CASAL VS.

COA
FACTS:
Sometime in December 1993, the National Museum granted an incentive award to its
officials and employees in the amount of P4,000 each, or a total of P1,162,333.35,
pursuant to Provision No. 8 of its Employees Suggestions and Incentive Awards System
(ESIAS) approved by the Civil Service Commission (CSC) on December 21, 1992
The COA Resident Auditor at the National Museum, State Auditor III Fe Marie H.
Dorado, subsequently inquired from the Department of Budget and Management (DBM)
on whether it granted authority to the National Museum to use its savings from its
appropriation for personal services to pay the subject incentive award.
The DBM, by letter dated June 7, 1994, informed Resident Auditor Dorado that it had
not received any request for such authorization from the National Museum.
Resident Auditor Dorado thus disallowed the incentive award through Notice of
Disallowance No. 94-02-101 P(93) dated July 19, 1994 for being violative of Section 7
of A.O. No. 268 and Section 2 of A.O. No. 29 and also for lack of the requisite
authorization from the DBM pursuant to P.D. No. 1177 Section 55.
Named in the Notice of Disallowance as "liable" to reimburse were petitioner Gabriel
S. Casal, petitioner Cecilio Salcedo, Mrs. Alma Cabrera, and Mrs. Corbina Vergara,
for their respective roles in the approval and release of the 1993 Incentive Award,
and all National Museum employees who received the award.
Petitioner Casal appealed the disallowance to the COA. The appeal was denied by
COA. Casals Motion for Reconsideration was also denied.
On September 17, 2001, petitioner Casal in his capacity as Executive Director of the
National Museum, petitioner Salcedo in his capacity as Acting Executive Director in the
place of petitioner Casal who by then was on terminal leave, and petitioner Luzviminda
B. Herrera, President of the National Museum Rank-and-File Employees Association
(NMRFEA), in her personal capacity and as authorized representative of the rank-andfile employees, filed the instant petition which prays for the issuance of a Temporary
Restraining Order and Writ of Preliminary Injunction.
This Supreme Court, on October 2, 2001, issued a Temporary Restraining Order
directing the COA to cease and desist from enforcing its Decision dated June 22, 1999,
effective immediately and until further orders.
The Office of the Solicitor General (OSG), In its Manifestation and Motion, stated that it
was unable to sustain the questioned Decision of the COA and thus prayed that the
same, as well as the Resolution dated August 3, 2001 and the Notice of Disallowance
No. 94-02-101 P(93) dated July 19, 1994, be set aside.
On request of the OSG, the Supreme Court gave COA the chance to file its own
comment. COA did file its Comment on June 13, 2002, to which petitioners filed a reply.

ISSUE:

WHETHER OR NOT THE COA ERRED IN ORDERING THE OFFICIALS AND

EMPLOYEES OF THE NATIONAL MUSEUM TO REFUND THE SUBJECT INCENTIVE
AWARDS OR BONUSES EVEN IN THE ABSENCE OF ANY BAD FAITH OR MALICE
ON THE PART OF THE MUSEUMS WORKFORCE[, AND]
WHETHER OR NOT THE COA ERRED IN NOT ADHEREING TO AND APPLYING THE
DECISION IN THE LEADING CASE OF BLAQUERA VS. ALCALA ON THE NONREFUND OF BENEFITS OR BONUSES RECEIVED IN GOOD FAITH BY
GOVERNMENT PERSONNEL DESPITE "VIOLATIONS" BY THEIR SUPERIOR
OFFICIALS OF EXISTING ADMINISTRATIVE ORDERS AND ISSUANCES
REGULATING THE GRANT OF SUCH INCENTIVES.
HELD:
In Blaquera, officials and employees of several government departments and agencies
were paid incentive benefits for the year 1992. On January 19, 1993, however, A.O. 29
was issued by President Ramos reiterating the prohibition under Section 7 of A.O. No.
268 against granting productivity incentive benefits or similar forms of
allowances/benefits without prior approval of the President
The Court upheld both administrative orders as having been issued in the valid exercise
of presidential control over the executive departments. Nonetheless, it held that the
therein petitioners could not be required to refund the incentive benefits, there being no
indicia of bad faith on the part of all parties involved
In the present case, petitioners assert that they, too, like those in Blaquera, may not be
compelled to return or refund the subject incentive benefits since they were released
and received by them in good faith.
Particularly with regard to petitioner Casal and the other officers held liable for their
participation in approving/authorizing the award ("approving officers"), petitioners claim
that their failure to observe the relevant administrative orders were mere lapses which
are consistent with the presumption of good faith.
The Court finds that while the Blaquera ruling maybe invoked by the employees who
received the subject award in good faith, the same provides no refuge for the herein
petitioners-approving officers due to significant factual distinctions
between Blaquera and the instant case.
First, while the incentive benefits in Blaquera were for CY 1992 and paid prior to the
issuance of A.O. 29 on January 19, 1993, the incentive awards subject of the instant
petition were released in December of 1993. When, therefore, the heads of departments
and agencies in Blaquera erroneously authorized the incentive benefits to the
employee, they did not then have the benefit of the categorical pronouncement of the
President in A.O. 29 that
[t]he prohibition prescribed under Section 7 of Administrative Order No. 268 is [thereby]
reiterated. Accordingly, all heads of government offices/agencies, including governmentowned and/or controlled corporations, as well as their respective governing boards are
hereby enjoined and prohibited from authorizing/granting Productivity Incentive Benefits
or any and all similar forms of allowances/benefits without prior approval and
authorization via Administrative Order by the Office of the President.

The same, however, is not the case with respect to the herein petitioners-approving
officers since the subject award was released when A.O. 29 had already been in effect
for nearly a year. Moreover, unlike in Blaquera, the prohibition stated in Section 7 of
A.O. 268 was brought to the attention of these approving officers by the CSC even prior
to the issuance of A.O. 29.
When petitioner Casal and the approving officers authorized the subject award then,
they disregarded a prohibition that was not only declared by the President through A.O.
268, but also brought to their attention by the CSC by a letter specifically addressed to
petitioner Casal and by annotation on the Museums ESIAS. Above all, at the time the
same officers approved the award, the prohibition in A.O. 268 had already been
reiterated by the President via A.O. 29.
The failure of petitioners-approving officers to observe all these issuances cannot be
deemed a mere lapse consistent with the presumption of good faith. Rather, even if the
grant of the incentive award were not for a dishonest purpose as they claimed, the
patent disregard of the issuances of the President and the directives of the COA
amounts to gross negligence, making them liable for the refund thereof. The following
ruling in National Electrification Administration v. COA bears repeating:
Executive officials who are subordinate to the President should not trifle with the
Presidents constitutional power of control over the executive branch. There is
only one Chief Executive who directs and controls the entire executive branch,
and all other executive officials must implement in good faith his directives and
orders. This is necessary to provide order, efficiency and coherence in carrying out the
plans, policies and programs of the executive branch.1wphi1
As to the employees who received the incentive award without participating in the
approval thereof, it cannot be said that they were either in bad faith or grossly negligent
in so doing. The imprimatur given by the approving officers on such award certainly
tended to give it a color of legality from the perspective of these employees. Being in
good faith, they cannot, following Blaquera, be compelled to refund the benefits already
granted to them.
The Supreme Court then ruled that the petition is PARTIALLY GRANTED. The Decision
dated June 22, 1999 of respondent COA and its Resolution dated August 3, 2001 are
declared INVALID only insofar as they hold liable all National Museum employees who
merely received the incentive award for CY 1993.