BRENDA L.

NAZARETH, REGIONAL DIRECTOR, DEPARTMENT OF SCIENCE AND TECHNOLOGY, REGIONAL

OFFICE NO. IX, ZAMBOANGA CITY, petitioner, vs. THE HON. REYNALDO A. VILLAR, HON. JUANITO G.
ESPINO, JR., (COMMISSIONERS OF THE COMMISSION ON AUDIT), and DIR. KHEM M. INOK, respondents.
GR NO. 188635 January 29, 2013 BERSAMIN, J.
Atencia

SUBJECT MATTER:
The Commission on Appointments — Appropriation Laws

DOCTRINE
No money shall be paid out of the Treasury except in pursuance of an appropriation made by law. A violation
of this constitutional edict warrants the disallowance of the payment. However, the refund of the disallowed
payment of a benefit granted by law to a covered person, agency or office of the Government may be barred
by the good faith of the approving official and of the recipient.

LEGAL BASIS
Sec. 25(5), Art. VI, 1987 Constitution. No law shall be passed authorizing any transfer of appropriations;
however, the President, the President of the Senate, the Speaker of the House of Representatives, the Chief
Justice of the Supreme Court, and the heads of Constitutional Commissions may, by law, be authorized to
augment any item in the general appropriations law for their respective offices from savings in other items of
their respective appropriations.

Sec. 29(1), Art. VI, 1987 Constitution. No money shall be paid out of the Treasury except in pursuance of an
appropriation made by law.

ACTION BEFORE THE SUPREME COURT:

Petition for Certiorari

Petitioner: Brenda Nazareth

Respondent(s): Hon. Reynaldo Villar et al.

SUMMARY:
RA 8439 (Magna Carta) was enacted in 1997, which conferred additional benefits to DOST officials and
employees. Petitioner Nazareth released the benefits for Calendar Year 1998, 1999, and 2000 without
appropriation from the General Appropriations Act (GAA). COA issued disallowances, which disproved the
payment of the benefits. DOST Sec. Dr. Uriarte Jr. requested the Office of the President to authorize the use of
DOST savings to pay for the Magna Carta benefits in CY 1998, 1999, and 2000, which was approved by
Executive Secretary Zamora. Nazareth lodged an appeal against the COA to lift the disallowances covering CY
1998 to CY 2001 based on the memo approved by Zamora.

The Court dismissed the petition for lack of merit. COA acted correctly based on Sec. 29(1), Art. VI of the
1987 Constitution, and that without appropriations, the benefits are just paper benefits. While Sec. 25(5), Art.
VI allows the President to augment any item in the GAA, this is subject to exceptions: (1) there must be
savings from the authorized appropriation of the agency, and (2) there must be an existing item, project,
activity, purpose or object of expenditure with an appropriation to which the savings would be transferred for
augmentation purposes only. The memo by Executive Secretary Zamora (who was acting by authority of the
President) approved only CY 1998, 1999, and 2000. This does not include CY 2001. However, the Court ruled
that released benefits do not need to be returned by the employees and officials of DOST since it was
received in good faith.

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ANTECEDENT FACTS:
● December 22, 1997: Congress enacted RA 8439 (Magna Carta for Scientists, Engineers, Researchers,
and other Science and Technology Personnel in the Government, or Magna Carta for short) to address
the policy of the State to provide a program for human resources development in science and
technology in order to achieve and maintain the reservoir of talent and manpower that would sustain
the drive for total science and technology mastery.
○ Sec. 7 of RA 8439 grants the following additional benefits (Magna Carta benefits) to the
covered officials and employees of the DOST. Funds shall be appropriated from GAA of the
year.
▪ Benefits included under Sec. 7 include hazard pay, laundry allowance, free medical
examination, honorarium, share in royalties, housing and quarter allowance,
longevity pay, and subsistence allowance equivalent to (3) meals a day.
● DOST IX RD Brenda Nazareth released the Magna Carta-covered officials and employees covering CY
1998 despite the absence of GAA appropriation.
● Following the post-audit by COA, several notices of disallowance (ND) disapproving payment of
Magna Carta benefits were issued.
● The President vetoed the use of savings for GAA.
● April 3, 2000: Due to the disallowance by COA, DOST Sec. Dr. Filemon Uriarte Jr. requested the Office
of the President for authority to utilize DOST savings to pay the Magna Carta benefits for CY 1998 and
CY 1999.
○ In his memo, DOST Sec. Uriarte Jr. stated that DOST had paid for the Magna Carta benefits in
CY 1998 and 1999 from the year’s savings as authorized by the GAA. However, since the
2000 GA has no provision for the use of savings, then the Department cannot continue the
payment of the Magna Carta benefits from its 2000 savings.
● April 12, 2000: Executive Secretary Ronaldo Zamora approved the memo of DOST Sec. Uriarte Jr. via a
Memorandum (who was acting by authority of the President) for CY 1998, 1999, and 2000.
● July 28, 2003: Nazareth lodged an appeal with COA lifting the disallowances of the Magna Carta
Benefits for CY 1998 to 2001, which was anchored by the April 12, 2000 Memorandum of Executive
Secretary Zamora.
○ Nazareth made the following claims:
▪ That DOST had “considered the subsistence and laundry allowance as falling into the
category 'other personnel benefits authorized by law,';
▪ That the Memo of Exec. Sec. Zamora ratified the payment of the Magna Carta
benefits out of the savings for CY 1998 and CY 1999 and allowed the use of the
savings for CY 2000, and
▪ That the Memo operated as a continuing endorsement of the use of savings to cover
the Magna Carta benefits in succeeding calendar years.
○ September 15, 2005: COA denied the appeal.
● Hence, this petition for Certiorari.

ISSUE/S, HOLDING, AND RATIO:

1. WON COA committed a grave abuse of discretion for affirming the disallowance of the Magna Carta
benefits for CY 2001? — NO

WON COA committed a grave abuse of discretion for affirming the disallowance of the Magna Carta
benefits for CY 2001? — NO
The April 12, 2000 Memorandum was not a blanket authority from the Office of the President to pay
the benefits out of the DOST’s savings.

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 ● Although the Memorandum was silent as to the period covered by the request for authority to
use the DOST's savings, it was clear just the same that the Memorandum encompassed only CY
1998, CY 1999 and CY 2000.
● The text of the Memorandum was also bereft of any indication that the authorization was to be
indefinitely extended to any calendar year beyond CY 2000.

Article VI Section 29 (1) of the 1987 Constitution firmly declares that: “No money shall be paid out of
the Treasury except in pursuance of an appropriation made by law.”
● This constitutional edict requires that the GAA be purposeful, deliberate, and precise in its
provisions and stipulations.
● The funding for the Magna Carta benefits would not materialize as a matter of course simply by
fiat of R.A. No. 8439, but must initially be proposed by the officials of the DOST as the concerned
agency for submission to and consideration by Congress. That process is what complies with the
constitutional edict.
● It is worthy to note that the DOST itself acknowledged the absolute need for the appropriation in
the GAA. Otherwise, Secretary Uriarte, Jr. would not have needed to request the OP for the
express authority to use the savings to pay the Magna Carta benefits.
● In the funding of current activities, projects, and programs, the general rule should still be that
the budgetary amount contained in the appropriations bill is the extent Congress will determine
as sufficient for the budgetary allocation for the proponent agency.
○ Exception: President, the President of the Senate, x x x are authorized to transfer
appropriations to augment any item in the GAA for their respective offices from savings
(Section 25(5), 14 Article VI).

The claim of the petitioner that the payment of the 2001 Magna Carta benefits was authorized by the
OP through the 12 April 2000 Memorandum of Executive Secretary Zamora was outrightly bereft of
legal basis.
● The authority granted to the President was subject to two essential requisites in order that a
transfer of appropriation from the agency's savings would be validly effected—
○ First: there must be savings from the authorized appropriation of the agency.
○ Second: there must be an existing item, project, activity, purpose or object of
expenditure with an appropriation to which the savings would be transferred for
augmentation purposes only.
● However, what was approved was only CY 1998, 1999, and 2000.
● The proposition of the petitioner that savings should be presumed from the mere transfer of
funds is incompatible with the doctrine in Demetria v. Alba.
○ Sec. 44(1) of PD 1177 overextends the privilege granted. It empowers the President to
indiscriminately transfer funds from one department to another.

Nonetheless, the Court opines that the DOST officials who caused the payment of the Magna Carta
benefits to the covered officials and employees acted in good faith in the honest belief that there was a
firm legal basis for the payment of the benefits.
● The Court declares and holds that the disallowed benefits received in good faith need not be
reimbursed to the Government, as maintained in De Jesus v. Commission on Audit.

DISPOSITIVE
WHEREFORE, the Court DISMISSES the petition for certiorari for lack of merit. The covered officials and
employees of the Department of Science and Technology who received the Magna Carta benefits for calendar
year 2001 are not required to refund the disallowed benefits received.

C2026 | LAW 121 | PROF. MOLO