EN BANC

[G.R. No. 130685. March 21, 2000.]

FELIX UY, ROMAN CAGATIN, JAMES ENGUITO, EMMIE

HURBODA FRANCISCO OLAER, LEONCIO BUSTAMANTE,
FRANCISCO RANARIO, JOE OSIN, JORGE PEDIDA, JOSE
BATISTING, LUCIO BATISTING, SEGUNDINO BOLOTAOLO,
HEIRS OF DEMOCRITO RANARIO Represented by FRANCISCO
RANARIO, HEIRS OF LOPE NAKILA, BONIFACIO BUSCAGAN,
MARIANO CAPA, JUAN MORALES, GODOFREDO RACHO,
ELIZABETH AMARILLO, BENIGNO ACAMPADO, PEDRO
AREGLO, SERVITO BATAO, ELEODORO BATISTING,
ROGELIO DE CLARO, SILFORO LIBANDO, HILARIO
MARINAS, ALEJANDRO NOJA, HEIRS OF PEDRITA OLAER
Represented by surviving spouse Francisco Olaer, HEIRS OF
SILFORO MORALES Represented by EVANGELINA MORALES,
ANTONIO RETUERTO, STELLA FILIPINAS, TEODOLO
FILIPINAS, HEIRS OF MANSUETO NATAD Represented by
NATIVIDAD NATAD, AMADO MAGSIGAY, TIMOTEO
GOLORAN, GREGORIO SEQUILLA, HEIRS OF ANTONIO
CANOY, APOLINARIO PLAZA, JESUS GUDELASAO, HEIRS OF
APOLONIO ANTIPASADO, TERESO CAGADAS, LUCIO
BARONG, LEONARDO LAPIZ, FRANCISCO PAIGAN, ARTURO
ESCOBIDO, BONIFACIO BUNOL, HEIRS OF FRANCISCO
PATAYAN Represented by NORMA PATAYAN, SALVADOR
CENA, BASILIO PAJE, DOMINADOR DAGONDON, FAUSTINO
LASTIMADO, EMPERATRIZ MORAN, EUGENIO MIRA,
ANGELO PLAZA, DEMETRIA ABAY-ABAY, ROLANDO
GASCON, DOROTEO GASCON, RIZALINO CUBILLAS, HEIRS
OF FAUSTINO MAGLAHUS Represented by LUISA MAGLAHUS,
and JOEL PLAZA, petitioners, vs. COMMISSION ON AUDIT,
Represented by its Chairman, CELSO D. GANGAN and by its
Commissioners, SOFRONIO B. URSAL and RAUL C. FLORES,
respondents.

Roman Cagatin for petitioners.

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 The Solicitor General for respondents.

SYNOPSIS

The issue is whether the Commission on Audit, in the exercise of its power to
audit, can disallow the payment of back wages of illegally dismissed employees by
the Provincial Government of Agusan del Sur which has been decreed pursuant to a
final decision of the Civil Service Commission. HCDaAS

The COA is bereft of power to disallow the payment of petitioner's back

wages. Relying solely on the decision of the Merit Systems Protection Board
(MSPB), the COA concluded that bad faith attended the dismissal of petitioners. The
MSPB, however, never made a categorical finding of fact that Governor Paredes
acted in bad faith and hence, personally liable for the payment of petitioners'
backwages. Then also, Governor Paredes was never made a party to nor served a
notice of the proceedings before the COA. It would be unfair to hold him personally
liable for the claims of petitioners without giving him an opportunity to be heard and
present evidence in his defense. Further, the MSPB decision is already final and
executory; and the ruling of the COA radically altered the MSPB decision holding the
provincial government liable to petitioners. The COA decision affected both the
procedural and the substantive rights of the parties.

SYLLABUS

1. CONSTITUTIONAL LAW; COMMISSION ON AUDIT; NO POWER

TO DISALLOW PAYMENT OF BACKWAGES OF ILLEGALLY DISMISSED
PROVINCIAL EMPLOYEES. — The COA is bereft of power to disallow payment
of petitioners' backwages after finding them illegally dismissed by the Provincial
Government of Agusan del Sur. The COA relied solely on the MSPB decision
although the MSPB never made a categorical finding of fact that former Governor
Paredes acted in bad faith and hence, is personally liable for the payment of
petitioners' back wages. Familiar learning is our ruling that bad faith cannot be
presumed and he who alleges bad faith has the onus of proving it. In the case at bar,
the decision of the MSPB by itself does not meet the quantum of proof necessary to
overcome the presumption of good faith.

2. ID.; ID.; POWER TO DECIDE ADMINISTRATIVE CASES

INVOLVING EXPENDITURES OF PUBLIC FUNDS; CANNOT VIOLATE
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 FUNDAMENTAL REQUIREMENTS OF DUE PROCESS. — The case at bar brings
to the fore the parameters of the power of the respondent COA to decide
administrative cases involving expenditure of public funds. Undoubtedly, the exercise
of this power involves the quasi-judicial aspect of government audit. As statutorily
envisioned, this pertains to the "examination, audit, and settlement of all debts and
claims of any sort due from or owing to the Government or any of its subdivisions,
agencies and instrumentalities." The process of government audit is adjudicative in
nature. The decisions of COA presuppose an adjudicatory process involving the
determination and resolution of opposing claims. Its work as adjudicator of money
claims for or against the government means the exercise of judicial discretion. It
includes the investigation, weighing of evidence, and resolving whether items should
or should not be included, or as applied to claim, whether it should be allowed or
disallowed in whole or in part. Its conclusions are not mere opinions but are decisions
which may be elevated to the Supreme Court on certiorari by the aggrieved party.
Accordingly, the fundamental requirements of procedural due process cannot be
violated in proceedings before the COA. In the case at bar, former Governor Paredes
was never made a party to nor served a notice of the proceedings before the COA.
While administrative agencies exercising quasi-judicial powers are not hide bound by
technical procedures, nonetheless, they are not free to disregard the basic demands of
due process. Notice to enable the other party to be heard and to present evidence is
not a mere technicality or a trivial matter in any administrative proceedings but an
indispensable ingredient of due process. It would be unfair for COA to hold former
Governor Paredes personally liable for the claims of petitioners amounting to millions
of pesos without giving him an opportunity to be heard and present evidence in his
defense. Our rulings holding that public officials are personally liable for damages
arising from illegal acts done in bad faith are premised on said officials having been
sued both in their official and personal capacities.

3. ID.; ID.; ID.; IMPEDIMENT THEREOF; WHEN RULING AMENDED

AN ALREADY FINAL DECISION. — There is a further impediment in the exercise
of the audit power of the respondent COA. The MSPB decision became final and
executory when the Provincial Government of Agusan del Sur failed to appeal within
the reglementary period. To be sure, the decision has already been partially executed
as the Acting Provincial Treasurer had paid petitioners some of their backwages.
Again, our undeviating jurisprudence is that final judgments may no longer be
reviewed or in any way modified directly or indirectly by a higher court, not even by
the Supreme Court, much less by any other official, branch or department of
Government. Administrative decisions must end sometime as public policy demands
that finality be written on controversies. In the case at bar, the action taken by COA
in disallowing the further payment by the Provincial Government of Agusan del Sur
of backwages due the petitioners amended the final decision of the MSPB. The
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 jurisdiction of the MSPB to render said decision is unquestionable. This decision
cannot be categorized as void. Thus, we cannot allow the COA to set it aside in the
exercise of its broad powers of audit. The audit authority of COA is intended to
prevent irregular, unnecessary, excessive, extravagant or unconscionable
expenditures, or uses of government funds and properties. Payment of backwages to
illegally dismissed government employees can hardly be described as irregular,
unnecessary, excessive, extravagant or unconscionable. This is the reason why the
Acting Provincial Treasurer, despite the pendency of his query with the COA,
proceeded to release government funds in partial payment of the claims of petitioners.
It cannot likewise be said that the MSPB gravely abused its discretion in failing to
hold former Governor Paredes personally liable. In the first place, it is not clear
whether the petitioners sued former Governor Paredes in his personal capacity.
Indeed, they did not appeal the ruling of the MSPB which did not hold Governor
Paredes personally liable for the payment of their back salaries. Moreover,
jurisprudence exists that under exceptional circumstances public officials who acted
in bad faith in the performance of their official duties were not held personally liable.
We are not aware of our ruling in Aguinaldo v. Sandiganbayan, that the conclusive
effect of the finality of the COA'S decision on the executive branch of the government
relates solely to the administrative aspect of the matter. However, in the case at bar,
the disallowance of the payment of backwages radically alters the MSPB decision
which held the provincial government, not the provincial governor, personally liable.
The COA decision affects not only the procedural, but more importantly the
substantive rights of the parties.

4. ID.; DOCTRINE THAT ESTOPPEL WILL NOT LIE AGAINST THE

STATE; EXCEPTION; INTEREST OF SOCIAL JUSTICE. — We subscribe to the
time-honored doctrine that estoppel will not lie against the State. In the case of CIR v.
CA, et al., however, we held that "admittedly the government is not estopped from
collecting taxes legally due because of mistakes or errors of its agents. But like other
principles of law, this admits of exceptions in the interest of justice and fair play, as
where injustice will result to the taxpayer." In the case at bar, a stringent application
of the rule exempting the state from the equitable principle of estoppel will prejudice
petitioners who are lowly employees of government. Petitioners' sufferings started
way back in 1988 when they were unceremoniously dismissed from the service. It
took five years for the MSPB to decide in their favor. Still, they were not reinstated
until the following year, and this only after several motions filed and orders issued to
compel the concerned public officials to reinstate them. Then again, despite an Order
issued as early as April 19, 1993 by the MSPB, the provincial government was able to
pay petitioners, and even only partially at that, a good two and a half years after or on
December 12, 1995. Now, after more than a decade, respondent COA holds that
petitioners should run after Governor Paredes in his personal capacity to collect their
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 claims. Worse, petitioners stand in danger of being made to reimburse what has been
paid to them. Under the policy of social justice, the law bends over backward to
accommodate the interests of the working class on the humane justification that those
with less privilege in life should have more in law. Rightly, we have stressed that
social justice legislation, to be truly meaningful and rewarding to our workers, must
not be hampered in its application by long-winded arbitration and litigation. Rights
must be asserted and benefits received with the least inconvenience. And the
obligation to afford protection to labor is incumbent not only on the legislative and
executive branches but also on the judiciary to translate this pledge into a living
reality. Social justice would be a meaningless term if an element of rigidity would be
affixed to the procedural precepts. Flexibility should not be ruled out. Precisely, what
is sought to be accomplished by such a fundamental principle expressly so declared
by the Constitution is the effectiveness of the community's effort to assist the
economically underprivileged. For under existing conditions, without such succor and
support, they might not, unaided, be able to secure justice for themselves. To make
them suffer, even inadvertently, from the effect of a judicial ruling, which perhaps
they could not have anticipated when such deplorable result could be avoided, would
be to disregard what the social justice concept stands for. Be that as it may, the
Provincial Government of Agusan del Sur is not without remedy against Governor
Ceferino S. Paredes, Jr., if he indeed acted in bad faith. Subject to the usual defenses,
the proper suit may be filed to recover whatever damages may have been suffered by
the provincial government. IDEScC

DECISION

PUNO, J : p

Petitioners were among the more than sixty permanent employees of the
Provincial Engineering Office, Province of Agusan del Sur, who were dismissed from
the service by then Governor Ceferino S. Paredes, Jr. when the latter assumed office,
allegedly to scale down the operations of the said office. 1(1) On July 11, 1988, a
petition for reinstatement was filed by petitioners before the Merit Systems Protection
Board (MSPB), docketed as MSPB Case No. 91-1739, alleging that Governor Paredes
was motivated by political vengeance when he dismissed them and hired new
employees to replace them. It appears that during the pendency of the petition for
reinstatement, Governor Paredes issued Memorandum Order No. 3-A dated March
20, 1989 providing for the hiring of casual employees to replace the dismissed
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 employees, allegedly due to exigency of service. cdphil

The MSPB required Governor Paredes to comment on the petition. On

February 1, 1989, the governor specifically denied the allegations of petitioners that
their dismissal was illegal. Subsequently, an amended petition and an amended
answer were filled by the parties. Hearings were conducted by the Civil Service
Regional Office No. X, Cagayan de Oro City, where both parties were represented by
their respective counsels. The last hearing was held on June 29, 1990, after which the
parties submitted their respective memorandum together with their evidence.

On January 29, 1993, the MSPB rendered a decision holding that the reduction
in work force was not done in accordance with civil service rules and regulations, and
ordering the reinstatement of petitioners. 2(2) The pertinent portions of said decision
state, viz:

"The focal point of controversy is whether or not Administrative Order

No. 88-01 streamlining the personnel complement of the PEO is in accordance
with Civil Service Laws, Rules and Regulations.

The law applicable in the case at bar, which is hereby quoted as follows
are Section 29 of E.O. 292 and Section 14 of the Rules on Personnel Actions
and Policies, thus:

'SECTION 29. Reduction in Force. — Whenever it

becomes necessary for lack of work or funds or due to change in the
scope or nature of an agency's program or as a result of reorganization,
to reduce the staff of any department or agency, those in the same group
or class of positions in one or more agencies within the particular
department or agency wherein the reduction is to be effected, shall be
reasonably compared in terms of relative fitness, efficiency and length
of service, and those found to be least qualified for the remaining
position shall be laid off. (italics supplied).

SECTION 14. The names of permanent employees laid off

shall be entered in a reemployment list for the appropriate occupation.
The list, arranged in the order of the employees' retention credit, shall be
kept by the Department or agency where the reduction took place, and a
copy thereof shall be furnished the Commission. The Commission shall
certify for purposes of reemployment from such list as the opportunity
for reemployment arises.'

It has been conceded that reduction in force due to lack of funds is a

valid ground for terminating the services of an employee. But this, of course, is

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 subject to some limitations.

While the Governor of the Province of Agusan del Sur may take
measures to retrench or reduce the work force yet this must be done in
accordance with law and rules. As the plantilla schedule for the period of
January to December 1988 would show, there are 106 employees in the
provincial Engineering Office and out of these, 53 employees were terminated.
There is no showing that these employees were compared in terms of relative
fitness, efficiency and length of service. Thus, there is no basis in removing
these employees except for the reason of lack of funds.

The manifest repugnance of the action taken by Governor Paredes, Jr.

was further exacerbated by the issuance of the highly questionable
Memorandum Order No. 3-A s. 1989 dated March 20, 1989. Said memorandum
provides for the hiring of casuals under the facade of exigency of the public
service. It was also a blatant violation of Section 14 of the Rules on Personnel
Actions and Policies which succinctly states that the names of permanent
employees laid off shall be entered in a reemployment list for the appropriate
occupation. The list, arranged in the order of the employees' retention credit,
shall be kept by the Department or agency where the reduction took place and
copy thereof shall be furnished the Commission. They shall certify for purposes
of reemployment from such list as the opportunity for reemployment arises.

xxx xxx xxx."

Pursuant to a Motion for Clarification filed by petitioners, the MSPB issued an

Order dated April 19, 1993 which directed the Provincial Government of Agusan del
Sur to pay petitioners their back salaries and other money benefits for the period that
they had been out of the service until their reinstatement. 3(3) In another motion dated
May 24, 1993, petitioners sought an order directing the Provincial Government of
Agusan del Sur to reinstate them and declare as invalid the appointments of those who
replaced them. On June 24, 1993, the Provincial Governor of Agusan del Sur was
ordered to reinstate the dismissed employees. 4(4) The Governor continued to refuse
to implement the order to reinstate. Another motion was filed by petitioners and
hence, an Order was issued by the MSPB on October 8, 1993, directing the Governor
to show cause why he should not be declared in contempt. The matter was thereafter
brought before the Civil Service Commission (CSC) which issued an Order dated
December 14, 1993 directing the Governor to reinstate the employees with the caveat
that should he fail to do so, the CSC would be constrained to initiate contempt
proceedings against him and other responsible officials. 5(5) As per its Resolution
No. 94-1567 dated March 21, 1994, the CSC actually initiated indirect contempt
proceedings against the Provincial Governor who was by then Democrito Plaza. 6(6)
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 This prompted Governor Plaza to comply, and herein petitioners were finally
reinstated to their former positions. cdll

The difficulties of petitioners did not end, for on July 9, 1994, the Provincial
Administrator, for and in behalf of Governor Plaza, wrote a letter 7(7) to respondent
COA through the Provincial Auditor, inquiring on whether or not:

"1. The MSPB Civil Service Commission decision directing the

incumbent Provincial Governor, Agusan del Sur to pay back salaries and other
benefits of the reinstated sixty one (61) PEO employees, illegally dismissed by
the former Provincial Governor Ceferino S. Paredes Jr., is final and executory;

2. The Commission on Audit is the only proper authority to

determine disbursement of such is in order;

3. The former Provincial Governor Ceferino S. Paredes, Jr., who

perpetrated the illegal act of dismissing the 61 PEO employees, would be
personally liable for payment of back salaries and other benefits."

In the meantime, the Provincial Treasurer of Agusan del Sur made a partial
payment to the reinstated employees on December 12, 1995, representing back
salaries in the amount of P2,291,423.34. 8(8)

On July 2, 1996, respondent COA rendered its Decision No. 96-351 9(9)
holding as follows:

"As regards the first issue, suffice it to state that the order of payment of
the back salaries and other benefits due the petitioners has become final and
executory there being no appeal filed by the Provincial Government of Agusan
del Sur within the reglementary period.

Anent the issue on jurisdiction, the Supreme Court had occasion to rule
in the case of Department of Agriculture vs. National Labor Relations
Commission . . ., thus:

'Pursuant, however to C.A. No. 327, as amended by PD No.

1445, the money claim should first be brought to the Commission on
Audit.'

The focal point of controversy in the case at bar is the issue as to

whether or not subject claim for back salaries and other monetary benefits may
be allowed in audit.

As a general proposition, a public official is not entitled to any

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 compensation if he has not rendered any service, and the justification for the
payment of salary during the period of suspension is that the suspension was
unjustified or that the official was innocent . . . .

The Civil Service Commission, in Resolution No. 91-1739 dated

January 29, 1993 ruled that there was illegal termination due to failure to
comply with the provisions of Section 29 of Executive Order No. 292. The said
Section 29, supra, provides that in case of reduction of force, those of the same
group of positions shall be reasonably compared in terms of relative fitness,
efficiency and length of service. As a consequence of the illegal termination of
herein claimants, the Civil Service Commission ordered their reinstatement. It is
a settled rule that when a government official has been illegally suspended or
dismissed, and his reinstatement had been ordered, for all intents and purposes,
he is considered as not having left his office, so that he is entitled to all the
rights and privileges that accrue to him by virtue of the office that he held . . . .

Premises considered, This Commission sees no further legal impediment

to the payment of the claims of Ms. Emmie Hurboda et al., of the Provincial
Engineering Office, Province of Agusan del Sur, for back salaries and other
monetary benefits in the total amount of P3,322,896.06 which has become the
personal liability of former Governor Paredes, it appearing that the illegal
dismissal was done in bad faith as clearly shown in the herein records."

As a result, the Provincial Government of Agusan del Sur, through its Acting
Provincial Treasurer, refused to release petitioners' remaining back salaries and other
monetary benefits. A motion for reconsideration filed by petitioners was denied by
respondent COA in its Decision No. 97-497 dated August 28, 1997. 10(10)

In this special civil action for certiorari, petitioners raise the following
assignment of errors: LexLib

"(A) The Honorable Commission on Audit committed grave abuse of

discretion tantamount to lack of jurisdiction when it promulgated Decision No.
97-497 on August 28, 1997 denying their motion for reconsideration and
affirming its Decision No. 96-351, dated July 2, 1996 by ruling that payment of
their back salaries and other money benefits became the personal liability of
former Governor Ceferino Paredes Jr. and not of the Provincial Government of
Agusan del Sur, after the Merit Systems Protection Board and the Civil Service
Commission declared its decisions final and executory;

(B) The Honorable Commission on Audit has no appellate authority to

revise, amend and modify the final and partially executed decisions/orders of
the Merit Systems Protection Board and the Civil Service Commission, being

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 the same constitutional commission and co-equal with each other;

(C) The decisions of the Merit Systems Protection Board and the Civil
Service Commission have already been partially executed by the local
government unit of the Province of Agusan del Sur by reinstating petitioners to
their former positions in 1993 and partially paying their back wages in the
amount of Two Million Two Hundred Ninety One Four Hundred Twenty Three
and Thirty Four (P2,291,423.34) Pesos on December 12, 1995; and

(D) The jurisprudence cited by public respondent in the case of

Dumlao vs. CA, 114 SCRA 251; Salcedo vs. CA, 81 SCRA 408; and Correa vs.
CFI of Bulacan, 92 SCRA 312 are not applicable in this case."

The hinge issue is whether respondent COA, in the exercise of its power to
audit, can disallow the payment of back wages of illegally dismissed employees by
the Provincial Government of Agusan del Sur which has been decreed pursuant to a
final decision of the Civil Service Commission.

We hold that respondent COA is bereft of power to disallow the payment of

petitioners' back wages.

FIRST, The ruling of the respondent COA is based on its finding that bad faith
attended the dismissal of petitioners. In arriving at this conclusion, respondent COA
relied solely on the MSPB decision of January 29, 1993 holding that the dismissal
was illegal because first, it was made in violation of Section 29 of EO 292 and
Section 14 of the Rules on Personnel Action and Policies, and second, new casual
employees were hired under the guise of exigency of the public service. A careful
perusal of said Decision will disclose that the MSPB never made a categorical
finding of fact that former Governor Paredes acted in bad faith and hence, is
personally liable for the payment of petitioners' back wages. Indeed, the MSPB even
found that there was lack of funds which would have justified the reduction in the
workforce were it not for the procedural infirmities in its implementation. If the
MSPB found bad faith on the part of Governor Paredes it would have categorically
decreed his personal liability for the illegal dismissal of the petitioners. To be sure,
even the petitioners did not proceed from the theory that their dismissal is the
personal liability of Governor Paredes. Familiar learning is our ruling that bad faith
cannot be presumed and he who alleges bad faith has the onus of proving it. 11(11) In
the case at bar, the decision of the MSPB by itself does not meet the quantum of proof
necessary to overcome the presumption of good faith.

SECOND. The case at bar brings to the fore the parameters of the power of the
respondent COA to decide administrative cases involving expenditure of public
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 funds. 12(12) Undoubtedly, the exercise of this power involves the quasi-judicial
aspect of government audit. As statutorily envisioned, this pertains to the
"examination, audit, and settlement of all debts and claims of any sort due from or
owing to the Government or any of its subdivisions, agencies and instrumentalities".
13(13) The process of government audit is adjudicative in nature. The decisions of
COA presuppose an adjudicatory process involving the determination and resolution
of opposing claims. Its work as adjudicator of money claims for or against the
government means the exercise of judicial discretion. It includes the investigation,
weighing of evidence, and resolving whether items should or should not be included,
or as applied to claim, whether it should be allowed or disallowed in whole or in part.
Its conclusions are not mere opinions but are decisions which may be elevated to the
Supreme Court on certiorari by the aggrieved party. 14(14)

Accordingly, the fundamental requirements of procedural due process cannot

be violated in proceedings before the COA. In the case at bar, former Governor
Paredes was never made a party to nor served a notice of the proceedings before the
COA. While administrative agencies exercising quasi-judicial powers are not hide
bound by technical procedures, nonetheless, they are not free to disregard the basic
demands of due process. 15(15) Notice to enable the other party to be heard and to
present evidence is not a mere technicality or a trivial matter in any administrative
proceedings but an indispensable ingredient of due process. 16(16) It would be unfair
for COA to hold former Governor Paredes personally liable for the claims of
petitioners amounting to millions of pesos without giving him an opportunity to be
heard and present evidence in his defense. Our rulings holding that public officials are
personally liable for damages arising from illegal acts done in bad faith are premised
on said officials having been sued both in their official and personal capacities.
17(17)

THIRD. There is a further impediment in the exercise of the audit power of the
respondent COA. The MSPB decision of January 29, 1993 became final and
executory when the Provincial Government of Agusan del Sur failed to appeal within
the reglementary period. To be sure, the decision has already been partially executed
as the Acting Provincial Treasurer had paid petitioners some of their backwages.
Again, our undeviating jurisprudence is that final judgments may no longer be
reviewed or in any way modified directly or indirectly by a higher court, not even by
the Supreme Court, much less by any other official, branch or department of
Government. 18(18) Administrative decisions must end sometime as public policy
demands that finality be written on controversies. 19(19) In the case at bar, the action
taken by COA in disallowing the further payment by the Provincial Government of
Agusan del Sur of backwages due the petitioners amended the final decision of the
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 MSPB. The jurisdiction of the MSPB to render said decision is unquestionable. This
decision cannot be categorized as void. Thus, we cannot allow the COA to set it aside
in the exercise of its broad powers of audit. The audit authority of COA is intended to
prevent irregular, unnecessary, excessive, extravagant or unconscionable
expenditures, or uses of government funds and properties. 20(20) Payment of
backwages to illegally dismissed government employees can hardly be described as
irregular, unnecessary, excessive, extravagant or unconscionable. This is the reason
why the Acting Provincial Treasurer, despite the pendency of his query with the
COA, proceeded to release government funds in partial payment of the claims of
petitioners. llcd

It cannot likewise be said that the MSPB gravely abused its discretion in
failing to hold former Governor Paredes personally liable. In the first place, it is not
clear whether the petitioners sued former Governor Paredes in his personal capacity.
Indeed, they did not appeal the ruling of the MSPB which did not hold Governor
Paredes personally liable for the payment of their back salaries. Moreover,
jurisprudence exists that under exceptional circumstances public officials who acted
in bad faith in the performance of their official duties were not held personally liable.
21(21)

We are not unaware of our ruling in Aguinaldo v. Sandiganbayan, 22(22) that

the conclusive effect of the finality of the COA's decision on the executive branch of
the government relates solely to the administrative aspect of the matter. However, in
the case at bar, the disallowance of the payment of backwages radically alters the
MSPB decision which held the provincial government, not the provincial governor,
personally liable. The COA decision affects not only the procedural, but more
importantly the substantive rights of the parties.

FOURTH. We subscribe to the time-honored doctrine that estoppel will not lie
against the State. In the case of CIR v. CA, et al., 23(23) however, we held that
"admittedly the government is not estopped from collecting taxes legally due because
of mistakes or errors of its agents. But like other principles of law, this admits of
exceptions in the interest of justice and fair play, as where injustice will result to the
taxpayer." In the case at bar, a stringent application of the rule exempting the state
from the equitable principle of estoppel will prejudice petitioners who are lowly
employees of government.

Petitioners' sufferings started way back in 1988 when they were

unceremoniously dismissed from the service. It took five years for the MSPB to
decide in their favor. Still, they were not reinstated until the following year, and this
only after several motions filed and orders issued to compel the concerned public
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 officials to reinstate them. Then again, despite an Order issued as early as April 19,
1993 by the MSPB, the provincial government was able to pay petitioners, and even
only partially at that, a good two and a half years after or on December 12, 1995.
Now, after more than a decade, respondent COA holds that petitioners should run
after Governor Paredes in his personal capacity to collect their claims. Worse,
petitioners stand in danger of being made to reimburse what has been paid to them.
Under the policy of social justice, the law bends over backward to accommodate the
interests of the working class on the humane justification that those with less privilege
in life should have more in law. 24(24) Rightly, we have stressed that social justice
legislation, to be truly meaningful and rewarding to our workers, must not be
hampered in its application by long-winded arbitration and litigation. Rights must be
asserted and benefits received with the least inconvenience. 25(25) And the obligation
to afford protection to labor is incumbent not only on the legislative and executive
branches but also on the judiciary to translate this pledge into a living reality. 26(26)
Social justice would be a meaningless term if an element of rigidity would be affixed
to the procedural precepts. Flexibility should not be ruled out. Precisely, what is
sought to be accomplished by such a fundamental principle expressly so declared by
the Constitution is the effectiveness of the community's effort to assist the
economically underprivileged. For under existing conditions, without such succor and
support, they might not, unaided, be able to secure justice for themselves. To make
them suffer, even inadvertently, from the effect of a judicial ruling, which perhaps
they could not have anticipated when such deplorable result could be avoided, would
be to disregard what the social justice concept stands for. 27(27)

Be that as it may, the Provincial Government of Agusan del Sur is not without
remedy against Governor Ceferino S. Paredes, Jr., if he indeed acted in bad faith.
Subject to the usual defenses, the proper suit may be filed to recover whatever
damages may have been suffered by the provincial government.

WHEREFORE, the Orders of the respondent Commission on Audit dated July

2, 1996 and August 28, 1997 are SET ASIDE.

SO ORDERED.

Davide, Jr., C.J., Bellosillo, Melo, Kapunan, Mendoza, Panganiban,

Quisumbing, Purisima, Pardo, Buena, Gonzaga-Reyes, Ynares-Santiago and De
Leon, Jr., JJ., concur.

Vitug, J., concurs in the result.

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