The Supreme Court has affirmed that public officials serving in an ex-officio capacity are not entitled to additional compensation beyond what is authorized by law. This ruling reinforces the principle that such officials are already compensated through their primary positions, and receiving extra benefits would constitute double compensation, violating constitutional prohibitions. This case clarifies the scope of permissible remuneration for government officers holding multiple roles, ensuring fiscal responsibility and preventing unjust enrichment at the expense of public funds. This decision serves as a crucial reminder of the limitations on additional compensation for those serving in ex-officio roles.

TIDCORP Benefits: When Does Service as an Ex-Officio Board Member Constitute Double Compensation?

This case revolves around the Commission on Audit’s (COA) disallowance of certain monetary benefits granted to the Board of Directors (BOD) of the Trade and Investment Development Corporation of the Philippines (TIDCORP), specifically those serving in an ex-officio capacity. Peter B. Favila, then Secretary of the Department of Trade and Industry (DTI), was one such ex-officio member who received these benefits. The central legal question is whether these benefits constituted prohibited double compensation under the 1987 Philippine Constitution, considering that Favila was already receiving compensation from his primary position as DTI Secretary. This case highlights the complexities of compensation for public officials holding multiple positions and the constitutional limitations designed to prevent abuse.

The COA disallowed various disbursement vouchers and checks totaling PHP 4,539,835.02, which pertained to monetary benefits for TIDCORP’s Board members from January 1, 2005, to December 31, 2010. The basis for the disallowance was Section 8, Article IX-B of the 1987 Philippine Constitution, which states:

“No elective or appointive public officer or employee shall receive additional, double, or indirect compensation, unless specifically authorized by law, x x x.”

The COA argued that the benefits constituted double compensation because the Board members received them in an ex-officio capacity, meaning they were already compensated through their primary government positions. Favila was among those held liable, having allegedly received PHP 454,598.28 in benefits from October 2008 to May 2010. TIDCORP appealed the disallowance, arguing that Section 7 of Republic Act No. (RA) 8494 grants the Board the power to fix the remuneration, emoluments, and fringe benefits of TIDCORP officers and employees. They claimed that the Board acted in good faith when it passed the resolutions granting the benefits.

However, the COA maintained that Section 7 of RA 8494 applies to the officers and employees of TIDCORP, not to the Board of Directors or its ex-officio members. The COA further pointed to Section 13 of RA 8494, which limits the benefits for Board members to per diem allowances only. The Corporate Government Sector (CGS) of the COA affirmed the disallowance, citing the Supreme Court’s ruling in Civil Liberties Union v. Executive Secretary, which established that ex-officio members have no right to additional compensation since their compensation is already paid by their respective principal offices. The COA-CGS also noted that the Board failed to obtain the prior approval of the President, as required by Memorandum Order No. (MO) 20, series of 2001, for any increase in benefits.

The Commission on Audit Proper denied TIDCORP’s Petition for Review, upholding the CGS’s findings. It also noted that the petition was filed beyond the 180-day period for appeals under Presidential Decree (PD) 1445 and the COA’s Revised Rules of Procedure. The Supreme Court, in a related case (Suratos v. Commission on Audit), already dismissed a similar petition challenging the COA’s decision, holding the petitioners solidarily liable for the disallowed amount. Peter Favila raised similar arguments, claiming entitlement to the benefits under TIDCORP’s charter, good faith in receiving the amounts, and a violation of due process. The COA countered that Favila’s appeal was filed late, he was not denied due process, the decision was in line with existing laws, and he should refund the unlawful allowance.

The Supreme Court found no merit in Favila’s petition. Given the prior ruling in Suratos, the Court dismissed Favila’s petition, finding that it offered no new arguments regarding the legality of the allowances. The Court reiterated that PD 1080 only authorizes the payment of per diem to TIDCORP’s Board members. Moreover, as an ex-officio member, Favila’s right to compensation was limited to the per diem authorized by law, aligning with the ruling in Land Bank of the Philippines v. Commission on Audit, which disallowed additional compensation for Land Bank’s Board of Directors. As the Supreme Court stated in Land Bank of the Philippines v. Commission on Audit:

“The LBP Charter – R.A. No. 3844, as amended by R.A. No. 7907, does not authorize the grant of additional allowances to the Board of Directors beyond per diems. Specifically, Section 86 of R.A. No. 3844, as amended, provides for the entitlement of the Chairman and the Members of the Board of Directors to a per diem of P1,500.00 for each Board meeting attended, but the same must not exceed P7,500.00 every month. Significantly, the LBP Charter provides for nothing more than per diems, to which regular/appointive Members of the Board of Directors are entitled to for each Board session.”

PD 1080 does not permit the grant of extra compensation to TIDCORP’s BOD beyond a per diem of PHP 500.00 for each board meeting attended. Any compensation beyond this is illegal and contravenes constitutional prohibitions against holding multiple government positions and receiving double compensation. The Court also rejected Favila’s due process argument, referencing Saligumba v. Commission on Audit, which stated that “[d]ue process is satisfied when a person is notified of the charge against him and given an opportunity to explain or defend himself.” Favila actively participated in the proceedings and sought reconsideration, satisfying the requirements of administrative due process.

Favila’s defense of good faith was also rejected. The Court emphasized that the prohibition against additional compensation for ex-officio members has been settled since 1991 in Civil Liberties Union. Favila could not claim ignorance of the illegality of the benefits. Furthermore, the Court noted that Favila and other members of the Board actively participated in approving the resolutions that granted the disallowed benefits without the President’s approval, as required by MO 20. Without the President’s approval and in clear circumvention of the law and the Constitution, the allowances were deemed illegal. The Court thus dismissed the petition and affirmed the COA’s decision, holding Peter B. Favila solidarity liable for the disallowed amount of PHP 4,539,835.02.

FAQs

What was the central issue in this case?	The central issue was whether the monetary benefits received by Peter Favila as an ex-officio member of TIDCORP’s Board of Directors constituted prohibited double compensation under the 1987 Philippine Constitution.
What does “ex-officio” mean in this context?	An ex-officio member is someone who is a member of a board or committee by virtue of their office or position. In this case, Peter Favila was an ex-officio member of the TIDCORP Board because he was the Secretary of the DTI.
What is double compensation, and why is it prohibited?	Double compensation refers to receiving additional payment for a service already covered by one’s primary compensation. It is prohibited by the Constitution to prevent unjust enrichment and ensure fiscal responsibility.
What is a Notice of Disallowance (ND)?	A Notice of Disallowance is a formal notification issued by the Commission on Audit (COA) when it finds that certain government expenditures are illegal, irregular, or unnecessary, and thus, should not be paid.
What was the basis for the COA’s disallowance?	The COA based its disallowance on Section 8, Article IX-B of the 1987 Philippine Constitution, which prohibits public officers from receiving additional, double, or indirect compensation unless specifically authorized by law.
What benefits did Peter Favila receive that were disallowed?	Peter Favila received productivity enhancement pay, developmental contribution bonuses, corporate guaranty, grocery subsidy, and anniversary bonuses, which the COA deemed to be unauthorized additional compensation.
What did the Supreme Court rule in this case?	The Supreme Court affirmed the COA’s decision, holding that Peter Favila, as an ex-officio member, was not entitled to the disallowed benefits and was solidarity liable for the amount of PHP 4,539,835.02.
What is the significance of the Civil Liberties Union case in this context?	The Civil Liberties Union case, cited by the COA, established the principle that ex-officio members in government agencies are prohibited from receiving additional compensation because their services are already paid for by their primary offices.
What is a per diem?	A per diem is a daily allowance paid to an individual for expenses incurred while performing official duties, such as attending meetings.

This case underscores the importance of adhering to constitutional and statutory limitations on compensation for public officials. The Supreme Court’s decision reinforces the principle that those serving in ex-officio capacities are not entitled to additional benefits beyond what is expressly authorized by law, ensuring accountability and preventing the misuse of public funds. This ruling serves as a guide for government entities in determining appropriate compensation for board members and officials, promoting transparency and responsible governance.

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: Peter B. Favila, vs. Commission on Audit, G.R. No. 251824, November 29, 2022