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Digest: Abanilla v. Commission on Audit (468 SCRA 87, 2005)

Public Office, not Contract
Digest: Abanilla v. Commission on Audit (468 SCRA 87, 2005)
G.R. NO. 142347 : August 25, 2005


Facts:  Pursuant to Presidential Decree 198 or the Provincial Water Utilities Act of 1973, Metropolitan Cebu Water District (MCWD), a local water district was organized as a government-owned corporation with original charter.


Subsequently, MCWD, through its Board of Directors, issued the following Resolutions giving benefits and privileges to its personnel, one of whom is Dulce M. Abanilla, MCWD's General Manager, Petitionerherein: (1) Board Resolution No. 054-83 dated May 23, 1983 granting hospitalization privileges; (2) Board Resolution Nos. 091-83 and 0203-85 dated October 21, 1983 and November 20, 1985, respectively, allowing the monetization of leave credits; (3) Board Resolution No. 0161-86 dated November 29, 1986 granting Christmas bonus; and (4) Board Resolution No. 083-88 granting longevity allowance.


MCWD and Metropolitan Cebu Water District Employees Union, petitioner-in-intervention, executed a collective bargaining agreement (CBA) providing for the continuous grant to all its regular rank and file employees of existing benefits, such as cash advances, thirteenth month pay, mid-year bonus, Christmas bonus, vacation and sick leave credits, hospitalization, medicare, uniform privileges, and water allowance.


On January 1, 1992, the parties renewed their CBA.


On November 13, 1995, an audit team of the COA, one of the herein Respondents, conducted an audit of the accounts and transactions of MCWD.


Thereafter, the Regional Director of COA Regional Office No. VII, also a Respondent, sent MCWD several notices disallowing the amount of P12,221,120.86 representing hospitalization benefits, mid-year bonus, 13th month pay, Christmas bonus and longevity pay.


Aggrieved, petitioner interposed an appeal to respondent COA at Quezon City. She cited COA Memorandum Circular No. 002-94 providing that "all benefits provided under the duly existing CBAs entered into prior to March 12, 1992, the date of official entry of judgment of the Supreme Court ruling in Davao City Water District, et al. v. CSC and COA, shall continue up to the respective expiry dates of the benefits or CBA whichever comes earlier.

COA Denied. respondent COA cited this Court's ruling in Davao City Water District v. Civil Service Commission that "a water district is a corporation created pursuant to a special law - P.D. No. 198, as amended, and as such, its officers and employees are covered by the Civil Service Law."

Petitioner contends that respondent COA acted with grave abuse of discretion in disallowing the above benefits and privileges and contravened the Labor Code provision on non-diminution of benefits.

Issue: Whether or not the disallowance of COA is valid despite the provision in the CBA

Ruling: Yes. In light of this Court's ruling in Davao City Water District that the officers and employees of a water district are covered by the Civil Service Law, petitioner’s invocation of the CBA, in justifying the receipt by the MCWD personnel of benefits and privileges, is utterly misplaced. Thus, we sustain the disallowance by respondent COA.

In Alliance of Government Workers v. Minister of Labor and Employment, this Court held:

"Subject to the minimum requirements of wage laws and other labor and welfare legislation, the terms and conditions of employment in the unionized private sector are settled through the process of collective bargaining. In government employment, however, it is the legislature and, where properly given delegated power, the administrative heads of government which fix the terms and conditions of employment. And this is effected through statutes or administrative circulars, rules, and regulations, not through collective bargaining agreements."

While we sustain the disallowance of the above benefits by respondent COA, however, we find that the MCWD affected personnel who received the above-mentioned benefits and privileges acted in good faith under the honest belief that the CBA authorized such payment. Consequently, they need not refund them.

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