Air France v.

Carrascoso – appellate conclusions: ultimate facts

DOCTRINE: A decision is not to be so clogged with details such that prolixity, if not confusion, may result. So long as the decision of the Court of
Appeals contains the necessary facts to warrant its conclusions, it is no error for said court to withhold therefrom "any specific finding of facts with
respect to the evidence for the defense."

FACTS:

• Rafael Carrascoso, a civil engineer, was a member of a group of 48 Filipino pilgrims that left Manila for Lourdes on March 30, 1958.
• On March 28, 1958, Air France, through its agent, Philippine Air Lines (PAL) issued to Carrascoso a first class round trip airplane ticket
from Manila to Rome.
o From Manila to Bangkok, Carrascoso was able to travel in first class.
o However, at Bangkok, the manager of Air France forced Carrascoso to vacate his seat because a “white man” had a better right to
it (the term was used by witness Ernesto Cuento).
o Carrascoso refused and told the manager that the seat “would be taken over his dead body”.
o Acommotionensuedandmanyoftheotherpassengersgotnervous.
o The other Filipino passengers pacified Carrascoso and told him to just give up his seat. He reluctantly 
gave his
seat.
• CFI of Manila ordered that the ff. be given to Carrascoso:
o 25K - Moral damages
o 10K - Exemplary damages
o P393.20 - Difference in fare between the first class and tourist class for the portion of the trip from 
Bangkok to
Rome.
o 3K - Attorney’s fees
• CA affirmed but modified slightly the refund from P393.20 to P382.10, and voted to affirm the appealed decision "in all other
respects.”
• DEFENSE is now claiming that that:
o The findings of the CA failed to make a complete finding of the case since it did not state therein the contentions of Air France as
well as the reasons why it was not sufficient.

ISSUES/HELD:
Did CA fail to make complete findings of fact on all the issues properly laid before it? – No.

• The provision in sec. 14 is echoed in the statutory demand that a judgment determining the merits of the case shall state "clearly and distinctly
the facts and the law on which it is based";1 and that "Every decision of the Court of Appeals shall contain complete findings of fact on all
issues properly raised before it."
• A decision with absolutely nothing to support it is a nullity. It is open to direct attack.
• The law, however, solely insists that a decision state the "essential ultimate facts" upon which the court's conclusion is drawn o A court of
justice is not hidebound to write in its decision every bit and piece of evidence presented by one party and the other upon the issues raised.
o Neither is it to be burdened with the obligation "to specify in the sentence the facts" which a party "considered as proved."
• A decision is not to be so clogged with details such that prolixity, if not confusion, may result. So long as the decision of the Court of
Appeals contains the necessary facts to warrant its conclusions, it is no error for said court to withhold therefrom
"any specific - finding of facts with respect to the evidence for the defense” because "There is no law that so requires." o the mere failure
to specify (in the decision) the contentions of the appellant and the reasons for refusing to believe them is not sufficient to hold the same
contrary to the requirements of the provisions of law and the Constitution". o People v. Maniqgue: The mere fact that the findings
“were based entirely on the evidence for the prosecution without taking into consideration or even mentioning the appellant’s side in
the controversy as shown by his testimony” would not vitiate the judgment.
• If the court did not recite in the decision the testimony of each witness for, or each item of evidence presented by, the defeated party, it does
not mean that the court has overlooked such testimony or such item of evidence.
o At any rate, the legal presumptions are that official duty has been regularly performed, and that all the matters within an issue in a
case were laid before the court and passed upon by it.
• Findings of fact, which the Court of Appeals is required to make, maybe defined as "the written statement of the ultimate facts as found by
the court 'x 'x 'x and essential to support the decision and judgment rendered thereon.” o They consist of the court’s “conclusions” with
respect to the determinative facts in issue.”
o A question of law, on the other hand, has been declared as “one which does not call for an examination of the probative value of
the evidence presented by the parties.”
• On balance, we say that the judgment of the Court of Appeals does not suffer from reversible error. We accordingly vote to affirm the same.
Francisco v. Permskul (1989) – Memorandum Decision

DOCTRINE: The memorandum decision, to be valid, cannot incorporate the findings of fact and the conclusions of law of the lower court only by
remote reference (this means that the challenged decision is not easily and immediately available to the person reading the memorandum decision).
For the incorporation by reference to be allowed, it must provide for direct access to the facts and the law being adopted, which must be contained
in a statement attached to the said decision. It is an additional condition for its validity that this kind of decision may be resorted to only in cases
where the facts are in the main accepted by both parties or easily determinable by the judge and there are no doctrinal complications involved that
will require an extended discussion of the laws involved.

FACTS:

• On May 21, 1984, Victorino Francisco leased his apartment in Makati to Winai Permskul for one year with P3,000 monthly rental and a
security deposit of P9,000 to answer for any unpaid rentals and any damages to the leased premises.
• On May 31, 1985, Permskul vacated the property. o He requested a refund of his deposit minus P1000 representing rental for the additional
10 days of his occupancy after the expiration of the lease.
• Francisco denied Permskul’s claim and said that Permskul still owed him for other charges, including the electricity and water bills and the
sum of P2,500.00 for repainting of the leased premises to restore them to their original condition.
• Permskul sued in Makati MeTC and Francisco was ordered to pay P7,750.00, representing the balance of the deposit after deducting the
water and electricity charges and the sum of P1,250.00 as attorney’s fees, plus the costs.
• There was an appeal in Makati RTC and the MTC decision was affirmed by Judge Jose C. de la Rama on January 14, 1987 through a
memorandum decision reading in full as follows:

MEMORANDUM DECISION:

After a careful and thorough perusal, evaluation and study of the records of this case, this Court hereby adopts by reference the
findings of fact and conclusions of law contained in the decision of the Metropolitan Trial Court of Makati, Metro Manila, Branch
63 and finds that there is no cogent reason to disturb the same.

WHEREFORE, judgment appealed from is hereby affirmed in toto.

• Francisco went to the CA but his petition for review was denied.
 • Judge dela Rama justifies the memorandum decision as authorized by B.P. Blg. 129 and invokes the ruling of this Court in Romero v. Court
of Appeals sustaining BP 129.
o Section 40 of B.P. Blg. 129 reads as follows:
o Sec. 40. Form of decision in appealed cases. Every decision or final resolution of a court in appealed cases shall clearly and distinctly
state the findings of fact and the conclusions of law on which it is based which may be contained in the decision or final resolution
itself, or adopted by reference from those set forth in the decision, order or resolution appealed from.

ISSUE/HELD:

Did the Memorandum decision issued by the RTC of Makati violate Article VIII, Section 14 of the Constitution? – YES

• Article VIII, Section 14 of the Constitution states:

o No decision shall be rendered by any court without expressing therein clearly and distinctly the facts and the law on which it is
based.
o No petition for review or motion for reconsideration of a decision of the court shall be refused due course or denied without stating
the legal basis therefor.
• The first paragraph of Art. VIII Sec. 14 has been in force since the 1935 Constitution. The purpose has always been the same, viz., to inform
the person reading the decision, and especially the parties, of how it was reached by the court after consideration of the pertinent facts and
examination of the applicable laws.
• The parties are entitled to no less than this explanation if only to assure them that the court rendering the decision actually studied the case
before pronouncing its judgment.
• Other reasons for the requirement are as follows: o The losing party must be given an opportunity to analyze the decision so that, if permitted,
he may elevate what he may consider its errors for review by a higher tribunal.
o The decision, if well-presented and reasoned, may convince the losing party of its merits and persuade it to accept the verdict in
good grace instead of prolonging the litigation with a useless appeal.
o Decisions with a full exposition of the facts and the law on which they are based, especially those coming from the Supreme Court,
will constitute a valuable body of case law that can serve as useful references and even as precedents in the resolution of future
controversies.
• The purpose of the law in authorizing the memorandum decision is to expedite the termination of litigations for the benefit of the parties as
well as the courts themselves.
• Viewed in the light of practical considerations, the memorandum decision can be welcomed indeed as an acceptable method of dealing
expeditiously with the case load of the courts of justice.
• However, expediency alone, no matter how compelling, cannot excuse non-compliance with the Constitution.
• In the case at bar, a judgment was made by the MeTC in compliance with the rule on summary procedure. The decision consisted of three
typewritten pages, single space, and stated clearly and distinctly the facts and the law on which it was based.
• The problem is that in affirming this judgment, RTC of Makati rendered a mere memorandum decision that simply adopted by reference
the findings of fact and law made by Judge Balita of Makati MeTC and then concluded, without saying more, that “there (was no cogent
reason to disturb the same.”
• Section 24 of the Interim Rules and Guidelines provides that: o The judgment or final resolution of a court in appealed cases may adopt by
reference the findings of fact and conclusions of law contained in the decision or final order appealed from.
• Where the decision of the appellate court actually reproduces the findings of fact or the conclusions of law of the court below, it is not a
memorandum decision as envisioned in the above provision.
• The distinctive features of the memorandum decision are: o It is rendered by an appellate court
o It incorporates by reference the findings of fact or the conclusions of law contained in the decision, order or ruling under review.
• The reason for allowing the incorporation by reference is to avoid the cumbersome reproduction of the decision of the lower court. This is
to avoid having to repeat in the body of the latter decision the findings or conclusions of the lower court since they are being approved or
adopted anyway.
• Section 40 of B.P. Blg. 129 per se is not invalid or unconstitutional. The Court in this case made an examination of the actual compliance
of Judge dela Rama’s memorandum decision with the provision of Article VIII, Section 14 and Section 40 of B.P. Blg. 129.
o The memorandum decision, to be valid, cannot incorporate the findings of fact and the conclusions of law of the lower court only
by remote reference, which is to say that the challenged decision is not easily and immediately available to the person reading the
memorandum decision.
o For the incorporation by reference to be allowed, it must provide for direct access to the facts and the law being adopted, which
must be contained in a statement attached to the said decision.
o The memorandum decision authorized under Section 40 of B.P. Blg. 129 should actually embody the findings of fact and
conclusions of law of the lower court in an annex attached to and made an indispensable part of the decision.
• In the case at bar, there was substantial compliance with Section 40 because of the direct availability and actual review of the decision of
Judge Balita incorporated by reference in the memorandum decision of Judge de la Rama.
• The Court further stated that the interpretation it made in the case at bar will not apply retroactively to the memorandum decision rendered
by the RTC in the case at bar, or to the decision of the CA affirming RTC’s decision on the strength of Romero v. CA.
• The Court, as final words, reiterated that all memorandum decisions shall comply with the requirements set forth in the case at bar, both as
to the form prescribed and the occasions when they may be rendered.
o Any deviation will summon the strict enforcement of Article VIII, Section 14 of the Constitution and strike down the flawed
judgment as a lawless disobedience.
Deutsche Bank v. CIR (2013) SUPRA – applies only to decisions not minute resolutions

DOCTRINE: The requirement that that the facts and the law on which the judgment is based must be expressed clearly and distinctly applies only
to decisions, not to minute resolutions.

FACTS:
• Deutsche Bank AG Manila Branch (DB Manila) remitted to the BIR P67M, representing 15% of the branch-profit remittance tax (BPRT)
on its remittances to its head office in Germany.
• Believing that they overpaid the BPRT, since the RP-Germany Treaty provides for a lower rate of 10% on branch remittances, the petitioner
filed a refund with the Bureau of Internal Revenue (BIR) and subsequently with the Court of Tax Appeals (CTA).
• Both the BIR and the CTA denied the refund stating that the branch office should have filed a tax treaty relief application prior to availing
of the preferential treaty rate.
• The CTA relied on the earlier case of Mirant Corporation vs. CIR (CTA En Banc Case No. 40, June 7, 2005) wherein the CTA held that a
ruling from the ITAD (International Tax Affairs Division) must be secured prior to the availment of a preferential tax rate under a tax treaty.
• Unsatisfied with the CTA decision, DB Manila Branch filed an appeal with the Supreme Court.
ISSUES/HELD:
Is the en-banc decision of the CTA in Mirant vs. CIR binding? NO.
• The SC’s minute resolution on Mirant is not a binding precedent.
• The Court cited Philippine Health Care Providers, Inc. v. Commissioner of Internal Revenue: o When a minute resolution denies or
dismisses a petition for failure to comply with formal and substantive requirements, the challenged decision, together with its findings of
fact and legal conclusions, are deemed sustained.
o However, with respect to the same subject matter and the same issues concerning the same parties, it constitutes res judicata.
o However, if other parties or another subject matter (even with the same parties and issues) is involved, the minute resolution is NOT
binding precedent.
• Thus, in CIR v. Baier-Nickel, the Court noted that a previous case, CIR v. Baier-Nickel involving the same parties and the same issues, was
previously disposed of by the Court thru a minute resolution dated February 17, 2003 sustaining the ruling of the CA.
o Nonetheless, the Court ruled that the previous case "ha(d) no bearing" on the latter case because the two cases involved different
subject matters as they were concerned with the taxable income of different taxable years.
• Besides, there are substantial, not simply formal, distinctions between a minute resolution and a decision.
o Doctrine: The constitutional requirement under the first paragraph of Section 14, Article VIII of the Constitution that the facts and
the law on which the judgment is based must be expressed clearly and distinctly applies only to decisions, not to minute resolutions.
 o A minute resolution is signed only by the clerk of court by authority of the justices, unlike a decision. It does not require the
certification of the Chief Justice.
o Moreover, unlike decisions, minute resolutions are not published in the Philippine Reports.
o Finally, the proviso of Section 4(3) of Article VIII speaks of a decision.
o Indeed, as a rule, this Court lays down doctrines or principles of law which constitute binding precedent in a decision duly signed
by the members of the Court and certified by the Chief Justice.
• Even if we had affirmed the CTA in Mirant, the doctrine laid down in that Decision cannot bind this Court in cases of a similar nature. There
are differences in parties, taxes, taxable periods, and treaties involved; more importantly, the disposition of that case was made only through
a minute resolution.

NOTE: On the substantive issue, the Court said that the principle of pacta sunt servanda requires the performance in good faith of treaty obligations.
Thus, to require that taxpayers must first comply with an administrative requirement (under RMO 1-2000) is not in consonance with the performance
in good faith. The obligation to comply with a tax treaty must take precedence over the objectives of the said RMO. In addition, it was pointed out
that the prior application becomes illogical if the premise of the claim was an erroneous payment since the taxpayer could not have known it would
be entitled to the refund since precisely it was using a different basis when it paid the taxes due.
Salazar v. Marigomen

DOCTRINE: Time and again, the Court had instructed judges to exert effort to ensure the decisions would present a comprehensive analysis or
account of the factual and legal findings that would substantially address the issues raised by the parties.

FACTS

• Doroteo M. Salazar charged Judge Antonio D. Marigomen (respondent), Presiding Judge of Branch 61, Regional Trial Court, Bogo, Cebu,
with gross ignorance of the law, bias, conduct prejudicial to the interest of the service and rendering a decision violative of the Commission
on Elections (COMELEC) Rules of Procedure and the Constitution in connection with Election SPC Case No. BOGO-00789.
• Zenaida F. Salazar, wife of complainant, and a mayoralty candidate in the Municipality of Madridejos, Cebu in the May 2001 elections,
filed on July 4, 2001 an election protest against the proclaimed winner Lety Mancio (Mancio) before the RTC
• Initially, the case was handled by another judge (dela Peña), who ordered that the ballots be revised;
o he was, however, replaced by Marigomen (no mention why).
• Marigomen in turn dismissed the protest and declared Mancio the mayor.
• On appeal, the COMELEC First Division, by Resolution of March 25, 2004, reversed and set aside the August 8, 2003 Decision of
respondent and declared complainant’s wife Zenaida Salazar as the duly elected mayor.
• Salazar claims that Marigonem admitted in evidence uncertified photocopies of the contested ballots, the original copies of which were in
the custody of the HRET, contrary to Section 7, Rule 130 of the Rules of Court which provide that it should be certified copies and that
Marigonem considered the uncertified photocopies-exhibits for Mancio in deciding the case.
o Hence, the charge of gross ignorance of the law.
• Salazar also claims that Marigonem was partial. For instance, he
o Ignored the objections to the evidence.
o Was acting as if he were the counsel for the protestee,
▪ demonstrated during the testimony of the Clerk of Court when protestee’s counsel had difficulty explaining the nature of
the clerk’s testimony and Marigonem laid the basis thereof.
o despite the parties’ agreement to follow the Memorandum on Policy Guidelines dated March 12, 2002 executed between the Office
of the Court Administrator (OCA) and the Integrated Bar of the Philippines (IBP) allowing the submission of affidavits of witnesses
in lieu of their testifying in court, subject to cross examination, Marigonem allowed protestee to present witnesses to give oral
testimonies.
• Finally, complainant claims that respondent (4) violated the COMELEC Rules of Procedure as well as the Constitution for not clearly and
distinctly stating the facts and the law on which his decision was based.
ISSUES/HELD:

(Main issue) Was the decision of Judge Marigonem based on factual and legal bases that were shown in the decision? – NO.

• SC found that there is also merit in the complaint that respondent judge failed to abide by the express mandate of the COMELEC Rules and
Procedure and the Constitution to state clearly and distinctly in every decision the facts and the law on which it is based.
• The questioned decision dismissed for lack of merit the election protest filed by Salazar against Mancio, and declaring the latter to be the
duly elected municipal mayor of Madridejos, Cebu, with a total votes of 5,214 as against the 5,144 votes garnered by Salazar, or a difference
of 70 votes.
o The final tabulation of votes came about after the respondent judge declared on the penultimate page of the 22page decision, thus:
▪ After reviewing or re-appreciating the ballots of the contested precincts, the Court invalidated ninety (90) votes of the
protestant and has not validated stray votes in her favor as she has not formally offered the claimed stray votes or ballots.
The court shall only consider ballots which are presented and formally offered.
• After a thorough examination of the questioned decision, it became obvious that the invalidation of the 90 votes against Salazar was made
without indicating in the decision the factual and legal bases therefor.
o Expectedly, the COMELEC First Division, in its Resolution promulgated on March 25, 2004, reversed and set aside the August 8,
2003 Decision of respondent judge, and declared Salazar as the duly elected mayor of Madridejos, Cebu.
• Time and again, the Court had instructed judges to exert effort to ensure the decisions would present a comprehensive analysis or account
of the factual and legal findings that would substantially address the issues raised by the parties.
o Respondent failed in this respect.

Was Judge Marigonem ignorant of the law and manifestly biased? – YES.

• SC cited the decision of the Office of the Court Administrator

• Administrative matter involves the exercise of the Court’s power to discipline judges. o It is undertaken and prosecuted solely for the public
welfare, that is, to maintain the faith and confidence of the people in the government.
o Thus, unlike in ordinary cases, there is no private offended party in administrative proceedings who may be entitled to judicial
relief.
o The complainant need not be a real party in interest, as anyone may file an administrative complaint against a judge, the only
requirement being that the complaint be verified and it “be in writing and shall state clearly and concisely the acts and omissions
constituting violations of standards of conduct prescribed for Judges by law, the Rules of Court, or the Code of Judicial Conduct.


 • The admission of the uncertified or plain photocopies of the contested ballots by respondent Judge in favor of Mancio betrays his ignorance
of Section 7, Rule 130 of the Rules of Court.
o The Rule, otherwise known as the Best Evidence Rule, simply provides that as long as the original evidence can be had, the court
should not receive in evidence that which is substitutionary in nature, such as photocopies, in the absence of any clear showing that
the original writing has been lost or destroyed or cannot be produced in court.
o In this case, the original copies of the contested ballots have neither been lost nor destroyed. They are in the custody of the HRET,
and had respondent judge wanted to examine them, he could have easily ordered the transfer of their custody to the court. 

• His invocation of Section 5, Rule 130 of the Rules of Court to justify his admission of the plain copies of the contested ballots is misplaced.
o The Rule allows the admission of secondary evidence when the original document has been lost or destroyed, or cannot be found.
▪ However, the offeror is burdened to prove the predicates thereof:
• (a) the loss or destruction of the original was without bad faith on the part of the proponent/offeror which can be shown by circumstantial
evidence of routine practices of destruction of documents;
• (b) the proponent must prove by a fair preponderance of evidence as to raise a reasonable inference of the loss or destruction of the original
copy; and
• (c) it must be shown that a diligent and bona fide but unsuccessful search has been made for the document in the proper place or places.
• Verily, as the original copies of the contested ballots are in the custody of the HRET, which fact was known to respondent judge, there was
no occasion to apply Section 5, Rule 130 of the Rules of Court. When the law is so elementary, not to know it constitutes gross ignorance
of the law. 

• Respondent judge took special interest in the presentation of Atty. Caayon as a witness for Mancio. The purpose of Atty. Caayon’s testimony
was to show that the photocopies of the ballots were the same as the original ballots in the custody of the HRET.
o When the counsel for Salazar, Atty. Manuel S. Paradela, refused to stipulate on the faithful reproduction of the original ballots, the
counsel for Mancio declared that they could request HRET to bring the original ballots to the court for comparison.
o Respondent judge, however, ignored the manifestation, and proceeded to ask Atty. Paradela if the latter was represented during the
photocopying of the original ballots. Nonetheless, the counsel for Mancio, Atty. Nathaniel Clarus 
 requested for the issuance of
a subpoena duces tecum and ad testificandum to bring the original ballots to the court.
o Despite that manifestation, respondent judge allowed Atty. Caayon to affirm the veracity of the photocopies in his possession
• Respondent judge’s bias for Mancio was further shown by respondent judge when he allowed one of the counsels for Mancio, Atty. Reinerio
Roiles, to testify despite the vigorous objection of Salazar through his counsel, as the testimony was in violation of Rule 12.08, Canon 12
of the Canons of Professional Responsibility.
The Rule prohibits a lawyer from testifying in behalf of his client, except on formal matters such as the mailing, authentication or custody of an
instrument, or on substantial matters, in cases where his testimony is essential to the ends
San Juan v. CSC (1991)

DOCTRINE: 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. Power of Governor to recommend is not merely directory.

FACTS:

• Mar. 22, 1988: position of Provincial Budget Officer (PBO) for Rizal was left vacant.
• Apr. 18, 1988: Reynaldo San Juan, Governor of Rizal, sent a letter to Director Reynaldo Abella of the Department of Budget and
Management (DBM) that Ms. Dalisay Santos assumed office as Acting PBO and requested Director Abella to endorse appointment of
Santos.
• BUUT in a Memo addressed to the DBM Secretary, Director Abella recommended appointment of a certain Cecilia Almajose as PBO of
Rizal on the basis of a comparative study of all Municipal Budget Officers in Rizal, including nominations by San Juan.
o Abella says that Almajose is the most qualified, hence the recommendation.
o She was the only Certified Public Accountant among the contenders.
• August 1988: DBM Undersecretary Cabuquit signed the appointment papers of Almajose.
• 2 days later, San Juan wrote to DBM Secretary Carague reiterating his request for appointment of Santos, unaware of the earlier appointment
of Almajose.
o DBM Regional Director Galvez replied to San Juan telling him that Santos and his other recommendees did not meet the minimum
requirements under Local Budget Circular No. 31.
• November 2, 1988: San Juan was informed of the appointment of Almajose so he wrote to DBM Secretary Carague again to protest the
appointment.
o He claims that Cabaquit as DBM Undersecretary is not legally authorized to appoint the PBO;
o That Almajose lacks the required 3 years work experience under Local Budget Circular 31
o That under EO No. 112, 2 it is the Provincial Governor, not the Regional Director or a Congressman, who has the power to
recommend nominees for the position of PBO.
• DBM issued a Memo ruling that San Juan’s letter-protest is not meritorious considering that DBM validly exercised its prerogative since
none of San Juan’s nominees met the requirements.
• After having been denied by DBM, San Juan wrote to the CSC protesting against the appointment of Almajose.
 • CSC now issues the assailed Resolution No. 89-868 dated Nov. 21, 1989 and its Resolution No. 90-150 dated Feb. 9, 1990. o Dispositive
portion of earlier resolution states:
o WHEREFORE, foregoing premises considered, the Commission resolved to dismiss, as it hereby dismisses the appeal of Governor
Reynaldo San Juan of Rizal. Accordingly, the approved appointment of Ms. Cecilia Almajose as Provincial Budget Officer of Rizal,
is upheld.
o Other resolution just reiterates the earlier resolution.
• CSC justifies the ruling by saying that the recommendation of the Governor is merely directory and not a condition sine qua non to the
exercise by the DBM of his appointing prerogative.
o CSC bases this on EO No. 112 as well.

ISSUES/HELD:

(Main issue) Is the Department Head free to appointment anybody in case the Governor recommends an unqualified person?
– NO.

• Interestingly, the SC notes that the issue is not limited to the validity of the appointment of the PBO, but lies in the “tug of war between the
DBM Secretary and Provincial Governor over a seemingly innocuous position which involves the application of a most important
constitutional policy – that of local autonomy.” o 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.
• Exercise of local governments of meaningful power has been a national goal since the turn of the century. o Court even points to
President’s McKinley’s instructions to the 2nd PH Commission.3
o 1935 Consti had no specific article on local autonomy. However, in distinguishing between presidential control and supervision, the
Consti limited the executive power over local governments to general supervision as may be provided by law, while he has
supervision and control over executive departments.
o 1973 Consti provided for local autonomy as a basic principle of government.
o Today, we have an entire article on Local Government in the consti; it called for a local government code defining more responsive
and accountable local govt structures.3
• In this case, when the CSC interpreted the recommending power of the Provincial Governor as purely directory, it went against the letter
and spirit of the constitutional provisions on local autonomy.
o If the DBM Secretary jealously hoards the entirety of budgetary powers and ignores the right of local governments to develop self-
reliance and resoluteness in the handling of their own funds, the goal of meaningful local autonomy is frustrated and set back.
 • The right given by Local Budget Circular No. 31 where the “DBM rreserves 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.
o DBM may only appoint from the list of qualified recommendees nominated by the Governor.
o If none 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.
• While PBO is expected to synchronize his work with DBM, it is more important to ensure the proper administration of fiscal affairs at the
local level.
o Provincial and municipal budgets are prepared at the local level and after completion are forwarded to the national officials for
review. They are prepared by the local officials who must work within the constraints of those budgets. They are not formulated in
the inner sanctums of an allknowing DBM and unilaterally imposed on local governments whether or not they are relevant to local
needs and resources.
o It is for this reason that there should be a genuine interplay, a balancing of viewpoints, and a harmonization of proposals from both
the local and national officials.
• Appointment of Almajose is nullified and DBM is ordered to appoint from among the qualified nominees submitted by Governor San Juan.

Pertinent Local Autonomy provisions mentioned in the case:

Article II, Section 25 on State Policies provides:

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. Thus, Sections 2 and 3 of Article X provide:

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.
City of General Santos v. COA (2014)
(edited Bibo Kids digest)

DOCTRINE: Designing and implementing a local government unit’s own “organizational structure and staffing pattern” also implies the power to
revise and reorganize.

FACTS:

• The City of GenSan enacted Ordinance No. 08, series of 2009 which established the GenSan SERVES (GenSan Scheme on Early
Retirement for Valued Employees Security). This is pursuant to its organizational development program.4
• The ordinance, as amended, provides that qualified employees below sixty (60) years of age but not less than fifty (50) years and sickly
employees below fifty (50) years of age but not less than forty (40) years may avail of the incentivesthe program. In other words, the
ordinance “provides for separation benefits for sickly employees who have not yet reached retirement age.”
• Sec 55 provides for an early retirement package (1 ½ month salary per year of service) to:
o Below 60 but at least 50
o Below 50 but at least 40 who are sickly
o This is on top of any GSIS/PAGIBIG benefit
• Sec 66 provides for post-retirement incentives such as: o Cash gift of Fifty Thousand Pesos (P50,000.00) for the sickly employees; o
Lifetime free medical consultation at General Santos City Hospital;
o Annual aid in the maximum amount of Five Thousand Pesos (P5,000.00), if admitted at General Santos City Hospital; and
o 14 karat gold ring as a token 

• Payment would be made in two tranches: 50% paid in January 2010 and the remainder in July 2010.
o Petitioner city alleged that out of its 1,361 regular employees, 50 employees applied, from which 39 employees qualified to avail of the incentives
provided by the ordinance.
o The first tranche of benefits was released in January 2010.
• The City sent a query on the legality of the ordinance to the COA.
• COA Office of gen counsel said that: o Ordinance No. 08, series of 2009, partakes of a supplementary retirement benefit plan, which is
proscribed under the GSIS Act (prohibits government agencies from establishing supplementary retirement or pension plans from the time
the Government Service Insurance System charter took effect).
o The opinion discussed that this prohibition was reiterated in Conte v. Commission on Audit. Laraño v. Commission on Audit, on the
other hand, ruled that an early retirement program should be by virtue of a valid reorganization pursuant to law in order to be valid.
▪ Then mayor of General Santos City, Pedro B. Acharon, Jr., issued Executive Order No. 40, Series of 2008, creating management teams pursuant
to its organization development program. This was patterned after Executive Order No. 366 dated October 4, 2004 entitled Directing a Strategic
Review of the Operations and Organizations of the Executive Branch and Providing Options and Incentives for Government Employees who
may be Affected by the Rationalization of the Functions and Agencies of the Executive Branch and its implementing rules and regulations.
▪ Mayor Pedro B. Acharon, Jr. declared the city’s byword of “Total Quality Service” in his state of the city address in 2005. This was followed
by the conduct of a process and practice review for each department, section, and unit of the local government. The product was an organization
development masterplan adopted as Executive Order No. 13, Series of 2009.This was followed by Resolution No. 004, Series of 2009, requesting
for the mayor’s support for GenSan SERVES, an early retirement program to be proposed to the Sangguniang Panlungsod.
▪ Consequently, 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.”

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 ½) months of the employee’s latest basic salary for every year of service in the City Government.

Section 6. GenSan SERVES Post-Retirement Incentives.—Upon availment of early retirement, a qualified employee shall enjoy the following in
addition to the above incentives:
(a) Cash gift of Fifty Thousand Pesos (P50,000.00) for the sickly employees;
(b) Lifetime free medical consultation at General Santos City Hospital;
(c) Annual aid in the maximum amount of Five Thousand Pesos (P5,000.00), if admitted at General Santos City Hospital; and
(d) 14 karat gold ring as a token.
ISSUE/ HELD:

Is Ordinance No. 8 Valid? Sec 5 invalid; Sec 6 valid

[On power to reorganize]

Sec. 5 – invalid (not really reorganization/streamlining since positions will be filled after some time.)
 • Local autonomy supports the Ordinance. Local autonomy also grants local governments the power to streamline and
reorganize.
o This power is inferred from Section 764 of the Local Government Code on organizational structure and staffing pattern,
and Section 165 otherwise known as the general welfare clause.
o Designing and implementing a local government unit’s own “organizational structure and staffing pattern” also implies
the power to revise and reorganize. Without such power, local governments will lose the ability to adjust to the needs
of its constituents.
▪ This was implied in Province of Negros Occidental v. Commissioners, Commission on Audit à In that case, 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.
▪ The case held that Section 2 of A. O. No. 103 requiring the President’s prior approval before the grant of any
allowance or benefit is applicable only to offices under the executive branch. Section 2 does not mention local
government units, thus, the prohibition does not apply to them. This court then referred to the policy of local
autonomy as follows:
• Thus, consistent with the state policy of local autonomy as guaranteed by the 1987 Constitution, under Section 25, Article II
and Section 2, Article X, and the Local Government Code of 1991, we declare that the grant and release of the hospitalization
and health care insurance benefits given to petitioner’s officials and employees were validly enacted through an ordinance
passed by petitioner’s Sangguniang Panlalawigan.
o Local autonomy allows an interpretation of Sections 76 and 16 as granting petitioner city the authority to create its organization
development program.
▪ Petitioner city’s vision in 2005 of “Total Quality Service” for “the improvement of the quality of services delivered by the
city to the delight of its internal and external customers” is a matter within its discretion.
▪ It then conducted a process and practice review for each and every unit within the city, resulting in the formulation of an
organization development masterplan adopted as Executive Order No. 13, series of 2009.
▪ Resolution No. 004, Series of 2009, was later passed requesting for the mayor’s support for GenSan SERVES.
• The third preambular clause states that in order “to transform the bureaucracy into [an] effective and result[s]-oriented structure, redounding to
improved governance, there is a need to entice employees aged 50-59 years old, to retire earlier than [age] 65 for them to enjoy their retirement
while they are still healthy.”
▪ Consequently, Ordinance No. 08, Series of 2009, was passed creating the GenSan SERVES program
• However, the reorganization must pass the test of good faith. No indicia of bad faith in this case. o R.A. No. 6656 invoked by
petitioner city as authority for the creation of GenSan SERVES, enumerates situations considered as bad faith when employees are removed as a
result of any reorganization:
a) Where there is a significant increase in the number of positions in the new staffing pattern of the department or agency
concerned;
b) Where an office is abolished and another performing substantially the same functions in created;
c) Where incumbents are replaced by those less qualified in terms of status of appointment, performance and merit;
d) Where there is a reclassification of offices in the department or agency concerned and the reclassified offices perform
substantially the same functions as the original offices; and
e) Where the removal violates the order of separation provided in Section 3 hereof
o None of these badges of bad faith exist in this case.
 It required applicants to go through a medical exam first.
• Unfortunately, these allegations showing good faith is not enough to declare the program created by petitioner city as a reorganization
that justifies the creation of a retirement benefit plan.

Petitioner city alleged that the positions occupied by those who qualified for GenSan SERVES remained vacant, and it would neither hire
replacements nor promote employees earlier than June 30, 2011. This means the positions left by those who availed of the program will
eventually be filled up by others. Their positions were not abolished or merged with other positions for streamlining in the service.

[On Supplementary Retirement Plans]

• The assailed decision by respondent COA was anchored on Sec. 28, par. (b) of C.A. No. 186 or the Government Service Insurance Act (as
amended by RA No. 4968.) This proscribes all supplementary retirement or pension plans for government employees:
Sec. 28 (b) Hereafter no insurance or retirement plan for officers or employees shall be created by any employer. All supplementary retirement or
pension plans heretofore in force in any government office, agency, or instrumentality or corporation owned and controlled by the government, are
hereby declared inoperative or abolished: Provided, That the rights of those who are already eligible to retire thereunder shall not be affected.
• Jurisprudence has discussed the nature and purpose of retirement benefits and pension plans as follows: o Retirement benefits are, after all,
a form of reward for an employee’s loyalty and service to the employer, and are intended to help the employee enjoy the remaining years
of his life, lessening the burden of worrying about his financial support or upkeep.
o On the other hand, a pension partakes of the nature of “retained wages” of the retiree for a dual purpose: to entice competent people
to enter the government service, and to permit them to retire from the service with relative security, not only for those who have
retained their vigor, but more so for those who have been incapacitated by illness or accident.
• Rationale behind prohibition on supplementary retirement plan under Sec. 28 (b) is to prevent the proliferation of iniquitous plans.
• Sec 5 is INVALID since it constitutes as retirement plan. o Under paragraph (d), employees should have served for a minimum of 15
years to qualify.
o This requirement is consistent with the definition of a retirement plan as a form of reward for an employee’s loyalty and service to
the employer. Moreover, pension plans as defined permit employees to retire with relative security, especially for those who have
been incapacitated by illness.
• Sec 6 is VALID. It is not a supplementary retirement plan. o While termed “retirement,” it is the nature which is controlling and not its
designation.
o The benefits under GenSan SERVES were only given to a select few (limited in its coverage) —the sickly and unproductive due to
health reasons. Certainly, this negates the position that the benefits provide for supplementary retirement benefits that augment
existing retirement laws.
o Out of 1,361 regular employees of petitioner city, only 50 employees applied, from which only 39 employees qualified to avail of
the ordinance benefits.
• Ordinance No. 08, series of 2009, was a one-time limited offer. The availment period was only within two months from the ordinance’s
effectivity. 
o This is also consistent with the constitutional mandate for a comprehensive approach to health development, with priority
for the needs of the sick (SC cited Art. XIII, Sec. 11).
o Thus, the cash gift for the sickly employees, lifetime free medical consultation in petitioner city’s hospital, and other similar
benefits under Section 6 of the ordinance are valid.
• The proscription under Section 28, paragraph (b) of C.A. No. 186, as amended, does not apply to Section 6 of the ordinance. o
Consequently, the COA acted with grave abuse of discretion when it declared the entire ordinance void and of no effect.
Province of Negros Occidental v. COA (2010) – power of general v. power of control

DOCTRINE: Since LGUs are subject only to the power of general supervision of the President, the President’s authority is limited to seeing to it
that rules are followed and laws are faithfully executed. The President may only point out that rules have not been followed but the President cannot
lay down the rules, neither does he have the discretion to modify or replace the rules. THUS, the grant of additional compensation like hospitalization
and health care insurance benefits does not need the approval of the President to be valid.

FACTS:

• The Sangguniang Panlalawigan of Negros Occidental passed Resolution No. 720-A allocating P4M of its retained earnings for the
hospitalization and health care insurance benefits of officials and employees of the province.
• After a public bidding, the Committee on Awards granted the insurance coverage to Philam Care.
• Petitioner Province of Negros Occidental (The Province), represented by its then Gov. Rafael Coscolluela and Philam Care entered into a
Group Health Care Agreement involving a total payment of P3.76M representing the insurance premiums of its officials and employees.
o The total premium amount was paid in 1996.
• After a post-audit investigation, the Provincial Auditor issued Notice of Suspension suspending the premium payment because of lack of
approval from the OP as provided under AO 103.
o The Provincial Auditor explained that the premium payment for health care benefits violated RA 6758 (Salary Standardization
Law).
• The Province complied with the directive post-facto and sent a letter-request to the OP.
• In a memorandum, Pres. Erap directed the COA to lift the suspension but only for P100k.
• The Provincial Auditor ignored the directive of the President and instead issued Notice of Disallowance stating similar grounds as the earlier
Notice of Suspension.
• The Province appealed the disallowance to the COA.
• The COA affirmed the Provincial Auditor’s Notice of Disallowance.
o The COA ruled that under AO 103, no government entity, including an LGU, is exempt from securing prior approval from the
President granting additional benefits to its personnel.
o This is in conformity with the policy of standardization of compensation laid down in RA 6758.
o The COA added that the LGC relied upon by Negros does not stand on its own but has to be harmonized with Sec. 12 of RA 6758.
• Further, the COA stated that the insurance benefits from Philam Care, a private insurance company, was a duplication of the benefits
provided to employees under the Medicare program which is mandated by law.
 o

• COA held the following persons liable: o All the 1,949 officials and employees of the province who benefited from the hospitalization and
health care insurance benefits with regard to their proportionate shares
o Former Gov. Coscolluela o The Sangguniang Panlalawigan who passed the Resolution.
• The COA did not hold Philam Care and Provincial Accountant Fortu liable for the disallowed disbursement. o It explained that it was unjust
to require Philam Care to refund the amount received for services it had duly rendered since insurance law prohibits the refund of premiums
after risks had already attached to the policy contract.
o As for the Provincial Accountant, the COA declared that the Sangguniang Panlalawigan resolution as sufficient basis for the
accountant to sign the disbursement voucher since there were adequate funds available for the purpose.
• COA ordered a refund.
• The Province filed an MR which the COA denied in a Resolution.
ISSUES/HELD:

Did COA commit grave abuse of discretion in affirming the disallowance of P3.76M for premium paid for the hospitalization and health care
insurance benefits granted by the Province of Negros Occidental to its 1,949 officials and employees? – YES

• AO 103 took effect in January 1994 or 11 months before the Sangguniang Panlalawigan of the Province of Negros Occidental passed
Resolution 720-A.
o Its main purpose is to prevent discontentment, dissatisfaction and demoralization among government personnel, national or local,
who do not receive, or who receive less, productivity incentive benefits or other forms of allowances or benefits.
This is clear in the Whereas Clauses of AO 103.
• Section 1 of AO 103 provides that the President authorized all agencies of the national government as well as LGUs to grant the maximum
amount of P2k productivity incentive benefit to each employee who had rendered at least 1 year of service as of December 31, 1993.
• In Section 2, the President enjoined all heads of government offices and agencies from granting productivity incentive benefits or any and
all similar forms of allowances and benefits without the President’s prior approval.
• HERE: The Province, through an approved Sangguniang Panlalawigan resolution, granted and released the disbursement for the
hospitalization and health care insurance benefits of the province’s officials and employees without any prior approval from the President.
• The COA disallowed the premium payment for such benefits since the Province disregarded AO 103 and RA 6758.
• From a close reading of the provisions of AO 103, Negros did not violate the rule of prior approval from the President since Section 2
states that the prohibition applies only to government offices/agencies, including GOCCs, as well as their respective governing boards.
• Nowhere is it indicated in Section 2 that the prohibition also applies to LGUs. o The requirement of prior approval from the President under
AO 103 is applicable only to departments, bureaus, offices and GOCCs under the Executive branch.
• In other words, AO 103 must be observed by government offices under the President’s control as mandated by Sec. 17, Art. 7 of the
Constitution.
• Being an LGU, the Province is merely under the President’s general supervision pursuant to Sec. 4, Art. 10 of the Constitution.
o The President’s power of general supervision means the power of a superior officer to see to it that subordinates perform their
functions according to law.
o This is distinguished from the President’s power of control which is the power to alter or modify or set aside what a subordinate
officer had done in the performance of his duties and to substitute the judgment of the President over that of the subordinate officer.
o The power of control gives the President the power to revise or reverse the acts or decisions of a subordinate officer involving the
exercise of discretion.
• Since LGUs are subject only to the power of general supervision of the President, the President’s authority is limited to seeing to it that
rules are followed and laws are faithfully executed.
• The President may only point out that rules have not been followed but the President cannot lay down the rules, neither does he have the
discretion to modify or replace the rules.
• THUS, the grant of additional compensation like hospitalization and health care insurance benefits does not need the approval of
the President to be valid.
• While it is true that LGUs are still bound by RA 6758, the COA did not clearly establish that the medical care benefits given by the
government at the time under PD 1519 were sufficient to cover the needs of government employees especially those employed by LGUs.
• The Province correctly relied on CSC Memo Circular 33 which provided the policy framework for working conditions at the workplace.
o In this circular, the CSC took note of the inadequate policy on basic health and safety conditions of work experienced by government
personnel.
• Thus, under CSC MC 33, all government offices, including LGUs, were directed to provide a health program for government employees
which included hospitalization services and annual mental, medical-physical examinations.
• Later, CSC MC 33 was further reiterated in AO 402. o Sec. 2, AO 402: LGUs are also encouraged to establish a similar program for their
personnel.
• The CSC, through CSC MC 33, as well as the President, through AO 402, recognized the deficiency of the state of health care and medical
services implemented at the time.
• Consistent with the state policy of local autonomy as guaranteed by the 1987 Constitution under Sec. 25, Art. 2 and Sec. 2, Art. 10 and the
LGC, the grant and release of the hospitalization and health care insurance benefits given to the Province’s officials and employees were
validly enacted through an ordinance passed by the Sanggunian.
 o

Alternative Center v. Zamora (2005) – Not to pass law that will prevent the release of funds

DOCTRINE: GR:Since, under Article X, Section 6 of the Constitution, only the just share of local governments is qualified by the words “as
determined by law”, and not the release thereof, the plain implication is that Congress is not authorized by the Constitution to hinder or impede the
automatic release of the IRA.

Exception: if the national internal revenue collections for the current fiscal year is less than 40 percent of the collections of the preceding third fiscal
year, in which case what should be automatically released shall be a proportionate amount of the collections for the current fiscal year.

FACTS:

• President Joseph Estrada submitted the National Expenditures Program for fiscal year 2000. o In the program, he proposed an Internal
Revenue Allotment (IRA) in the amount of P121,778,000,000 following the formula provided under the Local Government Code.
• The General Appropriations Act (GAA) for 2000 was then passed. o It provided under the heading “Allocations to Local Government
Units” the IRA amounting to P111,778,000,000. o In another part of the GAA under the heading “Unprogrammed Fund”, it is provided
that the amount of P10,000,000,000 (10B), apart from the amount mentioned for LGUs, shall be used to fund the IRA.
§ The law provides that this amount shall only be released when the original revenue targets submitted by the President can be realized based on a
quarterly assessment.9
o This means that: while the GAA appropriates P111,778,000,000 of IRA as Programmed Fund, it appropriates a separate
amount of P10 Billion of IRA under the classification of Unprogrammed Fund, the latter amount to be released only upon
the occurrence of the condition stated in the GAA.
• Petitioners (NGOs, People’s Organizations and three barangay officials) filed this petition before the court challenging the constitutionality
of the provisions of the GAA (Allocations to LGU and unprogrammed funds) o They contend that the GAA violated Article X, Section 6
when it made the release of the IRA contingent on whether revenue collections could meet the revenue targets originally submitted by the
President, rather than making the release automatic.
• Respondents counter that Section 6 is not addressed to the legislature but to the executive, hence, the same does not prevent the legislature
from imposing conditions upon the release of the IRA.
o SO: They argue that the provision merely prevents the executive from unilaterally withholding the IRA. BUT it does not prohibit
the legislature from creating a law authorizing the executive branch from withholding the same.
o This means that the President or any member of the Executive Department cannot unilaterally, i.e., without the backing of statute,
withhold the release of the IRA.
ISSUES/HELD:

Does the provisions under the GAA violate the constitutional rule that the just share of local governments shall be automatically released? –
YES

• The Constitution provides for the executive duty to automatically release the just share of local governments in national taxes, so it enjoins
the legislature NOT to pass laws that might prevent the executive from performing such duty.
o To follow the argument of the respondents that the executive may withhold the IRA as long as there is a statute backing it makes the Constitution
amendable by such statute.
• Article X, Section 6 mandates that: (1) the LGUs shall have a “just share” in the national taxes; (2) the “just share” shall be determined by
law; and (3) the “just share” shall be automatically released to the LGUs.
9
1. Release of the Fund. The amounts herein appropriated shall be released only when the revenue collections exceed the original revenue
targets submitted by the President of the Philippines to Congress pursuant to Section 22, Article VII of the Constitution or when the
corresponding funding or receipts for the purpose have been realized except in the special cases covered by specific procedures in Special Provision
Nos. 2, 3, 4, 5, 7, 8, 9, 13 and 14 herein: PROVIDED, That in cases of foreign-assisted projects, the existence of a perfected loan agreement shall
be sufficient compliance for the issuance of a Special Allotment Release Order covering the loan proceeds: PROVIDED, FURTHER, That no
amount of the Unprogrammed Fund shall be funded out of the savings generated from programmed items in this Act.
x xx x
4. Additional Operational Requirements and Projects of Agencies. The appropriations for Purpose 6·Additional Operational Requirements
and Projects of Agencies herein indicated shall be released only when the original revenue targets submitted by the President of the
Philippines to Congress pursuant to Section 22, Article VII of the Constitution can be realized based on a quarterly assessment of the
Development Budget Coordinating Committee, the Committee on Finance of the Senate and the
Committee on Appropriations of the House of Representatives and shall be used to fund the following:….”
While “automatic release” implies that the just share of the local governments determined by law should be released to them as a matter of course,
the GAA provisions, on the other hand, withhold its release pending an event which is not even certain of occurring. To rule that the term “automatic
release” contemplates such conditional release would be to strip the term “automatic” of all meaning.
o If the framers of the Constitution intended to allow this, they should have worded the law differently: “Local government units shall have a just
share, as determined by law, in the national taxes which shall be [automatically] released to them as provided by law”
§ Since, under Article X, Section 6 of the Constitution, only the just share of local governments is qualified by the words “as determined by law”
and not the release thereof, the plain implication is that Congress is not authorized by the Constitution to hinder or impede the automatic release of
the IRA.
 o

• HOWEVER, note that there is an exception to this rule as stated in the case of Batangas v. Romulo: o if the national internal revenue
collections for the current fiscal year is less than 40 percent of the collections of the preceding third fiscal year.
▪ in which case what should be automatically released shall be a proportionate amount of the collections for the current fiscal
year.
▪ The adjustment may even be made on a quarterly basis depending on the actual collections of national internal revenue
taxes for the quarter of the current fiscal year.
o This is based on Section 285 of the LGC.6
• Case comparisons/Basis: o The Province of Batangas v. Romulo: What is being challenged here is the proviso of the GAA setting up
the Local Government Equalization Fund (LGSEF).
▪ The LGSEF was a portion of the IRA which was to be released only upon a finding of the Oversight Committee on
Devolution that the LGU concerned had complied with the guidelines issued by said committee.
▪ This SC measured the challenged legislative acts against Article X, Section 6 and declared them unconstitutional - ruling
which presupposes that the legislature, like the executive, is mandated by said constitutional provision to ensure that the
just share of local governments in the national taxes are automatically released.
o Pimentel v. Aguirre – The executive withheld the release of the IRA pending an assessment very similar to the one provided in the
GAA. This Court ruled that such withholding contravened the constitutional mandate of an automatic release.
§ “A basic feature of local fiscal autonomy is the automatic release of the shares of LGUs in the national internal revenue. This is mandated by no
less than the Constitution. The Local Government Code specifies further that the release shall be made directly to the LGU concerned within five
(5) days after every quarter of the year and “shall not be subject to any lien or holdback that may be imposed by the national government for
whatever purpose.” As a rule, the term “shall” is a word of command that must be given a compulsory meaning”
Villafuerte v. Robredo (2014)

DOCTRINE: A reading of MC No. 2010-138 shows that it is a mere reiteration of an existing provision in the LGC. It was plainly intended to
remind LGUs to faithfully observe the directive stated in Section 287 of the LGC to utilize the 20% portion of the IRA for development projects. It
was, at best, an advisory to LGUs to examine themselves if they have been complying with the law.

FACTS:

• Villafuerte, then Governor of Camarines Sur, joined by the Provincial Government of Camarines Sur, filed the instant petition for certiorari,
seeking to nullify the issuances of the respondent DILG Secretary for being unconstitutional for violating the principles of local and fiscal
autonomy enshrined in the Constitution and the LGC.
• In 1995, the Commission on Audit (COA) conducted an examination and audit on the manner the local government units utilized their
Internal Revenue Allotment (IRA) for the calendar years 1993-1994.
o The examination yielded an official report, showing that a substantial portion of the 20% development fund of some LGUs was not
actually utilized for development projects but was diverted to expenses properly chargeable against the Maintenance and Other
Operating Expenses (MOOE) – in stark violation of Section 287 of R.A. No. 7160, otherwise known as the Local Government Code
of 1991 (LGC).
• In 2010, Jesse Robredo, in his capacity as DILG Secretary, issued the assailed Memorandum Circular (MC) No. 2010-83, entitled “Full
Disclosure of Local Budget and Finances, and Bids and Public Offerings,” which aims to promote good governance through enhanced
transparency and accountability of LGUs.
o The MC requires the posting within 30 days from the end of each fiscal year in at least three (3) publicly accessible and conspicuous
places in the local government unit a summary of all revenues collected and funds received including the appropriations and
disbursements of such funds during the preceding fiscal year.
o The foregoing circular also states that non- compliance will be meted sanctions in accordance with pertinent laws, rules and
regulations.
• On December 2, 2010, the Robredo issued another MC, reiterating that 20% component of the IRA shall be utilized for desirable social,
economic and environmental outcomes essential to the attainment of the constitutional objective of a quality of life for all. o It also
enumerated a list for which the fund must not be utilized.

ISSUES/HELD:
 o

Did the assailed memorandum circulars violate the principles of local and fiscal autonomy? – No. They are valid.

• A reading of MC No. 2010-138 shows that it is a mere reiteration of an existing provision in the LGC. o It was plainly intended to remind
LGUs to faithfully observe the directive stated in Section 287 of the LGC to utilize the 20% portion of the IRA for development projects.
o It was, at best, an advisory to LGUs to examine themselves if they have been complying with the law. It must be recalled that the
assailed circular was issued in response to the report of the COA that a substantial portion of the 20% development fund of some
LGUs was not actually utilized for development projects but was diverted to expenses more properly categorized as MOOE, in
violation of Section 287 of the LGC.
• Contrary to the Villafuerte, et al.’s posturing, however, the enumeration was not meant to restrict the discretion of the LGUs in the utilization
of their funds.
o LGUs remain at liberty to map out their respective development plans solely on the basis of their own judgment and utilize their
IRAs accordingly, with the only restriction that 20% thereof be expended for development projects.
o They may even spend their IRAs for some of the enumerated items should they partake of indirect costs of undertaking development
projects.
• Villafuerte, et al. likewise misread the issuance by claiming that the provision of sanctions therein is a clear indication of the President’s
interference in the fiscal autonomy of LGUs.
o Significantly, the issuance itself did not provide for sanctions. It did not particularly establish a new set of acts or omissions which
are deemed violations and provide the corresponding penalties therefor.
o It simply stated a reminder to LGUs that there are existing rules to consider in the disbursement of the 20% development fund and
that non-compliance therewith may render them liable to sanctions which are provided in the LGC and other applicable laws.
• Villafuerte, et al. claim that the requirement to post other documents in the mentioned issuances went beyond the letter and spirit of Section
352 of the LGC and R.A. No. 9184, otherwise known as the Government Procurement Reform Act, by requiring that budgets, expenditures,
contracts and loans, and procurement plans of LGUs be publicly posted as well.
o Pertinently, Section 352 of the LGC reads that Local treasurers, accountants, budget officers, and other accountable officers shall,
within thirty (30) days from the end of the fiscal year, post in at least three (3) publicly accessible and conspicuous places in the
local government unit. R.A. No. 9184, on the other hand, requires the posting of the invitation to bid, notice of award, notice to
proceed, and approved contract in the procuring entity’s premises, in newspapers of general circulation, and the website of the
procuring entity.
o In particular, the Constitution commands the strict adherence to full disclosure of information on all matters relating to official
transactions and those involving public interest. Pertinently, Section 28, Article II and Section 7, Article III of the Constitution.
• In the instant case, the assailed issuances were issued pursuant to the policy of promoting good governance through transparency,
accountability and participation. The action of the respondent is certainly within the constitutional bounds of his power as alter ego of the
President.
o It is needless to say that the power to govern is a delegated authority from the people who hailed the public official to office through
the democratic process of election.
o His stay in office remains a privilege which may be withdrawn by the people should he betray his oath of office. o Thus, he must
not frown upon accountability checks which aim to show how well he is performing his delegated power.
o For, it is through these mechanisms of transparency and accountability that he is able to prove to his constituency that he is worthy
of the continued privilege.