Demaala v. Commission On Audit (Local Govt) PDF
Demaala v. Commission On Audit (Local Govt) PDF
Demaala v. Commission On Audit (Local Govt) PDF
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LEONEN, J.:
Through this Petition for Certiorari, Lucena D. Demaala
(Demaala) prays that the September 22, 2008 Decision
(Decision No. 2008-087)1 and the November 16, 2011
Resolution (Decision No. 2011-083)2 of the Commission on
Audit be reversed and set aside.
The Commission on Audit’s Decision No. 2008-0873
denied Demaala’s appeal and affirmed with modification
Local Decision No. 2006-0564 dated April 19, 2006 of the
Commission on Audit’s Legal and Adjudication Office
(LAO). LAO Local Decision No. 2006-056, in turn, affirmed
Notice of Charge (NC) No. 2004-04-101.5 NC No. 2004-04-
101 was dated August 30, 2004 and issued by Rodolfo C. Sy
(Regional Cluster Director Sy), Regional Cluster Director of
the Legal Adjudication Sector, Commission on Audit
Regional Office No. IV, Quezon City.
The Commission on Audit’s Decision No. 2011-083
denied the Motion for Reconsideration filed by Demaala.6
I
The Sangguniang Panlalawigan of Palawan enacted
Provincial Ordinance No. 332-A, Series of 1995, entitled
“An Ordinance Approving and Adopting the Code
Governing the Revision of Assessments, Classification and
Valuation of Real Properties in the Province of Palawan”
(Ordinance).7 Chapter 5, Section 48 of the Ordinance
provides for an additional levy on real property tax for the
special education fund at the rate of one-half percent or
0.5% as follows:
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In conformity with Section 48 of the Ordinance, the
Municipality of Narra, Palawan, with Demaala as mayor,
collected from owners of real properties located within its
territory an annual tax as special education fund at the
rate of 0.5% of the assessed value of the property subject to
tax. This collection was effected through the municipal
treasurer.9
On post-audit, Audit Team Leader Juanito A. Nostratis
issued Audit Observation Memorandum (AOM) No. 03-005
dated August 7, 2003 in which he noted supposed
deficiencies in the special education fund collected by the
Municipality of Narra.10 He questioned the levy of the
special education fund at the rate of only 0.5% rather than
at 1%, the rate stated in Section 23511 of Republic Act No.
7160, otherwise known as the Local Government Code of
1991 (Local Government Code).12
After evaluating AOM No. 03-005, Regional Cluster
Director Sy issued NC No. 2004-04-101 dated August 30,
200413 in the amount of P1,125,416.56. He held Demaala,
the municipal treasurer of Narra, and all special education
fund payors liable for the deficiency in special education
fund collections.
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Charge not appealed within six (6) months as prescribed under
Sections 49, 50 and 51 of PD No. 1445 shall become final and
executory.
RODOLFY C. SY (sgd.)
Regional Cluster Director14
The Municipality of Narra, through Demaala, filed the
Motion for Reconsideration15 dated December 2, 2004. It
stressed
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14 Id.
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Thereafter, Demaala, who was no longer the mayor of
the Municipality of Narra, filed a Motion for
Reconsideration.24 Former Vice Governor Joel T. Reyes and
the other members of the Sangguniang Panlalawigan of
Palawan who were held liable under Decision No. 2008-087
filed a separate Motion for Reconsideration.25 The
Commission on Audit’s Decision No. 2011-08326 dated
November 16, 2011 affirmed its September 22, 2008
Decision.
Demaala then filed with this court the present Petition
for Certiorari.27
Respondent Commission on Audit, through the Office of
the Solicitor General, filed its Comment28 on April 20,
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2012. Peti-
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23 Id., at p. 30.
24 Id., at pp. 64-67.
25 Id., at pp. 68-80.
26 Id., at pp. 19-24.
27 Id., at pp. 3-16.
28 Id., at pp. 134-147.
620
The power to tax is an attribute of sovereignty. It is
inherent in the state. Provinces, cities, municipalities, and
barangays are mere territorial and political subdivisions of
the state. They act only as part of the sovereign. Thus, they
do
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621
Article X, Section 5 of the 1987 Constitution is the basis
of the taxing power of local government units:
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Paras, En Banc]; Icard v. City Council of Baguio, 83 Phil. 870, 873 (1949)
[Per J. Reyes, En Banc]; City of Iloilo v. Villanueva, 105 Phil. 337 (1959)
[Per J. Bautista Angelo, En Banc]; and Const. (1987), Art. X, Sec. 1.
32 Icard v. City Council of Baguio, id.
33 Id., citing Cu Unjieng v. Patstone, 42 Phil. 818, 830 (1922) [Per J.
Ostrand, En Banc]; Pacific Commercial Co. v. Romualdez, 49 Phil. 917,
924 (1927) [Per J. Malcolm, En Banc]; Batangas Transportation Co. v.
Provincial Treasure of Batangas, 52 Phil. 190, 196 (1928) [Per J. Villamor,
En Banc]; Baldwin v. Coty Council 53 Ala., p. 437; State v. Smith, 31
Lowa, p. 493; 38 Am Jur pp. 68, 72-73.
622
The taxing power granted by constitutional fiat to local
government units exists in the wider context to “ensure the
autonomy of local governments.”34 As Article II, Section 25
of the 1987 Constitution unequivocally provides:
Article II, Section 25 is complemented by Article X,
Section 2:
The 1935 Constitution was entirely silent on local
autonomy, albeit making a distinction between executive
departments, bureaus, and offices on the one hand, and
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SEC. 11. (1) 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.
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Any trend in the 1973 Constitution towards greater
autonomy for local government units “was aborted in 1972
when Ferdinand Marcos placed the entire country under
martial law [thereby] stunt[ing] the development of local
governments by centralizing the government in Manila.”36
While local autonomy was provided for in the 1973
Constitution, its existence was confined to principle and
theory. Practice neutered all of Article XI of the 1973
Constitution (on local government), including Section 5
which provided for the taxing power of local government
units. Article XI, Section 5 reads:
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Article X, Section 5 of the 1987 Constitution is more
emphatic in empowering local government units in the
matter of taxation compared with Article XI, Section 5 of
the 1973 Constitution. In addition to stating that local
government units have the power to tax (subject to
Congressional guidelines and limitations), Article X,
Section 5 of the 1987 Constitution adds the phrase
“consistent with the basic policy of local autonomy.”
Further, it is definite with the use of funds generated by
local government units through the exercise of their
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IV
The taxing powers of local government units must be
read in relation to their power to effect their basic
autonomy.
Consistent with the 1987 Constitution’s declared
preference, the taxing powers of local government units
must be
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Similarly, in San Juan v. Civil Service Commission,42
this court stated:
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40 364 Phil. 842; 305 SCRA 353 (1999) [Per J. Gonzaga-Reyes, Third
Division].
41 Id., at pp. 856-857; p. 365, citing Cruz, Isagani A., Constitutional
Law, p. 84 (1991) and Bernas, Joaquin G., The Constitution of the
Republic of the Philippines, p. 381 (1st ed, 1988).
42 San Juan v. Civil Service Commission, supra note 39.
43 Id., at p. 279; p. 75.
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The special education fund is not an original creation of
the Local Government Code. It was initially devised by
Republic Act No. 5447.45 The rate of 1% is also not a detail
that is original to the Local Government Code. As discussed
in Commission on Audit v. Province of Cebu:46
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The operative phrase in Section 235’s grant to
municipalities in Metro Manila, cities, and provinces of the
power to impose an additional levy for the special
education fund is prefixed with “may,” thus, “may levy and
collect an annual tax of one percent (1%).”
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Where the provision reads “may,” this word shows that it is not
mandatory but discretionary. It is an auxiliary verb indicating
liberty, opportunity, permission and possibility. The use of the
word “may” in a statute denotes that it is directory in nature and
generally permissive only.49
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48 G.R. Nos. 131481 and 131624, March 16, 2011, 645 SCRA 401 [Per
J. Leonardo-De Castro, First Division].
49 Id., at p. 437, citing Caltex (Philippines), Inc. v. Court of Appeals,
G.R. No. 97753, August 10, 1992, 212 SCRA 448, 463 [Per J. Regalado,
Second Division].
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52 Id.
53 Const. (1987), Art. X, Sec. 5.
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It is evident that the circumstances in Salalima are not
analogous to the circumstances pertinent to petitioner.
While Salalima involved the mishandling of proceeds
which was “tantamount to abuse of authority” and which
“can qualify as technical malversation,” this case involves
the collection of the additional levy for the special
education fund at a rate which, at the time of the collection,
was pursuant to an ordinance that was yet to be
invalidated.
Likewise, Salalima involved the liability of the
provincial officials who were themselves the authors of an
invalid ordinance. In this case, the Municipality of Narra
— as subordinate to the Province of Palawan — merely
enforced a provincial ordinance. Respondent, in its own
Memorandum, acknowledged that it was not even
petitioner but the municipal treasurer who actually
effected the collection at a supposedly erroneous rate.61
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62 Valley Trading Co., Inc. v. CFI of Isabela, 253 Phil. 494; 171 SCRA
501 (1989) [Per J. Regalado, Second Division]. See also Social Justice
Society v. Atienza, 568 Phil. 658, 682-683; 545 SCRA 92, 117 (2008) [Per J.
Corona, First Division].
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