PSALM v. COA

M., J.:

Before this Court are the consolidated Petitions for Certiorari1 under Rule 64, in relation to Rule 65, of the Revised Rules of Court docketed as G.R. No. 213425 and G.R. No. 216606. G.R. No. 213425 assails Decision No. 2013-2282 dated December 23, 2013 and Resolution3 dated April 4, 2014 of respondent Commission on Audit (COA) in COA CP Case No. 2011-144. On the other hand, G.R. No. 216606 questions the COA's Resolution4 dated November 20, 2014 in COA CP Case No. 2010-362.

Facts Petitioner Power Sector Assets and Liabilities Management Corporation (PSALM) is a government-owned and controlled corporation (GOCC) created under Republic Act (RA) No. 9136,5 also known as the "Electric Power Industry Reform Act of 2001" (EPIRA). Its principal purpose is to manage the orderly sale, disposition, and privatization of National Power Corporation (NPC) assets to liquidate all NPC financial obligations and stranded contract costs in an optimal manner.6 Since 2002, PSALM had been reimbursing Extraordinary and Miscellaneous Expenses (EME) to its officers and employees with certifications issued by the claimant as evidence of disbursement in accordance with Section 397(c)7 of the Government Accounting and Auditing Manual (GAAM)8 - Volume I and COA Circular No. 89-3009 dated March 21, 1989.10 In a Letter11 dated August 28, 2008, however, the COA Audit Team Leader reminded PSALM that COA Circular No. 2006-00112 dated January 3, 2006 no longer allows the use of such certification as an alternative supporting document for reimbursement claims of EME and other similar expenses.

Notably, PSALM and all its departments were furnished a copy of COA Circular No. 2006-001 on March 8, 2006,13 Paragraph III(3) of which provides: 3. The claim for reimbursement of such expenses shall be supported by receipts and/or other document evidencing disbursements; x x x (Emphasis supplied.) Despite such advice, PSALM continued to pay out EME in 2008 and 2009, supported merely by certifications. Consequently, the disbursed 2008 EME became the subject of Notice of Suspension (NS) No. 09-0001-000-(08)14 dated March 16, 2009 on the ground that they were not supported by documents required under COA Circular No. 2006-001.

The NS required PSALM to submit receipts corresponding to the 2008 EME reimbursements. Still unwilling to comply, PSALM filed a motion for reconsideration (MR) for the lifting of the NS. Unmoved, the Auditor issued Notice of Disallowance (ND) No. 09-004-(08)15 (2008 EME ND) on December 28, 2009, disallowing the 2008 EME, amounting to an aggregate of P2,385,334.06.

The approving and certifying officers, as well as the individual payees were all made liable to settle the disallowed amount.16 On June 2, 2010, a Memorandum on Appeal17 was filed before the COA Corporate Government Sector (CGS), Cluster B, questioning the 2008 EME ND, which was denied in Decision No. 2010-01218 dated November 25, 2010: WHEREFORE , foregoing premises considered, the instant appeal is hereby DENIED for lack of merit. Accordingly, [ND] No. 09-004-(08) dated December 28, 2009 amounting to P2,385,334.06 is hereby AFFIRMED.19 (Emphasis in the original.) PSALM then filed a Petition for Review20 of COA CGS Decision No. 2010-012 before the COA Proper on December 28, 2010, which was also denied in Decision No.

2013-22921 dated December 23, 2013: WHEREFORE , the Petition for Review of [PSALM] and its concerned officers is hereby DENIED. Accordingly, [COA CGS]-Cluster B Decision No. 2010-012 dated November 25, 2010 and [2008 EME ND] dated December 28, 2009, on the payment of [EME] to [PSALM] officers for the year 2008 in the total amount of [P]2,385,334.06, are hereby AFFIRMED.22 (Emphasis in the original.) No MR or petition for certiorari was filed. Thus, Decision No. 2013-229 became final and executory.

A Notice of Finality of Decision23 (NFD) dated March 6, 2014 was issued and served upon PSALM through a 1st Indorsement.24 This prompted PSALM to file a Motion for Relief from Judgment and/or to Defer/Suspend Enforcement of Finality of Decision,25 claiming that its failure to file an MR or a petition for certiorari was due to an honest mistake, inadvertence, or excusable negligence. Unconvinced, the COA Proper En Banc issued Resolution26 dated November 20, 2014, denying PSALM's motion: "The [COA Proper] dismissed the Urgent Manifestation and Motion for having been filed out of time. The Notice of Finality of Decision dated March 6, 2014 shall remain in force and effect."27 The COA Proper's Resolution dated November 20, 2014 is now the subject of the Petition for Certiorari in G.R. No. 216606.

Meanwhile, pending resolution of the 2008 EME ND appeal, ND No. 10-005-(2009) (2009 EME ND)28 dated August 9, 2010 was issued, similarly disallowing the 2009 EME reimbursements, amounting to an aggregate of P2,615,500.79, for failure to submit the documentary requirements under COA Circular No. 2006-001. All the approving/certifying officers and payees of the 2009 EME were likewise made liable for the disallowed transactions.29 On February 1, 2011, PSALM filed a Memorandum on Appeal30 before the COA CGS, Cluster B, challenging the 2009 EME ND, but was denied in COA CGS Decision No. 2011-00431 dated April 13, 2011: WHEREFORE , foregoing premises considered, the instant appeal is hereby DENIED for lack of merit. Accordingly, [ND] No. 10-005-(2009) dated August 9, 2010 relative to the payment of CY 2009 [EME] to PSALM officials in the total amount of [P]2,615,500.79 is hereby AFFIRMED.32 (Emphasis in the original.) On May 4, 2011, PSALM filed a Petition for Review33 of COA CGS Decision No. 2011-004 before the COA Proper, which was likewise denied in Decision No. 2013-22834 dated December 23, 2013: WHEREFORE , the Petition for Review of [PSALM] is hereby DENIED.

Accordingly, [CGS]-Cluster B Decision No. 2011-004 dated April 13, 2011 and [2009 EME ND] dated August 9, 2010, on the payment of [EME] to its officials for the year 2009 in the total amount of [P]2,615,500.79, are hereby AFFIRMED.35 (Emphasis in the original.) Unlike with Decision No. 2013-229, PSALM was able to timely file an MR of the COA Proper's Decision No. 2013-228, but it was denied in a Resolution36 dated April 4, 2014: "The [COA Proper] denied the [MR] for lack of merit. The movants failed to raise a new matter or show sufficient ground to justify a reconsideration of COA Decision No. 2013-228 dated December 23, 2013."37 The COA Proper's Decision No. 2013-228 and Resolution dated April 4, 2014 are now the subjects of the Petition for Certiorari in G.R. No. 213425. Issues In G.R. No. 213425, PSALM contends that the COA Proper erred in upholding the 2009 EME ND.

It claims that its officials and employees' right to due process was violated when the 2009 EME ND was issued without first issuing an Audit Observation Memorandum (AOM).38 PSALM also argues that COA Circular No. 2006-001 is not applicable to it because it derives its authority to disburse EME from the General Appropriations Act (GAA).39 As such, it disburses EME in accordance with Section 397(c)40 of the GAAM,41 Volume I, citing Paragraph III(4)42 of COA Circular No. 89-300,43 which allows national government agencies (NGA) to use certifications, in lieu of receipts, as proof of disbursement.

Hence, PSALM posits that the evil sought to be prevented by the stricter requirement under COA Circular No. 2006-001 is already addressed by the ceiling amounts provided under the GAA. In any case, PSALM contends that the certifications supporting the claims should be considered sufficient as they fall under the "other document evidencing disbursements" contemplated under paragraph III(3) of COA Circular No. 2006-001.44 Violation of the equal protection clause was also raised because of the alleged preferential treatment given to the NPC and the National Transmission Commission (TransCo) when no disallowance was issued to the EMEs that they disbursed, which were merely supported by certifications;45 and also due to the difference in treatment between NGAs and GOCCs as NGAs are allowed to use certifications under COA Circular No. 89-300.46 Lastly, PSALM invokes good faith on the part of its officials in approving and receiving the 2009 EME reimbursements.47 In G.R. No. 216606, PSALM argues that the COA gravely abused its discretion in denying its motion for relief from judgment and sustaining the finality of Decision No. 2013-229.

PSALM beseeches the Court to brush aside the technical rules of procedure and to review the merits of the case.48 On the merits, PSALM maintains that the COA Proper committed grave abuse of discretion in affirming the 2008 EME ND, raising the same substantive issues stated above.49 To synthesize, the issues for our resolution are the following: I. Whether the COA committed grave abuse of discretion in ruling that due process was not disregarded when the 2009 EME ND was issued without first issuing an AOM; II. Whether the COA committed grave abuse of discretion in denying PSALM's motion for relief from judgment and declaring Decision No. 2013-229 as final and executory; III. Whether the COA committed grave abuse of discretion in affirming the 2008 EME ND and 2009 EME ND or specifically: A. Did the COA err in ruling that COA Circular No. 2006-001 applies to PSALM?

B. Did the COA err in ruling that certifications cannot be considered as substantial compliance with the documentary requirement under COA Circular No. 2006-001? C. Did the COA err in ruling that there was no violation of the equal protection clause when COA auditors allegedly failed to apply COA Circular No. 2006-001 to the NPC and TransCo? Was the principle of equal protection violated by the difference in treatment between NGAs and GOCCs?

D. Did the COA err in affirming the liability of PSALM's officers and employees to settle the disallowed amounts? Ruling We find no merit in both Petitions. The COA's audit power is among the constitutional mechanisms structured to ensure the check-and-balance system inherent in our form of government.

Under the 1987 Constitution,50 the COA is vested with broad powers over all accounts pertaining to government revenues and expenditures, including the exclusive authority to promulgate accounting and auditing rules and regulations for the prevention and disallowance of irregular, unnecessary, excessive, extravagant, or unconscionable uses of government funds and properties.51 As a necessary consequence, the COA's interpretation of its own auditing rules and regulations, as enunciated in its decisions, should be accorded great weight and respect.52 It is the general policy of the Court to sustain the decisions of the COA, unless it acted without or in excess of jurisdiction or with grave abuse of discretion.

Congruent with this precept is the limited scope of the Court's review under the extraordinary remedy of certiorari , wherein the Court is confined solely to questions of jurisdiction whenever a tribunal, board or officer exercising judicial or quasi-judicial function acts without jurisdiction or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction.53 Grave abuse of discretion speaks of an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law or to act in contemplation of law as when the judgment rendered is not based on law and evidence but on caprice, whim and despotism.54 As will be discussed, we do not find any COA action in these cases done beyond its jurisdiction or with grave abuse discretion. I. Right to due process In G.R. No. 213425, PSALM laments that the Auditor's failure to issue an AOM before the issuance of the 2009 EME ND is a breach of the right to due process.

This argument has no legal basis. We agree with the COA that COA Circular No. 2009-00655 or the COA Rules and Regulations on Settlement of Accounts (RRSA) does not require the issuance of an AOM before a disallowance may be issued. Paragraph 5.3 of the RRSA states that an AOM shall be issued only "[i]n case an audit decision cannot as yet be reached due to incomplete documentation/information, or if the deficiencies noted refer to financial or operational matters which do not involve pecuniary loss[]"56 Considering the clear violation of a COA regulation as stated in the 2009 EME ND, and the disallowance of a previous similar transaction,57 the COA correctly observed that the transaction subject of the 2009 EME ND was "already ripe for auditorial determination."58 Correspondingly, under paragraph 10.1 of the RRSA, an ND shall issue, without the mention of an AOM, "for transactions which are irregular/unnecessary/excessive and extravagant as defined in COA Circular No. 85-55A59 as well as other COA issuances, and those which are illegal and unconscionable."

In fact, paragraph 10.3 of the RRSA requires that "[t]he ND shall be issued as often as disallowances are made by the Auditor in order to notify the agency head, the accountant, and the persons liable for the amount disallowed in audit." Upon receipt of the ND, the affected officers and employees can appeal the ND to the COA CGS,60 then to the COA Proper,61 and even question it before this Court62 as PSALM did. Thus, despite non-issuance of an AOM, PSALM was afforded the right to be properly notified and fully heard.

It cannot complain that due process requirements were disregarded. Well-settled is the rule that the essence of due process is simply an opportunity to be heard; an opportunity to explain one's side; or the opportunity to seek a reconsideration of the action or ruling complained of. It safeguards, not the lack of previous notice, but the denial of the opportunity to be heard.

When the party was afforded the opportunity to defend his interests in due course, there is no denial of due process.63 Verily, the COA did not commit grave abuse of discretion in upholding the 2009 EME ND despite non-issuance of an AOM. II. Finality of COA Proper Decision No. 2013-229 It is undisputed that the COA Proper's Decision No. 2013-229 had already attained finality for PSALM's failure to file an MR or petition for certiorari in accordance with Sections 9 and 10, Rule X of the 2009 Revised Rules of Procedure of the COA,64 as amended by COA Resolution No. 2011-006,65 viz.: SEC.

9. Finality of Decisions or Resolutions. - A decision or resolution of the Commission upon any matter within its jurisdiction shall become final and executory after the lapse of thirty (30) days from notice of the decision or resolution.

x x x x x x x SEC. 10. Motion for Reconsideration.

- A motion for reconsideration may be filed within thirty (30) days from notice of the decision or resolution, on the grounds that the evidence is insufficient to justify the decision; or that the said decision of the Commission is contrary to law. Only one (1) motion for reconsideration of a decision of the Commission shall be entertained. Despite such admitted lapse on PSALM's part, it faults the COA Proper for denying its motion for relief from judgment and for maintaining the validity of the NFD.

PSALM insists that it is entitled to relief on the grounds of honest mistake, inadvertence, or excusable negligence on the part of its staff, who claim to have "unknowingly"66 received two COA Proper decisions (Decision No. 2013-228 and Decision No. 2013-229) on the same day. Thinking that they received only one decision, they were able to file an MR only of Decision No. 2013-228. This argument fails to impress.

Relief from judgment is a remedy found under Rule 38 of the Revised Rules of Court.67 It is an equitable relief granted only under exceptional circumstances when a judgment or final order is rendered against a party, who was prevented from taking part in the proceedings or taking an appeal due to lack of available or adequate remedy, or on grounds of fraud, accident, mistake, or excusable negligence.68 "Mistake" as a ground for relief from judgment should be of such nature as to cause substantial injustice, or so palpable that it borders on extrinsic fraud. There is extrinsic fraud when a party is prevented from fully and fairly presenting his case to the Court.69 On the other hand, "negligence"

or inadvertence to be excusable, must be one which ordinary diligence and prudence could not have guarded against.70 In this case, PSALM had the remedies of filing an MR and a petition for certiorari , but failed to do so due to its own fault.⚖ - ℒαɯρhi৷ The alleged mistake and inadvertence or negligence of PSALM's staff in failing to avail of its legal remedies do not fall under the contemplation of the rules to warrant relief from a final and immutable judgment. There is no showing that PSALM was deprived of the opportunity to present its case fully and fairly as it had several occasions to justify its 2008 EME reimbursements. Notably, it repeatedly raised the same arguments, which were fully addressed by the COA Auditor, COA CGS, as well as the COA Proper.

There is also no showing that the alleged mistake or negligence could not have been prevented through ordinary diligence and prudence. PSALM knew that it had pending cases with the COA, and as a litigant, it has the duty to be vigilant with the status of its pending cases.71 Relief cannot be granted on a flimsy excuse that the failure to file the necessary pleading was due to some mistake, inadvertence, or negligence of the party's staff, who got confused upon receipt of two COA decisions when they were, in fact, awaiting two decisions from the COA.

Otherwise, all that a defeated party would do to salvage his or her case is to claim such simple mistake, inadvertence, or neglect as grounds for the review of every adverse judgment, which will put no end to litigation.72 Time and again, we have held that a party to an original action who fails to question an adverse judgment by not filing the proper remedy within the period prescribed by law loses the right to do so, and the judgment or decision as to him or her becomes final and binding.73 The decision becomes immutable and unalterable, and may no longer be modified in any respect, even if the modification is meant to correct erroneous conclusions of fact and law.74 This doctrine of immutability is grounded upon the fundamental principles of public policy and sound practice that, at the risk of occasional error, the judgment of courts and quasi-judicial agencies must become final at some definite date fixed by law.75 By and large, we find that the COA did not commit grave abuse of discretion in denying the motion for relief from judgment and sustaining the finality and immutability of its Decision No. 2013-229.

Significantly, it would not go amiss to emphasize that PSALM's failure to file an MR or a petition for certiorari was not a denial of due process as it was able to fully ventilate its case before the COA Auditor, the COA CGS, and the COA Proper. Be that as it may, in the proceeding discussions, we shall address the common substantive issues raised to challenge Decision No. 2013-229 on the propriety of the 2008 EME ND and Decision No. 2013-228 with regard to the 2009 EME ND. III.

Propriety of the 2008 EME ND and 2009 EMEND A. COA Circular No. 2006-001 applies to PSALM Pertinent portions of COA Circular No. 2006-001 provide: I. RATIONALE Governing boards of government-owned and controlled corporations/government financial institutions (GOCCs/GFIs) are invariably empowered to appropriate through resolutions such amounts as they deem appropriate for [EME]. Previous circulars issued by this Commission pursuant to its constitutional mandate to promulgate accounting and auditing rules and regulations governing such expenses, however, clearly and categorically pertain to [NGAs] only. There is a need, therefore, to prescribe rules and regulations specifically for government corporations to regulate the incurrence of these expenditures and ensure the prevention or disallowance of irregular, unnecessary, excessive, extravagant, or unconscionable expenditures or uses of government funds.

II. SCOPE AND COVERAGE This Circular shall be applicable to all GOCCs, GFIs and their subsidiaries. It shall cover [EME] and other similar expenses, such as discretionary, business development expenses, representation expenses and the like, provided that the nature or purpose of said expenditures pertain to any of the following: x x x x The above enumeration is not exclusive and shall not prevent the inclusion of other similar disbursements which may be categorized as [EME] within its contemplation.

III. AUDIT GUIDELINES 1. The amount of [EME], as authorized in the corporate charters of GOCCs/GFIs shall be the ceiling in the disbursement of these funds.

Where no such authority is granted in the corporate charter and the authority to grant [EME] is derived from the General Appropriations Act (GAA), the amounts fixed thereunder shall be the ceiling in the disbursements[.] x x x x (Emphases supplied.) PSALM harps on the first sentence of COA Circular No. 2006-001's "Rationale" in arguing that the circular specifically applies only to GOCCs, which are invariably empowered to allocate through their governing boards such amounts as they deem appropriate for EME, and not to those which disburse EME in accordance with the amounts fixed under the GAA. It theorizes that the evil sought to be prevented by COA Circular No.

2006-001, i.e., the irregular, excessive, extravagant, or unconscionable expenditure of public funds through EME disbursements, was already addressed by compliance with the ceiling amounts fixed under the GAA. Since PSALM disburses EME in accordance with the GAA, it insists that Section 397(c) of the GAAM - Volume I, echoing Paragraph III(4) of COA Circular No. 89-300 dated March 21, 1989, should instead be applied, thus: SEC. 397.

Guidelines for payment of extraordinary and miscellaneous expenses. - The officials concerned shall be guided by the following rules: x x x x c. The entitlement to the benefit shall be strictly non-commutable or reimbursement basis.

The corresponding claim for reimbursement of such expenses shall be supported by receipts and/or other documents evidencing disbursement, if these are available, or, in lieu thereof, by a certification executed by the official concerned that the expenses sought to be reimbursed have been incurred for any of the purposes contemplated under the law or regulation in relation to incurred for an office specified in the law, such certification shall be executed solely by the head of the office. (COA Cir. 89-300, Mar.

21, 1989) (Emphasis supplied.) We do not agree. COA Circular No. 89-300, which was reproduced in Section 397(c) of the GAAM - Volume I, is a previous regulation, applicable only to NGAs, and not to GOCCs/GFIs.76 Paragraph II of COA Circular No. 89-300, captioned as "Scope and Coverage" categorically indicates that it applies to "appropriations authorized under [the GAA of 1989 for National Government [A]gencies [that] may be used for incurrence of [EME] at the rates and by the offices and officials specified therein."77 On the other hand, COA Circular No. 2006-001 is a recent regulation, issued specifically to all GOCCs, GFIs and its subsidiaries without distinction, as can be inferred from the express statement under its Paragraph II, captioned as "Scope and Coverage."

Too, Paragraph III(1) of COA Circular No. 2006-001 particularly mentions GOCCs that derive their authority to grant EME from the GAA to be covered by the "Audit Guidelines." The explicit language of COA Circular 2006-001 is clear and needs no interpretation. It applies to PSALM and all other GOCCs without qualification.

Hence, the COA correctly applied the legal maxim "ubi lex non distinguit, nec nos distinguere debemus" or "where the law does not distinguish, neither should we."78 Furthermore, that COA Circular No. 89-300 applies only to NGAs, while COA Circular No. 2006-001 governs GOCCs/GFIs is confirmed in the more recent COA Circular No. 2012-00179 dated June 14, 2012, which provides: General Guidelines The amount fixed under the GAA for National Government offices and officials shall be the ceiling in the disbursement of [EME]. It shall cover [EME] and other similar expenses, such as discretionary, business development expenses, representation expenses and the like.

The audit guidelines on disbursement for these expenses in [NGAs] are prescribed under COA Circular No. 89-300 dated March 31, 1989. For GOCCs/GFIs, the amount authorized in their corporate charters shall be the ceiling in the disbursement of funds. Where no such authority is granted in tbe corporate charter and the authority to grant [EME] is derived from the GAA, the amounts fixed thereunder shall be the ceiling in the disbursements.

The guidelines for GOCCs/GFIs are prescribed under COA Circular No. 2006-001 dated January 3, 2006. x x x x Documentary Evidence