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DEVELOPMENT BANK OF PHILIPPINES v. COA

FACTS:

The petitioner in this case is the Development Bank of the Philippines (DBP). DBP filed a Petition for Certiorari with the court, seeking the nullification of certain issuances made by the Commission on Audit (COA). These issuances concerned the disallowance of the payment of the Governance Forum Productivity Award (GFPA) to DBP's officials and employees.

COA denied DBP's Petition for Review and affirmed the disallowance of the GFPA payment. The COA argued that the grant of the GFPA had no legal basis and recommended that the money be refunded. On the other hand, DBP contended that the payment was made in accordance with its Board of Directors' authority to enter into a compromise agreement for the resolution of employees' claims.

However, the COA upheld its decision to disallow the GFPA payment and rejected DBP's arguments. Unsatisfied with the outcome, DBP filed a Petition for Review with the court, but its petition was denied. DBP then sought a reconsideration of the court's decision through a Motion for Reconsideration, but this too was denied with finality.

As a result, DBP filed the present petition, once again seeking to nullify the issuances made by the COA regarding the disallowance of the GFPA payment.

ISSUES:

  1. Whether the COA acted without or in excess of its jurisdiction when it disallowed the grant of the Governance Forum Performance Award (GFPA) as an ultra vires act of the DBP's Board of Directors (BOD).

  2. Whether the grant of Governance Forum Productivity Award (GFPA) by DBP's Board of Directors (BOD) was an ultra vires act or beyond the authority of the BOD.

  3. Whether the Commission on Audit (COA) committed grave abuse of discretion in disallowing the GFPA.

  4. Whether DBP should be ordered to refund the GFPA.

RULING:

  1. The COA acted within its jurisdiction when it disallowed the GFPA as an ultra vires act of the DBP's BOD. The GFPA was granted through labor negotiations, which the COA considered outside the powers of the DBP's BOD. The DBP's authority to compromise under its charter does not include contested benefits demanded by its employees. The compensation and allowances of DBP's officers and employees should be granted in accordance with the principles under the Salary Standardization Law (SSL) and conformably with the provisions of its charter. The COA correctly asserted that industrial peace is not a determining factor in fixing the compensation of DBP's employees under the SSL. While employees of chartered GFIs have the right to bargain collectively, they may only do so for non-economic benefits not fixed by law and may not resort to acts amounting to work stoppages or interruptions. Thus, the GFPA was disallowed as an ultra vires act of the DBP's BOD.

  2. The Supreme Court affirmed the COA's disallowance of the payment of GFPA to DBP's officials and employees. The Court held that the grant of GFPA was indeed an ultra vires act by DBP's BOD, as the terms and conditions of employment in government employment are fixed by the legislature and administrative heads of government through statutes or administrative circulars, and not through collective bargaining agreements. There was no grave abuse of discretion on the part of COA in disallowing the GFPA.

  3. Regarding the issue of refund, the Court held that a refund of the GFPA would not be in order. While in a related case, the Court ordered a refund of an additional allowance (AA) granted by DBP, the refund was justified in that case due to the finding of bad faith on the part of DBP's Executive Committee (Execom) and the violation of the prohibition on the payment of AA and other inflation-connected allowance. In contrast, there was no finding of bad faith on the part of DBP with regard to the grant of GFPA, and the disallowance of GFPA was a distinct matter from the legality of the AA. The DBP acted in good faith based on its interpretation of its statutory authority and its belief that its charter authorized the settlement of contested employee benefits in the interest of the bank. Thus, DBP was no longer required to refund the GFPA distributed.

PRINCIPLES:

  • The authority of a government financial institution (GFI) to compromise claims is limited to claims against the GFI and does not include contested benefits demanded by its employees.

  • The compensation and allowances of officers and employees of a GFI should be granted in accordance with the principles under the Salary Standardization Law (SSL) and conformably with the provisions of its charter.

  • Industrial peace is not a determining factor in fixing the compensation of GFI employees under the principles of the SSL.

  • While employees of chartered GFIs have the right to bargain collectively, they may only do so for non-economic benefits not fixed by law and may not resort to acts amounting to work stoppages or interruptions.

  • In the unionized private sector, the terms and conditions of employment are settled through collective bargaining, while in government employment, they are fixed by the legislature and administrative heads of government.

  • Disbursements subsequently disallowed by COA do not need to be refunded when received in good faith.

  • Officers who participated in the approval of disallowed allowances or benefits are required to refund only if they are found to be in bad faith or grossly negligent amounting to bad faith.