HONORARIUM is a gesture of appreciation for the service of one with expertise of

professional standing in recognition of his broad and superior knowledge in spec

ific
fields. It is given to officials/employees not as a matter of obligation but in
appreciation for services which admit of no compensation in money. (Teodoro
Santiago vs. COA, GR No. 92284, July 12, 1991, emphasis supplied).
Honorarium also comes in the form of extra monetary remuneration paid to a
government official and/or employee by virtue of his office, position or in conn
ection
with the function of his office or in the discharge of his duties. (csc Resoluti
on No.
001523, Gloria Tabuyo, 29 June 2000, emphasis supplied).
In the case of Government Service Insurance System vs Civil Service
Commission, G.R. No. 98395, 28 October 1994, the Supreme Court cited
COMPENSATION as one that excludes per diem, bonus, allowances, overtime pay,
pay or compensation given in addition to the base pay of the position or ranks a
s
fixed by law:
"Compensation" is de?ned by Section 1(c) of RA. No. 1573, which amended
Section 1(c) of CA. No. 186 (Government Seivice Insurance Act), thus:
(c) " Salary, pay, or compensation " shall be construed as to exclude all bonuse
s,
per diems, allowances and overtime pay, or salary, pay or compensation given
in addition to the base pay of the position or rank as ?xed by law or regulation
s
(Emphasis supplied).
A similar de?nition is provided in Section 2(i) of PD. No. 1146:
(i) Compensation the basic pay or salary received by an employee, pursuant
to his employment/appointments, excluding per diems, bonuses, overtime pay, and
allowances (Emphasis supplied).
CESARIO G. SAMUT
SWRFT/ IDO
SSS says Cunanan, Neri bonuses illegal
By Christian V. Esguerra
Philippine Daily Inquirer
First Posted 03:48:00 09/08/2010
Filed Under: Government offices & agencies, Wages & Pensions
MANILA, Philippines?Officials of the Social Security System (SSS) sitting on the
boards of private companies are barred from pocketing bonuses and profit share
given by these firms, the legal department of the state-run pension fund said.
?The SSS-nominated director is precluded from receiving and appropriating for hi
mself the proceeds of a profit-sharing scheme and/or the grant of bonus by the c
ompany where he is appointed as the said share and/or bonus also partake the nat
ure of compensation,? Joselito Vivit, manager of the SSS legal department, said
in a memorandum.
The three-page memorandum, a copy of which was obtained by the Inquirer, was add
ressed to Rizaldy Capulong, vice president for the SSS capital markets division,
who had sought legal opinion on the ?appropriate practice and policy? on the ma
tter.
The memo was dated July 1?or more than three weeks before no less than President
Benigno Aquino III made the questionable practice public in his State of the Na
tion Address.
The issue ostensibly covered the likes of former SSS president Romulo Neri, ex-c
hair Thelmo Cunanan and ex-commissioner Sergio Apostol, who all got a combined a
mount of P46.3 million in director?s fees by sitting on the board of Union Bank
in 2009 alone. In addition, each of the three officers received P15.4 million in
profit share from Union Bank.
Vivit cited a Supreme Court ruling covering ex-officio officials, a setup not un
related to the case of SSS officials on the boards of private corporations where
the pension fund has investments.
?The ex-officio position being actually and in legal contemplation part of the p
rincipal office, it follows that the official concerned has no right to receive
additional compensation for his services in the said position,? he quoted the hi
gh court as saying.
?The reason is that these services are already paid for and covered by the compe
nsation attached to his principal office,? the Supreme Court said.
Prohibited by law
The high tribunal added: ?By whatever name it is designated, such additional com
pensation is prohibited by the Constitution.?
Vivit said Section 54 of the Government Accounting and Auditing Manual (GAAM) al
so included a related prohibition.
?Except as may otherwise be specifically provided by law or competent authority,
? it said, ?all moneys and property officially received by the public officer in
any capacity or upon any occasion must be accounted for as government funds and
government property.?
Government fund
Going by the GAAM, Vivit said an SSS official on a private company?s board ?must
account for whatever money he received in his capacity as director of the compa
ny since the money is considered a government fund.?
?Hence, the director must necessarily remit the same to the SSS,? he pointed out
, way before Cunanan and company?s enormous compensations were made public.
At Philex Mining Corp., Cunanan, Neri and two other SSS officials received a tot
al of P127.4 million in bonuses and compensation, the bulk of which came after t
hey exercised their stock options in the firm in the last three years.
Cunanan alone collected P66.6 million from stock options from 2007 to 2010. But
he later clarified that he got only P15.3 million. He said he had used his own m
oney to purchase the stocks made available to him.
Vivit pointed out that a ?public officer?s designation or nomination to the comp
any as director is only due to his being an SSS official and not because of his
ownership of any share of stocks in the company.?
?He is merely representing the interest of the SSS as an institutional investor,
? Vivit said. ?He cannot appropriate the money he receives from the company as t
he same is government fund.?
EN BANC

PHILIPPINE ECONOMIC ZONE AUTHORITY (PEZA),
Petitioner,
G.R. No. 189767

Present:







- versus -






CARPIO,
VELASCO, JR.,
LEONARDO-de castro,
BRION,*
PERALTA,
BERSAMIN,**
DEL CASTILLO,
ABAD,
VILLARAMA, JR.,
PEREZ,
MENDOZA,
SERENO,
REYES, and
PERLAS-BERNABE, JJ.

COMMISSION ON AUDIT and REYNALDO A. VILLAR, Chairman, Commission on Audit,

Respondents.
Promulgated:

July 3, 2012
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - -x
RESOLUTION

VILLARAMA, JR., J.:
Before us is a petition for certiorari under Rule 64 in relation to Ru
le 65 of the 1997 Rules of Civil Procedure, as amended, seeking to annul Commiss
ion on Audit (COA) Decision No. 2009-081[1] which affirmed the Decision[2] of th
e Director, Cluster IV - Industrial and Area Development and Regulatory, Corpora
te Government Sector, COA, affirming Notice of Disallowance Nos. 2006-001-101 (0
2-06) to 2006-021-101 (01-03)[3] for the payment of P5,451,500.00 worth of per d
iems to ex officio members of the Board of Directors of petitioner Philippine Ec
onomic Zone Authority (PEZA).
The Facts
The PEZA Board of Directors is composed of 13 members which include the Undersec
retaries of the Department of Finance, the Department of Labor and Employment, t
he Department of the Interior and Local Government, the Department of Environmen
t and Natural Resources, the Department of Agriculture, the Department of Public
Works and Highways, the Department of Science and Technology and the Department
of Energy. Said Undersecretaries serve in ex officio capacity and were granted
per diems by PEZA for every attendance in a board meeting.
On September 13, 2007, the PEZA Auditor Corazon V. Espao issued Notice of Disallo
wance Nos. 2006-001-101 (02-06) to 2006-021-101 (01-03) on the following payment
s of per diems to ex officio members of the PEZA Board for the period 2001-2006:
N.D. No.
DATE
PAYEE
TOTAL
AMOUNT
2006-001-101 (02-06)
7/26/07
Eduardo R. Soliman, Jr.
P 632,000.00
2006-002-101 (02-05)
7/16/07
Juanita D. Amatong
448,000.00
2006-003-101 (01-02)
7/16/07
Anselmo S. Avenido
162,000.00
2006-004-101 (01)
7/16/07
Rosalinda Dimapilis-Baldoz
45,000.00
2006-005-101(05)
7/16/07
Benedicto Ernesto R. Bitonio, Jr.
56,000.00
2006-006-101 (05-06)
7/19/07
Manuel M. Bonoan
112,000.00
2006-007-101(01-02)
7/19/07
Arturo D. Brion
177,000.00
2006-008-101(05/06)
7/19/07
Armando A. De Castro
144,000.00
2006-009-101(02-06)
7/19/07
Fortunato T. De La Pea
904,000.00
2006-010-101(01)
7/19/07
Roseller S. Dela Pea
36,000.00
2006-011-101(01-05)
7/23/07
Cyril Del Callar
762,000.00
2006-012-101(03)
7/23/07
Renato A. De Rueda
48,000.00
2006-013-101(01-06)
7/23/07
Cesar M. Drilon, Jr.
811,000.00
2006-014-101(03-05)
7/23/07
Josephus B. Jimenez
336,000.00
2006-015-101(01)
7/23/07
Rufino C. Lirag, Jr.
63,000.00
2006-016-101(06)
7/26/07
Gaudencio A. Mendoza, Jr.
16,000.00
2006-017-101(03-04)
7/26/07
Rolando L. Metin
256,000.00
2006-018-101(01-02)
7/26/07
Edmundo V. Mir
124,500.00
2006-019-101(05-06)
7/26/07
Melinda L. Ocampo
104,000.00
2006-020-101(05-06)
7/26/07
Luzviminda G. Padilla
56,000.00
2006-021-101(01-03)
7/26/07
Ramon J.P. Paje
159,000.00


TOTAL
P5,451,500.00[4]
The disallowance was based on this Courts April 4, 2006 En Banc Resolution dismis
sing the petition for certiorari in Cyril del Callar, et al., Members of the Boa
rd of Directors, Philippine Economic Zone Authority v. COA and Guillermo N. Cara
gue, Chairman, COA[5] which assailed COA Decision No. 2006-009 dated January 31,
2006 affirming the March 29, 2002 decision of the Director, then Corporate Audi
t Office II, disallowing the payment of per diems of ex officio members of the P
EZA Board of Directors. Said disallowance was based on COA Memorandum No. 97-03
8 dated September 19, 1997 implementing Senate Committee Report No. 509 and this
Courts ruling in Civil Liberties Union v. Executive Secretary.[6]
On October 31, 2007, the Deputy Director General for Finance and Administration
of PEZA moved to reconsider[7] the subject Notices of Disallowance (NDs) and pra
yed that the concerned ex officio members be allowed to retain the per diems alr
eady received as they received them in good faith. It was contended that the pa
yment of the per diems covered the period when the April 4, 2006 Supreme Court R
esolution was not yet final and thus, PEZA honestly believed that the grant of t
he same was moral and legal. In the same vein, the ex officio members received
them in good faith. The motion cited the cases of Home Development Mutual Fund v
. Commission on Audit[8] and De Jesus v. Commission on Audit[9] as bases.
In a letter[10] dated November 16, 2007, PEZA Auditor Espao denied the motion for
reconsideration. She stated that the PEZA Management continued paying the per
diems even after they were duly notified through said NDs that such was in viola
tion of the Constitution as explained in the Civil Liberties Union case. She op
ined that the receipt of the NDs in effect notified the recipients and PEZA offi
cials that such payment was illegal and hence, the failure of PEZA to heed the n
otices cannot be deemed consistent with the presumption of good faith.
By letter[11] dated January 4, 2008, PEZA Director General Lilia B. De Lima appe
aled the denial of their motion for reconsideration to the Office of the Cluster
Director, COA. De Lima reiterated their claim of good faith contending that th
e Del Callar case had yet to be decided with finality when the subject per diems
were disbursed. She argued that since the issue on the propriety of giving per
diems to ex officio members was still unresolved, and because PEZA firmly belie
ved that it had legal basis, it continued to pay the per diems despite knowledge
and receipt of NDs. Good faith, therefore, guided PEZA in releasing the paymen
ts.
In a 2nd Indorsement[12] dated March 17, 2008, the COA Cluster Director, Ma. Cri
stina Dizon-Dimagiba, denied PEZAs appeal. She ruled that PEZAs claim of good fai
th cannot be given merit because in several other instances previous payments of
per diems have been disallowed. She noted that by the time PEZA received the no
tices of disallowance, it can be said that there is already an iota of doubt as
to whether the said transaction is valid or not. Hence, good faith can no longe
r apply.
On April 30, 2008, PEZA filed a petition for review[13] before the COA to assail
the denial of its appeal by the Office of the Cluster Director. PEZA reiterated
the same arguments it raised in its appeal.
On September 15, 2009, the COA rendered the assailed decision denying PEZAs petit
ion for review. The dispositive portion reads:
WHEREFORE, foregoing premises considered, the instant petition is hereby DENIED
for lack of merit. Accordingly, ND Nos. 2006-001-101 (02-06) to 2006-021-101 (01
-03) in the total amount of P5,451,500.00 representing payment of per diems to e
x-officio members of the Board of Directors of PEZA are hereby AFFIRMED. All the
recipients and the persons liable thereon are required to refund the said disal
lowed per diems. The Auditor of PEZA is also directed to inform this Commission
of the settlement made thereon.[14]
The COA ruled that the last paragraph of Section 11 of Republic Act
(R.A.) No. 7916 authorizing the members of the Board to receive per diems was de
leted in the amendatory law, R.A. No. 8748. Hence, from the time of the effecti
vity of R.A. No. 8748 in 1999, the members of the PEZA Board of Directors were n
o longer entitled to per diems. It further held that the payments to and receip
t by ex officio members of the PEZA Board of per diems for CYs 2001-2006 run cou
nter to the express prohibition in Section 13, Article VII of the 1987 Constitut
ion.
The COA also dismissed PEZAs claim of good faith in making the disburse
ments of per diems to the ex officio members of its Board. It ruled:
As to the petitioners claim of good faith, it must be emphasized that u
nder the Bitonio case, as early as 1998, PEZA was already notified of the illega
lity of the payment of per diems to ex-officio members of the PEZA Board thru th
e NDs issued by the COA Auditor from 1995 to 1998 on the payment of per diem to
every board meeting attended by the petitioner Benedicto Ernesto R. Bitonio, Jr.
as representative of the Secretary of Labor to the PEZA. This was anchored on t
he case of Civil Liberties Union v. Executive Secretary, supra, which affirmed C
OA Decision Nos. 2001-045 and 98-017-101(97) dated January 30, 2001 and October
9, 1998, respectively, which declared that:
x x x The framers of R.A. No. 7916 (Special Economic Zone Act of 1995) must have
realized the flaw in the law which is the reason why the law was later amended b
y R.A. No. 8748 to cure such defect.
x x x
Likewise, the last paragraph as to the payment of per diems to the m
embers of the Board of Directors was also deleted, considering that such stipula
tion was clearly in conflict with proscription set by the Constitution.
Prescinding from the above, the petitioner (Benedicto Ernesto R. Bit
onio, Jr.) is indeed, not entitled to receive a per diem for his attendance at b
oard meetings during his tenure as member of the Board of Directors of the PEZA.
(italics ours)
After the Bitonio case, the Auditor again disallowed the payments of
per diems granted for the period 1999 to 2000 by PEZA to the ex-officio members
of the PEZA Board under ND Nos. 2001-001-101 to 2001-008-101, which were upheld
under COA Decision No. 2006-009 dated January 31, 2006. Thus, PEZA was repeated
ly notified of the illegality of the payment of the said per diems. However, sim
ilar disbursements were continued, ignoring the Auditors findings. At the time th
ey first received the ND in 1998, it can be said that there should already have
been a doubt to say the least, on the legality of the said transaction which sho
uld have made management discontinue such payments. But even after the promulgat
ion of the SC decision in the Bitonio case, PEZA continued the payment of the sa
me until year 2006. Indeed, such actuation is incompatible with good faith. Hen
ce, even if the per diems were granted prior to the finality of the Cyril Del Ca
llar v. COA case cited by herein petitioner, PEZA management was already aware t
hat the payment thereof had been declared illegal by the SC in the earlier afore
cited cases.[15]
PEZA now comes to this Court seeking to annul the assailed decision on the follo
wing grounds:
REPUBLIC ACT NO. 7916, AS AMENDED BY REPUBLIC ACT NO. 8748 ALLOWS THE PAYMENT OF
PER DIEMS TO THE MEMBERS OF THE PEZA BOARD OF DIRECTORS.
THE EX-OFFICIO MEMBERS OF THE PEZA BOARD OF DIRECTORS SHOULD NO LONGER BE REQUIR
ED TO REFUND THE PER DIEMS ALREADY RECEIVED BECAUSE THEY WERE OF THE HONEST BELI
EF THAT THEY WERE LEGALLY ENTITLED TO RECEIVE THE SAME.[16]
PEZA argues that contrary to the COAs position, the last paragraph of
Section 11, R.A. No. 7916 authorizing the members of the PEZA Board to receive
per diems still exists because it was never deleted in R.A. No. 8748. It conten
ds that just because the last paragraph of Section 11, R.A. No. 7916 does not ap
pear in Section 1 of R.A. No. 8748 but is merely represented by the characters x
x x does not mean that it has already been deleted. PEZA submits that since ther
e was no repeal by R.A. No. 8748 and neither was the last paragraph of Section 1
1 of R.A. No. 7916 declared void or unconstitutional by this Court, the provisio
n enjoys the presumption of validity and therefore, PEZA cannot be faulted for r
elying on the authority granted by law.
PEZA also insists on its claim of good faith. It emphasizes that the
per diems were granted by PEZA in good faith as it honestly believed that the gr
ant of the same was legal and similarly, the ex officio members of the PEZA Boar
d received the per diems in good faith.
COA, for its part, opposes PEZAs contention that the last paragraph of
Section 11 of R.A. No. 7916 authorizing the grant of per diems to ex officio mem
bers of the PEZA Board was not deleted by its amendatory law, R.A. No. 8748, cit
ing this Courts ruling in Bitonio, Jr. v. Commission on Audit.[17]
COA likewise contends that the deletion of the last paragraphs of the
subject provision merely conformed with the Constitution. It argues that the po
sition of the undersecretaries of the Cabinet as members of the Board is in an e
x officio capacity or part of their principal office and thus, they were already
being paid in their respective Departments. To allow them to receive additiona
l compensation in PEZA would amount to double compensation. COA submits that th
is is precisely the reason why this Court, in several cases, declared unconstitu
tional the payment of additional compensation to ex officio officials.
The Issues
Does the PEZA have legal basis in granting per diems to the ex officio
members of its Board? And if there is no legal basis, was there good faith in
PEZAs grant and the ex officio members receipt of the per diems?
Our Ruling
The Court finds the petition devoid of merit.
The lack of legal basis to grant per diems to ex officio members of the PEZA Boa
rd, including their representatives, has already been settled by no less than th
e Court En Banc in the case of Bitonio, Jr. where we held that the amendatory la
w, R.A. No. 8748, purposely deleted the last paragraph of Section 11 of R.A. No.
7916 that authorized the grant of per diems to PEZA Board members as it was in
conflict with the proscription laid down in the 1987 Constitution. We held in B
itonio, Jr.:
The framers of R.A. No. 7916 must have realized the flaw in the law which is the
reason why the law was later amended by R.A. No. 8748 to cure such defect. In
particular, Section 11 of R.A. No. 7916 was amended to read:
SECTION 11. The Philippine Economic Zone Authority (PEZA) Board. Th
ere is hereby created a body corporate to be known as the Philippine Economic Zo
ne Authority (PEZA) attached to the Department of Trade and Industry. The Board
shall have a director general with the rank of department undersecretary who sh
all be appointed by the President. The director general shall be at least forty
(40) years of age, of proven probity and integrity, and a degree holder in any
of the following fields: economics, business, public administration, law, manage
ment or their equivalent, and with at least ten (10) years relevant working expe
rience preferably in the field of management or public administration.
The director general shall be assisted by three (3) deputy directors
general each for policy and planning, administration and operations, who shall
be appointed by the PEZA Board, upon the recommendation of the director general.
The deputy directors general shall be at least thirty-five (35) years old, wit
h proven probity and integrity and a degree holder in any of the following field
s: economics, business, public administration, law, management or their equivale
nt.
The Board shall be composed of thirteen (13) members as follows: the
Secretary of the Department of Trade and Industry as Chairman, the Director Gen
eral of the Philippine Economic Zone Authority as Vice-chairman, the undersecret
aries of the Department of Finance, the Department of Labor and Employment, the
Department of [the] Interior and Local Government, the Department of Environment
and Natural Resources, the Department of Agriculture, the Department of Public
Works and Highways, the Department of Science and Technology, the Department of
Energy, the Deputy Director General of the National Economic and Development Aut
hority, one (1) representative from the labor sector, and one (1) representative
from the investors/business sector in the ECOZONE. In case of the unavailabili
ty of the Secretary of the Department of Trade and Industry to attend a particul
ar board meeting, the Director General of PEZA shall act as Chairman.
As can be gleaned from above, the members of the Board of Directors was increase
d from 8 to 13, specifying therein that it is the undersecretaries of the differ
ent Departments who should sit as board members of the PEZA. The option of desi
gnating his representative to the Board by the different Cabinet Secretaries was
deleted. Likewise, the last paragraph as to the payment of per diems to the me
mbers of the Board of Directors was also deleted, considering that such stipulat
ion was clearly in conflict with the proscription set by the Constitution.
Prescinding from the above, the petitioner is, indeed, not entitled to receive a
per diem for his attendance at board meetings during his tenure as member of th
e Board of Directors of the PEZA.[18] (Italics in the original.)
PEZAs insistence that there is legal basis in its grant of per diems to
the ex officio members of its Board does not hold water. The constitutional pr
ohibition explained in Civil Liberties Union case still stands and this Court fi
nds no reason to revisit the doctrine laid down therein as said interpretation,
to this Courts mind, is in consonance with what our Constitution provides.
Neither can this Court give credence to PEZAs claim of good faith.
In common usage, the term good faith is ordinarily used to describe that state of
mind denoting honesty of intention, and freedom from knowledge of circumstances w
hich ought to put the holder upon inquiry; an honest intention to abstain from t
aking any unconscientious advantage of another, even through technicalities of l
aw, together with absence of all information, notice, or benefit or belief of fa
cts which render transaction unconscientious.[19]
Definitely, PEZA cannot claim that it was not aware of circumstances pointing to
the possible illegality of the disbursements of per diems to the ex officio mem
bers of the Board. In Civil Liberties Union, this Court clarified the prohibiti
on under Section 13, Article VII of the Constitution and emphasized that a publi
c official holding an ex officio position as provided by law has no right to rec
eive additional compensation for the ex officio position. This Court ruled:
It bears repeating though that in order that such additional duties or functions
may not transgress the prohibition embodied in Section 13, Article VII of the 1
987 Constitution, such additional duties or functions must be required by the pr
imary functions of the official concerned, who is to perform the same in an ex-o
fficio capacity as provided by law, without receiving any additional compensatio
n therefor.
The ex-officio position being actually and in legal contemplation part of the pr
incipal office, it follows that the official concerned has no right to receive a
dditional compensation for his services in the said position. The reason is that
these services are already paid for and covered by the compensation attached to
his principal office. It should be obvious that if, say, the Secretary of Finan
ce attends a meeting of the Monetary Board as an ex-officio member thereof, he i
s actually and in legal contemplation performing the primary function of his pri
ncipal office in defining policy in monetary and banking matters, which come und
er the jurisdiction of his department. For such attendance, therefore, he is not
entitled to collect any extra compensation, whether it be in the form of a per
diem or an honorarium or an allowance, or some other such euphemism. By whatever
name it is designated, such additional compensation is prohibited by the Consti
tution.[20] (Italics in the original; emphasis supplied.)
It bears stressing that the Civil Liberties Union case was promulgated
in 1991, or a decade before the subject disallowed payments of per diems for th
e period starting 2001 were made by PEZA. Thus, even if the Bitonio case was on
ly promulgated in 2004 when part of the disallowed payments have already been ma
de, PEZA should have been guided by the Civil Liberties Union case and acted wit
h caution. It would have been more prudent for PEZA, if it honestly believed th
at there is a clear legal basis for the per diems and there was a chance that th
is Court might rule in their favor while the Bitonio case was pending, to withho
ld payment of the per diem instead of paying them. PEZAs actual knowledge that t
he disbursements are being questioned by virtue of the notices of disallowance i
ssued to them by the COA and knowledge of the pronouncements of the Court in the
Civil Liberties Union case and in other cases[21] where ex officio members in s
everal government agencies were prohibited from receiving additional compensatio
n, militate against its claim of good faith.
WHEREFORE, in light of the foregoing, the present petition is DISMISSE
D. The assailed COA Decision No. 2009-081 dated September 15, 2009 is AFFIRMED
and UPHELD.
No costs.
SO ORDERED.