SAN JUAN VS SCS, DBM & ALMAJOSE

Reynaldo R. San Juan vs CSC, DBM, Cecilia Almajose

GR No. 92299, April 19, 1991

FACTS:
The position of Provincial Budget Officer for the Province of Rizal was left vacant on March 22, 1988.

Provincial Governor, petitioner informed the Director of DBM that Ms. Dalisay Santos, then Municipal
Budget Officer of Taytay, Rizal, assumed offices as Acting PBO since March 22, 1988 and requested the
Director of DBM to endorse the appointment of Ms. Santos to the position of PBO. DBM Regional
Director found Cecilia Almajose, among the nominees of the petitioner to be the most qualified and
recommended to the DBM Secretary the appointment of Almajose as PBO of Rizal, which the DBM USec
signed the appointment papers of Almajose as PBO.

Upon learning of Almajose’s appointment, petitioner wrote DBM Sec protesting against the said
appointment on the grounds that the DBM Usec is not legally authorized to appoint the PBO, that
Almajose lacks the required 3 yrs works experience as provided in Local Budget Circular No. 31, and that
under EO No. 112, it is the Provincial Governor, not the Regional Director or a Congressman, who has
the power to recommend nominees for the position of PBO.

ISSUE:
Whether or not the DBM has the power to appoint the PBO without violating the principle of Local
Autonomy.

RULING:
We have to obey the clear mandate on local autonomy. Where a law is capable of two interpretations,
one in favor of centralized power in Malacañang and the other beneficial to local autonomy, the
scales must be weighed in favor of autonomy.

The 1935 Constitution had no specific article on local autonomy but distinguished presidential control to
supervision:
"The President shall have control of all the executive departments, bureaus, or offices, exercise general
supervision over all local governments as may be provided by law, and take care that the laws be
faithfully executed. (Sec. 11, Article VII, 1935 Constitution)"

The President controls the executive departments. He has no such power over local governments. He
has only supervision and that supervision is both general and circumscribed by statute.

Article II, S. 25, 1987 Constitution states:

"Sec. 25. The State shall ensure the autonomy of local governments."

The 14 sections in Article X, on Local Government not only reiterate earlier doctrines but give in greater
detail the provisions making local autonomy more meaningful.
"Sec. 2. The territorial and political subdivisions shall enjoy local autonomy.

"Sec. 3. The Congress shall enact a local government code which shall provide for a more responsive and
accountable local government structure instituted through a system of decentralization with effective
mechanisms of recall, initiative, and referendum, allocate among the different local government units
their powers, responsibilities, and resources, and provide for the qualifications, election, appointment
and removal, term, salaries, powers and functions and duties of local officials, and all other matters
relating to the organization and operation of the local units."

The right given by Local Budget Circular No. 31 which states:

Sec. 6.0 — The DBM reserves the right to fill up any existing vacancy where none of the nominees of the
local chief executive meet the prescribed requirements.

is ultra vires and is, accordingly, set aside. The DBM may appoint only from the list of qualified
recommendees nominated by the Governor. If none is qualified, he must return the list of nominees to
the Governor explaining why no one meets the legal requirements and ask for new recommendees who
have the necessary eligibilities and qualifications.
CITY OF GENERAL SANTOS, represented by its Mayor, HON. DARLENE MAGNOLIA R.
ANTONINO-CUSTODIO Petitioner,
vs.
COMMISSION ON AUDIT, Respondent.
LEONEN, J.:

NATURE:
This is a special civil action for certiorari filed by the city of General Santos asking to find grave
abuse of discretion on the part of the Commission on Audit (COA).which affirmed the findings of its
Legal Services Sector in its Opinion No. 2010-021 declaring Ordinance No. 08, series of 2009, as
illegal.

FACTS:
Ordinance No. 08, series of 2009, was passed together with its implementing rules and regulations,
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."6
This contextual background in the passing of Ordinance No. 08, series of 2009, was not contested
by respondent Commission on Audit.

In response to the endorsement of the city audit team leader, respondent Commission’s regional
director agreed that the grant lacked legal basis and was contrary to the Government Service
Insurance System (GSIS) Act. He forwarded the matter to respondent Commission’s Office of
General Counsel, Legal Services Sector.
The Office of General Counsel issued COA-LSS Opinion No. 2010-021. Respondent Commission on
Audit observed that GenSan SERVES was not based on a law passed by Congress but on
ordinances and resolutions passed and approved by the Sangguniang Panlungsod and Executive
Orders by the city mayor.26 Moreover, nowhere in Section 76 of Republic Act No. 7160, otherwise
known as the Local Government Code, does it provide a specific power for local government units to
establish an early retirement program.

ISSUE:
WHETHER RESPONDENT COMMISSION ON AUDIT COMMITTED GRAVE ABUSE OF
DISCRETION WHEN IT CONSIDERED ORDINANCE NO. 08, SERIES OF 2009, IN THE NATURE
OF AN EARLY RETIREMENT PROGRAM REQUIRING A LAW AUTHORIZING IT FOR ITS
VALIDITY

HELD:
The Court agree with respondent Commission on Audit but only insofar as the invalidity of Section 5
of the ordinance is concerned.
Section 5. GenSan SERVES Program Incentives On Top of Government Service Insurance System
(GSIS) and PAG-IBIG Benefits – Any personnel qualified and approved to receive the incentives of
this program shall be entitled to whatever retirement benefits the GSIS or PAG-IBIG is granting to a
retiring government employee.
Moreover, an eligible employee shall receive an early retirement incentive provided under this
program at the rate of one and one-half (1 1/2) months of the employee’s latest basic salary for
every year of service in the City Government.9
Section 5 refers to an "early retirement incentive," the amount of which is pegged on the
beneficiary’s years of service in the city government. The ordinance provides that only those who
have rendered service to the city government for at least 15 years may apply.75 Consequently, this
provision falls under the definition of a retirement benefit. Applying the definition in Conte, it is a form
of reward for an employee’s loyalty and service to the city government, and it is intended to help the
employee enjoy the remaining years of his or her life by lessening his or her financial worries.
Sec. 28 (b) as amended by RA 4968 in no uncertain terms bars the creation of any insurance or
retirement plan – other than the GSIS – for government officers and employees, in order to prevent
the undue and inequitous proliferation of such plans. x x x. To ignore this and rule otherwise would
be tantamount to permitting every other government office or agency to put up its own
supplementary retirement benefit plan under the guise of such "financial assistance.71

The Court declares Section 6 on post-retirement incentives as valid.

FALLO:

WHEREFORE, the petition is PARTIALLY GRANTED. The assailed Commission on Audit decision dated
January 20, 2011 and resolution dated October 17, 2011 are AFFIRMED with MODIFICATION insofar as
Section 6 of Ordinance No. 08, series of 2009, as amended by Ordinance No. 11, series of 2009, is
declared as VALID.
FILM DEVELOPMENT COUNCIL OF THE PHILIPPINES, Petitioner, v. CITY OF CEBU AND SM PRIME
HOLDINGS, INC.,

Sometime in 1993, respondent City of Cebu, in its exercise of its power to impose amusement taxes under
Section 140 of the Local Government Code2 (LGC)anchored on the constitutional policy on local
autonomy,3 passed City Ordinance No. LXIX otherwise known as the “Revised Omnibus Tax Ordinance of the
City of Cebu (tax ordinance).” Central to the case at bar are Sections 42 and 43, Chapter XI thereof which
require proprietors, lessees or operators of theatres, cinemas, concert halls, circuses, boxing stadia, and
other places of amusement, to pay an amusement tax equivalent to thirty percent (30%) of the gross
receipts of admission fees to the Office of the City Treasurer of Cebu City. Said provisions read:
chanRoble svi rtual Lawli bra ry

Section 13. Privileges of Graded Films. – Films which have obtained an “A” or “B” grading from the Council
pursuant to Sections 11 and 12 of this Act shall be entitled to the following privileges:

a. Amusement tax reward. – A grade “A” or “B” film shall entitle its producer to an
incentive equivalent to the amusement tax imposed and collected on the graded
films by cities and municipalities in Metro Manila and other highly urbanized and independent
component cities in the Philippines pursuant to Sections 140 to 151 of Republic Act No. 7160
at the following rates:
1. For grade “A” films – 100% of the amusement tax collected on such film; and

2. For grade “B” films – 65% of the amusement tax collected on such films. The
remaining thirty-five (35%) shall accrue to the funds of the Council.

Section 14. Amusement Tax Deduction and Remittance. - All revenue from the amusement tax on the
graded film which may otherwise accrue to the cities and municipalities in Metropolitan Manila and
highly urbanized and independent component cities in the Philippines pursuant to Section 140 of Republic
Act. No. 7160 during the period the graded film is exhibited, shall be deducted and withheld by the
proprietors, operators or lessees of theaters or cinemas and remitted within thirty (30) days from the
termination of the exhibition to the Council which shall reward the corresponding amusement tax to
the producers of the graded film within fifteen (15) days from receipt thereof.

Proprietors, operators and lessees of theaters or cinemas who fail to remit the amusement tax proceeds within
the prescribed period shall be liable to a surcharge equivalent to five percent (5%) of the amount due for each
month of delinquency which shall be paid to the Council. (emphasis added)
According to petitioner, from the time RA 9167 took effect up to the present, all the cities and municipalities
in Metro Manila, as well as urbanized and independent component cities, with the sole exception of Cebu
City, have complied with the mandate of said law.

RA 9167 violates local fiscal autonomy

It is beyond cavil that the City of Cebu had the authority to issue its City Ordinance No. LXIX and impose an
amusement tax on cinemas pursuant to Sec. 140 in relation to Sec. 151 of the LGC. Sec. 140 states, among
other things, that a “province may levy an amusement tax to be collected from the proprietors, lessees, or
operators of theaters, cinemas, concert halls, circuses, boxing stadia, and other places of amusement at a
rate of not more than thirty percent (30%) of the gross receipts from admission fees.” By operation of said
Sec. 151,31extending to them the authority of provinces and municipalities to levy certain taxes, fees, and
charges, cities, such as respondent city government,may therefore validly levy amusement taxes subject to
the parameters set forth under the law. Based on this authority, the City of Cebu passed, in 1993, its
Revised Omnibus Tax Ordinance,32 Chapter XI, Secs. 42 and 43 of which reads:…………..

From the above, the difference between Sec. 133 and the questioned amendment of Sec. 140 of the LGC by
RA 9167 is readily revealed. In Sec. 133, what Congress did was to prohibit the levy by LGUs of the
enumerated taxes. For RA 9167, however, the covered LGUs were deprived of the income which they will
otherwise be collecting should they impose amusement taxes, or, in petitioner’s own words, “Section 14 of
[RA 9167] can be viewed as an express and real intention on the part of Congress to remove from the
LGU’s delegated taxing power, all revenues from the amusement taxes on graded films which
would otherwise accrue to [them] pursuant to Section 140 of the [LGC].”36 chanrobleslaw

In other words, per RA 9167, covered LGUs still have the power to levy amusement taxes, albeit at the end
of the day,they will derive no revenue therefrom. The same, however, cannot be said for FDCP and the
producers of graded films since the amounts thus levied by the LGUs––which should rightfully accrue to
them, they being the taxing authority––will be going to their coffers. As a matter of fact, it is only through
the exercise by the LGU of said power that the funds to be used for the amusement tax reward
can be raised. Without said imposition, the producers of graded films will receive nothing from the owners,
proprietors and lessees of cinemas operating within the territory of the covered LGU.

Taking the resulting scheme into consideration, it is apparent that what Congress did in this instance was
not to exclude the authority to levy amusement taxes from the taxing power of the covered LGUs, but to
earmark, if not altogether confiscate, the income to be received by the LGU from the taxpayers in favor of
and for transmittal to FDCP, instead of the taxing authority. This, to Our mind, is in clear contravention of
the constitutional command that taxes levied by LGUs shall accrue exclusively to said LGU and is repugnant
to the power of LGUs to apportion their resources in line with their priorities.

It is a basic precept that the inherent legislative powers of Congress, broad as they may be, are limited and
confined within the four walls of the Constitution.37 Accordingly, whenever the legislature exercises its
power to enact, amend, and repeal laws, it should do so without going beyond the parameters wrought by
the organic law.

Moreover, in Pimentel,38 the Court elucidated that local fiscal autonomy includes the power of LGUs to
allocate their resources in accordance with their own priorities. By earmarking the income on amusement
taxes imposed by the LGUs in favor of FDCP and the producers of graded films, the legislature appropriated
and distributed the LGUs’ funds––as though it were legally within its control––under the guise of setting a
limitation on the LGUs’ exercise of their delegated taxing power. This, undoubtedly, is a usurpation of the
latter’s exclusive prerogative to apportion their funds, an impermissible intrusion into the LGUs’
constitutionally-protected domain which puts to naught the guarantee of fiscal autonomy to municipal
corporations enshrined in our basic law.