Abella v. Commission on Audit Proper, G.R. No. 238940, [April 19, 2022]

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Abella v. Commission on Audit Proper

 G.R. No. 238940, [April 19, 2022]

EN BANC, LOPEZ, M.V

 

Administrative Law; Disallowances by COA against extraordinary and miscellaneous expenses to LGU Officials 

The appropriation of Extraordinary and Miscellaneous Expenses (EME) separate from discretionary funds in a local government's budget, in violation of Section 325(h) of the Local Government Code, is impermissible. The decision underscores the principle that local government units must adhere to limitations set by law, and any attempt to circumvent these limitations through separate appropriations is subject to disallowance. Additionally, the court affirmed that the good faith or bad faith of the recipients is inconsequential when disbursements are without legal basis, and recipients are liable to refund the amounts received.

 

The case involves the disapproval by the Department of Budget and Management (DBM) Regional Office No. XIII of the separate item for Extraordinary and Miscellaneous Expenses (EME) appropriation in the City of Butuan's annual budget for the fiscal year 2000. The disapproval was based on the violation of Section 325(h)4 of Republic Act (RA) No. 71605 or the Local Government Code of 1991 (LGC), which prohibits appropriations with the same purpose as discretionary funds. Despite seeking reconsideration, the disapproval was affirmed by the DBM. Subsequently, the City Government of Butuan continued to appropriate and grant EME to its officials until 2010, leading to several Notices of Disallowance (NDs) being issued for lack of legal basis. The petitioners, as recipients held liable to settle the disallowances, appealed the NDs, arguing violations of their right to speedy disposition, contesting the propriety of the NDs, and invoking good faith. 

 

Whether there was a violation of the right to speedy disposition of cases.

NO. The court held that the constitutional guarantee to a speedy disposition of cases is not violated merely by the length of time taken for resolution. It emphasized the need to consider factors such as the complexity of the case, number of transactions involved, and other relevant circumstances. The court found that the delay in this case was not arbitrary or oppressive, considering the thorough audit required for 94 disallowances dating back to 2004-2009, and challenges faced by the COA, including the destruction of records in a fire.

 

Whether the issuance of the Notice of Disallowance was proper.

YES. The court upheld the disallowance, stating that EME and discretionary funds have the same purpose and cannot be made separate items of appropriation, as per Section 325(h) of the LGC. The court noted that COA Circulars consistently characterized Extraordinary and Miscellaneous Expenses (EME) as similar to discretionary expenses. It also highlighted that the local ordinance circumvented limitations in the LGC and the General Appropriations Acts by appropriating separate amounts for discretionary purposes.

 

Whether good faith can exonerate petitioners' liability to settle the disallowances.

NO. The court rejected petitioners' argument that good faith. It clarified that the recipients' good faith or bad faith is inconsequential, applying principles of solutio indebiti and unjust enrichment. Recipients are liable to refund if the disbursement is without legal basis. The court also explained that local autonomy does not preclude national government intervention, emphasizing compliance with laws and regulations. Ultimately, the court dismissed the petition, affirming the COA's decision on the disallowances.

 

 

 

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Municipality of Bakun, Benguet v. Municipality of Sugpon, Ilocos Sur, G.R. No. 241370, [April 20, 2022]

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Municipality of Bakun, Benguet v. Municipality of Sugpon, Ilocos Sur

 G.R. No. 241370, [April 20, 2022]

THIRD, LOPEZ, M.V

 

Boundary Dispute; LGU Territorial Jurisdiction; Law on Public Corporations; Local Government Code

Act No. 1646 in establishing the new boundary lines between the sub-province of Amburayan and the provinces of Ilocos Sur and La Union, and Act No. 2877 in modifying the boundaries between the Mountain Province and the provinces of Ilocos Sur and La Union, they do not prove that the disputed properties would form part of the territory of Bakun. Bakun simply failed to show, by preponderant evidence, that the conflicted areas are located within the "new boundary line."

 

The dispute revolves around a 1,117.20-hectare parcel of land situated within the boundaries of Bakun, Benguet, represented by Mayor Fausto T. Labinio, and Sugpon, Ilocos Sur, represented by Mayor Gernando C. Quiton, Sr. After failed attempts to settle the matter, the Sangguniang Panlalawigan issued Joint Resolution No. 1, Series of 2014, adjudicating the disputed area to Bakun. Dissatisfied, Sugpon appealed to the RTC, resulting in a Resolution on April 28, 2015, which reversed the Sangguniang Panlalawigan's decision. The RTC argued that the laws cited by Bakun did not delineate the boundaries, and Sugpon's evidence, particularly maps, demonstrated its territorial jurisdiction. The CA upheld the RTC's decision on February 1, 2018, emphasizing that Sugpon's evidence surpassed Bakun's, and the old legislations were insufficient for boundary determination. 

 

Whether Bakun or Sugpon holds territorial jurisdiction over the 1,117.20-hectare disputed area. 

Sugpon holds territorial jurisdiction over the 1,117.20-hectare disputed area. The Supreme Court upheld the CA's decision, denying Bakun's petition for review. The Court emphasized its limited role as a reviewer of legal issues and affirmed the lower courts' findings, supported by substantial evidence. Sugpon's evidence, including administrative maps, tax declarations, and certifications from government offices, convincingly established its territorial claim. In contrast, Bakun's reliance on Act Nos. 1646 and 2877 was deemed inadequate, as these laws lacked specificity regarding the disputed municipalities' boundaries. The Court ruled that Bakun failed to prove, by preponderance of evidence, that the conflicted areas fell within the modified boundary line set by the cited laws. Consequently, the disputed area was adjudicated as part of Sugpon's territorial jurisdiction.

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Ortigas & Co., Limited Partnership, Vs. Feati Bank And Trust Co. G.R. No. L-24670 December 14, 1979

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ORTIGAS & CO., LIMITED PARTNERSHIP, vs. FEATI BANK AND TRUST CO.

G.R. No. L-24670 December 14, 1979

EN BANC, SANTOS, J.

 

Constitutional Law; Non-impairment of Contracts; Superiority of Police Power of the State 

 

While non-impairment of contracts is constitutionally guaranteed, the rule is not absolute since it must be reconciled with the legitimate exercise of police power. Legitimate measures of Police Power prevails over the contract stipulations.

Plaintiff Ortigas & Co., Limited Partnership is engaged in real estate business, specifically the Highway Hills Subdivision along Epifanio de los Santos Avenue, Mandaluyong, Rizal. Plaintiff sold Lots 5 and 6 of the subdivision through installment agreements in 1952, with restrictions on use and construction. Vendees later transferred the lots to Emma Chavez, and upon full payment, plaintiff executed deeds of sale. Building restrictions were annotated in TCTs issued to Emma Chavez, to be exclusive for residential purposes only. 

Feati then acquired Lot 5 directly from Emma Chavez and Lot 6 from Republic Flour Mills. Feati started construction of a building on both lots to be devoted for banking purposes but could also be for residential use. Ortigas sent a written demand to stop construction but Feati continued contending that the building was being constructed according to the zoning regulations as stated in Municipal Resolution 27 declaring the area along the West part of EDSA to be a commercial and industrial zone. 

 

Whether Resolution No. 27, series of 1960, declaring the area a commercial and industrial zone, is a valid exercise of police power. 

YES.  The resolution is a regulatory measure within the municipality's power to adopt zoning and subdivision ordinances. Resolution No. 27 was obviously passed in exercise of police power to safeguard health, safety, peace and order and the general welfare of the people in the locality as it would not be a conducive residential area considering the amount of traffic, pollution, and noise which results in the surrounding industrial and commercial establishments. The municipality was justified in passing the resolution to promote the health, safety, peace, good order, and general welfare of the people in the are 

 

Whether the resolution can nullify or supersede the contractual obligations assumed by defendant-appellee.

YES. Resolution No. 27 prevails over the contract stipulations. Section 3 of RA 2264 of the Local Autonomy Act empowers a Municipal Council to adopt zoning and subdivision ordinances or regulations for the Municipality. Although non-impairment of contracts is constitutionally guaranteed, it is not absolute since it has to be reconciled with the legitimate exercise of police power, e.g. the power to promote health, morals, peace, education, good order or safety and general welfare of the people. The public welfare when clashing with the individual right to property should prevail through the state’s exercise of its police power.

 

 

 

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Province of North Cotabato v. GRP [GR No. 183591, October 14, 2008]

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 Province of North Cotabato v. GRP

GR No. 183591, October 14, 2008

 

SUBJECT: LAW ON PUBLIC CORPORATION

Topic: Creation of Bangsamoro Judicial Entity (BJE); Concept of Associative State; Expansion of territory of ARMM

Facts: In pursuit of peace in Mindanao, the Philippine Government and MILF agreed to undergo peace talks. The fruit of the talks is the Memorandum of Agreement on the Ancestral Domain (MOA-AD). The parties were about to sign the agreement but petitioners filed for Mandamus and Prohibition with Prayer for the Issuance of Writ of Preliminary Injunction and Temporary Restraining Order. The Court issued the TRO.

The MOA-AD essentially would create a Bangsamoro Juridical Entity (BJE), which would result to an associative relationship (a state within a state).

ISSUE: Whether or not the MOA-AD is inconsistent with the Philippine Constitution and laws.

RULING:  UNCONSTITUTIONAL.

The provisions of MOA-AD establishes an associative relationship with the Philippine Government and the BJE resulting to the latter as a separate independent state or a juridical, territorial, political subdivision not recognized by law. The MOA-AD cannot be reconciled with the present Constitution and laws. Not only its specific provisions but the very concept underlying them, namely, the associative relationship (a state within a state) envisioned between the GRP and the BJE, are unconstitutional, for the concept presupposes that the associated entity is a state and implies that the same is on its way to independence.

While there is a clause in the MOA-AD stating that the provisions thereof inconsistent with the present legal framework will not be effective until that framework is amended, the same does not cure its defect. The inclusion of provisions in the MOA-AD establishing an associative relationship between the BJE and the Central Government is, itself, a violation of the Memorandum of Instructions from the President, dated March 1, 2001, addressed to the government peace panel. Moreover, as the clause is worded, it virtually guarantees that the necessary amendments to the Constitution and the laws will eventually be put in place.

On the recognition of the BJE entity as a state. The concept implies power beyond what the Constitution can grant to a local government; even the ARMM do not have such recognition; and the fact is such concept implies recognition of the associated entity as a state. There is nothing in the law that contemplate any state within the jurisdiction other than the Philippine State, much less does it provide for a transitory status that aims to prepare any part of Philippine territory for independence. As such the MOA-AD clearly runs counter to the national sovereignty and territorial integrity of the Republic.

On the expansion of the territory of the BJE. The territory included in the BJE includes those areas who voted in the plebiscite for them to become part of the ARMM. The stipulation of the respondents in the MOA-AD that these areas need not participate in the plebiscite is in contrary to the express provision of the Constitution. The law states that that "[t]he creation of the autonomous region shall be effective when approved by a majority of the votes cast by the constituent units in a plebiscite called for the purpose, provided that only provinces, cities, and geographic areas voting favourably in such plebiscite shall be included in the autonomous region." Clearly, assuming that the BJE is just an expansion of the ARMM, it would still run afoul the wordings of the law since those included in its territory are areas which voted in its inclusion to the ARMM and not to the BJE.

In sum, upholding such an act would amount to authorizing a usurpation of the constituent powers vested only in Congress, a Constitutional Convention, or the people themselves through the process of initiative, for the only way that the Executive can ensure the outcome of the amendment process is through an undue influence or interference with that process.

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League of Cities of the Philippines vs. COMELEC

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League of Cities of the Philippines vs. COMELEC

 

SUBJECT: LAW ON PUBLIC CORPORATION

Topic: RA 9009 on income requirement for cities; Cityhood Laws exemption

FACTS: These are consolidated petitions for prohibition with prayer for the issuance of a writ of preliminary injunction or temporary restraining order filed by the League of Cities of the Philippines, City of Iloilo, City of Calbayog, and Jerry P. Treñas assailing the constitutionality of the subject Cityhood Laws and enjoining the Commission on Elections (COMELEC) and respondent municipalities from conducting plebiscites pursuant to the Cityhood Laws.

 

During the 12th Congress, Congress enacted into law Republic Act No. 9009 (RA 9009), which took effect on 30 June 2001. RA 9009 amended Section 450 of the Local Government Code by increasing the annual income requirement for conversion of a municipality into a city from P20 million to P100 million. After the effectivity of RA 9009, the House of Representatives of the 12th Congress adopted Joint Resolution No. 29, which sought to exempt from the P100 million income requirement in RA 9009 the 24 municipalities whose cityhood bills were not approved in the 11th Congress. However, the 12th Congress ended without the Senate approving Joint Resolution No. 29.

During the 13th Congress, the House of Representatives re-adopted Joint Resolution No. 29 as Joint Resolution No. 1. The 16 cityhood bills contained a common provision exempting all the 16 municipalities from the P100 million income requirement in RA 9009. The cityhood bills lapsed into law (Cityhood Laws) on various dates from March to July 2007 without the President’s signature. The Cityhood Laws direct the COMELEC to hold plebiscites to determine whether the voters in each respondent municipality approve of the conversion of their municipality into a city.

Petitioners filed the present petitions to declare the Cityhood Laws unconstitutional for violation of Section 10, Article X of the Constitution, as well as for violation of the equal protection clause.

 

ISSUE: Whether the Cityhood Laws violate Section 10, Article X of the Constitution on the creation of LGUs in accordance with the criteria in the local government code, and not in any other law.

 

RULING:

• ·   1^st ruling – unconstitutional (2008)
• ·       2^nd ruling – valid (2009)
• ·       3^rd ruling – unconstitutional (2010)
• ·       4^th ruling – valid (2011 FINAL RULING)

RATIO on FINAL RULING: Congress intended that those with pending cityhood bills during the 11^th Congress would not be covered by the new and higher income requirement of 100 million imposed by RA 9009. The exemption clause found in the individual cityhood bills are the express articulation of that intent of Congress to exempt respondent municipalities from the coverage of RA 9009.

It cannot be denied (based on the exchange of Senate President Drilon and Senator Pimentel during the deliberation of RA 9009) that Congress saw the wisdom of exempting the municipalities from complying with the higher income requirement (from 20Million to 100 Million) imposed by the LGC as amended by RA 9009. Indeed these municipalities have proven themselves viable and capable to become component cities of their respective provinces. It is also acknowledge that they were centers of trade and commerce, points of convergence of transportation, rich havens of agricultural, mineral, and other natural resources, and flourishing tourism spots. In this regard, it is worthy to mention that this distinctive traits, makes it’s a self-sufficient cities.

 

MALABANG v. BENITO [G.R. No. L-28113 March 28, 1969]

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MALABANG v. BENITO

G.R. No. L-28113 March 28, 1969

SUBJECT: LAW ON PUBLIC CORPORATION

Topic: De Facto Municipal Corporation

FACTS: Petitioner Amer Macaorao Balindong is the mayor of Malabang, Lanao del Sur. Balabagan was formerly a part of the municipality of Malabang, having been created on March 15, 1960, by Executive Order 386 of the then Pres. Carlos P. Garcia, out of barrios and sitios of the latter municipality.

 

Petitioners assailed the validity of EO 386 of the then President Carlos P. Garcia, which created the Municipality of Balabagan out of barrios and sitios of Malabang. Petitioner relied on the ruling in Pelaez v. Auditor General while respondent contended that  that the rule announced in Pelaez can have no application in this case because unlike the municipalities involved in Pelaez, the municipality of Balabagan is at least a de facto corporation, having been organized under color of a statute before this was declared unconstitutional, its officers having been either elected or appointed, and the municipality itself having discharged its corporate functions for the past five years preceding the institution of this action. It is contended that as a de facto corporation, its existence cannot be collaterally attacked, although it may be inquired into directly in an action for quo warranto at the instance of the State and not of an individual like the petitioner Balindong.

 

ISSUE: Whether or not the municipality of Balabagan is a de facto corporation.

 

RULING: NO. A corporation organized under a statute subsequently declared invalid cannot acquire the status of a ‘de facto’ corporation unless there is some other statute under which the supposed corporation may be validly organized.

 

The following principles were deduced by the SC:

 

1. The color of authority requisite to the organization of a de facto municipal corporation may be:

• A valid law enacted by the legislature
• An unconstitutional law, valid on its face, which has either (a) been upheld for a time by the courts or (b) not yet been declared void; provided that a warrant for its creation can be found in some other valid law or in the recognition of its potential existence by the general laws or constitution of the state.

 

2. There can be no de facto municipal corporation unless either directly or potentially, such a de jure corporation is authorized by some legislative fiat.

 

3. There can be no color of authority in an unconstitutional statute alone, the invalidity of which is apparent on its face.

 

4. There can be no de facto corporation created to take the place of an existing de jure corporation, as such organization would clearly be a usurper.

 

In the cases where a de facto municipal corporation was recognized as such despite the fact that the statute creating it was later invalidated, the decisions could fairly be made to rest on the consideration that there was some other valid law giving corporate vitality to the organization. Hence, in the case at bar, the mere fact that Balabagan was organized at a time when the statute had not been invalidated CANNOT conceivably make it a de facto corporation, as, independently of the Administrative Code provision in question, there is no other valid statute to give color of authority to its creation.

 

The petition is GRANTED. Executive Order 386 is declared void, and the respondents are hereby permanently restrained from performing the duties and functions of their respective offices.

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Municipality of San Fernando vs. Firme [G.R. No.L-52179 April 8, 1991]

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Municipality of San Fernando vs. Firme

G.R. No.L-52179 April 8, 1991

SUBJECT: LAW ON PUBLIC CORPORATION

Topic: Suability of LGUs

FACTS: The passengers of the jeepney died as a result of the collision between a jeepney and a dump truck of the Municipality of San Fernando, La Union. As a result, the heirs filed a complaint for damages against the owner and driver of the jeepney, as well as the Municipality of San Fernando, La Union. The respondent judge rendered a judgment ruling that the Municipality of San Fernando is jointly and severally liable with the driver of the dump truck. Petitioner maintains that the respondent judge committed grave abuse of discretion amounting to excess of jurisdiction in issuing the aforesaid orders and in rendering a decision.

 

ISSUE: Whether the Municipality can be held liable for the tort committed.

 

RULING:

NO. In the case at bar, the driver of the dump truck of the municipality insists that “he was on his way to the Naguilian river to get a load of sand and gravel for the repair of San Fernando’s municipal streets.” In the absence of any evidence to the contrary, the regularity of the performance of official duty is presumed pursuant to Section 3(m) of Rule 131 of the Revised Rules of Court. Hence, We rule that the driver of the dump truck was performing duties or tasks pertaining to his office.

 

We already stressed in the case of Palafox, et. al. vs. Province of IlocosNorte, the District Engineer, and the Provincial Treasurer that “the construction or maintenance of roads in which the truck and the driver worked at the time of the accident are admittedly governmental activities.” Consequently, municipality cannot be held liable for the torts committed by its regular employee, who was then engaged in the discharge of governmental functions. Hence, the death of the passenger –– tragic and deplorable though it may be –– imposed on the municipality no duty to pay monetary compensation.

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Surigao Electric Company vs Municipal of Surigao [24 SCRA 898 30 August 1968]

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Surigao Electric Company vs Municipal of Surigao

24 SCRA 898

30 August 1968

SUBJECT: LAW ON PUBLIC CORPORATION

Topic: LGU as an agent of the State; Governmental Functions of LGU

FACTS: On June 1960, Congress amended the Public Service Act, one of the changes introduced doing away with the requirement of a certificate of public convenience and necessity from the Public Service Commission for public services owned and operated by government entities or government-owned or controlled corporations. The petitioners, Surigao Electric Co. challenged the validity of the said order.

 

ISSUE: Whether or not a municipality of Surigao can directly maintain and operate an electric plant without obtaining a specific franchise for the purpose and without a certificate of public convenience and necessity duly issued by the Public Service Commission.

 

RULING: YES. Municipal government actually functions as extension of national government and, therefore, it is an instrumentality of the latter. By express provision of Public Service Act (Act 2677), an instrumentality of the government is exempted from the jurisdiction of the PSC except with respect to fixing the rate.

 

The court held that a municipality corporation maintains a dual personality: governmental and corporate. Municipal corporations may promote public services without the need of a certificate of public convenience. This exercise of governmental prerogatives comes within the undefined scope of police power of the State. No franchise or right can override the proper exercise of police power of the government. The Amendatory Act provided in the Public Service Act lend encouragement and support for municipality corporations to undertake activities, and to better enable it to aid the State.

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Bara Lidasan v. COMELEC [27 SCRA 533 October 25, 1967]

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Bara Lidasan v. COMELEC

27 SCRA 533

October 25, 1967

SUBJECT: LAW ON PUBLIC CORPORATION

Topic:  Limitations on Power of Congress to Create Municipalities; One Subject, One Bill Rule

FACTS: Lidasan, a resident and taxpayer of the detached portion of Parang, Cotabato, and a qualified voter for the 1967 elections assails the constitutionality of RA 4790 and petitioned that Comelec's resolutions implementing the same for electoral purposes be nullified. Under RA 4790, 12 barrios in two municipalities in the province of Cotabato are transferred to the province of Lanao del Sur. This brought about a change in the boundaries of the two provinces.

 

Barrios Togaig and Madalum are within the municipality of Buldon in the Province of Cotabato, and that Bayanga, Langkong, Sarakan, Kat-bo, Digakapan, Magabo, Tabangao, Tiongko, Colodan and Kabamakawan are parts and parcel of another municipality, the municipality of Parang, also in the Province of Cotabato and not of Lanao del Sur.

 

Apprised of this development, the Office of the President, recommended to Comelec that the operation of the statute be suspended until "clarified by correcting legislation." COMELEC, by resolution declared that the statute should be implemented unless declared unconstitutional by the Supreme Court.

 

ISSUE: Whether or not RA 4790, which is entitled "An Act Creating the Municipality of Dianaton in the Province of Lanao del Sur", but which includes barrios located in another province — Cotabato is unconstitutional for embracing more than one subject in the title.

 

RULING: YES. Republic Act 4790 is null and void. The title “An Act Creating the Municipality of Dianaton, in the Province of Lanao del Sur” projects the impression that solely the province of Lanao del Sur is affected by the creation of Dianaton. Not the slightest intimation is there that communities in the adjacent province of Cotabato are incorporated in this new Lanao del Sur town. The phrase “in the Province of Lanao del Sur” makes the title misleading and deceptive. For, the known fact is that the legislation has a two-pronged purpose combined in one statute:

(1) it creates the municipality of Dianaton purportedly from twenty-one barrios in the towns of Butig and Balabagan, both in the province of Lanao del Sur; and

(2) it also dismembers two municipalities (12 Barangays) in Cotabato, a province different from Lanao del Sur.

 

The title did not inform the members of the Congress as to the full impact of the law; it did not apprise the people in the towns of Cotabato that were affected by the law, and the province of Cotabato itself that part of their territory is being taken away from their towns and provinces and added to the adjacent Province of Lanao del Sur. These are the pressures which heavily weigh against the constitutionality of Republic Act 4790.

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Mandanas v. Ochoa (G.R. Nos. 199802, 208488) April 10, 2019

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Mandanas v. Ochoa

(G.R. Nos. 199802, 208488)

April 10, 2019

SUBJECT: LAW ON PUBLIC CORPORATION

Topic: Fiscal Autonomy of LGU

FACTS: The fiscal autonomy guaranteed to local governments under Section 6, Article X of the 1987 Constitution means the power to create their own sources of revenue in addition to their equitable share in the "national taxes" released by the National Government, as well as the power to allocate their resources in accordance with their own priorities.

 

Pursuant to this Constitutional dictum, Congress enacted Republic Act No. 7160, otherwise known as the Local Government Code (LGC). Sec. 284 of the LGC provides that LGUs shall have an allotment equivalent to 40% of the the national internal revenue taxes. The share of the LGUs, known as the Internal Revenue Allotment (IRA), has been regularly released to the LGUs. Two petitions were filed to challenge the base figure for the computation of the IRA.

 

In G.R. No. 199802, Cong. Hermilando Mandanas, et al., alleged that the NIRTs certified by the BIR excluded the NIRTs collected by the Bureau of Customs, specifically excise taxes, value added taxes (VATs), and documentary stamp taxes (DSTs). Such exclusion resulted in LGUs being deprived of ₱60,750,000,000.00 for FY 2012. Further, the petitioners argued that since this mistake in computation was happening since 1992, then the National Government has effectively deprived LGUs of ₱438,103,906,675.73 in their IRA.

 

Meanwhile, in G.R. No. 208488, Cong. Enrique Garcia, Jr. sought the issuance of the writ of mandamus to compel respondents to compute the just share of the LGUs on the basis of all national taxes. He argued that the insertion by Congress of the words "internal revenue" in the phrase "national taxes" found in Section 284 of the LGC caused the diminution of the base for determining the just share of the LGUs, and should be declared unconstitutional.

 

ISSUE: Whether or not Section 284 of the Local Government Code is unconstitutional for being repugnant to Section 6, Article X of the 1987 Constitution. 

 

HELD:

Yes. Section 6 of the Constitution mentions "national taxes" as the source of the just share of the LGUs while Section 284 of the LGC ordains that the share of the LGUs be taken from "national internal revenue taxes" instead. Congress thereby infringed the constitutional provision.

 

Although the power of Congress to make laws is plenary in nature, congressional lawmaking remains subject to the limitations stated in the 1987 Constitution.

 

The phrase "national internal revenue taxes" in Section 284 is undoubtedly more restrictive than the term "national taxes" written in Section 6 of the Constitution. As such, Congress has actually departed from the letter of the 1987 Constitution stating that national taxes should be the base from which the just share of the LGU comes. Such departure is impermissible. Verba legis non est recedendum (from the words of a statute there should be no departure).

 

Equally impermissible is that Congress has also thereby curtailed the guarantee of fiscal autonomy in favor of the LGUs under the 1987 Constitution. What the phrase "national internal revenue taxes" as used in Section 284 of the LGC included are all the taxes enumerated in Section 21 of the National Internal Revenue Code (NIRC), as amended by R.A. No. 8424, namely: income tax, estate and donor's taxes, VAT, other percentage taxes, excise taxes, documentary stamp taxes, and such other taxes as may be imposed and collected by the BIR.

 

In view of the foregoing enumeration of what are the national internal revenue taxes, Section 284 of the LGC has effectively deprived the LGUs from deriving their just share from other national taxes, like the customs duties.

 

Moving forward, the BIR and the BOC are directed certify all national tax collections. This ruling, also known as the "Mandanas Ruling," is to be applied prospectively.

City of General Santos v. COA G.R. No. 199439 [April 22, 2014]

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City of General Santos v. COA

G.R. No. 199439 [April 22, 2014]

SUBJECT: LAW ON PUBLIC CORPORATION

Topic: Local Autonomy of LGU

FACTS: The City of General Santos enacted Ordinance No. 08, series of 2009 entitled An Ordinance Establishing the General Santos City Scheme on Early Retirement for Valued Employees Security (GenSan SERVES), which was designed “to entice those employees who were unproductive due to health reasons to avail of the incentives being offered therein by way of early retirement package.”

 

The city’s audit team leader, through its supervising auditor, sent a query on the legality of the ordinance to respondent Commission on Audit’s director for Regional Office No. XII, Cotabato City.

 

Respondent Commission’s regional director postulated that the grant lacked legal basis and was contrary to the GSIS Act because it partakes of the nature of a supplementary retirement benefit plan proscribed by law; and that since Ordinance No. 08 is in the nature of an ERP [Early Retirement Program] of the City Government of General Santos, a law authorizing the same is a requisite for its validity. In the absence, however, of such law, the nullity of Ordinance No. 08 becomes a necessary consequence

 

ISSUE: Whether or not Ordinance No. 08, series of 2009 is invalid in the absence of a law passed by Congress specifically authorizing the enactment of an ordinance granting an early retirement scheme.

 

RULING: No. The constitutional mandate for local autonomy supports petitioner city’s issuance of Executive Order No. 40, series of 2008, creating change management teams as an initial step for its organization development masterplan.

 

Local autonomy also grants local governments the power to streamline and reorganize.

 

Section 5, paragraph (a) of the Local Government Code states that “any provision on a power of a local government unit shall be liberally interpreted in its favor, and in case of doubt, any question thereon shall be resolved in favor or devolution of powers x x x.”

 

Section 5, paragraph (c) also provides that “the general welfare provisions in this Code shall be liberally interpreted to give more powers to local government units in accelerating economic development and upgrading the quality of life for the people in the community.”

 

These rules of interpretation emphasize the policy of local autonomy and the devolution of powers to the local government units. Thus, in Province of Negros Occidental v.  Commissioners, Commission on Audit, this court declared as valid the ordinance passed by the province granting and releasing hospitalization and health care insurance benefits to its officials and employees, consistent with the state policy of local autonomy as guaranteed by the 1987 Constitution, and the Local Government Code of 1991.

 

Local autonomy allows an interpretation of Sections 76 and 16 as granting petitioner city the authority to create its organization development program. This court has previously explained that a streamlining of organization for a more efficient system must pass the test of good faith in order to be valid. There are indicia of bad faith, none of which are present in this case. Consequently, the Commission on Audit acted with grave abuse of discretion when it declared the entire ordinance void and of no effect. 

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