The Supreme Court ruled that the Development Bank of the Philippines (DBP) Board of Directors is only entitled to per diems as compensation, as expressly stated in its charter. While the Board members received additional benefits beyond the allowed per diems, the Court, however, absolved the responsible officers from refunding the disallowed amounts, recognizing their good faith reliance on their interpretation of the DBP charter and the perceived approval of the President. This decision clarifies the scope of allowable compensation for board members of government financial institutions and underscores the importance of explicit legal provisions for benefits beyond per diems. This ruling impacts governance practices in GOCCs by reinforcing adherence to statutory compensation limits.

Beyond Per Diems? DBP Board’s Benefit Claims and the Limits of Presidential Approval

This case revolves around the Development Bank of the Philippines (DBP) and a Commission on Audit (COA) disallowance of P16,565,200.09 in benefits paid to the DBP Board of Directors. The core issue is whether the DBP Board could receive compensation beyond the per diems explicitly mentioned in the DBP Charter. The DBP argued that a provision in its charter allowed for additional benefits with presidential approval, while the COA contended that the charter limited compensation to per diems only. At the heart of the dispute is the interpretation of Section 8 of the DBP Charter, which outlines the composition, tenure, and per diems of the Board of Directors.

The DBP Board, through Resolution No. 0121, approved several benefits for its Chairman and members, including reimbursements for transportation, representation expenses, medical expenses, and anniversary bonuses. These benefits were accounted for under “Representation and Entertainment – Others.” Upon post-audit, the COA issued an Audit Observation Memorandum (AOM), stating that these compensations were contrary to Section 8 of the DBP Charter, which, according to the COA, only entitled Board members to per diems. The DBP countered that there was no prohibition in granting additional benefits and that they had secured presidential approval. The Supervising Auditor issued a Notice of Disallowance (ND), demanding the return of P16,565,200.09 by the Board members and other responsible officers.

The COA, in its decision, underscored that Section 8 of the DBP Charter only mentioned per diem and that the authority of the Board, with presidential approval, was limited to setting the per diem amount. The COA reasoned that if Congress intended to allow the Board to receive other benefits, it would have expressly stated so. The COA also cited Department of Budget and Management (DBM) Circular Letter No. 2002-02, which provides that Board members of agencies are non-salaried officials and, thus, not entitled to benefits unless expressly provided by law. The Supreme Court sided with the COA’s interpretation, emphasizing the legal principle of expressio unius est exclusio alterius, meaning the express mention of one thing implies the exclusion of others.

The Supreme Court emphasized that Section 8 of the DBP Charter only mentions per diem as the compensation for Board members. The Court stated,

“[I]t is a settled rule of statutory construction that the express mention of one person, thing, act, or consequence excludes all others. This rule is expressed in the familiar maxim expressio unius est exclusio alterius.“

Building on this principle, the Court found that the phrase “[u]nless otherwise set by the Board and approved by the President of the Philippines” in Section 8 refers only to the authority to increase the per diems of Board members. The Court drew a parallel to the case of Bases Conversion and Development Authority v. COA (BCDA v. COA), where it similarly ruled that the BCDA Charter limited the Board’s benefits to per diems because the law did not expressly provide for other benefits. The High Court stated,

“The specification that Board members shall receive a per diem of not more than P5,000 for every meeting and the omission of a provision allowing Board members to receive other benefits lead the Court to the inference that Congress intended to limit the compensation of Board members to the per diem authorized by law and no other. Expressio unius est exclusio alterius. Had Congress intended to allow the Board members to receive other benefits, it would have expressly stated so.”

Furthermore, the Supreme Court highlighted DBM Circular Letter No. 2002-02, which clarifies that members of the Board of Directors of agencies are not salaried officials and, therefore, not entitled to benefits unless expressly provided by law. This reinforces the principle that government officials can only receive compensation and benefits that are explicitly authorized by statute. In this case, the Court noted, there was no such explicit authorization for benefits beyond per diems in the DBP Charter. Allowing the DBP Board to unilaterally grant additional benefits would render the statutory limitations on per diems meaningless and create a potential for abuse. The court underscored that the recourse for the Board, if they believed the compensation was inadequate, was to lobby Congress for an amendment to the DBP Charter, rather than unilaterally granting or increasing benefits.

However, the Court, recognizing the good faith of the DBP officers, absolved them from the responsibility of refunding the disallowed amounts. Good faith, in this context, means an honest intention, freedom from knowledge of circumstances that would put one on inquiry, and absence of any intention to take unconscientious advantage of another. The Supreme Court considered that at the time the benefits were disbursed, there was no clear jurisprudence or administrative order expressly prohibiting the grant of such benefits to DBP Board members. Also, the DBP Board members honestly believed they were entitled to the said compensation, and DBP claimed the additional benefits had the approval of the President Arroyo. The Court emphasized that the absence of a similar ruling disallowing a certain expenditure is a significant indicator of good faith.

This ruling clarifies that Section 8 of the DBP Charter must be categorically interpreted to mean that Board members are not entitled to benefits other than per diems and that the phrase “[u]nless otherwise set by the Board and approved by the President of the Philippines” solely refers to per diems. This underscores the importance of adherence to statutory provisions and the need for explicit legal authorization for any form of compensation or benefits received by government officials.

FAQs

What was the key issue in this case?	The key issue was whether the DBP Board of Directors could receive compensation and benefits beyond the per diems expressly mentioned in the DBP Charter. The COA disallowed additional benefits, arguing that the charter limited compensation to per diems only.
What did the Supreme Court rule?	The Supreme Court ruled that the DBP Board of Directors is only entitled to per diems as compensation, as the DBP Charter did not explicitly provide for any other benefits. However, it absolved the responsible officers from refunding the disallowed amounts due to their good faith reliance on their interpretation of the DBP charter.
What is the principle of expressio unius est exclusio alterius?	Expressio unius est exclusio alterius is a rule of statutory construction that means the express mention of one thing implies the exclusion of others. The Court applied this principle to interpret the DBP Charter as limiting compensation to per diems because it did not expressly mention other benefits.
Why did the Court absolve the DBP officers from refunding the disallowed amounts?	The Court absolved the DBP officers from refunding the disallowed amounts because they acted in good faith, believing that they were entitled to grant the additional benefits based on their interpretation of the DBP Charter and the claimed approval of the President. There was also no existing jurisprudence or administrative order expressly prohibiting the disbursement of such benefits at the time.
What is the significance of DBM Circular Letter No. 2002-02?	DBM Circular Letter No. 2002-02 clarifies that members of the Board of Directors of government agencies are not salaried officials and are, therefore, not entitled to benefits unless expressly provided by law. This reinforces the principle that government officials can only receive compensation and benefits that are explicitly authorized by statute.
What was the basis of the DBP’s argument for granting additional benefits?	The DBP argued that the phrase “[u]nless otherwise set by the Board and approved by the President of the Philippines” in Section 8 of the DBP Charter allowed them to grant additional benefits with presidential approval. However, the Court rejected this interpretation, stating that the phrase only refers to the authority to increase per diems.
What should the DBP have done if they believed the compensation was inadequate?	The Court stated that if the DBP believed the compensation of its Board members was inadequate, their recourse should have been to lobby Congress for an amendment to the DBP Charter, rather than unilaterally granting or increasing benefits.
What is the practical implication of this ruling for GOCCs?	The ruling reinforces the importance of adherence to statutory provisions and the need for explicit legal authorization for any form of compensation or benefits received by government officials and board members of GOCCs. It also cautions against relying on broad interpretations of charter provisions to justify additional benefits.

This case underscores the importance of clear and explicit statutory language in defining the compensation and benefits of government officials. While good faith may excuse individuals from liability for disallowed expenditures, it does not override the fundamental principle that government officials are only entitled to compensation and benefits authorized by law. This decision serves as a reminder to government financial institutions and their officers to adhere strictly to the provisions of their charters and to seek legislative clarification when necessary.

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: DEVELOPMENT BANK OF THE PHILIPPINES vs. COMMISSION ON AUDIT, G.R. No. 221706, March 13, 2018