The Supreme Court ruled that a public official, Director Nini A. Lanto, could not be held personally liable for disallowed salary payments to a dismissed employee, Leonel P. Labrador, because she acted in good faith. This decision underscores the importance of demonstrating malice or bad faith to hold public officials personally liable for disallowed payments. It serves as a reminder that public officials are presumed to act in good faith and should not be penalized for honest mistakes.

When Duty and Good Faith Collide: Can Public Officials Be Held Liable for Honest Errors?

This case revolves around Nini A. Lanto, then Director II of the Administrative Branch (now Director IV of the Pre-Employment Services Office) of the Philippine Overseas Employment Administration (POEA), and the Commission on Audit’s (COA) decision to hold her personally liable for the disallowed payment of salaries and benefits to Leonel P. Labrador, a dismissed public employee. Labrador had been dismissed following a conviction by the Sandiganbayan, but continued to receive payments. The central question is whether Lanto, in her capacity as a certifying officer, should be held accountable for these payments made after Labrador’s dismissal, despite her claim of acting in good faith and without knowledge of the dismissal order.

The factual backdrop begins with Labrador’s dismissal from his position as Chief of the POEA’s Employment Services Regulation Division (ESRD). He was initially dismissed by the Labor Secretary in 1997 for bribery, a decision affirmed by the Civil Service Commission (CSC). Simultaneously, a criminal case for direct bribery led to his conviction by the Sandiganbayan on August 31, 1999, carrying penalties including temporary special disqualification from public office. Despite this conviction, Labrador continued to receive his salaries and benefits until March 2004. This was discovered in 2005 when the COA issued an audit observation memorandum, highlighting the overpayment of salaries and benefits to Labrador from August 31, 1999, to March 15, 2004.

Based on these observations, the COA issued a Notice of Disallowance in January 2006, holding several POEA employees, including Lanto, personally liable for the unduly received salaries and benefits amounting to P1,740,124.08. Lanto, as the certifying officer, was deemed responsible for ensuring the accuracy of the payroll. The COA’s decision was based on the principle that public officials are personally liable for expenditures of government funds made in violation of law or regulations, as stipulated in Book V, Title I, Subtitle B, Chapter 9, Sec. 52 of EO 292 and Sec. 103 of PD 1445.

Lanto challenged the COA’s decision, arguing that she acted in good faith and with due diligence in certifying the payrolls. She claimed she had no knowledge of Labrador’s dismissal or the criminal case against him at the time she certified the payrolls from September 16, 2002, to March 2004. She submitted documents, including Labrador’s service record, leave records, and performance evaluations, to support her claim that he had rendered service during the period in question. She also highlighted that she was on foreign assignment during a significant period and was not notified of the COA’s decisions and orders.

The Supreme Court, in its analysis, acknowledged that the petition was filed beyond the reglementary period. Ordinarily, this delay would render the COA’s decision final and unassailable. The Court cited Section 3 of Rule 64 of the Rules of Court, which stipulates that petitions for review of adverse judgments must be filed within thirty days from notice. However, the Court recognized exceptions to the strict application of procedural rules, particularly when matters of life, liberty, honor, or property are at stake.

In this instance, the Court found compelling reasons to suspend the strict adherence to the rules. The Court found that the potential for personal liability for a substantial sum, her good faith reliance on available records, and her lack of knowledge regarding Labrador’s dismissal, and her foreign assignment when the COA rendered the assailed issuances constituted compelling circumstances warranting an exception. The Court emphasized that every public official is presumed to act in good faith, and the burden of proving malice or bad faith lies with the party alleging it. The Court quoted from Dimapilis-Baldoz v. Commission on Audit:

It is a standing rule that every public official is entitled to the presumption of good faith in the discharge of official duties, such that, in the absence of any proof that a public officer has acted with malice or bad faith, he should not be charged with personal liability for damages that may result from the performance of an official duty. Good faith is always presumed and he who alleges the contrary bears the burden to convincingly show that malice or bad faith attended the public officer’s performance of his duties.

The COA failed to present convincing evidence of Lanto’s malice or bad faith. The Court also considered that Lanto was on foreign assignment when the COA issued the assailed orders, which further supported her claim of not having been duly notified of the proceedings. Consequently, the Court held that the COA’s directive to withhold Lanto’s salary was void and without legal effect. This led to the conclusion that the COA’s issuances did not attain finality as to her.

In the Court’s own words, in Land Bank of the Philippines v. Orilla:

A void judgment or order has no legal and binding effect, force or efficacy for any purpose. In contemplation of law, it is non-existent. Such judgment or order may be resisted in any action or proceeding whenever it is involved. It is not even necessary to take any steps to vacate or avoid a void judgment or final order; it may simply be ignored.

The Supreme Court ultimately PARTIALLY GRANTED the petition, affirming the COA’s decision but DELETING the portion pertaining to Lanto’s personal liability. This decision reinforces the principle that public officials should not be held personally liable for disallowed payments unless there is clear evidence of malice or bad faith. Good faith, in the absence of contrary evidence, remains a significant shield for public officers performing their duties.

FAQs

What was the key issue in this case?	The key issue was whether Director Nini A. Lanto could be held personally liable for disallowed payments to a dismissed employee when she acted in good faith and without knowledge of the dismissal.
What is the presumption regarding public officials’ actions?	Public officials are presumed to act in good faith when performing their duties. The burden of proving malice or bad faith lies with the party alleging it.
What must be proven to hold a public official personally liable for disallowed payments?	To hold a public official personally liable, it must be convincingly shown that malice or bad faith attended the public officer’s performance of their duties.
What were the main arguments of Director Lanto?	Director Lanto argued that she acted in good faith, had no knowledge of the employee’s dismissal, and relied on official records indicating that the employee had rendered service.
Why did the Supreme Court initially consider dismissing the petition?	The Supreme Court initially considered dismissing the petition because it was filed beyond the reglementary period stipulated in the Rules of Court.
What exceptions did the Court recognize to justify suspending the procedural rules?	The Court recognized exceptions for matters of life, liberty, honor, or property, and the existence of special or compelling circumstances that favored the suspension of the rules.
What was the Court’s ultimate ruling in this case?	The Court partially granted the petition, affirming the COA’s decision but deleting the portion pertaining to Director Lanto’s personal liability, based on her good faith and lack of knowledge of the employee’s dismissal.
What is the significance of the ruling?	The ruling reinforces the principle that public officials should not be held personally liable for disallowed payments without clear evidence of malice or bad faith, providing a level of protection for those acting in good faith.

The Supreme Court’s decision in this case serves as a crucial reminder of the protections afforded to public officials acting in good faith. It highlights the necessity for clear evidence of malice or bad faith before holding public officials personally liable for disallowed payments. This ruling offers essential guidance for future cases involving the accountability of public officers.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: NINI A. LANTO v. COMMISSION ON AUDIT, G.R. No. 217189, April 18, 2017