276775 Teresita P. De Guzman, et al. Vs. Commission on Audit — Official PDF

[ Digital p. 1 of 20 ] Supreme Court of the Philippines GFFICE OF THE SPOKESPERSON | ya 0 ome ee a Republic of the PHIlIppINET esovsccomarno, MMO) | Supreme Court Manila EN BANC TERESITA P. DE GUZMAN, in her capacity as former General Manager; MONA LISA PENAFIEL, in her capacity as former Audit Supervisor; JOEL WADWADAN, in his capacity as former Watershed/ROW Supervisor; WILHELMINA A. AQUINO, in her capacity as Senior Accountant; SALVADOR M. ROYECA, in_ his capacity as Former Assistant General Manager-Technical; MA. LUISA TENEDERO, in her capacity as Assistant General Manager for Finance, Admin and Commercial; ATTY. MOISES P. CATING (+), DR. GINA ROMILLO-CO, MARIA ROSARIO LOPEZ, EMMANUEL MALICDEM, RODOLFO TABANGIN, and RAMSAY COLORADO, in _ their capacities as former members of the BAGUIO WATER DISTRICT Board of Directors; and RENATO RONDEZ, in his capacity as incumbent member of the Board, Petitioners, - versus - COMMISSION ON AUDIT, Respondent. G.R. No. 276775 Present: GESMUNDO,* C.J, LEONEN,”™ Acting CL, CAGUIOA, HERNANDO, LAZARO-JAVIER, INTING, ZALAMEDA, GAERLAN, ROSARIO, LOPEZ," DIMAAMPAO, MARQUEZ,” KHO, SINGH,’ and VILLANUEVA, J/. Promulgated: July 8, 2026 Noone PD Ad Deo NO DECISION GAERLAN, J.: / Designated as Acting Chief Justice per Special Order No. 3308 dated July 3, 2026. * On leave. \) [ Digital p. 2 of 20 ] i) Decision GR. No. 276775 This is a Petition for Certiorari'questioning the Commission on Audit’s (COA) Decision Nos. 2020-487° and 2023-457, dated January 31, 2020 and December 7, 2023, respectively. The assailed rulings affirmed the disallowance of fringe benefits paid to the general manager (GM) and the two assistant general managers (AGM) of the Baguio Water District (BWD) for the year 2009. The BWD is a government-owned and controlled corporation (GOCC) established under Presidential Decree No. 198, or the Provincial Water Utilities Act of 1973.4 On December 6, 2008, the BWD Board of Directors (Board) issued Resolution Nos. 64-2008 and 65-2008 authorizing the payment of monthly fringe benefits in the amount of PHP 40,000.00 to its GM, and PHP 20,000.00 to its two AGM, starting in January 2009.5 The payments were justified as recognition of the GM and the AGMs’ efforts “in sustaining the operations of the District,... increasing production capability through... completing the AusAid project activation jointly with the LWUA [Local Water Utilities Administration],.... sourcing out new water sources and... hurdling all tribulations related in [the BWD’s] operations.”® Resolution No. 64-2008 further discontinued the grant of extraordinary and miscellaneous expenses (EME).’ The amounts were charged to the BWD’s extraordinary expenses account® and subjected to post-audit.’ On May’ 15,°2012, the BWD’s resident auditors issued’ Notice of Disallowance (ND) Nos. 12-013-101-(09) to 12-022-101-(09),'° covering a total amount of PHP 683,882.37 in disbursements to the GM and PHP 705,882.24 to the two AGMs.'! The disbursements to the GM were disallowed for being in excess of the amount allowed for extraordinary expenses under the then- applicable 2009 General Appropriations Act (GAA)? and Corporate Budget Circular No. 18 dated November 14, 2000,'? while the disbursements to the AGMs were disallowed because AGMs are not among the personnel entitled to ! Rollo, pp. 3~14. Id, at 31-42. Signed by Chairperson Michael G. Aguinaldo and Commissioner Roland C. Pondoc. Commissioner Jose A. Fabia participated but did not sign the Decision. Id. at 90-96, Signed by Chairperson Michael G. Aguinaido and Commissioners Roland C. Pondoc and Mario G. Lipana. 4 De Guzman v. Commission on Audit, 887 Phil. 1067, 1074--1075 (2020) [Per J. Lazaro-Javier, En Banc]; Tanjay Water District v. Gabaton, 254 Phil, 253 (1989) [Per J. Grifio-Aquino, First Division]; Baguio Water District v. Hon. Trajano, 212 Phil. 674, 675 (1984) [Per J. Abad Santos, Second Division]. 5 Rollo, pp. 113-114. Resolution Nos. 64-2008 and 65-2008. 6 Id. 7 Id. at 113: : 8 Id. at 98-111. Notices of Disallowance. 9 Id. at 32. COA Decision No. 2020-487. Id. at 98-111. "Id. at 33, 43-44, 53-54, COA Decision No. 2020-487 and COA-CAR Decision. 2 Republic Act No. 9524. 3 Rollo, pp. 98-102. ND Nos. 12-013-101-(09) to 12-016-101-(09). [ Digital p. 3 of 20 ] Decision G.R. No. 276775 EME under the 2009 GAA." The following BWD officers and employees were held liable for the refund of the disallowed amounts: Name Position Participation in the | Participation in the Disallowed Present Petition Disbursements _| Moises P. Cating Rodolfo T. Tabangin Voted to pass Board Gina Romillo-Co Member, BWD Resolutions 64- Yes “Renato 8. Rondez Board 2008 and 65-2008" Emmanuel B. | Malicdem - : Approved payment Feresita P. De General Manager and received the Yes Guzman . 16 disbursed amounts Mona Lisa Pefiafiel | Audit Supervisor Audited the Yes disbursement vouchers subject of ND Nos. 12-013- 101-(09) to 12-015- Godiula T. Guinto | ‘ Internal Auditor 101-(09), 12-017- No i 101-(09), 12- 018- 101-(09), 12-021- 101-(09); and 12- 022-101-(09)!7 | Certified that the disbursements subject of ND Nos. 12-013-101-(09) Watershed/ROW and 12-018-101- Joel A. Wadwadan Supervisor (09) were Yes necessary, lawful and incurred under his direct . supervision!® __| Certified that the disbursements subject of ND Nos. 12-015-101-(09), Viveca A. ; Administrative 12-019-101-(09), No Villafuerte Division Manager | 12-020-101-(09) and 12-022-101- (09) were necessary, lawful |_and incurred under 4 Jd. at 103-111. ND Nos. 12-018-101-(09) to 12-022-101-(09). 8 Id. at 33-34, 98-111. COA Decision No, 2020-487 and Notices of Disallowance. 6 Id. Td. at34, 98-111. id. [ Digital p. 4 of 20 ] Decision , 4 G.R. No. 276775 her direct supervision vine A Senior Accountant Ceniied that the Yes supporting the disbursements subject of ND Nos. 12-013-101-(09), Joanna Carame Junior Accountant ot 2 ; ot “(09 No 12-020-101-(09), and 12-022-101-(09) were complete and __|__ proper”? Certified that the documents supporting the disbursements Corporate Accounts | subject of ND Nos. No Analyst ND Nos. 12-014- 101-(09), 12-019- 101-(09) were complete and proper”! 19 Jo Allan Baptista Salvador M. Royeca Assistant General Received the Ma. Luisa C. Manager disbursed amounts** Tenedero Yes Petitioners appealed the disallowance to the COA-Cordillera Administrative Region (CAR), arguing that: 1) the applicable law is not the 2009 GAA but Presidential Decree No. 198, which governs the rights, powers, and privileges of provincial water utilities; 2) the disbursements are not EMEs but fringe benefits as defined in the National Internal Revenue Code (NIRC), the amount of which can be fixed by the BWD Board under Presidential Decree No. 198; 3) the Department of Budget and Management (DBM) issued a letter allowing employees of local water utilities to continue receiving allowances or fringe benefits that were given prior to the classification of local water utilities as GOCCs, provided that these benefits are proven to be part of established practice as of December 31, 1999; and 4) it would be unfair to order petitioners to refund the disallowed amounts as they received them in good faith.” The resident auditors replied that: 1) since BWD already admitted its status as a GOCC, it is already subject to COA and Civil Service rules, including 8 td. 20 Id. dd. 22 Id. at 33-35, 98-111. 3 Id. at 44. COA-CAR Decision, 2 Id. at 44-45, [ Digital p. 5 of 20 ] Decision 5 G.R. No. 276775 those governing’ the grant of additional benefits to its employees; 2) the disallowed amounts were treated as EMEs because they were debited to the extraordinary expense account, the audit of which is based on COA Circular No. 2006-001 governing the EMEs and other similar expenses of GOCCs; and 3) refund is proper because the disallowed amounts were paid out in violation of the GAA and COA Circular No. 2006-001. On May 21, 2015, the COA-CAR rendered a Decision”® affirming the NDs.”’ The regional audit office sustained the BWD resident auditors’ reasoning on the applicability of the 2009 GAA to the disallowed amounts. Under COA Circular No. 2006-001, if a GOCC’s charter does not contain an authority to grant EMEs, such authority is deemed derived from the 2009 GAA, and the limits fixed by the 2009 GAA for EMEs will apply. Since Presidential Decree No. 198 contains no authority to grant EMEs, the Board’s grant of EMEs to its GM and AGMs must be understood to have been based on the 2009 GAA.”8 As regards petitioners’ claim that the fringe benefits were “orandfathered” by the DBM, the COA-CAR found that the fringe benefits were based on board resolutions passed in 2008, and there was no proof that they were part of BWD’s benefit package before December 31, 1999. Furthermore, there is no account for fringe benefits in the Philippine Government Chart of Accounts. The payment of additional fringe benefits is prohibited by paragraphs 5.4 to 5.6 of DBM Corporate Compensation Circular No. 10,°° and is considered illegal disbursement of public funds. Even assuming that BWD had the authority to pay out said benefits, the amounts it authorized are nevertheless extravagant as defined in the Government Accounting and Auditing Manual, as they effectively doubled the total amount of salary and benefits received by the GM and AGMs without sufficient justification?! Finally, refund is proper. Petitioners cannot claim good faith as they blatantly disregarded the applicable laws and regulations and insisted on their own interpretation thereof. Furthermore, they charged the benefits to the extraordinary expense account and then objected to the application of the auditing rules governing said account.>? Petitioners lodged a Petition for Review with the COA proper, still arguing that: 1) the 2009 GAA does not apply to the questioned fringe benefits, which were granted by authority of the Board; 2) the power granted 25 Id at 4546. ; 26 Id. at 43-54. Signed by Regional Director Eden T. Rafanan. 27 Td, at 53-54, Id. at 47-8. 2% Id. at 48-49. 3 Dated February 15, 1999. 3 Rollo, pp. 49-53. COA-CAR Decision. 2 Id. at 53. \f [ Digital p. 6 of 20 ] Decision 6 G.R. No. 276775 to the Board by Presidential Decree No. 198 is superior to COA Circular No. 2006-001; and 3) the refund. of the fringe benefits received would be a violation of the precepts of justice and equity. The COA proper denied the Petition for lack of merit. It held that the Board’s power to grant incentives and benefits to its employees is subject to the executive control power and the audit prerogatives of the COA. Administrative Order (AO) No. 103 limits the combined total of per diems, honoraria, and allowances of GOCC employees to a maximum of PHP 20,000.00 per month, while COA Circular No. 2006-001 and the 2009 GAA set the annual limit of extraordinary expenses of heads of Bureau Regional Offices and officers of equivalent rank at PHP 22,000.00 plus an additional PHP 72,000.00 for miscellaneous expenses. Here, petitioner Teresita P. de Guzman (de Guzman) received a total of PHP 683,882.37 from January to December 2009 as the incumbent GM, while petitioners Salvador M. Royeca (Royeca) and Ma. Luisa C. Tenedero (Tenedero) were paid a total of PHP 705,882.24 for the same period, as the incumbent AGMs, all in excess of the limits set by the aforementioned regulations. Thé payments were not supported by receipts or other documentary proof of disbursement, as required by COA Circular No. 2006- 001. Too, AGMs and their equivalent-ranked counterparts are not among the officers entitled to receive EMEs under the 2009 GAA. The disbursements are therefore illegal and the resident auditors did not err in disallowing the whole amounts.*4 Classifying the disbursements as fringe benefits will not save the day for petitioners, as fringe benefits are not exempt from the integration of all allowances into the standardized salary rates and may therefore be granted only by authority of the President. There is no proof that the questioned fringe benefits were not consolidated into the standard salary of the BWD’s employees, or that de Guzman, Royeca, and Tenedero were incumbents in their respective positions and legally authorized to discharge the duties of their offices as of July 1, 1989. Furthermore, since the benefits in question are in the nature of performance bonuses, they should have been charged to the Productivity Incentive Allowance account.*> Finally, petitioners must return the disallowed amounts, because the disbursements would not have been made without their participation.” Petitioners filed a Motion for Reconsideration, arguing that de Guzman, Royeca, and Tenedero are not liable to return the disbursements following guideline 2(c) of Madera v. Commission on Audit,” which absolves recipients 3 Id. at 35. COA Decision No. 2020-487, Id. at 37-39, 33 Id. at 39-40. 6 Id. at 40-41, 37 882 Phil. 744 (2020) [Per J. Cagaioa, &n Banc} [ Digital p. 7 of 20 ] Decision 7 G.R. No. 276775 of disallowed disbursements from liability if the amounts are shown to have been genuinely given in consideration of services rendered.** The COA rejected the argument, ruling that guideline 2c of Madera was “not intended to cover compensation not authorized by law or those granted against salary standardization laws”, and only covers disbursements that “hav/e] proper basis in law... [and] a clear, direct, and reasonable connection to the actual performance of the payee-recipient’s official work and functions.” The personal liability of officers who approve or certify expenditures contrary to law or regulations is based on Section 52, Chapter 9, Subtitle B, Title 1, Book V and Section 43, Chapter 5, Book VI of the Administrative Code of 1987, while the personal liability of recipients of such illegal expenditures is based on the civil law principles of unjust enrichment and solutio indebiti.” Before this Court, petitioners insist that: 1) the benefits in question are authorized by Sections 6 and 17 of Presidential Decree No. 198, and by Section 33(B) of the NIRC; 2) the consolidation of allowances and compensation under Republic Act No. 6758 is not inconsistent with the bonus- granting powers of local water utilities under Presidential Decree No. 198;"! and 3) they should not be held liable for the disallowed amounts as they relied bona fide on the statutory bonus-granting powers of the BWD Board.” On the COA’s behalf, the Office of the Solicitor General (OSG) prays that the Petition be dismissed outright for being an unsigned pleading, pointing to the fact that the Petition was signed and filed not by a member of the Philippine Bar, but by an attorney-in-fact who is not party to the case. The OSG asserts that non-lawyers may personally appear before tribunals to litigate their own cases but are not allowed to appear on behalf of other persons, and Rule 7, Section 3(a) of the Rules of Court, as amended, requires every pleading to be signed by the party or their counsel. Since the present Petition was not signed by the parties nor their counsel who is a member of the Bar, it must be treated as an unsigned pleading with no legal effect.” On the substantive aspect, the OSG argues that while the questioned disbursements are indeed in the nature of fringe benefits, they remain illegal because Section 12 of Republic Act No. 6758 mandates the inclusion of all allowances and benefits into the standardized salary rates prescribed in said statute, unless excluded by law or by order of the DBM. The fringe benefits in question do not fall under any of ilie exceptions in Section 12 of Republic Act No. 6758. In fact, DBM Corporate Compensation Circular (CCC) No. 10 declares all allowances and fringe benefits on top of the standardized salary 38 Rollo, pp. 91--92. COA Decision No. 2023-457. % Id. at 92-94, quoting Abellanosa v. Commission on Audit, 890 Phil. 413, 431-432 (2020) [Per J. Perlas- Bernabe, En Banc]: 48 Ted, at 94-95. # Jd. at 6-10, 226--227. 4 fd. at (0-14, 227-228. 8 fd. at 169-171, Comment. [ Digital p. 8 of 20 ] Decision 8 G.R. No. 276775 as unauthorized and illegal disbursements of public funds. Being GOCCs with a special charter, local water utilities such as the BWD are covered by Republic Act No. 6758, as Presidential Decree No. 198 does not contain any exemption clause. As a mere creation of statute, the BWD’s powers are circumscribed by laws and regulations. Corporations, whether created by special or general charter, cannot issue resolutions that are contrary to law or regulations.“* The questioned disbursements remain invalid even if they are classified as EMEs, as the COA proper correctly applied COA Circular No. 2006-001 and the 2009 GAA in the absence of authority to grant EMEs in Presidential Decree No. 198." Finally, good faith cannot be invoked against liability for illegal disbursements when there is a clear contravention of prevailing law and regulations. Petitioners’ case for good faith is premised solely on the purported validity of Resolution Nos. 64-2008 and 65-2008. However, as approving and certifying officers who are responsible for ascertaining the legal bases of the disbursements they authorize, they should have been aware of Republic Act No. 6758 and DBM CCC No. 10, which had been in effect for 19 ‘and 9 years, respectively, when the BWD Board approved. Resolution Nos. 64-2008 and 65-2008." The recipients, petitioners de Guzman, Royeca, and Tenedero, are likewise liable, as the benefits are not only patently illegal but also had no clear, direct, and reasonable connection to their official functions, as Resolution Nos. 64-2008 and 65-2008 do not specify the acts or efforts they committed in contribution to the purported successes of the BWD.”7 Petitioners reply that a non-lawyer may be authorized to sign and file a Petition for Certiorari through a special power of attorney (SPA). They argue that the BWD directors, officers, and employees have consistently executed SPAs for such purpose since 2018, and this is the first time that the OSG has questioned such practice. The Petition fails. Petitioners admit that: [s]ince 2018, the Board of Directors, officers, and employees of BWD have consistently. executed Special Powers of Attorney (SPAs) designating non- lawyers as attorneys-in-fact. In numerous Petitions for Certiorari previously filed by BWD—several of which have already attained finality through rulings of the Supreme Court—this is the first instance in which the Commission on Audit, through the Office of the Solicitor General, has questioned the authority of the attorneys-in-fact to initiate such petitions.” 4 Id, at 173-178. Jd. at 178-182. 4 Id. at 182-186. “7 Id. at 186-187. Id. at 226. [ Digital p. 9 of 20 ] Decision 9 G.R. No. 276775 Their Petition. for Review before the COA proper was signed by two persons named Guillermo V. Lucero (Lucero) and Bernadette B. Velasquez (Velasquez),”° while their Petition for Certiorari before the Court was signed by a certain Luzvimin G. Ramos (Ramos). Also attached to the Petitions are SPA executed by petitioners, which commonly authorized Lucero, Velasquez, Ramos and a certain Jelyn D. Penales (Penales) to: 1) prosecute and file the appeal/s before the COA-CAR, COA proper, and Supreme Court in relation to the COA’s notices of disallowance issued against them in their capacity as BWD officers; 2) sign the appeal/s’ Verification and Certification against Non-Forum Shopping; and 3) discuss the possibility of an amicable settlement, negotiate, enter into, conclude, execute, sign, and/or deliver a compromise agreement which they may deem necessary or appropriate, to submit to mediation or alternative modes of dispute resolution, and to enter into stipulations or admissions of facts and of documents or to proceed with pre-trial until terminated and further to act accordingly in all matters relating to an incident in the above-entitled matter.*° It further appears that Lucero, Velasquez, Ramos, and Penales are also employees of the BWD,”>! with Ramos being the manager of its Internal Audit Division, and Penales the manager of its Finance Division.* Rule 7, Section 3(a) of the Rules of Court states that every pleading must be signed by the party or counsel representing them. The word “ denotes disassociation or independence of one thing from another,® such that one of either the party or their counsel may sign the pleading.™ In turn, Rule 138, Section 34 states that in the municipal courts, parties may conduct their litigation personally with the aid of an agent or a friend.** In any other court, parties must conduct their litigation personally or by the aid of an attorney. The word “personal” means “of or relating to a particular person{;] affecting one individual or each of many individuals[;] peculiar or proper to private 4° Id. at 66. Signature page of Petition for Review. 50 [d. at 16-30. Special Powers of Attorney. 5! Ramos is among the signatories of a special power of attorney entered into by the employees of the BWD granting her and Penales the abovementioned powers. Jd. at 144-150. The said SPA lists her as a BWD employee with ID No. 174, id. at 148. The petition for review before the COA proper claims that Lucero has BWD ID'No, 104 while Velasquez has BWD ID No. 09. id. at 66. Baguio Water District, Liguidum (Official Publication of the Baguio Water District), volume 1, issue 1, p. 2, January-March 2025, available at hitps://edne.heyzir n/files/uploaded/ 3, Jerfd9 1 98dd7 536383072047 76¢eaecd0-2.pdf (last accessed oO November 2025), archive fink at https://web.archive:org/web/2025 11 10092434/t ftps v/edne.heyzine.com/files/uploaded/v3/0024370990 afd9 [98dd7536383072a4776eaccd0-2.pdf, Baguis Water District, BWD Officers, available at https://baguiowaterdistrict.gov.ph/bwa. (last accessed on November 10, 2025), archive link at https://web.archive.org/web/2025 11 10093043/ i/paguiowaterdistrict.gov.ph/bwd-officers/. 3 People v. Soliman, 941 Phil. 438, 446-447 (2023) [Per J. Kho, Jr., En Bane]; Microsoft Corporation v. Manansala, 772 Phil. 14, 22 (2015) [Per J. Bersamin, First Division]. Bukluran ng Manggagawa sa Clothman Knitting Corporation v. Court af Appeals, 489 Phil. 609 (2005) {Per J. Callejo, Sr.,,Second Division] Cruz v. Mina, 550 Phil. 543, 549-550 ¢ ia~Martinez, Third Division); Cantimbuhan v. Hon, Cruz, 211 Phil. 373, 378 (1983) [Per hi Relova, En Banc}; Laput v. Bernabe, 55 Phil. 621 (1931) {Per J. Maicoim, En Banc}. 52 Sa 58 [ Digital p. 10 of 20 ] Decision id G.R. No. 276775 concerns[;] done in person without the intervention of another{;] direct from one person to another{;] originating in or proceeding from a single person...”°° Rule 138, Section 34 also distinguishes between an agent or a friend and an attorney, with the former being allowed to appear only in the municipal courts,°’ which further evinces the dual intent of the Rules to limit the representation of litigants by non-lawyers to the municipal courts only, and to require litigants in all other courts to conduct their litigation either by themselves, without any representation at all, or through a member of the Philippine Bar. In Santos v. Judge Lacurom,* We sanctioned a regional trial court judge who allowed the pro se appearance of a non-lawyer party who was already represented by counsel: 36 37 58 59 WEBS! Torcino, 219 Phil. 224, 229-231 (1985) [ 211 Phil. 373, 378 (1983) [Per J. Relov 331 Phil. 239 (2006) [Per J. Carpio, Third Div Td, at 249-250, The Rules [of Court] recognize the right of an individual to represent himself in any case in which he is'a party. The Rules state that a party may conduct his litigation personally or by aid of an attorney, and that his appearance must be either personal or by a duly authorized member of the Bar. The individual litigant may personally do everything in the progress of the action from commencement to the termination of the litigation. A party’s representation on his own behalf is not considered to be a practice of law as “one does not practice law by acting for himself, any more than he practices medicine by. rendering first aid to himself.” Therefore, Santos can conduct the litigation of the cases personally. Santos is not engaged in the practice of law if he represents himself in cases in which he is a party. By conducting the litigation of his own cases, Santos acts not as a counsel or lawyer but as a party exercising his right to represent himself. Certainly, Santos does not become a counsel or lawyer by exercising such right. The Court, however, notes the use of the disjunctive word “or” under the Rules, signifying disassociation and independence of one thing from each of the other things enumerated, to mean that a party must choose between self-representation or being represented by a member of the bar. During the course of the proceedings, a party should not be allowed to shift from one form of representation to another. Otherwise, this would lead to contusion, not only for the other party, but for the court as well. Ifa party, originally represented by counsel, would later decide to represent himself, the prudent course of action is to dispense with the services of a and prosecute or defend the case personally. For the orderly administration of justice, respondent judge should not have allowed Santos to litigatu perscnatly because Santos was already represented by counsel. Respondent judge should have required Santos to choose between self-representation or being represented by counsel.°? (Emphasis supplied) n (1993). Cruz v. Hon. Mijares, 586 Phil. 433, 441-443 (2068) [Per Gotierrez, ER’S THIRD: NEW INTERNATIONAL DICTIONARY OF THE ENGLISH LANGUAGE, UNABRIDGED 1686 3, Nachura, Third Division]; Bulacan v. irst Division}; Cantimbuhan v. Hon. Cruz, [ Digital p. 11 of 20 ] Decision il G.R. No. 276775 The act of signing a pleading constitutes a warranty of good faith in its filing and the existence of factual and legal bases therefor. Only the party, per se, is in a position to make such warranty, being the one most cognizant of the legal and factual bases of their claims. Rule 7, Section 3(b) of the Rules of Court extends this cognizance to the counsel by virtue of the information shared to them by virtue, of the lawyer-client relationship. In the early case of United States v. Ney,®: Section 102 of the Code of Civil Procedure,°! providing that every pleading must be subscribed by the party or his attorney, does not permit, and by implication prohibits, a subscription of the names of any other persons, whether agents or otherwise; therefore a signature containing the name of one neither a party nor an attorney was not a compliance with this section, nor was it aided by the too obvious subterfuge of the addition of the individual name of a licensed attorney. The illegality in this instance was aggravated by the fact that one of the agents so named was a person residing in these Islands to whom this court had expressly denied admission to the bar. The papers in question were irregular and were properly rejected. We refuse to recognize as a practice any signature of names appended to pleadings or other papers in an action other than those specified in the statute. A signature by agents amounts to a signing by non-qualified attorneys, the office of attorney being originally one of agency... We do not, however, mean to discountenance the use of a suitable firm designation by partners, all of whom have been duly admitted to practice. We therefore sustain the OSG’s contention that the present Petition for Certiorari should be treated as an unsigned pleading with no legal effect.® Not only are judicial agents prohibited from appearing before the Supreme Court, the act of signing a pleading is personal to a party and cannot be delegated to an ordinary agent who is not a member of the Bar. Petitioners’ reliance on Dandoy v. Court of Appeals and Wee v. Galvez®° is misplaced, because in the former case, the party and her attorney-in-fact were represented by counsel, while in the latter, the party represented by the non-lawyer atiorney-in-fact was out of the Philippines and could not sign pleadings personally. There is no showing that petitioners are out of the country nor otherwise unable to sign their pleadings personally. 6 8 Phil. 146 (1907) [Per J. Tracey, First Division). Sl SECTION 102. Authentication of Pleadir Every pleading must be subscribed by the party or his attorney and a copy thereof must be forthwith fursished to the adverse party or his attomey. Cf. RULES OF Courr, rule 7, sec. 3(a). @ United States vy. Ney, 8 Phil. 146, 147 (1907) [Per J. Tracey, First Division]. (Citations omitted, footnote supplied.) 63 L- People Manpower Resources, Ine. v. Court of Appeals, 934 Phil. 686, 697 (2023) [Per J. JY. Lopez, Second Division]; Batanguefto Humai Resources, Inc. vy, De Jesus, 932 Phil. 231, 235-236 (2022) [Per J. Kho, Jr, Second Division]; Spouses Mariane ¥. Abrajfano, 900 Phil, 1, 7-8 (2021) [Per J. Perlas- Bernabe, Second Division]. 64 $58 Phil. 90 (2007) [Per J. Nachura, Third Division}. S479 Phi}. 737 (2004) [Per J. Quisumbing, First Division]. [ Digital p. 12 of 20 ] Decision 12 7 G.R. No. 276775 i. In the interest of justice, We resolve the Petition on the merits despite its procedural defects. The disbursements in question were paid to petitioners de Guzman, Royeca, and Tenedero in recognition of their efforts toward the accomplishment of the BWD’s projects. While the resolutions characterized the payments as fringe benefits,” they were nevertheless charged against the BWD’s EME account. The resident auditors thus treated them as EMEs and disallowed them for being in excess of the limit for EMEs under the 2009 GAA, as Presidential Decree No. 198 did not regulate EMEs. It is settled law that the compensation of local water district managers is governed by Section 12 of Republic Act No. 6758, which provides that all allowances not mentioned therein are deemed integrated into the standard salary. DBM CCC No. 10, which also governs compensation of GOCC employees, declares all allowances not mentioned therein or in Section 12 of Republic Act No. 6758, as unauthorized and illegal disbursements of public funds. The legality of EME payments to water district executives has been settled in Paguio v. Commission on Audit,® where We upheld the disallowance of PHP 432,000.00 in EME payments to Paguio, the then-GM of the Pagsanjan Water District. Paguio held that EME payments to local water district GMs are ultra vires because EMEs are not among the exceptions to the salary integration rule under Section 12 of Republic Act No. 6758: {T]he Salary Standardization Law applies to all government positions, including those in government-owned and controlled corporations. However, an exemption to the rule exists where the said corporation’s charter explicitly exempts it from the coverage of the Salary Standardization Law. In view thereof, ... despite the amendment of Presidential Decree No. 198 through Republic Act No. 9286 on April 2, 2004, no such exemption from the coverage of the Salary Standardization Law was expressly granted to the position of general manager of local water districts. Accordingly, a local water district’s board of directors maintains the power to fix the compensation of its general manager, provided that such See Abriga v. Commission on Audit-Commission Proper, 921 Phil. 1067, 1075-76 (2022) [Per J. Zalameda, En Banc]. 6 Rollo, pp. 113-114. © Ancheta v. Commission on Audit, 895 Phil. 347, 356-361 (2021) [Per J. M.V. Lopez, En Banc]; Almodovar y, Pulido-Tan, 773 Phil. 165, 173-175 (2015) [Per J. Mendoza, &n Banc]; Mendoza v. Commission on Audit, TIT Phil. 491, 504-522 (2013) [Per J. Leonen, En Banc]. © 931 Phil. 489 (2022) [Per J. J.Y. Lopez, &r Bane}, 66 [ Digital p. 13 of 20 ] Decision 13 G.R. No. 276775 compensation is in accordance with the provisions of the Salary Standardization Law. Since the position of general manager is covered by the Salary Standardization Law, it follows that the same is covered by the provi sions of the said law pertaining to the integration of allowances, particularly, Section 12.thereof... Accordingly; the prevailing rule is that the allowances of employees covered by the Salary Standardization Law are deemed included in the standardized salary, except: (1) representation and transportation allowance; (2) clothing and laundry allowance; (3) subsistence allowance of marine officers and crew on board government vessels; (4) subsistence allowance of ho spital personnel; (5) hazard pay; (6) allowance of foreign service personnel stationed abroad; and (7) such other allowances as the DBM may determine. Notably, the Extraordinary and Miscellaneous Expenses granted by the Board of Pagsanjan Water District is not among the listed exemptions to the integrated allowances under the Salary Standardization Law. Neither is there any showing that the said allowance was determined by the DBM as one which may be granted to the General Manager of Pagsanjan Water District. Verily, the mere grant of authority to the board of directors of a local water district to fix the compensation of the general manager does not amount to an unrestrained prerogative to grant salary and allowances wi complying with the foregoing legislative enactment.” thout Paguio goes on to rule that since Presidential Decree No. 198 does not give local water districts any authority to grant EMEs, such authority must derive from, and thus be governed by the GAA, following CO 2006-001: : ; A. Circular Circular No. 2006-01 prescribes guidelines on the disbursement of Extraordinary and Miscellaneous Expenses and other similar expenses in government-owned and controlled corporations and/or government financial institutions and their subsidiaries. While it recognizes that the governing boards of such entities are empowered to appropriate such amounts as they may deem appropriate for the said allowance, the authority is qualified. Under Item No. 1, Part Ill of the same circular pertaini Audit Guidelines, it indicates: If. AUDIT GUIDELINES ing to 1. The amount of extraordinary and miscellaneous expenses, as authorized in the corporate charters of GOCCs/GFls, shall be the ceiling in the disbursement of these finds. Where no such authority is granted in the corporate charier and the authority to grant extraordinary and miscellaneous expenses is derived from the 7% Id. at 499-503 A [ Digital p. 14 of 20 ] Decision 14 G.R. No. 276775 General Appropriations Act (GAA), the amounts fixed thereunder shall be the ceiling in the disbursements; Clearly, the authority of a government-owned and controlled corporation’s board of directors to appropriate amounts for Extraordinary and Miscellaneous Expenses must emanate from said corporation’s respective charter. In the event that there is no such authority in its corporate charter, the governing board may refer to the General Appropriations Act. In this connection, there is nothing in Presidential Decree No. 198, as amended, the corporate charter of Pagsanjan Water District, that authorizes the Board thereof to grant the Extraordinary and Miscellaneous Expenses in favor of its General Manager. Considering this, this Court now refers to the General Appropriations Act.” The application of the GAA to the EMEs of GOCCs without charteral” authority to grant such benefits is not new. We invoked the same principle in Philippine Health Insurance Corporation v. Commission on Audit,” regarding EMEs granted by PhilHealth to its directors; in Power Sector Assets and Liabilities. Management Corporation v. Commission on Audit,” regarding business development expenses incurred by board members, committee members, and managers of Power Sector Assets and Liabilities Management Corporation that were charged to its EME account; and in National Transmission Corporation v. Commission on Audit,” regarding EMEs paid to TransCo officials. The same principle was also applied in Espinas v. Commission-on Audit,”® involving EMEs paid to officials of the Local Water Utilities Administration, which, like the BWD, is a creature of Presidential Decree No. 198. In that case, We upheld the applicability of COA Circular 2006-01 to GOCCs: ... Item Il of CoA Circular No. 2006-01, captioned as “Scope and Coverage,” explicitly states that “[t]his circular shall be applicable to all GOCCs, GFls and their subsidiaries” and shall cover their “extraordinary and miscellaneous expenses and other similar expenses.” Item I of CoA Circular No. 2006-01, captioned as “Rationale,” also mentions the CoA’s declared policy to “prescribe rules and regulations specifically for government ‘corporations to regulate the incurrence of these expenditures and ensure the prevention and disallowance of irregular, unnecessary, excessive, extravagant, or unconscionable expenditures or uses of government funds” considering that “{g]overning boards of [GOCCs/GFIs] are invariably empowered to appropriate through resolutions such amounts as they deem appropriate for extraordinary and miscellaneous expenses”...”7 1 Id. at 503-504. 72 “Tn accordance with a charter. WEHD.com, * Charteral. World English Historical Dictionary, available A NEW ENGLISH DICTIONARY ON HISTORICAL PRINCIPLES 294 (1893). 7% 839 Phil. 573, 583-595 (2018) [Per J. Jardeleza, En Banc]. ™ 918-A Phil. 571, 583-585 (2021) [Per J. Inting, Ea Banc]. 7 889 Phil. 1170, 1180-1181 (2020) {Per J. Delos Santos, En Banc]. 7 731 Phil. 67 (2014) [Per J. Perlas-Bernabe, En Bunz]. 7 Id. at 79-80. VW) [ Digital p. 15 of 20 ] G.R. No. 276775 wn Decision | Thus, the COA correctly applied the provisions of the 2009 GAA in disallowing the questioned benefits. In Paguio again: The grant of the Extraordinary and Miscellaneous Expenses in question is provided for under Section 25 of the 2009 General Appropriations Act and Section 28 of the 2010 General Appropriations Act. Both provisions are similarly worded as follows: {E]xtraordinary and Miscellaneous Expenses. Appropriations authorized herein may be used for extraordinary expenses of the following officials and those of equivalent rank as may be authorized by the DBM, not exceeding: (a) [PHP] 220,000 for each Department Secretary; (b) [PHP] 90,000 for each Department Undersecretary; (c) [PHP 50,000 for each Department Assistant Secretary; (d) [PHP] 38,000 for each head of bureau or organization of equivalent rank, and for each head of a Department Regional Office; (e) [PHP] 22,000 for each head of a Bureau Regional Office or organization of equivalent rank; and (f) [PHP] 16,000 for each Municipal Trial Court Judge, Municipal Circuit Trial Court Judge, and Shari’a Circuit Court Judge. Undoubtedly, the above provisions dictate that only those officials named therein or the officers equivalent in rank, as may be authorized by the DBM, are entitled to claim reimbursement for Extraordinary and Miscellaneous Expenses in the amounts not exceeding those provided. Jt is evident that a general manager of a local water district is not among those public officers mentioned. Paguio et al. likewise failed to prove that the said position has been authorized by the DBM as an officer equivalent in rank with the officials listed. Thus, there is no legal basis for the grant of Extraordinary and Miscellaneous Expenses to Paguio and he is not entitled to the same.” De Guzman and Paguio are both local water district GMs who were granted EMEs in fiscal year 2009. Petitioners also failed to prove that the AGMs, Royeca and Tenedero, hold ranks equivalent to those mentioned in Section 25 of the 2009 GAA. The abovequoted ruling on the validity of Paguio’s benefits is thus squarely applicable to De Guzman, Royeca, and Tenedero. . Treating the disallowed payments as fringe benefits will not save petitioners’ case, for such benefits are also not among the exempted classes of B® Id. at 304-505, citing REPUBLIC ACY'NG. 9524 (2609), sec. 25. [ Digital p. 16 of 20 ] Decision 16 G.R. No. 276775 compensation under Section 12 of Republic Act No. 6758. Local water districts as created by Presidential Decree No. 198 are public corporations; as such, they only have the powers that are granted to them by law, or are necessary to carry out their purposes. 7% As discussed in Paguio, the compensation-fixing power of local water districts is controlled by Republic Act No. 6758 and other issuances governing the compensation of local water district employees. Thus, the taxation of fringe. benefits under the NIRC cannot be construed as a grant of authority for local water districts to grant such non-integrated benefits, moreso in the absence of any express or implied authority to do so in Section 33 of the NIRC. That provision simply taxes fringe benefits as defined therein. Also, as the COA-CAR correctly points out, the EMEs paid to De Guzman, Royeca and Tenedero cannot be considered exempted fringe benefits under paragraphs 5.4 and 5.5 of DBM CCC No. 10, as they were authorized long after the June 30, 1989 cut-off date, and the Board resolutions simply describe them as fringe benefits, without specifying their purpose or character.®° Ii. Anent petitioners’ liability to refund the disallowed amounts, the Madera rules and its subsequent clarifications apply: 2. If a Notice of Disallowance is upheld, the rules on return are as follows: a. Approving and certifying officers who acted in good faith, in regular performance of official functions, and with the diligence of a good father of 7 Davao City Water District v. Civil Service Commission, 278 Phil. 605, 609-617 (1991) [Per J. Medialdea, En Banc]; Marilao Water Consumers Association, Inc. v. Intermediate Appellate Court, 278 Phil. 444, 453 (1991) [Per J. Narvasa, First Division]. 80 Rollo, pp. 50-51. COA-CAR Decision. Paragraphs 5.4 and 5.5 of DBM CCC No. 10 list 23 specific types of fringe benefits that can remain disintegrated from the standard salary and may continue to be received only by incumbents as of June 30, 1989 who are authorized and actually receiving said allowances/benefits as of said date, at the same terms and conditions prescribed by P.D. No. 985, as amended, namely: Representation and Transportation Allowances (RATA); Uniform and Clothing Allowance; Hazard Pay as authorized by law; Honoraria/additional compensation for employees on detail with special projects or inter-agency undertakings; Honoraria for services rendered by researchers, experts and specialists who are of acknowledged authorities in their fields of specialization; Honoraria for lecturers and resource persons/speakers; Overtime Pay as authorized by law; Laundry and subsistence allowances of matine officers and crew, on board GOCCs/GFIs owned vessels and used in their operations, and of hospital personnel who attend directly to patients and who by nature of their duties are required to wear uniforms; Quarters Allowance of officials and employees who are entitled to the same; Overseas, Living Quarters and other allowances presently authorized for personnel stationed abroad; Night Differential of personnel on night duty; Per Diems of members of the governing Boards of GOCCs/GFls at the rate as prescribed in their respective Charters; Flying Pay of personnel undertaking aerial flights; Per Diems/Aflowances of Chairman and Members/Staff of collegial bodies and Committees; Per Diems/Allowances of officials and employees on official foreign and loca! travel outside of their official station (DBM CCC No. 10, paragraphs 5.4.1.-5.4.15); Rice Subsidy, Sugar Subsidy; Death Benefits other than those granted by the GSIS; Medical/dental/optical allowances/benefits; Children’s Allowance; Special Duty Pay/Allowance; Meal Subsidy; Longevity Pay; and Teller’s Atlowance Committees (DBM CCC No. 10, paragraphs 5.5,1,-5.5.9). The benefits at bar were simply characterized as “fringe benefits,” without specifying the type of benefit as enumerated above. Rollo, pp. 113-114. BWD Board Resolution Nos. 64-2008 and 65-2008. [ Digital p. 17 of 20 ] Decision 17 G.R. No. 276775 the family are not civilly liable to return consistent with Section 38 of the Administrative Code of 1987. b. Approving and certifying officers who are clearly shown to have acted in bad faith, malice, or gross negligence are, pursuant to Section 43 of the Administrative Code of 1987, solidarily liable to return only the net disallowed amount which, as discussed herein, excludes. amounts excused under the following Sections 2c and 2d. c. Recipients —— whether approving or certifying officers or mere passive recipients — are liable to return the disallowed amounts respectively received by them, unless they are able to show that the amounts they received were genuinely given in consideration of services rendered. d. The Court may likewise excuse the return of recipients based on undue prejudice, social justice considerations, and other bona fide exceptions as it may determine on a case to case basis.*! ...[AJuthorizing officers for unnecessary disallowances generally have no liability to return the expenditures. Nevertheless, liability may attach if it is proven that the officers purposely and knowingly issued the unnecessary funds. As for disallowances of illegal or irregular expenditures, a more objective approach is taken. First, the authorizing officer’s basis for issuing the benefit must be reviewed. For one to be absolved of liability, the following requisites must be present: (1) a certificate of availability of funds, pursuant to Section 40 of the Administrative Code; (2) an in-house or a Department of Justice legal opinion; (3) lack of jurisprudence disallowing a similar case; (4) the issuance of the benefit is traditionally practiced within the agency and no prior disallowance has been issued; and (5) on the question of law, that there is a reasonable textual interpretation on the expenditure or benefit’s legality. If all of these requirements are met, the authorizing officer is absolved of liability for having shown that they exercised the diligence of a good father of the family in the performance of their duty.** As a supplement to the Madera Rules on Return, the Court now finds it fitting to clarify that in order to fall under Rule 2c, i.e., amounts genuinely given in consideration of services rendered, the following requisites must concur: (a) the personnel incentive or benefit has proper basis in law but is only disallowed due to irregularities that are merely procedural in nature; and {b) the personnel incentive or benefit must have a clear, direct, and- reasonable connection to the actual performance of the payee-recipient’s official work and functions for which ihe benefit or incentive was intended as further compensation. Madera v, Commission on Audit, 882 Phil. 744, 818-819 (2020) [Per J. Caguioa, En Banc]. Senior Associate Justice J. Marvic M.V.F. Leonen,, concurting opinion in Madera v. Commission on Audit, id. at 853-854. Abellanosa v. Commission on Audit, 899 Phil. 413, 430 (2020) [Per J. Perlas-Bernabe, En Banc]. 81 82 83 [ Digital p. 18 of 20 ] Decision 18 G.R. No. 276775 As for the good faith of the certifying and approving officers, the Watershed/ROW Supervisor and Administrative Division Manager of the BWD certified that the questioned EME payments were necessary, lawful, and incurred under their direct supervision,” despite the absence of any in- house or Department of Justice legal opinion or ruling supporting the grant of EMEs. BWD’s accounting department also certified that the documents supporting the disbursements are complete and proper.** While the questioned EME payments were ostensibly issued in recognition of the GM and the AGM’s contribution to the meeting of the BWD’s performance targets and the completion of certain projects, petitioners nevertheless failed to present any legal opinion or ruling supporting their interpretation of the compensation-fixing power of local water districts under Presidential Decree No. 198, which, it must be stressed, has been soundly rejected by the Court in Paguio and its allied rulings. The Court thus has no choice but to find the certifying and approving officers in bad faith,®° as they relied on their own institutional reading of Presidential Decree No. 198, without regard to Republic Act No. 6758 and other legal limitations on the compensation-fixing power of the BWD. We therefore find petitioners solidarily liable for the net disallowed amount, save for petitioner Wilhelmina A. Aquino (Aquino), whose participation was limited to certifying that the documents supporting the disbursements are complete and proper.®” Unfortunately, We cannot extend this absolution to the other BWD accounting department employees with the same participation, namely, Joanna Carame and Jo Allan Baptista, who did not join the present Petition and are therefore outside the jurisdiction of the Court. Parties performing purely ministerial duties unrelated to the illegality of a disbursement may be excused from audit liability on the basis of good faith.88 As BWD’s Senior Accountant, Aquino’s certification was purely ministerial, as she could not refuse to do so if the disbursement documents were indeed complete. Similarly, We find de Guzman, Royeca and Tenedero fiable for the amounts they received, as these were granted contrary to Republic Act No. 8 Rollo, p. 34. COA Decision No. 2020-487. 85 Id. 85 See Advincula v. Commission on Audit, 897 Phil. 177, 192 (2021) [Per J. Inting, Zn Banc]. 87 Rollo, p. 34. COA Decision No. 2020-487. 88 Corvera-Cirunay v. Commission on Audit, G.R. No. 278177, May 20, 2025 [Per J. M.V. Lopez, En Banc] at 11-12. This pinpoint citation refers to the copy of the Decision uploaded to the Supreme Court website; Abrigo v. Cominission on Augil-Coimmission Proper, 921 Phil. 1067, 1084-1086 (2022) [Per J. Zalameda, En Banc}; Celeste v. Commission on Audit, 904 Phil, 199, 207-215 (2021) [Per J. Caguioa, En Banc). l [ Digital p. 19 of 20 ] Decision 19 Oa G.R. No. 276775 6758 and DBM CCC No. 10. the EMEs were disallowed not for mere procedural reasons but for being udéra vires, so they cannot be considered benefits genuinely given in consideration of services rendered. ACCORDINGLY, the Petition for Certiorari is DISMISSED. The Decision Nos. 2020-487 and 2023-457 of the Commission on Audit, dated January 31, 2020 and December 7, 2023, are AFFIRMED WITH MODIFICATION, in that petitioner Wilkelmina A. Aquino is ABSOLVED from liability to return the amounts disallowed therenncer. SO ORDERED. SAMUEL H. GAERLAN Associate Justice WE CONCUR: (On official business) ALEXANDER G. GESM Chief Justice INDO “KE K LEONEN— ALFREDO B Senior Associate Justice and: _ Ass Acting Chief Justice Per Special Order No. 3308 dated July 3, 2026 » CAGUION c ui RAI HEN MUM TENG Associate Justice AZARO-TAVIER ate Justice [ Digital p. 20 of 20 ] g G.R. No. 276775 Desision ROSARIO SABA Asséciate Justice / Associate justice : (On Official Business} exe Ze JOSE MIDAS P. MARQUEZ a KE 1 iio, IR Associate Justice Associate Justice (On Official Business} (On Leave) MARIA FILOMENA D. SINGH JHOSEP Y. LOPEZ Associate Justice < Associate Justice i Wer EN AgSoclate Justice CERTIFICATION Pursuant to Article VII, Section i3 of the Constitution, | certify that the conchisions in the above Decision had been reached in consultation befiwe the case was assigned to the writer of ie opinion of the Court. “MEARE MALE. LISONEN Asting “hief Iustice Per Special Order No. 3308 dated July 3, 2026