The Supreme Court clarified that while local water districts (LWDs) have the authority to fix the salaries of their General Managers (GMs), this power is not absolute. The GM’s compensation must still comply with the standards set by the Salary Standardization Law (SSL). However, the Court also ruled that Engr. Artemio A. Quintero, Jr., the GM in this case, was not required to refund the overpayment he received because he acted in good faith. This decision balances the autonomy of local water districts with the need for standardized compensation across government entities, offering a practical resolution to compensation disputes in similar contexts.

Cauayan City Water District: Can Local Boards Override National Salary Standards?

This case revolves around Engr. Artemio A. Quintero, Jr., the General Manager (GM) of the Cauayan City Water District (CCWD), and a dispute over his salary. In 2008, the CCWD’s Board of Directors (BOD) increased Quintero’s monthly salary from P25,392.00 to P45,738.00, citing Republic Act (R.A.) No. 9286, which grants the BOD the power to fix the GM’s compensation. However, the Department of Budget and Management (DBM) advised that the salary adjustment should still comply with the Salary Standardization Law (SSL), R.A. No. 6758. This prompted an audit by the Commission on Audit (COA), which disallowed the overpayment of Quintero’s salary, leading to a legal battle that ultimately reached the Supreme Court.

The central legal question is whether the BOD’s authority to fix the GM’s salary, as provided by R.A. No. 9286, supersedes the compensation limits set by the SSL. Quintero argued that R.A. No. 9286, being a later law, effectively repealed or created an exception to the SSL, granting the BOD unlimited discretion in setting the GM’s salary. He also claimed protection against salary diminution under Executive Order (E.O.) No. 811 and asserted that he should not be held liable to refund the overpayment due to his good faith. The COA, on the other hand, contended that R.A. No. 9286 did not repeal the SSL and that the BOD’s authority was subject to the SSL’s limitations. The COA also challenged Quintero’s claim of good faith, arguing that it was raised for the first time on appeal.

The Supreme Court addressed the core issue of the BOD’s power to fix the GM’s compensation, referencing Section 23 of Presidential Decree (P.D.) No. 198, as amended by Section 2 of R.A. No. 9286. Section 23 of P.D. No. 198 originally stated that the board shall define the GM’s duties and fix his compensation, with the officer serving at the pleasure of the Board. R.A. No. 9286 amended this provision to state that the officer shall not be removed from office, except for cause and after due process. The Court noted that R.A No. 9286 reiterated the power of the BOD to set the salary of the GM, and it merely amended the provisions of P.D. No. 198 to provide the GMs with security of tenure preventing their removal without cause and due process. This legislative grant of authority, however, is not without limitations.

The Supreme Court relied on its prior ruling in Mendoza v. COA, which established that LWDs must adhere to the limits set by the SSL when fixing the salaries of their GMs. The Court emphasized that the SSL applies to all government positions, including those in government-owned or controlled corporations, unless the corporation’s charter specifically exempts it from the SSL’s coverage. The Court found that Section 23 of Presidential Decree No. 198, as amended, does not provide such an exemption for water utilities.

The Salary Standardization Law applies to all government positions, including those in government-owned or controlled corporations, without qualification. The exception to this rule is when the government-owned or controlled corporation’s charter specifically exempts the corporation from the coverage of the Salary Standardization Law.

The Court further explained that if Congress had intended to exempt water utilities from the SSL, it could have expressly included an exemption clause in P.D. No. 198, similar to those found in the charters of other government-owned and controlled corporations. Since Congress did not include such an exemption, the Court concluded that the BOD’s power to fix the GM’s salary is subject to the limitations of the SSL. R.A. No. 9286 was aimed at giving security of tenure for GMs of LWDs not to give blanket authority to BODs to increase salaries.

Addressing Quintero’s argument that R.A. No. 9286 repealed the SSL, the Court reiterated the principle that implied repeals are disfavored. An implied repeal occurs only when there is a substantial conflict between the new and prior laws, making them irreconcilable. In this case, the Court found no such conflict between the SSL and R.A. No. 9286. Both laws can be harmoniously construed to recognize the BOD’s power to fix the GM’s salary while still adhering to the salary rates prescribed by the SSL. This harmonious interpretation ensures that local autonomy is respected without undermining the national policy of salary standardization.

Despite upholding the COA’s disallowance of the salary overpayment, the Court recognized Quintero’s good faith in receiving the adjusted salary. The Court noted that Quintero did not participate in fixing his salary and that, at the time the salary increase was approved, there was no definitive ruling from the Court that LWDs were subject to the SSL’s coverage. Citing De Jesus v. Commission on Audit, the Court held that Quintero should not be required to refund the disallowed amount because he received it in good faith. Good faith, in this context, implies an honest intention to abstain from taking any unconscientious advantage of another.

The Court highlighted that it was the BOD that approved the salary increase for Quintero, not the GM himself. Also, when the salary increase was made in 2008, there was no clear jurisprudence stating that LWDs were not exempt from SSL. While a public officer is bound to know the law, the complexity of the interaction of different laws, presidential decrees, and executive orders, makes it hard to expect public officers to know the exact limitations and boundaries of the SSL. Therefore, it is not only fair, but just, for the Court to find in his favor.

FAQs

What was the key issue in this case?	The main issue was whether the Board of Directors of a local water district (LWD) has the authority to fix the salary of its General Manager (GM) without being subject to the Salary Standardization Law (SSL).
What is the Salary Standardization Law (SSL)?	The SSL is Republic Act No. 6758, which aims to standardize the salaries of government employees, including those in government-owned or controlled corporations. It sets limits on the compensation that can be paid to public officials.
Did R.A. 9286 repeal the SSL?	No, the Supreme Court held that R.A. 9286 did not repeal the SSL. There was no express repeal, and no irreconcilable inconsistency exists between the two laws.
Can the BOD of a LWD set the GM’s salary at any amount they choose?	No. While the BOD has the power to fix the GM’s salary, that power is not absolute. The salary must be within the limits prescribed by the SSL.
Why was Engr. Quintero not required to refund the overpayment?	The Supreme Court ruled that Engr. Quintero acted in good faith. He did not participate in fixing his own salary, and there was no clear jurisprudence at the time stating that LWDs were not exempt from the SSL.
What does “good faith” mean in this context?	In this context, “good faith” means that Engr. Quintero honestly believed that he was entitled to the salary he received and did not act with any intention to deceive or take undue advantage.
What is the significance of the Mendoza v. COA case?	Mendoza v. COA established the precedent that LWDs are not exempt from the SSL unless their charter specifically provides for such an exemption. This case was relied upon by the Court in resolving the present dispute.
What is the effect of this ruling on other General Managers of LWDs?	This ruling clarifies that the salaries of GMs of LWDs must comply with the SSL. However, if an overpayment occurred due to good faith, the GM may not be required to refund the disallowed amount.

In conclusion, the Supreme Court’s decision in this case strikes a balance between local autonomy and national standardization. While the BODs of LWDs have the authority to fix the salaries of their GMs, this power is subject to the limitations of the SSL. This ensures that compensation is standardized across government entities while still allowing local boards some flexibility in managing their affairs. However, public officers who acted in good faith, and received compensation in the belief that such compensation is within legal limitations, should not be sanctioned or be asked to refund the amounts that they have already received.

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: ENGR. ARTEMIO A. QUINTERO, JR. VS. COMMISSION ON AUDIT, G.R. No. 218363, May 31, 2016