preempt this
Congressional power.
Provision I(C) of the Annex on Transitional Arrangements and Modalities provides that "[t]he
proposed Basic Law shall be submitted to the Office of the President" and that "[t]he
President shall submit the proposed Basic Law to Congress as a legislative proposal. The bill
for the proposed Basic Law shall be certified as urgent by the President." The CAB, as the
consolidation of the peace agreements between the government and the MILF, requires the
drafting of the Bangsamoro Basic Law, its submission to the Office of the President and the
President's submission of a draft Bangsamoro Basic Law to Congress as a legislative
proposal. It is a fundamental premise of the CAB that a law and a ratification process are
required for its "actual implementation."
Significantly, President Rodrigo Roa Duterte issued EO No. 08 expanding the membership
and functions of the Bangsamoro Transition Commission. EO No. 08 increases the number of
members of the Bangsamoro Transition Commission from 15 to 21. Section 3 of EO No. 120,
as amended by EO No. 08, provides for the functions of the Bangsamoro Transition
Commission, which include drafting proposals for a Bangsamoro Basic Law, to be submitted
to the Office of the President for submission to Congress, and recommending to Congress
proposed amendments to the Constitution for submission to the people for ratification.
The functions of the Bangsamoro Transition Commission, which explicitly include the
drafting of proposals for a Bangsamoro Basic Law, as required under the CAB and the FAB,
highlight the fact that the CAB and the FAB are mere preliminary framework agreements
which will guide the Bangsamoro Transition Commission in the formulation of the proposed
Bangsamoro Basic Law for submission to Congress, which may adopt such proposed law in
whole or in part, amend or revise the same, or even reject it outright.
During the Aquino administration, the Bangsamoro Transition Commission submitted its
proposed Bangsamoro Basic Law to former President Benigno S. Aquino III, who submitted
the same to the l6th Congress, which however failed to enact the same before its
adjournment. Thus, the bill proposing the Bangsamoro Basic Law has to be refiled with the
present Congress. With the signing of EO No. 08 by President Duterte, the expanded
Bangsamoro Transition Commission shall redraft the proposed Bangsamoro Basic Law to be
submitted to the President who is expected to certify it to the present Congress as an urgent
bill. Congress, in turn, may or may not accept the proposed Bangsamoro Basic Law as it is
worded. There is therefore no guarantee that Congress will enact the Bangsamoro Basic Law.
Congress has the sole discretion whether or not to pass the Bangsamoro Basic Law, as
proposed by the Bangsamoro Transition Commission.
It is not the CAB or the FAB that will establish the Bangsamoro but the Bangsamoro Basic
Law enacted by Congress and ratified in a plebiscite in accordance with the Constitution.
Congress must still enact a Bangsamoro Basic Law. The requirement of a Bangsamoro Basic
Law under the CAB and the FAB ensures that the pitfalls under the invalid MOA-AD will be
avoided.
Even if there were today an existing bill on the Bangsamoro Basic Law, it would still not be
subject to judicial review.42 The Court held in Montesclaros v. COMELEC43 that it has no
power to declare a proposed bill constitutional or unconstitutional because that would be in
the nature of rendering an advisory opinion on a proposed act of Congress. The power of
judicial review cannot be exercised in vacuo. As the Court in Montesclaros noted, invoking
Section 1, Article VIII of the Constitution, there can be no justiciable controversy involving
the constitutionality of a proposed bill. The power of judicial review comes into play only
after the passage of a bill, and not before.44 Unless enacted into law, any proposed
Bangsamoro Basic Law pending in Congress is not subject to judicial review.
Clearly, any question on the constitutionality of the CAB and the FAB, without the
implementing Bangsamoro Basic Law, is premature and not ripe for adjudication. Until a
Bangsamoro Basic Law is passed by Congress, it is clear that there is no actual case or
controversy that requires the Court to exercise its power of judicial review over a co-equal
branch of government.
WHEREFORE, we DISMISS the petitions on the ground of prematurity.
SO ORDERED.
ANTONIO T. CARPIO
Associate Justice
WE CONCUR:
MARIA LOURDES P.A. SERENO

Chief Justice
PRESBITERO J. VELASCO, JR. TERESITA J. LEONARDO-DE CASTRO

Associate Justice Associate Justice
ARTURO D. BRION DIOSDADO M. PERALTA

LUCAS P. BERSAMIN MARIANO C. DEL CASTILLO

JOSE PORTUGAL PEREZ JOSE CATRAL MENDOZA
BIENVENIDO L. REYES ESTELA M. PERLAS-BERNABE

(no part) (no part)

MARVIC M.V.F. LEONEN* FRANCIS H. JARDELEZA*
(No Part)
ALFREDO BENJAMIN S. CAGUIOA*
Associate Justice
CERTIFICATION
Pursuant to the Section 13, Article VIII of the Constitution, 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’s Division.
MARIA LOURDES P.A. SERENO

Chief Justice
Footnotes
*
No part.
*
No part.
*
No part.
1
G.R. No. 204354 is a petition to declare the Framework Agreement on Bangsamoro
unconstitutional and to prohibit fu1iher negotiation and implementation thereof.
G.R. No. 204355 is a petition for certiorari, prohibition, mandamus, and writ of preliminary
injunction with prayer for the issuance of a temporary restraining order.
G.R. No. 218406 is a petition for ce1iiorari, prohibition, and mandamus with prayer for
issuance of temporary restraining order and writ of preliminary injunction.
G.R. No. 218407 and G.R. No. 218761 are petitions for certiorari.
2
These provisions read:
Section 3. Corrupt practices of public officers. In addition to acts or omissions of public
officers already penalized by existing law, the following shall constitute corrupt practices of
any public officer and are hereby declared to be unlawful:
xxxx
(e) Causing any undue injury to any party, including the Government, or giving any private
party any unwarranted benefits, advantage or preference in the discharge of his official
administrative or judicial functions through manifest partiality, evident bad faith or gross
inexcusable negligence. This provision shall apply to officers and employees of offices or
government corporations charged with the grant of licenses or permits or other concessions.
xxxx
(g) Entering, on behalf of the Government, into any contract or transaction manifestly and
grossly disadvantageous to the same, whether or not the public officer profited or will profit
thereby.
3
Rollo (G.R. No. 218406), p. 11.
4
An Act to Strengthen and Expand the Organic Act for the Autonomous Region in Muslim
Mindanao, Amending for the Purpose Republic Act No. 6734, entitled "An Act Providing for
the Autonomous Region in Muslim Mindanao," as amended. Lapsed into law on 31 March
2001 without the President's signature.
5
Rollo (G.R. No. 204354), p. 7.
6
Defining the Approach and Administrative Structure for Government's Comprehensive
Peace Efforts.
7
Defining Policy and Administrative Structure for Government's Comprehensive Peace
Efforts.
8
589 Phil. 387 (2008).
9
Now a Member of this Court.
10
Rollo (G.R. No. 218761), pp. 34-48.
11
Id. at 49-54.
12
Id. at 55-62.
13
Id. at 63-74.
14
Id. at 75-87.
15
Id. at 88-90.
16
Constituting the Transition Commission and For Other Purposes.
17
Section 3 a. and b., respectively, of EO No. 120.
18
Rollo (G.R. No. 218761), pp. 91-97.
19
Id. at 98-182.
20
Introduced by Representatives Feliciano Belmonte, Jr., Henedina R. Abad, Giorgidi B.
Aggabao, Sergio A.F. Apostol, Pangalian M. Balindong, Carlos M. Padilla, Roberto V. Puno,
Neptali M. Gonzales II, Mel Senen S. Sarmiento, Enrique M. Cojuangco, Mark Llandro L.
Mendoza, Eleandro Jesus F. Madrona, Elpidio F. Barzaga, Jr., Antonio F. Lagdameo, Jr.,
Rolando G. Andaya, Jr., Nicanor M. Briones, and Raymond Democrito C. Mendoza.
21
Sponsored by Representatives Rufus B. Rodriguez, Pangalian M. Balindong, Jim
HatamanSalliman, Bai Sandra A. Serna, Henry S. Oaminal, Tupay T. Loong, Romeo M. Acop,
Raymond Democrito C. Mendoza, Sergio A.F. Apostol.
22
Prepared jointly by the Committees on Local Government; Peace Unification and
Reconciliation; and Constitutional Amendments and Revision of Codes with Senators
Franklin M. Drilon, Vicente C. Sotto III, Loren B. Legarda, Ralph G. Recto, Maria Lourdes
Nancy S. Binay, Francis G. Escudero, Paolo Benigno "Bam" Aquino IV, Juan Edgardo M.
Angara, Pia S. Cayetano, Gregorio B. Honasan II, Teofisto Guingona III, Ferdinand R. Marcos,
Jr., and Miriam Defensor Santiago, as authors.
23
Sine Die Adjournment.
24
Rollo (G.R. No. 204355), p. 70.
25
Rollo (G.R. No. 218407), pp. 15f-152.
26
Rollo (G.R. No. 218761 ), p. 225-C.
27
Amending Further Executive Order No. 120 (s. 2012), as Amended by Executive Order No.
187 (s. 2015), on the Bangsamoro Transition Commission and for Other
Purposes. http://www.gov.ph/downloads/2016/11nov/20161107-E0-8-RRD.pdf (last accessed
on 11 November 2016).
28
Province of North Cotabato v. Government of the Republic of the Philippines Peace Panel
on Ancestral Domain, supra note 8, at 480-481.
29
Philippine Amusement and Gaming Corporation v. Thunderbird Pilipinas Hotels and
Resorts, Inc., et al., 730 Phil. 543, 562 (2014).
30
Id.
31
Id., citing Didipio Earth Savers' Multi-Purpose Association, Inc. v. Sec. Gozun, 520 Phil. 457
(2006).
32
Guingona v. Court of Appeals, 354 Phil. 415, 427 (1998).
33
Imbong v. Ochoa, Jr., G.R. Nos. 204819, 204934, 204957, 204988, 205003, 205043, 205138,
205478, 205491, 205720, 206355, 207111, 207172, 207563, 8 April 2014, 721 SCRA 146, 280.
34
Id.
35
Supra note 8.
36
Supra note 8, at 482.
37
Supra note 8, at 486.
38
Under the MOA-AD, "[b]oth Parties agree that the Bangsamoro Juridical Entity (BJE) shall
have the authority and jurisdiction over the Ancestral Domain and Ancestral lands, including
both alienable and non-alienable lands encompassed within their homeland and ancestral
territory, as well as the delineation of ancestral domain/lands of the Bangsamoro people
located therein." (paragraph 6, Concepts and Principles, MOA-AD)
39
Justice Carpio's Separate Concurring Opinion in Province of North Cotabato v. GRP, supra
note 8, at 585, 589, 603.
40
Office of the Solicitor General's (OSG) Comment Ad Cautelam, rollo (G.R. No. 218406), p.
420.
41
This provision reads:
Section 18. The Congress shall enact an organic act for each autonomous region with the
assistance and pa1iicipation of the regional consultative commission composed of
representatives appointed by the President from a list of nominees from multisectoral bodies.
The organic act shall define the basic structure of government for the region consisting of
the executive department and legislative assembly, both of which shall be elective and
representative of the constituent political units. The organic acts shall likewise provide for
special courts with personal, family, and property law jurisdiction consistent with the
provisions of this Constitution and national laws.
The creation of the autonomous region shall be effective when approved by majority of the
votes cast by the constituent units in a plebiscite called for the purpose, provided that only
provinces, cities, and geographic areas voting favorably in such plebiscite shall be included
in the autonomous region.
42
See OSG's Comment, rollo (G.R. No. 204354), p. 210.
43
433 Phil. 620, 634 (2002).
44
Id.
Manila
EN BANC
[ G.R. No. 213453. November 29, 2016 ]
PHILIPPINE HEALTH INSURANCE CORPORATION, PETITIONER, VS. COMMISSION ON

AUDIT, MA. GRACIA PULIDO TAN, CHAIRPERSON; AND JANET D. NACION, DIRECTOR IV,
RESPONDENTS.
DECISION
PERALTA, J.:
Before the Court is a special civil action for certiorari under Rule 64, in relation to Rule 65 of
the 1997 Rules of Civil Procedure, as amended, seeking to reverse and set aside the Decision
No. 2013-2081 dated November 20, 2013 and Resolution dated April 4, 2014 of the
Commission on Audit (COA), which affirmed the Notice of Disallowance (ND) Philippine
Health Insurance Corporation (PHIC) 2008-003 (2004)2 dated February 7, 2008 of the COA
Legal Service.
The antecedent facts are as follows:
The instant case stems from petitioner PHIC's grant of several allowances to its officers and
employees that were subsequently disallowed by respondent COA. In its PHIC Board
Resolution No. 406, s. 20013 dated May 31, 2001, for one, petitioner granted the payment of
the Collective Negotiation Agreement Signing Bonus (CNASB) of ₱5,000.00 each to all
qualified employees due to the extension of the then existing CNA between the PHIC
management and the PhilHealth Employees Association (PHICEA) for the period of another
three (3) years beginning April of 2001. For another, in its PHIC Board Resolution No. 385, s.
20014 effective January 1, 2001, petitioner approved. the payment of the Welfare Support
Assistance (WESA) of ₱4,000.00 each, in lieu of the subsistence and laundry allowances paid
to public health workers under Republic Act (R.A.) No. 7305, otherwise known as the Magna
Carta of Public Health Workers. Petitioner then resolved to approve the grant of the Labor
Management Relations Gratuity (LMRG) by virtue of its PHIC Board Resolution No. 717, s.
20045 dated July 22, 2004, in recognition of harmonious labor-management relations of its
employees with the management. Finally, for the services rendered during the period
beginning July 1989 until January 1995, petitioner paid the Cost of Living Allowance (COLA)
to personnel it had absorbed from the Philippine Medical Care Commission (PMCC) by virtue
of Section 516 of R.A. No. 7875, otherwise known as The National Health Insurance Act of
1995.7
On February 7, 2008, however, pursuant to the recommendations of the Supervising Auditor

of the PHIC in various Audit Observation Memoranda (AOM),8 respondent Janet D. Nacion,
Director IV of the Legal and Adjudication Office - Corporate of the COA, issued ND PHIC 2008-
003 (2004), disallowing the payment of the aforementioned allowances granted to PHIC
officers and employees in the total amount of P87,699,144.00.9 According to respondent
Nacion, the payment of the CNASB was contrary to the doctrine enunciated in Social Security
System (SSS) v. COA10 wherein the Court expressly invalidated the payment of the same.
With respect to the WESA, Nacion maintained that its payment was made without legal basis
in the absence of approval from the Office of the President.11 As for the payment of the
LMRG, Nacion found that it was merely a duplication of the Performance Incentive Bonus
(PIB) which was granted to employees based on their good performance, increased efficiency
and productivity. Lastly, Nacion disallowed the payment of back COLA to PHIC personnel
ratiocinating that it should be collected not from petitioner PHIC but from the government
agency where the services have been rendered prior to its creation in January 1995.12
Petitioner filed its motion for reconsideration which was, however, denied by the COA Legal
Services Sector (LSS) in its Decision No. 2010-02013 issued on May 21, 2010. On appeal, the
COA Commission Proper (CP) sustained the disallowance in its Decision No. 2013-208 dated
November 20, 2013.14 Thereafter, in a Resolution15 dated April 4, 2014, the COA CP en
banc further denied petitioner's motion for reconsideration.
Aggrieved, petitioner filed the instant petition before the Court raising the following issues:
I.
WHETHER THE COA GRAVELY ABUSED ITS DISCRETION, AMOUNTING TO LACK OR

EXCESS OF JURISDICTION, IN ISSUING THE ASSAILED DECISION AND RESOLUTION.
II.
WHETHER THE COA DISREGARDED THE FISCAL AUTONOMY GRANTED TO PHIC UNDER
SECTION 16 (N), R.A. 7875, AS AMENDED, AS WELL AS EXISTING AND RELEVANT
JURISPRUDENCE, IN AFFIRMING THE ND PHIC 2008-003 (2004).
III.
WHETHER PHIC'S PAYMENTS OF THE CNASB, LMRG, WESA, AND BACK COLA IN FAVOR
OF ITS OFFICERS AND EMPLOYEES AMOUNTING TO PHP87,699,144.00 WAS PROPER.
IV.
GRANTING THAT THE PAYMENTS WERE NOT PROPER, WHETHER THE PHIC OFFICERS
AND EMPLOYEES CAN BE REQUIRED TO REFUND THE AMOUNTS RECEIVED.1aшphi1
Petitioner PHIC raises several infirmities attendant in respondent COA's

disallowance. First, contrary to respondent's findings, petitioner paid the CNASB to its
regular plantilla personnel in 2001 and not in 2004 as evinced by the Certification and
payrolls it duly presented.16 During said year, such grant was expressly sanctioned by
Budget Circular No. 2000-19 issued by the Department of Budget and Management (DBM) on
December 15, 2000 which authorizes the payment of the signing bonus to each entitled rank-
and-file personnel. During said year, moreover, the ruling in SSS v. COA17 had not yet been
laid down by the Court, which was actually promulgated on July 11, 2002, or more than a
year after the payment of the subject CNASB. Thus, on the basis of the established principle
of prospective application of laws, the invalidation of the CNASB enunciated in the SSS case
cannot be used as legal basis in disallowing the issuance of said bonus.18
Second, petitioner asserts that the WESA was duly granted in compliance with applicable
law, particularly R.A. No. 7305 or the Magna Carta of Public Health Workers (PHW). According
to petitioners, the WESA was issued in lieu of the subsistence and laundry allowance due to
PHWs under Section 22 of the Magna Carta, which provides that said subsistence allowance
shall be "computed in accordance with prevailing circumstances as determined by the Health
Secretary in consultation with the Management Health Worker's Consultative Councils."
Petitioner explains that respondent COA's assertion that the WESA should be disallowed
because it was granted without the participation of the Health Secretary is not entirely
accurate. Under Section 18 (a) of R.A. No. 7875, the Board of Directors of the PHIC is
composed of eleven (11) members (which was increased to sixteen (16) members under R.A.
No. 10606 passed in June 2013) with the Health Secretary sitting as the Ex-Officio19 As part
of said PHIC board, its unanimous passage of PHIC Board Resolution No. 385, s. 2001
granting the subject WESA was compliantly the positive act of then Health Secretary Dr.
Alberto G. Romualdez, Jr. required under the law.20 Any official act of the PHIC Board, with
the Health Secretary sitting as Ex-Officio Chairperson, cannot be considered as an exclusive
act of the board, but also as an act of the Health Secretary in his primary capacity as such.
Third, petitioner contends that contrary to respondent's allegation, the LMRG is not merely a
duplicate of the PIB. The LMRG was passed in the exercise of the PHIC Board of its "fiscal
autonomy" to fix compensation and benefits of its personnel under Section 16 (n) of R.A. No.
7875 in recognition of notable labor-management relations, while the PIB was granted as a
performance-based incentive under Executive Order (E.O.) No. 486, entitled Establishing a
Performance-Based Incentive System for Government-Owned or Controlled Corporations
and for Other Purposes.21 In addition, the two (2) grants not only have different requirements
for entitlement but also differ in their amounts and manner of computation.
Fourth, with respect to the grant of the COLA back pay, petitioner posits that while it agrees
with the position taken by respondent COA Director Nacion that the Court, in De Jesus v.
COA,22 has given imprimatur on the propriety of the said COLA during the time when the
DBM Corporate Compensation Circular (CCC) 10 was in legal limbo, it, nevertheless,
disagrees with her view that the PHIC is not legally bound to pay the same to its absorbed
personnel for their services were not rendered to PHIC but to another government agency
prior to PHIC's creation.23 Petitioner recounts that the COLA back pay was for services
rendered between July 1989 and January 1995 when the payment of the same had been
discontinued by reason of DBM CCC 10 issued in July 1995, pursuant to R.A. No. 6758, or
the Salary Standardization Law (SSL). But the failure to publish the DBM CCC 10 integrating
COLA into the standardized salary rates meant that the COLA was not effectively integrated
as of July 1989 but only on March 16, 1999 when the circular was published as required by
law. Thus, in between those two dates, the employees were still entitled to receive the COLA.
But unlike respondent Nacion, who opined that petitioner PHIC has no business to settle the
obligations of other government entities having a separate and distinct legal personality
therefrom, petitioner PHIC invokes Section 51 of R.A. No. 7875 which transfers all the
functions and assets of the defunct PMCC to PHIC. According to petitioner, the term
"functions" necessarily means to include then PMCC's obligation to pay the benefits due to
its employees who have been absorbed by PHIC such as the COLA that was unduly
withdrawn from their salaries after the issuance of DBM CCC 10 in 1989.24 This is in keeping
with the principle of equal protection of laws guaranteed under the Constitution. In the end,
petitioner posits that since PHIC personnel received the CNASB, WESA, LMRG and back
COLA in good faith, they should not be required to refund them.25
For its part, respondent COA initially raised certain procedural defects in petitioner's action.
For one, it is alleged that petitioner PHIC is not the real party-in-interest and, therefore, has
no locus standi to file the instant petition.26 This is because the parties who benefitted and
who will be injured by the disallowance are the officers and employees of PHIC, and not PHIC
itself. For another, the special civil action for certiorari under Rule 65 is improper as it was
not shown that respondent COA acted without jurisdiction or with grave abuse of discretion
amounting to lack or excess of jurisdiction.
Substantially, moreover, respondent COA asseverates that PHIC's socalled "fiscal autonomy"
does not preclude the COA's power to disallow the grant of allowances.27 In the exercise of
said power, respondent COA claims that petitioner, in granting the subject allowances,
cannot rely on Section 16 (n)28 of R.A. No. 7875. This is because as held in Government
Service Insurance System (GSIS) v. Civil Service Commission,29 the term "compensation"
"excludes all bonuses, per diems, allowances and overtime pay, or salary pay or
compensation given in addition to the base pay of the position or rank as fixed by law or
regulations."
Respondent COA further insists that with respect to the CNASB, the payment of the same
was made not in 2001, as petitioner claims, but on June 11, 2004, based on an Automatic
Debit Advice "dated 6-11-2004."30 Consequently, SSS v. COA31 is applicable. In fact, in a
letter dated October 18, 2004, the DBM reminded the PHIC of the said ruling. Thus,
respondent COA posits that while it is true that the payment of the CNASB was allowed under
DBM Budget Circular No. 2000-19, dated December 15, 2000, which was the basis of PHIC
Board Resolution No. 406, s. 2001 approving said grant, actual payment thereof by petitioner
PHIC, however, was made only on June 11, 2004, or after the pronouncement in SSS v.
COA. Moreover, said Board Resolution has already been made ineffective by Resolution No.
04, s. 2002 and Resolution No. 02, s. 2003 of the Public Sector LaborManagement Council
(PSLMC), which allows the grant of the CNA Incentive but declares the CNASB illegal as a
form of additional compensation.32 Respondent adds that the pieces of evidence submitted
by petitioner consisting of the Certification and payrolls are self-serving for they were made
out of court, the COA having no opportunity to impugn the same in open court.33
Respondent COA also rejects petitioner's assertions on the validity of the grant of the WESA
claiming that the act of the PHIC Board is not the act of the individual composing the Board
in view of the settled rule that a corporation is invested by law with a personality separate
and distinct from those of the persons composing it.34 Thus, the act of the PHIC Board of
which the Health Secretary is the ex-officio chair is separate and distinct from the Health
Secretary. Consequently, the benefit given as WESA is invalid because the rate thereof was
not determined by the Health Secretary as mandated by the Magna Carta of PHWs.
As regards the LMRG, respondent maintains that it is exactly the same as the PIB earlier
granted to PHIC employees based on their good performance, increased productivity and
efficiency, for good performance is the result of a harmonious relationship between the
employees and the management.35 Even assuming that the LMRG does not partake of the
nature of the PIB, the former nonetheless remains an additional benefit that requires prior
approval of the Office of the President (OP) as mandated by Memorandum Order (MO) No. 20
dated June 25, 2001. Said MO requires presidential approval, for any increases in salary or
compensation of Government-Owned and Controlled Corporations (GOCCs) that are not in
accordance with the SSL.
As for the COLA back pay, respondent reiterates Nacion's view that petitioner PHIC is
unauthorized to settle the obligations PMCC had because it is not one of the powers and
functions enumerated in its charter, particularly Section 16 of R.A. 7875. Said functions do
not include the obligation to pay the benefits due to the employees of PMCC or other
employees of the government who have been absorbed by the PHIC. Respondent adds that at
the time covering the period of July 1989 to January 1995, PHIC had no legal personality yet,
for it was created only in 1995.36
Thus, the obligation to pay the COLA commenced only from that time. Prior to 1995, the
COLA of PMCC employees should have been collected from the PMCC where they rendered
their services.
The petition is partly meritorious.
At the outset, the Court rejects the alleged procedural barriers that supposedly prevent it
from entertaining the instant petition. Respondent claims that petitioner PHIC is not the
proper "aggrieved party" to file the petition because the parties who actually received and
who will be injured by the disallowance are the officers and employees of PHIC, and not PHIC
itself. Time and again, the Court has defined locus standi or legal standing as a personal and
substantial interest in the case such that the party has sustained or will sustain direct injury
as a result of the governmental act that is being challenged. The gist of the question of
standing is whether a party alleges such a personal stake in the outcome of the controversy
as to assure that concrete adverseness which sharpens the presentation of issues upon
which the court depends for illumination of difficult constitutional questions.37
In this regard, the Court. finds that petitioner PHIC certainly possesses the legal standing to
file the instant action. Petitioner comes before the Court invoking its power to fix the
compensation of its employees and personnel enunciated under the National Health
Insurance Act. Accordingly, when respondent disallowed petitioner's grant of certain
allowances in its exercise of said power, it effectively and directly challenged petitioner's
authority to grant the same. Thus, petitioner must be granted the opportunity to justify its
issuances by presenting the basis on which they were made. As petitioner pointed out,
whatever benefit received by the personnel as a consequence of PHIC's exercise of its
alleged authority is merely incidental to the main issue, which is the validity of PHIC's grant
of allowances and benefits.38 In fact, in light of numerous disallowances being made by the
COA, it is rather typical for a government entity to come before the Court and challenge the
COA's decision invalidating such entity's disbursement of funds.39 The nonparticipation of
the particular employees who actually received the disallowed benefits does not prevent
the Court from determining the issue of whether the COA gravely abused its discretion in
declaring the entity's issuance as illegal. In Maritime Industry Authority v. COA,40 We
explained:
The burden of proving the validity or legality of the grant of allowance or benefits is with the
government agency or entity granting the allowance or benefit, or the employee claiming the
same. After the Resident Auditor issues a notice of disallowance, the aggrieved party may
appeal the disallowance to the Director within six (6) months from receipt of the decision. At
this point, the government agency or employee has the chance to prove the validity of the
grant of allowance or benefit. If the appeal is denied, a petition for review may be filed before
the Commission on Audit Commission Proper. Finally, the aggrieved party may file a petition
for certiorari before this court to assail the decision of the Commission on Audit Commission
Proper.
Our laws and procedure have provided the aggrieved party several chances to prove the
validity of the grant of the allowance or benefit.41
As Article IX-A, Section 7 of the 1987 Constitution expressly provides, "unless otherwise
provided by this Constitution or by law, any decision, order, or ruling of each Commission
may be brought to the Supreme Court on certiorari by the aggrieved party within thirty days
from receipt of a copy thereof." In like manner, Rule 64, Section 2 of the Revised Rules of
Civil Procedure also provides that "a judgment or final order or resolution of the Commission
on Elections and the Commission on Audit may be brought by the aggrieved party to the
Supreme Court on certiorari under Rule 65, except as hereinafter provided." Thus, while
findings of administrative agencies, such as the COA herein, are generally respected, when it
is shown to have been tainted with unfairness amounting to grave abuse of discretion, the
aggrieved party can assail the COA decision in special civil action for certiorari under Rule 64
in relation to Rule 65, an extraordinary remedy, the purpose of which is to keep the public
respondent within the bounds of its jurisdiction, relieving the petitioner from the public
respondent's arbitrary acts.42
The Court shall now proceed to determine the propriety of respondent COA's disallowance.
In support of its grant of the subject allowances and benefits, petitioner PHIC persistently
invokes its 'fiscal autonomy' enunciated under Section 16(n) of R.A. 7875 "to organize its
office, fix the compensation of and appoint personnel as may be deemed necessary and
upon the recommendation of the president of the Corporation." It argued that unlike in Intia,
Jr. v. COA43 cited by respondent COA where the charter of the Philippine Postal Corporation
expressly stated that it shall ensure that its compensation system conforms closely to the
provisions of the SSL, the PHIC charter does not contain a similar limitation thereby
removing the PHIC from the ambit thereof.44 Moreover, had the legislature intended to
subject its power to fix its personnel's compensation to the approval of the DBM or the Office
of the President (OP), its charter should have expressly provided as it did in Section 19(d)
thereof which states that "the President shall receive a salary to be fixed by the Board, with
the approval of the President of the Philippines, payable from the funds of the Corporation."
In further support thereof, petitioner cites certain opinions of the Office of Government
Corporate Counsel (OGCC) dated December 21, 1999 and March 31, 2004 upholding PHIC's
unrestricted 'fiscal autonomy' to fix the compensation of its personnel.45
Petitioner adds that in any event, its power to fix its personnel compensation is still subject
to certain limitations such as Section 26(b) of R.A. 7875 providing that it may charge various
funds under its control for costs of administering the Program for as long as they shall not
exceed the twelve percent (12%) of the total contributions to the Program and three percent
(3%) of the investment earnings collected during the immediately preceding year.46 Thus,
petitioner posits that it is the intent of the legislature to limit the determination and approval
of allowances to the PHIC Board alone, subject only to the 12%-13% limitation.47 In the end,
petitioner emphasizes that it enjoys an unmistakeable authority to exclusively approve its
own, internal operating budget for prior DBM approval is only required when national
budgetary support is needed.48
Petitioner's contentions are devoid of merit.
The extent of the power of GOCCs to fix compensation and determine the reasonable
allowances of its officers and employees had already been conclusively laid down
in Philippine Charity Sweepstakes Office (PCSO) v. COA,49 to wit:
The PCSO stresses that it is a self-sustaining government instrumentality which generates its
own fund to support its operations and does not depend on the national government for its
budgetary support. Thus, it enjoys certain latitude to establish and grant allowances and
incentives to its officers and employees.
We do not agree. Sections 6 and 9 of R.A. No. 1169, as amended, cannot be relied upon by
the PCSO to grant the COLA. Section 6 merely states, among others, that fifteen percent
(15%) of the net receipts from the sale of sweepstakes tickets (whether for sweepstakes
races, lotteries, or other similar activities) shall be set aside as contributions to the operating
expenses and capital expenditures of the PCSO. Also, Section 9 loosely provides that among
the powers and functions of the PCSO Board of Directors is "to fix the salaries and determine
the reasonable allowances, bonuses and other incentives of its officers and employees as
may be recommended by the General Manager x x x subject to pertinent civil service and
compensation laws." The PCSO charter evidently does not grant its Board the unbridled
authority to set salaries and allowances of officials and employees. On the contrary, as a
government owned and/or controlled corporation (GOCC), it was expressly covered by P.D.
No. 985 or "The Budgetary Reform Decree on Compensation and Position Classification of
1976," and its 1978 amendment, P.D. No. 1597 (Further Rationalizing the System of
Compensation and Position Classification in the National Government), and mandated to
comply with the rules of then Office of Compensation and Position Classification (OCPC)
under the DBM.
Even if it is assumed that there is an explicit provision exempting the PCSO from the OCPC
rules, the power of the Board to fix the salaries and determine the reasonable allowances,
bonuses and other incentives was still subject to the DBM review. In Intia, Jr. v. COA, the
Court stressed that the discretion of the Board of Philippine Postal Corporation on the matter
of personnel compensation is not absolute as the same must be exercised in accordance
with the standard laid down by law, i.e., its compensation system, including the allowances
granted by the Board, must strictly conform with that provided for other government
agencies under R.A. No. 6758 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 DBM pursuant to Section 6 of P.D. No. 1597.
The Court, in the same case, further elaborated on the rule that notwithstanding any
exemption granted under their charters, the power of GOCCs to fix salaries and allowances
must still conform to compensation and position classification standards laid down by
applicable law. Citing Philippine Retirement Authority (PRA) v. Buñag,50 We said:
In accordance with the ruling of this Court in Intia, we agree with petitioner PRA that these
provisions should be read together with P.D. No. 985 and P.D. No. 1597, particularly Section 6
of P.D. No. 1597. Thus, notwithstanding exemptions from the authority of the Office of
Compensation and Position Classification granted to PRA under its charter, PRA is still
required to 1) observe the policies and guidelines issued by the President with respect to
position classification, salary rates, levels of allowances, project and other honoraria,
overtime rates, and other forms of compensation and fringe benefits and 2) 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.
Despite the power granted to the Board of Directors of PRA to establish and fix a
compensation and benefits scheme for its employees, the same is subject to the review of
the Department of Budget and Management. x x x x
The rationale for the review authority of the Department of Budget and Management is
obvious. Even prior to R.A. No. 6758, the declared policy of the.1aшphi1 national government
is to provide "equal pay for substantially equal work and to base differences in pay upon
substantive differences in duties and responsibilities, and qualification requirements of the
positions." To implement this policy, P.D. No. 985 provided for the standardized
compensation of government employees and officials, including those in government-owned
and controlled corporations. Subsequently, P.D. No. 1597 was enacted prescribing the duties
to be followed by agencies and offices exempt from coverage of the rules and regulations of
the Office of Compensation and Position Classification. The intention, therefore, was to
provide a compensation standardization scheme such that notwithstanding any exemptions
from the coverage of the Office of Compensation and Position Classification, the exempt
government entity or office is still required to observe the policies and guidelines issued by
the President and to submit a report to the Budget Commission on matters concerning
position classification and compensation plans, policies, rates and other related details. This
ought to be the interpretation if the avowed policy of compensation standardization in
government is to be given full effect. The policy of "equal pay for substantially equal work"
will be an empty directive if government entities exempt from the coverage of the Office of
Compensation and Position Classification may freely impose any type of salary scheme,
benefit or monetary incentive to its employees in any amount, without regard to the
compensation plan implemented in the other government agencies or entities. Thus, even
prior to the passage of R.A No. 6758, consistent with the salary standardization laws in effect,
the compensation and benefits scheme of PRA is subject to the review of the Department of
Budget and Management.51
Accordingly, that Section 16(n) of R.A. 7875 granting PHIC's power to fix the compensation of
its personnel does not explicitly provide that the same shall be subject to the approval of the
OBM or the OP as in Section 19(d) thereof does not necessarily mean that the PHIC has
unbridled discretion to issue any and all kinds of allowances, limited only by the provisions
of its charter. As clearly expressed in PCSO v. COA, even if it is assumed that there is an
explicit provision exempting a GOCC from the rules of the then Office of Compensation and
Position Classification (OCPC) under the OBM, the power of its Board to fix the salaries and
determine the reasonable allowances, bonuses and other incentives was still subject to the
standards laid down by applicable laws: P.O. No. 985,52 its 1978 amendment, P.O. No.
1597,53 the SSL, and at present, R.A. 10149.54 To sustain petitioners' claim that it is the
PHIC, and PHIC alone, that will ensure that its compensation system conforms with
applicable law will result in an invalid delegation of legislative power, granting the PHIC
unlimited authority to unilaterally fix its compensation structure.55 Certainly, such effect
could not have been the intent of the legislature.
It must be noted, though, that the power of review granted to the OMB is simply to ensure
that the proposed compensation and benefit schemes of the GOCCs comply with the
requirements of applicable laws, rules and regulations. PRA v. Buñag56 clarifies:
However, in view of the express powers granted to PRA under its charter, the extent of the
review authority of the Department of Budget and Management is limited. As stated in Intia,
the task of the Department of Budget and Management is simply to review the compensation
and benefits plan of the government agency or entity concerned and determine if the same
complies with the prescribed policies and guidelines issued in this regard. The role of the
Department of Budget and Management is supervisorial in nature, its main duty being to
ascertain that the proposed compensation, benefits and other incentives to be given to PRA
officials and employees adhere to the policies and guidelines issued in accordance with
applicable laws.
The rule, therefore, is that for as long as the allowances and benefits granted by petitioner
PHIC are in accordance with and authorized by prevailing law, the same shall be upheld by
the DBM.57 As Section 29(1), Article VI of the 1987 Constitution provides, "[n]o money shall
be paid out of the Treasury except in pursuance of an appropriation made by law."
Accordingly, in order to determine the validity of PHIC's issuances, the Court must give due
regard to the following Section 12 of the SSL in force at the time of the subject grants:
Section 12. Consolidation of Allowances and Compensation. - All allowances, except

for representation and transportation allowances; clothing
and laundry allowances; subsistence allowance of marine officers and crew on board
government vessels and hospital personnel; hazard pay; allowances of foreign service
personnel stationed abroad; and such other additional compensation not otherwise specified
herein as may be determined by the DBM, shall be deemed included in the standardized
salary rates herein prescribed. Such other additional compensation, whether in cash or in
kind, being received by incumbents only as of July 1, 1989 not integrated into the
standardized salary rates shall continue to be authorized.
Existing additional compensation of any national government official or employee paid from
local funds of a local government unit shall be absorbed into the basic salary of said official
or employee and shall be paid by the National Government. (Emphasis supplied)
Thus, the general rule is that all allowances are deemed included in the standardized salary
except for the following: (1) representation and transportation allowances; (2) clothing and
laundry allowances; (3) subsistence allowance of marine officers and crew on board
government vessels and hospital personnel; (4) hazard pay; (5) allowances of foreign service
personnel stationed abroad; and (6) such other additional compensation not otherwise
specified herein as may be determined by the DBM.
Time and again, the Court has ruled that Section 12 of the SSL is self-executing. This means
that even without DBM action, the standardized salaries of government employees are
already inclusive of all allowances, save for those expressly identified in said section.58 It is
only when additional non-integrated allowances will be identified that an issuance of the DBM
is required. Thus, until and unless the DBM issues rules and regulations identifying those
excluded benefits, the enumerated nonintegrated allowances in Section 12 remain
exclusive.59 When a grant of an allowance, therefore, is not among those excluded in the
Section 12 enumeration or expressly excluded by law or DBM issuance, such allowance is
deemed already given to its recipient in their basic salary. As a result, the unauthorized
issuance and receipt of said allowance is tantamount to double compensation justifying COA
disallowance.60
Prescinding from the foregoing, the Court had consistently ruled that not being an
enumerated exclusion, the COLA is deemed already incorporated in the standardized salary
rates of government employees under the general rule of integration of the
SSL.61 Petitioner's argument that the failure to publish the DBM-CCC No. 10 integrating
COLA into the standardized salary rates meant that the COLA was not effectively integrated
as of July 1989 but only on March 16, 1999 when the circular was published as required by
law has already been definitively addressed in Maritime Industry Authority v. COA,62 viz.:
We cannot subscribe to petitioner Maritime Industry Authority's contention that due to the
non-publication of the Department of Budget and Management's National Compensation
Circular No. 59, it is considered invalid that results in the non-integration of allowances in the
standardized salary.
xxxx
As held in Philippine International Trading Corporation v. Commission on Audit, the non-

publication of the Department of Budget and Management's issuance enumerating
allowances that are deemed integrated in the standardized salary will not affect the execution
of Section 12 of Republic Act No. 6758. Thus:
There is no merit in the claim of PITC that R.A. No. 6758, particularly Section 12 thereof is
void because DBM-Corporate Compensation Circular No. 10, its implementing rules, was
nullified in the case of De Jesus v. Commission on Audit, for lack of publication. The basis of
COA in disallowing the grant of SFI was Section 12 of R.A. No. 6758 and not DBM-CCC No. 10.
Moreover, the nullity of DBM-CCC No. 10 will not affect the validity of R.A. No. 6758. It is a
cardinal rule in statutory construction that statutory provisions control the rules and
regulations which may be issued pursuant thereto. Such rules and regulations must be
consistent with and must not defeat the purpose of the statute. The validity of R.A. No. 6758
should not be made to depend on the validity of its implementing rules.
In Gutierrez v. Department of Budget and Management, this court held that:
xxxx
In this case, the DBM promulgated NCC 59 [and CCC 10. But, instead of identifying some of
the additional exclusions that Section 12 of R.A. 6758 permits it to make, the DBM made a list
of what allowances and benefits are deemed integrated into the standardized salary rates.
More specifically, NCC 59 identified the following allowances/additional compensation that
are deemed integrated:
xxxx
The drawing up of the above list is consistent with Section 12 above. R.A. 6758 did not
prohibit the DBM from identifying for the purpose of implementation what fell into the class of
"all allowances." With respect to what employees' benefits fell outside the term apart from
those that the law specified, the DBM, said this Court in a case, needed to promulgate rules
and regulations identifying those excluded benefits. This leads to the inevitable
conclusion that until and unless the DBM issues such rules and regulations, the enumerated
exclusions in items (1) to (6) remain exclusive. Thus so, not being an enumerated exclusion,
COLA is deemed already incorporated in the standardized salary rates of government
employees under the general rule of integration.63
In certain instances, however, the Court had opted to sustain the continued grant of
allowances, whether or not integrated into the standardized salaries, but only to those
incumbent government employees who were actually receiving said allowances before and
as of July 1, 1989.1aшphi164 This is in consonance with the second sentence of the first
paragraph of Section 12 of the SSL which states that: "such other additional compensation,
whether in cash or in kind, being received by incumbents only as of July 1, 1989 not
integrated into the standardized salary rates shall continue to be authorized." But
unfortunately, petitioner failed to prove such exception. To recall, petitioner merely asserted,
as basis for its issuance of the COLA, the ineffectivity of DBM CCC 10 as well as its
obligation towards the employees it had absorbed from its predecessor, Philippine Medical
Care Commission. While petitioner loosely mentioned that the COLA back pay was for
services rendered between July 1989 and January 1995 when the payment of the same had
been "discontinued" and "unduly withdrawn," it failed to present any sort of proof,
documentary or otherwise, to sufficiently establish that those COLA recipients were, indeed,
incumbent government employees who were actually receiving the same as of July 1, 1989.
In fact, nowhere in its pleadings filed before the Court was it even invoked that the PHIC
officers and employees actually suffered a diminution in pay as a result of the consolidation
of the COLA back pay into their standardized salary rates. Petitioner cannot, therefore, rely
on Our ruling in Philipgine Ports Authority (PPA) Employees Hired After July 1, 1989 v.
COA.65 As the Court elucidated in NAPOCOR Employees Consolidated Union (NEU) v.
National Power Corporation (NPC):66
The Court has, to be sure, taken stock of its recent ruling in Philippine Ports Authority (PPA)
Employees Hired After July 1, 1989 vs. Commission on Audit. Sadly, however, our
pronouncement therein is not on all fours applicable owing to the differing factual milieu.
There, the Commission on Audit allowed the payment of back cost of living allowance
(COLA) and amelioration allowance previously withheld from PPA employees pursuant to the
heretofore ineffective DBM CCC No. 10, but limited the back payment only to incumbents as
of July 1, 1989 who were already then receiving both allowances. COA considered the COLA
and amelioration allowance of PPA employees as "not integrated" within the purview of the
second sentence of Section 12 of Rep. Act No. 6758, which, according to COA confines the
payment of "not integrated" benefits only to July 1, 1989 incumbents already enjoying the
allowances.
In setting aside COA's ruling, we held in PPA Employees that there was no basis to use the
elements of incumbency and prior receipt as standards to discriminate against the
petitioners therein. For, DBM-CCC No. 10, upon which the incumbency and prior receipt
requirements are contextually predicated, was in legal limbo from July 1, 1989 (effective date
of the unpublished DBM-CCC No. 10) to March 16, 1999 (date of effectivity of the heretofore
unpublished DBM circular). And being in legal limbo, the benefits otherwise covered by the
circular, if properly published, were likewise in legal limbo as they cannot be classified either
as effectively integrated or not integrated benefits.
There lies the difference.
Here, the employee welfare allowance was, as above demonstrated, integrated by NPC into
the employees' standardized salary rates effective July 1, 1989 pursuant to Rep. Act No.
6758. Unlike in PPA Employees, the element of discrimination between incumbents as of July
1, 1989 and those joining the force thereafter is not obtaining in this case. And while after
July 1, 1989, PPA employees can rightfully complain about the discontinuance of payment of
COLA and amelioration allowance effected due to the incumbency and prior receipt
requirements set forth in DBM-CCC No, 10, NPC cannot do likewise with respect to their
welfare allowance since NPC has, for all intents and purposes, never really discontinued the
payment thereof.
To stress, herein petitioners failed to establish that they suffered a diminution in pay as a
consequence of the consolidation of the employee welfare allowance into their standardized
salary. There is thus nothing in this case which can be the subject of a back pay since the
amount corresponding to the employee welfare allowance was never in the first place
withheld from the petitioners.67
Here, petitioner's constant invocation of the equal protection clause is misleading. In its
petition, petitioner PHIC insists that all its employees should be treated equally, regardless of
whether they rendered their service to the PHIC or to its predecessor, PMCC.68 Without
delving into the matter of whether said employees were employed before or after July 1, 1989,
it then concluded that all employees must be paid their back COLA that was unduly
withdrawn from them after the issuance of the DBM CCC 10, and for the entire duration that
the circular was in legal limbo.69 It bears stressing, however, that the Court,
in PPA, accorded equal treatment to all PPA employees whether they were incumbents as of
July 1, 1989, the time of effectivity of the SSL, or employed thereafter. Hence, to successfully
invoke the guarantee of equal protection clause under the PPA doctrine, petitioner needed to
prove, to the Court's satisfaction, not a discrimination between the current PHIC employees
and those absorbed from PMCC, but rather, a discrimination between incumbent PHIC
employees as of July 1, 1989 and those employed thereafter, who, as addressed by the
second sentence of Section 12 of the SSL, suffered a diminution in pay. But as previously
observed, petitioner never even alleged the same. Resultantly, petitioner can neither invoke
the guarantee of equal protection of laws nor the principle of non-diminution ofbenefits to
sustain its grant of the COLA.
For parallel reasons, the Court finds that the PHIC's issuance of the LMRG must suffer the
same fate. In defending the validity thereof, petitioner PHIC merely asserted, in its petition, its
'fiscal autonomy' to fix compensation and benefits of its personnel under Section 16 (n) of
R.A. No. 7875 and the argument that the LMRG is not merely a duplicate of the PIB.
Seemingly realizing the insufficiency thereof, petitioner, in its Reply, attempted to provide the
Court with additional legal basis by citing certain OGCC opinions and jurisprudence
reiterating its "fiscal autonomy" and averring that Section 19, Chapter 3, Book VI of E.O. 292,
otherwise known as the 1987 Administrative Code of the Philippines, clearly provides that
internal operating budgets of GOCCs are generally subject only of their respective governing
boards, and the only exception thereto requiring DBM approval is when national government
budgetary support is used. Thus, it waalleged that since the funds used in the disbursement
of the LMRG were sourced from PHIC's internal operating budget, DBM approval is
unnecessary.70
Petitioner fails to persuade.
PCSO v. COA has already established, in no uncertain terms, that the fact that a GOCC is a
self-sustaining government instrumentality which does not depend on the national
government for its budgetary support does not automatically mean that its discretion on the
matter of compensation is absolute. As elucidated above, regardless of any exemption
granted under their charters, the power of GOCCs to fix salaries and allowances must still
conform to compensation and position classification standards laid down by applicable law,
which, in this case, is the SSL. In view of petitioner's failure to present any statutory authority
or DBM issuance expressly authorizing the grant of the LMRG, the same must be deemed
incorporated in the standardized salaries of the PHIC employees. Accordingly, the Court
must necessarily strike its unauthorized issuance as invalid for the receipt by the PifiC
employees thereof was tantamount to double compensation.
With respect to the CNASB, however, it is undisputed that the same momentarily had DBM
approvaL Let it be remembered that on December 15, 2000, the DBM issued Budget Circular
No. 2000-19 explicitly authorizing the payment of the signing bonus to each entitled rank-and-
file personnel. But on July 11, 2002, the Court, in SSS v. COA, declared as invalid said
signing bonus for being inconsistent with the rule of salary integration under the SSL and for
not being "a truly reasonable compensation" due to the fact that peaceful collective
negotiations "should not come with a price tag." Thus, while respondent COA admits that the
payment of the CNASB was allowed under the DBM Circular, it contends that actual payment
thereof was made only on June 11, 2004, or after the pronouncement in SSS v. COA, and as a
consequence, petitioner PHIC's payment thereof is invalid.
Nevertheless, based on the records of the case, the Court is inclined to give more credence
to petitioner PHIC's allegations on the allowance's validity than to the apparently
unsubstantiated contentions of respondent COA. In disallowing the grant of the CNASB,
respondent COA primarily anchored its decision on a certain "Automatic Debit Advice dated
6-11-2004."71 Relying solely on the basis thereof, respondent summarily concluded that the
actual payment of the CNASB was made only on June 11, 2004 or after the pronouncement
in SSS v. COA.72 The Court, however, is unconvinced. Nowhere in the records was the
source of said "Automatic Debit Advice" shown. The initial Audit Observation Memorandum,
which was the basis of respondent COA's disallowance, simply indicated "ADA No. 01-06-028
dtd. 6/11/2004"73 and "ADA No. 01-05-029 dtd. 6/11/2004"74 without even explaining what
such code represents. Moreover, as aptly pointed out by petitioner, respondent COA
automatically insisted that the CNASB was granted after the promulgation of SSS v.
COA, merely mentioning, for the first time in its Comment before the Court, its basis as the
"Automatic Debit Advice." Said advice, however, was never shown to petitioner for
validation. Worse, it was not even presented before the Court to support the COA
disallowance.
Thus, as between petitioner PHIC's allegations together with its corresponding documentary
evidence consisting of certifications and employee payrolls on the one hand, and respondent
COA's plain assertions, unsubstantiated by any sort of proof on the other, the Court finds
that the former deserves to be given more weight and credence. Remember that the power
granted to the DBM is simply to ensure that the proposed compensation, benefits and other
incentives given to GOCC officials and employees adhere to the policies and guidelines
issued in accordance with applicable laws.75 It is only just that the extent of its reviewing
authority be sufficiently supported by reasonable proof. Considering, therefore, that the
records of the case, taken in conjunction with the circumstances surrounding their issuance,
supports a reasonable conclusion that the CNASB was, indeed, paid in 2001 and not in 2004,
at the time when the payment thereof was expressly sanctioned by DBM Budget Circular No.
2000-19, the Court holds that respondent COA carelessly and whimsically issued its
disallowance in absence of any sufficient basis in support of the same.
In a similar manner, the Court finds that the PHIC's grant of the WESA was aptly sanctioned
not only by Section 1276 of the SSL but also by statutory authority. PHIC Board Resolution
No. 385, s. 200177 states that the WESA of ₱4,000.00 each shall be paid to public health
workers under the Magna Carta of PHWs in lieu of the subsistence and laundry allowances.
Respondent COA contested the same not so much on the propriety of the subsistence and
laundry allowances in the form of the WESA, but that the Secretary of Health prescribed the
rates thereof not in accordance with the Magna Carta of PHWs. According to respondent
COA, the WESA is invalid because the act of the PHIC Board, of which the Health Secretary is
the Ex-Officio Chairperson, in approving the allowance is not the same as the act of the
Secretary himself. In this regard, Section 22 and 24 of the Magna Carta pertinently provides:
Section 22. Subsistence Allowance. - Public health workers who are required to render
service within the premises of hospitals, sanitaria, health infirmaries, main health centers,
rural health units and barangay health stations, or clinics, and other health-related
establishments in order to make their services available at any and all times, shall be entitled
to full subsistence allowance of three (3) meals which may be computed in accordance with
prevailing circumstances as determined by the Secretary of Health in consultation with the
Management-Health Worker's Consultative Councils, as established under Section 33 of this
Act: Provided, That representation and travel allowance shall be given to rural health
physicians as enjoyed by municipal agriculturists, municipal planning and development
officers and budget officers.
xxxx
SEC. 24. Laundry Allowance. - All public health workers who are required to wear uniforms
regularly shall be entitled to laundry allowance equivalent to one hundred twenty-five pesos
(₱125.00) per month: Provided, That this rate shall be reviewed periodically and increased
accordingly by the Secretary of Health in consultation with the appropriate government
agencies concerned taking into account existing laws and prevailing practices. (Emphases
ours)
Moreover, the Magna Carta's Revised Implementing Rules and Regulations (IRR) issued by
the Secretary of Health in November 1999 similarly provide:
7.2. Subsistence Allowance
7.2.1. Eligibility for Subsistence Allowance
a. All public health workers covered under RA 7305 are eligible to receive full subsistence
allowance as long as they render actual duty.
b. Public Health Workers shall be entitled to full Subsistence Allowance of three (3) meals
which may be computed in accordance with prevailing circumstances as determined by the
Secretary of Health in consultation with the Management Health Workers Consultative
Council, as established under Section 33 of the Act.
c. Those public health workers who are out of station shall be entitled to per diems in place
of Subsistence Allowance. Subsistence Allowance may also be commuted.
7.2.2. Basis for Granting Subsistence Allowance
Public health workers shall be granted subsistence allowance based on the number of
meals/days included in the duration when they rendered actual work including their regular
duties, overtime work or on-call duty as defined in this revised IRR.
Public health workers who are on the following official situations are not entitled to
collect/receive this benefit:
a. Those on vacation/sick leave and special privilege leave with or without pay;
b. Those on terminal leave and commutation;
c. Those on official travel and are receiving per diem regardless of the amount; and
d. Those on maternity/paternity leave.
7.2.3. Rates of Subsistence Allowance
a. Subsistence allowance shall be implemented at not less than PhP50.00 per day or
PhP1,500.00 per month as certified by head of agency.
b. Non-health agency workers detailed in health and health related

institutions/establishments are entitled to subsistence allowance and shall be funded by the
agency where service is rendered.
c. Subsistence allowance of public health workers on full-time and part-time detail in other
agency shall be paid by the agency where service is rendered.
d. Part-time public health workers/consultants are entitled to one-half (1/2) of the prescribed
rates received by full-time public health workers.
7.3. Laundry Allowance
7.3.1. Eligibility for Laundry Allowance
All public health workers covered under RA 7305 are eligible to receive laundry allowance if
they are required to wear uniforms regularly.
7.3.2. Rate of Laundry Allowance

The laundry allowance shall be P150.00 per month. This shall be paid on a monthly basis
regardless of the actual work rendered by a public health worker.
It may be observed, however, that the foregoing excerpts do not prescribe a specific form or
process by which the Secretary of Health must compute the rates of the subsistence and
laundry allowances. The law simply states that the Health Secretary shall compute said rates
"in accordance with prevailing circumstances" and "in consultation with the Management
Health Workers Consultative Council." But nowhere in the law was it required that the
Secretary of Health, in determining the allowances due to PHWs, must be acting alone.
Neither has respondent COA presented any provision of law, rule, or other similar authority
to that effect.
Instead, respondent COA insists that since the Health Secretary actually approved the
issuance of the WESA by virtue of a resolution of the PHIC Board, such approval is invalid for
the act of the PHIC Board is not the act of the individual composing the Board in view of the
rule that a corporation is invested by law with a personality separate and distinct from those
of the persons composing it. The Court, however, cannot subscribe to such argument. It is
true that a corporation is a juridical entity with legal personality separate and distinct from
those acting for and in its behalf and, in general, from the people comprising it. Resultantly,
obligations incurred by the corporation, acting through its .directors, officers and employees,
are its sole liabilities.78 Moreover, when said corporation's corporate legal entity is used as a
cloak for fraud or illegality, the law will regard it as an association of persons or, in case of
two corporations, merge them into one.79 It must be clarified, however, that these principles
of separate juridical personalities as well as the piercing of its veil of corporate fiction
essentially apply only in determining established liabilities.80 It is but a legal fiction
introduced for purposes of convenience and to subserve the ends of justice.81 But the issue
in the instant case is far from holding a director liable for the obligations of the corporation
insofar as claims of third persons are concerned. The issue here, instead, is merely whether
the Secretary of Health duly complied with prevalent law in determining the rates of
allowances to be granted to qualified PHWs. In this regard, the Court rules in the affirmative.
To repeat, the law does not prescribe a particular fonn nor restrict to a specific mode of
action by which the Secretary of Health must determine the subject rates of subsistence and
laundry allowance. That the Health Secretary approved the grant of the WESA together with
ten (10) other members of the Board does not make the act any short of the approval required
under the law. As far as the Magna Carta and its Revised IRR are concerned, the then Health
Secretary Dr. Alberto G. Romualdez, Jr. voted in favor of the WESA's issuance, and for as
long as there exists no deception or coercion that may vitiate his consent, the concurring
votes of his fellow Board members does not change the fact of his approval. To rule
otherwise would create additional constraints that were not expressly provided for by law.
Nevertheless, even assuming the invalidity of the WESA due to the inegular manner by which
the Health Secretary determined its rates, the Court does not find that the PHIC Board of
Directors, other responsible officers, and recipients thereof should be ordered to refund the
same. On this matter, PCSO v. COA82 summarized the rules as follows:
Recipients or payees need not refund disallowed benefits or allowances when it was received
in good faith and there is no finding of bad faith or malice. On the other hand, officers who
participated in the approval of such disallowed amount are required to refund only those
received if they are found to be in bad faith or grossly negligent amounting to bad faith.
Public officials who are directly responsible for, or participated in making the illegal
expenditures, as well as those who actually received the amounts therefrom shall be
solidarity liable for their reimbursement. The receipt or non-receipt of illegally disbursed
funds is immaterial to the solidary liability of government officials directly responsible.
As previously discussed, PHIC's grant of the WESA was aptly sanctioned not only by Section
12 of the SSL which explicitly identifies laundry and subsistence allowance as excluded from
the integrated salary, but also by statutory authority, particularly, Section 22 and 24 of the
Magna Carta. In view of such fact, the PHIC officers cannot be found to have approved the
issuance of the same in bad faith or in gross negligence amounting to bad faith for it was
well within the parameters set by law. Thus, the WESA need not be refunded.
Neither must the concerned PHIC officers and employees be ordered to refund the CNAB
because, as previously mentioned, the same was expressly authorized by DBM Budget
Circular No. 2000-19. Contrary to respondent COA's unsubstantiated assertion, the Court is
convinced that the CNAB was paid in 2001, before the payment ofthe same was invalidated
by Our ruling in SSS v. COA. The PHIC approving officers, therefore, had no knowledge of
the fact that the payment of the CNAB was contrary to the SSL for the same was actually
authorized by the DBM itself.
Similarly, there is no showing that the PHIC officers approved the issuance and payment of
the back COLA in bad faith. From the very beginning, petitioner had been invoking, albeit
enoneously, Our ruling in PPA Employees Hired After July 1, 1989 v. COA, wherein We
granted the payment of the COLA back pay to PPA employees for the period beginning July
1, 1989 until March 16, 1999, during the time the DBM-CCC No. 10 was in legal limbo,
seemingly believing, in good faith, that on the basis thereof, the PHIC employees could
likewise be granted the same. In fact, even respondent COA Director Janet Nacion was under
the same impression when she conceded that "no less than the SC has made an imprimatur
regarding the employee's entitlement to COLA" during the time the circular was in legal
limbo.83 It is therefore apparent that during such time, there were differing opinions
regarding the true interpretation of a technicality of law. Thus, before the Court was able to
clarify that the ruling in PPA Employees was limited to distinguishing the benefits that may
be received by government employees who were hired before and after the effectivity of the
SSL,84 there was yet no absolute and clear-cut rule regarding the entitlement to the COLA
during the period when the DBM circular was in legal limbo. Hence, it might seem rather
severe to hold the concerned PHIC officers personally liable to refund the COLA back pay in
view of the fact that they may have honestly believed in the propriety of the same. In fact, just
recently, We held that since certain officers who authorized the back payment of the COLA
were oblivious that said payments were improper, the same need not be refunded.85 This is
because absent any showing of bad faith or malice, public officers are not personally liable
for damages resulting from the performance of official duties.86 As the Court explained
in Philippine Economic Zone Authority (PEZA) v. COA:87
x x x x 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. If there is any ambiguity, which is actually clarified
years later, then it should only be applied prospectively. A contrary rule would be
counterproductive. It could result in paralysis, or lack of innovative ideas getting tried. In
addition, it could dissuade others from joining the government. When the government
service becomes unattractive, it could only have adverse consequences for society.88
Thus, the fact that the PHIC officers had an unclear knowledge of a ruling by this Court
categorically prohibiting the particular disbursement herein is a badge of good
faith,89 especially in light of the COA's failure to overturn the presumption of regularity in the
performance of their official duties.
The same does not hold true, however, with respect to the LMRG. Unlike the issuances of the
WESA, CNAB, and COLA, which need not be refunded either for being expressly sanctioned
by law or for being issued in an honest belief that the same was authorized by recent
jurisprudence, petitioner's issuance of the LMRG cannot be said to have been done in good
faith. Time and again, the Court has defined good faith as "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 transactions unconscientious."90
As previously mentioned, the PHIC Board members and officers approved the issuance of
the LMRG in sheer and utter absence of the requisite law or DBM authority, the basis thereof
being merely PHIC's alleged "fiscal autonomy" under Section 16(n) of RA 7875.91 But again,
its authority thereunder to fix its personnel's compensation is not, and has never been,
absolute. As previously discussed, in order to uphold the validity of a grant of an allowance,
it must not merely rest on an agency's "fiscal autonomy" alone, but must expressly be part of
the enumeration under Section 12 of the SSL, or expressly authorized by law or DBM
issuance. This directive was definitively established by the Court as early as 1999 in National
Tobacco Administration v. Commission on Audit,92 which was even subsequently affirmed
in Philippine International Trading Corporation v. Commission on Audit93 in 2003. Thus, at
the time of the passage of PHIC Board Resolution No. 717, s. 2004 on July 22, 2004 by virtue
of which the PHIC Board resolved to approve the LMRG's issuance, the PHIC Board members
and officers had an entire five (5)-year period to be acquainted with the proper rules insofar
as the issuance of certain allowances is concerned. They cannot, therefore, be allowed to
feign ignorance to such rulings for they are, in fact, duty-bound to know and understand the
relevant rules they are tasked to implement.94 Thus, even if We assume the absence of bad
faith, the fact that said officials recklessly granted the LMRG not only without authority of
law, but even contrary thereto, is tantamount to gross negligence amounting to bad faith.
Good faith dictates that before they approved and released said allowance, they should have
initially determined the existence of the particular rule of law authorizing them to issue the
same.
In view of the foregoing, the Court holds that the PHIC Board members who approved PHIC
Board Resolution No. 717, series of2004 and the PHIC officials who authorized its release are
bound to refund the LMRG. It is unclear, however, from a review of the records of the case,
which of the PHIC Board members and officials named in the COA's Notice of Disallowance
were the ones responsible for the issuance of the LMRG, considering that what was listed
therein were the "Persons Liable" for the grant and release of all four (4) allowances lumped
together as subject of the instant case, without any distinction as to the particular set of
officers responsible for the approval of a respective type of allowance as well as its
corresponding amount.95 Hence, for the proper implementation of this judgment, the COA is
hereby ordered to identify, in a clear and certain manner, the specific PHIC Board members
and officials who approved the grant of the LMRG and authorized its release as well as to
compute the exact amount they received.
With respect to the PHIC officials and employees, however, who merely received the subject
LMRG but had no participation in the approval and release thereof, the Court deems them to
have acted in good faith, honestly believing that the PHIC Board Resolution was issued in the
Board's valid exercise of its power. Thus, they are absolved from refunding the LMRG they
received.
WHEREFORE, premises considered, the instant petition is PARTLY GRANTED. The

November 20, 2013 Decision and April 4, 2014 Resolution of the COA Commission Proper,
which affirmed the Notice of Disallowance PHIC 2008-003 (2004) dated February 7, 2008,
are AFFIRMED WITH MODIFICATION. The recipients and officers who authorized the
following disbursements need not refund the amounts paid in connection therewith: (1) the
Collective Negotiation Agreement Signing Bonus; (2) the Welfare Support Assistance; and (3)
the back payment of Cost of Living Allowance. As for the Labor Management Relations
Gratuity, only the PHIC Board members who approved PHIC Board Resolution No. 717, series
of 2004 and the PHIC officials who authorized its release are bound to refund the same. For
this purpose, the COA is hereby ordered to: (1) particularly identify the PHIC Board members
and officials responsible for the approval and release of the LMRG; and (2) compute the exact
amount of the LMRG that said officers and employees respectively received.
SO ORDERED.
Sereno, C. J., Carpio, Velasco, Jr., Leonardo-De Castro, Brion, Bersamin, Del Castillo, Perez,
Mendoza, Reyes, Perlas-Bernabe, Leonen, Jardeleza, and Caguioa, JJ., concur.
NOTICE OF JUDGMENT
Sirs/Mesdames:
Please take notice that on November 29, 2016 a Decision/Resolution, copy attached herewith,
was rendered by the Supreme Court in the above-entitled case, the original of which was
received by this Office on December 16, 2016 at 1:10 p.m.
Very truly yours,
(SGD) FELIPA G. BORLONGAN-ANAMA

Clerk of Court
Footnotes
1 Signed by Commissioner Ma. Gracia M. Pulido Tan, Chairperson, with Commissioners Heidi
L. Mendoza and Rowena V. Guanzon, concurring; rollo, pp. 47-56.
2 ld. at 119-123.
3 Id. at 96.
4 Id. at 109-111.
5 Id. at 112-114.
6 Section 51 of R.A. No. 7875 provides:
SECTION 51. Merger. - Within sixty (60) days from the promulgation of the implementing rules
and regulations, all functions and assets ofthe Philippine Medical Care Commission shall be
merged with those of the Corporation (PHILHEALTH) without need of conveyance, transfer or
assignment. The PMCC shall thereafter cease to exist.
The liabilities of the PMCC shall be treated in accordance with existing laws and pertinent
rules and regulations.
7 Rollo, p. 7.
8 Id. at 47.
9 Id. at 119.
10 433 Phil. 946 (2002).
11 Id. at 120.
12 Id.
13 Id. at 124.
14 Id. at 47-56.
15 Id. at 57.
16 Id. at 11.
17 Supra note 10.
18 Id. at 14.
19 Id. at 16.
20 Id. at 17
21 Id. at 18-19.
22 355 Phil. 584 (1998).
23 Rollo, p. 21.
24 Id. at 23.
25 Id. at 25.
26 Id. at 169.
27 Id. at 175-176.
28 Section 16 (n) of R.A. No. 7875 provides:
Section 16. Powers and Functions - The Corporation shall have the following powers and
functions:
xxxx
n) to organize its office, fix the compensation of and appoint personnel as may be deemed
necessary and upon the recommendation ofthe president of the Corporation; x x x
29 G.R. No. 98395, October 28, 1994, 237 SCRA 809, 816.
30 Rollo, pp. 166 and 184.
31 Supra note 10.
32 Id. at 186.
33 Id. at 187.
34 Id. at 180.
35 Id. at 188.
36 Id. at 183-184.
37 Francisco, Jr. v. The House of Representatives, 460 Phil. 830, 893 (2003).
38 Rollo, p. 307.
39 Maritime Industry Authority v. COA, G.R. No. 185812, January 13, 2015, 745 SCRA
300; Manila International Airport Authority v. COA, 681 Phil. 644 (2012).
40 Supra.
41 Id. at 340. (Emphasis ours)
42 Id. at 312-313.
43 366 Phil. 273 (1999).
44 Rollo, pp. 312-313.

45 Id. at 318-319.
46 SEC. 26. Financial Management - The use, disposition, investment, disbursement,

administration and management of the National Health Insurance Fund, including any
subsidy, grant or donation received for program operations shall be governed by resolution
of the Board of Directors of the Corporation subject to the following limitations:
xxxx
b) The Corporation is authorized to charge the various funds under its control for the costs of
administering the Program. Such costs may include administration, monitoring, marketing
and promotion, research and development, audit and evaluation, information services, and
other necessary activities for the effective management of the Program. The total annual
costs for these shall not exceed twelve percent (12%) of the total contributions, including
government contributions to the Program and not more than three (3%) of the investment
earnings collected during the immediately preceding year.
47 Rollo, p. 320.
48 Id. at 322.
49 G.R. No. 216776, April 19, 2016. (Emphasis ours)
50 444 Phil. 859 (2003).
51 Philippine Retirement Authority (PRA) v. Buñag, supra, at 869-870. (Emphases ours)
52 Entitled "The Budgetary Reform Decree on Compensation and Position Classification of

1976."
53 Entitled "Further Rationalizing the System of Compensation and Position Classification in

the National Government."
54 Entitled "GOCC Governance Act of 2011."
55 Intia, Jr. v. COA, supra note 43, at 291.
56 Supra note 50, at 869-870.
57 Yap v. Commission on Audit, 633 Phil. 174, 193-194 (2010).
58 Maritime Industry Authority v. Commission on Audit, supra note 39, at 321.
59 Id. at 322.
60 Id. at 342.
61 Philippine Charity Sweepstakes of Office (PCSO) v. COA, supra note 49; Gutierrez, et al. v.
Dept. of Budget and Mgt., et al., 630 Phil. 1, 14 (2010); Maynilad Water Supervisors
Association v. Maynilad Water Services, Inc., G.R. No. 198935, November 27, 2013, 711 SCRA
110, 119; Land Bank of the Philippines v. Naval, G.R. No. 195687, April 14, 2014.
62 Supra note 39.
63 Maritime Industry Authority v. COA, supra note 39, at 323-326. (Emphases ours)
64 PCSO v. COA, supra note 49.
65 506 Phil. 382 (2005).
66 519 Phil. 372 (2006).
67 NAPOCOR Employees Consolidated Union v. National Power Corporation, supra, at 388-

389. (Emphases ours)
68 Rollo, p. 25.
69 Id. at 23.
70 Id. at 323.
71 Id. at 166 and 184.
72 Id. at 186.
73 Id. at 116.
74 Id. at 117.
75 PRA v. Buñag, supra note 50, at 870.
76 Section 12 of R.A. No. 6758 provides:
Section 12. Consolidation of Allowances and Compensation. - All allowances, except for
representation and transportation allowances; clothing
and laundry allowances; subsistence allowance of marine officers and crew on board
government vessels and hospital personnel; hazard pay; allowances of foreign service
personnel stationed abroad; and such other additional compensation not otherwise specified
herein as may be determined by the DBM, shall be deemed included in the standardized
salary rates herein prescribed. Such other additional compensation, whether in cash or in
kind, being received by incumbents only as of July 1, 1989 not integrated into the
standardized salary rates shall continue to be authorized. x x x x (Emphases ours)
77 Rollo, pp. 109-111.
78 Francisco v. Mallen, Jr., 645 Phil. 369, 374 (2010).
79 Id. at 376.
80 Kukan International Corporation v. Honorable Reyes, 646 Phil. 221, 234 (2010).
81 Garcia v. Social Security Commission Legal and Collection, Social Security System, 565
Phil. 193, 214 (2007).
82 Supra note 49.
83 Rollo, p. 132.
84 Maritime Industry Authority v. COA,supra note 39, at 326.
85 Zamboanga City Water District (ZCWD) v. COA, G.R. No. 213472, January 26, 2016.
86 Id.
87 G.R. No. 210903, October 11, 2016.
88 Id.
89 Id.
90 Id.
91 Rollo, p. 112.
92 370 Phil. 793 (1999).
93 461 Phil. 737 (2003).
94 PCSO v. COA, supra note 49.
95 Rollo, pp. 119-123.
[ I.P.I. No. 15-227-CA-J. November 29, 2016 ]
RE: VERIFIED COMPLAINT DATED 17 NOVEMBER 2014 OF DOLORA CADIZ KHANNA

AGAINST HON. EDGARDO L. DELOS SANTOS, HON. MARILYN B. LAGURA-YAP AND HON.
JHOSEP Y. LOPEZ, ASSOCIATE JUSTICES, COURT OF APPEALS, JUDGE RONALD H.
EXMUNDO, REGIONAL TRIAL COURT, BRANCH 4, KALIBO, AKLAN, JUDGE FRICIA C.
GOMEZ-GUILLEN, BRANCH 15, METROPOLITAN TRIAL COURT, MANILA AND JUAN S.
APOLINAR,[1] SHERIFF III, BRANCH 17, METROPOLITAN TRIAL COURT, MANILA.
RESOLUTION
PEREZ, J.:
This resolves the complaint2 filed by Dolora Cadiz Khanna (Khanna) charging Hon. Edgardo L.
Delos Santos (Justice Delos Santos), Hon. Marilyn B. Lagura-Yap (Justice Lagura-Yap) and Hon.
Jhosep Y. Lopez (Justice Lopez), Associate Justices, Court of Appeals (CA), Judge Ronald H.
Exmundo (Judge Exmundo), Regional Trial Court (RTC), Branch 4, Kalibo, Aklan, Judge Fricia C.
Gomez-Guillen (Judge Gomez-Guillen), Branch 15. Metropolitan Trial Court (MeTC), Manila and
Apolinar S. Juan, Sheriff III (Sheriff Juan), Branch 17, MeTC, Manila with corruption and extortion.
Khanna alleged that sometime in 2007, she and her husband named Summit bought parcels of
land located at Bolabog, Balabag, Malay, Aklan from Atty. Lucas Licerio (Atty. Licerio). She alleged
that they paid over ₱30,000,000.00 for all the lots, not knowing that the properties are part of the
inalienable reserved forest land of the government by virtue of Proclamation 1064.
Sometime in May or June 2007, the spouses took possession of the lots and started building
their dream house thereon. They developed the property which was then a forest, coco and grassy
land. Seeing the potential of the property, they later on developed it into a luxury resort community
which they called "The Cliff Resorts."
Khanna claimed that in the latter part of 2009, Atty. Licerio and his cohorts started harassing
them by filing numerous cases of Estafa thru Falsification of Public Documents.1aшphi1
Khanna narated that she filed, through her counsel Atty. Lorna Kapunan (Atty. Kapunan), a
Petition for Injunction with Prayer for the Issuance of Temporary Restraining Order (TRO) against
Atty. Licerio and twenty John Does before the RTC, Kalibo, Aklan. The case was docketed as Civil
Case No. 8988 entitled "Dolora Khanna vs. Lucas Licerio and Twenty John Does" and raffled to
RTC, Branch 4, presided over by Judge Exmundo.
After filing the case, Khanna requested one of her employees, a province mate of Judge
Exmundo from Iloilo, to seek the assistance of the latter. Khanna al1eged that during their
conversation, she ventilated to Judge Exmundo the injustices committed against them by Atty.
Licerio.
Judge Exmundo allegedly instructed Khanna to secure the services of Atty. Mateo C. Hachuela
(Atty. Hachuela) to be her counsel in lieu of Atty. Kapunan. She was also told to give ₱300,000.00 in
order for Judge Exmundo to grant her prayer for the issuance of a TRO.
In compliance with the directive, Khanna contended that she hired Atty. Hachuela; paid the latter
his acceptance fee; and gave the P300,000.00 for the TRO. As agreed upon, on 3 November 2010,
Judge Exmundo issued the TRO. By virtue thereof, she and her husband regained possession of the
premises which were unlawfully and forcibly taken from them by Atty. Licerio and his armed goons.
During the pendency of the case, Atty. Hachuela allegedly informed Khanna that Judge
Exmundo was demanding ₱2,000,000.00 for a favorable decision of the Petition for Injunction that
they filed. Believing on the merits of her case, she did not concede to the demand.
She noted that on 7 December 2012, Atty. Licerio again forcibly took over the property even
without any court order. Khanna alleged that she received information from a reliable source that
Atty. Licerio had already paid Judge Exmundo to rule in his favor. The same source likewise told her
that Atty. Hachuela and Judge Exmundo' travelled to Hongkong after receiving the payment from
Atty. Licerio. Khanna stated that during the take-over of the property, she called and informed Atty.
Hachuela about what happened. She claimed that during their conversation she heard slot machines
and Judge Exmundo's voice in the background.
Khanna contended that for her failure to cough up ₱2,000,000.00 and after Atty. Licerio met with
Judge Exmundo, a decision was rendered on 21 December 2012 denying the Petition for Injunction.
The Motion for Reconsideration she subsequently filed was likewise denied by Judge Exmundo.
Thereafter, Atty. Licerio filed a Motion for Execution Pending Appeal before RTC, Branch 4,
Kalibo, Aklan. Atty. Hachuela, the alleged bagman of Judge Exmundo, again asked the spouses to
give ₱1,000,000.00 for the denial of the aforesaid motion. Considering that their property was at
stake, the spouses agreed to the demand and gave Atty. Hachuela the amount of ₱1,00,000.00
consisting of two checks of ₱500,000.00 each, dated 20 and 25 March 2013, respectively. As
agreed upon, Judge Exmundo denied the motion filed by Atty. Licerio. Khanna attached in her
complaint a photocopy of the two checks cleared by the bank, as well as a copy of the exchanges of
text messages between her and Atty. Hachuela.
Atty. Licerio then filed a Motion for Execution Pending Appeal before the CA. The case was
docketed as CA-G.R. CV No. 04899 and raffled to the 19th Division of the CA, Cebu City.
On 12 September 2014, the 19th Division of the CA composed of Associate Justices Delos
Santos, Lagura-Yap and Lopez granted the motion filed by Atty. Licerio. Khanna claimed that the
associate justices of the CA totally disregarded the valid objections she raised and issued the
resolution without basis and despite the absence of good reason. Consequently, Khanna filed a
Motion for Reconsideration and Addendum (to the Motion for Reconsideration).
Khanna claimed that on 27 September 2014 at around 7:00 p.m., she and her husband, together
with their friend Paul from the National Bureau of Investigation (NBI), met Judge Gomez-Guillen of
the MeTC, Branch 15, Manila; the latter's husband Miller Guillen; and Sheriff of MeTC, Branch 17,
Manila. During the meeting, the spouses discussed with the group their case which is pending in the
CA. The group allegedly told the spouses that they can assist in having the CA rule in their favor.
The meeting was allegedly recorded in the CCTV camera of Woodfire Pizza at Rockwell Makati.
The meeting was allegedly followed by several telephone conversations wherein the spouses
were informed that the CA justices were asking for Twelve Million Pesos for the lifting of the writ of
execution earlier issued and the issuance of an order of .permanent injunction.
Khanna further stated that on one occasion, Miller Guillen even called and requested for an
amount of ₱10,000.00 to cover the dinner expenses for his alleged meeting with CA Justice Lopez.
The amount requested was deposited to the bank account of Miller Guillen. Khanna attached to her
complaint a photocopy of the deposit slip as evidence.
On 8 November 2014, Miller Guillen again called the spouses and informed them that the 15-day
period given to the other party is about to expire. They were told that after that, the CA justices will
release a decision and the justices will expect the payment of half of the amount, which is
₱6,000,000.00.
Feeling threatened, Khanna's husband thereafter talked to Judge Gomez-Guillen and the latter
explained that the CA justices are expecting the money as soon as possible. At that time, the
spouses informed Judge Gomez-Guillen that they cannot afford to give such large amount of money
and that they are already sick and tired of the extortion and corruption. Khanna alleged that since
then, they never communicated with the group again. 1aшphi1
Khanna, thereafter, filed the instant administrative complaint against herein respondents with the
prayer that an order be issued directing Judge Exmundo and the associate justices of the
19th division of the CA to cease and desist from further proceeding in the cases pending before
them and to inhibit themselves from the subject cases.
In a Resolution3 dated 21 January 2015, the Court required the respondents to comment on the
verified complaint filed by Khanna.
In compliance with the resolution, Judge Exmundo filed his comment4 on 6 March 2015. He
narrated that the complaint of Khanna arose from Civil Case No. 8988, entitled Dolora Khanna vs.
Lucas Licerio and Twenty John Does, for Injunction with Prayer for the Issuance of a Writ of
Preliminary Injunction and/or Temporary Restraining Order. The case was filed before RTC, Branch
4, Kalibo, Aklan, where he is the presiding judge. Based on the merits of the case, he denied the
petition in his decision dated 21 December 2012.
Judge Exmundo averred that all the allegations hurled against him are mere conjectures, false,
baseless and product of an evil and malicious mind. He claimed that Atty. Hachuela was personally
hired by complainant as collaborating counsel of Atty. Kapunan without his intervention as it is not
his task to do so considering that the case is being heard in his sala. He denied that he demanded,
through Atty. Hachuela, the amounts of ₱300,000.00 for a favorable issuance of a temporary
restraining order and ₱2,000,000.00 for a favorable decision in Civil Case No. 8998. He alleged that
these are but products of complainant's imagination. He maintained that the exchange of text
messages between Khanna and Atty. Hachuela is part of attorney-client relationship and the person
referred to as "Pope" therein can be anybody but definitely not and cannot be him. He contended
that he never transacted nor discussed Civil Case No. 8998 with Atty. Hachuela. He also contended
that the allegation: that he travelled to Hong Kong and Macau with Atty. Hachuela is untrue and
without any basis.
In her comment,5 Judge Gomez-Guillen admitted that she, her husband Miller and their friend
Sheriff Juan met and had dinner with Khanna and the latter's husband Summit at a pizza restaurant
in Power Plant Mall, Makati City. They were introduced by their friend Paul from the NBI as his "Tita
Dolly." Judge Gomez-Guillen, however, denied that they discussed or that Khanna consulted about
the latter's case pending before the CA. She likewise denied that she spoke with complainant's
husband to explain that the justices of the 19th Division of the CA want ₱6,000,000.00 for a
favorable ruling. She averred that' neither she nor her husband personally knows the CA justices
mentioned in the complaint and that there is no way for them to approach or even communicate with
any of them. She concluded that the complaint seemed to be desperate move from a disgruntled
litigant.
Sheriff Juan, for his part, likewise admitted that they had dinner with Khanna and the latter's
husband at Woodfire Pizza Restaurant in Rockwell Power Plant, Makati City. Khanna allegedly
introduced herself as a businesswoman and owner of a resort in Boracay. She allegedly offered him
an opportunity to earn commission by selling her condominium at Rockwell and by looking for
investors in her resort business. He declined the offer since he doesn't know of any person wealthy
enough to afford the properties she's selling.
Contrary to the allegations in the complaint, Sheriff Juan contended that he and the Guillen
spouses never claimed that they knew Justice Lopez of the CA. On the other hand, he alleged that it
was Khanna who asked if they knew Justice Lopez and offered to give money if they could assist
them in their case pending before the CA. Sheriff Juan. further alleged that on one occasion, Khanna
called the cellphone of Miller Guillen and insisted on talking to him. Khanna allegedly persisted on
seeking assistance from him since he is a sheriff and the former had a mistaken notion that as such,
he knew a lot of judges and justices. He claimed that he told Khanna that he doesn't know any
justice and even if he knew them, he cannot help because what the complainant was asking is
wrong and illegal. It was allegedly at that time that Khanna threatened to file a case against him and
the Guillen spouses.6
In their respective comments,7 the respondent associate justices of the CA denied vehemently
denied the allegations against them in the complaint. The respondent justices were categorical in
their statements that they do not know complainant Khanna, Miller Guillen,' Judge Gomez-Guillen,
Sheriff Juan and a certain Paul from the NBI. Justice Lagura-Yap even added that she does not
know Khanna's present and previous counsel or the counsel of the latter's opponent.
They denied demanding ₱6,000,000.00, ₱12,000,000.00 or any other amount from Khanna
through Miller Guillen, Judge Gomez-Guillen, Sheriff Juan or Paul from NBI. Neither were they
promised by appellee Atty. Licerio nor received from him, Khanna's personal homes, gifts or any
favor.
The respondent justices presented evidence of their detailed whereabouts on 6 and 7 November
2014 to prove that they did not meet with Miller Guillen and NBI Paul to discuss the case and the
terms of payment for a favorable ruling. Justice Delos Santos even challenged Khanna to produce
the necessary evidence showing their presence during the alleged SM Convention Center meeting.
He claimed that with the advent of modern technology, CCTV footage can be obtained by Khanna if
indeed the alleged meeting at SM Convention Center took place. They reported that they were in
Manila on those days but not to meet regarding the case of Khanna but to attend the En
Banc session of the CA in the afternoon of 7 November 2014 and to vote in the selection of the
Division Clerk of Court of the Eighteenth division for the Visayas station. They presented itineraries,
airplane tickets, credit card billing statements, Uber receipts, Agenda of the CA En Banc session and
affidavits of persons they were with during the subject dates and time.
They maintained that the assailed resolution they issued on 12 September 2014 in CA-G.R. CV
NO. 04899 has factual and legal basis. They averred that the resolution was supported by law and
jurisprudence and that they merely applied the law. They concluded that Khanna was prompted to
file the instant administrative complaint only because she was not satisfied with the aforesaid
resolution, not having received a favorable ruling thereon. They submit that the administrative
complaint was clearly intended to pressure and harass them.
Our Ruling
This Court has consistently ruled that in administrative proceedings, the burden of proof that
respondent committed the acts complained of rests on the complainant.8 After a careful perusal of
the records, we find no substantial evidence to support the allegations against the respondent
associate justices of the CA. The record is absent of any affidavits of persons who have personal
knowledge regarding the supposed extortion and corruption allegedly committed by the CA justices
or even documents to corroborate the accusations against them. Clearly, the allegations against
them were based solely on hearsay evidence.
In all the instances stated in the Complaint-Affidavit involving the respondent CA justices, we
noted that Khanna relied solely on what Miller Guillen, Judge Gomez-Guillen, Sheriff Juan or Paul
from the NBI told her and/or her husband. Although, Khanna attached in her complaint the affidavit
of her staff, Agnes Ramos, a reading of the same would only show that it was Miller Guillen, not the
respondent CA justices, who asked for the ₱12,000,000.00 bribe.
These are only second hand accounts which have no probative value because these do not
establish the acts complained of, that the CA justices demanded money in exchange for a favorable
order and that they were a part of the scheming plan to extort money from complainant. Other than
complainant's bare allegations and informations coming from her brokers, fixers or agents, there
were no evidence presented to show any wrong doings or bad faith on the part of respondent CA
justices.
The relevant portion of the assailed CA resolution reads:

Under Section 4, Rule 39 of the Revised Rules of Court, judgments in actions for injunction are
not stayed by appeals taken therefrom. Thus:
Sec. 4. Judgments not stayed by appeal. - Judgments in actions

for injunction, receivership, accounting and support, and such other
judgments as are now or may hereafter be declared to be
immediately executory, shall be enforceable after their rendition
and shall not be stayed by an appeal taken therefrom, unless
otherwise ordered by the trial court. On appeal therefrom, the
appellate court in its discretion may make an order suspending,
modifying, restoring, or granting the injunction, receivership,
accounting, or award of support.
The above rule is well-established and has been cited by the Honorable Supreme Court in a
number of cases. In Intramuros Tennis Club, Inc. vs. Philippine Tourism Authority, the Honorable
Supreme Court, citing Crisostomo vs. Securities and Exchange Commission and Defensor-Santiago
vs. Vasquez, held that judgments in actions for injunction are not stayed by the pendency of an
appeal taken therefrom. This rule has been held to extend to judgments decreeing the dissolution of
a writ of preliminary injunction, which are immediately executory.9
The assailed resolution was issued by respondent CA justices in the proper exercise of their
judicial functions. As such, this is not subject to administrative disciplinary action. The resolution
issued was indeed based on existing law and jurisprudence. We have settled the rule that a judge
may not be administratively sanctioned from mere errors of judgment in the absence of showing of
any bad faith, fraud, malice, gross ignorance, corrupt purpose, or a deliberate intent to do an
injustice on his or her part.10 Judicial officers cannot be subjected to administrative disciplinary
actions for their performance of duty in good faith.11
We noted that on 8 January 2015, respondent CA justices issued a resolution granting Khanna's
motion for reconsideration and ordered for the staying of the execution of the court a quo's judgment,
conditioned upon her posting of the bond in the amount of ₱500,000.00. Such later ruling only
indicates that the respondent justices were just exercising their authority to pass upon and in their
sound discretion, correct its earlier resolution. We further noted that the later resolution was issued
even before the respondent CA justices received a copy of the administrative complaints filed
against them. Such scenario rendered the allegations in the complaint against respondent CA
justices illogical. If money was the consideration for a favorable ruling, then why was the motion for
reconsideration of Khanna granted if she declined to accede to the alleged demand for money? The
only plausible answer is that the resolution was issued based on the merits of the case.
In the aforesaid resolution dated 8 January 2015, the respondent CA justices explained that
since Khanna was in possession of the property and was able to adduce evidence that she spent
millions in renovating the subject property, it is but proper to stay the execution of the judgment and
preserve the status quo.
In fine, in the absence of proof to the contrary, the presumption is that the respondent CA
justices issued the resolutions in good faith. As a matter of public policy, a judge cannot be
subjected to liability for any of his official acts, no matter how erroneous, as long as he acts in good
faith. To hold otherwise would be to render judicial office untenable, for no one called upon to try the
facts or interpret the law in the process of administering justice can be infallible in his judgment.12
The same thing cannot be said with respect to the other respondents herein. In the case of
Judge Exmundo, Judge Gomez-Guillen and Sheriff Juan, the evidence presented by Khanna which
were based on her personal knowledge, if established, would be sufficient to hold them
administratively liable.
It appears that complainant is primarily to be blamed for the extortions because even at the
outset she kept on looking for people who could assist her in getting favorable rulings from the
courts where her cases are pending. It is regrettable, however, that Judge Exmundo, Judge Gomez
Guillen and Sheriff Juan allowed themselves to be part of that scheme to thwart the administration of
justice. These officials and personnel of the court preyed on a willing victim. Their actions although
they may have been done outside the confines of their courts clearly tarnished the image of the
judiciary.
WHEREFORE, in the light of the foregoing premises, the Court hereby resolved to:
1) RE-DOCKET the instant administrative complaint filed by Dolora Cadiz Khanna as a regular
administrative matter against Judge Ronald H. Exmundo, Regional Trial Court, Branch 4,
Kalibo, Aklan, Judge Fricia C. Gomez-Guillen, Branch 15, Metropolitan Trial Court, Manila
and Apolinar S. Juan, Sheriff III, Branch 17, Metropolitan Trial Court, Manila;
2) DIRECT the Court Administrator, through any of his Deputy Court Administrators, to
investigate the aforesaid administrative complaint and SUBMIT a report and
recommendation thereon within Forty Five (45) days from receipt hereof;
3) DISMISS the administrative complaint against Associate Justices Edgardo L. Delos Santos;
Marilyn B. Lagura-Yap; and Jhosep Y. Lopez, all of the Nineteenth Division, Court of Appeals
for utter lack of merit.
SO ORDERED.
Sereno, C. J., Carpio, Velasco, Jr., Leonardo-De Castro, Brion, Peralta, Bersamin, Del Castillo,
Mendoza, Reyes, Perlas-Bernabe, Leonen, Jardeleza, and Caguioa, JJ., concur.
NOTICE OF JUDGMENT
Sirs/Mesdames:
Please take notice that on November 29, 2016 a Decision/Resolution, copy attached herewith,
was rendered by the Supreme Court in the above-entitled administrative matter, the original of which
was received by this Office on December 16, 2016 at 1:10 p.m.
Very truly yours,
(SGD) FELIPA G. BORLONGAN-

ANAMA
Clerk of Court

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November 29, 2016

G.R. No. 218406

PHILIPPINE CONSTITUTION ASSOCIATION (PHILCONSA), represented by its President

G.R. No. 218761

TANGGULANG DEMOKRASYA (TAN DEM), INC., represented by its President TERESITA

G.R. No. 204355

REV. VICENTE LIBRADORES AQUINO, REV. MERCIDITA S. REDOBLE, and INTERNATIONAL

G.R. No. 218407

JACINTO V. PARAS, Petitioner,

G.R. No. 204354

In G.R. No. 218406, petitioners Philippine Constitution Association (Philconsa), represented

a) Annex on Transitional Arrangements and Modalities; 11

b) Annex on Revenue Generation and Wealth Sharing; 12

c) Annex on Power Sharing;13

d) Annex on Normalization;14 and

The Annexes and Addendum discussed the following:

a) The Annex on Transitional Arrangements and Modalities, signed on 27 February 2013,

c) The Annex on Power Sharing, signed on 8 December 2013, discussed intergovernmental

On 7 December 2012, Miriam Coronel-Ferrer succeeded Marvic M.V.F. Leonen as GPNP

On 27 March 2014, the Philippine Government, represented by GPNP Chairperson Miriam

The Court's Ruling

We dismiss the petitions.

Not ripe for adjudication due to non-enactment of

An actual case or controversy involves a conflict of legal rights, an assertion of opposite

Closely linked to the requirement of an actual case or controversy is the requirement of

WHEREFORE, we DISMISS the petitions on the ground of prematurity.

MARIA LOURDES P.A. SERENO

PRESBITERO J. VELASCO, JR. TERESITA J. LEONARDO-DE CASTRO

ARTURO D. BRION DIOSDADO M. PERALTA

LUCAS P. BERSAMIN MARIANO C. DEL CASTILLO

BIENVENIDO L. REYES ESTELA M. PERLAS-BERNABE

(no part) (no part)

MARIA LOURDES P.A. SERENO

[ G.R. No. 213453. November 29, 2016 ]

PHILIPPINE HEALTH INSURANCE CORPORATION, PETITIONER, VS. COMMISSION ON

The antecedent facts are as follows:

On February 7, 2008, however, pursuant to the recommendations of the Supervising Auditor

WHETHER THE COA GRAVELY ABUSED ITS DISCRETION, AMOUNTING TO LACK OR

Petitioner PHIC raises several infirmities attendant in respondent COA's

The petition is partly meritorious.

Petitioner's contentions are devoid of merit.

Section 12. Consolidation of Allowances and Compensation. - All allowances, except

As held in Philippine International Trading Corporation v. Commission on Audit, the non-

In Gutierrez v. Department of Budget and Management, this court held that:

There lies the difference.

Petitioner fails to persuade.

7.2. Subsistence Allowance

7.2.1. Eligibility for Subsistence Allowance

7.2.2. Basis for Granting Subsistence Allowance

b. Those on terminal leave and commutation;

d. Those on maternity/paternity leave.

7.2.3. Rates of Subsistence Allowance

b. Non-health agency workers detailed in health and health related

7.3. Laundry Allowance

7.3.1. Eligibility for Laundry Allowance

7.3.2. Rate of Laundry Allowance

x x x x It is unfair to penalize public officials based on overly stretched and strained

WHEREFORE, premises considered, the instant petition is PARTLY GRANTED. The

Very truly yours,

(SGD) FELIPA G. BORLONGAN-ANAMA

6 Section 51 of R.A. No. 7875 provides:

10 433 Phil. 946 (2002).

17 Supra note 10.

22 355 Phil. 584 (1998).