l\epublic of tbe Jbilippine~

j,upremt (ourt
~lanila

EN BANC

NATIONAL TRANSMISSION G.R. No. 227796

CORPORATION,
Petitioner, Present:

SERENO, CJ,
CARPIO,
VELASCO, JR,
LEONARDO-DE CASTRO,
PERALTA,
BERSAMIN,
-versus - DEL CASTILLO,
PERLAS-BERNABE,
LEONEN,
JARDELEZA,
CAGUIOA,*
MARTIRES,
TIJAM,·"'
REYES, and
COMMISSION ON AUDIT (COA) GESMUNDO, JJ.
and COA Chairperson MICHAEL
G. AGUINALDO, Promulgated:
Respondents. February 20, 2018
x----------------------------------1¥1-~~=~--x
RESOLUTION

DEL CASTILLO, J.:

1
This Petition for Certiorari filed under Rule 64 in relation to Rule 65 of
the Rules of Court assails the Decision No. 2016-278 2 dated September 28, 2016
of respondent Commission on Audit (COA) Commission Proper (CP), affirming
the disallowance of the payment of separation benefits to Mr. Alfredo V. Agulto,
Jr. in the amount ofll22,965.8 l ./gaJftt'

On official leave.
1
Rollo, pp. 13-42.
2
Id. at 43-50; signed by Chairperson Michael G. Aguinaldo, Commissioner Jose A. Fabia and Commissioner
Isabel D. Agito.
 Resolution 2 G.R. No. 227796

Factual Antecedents

Petitioner National Transmission Corporation (TransCo) is a government

instrumentality created under Republic Act No. 9136 (RA 9136), otherwise
known as the Electric Power Industry Reform Act of 2001 (EPIRA Law). lt
operates and manages the power transmission system that links power plants to
3
electric distribution utilities nationwide.

In December 2007, pursuant to the EPIRA Law, its concession was

4
awarded to the National Grid Corporation of the Philippines (NGCP).
Accordingly, on June 30, 2009, its employees were either retired or separated from
service. 5

Mr. Alfredo V. Agulto, Jr. (Agulto ), who was a regular employee of

petitioner Transco with the position Principal Engineer B from March 17, 2003 to
6
June 29, 2009, received the amount of P656,597.50 as separation benefits
pursuant to petitioner Transco' s Resolution implementing the Early Separation
Program.

During post-audit, the Supervising Auditor (SA) issued Notice of

Disallowance (ND) No. TC-10-005 (09) dated October 19, 2010, 7 disallowing the
amount of P22,965.81 from Agulto's separation benefits as said amount pertained
to the period March 1 to 15, 2004 during which Agulto's employment status was
still contractual. 8 The SA noted that the Service Agreement of Agulto during the
said period specially provided that "the service to be rendered is not considered
and will not be credited as government service. " 9 Thus, the SA found the
following persons liable:

1. Bernadine L. Protomartir - Division Manager, General Accounting &

Financial Reporting (GAFR)
2. Jose Mari M. Ilagan - Manager, Administrative Department
3. Alfredo V. Agulto, Jr. - Payee. 10

Petitioner Transco appealed the ND before the Director, Cluster B,

Corporate Government Sector (CGS) of the COA. It argued that t.he payment of
separation benefits to contractual employees was lawful as it was in accordance
with the EPIRA Law, the Corporation Code, and the Board Resolution~~

Id. at 14-15.
Id. at 15.
Id. at 16.
ld. at 16-1 7.
Id. at 65.
Id.
<)
Id.
io Id.
Resolution 3 G.R. No. 227796

petitioner Transco. 11

Ruling ofthe Commission 011 Audit Director

On July 9, 2014, the COA Director partially granted the appeal by

exempting Agulto from liability since he received his separation benefits in good
faith. The dispositive portion of the Decision 12 reads:

WHEREFORE, foregoing premises considered, the instant Appeal is

hereby PARTIALLY GRANTED. Accordingly, only the Members of the
Board of Directors responsible for the passage of Resolution Nos. TC 2009-005
and TC 2009-007 and the officers who authoriz.ed the release of the funds and
certified the expense as necessary and lawful are hereby ordered to refund the
amount of disallowed retirement benefits they respectively received. Hence, Mr.
Alfredo V. Agulto, Jr. is no longer required to refund the ammmt disallowed.

This, notwithstanding, herein Decision is not yet final and is subject to

the automatic review of the COA-[CP] pursuant to Section 7, Rule V of the 2009
Revised Rules of Procedure of the Commission on Audit. 13

Ruling ofthe Commission on Audit Commission Proper

On September 28, 2016, respondent COA-CP rendered Decision No. 2016-

14
278, disapproving the Decision of the COA Director. Respondent COA-CP
maintained, that under Section 63 15 of RA 9136, in relation to Rule 33 16 of~~

II
Id. at 17-18.
12
Id. at 81-88; penned by Rufina S. Laquindanum, Director IV.
IJ
Id. at 87-88.
14
Id. at 43-50.
15
SEC. 63. Separation Benefits of Officials and Employees of Affected Agencies. - National government
employees displaced or separated from the service as a result of the restructuring of the electricity industry
and privatization ofNPC assets pursuant to this Act, shall be entitled to either a separation pay and other
benefits in accordance with existing laws, rules or regulations or be entitled to avail of the privileges
provided under a separation plan which shall be one and one-half month ~alary for every year of service in
the government: Provided, however, That those who avail of such privilege shall start their government
service anew if absorbed by any government-owned successor company. In no case, shall there be any
diminution of benefits under the separation plan until the full inlplementation of the restructuring and
privatization.
Displaced or separated personnel as a result of the privatization, if qualified, shall be given preforencc
in the hiring of the manpower requirements of the privatized companies.
The salaries of employees of NPC shall continue to be exempt from the coverage of Republic Act No.
6758, otherwise known as ''The Salary Standardization Act".
With respect to employees who are not retained by NPC, the government, through the Department of
Labor and Employment, shall endeavor to implement re-training, job counseling, and job placement
programs.
16
RULE 33. SEPARATION BENEFITS Section 1. General Statement on Coverage. This Rule shall apply to
all employees in the National Government service as of26 June 2001 regardless of position, designation or
status, who are displaced or separated from the service as a result of the Restructuring of the electricity
indust1y and Privatization of NPC assets: Provided, however, That the coverage for casual or contractual
employees shall be limited to those whose appointments were approved or attested by the Civil Service
Commission (CSC).
 Resolution 4 G.R. No. 227796

separation benefits only if their appointments were approved or attested to by the

17
Civil Service Commission (CSC). In this case, since there was no proof that
Agulto' s appointment was duly approved or attested to by fae CSC, the payment
of the amount of P22,965 .81 was correctly disallowed. 18 Accordingly, the
members of petitioner Transco' s Board of Directors who approved the
Resolutions implementing the Early Separation Program, as well as Agulto, were
liable to return the said amount. 19

As to the defonse of good faith of Agulto, respondent COA-CP ruled that

this cannot exempt him from liability as the disregard of laws and rules cannot be
a source of a privilege to exempt him from refunding the benefits he was not
. "0 Thus:
entit. led to receive.~

WHEREFORE, premises considered, Commission on Audit Corporate

Government Sector--Cluster 3 Decision No. 09 dated July 9, 2014 on the appeal
of the National Transmission Corporation, Quezon City is hereby
DISAPPROVED. Accordingly, Notice of Disallowance No. TC 10-005 (09)
dated October 19, 2010, on t11e payment of separation benefits to Mr. Alfredo V.
Agulto, Jr. in the amount ofP22,965.81, is AFFIRMED.

1be Board of Directors of National Transmission Corporation who

approved Board Resolution Nos. TC 2009-005 and TC No. 2009-007, shall be
solidarily liable with Mr. Agulto, Jr.

'll1e concemed Audit Team Leader and Supervising Auditor shall issue a
supplemental Notice of Disallowance to include as persons liable the concerned
Members of the Board of Directors who approved said Board Resolutions. 21

Aggrieved, petitioner Transco filed the instant Petition for Certiorari,

raising the following issues:

A. WHETHER X X X THE GRANT OF FINANCIAL

ASSISTA"l\JCE/SEPARATION BENEFIT[S] TO FORT\.1ER TRANSCO
PERSONNEL ENGAGED BY VIRTUE OF SERVICE AGREEMENTS
IS PROHIBITED.

B. WHETHER X X X IT IS WITHIN THE fPETI110NER] TRANSCO

BOARD'S POWER TO GRANT FINANCIAL ASSISTANCE/
SEPARATION BENEFIT[S] TO PERSONNEL ENGAGED BY
VIRTUE OF SERVICE AGREEMENTS.

C.
WHETHER X X X [RESPONDENT COA-CP] COMNIITTED GRAVE
ABUSE OF DISCRETION IN ISSUING DECISION NO. 2016-278
~~
22
_ _ _ _D_A_1_E_D 28 SEP'l'EMBER2016.
17 /.tf/£/C"
Rollo, pp. 46-48.
18
Id. at 47-48.
19
Id. at 48-49.
20
Id. at 48.
21
ld. at 49.
22
Id.at19.
Resolution 5 G.R. No. 227796

Simply pµt, the issues boil down to whether respondent COA-CP

committed grave abuse of discretion in disallowing a portion of Agulto's
separation benefits and in finding him and the members of petitioner TransCo's
Board of Directors solidarily liable.

Ruling

The Petition is partly meritorious.

The issues raised by petitioner Transco hf!ve be~n resolved in the similar
Gase of National Transmission Corporation v. Commission on Audit,23 where the
Court sustained the disallowance of a portion of the separation benefits of an
employee corresponding to the period when he was still a contractual employee.
In that case, the Court ruled that under the EPIRA Law contractual employees are
entitled to separation benefits only if their appointments have been approved or
attested to by the CSC. 24

In this case, since there was no proof that Agulto's appointment was duly
approved or attested to by the CSC, the disallowance of the amount of P22,965.81
was valid and proper. Thus, the Court finds no grave abuse of discretion on the
part of respondent COA~CP is sustaining the disallow~nce.

The disallowed amount, however, need not be refunded by the memb~rs of

petitioner Transco' s Board of Directors as well as by Agulto, following the ruling
of the Court in Nationql Transmission Corporation --

TI1e Court, nevertheless, finds that Transco and Miranda be excused

from refi.u1ding the disallowed amount notwithstanding the propriety of the ND
in question. In view of Trans(.:o's relianc~ on Lopez, which the Court now
abandons, the Court grants TransCo's petition pro hac vice and absolved it from
any liability in refunding the disallowed amotµlt.

On another note, even if the 1\ITJ is to be upheld, Miranda shoi.tld not be

solidarily liable to refund the same. In Silang v. COA, the Cmut had ruled that
passive recipients of the disallowed disbursements, who acted in good faith, are
absolved from r~fundin~ the same, x x x25

WHEREF'ORE, the instant Petition is PARTLY GRANTED. The

Decision No. 2016-278 dated September 28, 2016 of respondent Comll1ission on
Audit, Commission Proper, is AF:FIRMED witb MODIFICATION that the
disall~~~:n.t~·p22,~5.81 need not be refund~~
23
G.R, No, 223625, November 22. 20 i 6.
24 Id.
25 Id.
 Resolution 6 G.R. No. 227796

SO ORDERED.
,.
~~
MARIANO C. DEL CASTILLO
Associate Justice

WE CONCUR:

MARL!\ LOURDES P.A. SERENO

Chi~(Justice

ANTONIO T. CARPIO PRESBI"~~ J. VE~ASCO, .JR.

Associate Justice J.1.ssoctate Justzce

,$
4~.~1l:~ Associate Justice
.PERALTA

ha~ fl.t,rJ/
ESTEI-1A N!fPERLAS-BERNABE
Associate Justice

,. . . ., (h A. ~~,.., ,,.__

/~~~'{)'' ~
FRANCIS H . .lARDELEZA
Associate Justice

'.~11 'v1l
/ j 111A~

~.
(On official leave) tvr,.( 11111w1/
ALFREDO BENJAlVUN S. CAGUIOA 'JVJUEL . TIRES
Associate Justice Associate Justice
Resolution 7 G.R. No. 227796

(On ofjicial leave)

~
u,
NOEL GIMENEZ TIJAM AND REYES, JR.
Associate Justice A te.Justice

CERTIFICATION
I certify that the conclusions in the above Resolution had been reached in
consultation before the case wm; assigned to the writer of the opinion of the Comt.

MARIA LOURDES P.A. SERENO

ChiefJustice

CERTIFIED XEROX COPY;

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