The Supreme Court addressed whether members of the Philippine International Convention Center, Inc. (PICCI) Board of Directors, who were also Bangko Sentral ng Pilipinas (BSP) officials, were entitled to both Representation and Transportation Allowances (RATA) from BSP and additional RATA from PICCI. The Court ruled that while the PICCI By-Laws limited director compensation to per diems, the directors could keep the RATA they received in good faith, despite the initial disallowance by the Commission on Audit (COA). This decision underscores the importance of adhering to corporate by-laws while recognizing the potential for good faith exceptions in compensation matters.

Double Dipping or Due Diligence? The PICCI Board’s RATA Riddle

This case revolves around the financial benefits received by several individuals serving on the board of the Philippine International Convention Center, Inc. (PICCI). These individuals, who were also officials of the Bangko Sentral ng Pilipinas (BSP), received Representation and Transportation Allowances (RATA) from both BSP and PICCI. The Commission on Audit (COA) disallowed the RATA payments from PICCI, arguing it constituted double compensation prohibited by the Constitution and PICCI’s By-Laws. The petitioners, however, claimed entitlement based on a BSP Monetary Board (MB) resolution and their good-faith belief in the legality of the payments. The central legal question is whether the RATA received by the PICCI directors, who were also BSP officials, was a valid form of compensation or an unconstitutional double payment.

The Commission on Audit (COA) initially disallowed the RATA payments, citing Section 8, Article IX-B of the 1987 Constitution, which prohibits additional, double, or indirect compensation unless specifically authorized by law. The COA also pointed to PICCI’s By-Laws, which limited director compensation to per diems. However, the petitioners argued that Section 30 of the Corporation Code authorized the stockholders (in this case, BSP) to grant compensation to its directors. They also maintained their good faith in receiving the allowances, relying on the BSP Monetary Board resolutions that authorized the RATA payments.

To fully understand the Court’s perspective, it’s crucial to examine the relevant provisions of the Corporation Code and PICCI’s By-Laws. Section 30 of the Corporation Code addresses the compensation of directors, stating:

Sec. 30.  Compensation of Directors. – In the absence of any provision in the by-laws fixing their compensation, the directors shall not receive any compensation, as such directors, except for reasonable per diems; Provided, however, that any such compensation (other than per diems) may be granted to directors by the vote of the stockholders representing at least a majority of the outstanding capital stock at a regular or special stockholders’ meeting.  In no case shall the total yearly compensation of directors, as such directors, exceed ten (10%) percent of the net income before income tax of the corporation during the preceding year.

This provision suggests that while directors generally receive only per diems, stockholders can authorize additional compensation. However, PICCI’s By-Laws provided a more restrictive stance. Section 8 of the Amended By-Laws of PICCI states:

Sec. 8.  Compensation. – Directors, as such, shall not receive any salary for their services but shall receive a per diem of one thousand pesos (P1,000.00) per meeting actually attended; Provided, that the Board of Directors at a regular and special meeting may increase and decrease, as circumstances shall warrant, such per diems to be received.  Nothing herein contained shall be construed to preclude any director from serving the Corporation in any capacity and receiving compensation therefor.

The Court emphasized that the PICCI By-Laws, in line with Section 30 of the Corporation Code, explicitly restricted the scope of director compensation to per diems. The specific mention of per diems implied the exclusion of other forms of compensation, such as RATA, according to the principle of expression unius est exclusio alterius. The Court acknowledged the COA’s argument that receiving RATA from both BSP and PICCI could be construed as double compensation, violating Section 8, Article IX-B of the Constitution. However, the Court distinguished the concept of RATA from a salary, noting that RATA is intended to defray expenses incurred in the performance of duties, not as compensation for services rendered.

Ultimately, the Court invoked the principle of good faith, citing precedents such as Blaquera v. Alcala and De Jesus v. Commission on Audit. These cases established that if individuals receive benefits in good faith, believing they are entitled to them, they should not be required to refund those benefits, even if later disallowed. The Court found that the PICCI directors acted in good faith, relying on the BSP Monetary Board resolutions that authorized the RATA payments. While the Court upheld the disallowance of the RATA payments due to the restrictions in the PICCI By-Laws, it also ruled that the directors were not required to refund the amounts they had already received.

This decision highlights the complexities of compensation for individuals serving on government boards, especially when they hold positions in multiple government entities. It emphasizes the importance of clear and consistent compensation policies, as well as adherence to corporate by-laws. However, it also recognizes the potential for good faith exceptions, particularly when individuals rely on official resolutions or directives in accepting benefits. In effect, what the Court did was strike a balance between strict adherence to legal and corporate governance principles and equitable considerations. It clarified that while the COA’s disallowance was technically correct due to the conflict with PICCI’s By-Laws, requiring the directors to refund the RATA would be unfair given their reliance on the BSP resolutions and their honest belief in the legality of the payments.

FAQs

What was the key issue in this case?	The key issue was whether members of the PICCI Board of Directors, who were also BSP officials, were entitled to RATA from both BSP and PICCI, or if this constituted prohibited double compensation.
What is RATA?	RATA stands for Representation and Transportation Allowance. It is an allowance intended to defray expenses deemed unavoidable in the discharge of office, and paid only to certain officials who, by the nature of their offices, incur representation and transportation expenses.
What did the COA initially decide?	The COA initially disallowed the RATA payments from PICCI, arguing that they constituted double compensation prohibited by the Constitution and PICCI’s By-Laws.
What was PICCI’s By-Law regarding director compensation?	PICCI’s By-Laws stated that directors shall not receive any salary for their services but shall receive a per diem of P1,000.00 per meeting actually attended.
What did the Supreme Court ultimately rule?	The Supreme Court upheld the disallowance of the RATA payments based on PICCI’s By-Laws, but ruled that the directors did not need to refund the amounts they received in good faith.
What does the term ‘good faith’ mean in this context?	In this context, ‘good faith’ refers to the directors’ honest belief that they were legally entitled to the RATA payments, based on the BSP Monetary Board resolutions.
What is the significance of Section 30 of the Corporation Code?	Section 30 of the Corporation Code allows stockholders to grant compensation to directors, even if the by-laws only provide for per diems.
What previous cases influenced the Court’s decision?	The Court was influenced by previous cases such as Blaquera v. Alcala and De Jesus v. Commission on Audit, which established the principle of non-refundability of benefits received in good faith.
Did the Court find that there was double compensation?	The Court clarified that while there was a technical violation of PICCI’s By-Laws, there was no prohibited double compensation since RATA is distinct from salary and intended to cover expenses, not as payment for services.

The Singson v. COA case serves as a reminder of the importance of clear and consistent compensation policies for government officials. While good faith can sometimes mitigate the consequences of improper payments, it is always best to ensure that compensation practices align with both corporate by-laws and constitutional principles. This case also demonstrates how the judiciary navigates the intersection of corporate law, constitutional principles, and equity considerations.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Gabriel C. Singson, et al. vs. Commission on Audit, G.R. No. 159355, August 09, 2010