CASE DIGEST : LUCILO R. BAYRON v. COA GR No. 253127, Nov 29, 2022 GAERLAN

 

FACTS

The City Government of Puerto Princesa enacted Ordinance No. 438 and Resolution No. 850-2010, creating the Early and Voluntary Separation Incentive Program (EVSIP). The program granted cash incentives to qualified city employees who voluntarily retired or separated from government service. The incentives were computed based on the employees' years of service and were intended to augment the retirement benefits already provided under existing laws. Pursuant to the ordinance, the city disbursed approximately ₱89.67 million to qualified employees.

The Commission on Audit (COA) disallowed the disbursements, holding that the EVSIP was ultra vires because it granted additional retirement benefits not authorized by national law. COA ruled that the ordinance violated Section 28(b) of Commonwealth Act No. 186 (Government Service Insurance Act), as amended by Republic Act No. 4968, which prohibits government agencies and local government units from providing supplementary retirement or separation benefits beyond those authorized by law. The city officials challenged the COA decision, arguing that the ordinance was a valid exercise of the local government's autonomy under the Local Government Code of 1991 and that the operative fact doctrine should protect the benefits already received by the employees.

ISSUE

Whether Ordinance No. 438 and Resolution No. 850-2010, establishing the EVSIP and granting additional retirement incentives to employees of the Puerto Princesa City Government, were valid exercises of the legislative powers of the local government under the Local Government Code, or whether they were ultra vires for violating Section 28(b) of Commonwealth Act No. 186, as amended by Republic Act No. 4968, which prohibits government entities from granting retirement or separation benefits beyond those authorized by law.

Whether the operative fact doctrine could validate the disbursements already made under the ordinance and exempt the recipients and approving officials from liability, considering that the ordinance had not yet been judicially declared void at the time the benefits were paid. The Court also had to determine whether the recipients should return the amounts received under the principle of solutio indebiti embodied in Article 2154 of the Civil Code, which requires the return of benefits unduly received through mistake or without legal basis.

HELD

The Supreme Court denied the petition and affirmed the COA Decision. It held that Ordinance No. 438 and Resolution No. 850-2010 were ultra vires and void because they directly contravened Section 28(b) of Commonwealth Act No. 186, as amended by Republic Act No. 4968, which expressly prohibits government agencies and local government units from granting additional retirement or separation benefits not authorized by Congress. Although local governments enjoy autonomy under the 1987 Constitution and the Local Government Code, such autonomy is not absolute and must always conform to national laws. Since the EVSIP merely supplemented statutory retirement benefits based on employees' years of service, it exceeded the legislative authority of the city government and was therefore invalid.

The Court further ruled that the operative fact doctrine did not justify the continued validity of the disbursements because the doctrine merely recognizes the practical consequences of an invalid law before its nullification and does not legalize acts expressly prohibited by statute. It likewise held that the recipients of the incentives are generally obliged to return the amounts received under Article 2154 of the Civil Code (solutio indebiti), since the payments had no valid legal basis. The Court nevertheless left to the Office of the Ombudsman the determination of the administrative or criminal liability of the public officials involved in approving the disbursements. Accordingly, the ordinance and resolution were declared null and void, and the COA's notice of disallowance was sustained.