PUBLIC CORPORATION 2.3.2.

In the light of the authority granted to the local government units

under the Local Government Code to provide for additional allowances
G.R. No. 125350 December 3, 2002 and other benefits to national government officials and employees
assigned in their locality, such additional allowances in the form of
HON. RTC JUDGES MERCEDES G. DADOLE (Executive Judge, Branch 28), honorarium at rates not exceeding P1,000.00 in provinces and cities and
ULRIC R. CAÑETE (Presiding Judge, Branch 25), P700.00 in municipalities may be granted subject to the following
AGUSTINE R. VESTIL (Presiding Judge, Branch 56), conditions:
HON. MTC JUDGES TEMISTOCLES M. BOHOLST (Presiding Judge, Branch 1),
VICENTE C. FANILAG (Judge Designate, Branch 2), a) That the grant is not mandatory on the part of the LGUs;
and WILFREDO A. DAGATAN (Presiding Judge, Branch 3), all of Mandaue
City, petitioners, b) That all contractual and statutory obligations of the LGU including the
vs. implementation of R.A. 6758 shall have been fully provided in the budget;
COMMISSION ON AUDIT, respondent.
c) That the budgetary requirements/limitations under Section 324 and
DECISION 325 of R.A. 7160 should be satisfied and/or complied with; and

CORONA, J.: d) That the LGU has fully implemented the devolution of
functions/personnel in accordance with R.A. 7160.3" (italics supplied)
Before us is a petition for certiorari under Rule 64 to annul the decision1 and
resolution2, dated September 21, 1995 and May 28, 1996, respectively, of the xxx xxx xxx
respondent Commission on Audit (COA) affirming the notices of the Mandaue City
Auditor which diminished the monthly additional allowances received by the The said circular likewise provided for its immediate effectivity without need of
petitioner judges of the Regional Trial Court (RTC) and Municipal Trial Court publication:
(MTC) stationed in Mandaue City.
"5.0 EFFECTIVITY
The undisputed facts are as follows:
This Circular shall take effect immediately."
In 1986, the RTC and MTC judges of Mandaue City started receiving monthly
allowances of P1,260 each through the yearly appropriation ordinance enacted by Acting on the DBM directive, the Mandaue City Auditor issued notices of
the Sangguniang Panlungsod of the said city. In 1991, Mandaue City increased the disallowance to herein petitioners, namely, Honorable RTC Judges Mercedes G.
amount to P1,500 for each judge. Dadole, Ulric R. Cañete, Agustin R. Vestil, Honorable MTC Judges Temistocles M.
Boholst, Vicente C. Fanilag and Wilfredo A. Dagatan, in excess of the amount
On March 15, 1994, the Department of Budget and Management (DBM) issued authorized by LBC 55. Beginning October, 1994, the additional monthly
the disputed Local Budget Circular No. 55 (LBC 55) which provided that: allowances of the petitioner judges were reduced to P1,000 each. They were also
asked to reimburse the amount they received in excess of P1,000 from April to
"x x x xxx xxx September, 1994.
The petitioner judges filed with the Office of the City Auditor a protest against the b) Provide criteria and guidelines for the grant of
notices of disallowance. But the City Auditor treated the protest as a motion for all allowances and additional forms of compensation to local
reconsideration and indorsed the same to the COA Regional Office No. 7. In turn, government employees; xxx." (underscoring supplied)
the COA Regional Office referred the motion to the head office with a
recommendation that the same be denied. To operationalize the aforecited presidential directive, DBM issued LBC No. 55,
dated March 15, 1994, whose effectivity clause provides that:
On September 21, 1995, respondent COA rendered a decision denying
petitioners' motion for reconsideration. The COA held that: xxx xxx xxx

The issue to be resolved in the instant appeal is whether or not the City "5.0 EFFECTIVITY
Ordinance of Mandaue which provides a higher rate of allowances to the
appellant judges may prevail over that fixed by the DBM under Local Budget This Circular shall take effect immediately."
Circular No. 55 dated March 15, 1994.
It is a well-settled rule that implementing rules and regulations promulgated by
xxx xxx xxx administrative or executive officer in accordance with, and as authorized by law,
has the force and effect of law or partake the nature of a statute (Victorias Milling
Applying the foregoing doctrine, appropriation ordinance of local government Co., Inc., vs. Social Security Commission, 114 Phil. 555, cited in Agpalo's Statutory
units is subject to the organizational, budgetary and compensation policies of Construction, 2nd Ed. P. 16; Justice Cruz's Phil. Political Law, 1984 Ed., p. 103;
budgetary authorities (COA 5th Ind., dated March 17, 1994 re: Province of Espanol vs. Phil Veterans Administration, 137 SCRA 314; Antique Sawmills Inc. vs.
Antique; COA letter dated May 17, 1994 re: Request of Hon. Renato Leviste, Cong. Tayco, 17 SCRA 316).
1st Dist. Oriental Mindoro). In this regard, attention is invited to Administrative
Order No. 42 issued on March 3, 1993 by the President of the Philippines xxx xxx xxx
clarifying the role of DBM in the compensation and classification of local
government positions under RA No. 7160 vis-avis the provisions of RA No. 6758 in There being no statutory basis to grant additional allowance to judges in excess of
view of the abolition of the JCLGPA. Section 1 of said Administrative Order P1,000.00 chargeable against the local government units where they are
provides that: stationed, this Commission finds no substantial grounds or cogent reason to
disturb the decision of the City Auditor, Mandaue City, disallowing in audit the
"Section 1. The Department of Budget and Management as the lead allowances in question. Accordingly, the above-captioned appeal of the MTC and
administrator of RA No. 6758 shall, through its Compensation and RTC Judges of Mandaue City, insofar as the same is not covered by Circular Letter
Position Classification Bureau, continue to have the following No. 91-7, is hereby dismissed for lack of merit.
responsibilities in connection with the implementation of the Local
Government Code of 1991: xxx xxx x x x4

a) Provide guidelines on the classification of local government On November 27, 1995, Executive Judge Mercedes Gozo-Dadole, for and in behalf
positions and on the specific rates of pay therefore; of the petitioner judges, filed a motion for reconsideration of the decision of the
COA. In a resolution dated May 28, 1996, the COA denied the motion.
Hence, this petition for certiorari by the petitioner judges, submitting the On the other hand, the yearly appropriation ordinance providing for additional
following questions for resolution: allowances to judges is allowed by Section 458, par. (a)(1)[xi], of RA 7160,
otherwise known as the Local Government Code of 1991, which provides that:
I
Sec. 458. Powers, Duties, Functions and Compensation. – (a) The sangguniang
HAS THE CITY OF MANDAUE STATUTORY AND CONSTITUTIONAL BASIS TO panlungsod, as the legislative body of the city, shall enact ordinances, approve
PROVIDE ADDITIONAL ALLOWANCES AND OTHER BENEFITS TO JUDGES resolutions and appropriate funds for the general welfare of the city and its
STATIONED IN AND ASSIGNED TO THE CITY? inhabitants pursuant to Section 16 of this Code and in the proper exercise of the
corporate powers of the city as provided for under Section 22 of this Code, and
II shall:

CAN AN ADMINISTRATIVE CIRCULAR OR GUIDELINE SUCH AS LOCAL BUDGET (1) Approve ordinances and pass resolutions necessary for an efficient and
CIRCULAR NO. 55 RENDER INOPERATIVE THE POWER OF THE LEGISLATIVE BODY effective city government, and in this connection, shall:
OF A CITY BY SETTING A LIMIT TO THE EXTENT OF THE EXERCISE OF SUCH
POWER? xxx xxx xxx

III (xi) When the finances of the city government allow, provide for additional
allowances and other benefits to judges, prosecutors, public elementary and high
HAS THE COMMISSION ON AUDIT CORRECTLY INTERPRETED LOCAL BUDGET school teachers, and other national government officials stationed in or assigned
CIRCULAR NO. 55 TO INCLUDE MEMBERS OF THE JUDICIARY IN FIXING THE to the city; (italics supplied)
CEILING OF ADDITIONAL ALLOWANCES AND BENEFITS TO BE PROVIDED TO
JUDGES STATIONED IN AND ASSIGNED TO MANDAUE CITY BY THE CITY Instead of filing a comment on behalf of respondent COA, the Solicitor General
GOVERNMENT AT P1,000.00 PER MONTH NOTWITHSTANDING THAT THEY HAVE filed a manifestation supporting the position of the petitioner judges. The
BEEN RECEIVING ALLOWANCES OF P1,500.00 MONTHLY FOR THE PAST FIVE Solicitor General argues that (1) DBM only enjoys the power to review and
YEARS? determine whether the disbursements of funds were made in accordance with
the ordinance passed by a local government unit while (2) the COA has no more
IV than auditorial visitation powers over local government units pursuant to Section
348 of RA 7160 which provides for the power to inspect at any time the financial
IS LOCAL BUDGET CIRCULAR NO. 55 DATED MARCH 15, 1994 ISSUED BY THE accounts of local government units.
DEPARTMENT OF BUDGET AND MANAGEMENT VALID AND ENFORCEABLE
CONSIDERING THAT IT WAS NOT DULY PUBLISHED IN ACCODANCE WITH LAW?5 Moreover, the Solicitor General opines that "the DBM and the respondent are
only authorized under RA 7160 to promulgate a Budget Operations Manual for
Petitioner judges argue that LBC 55 is void for infringing on the local autonomy of local government units, to improve and systematize methods, techniques and
Mandaue City by dictating a uniform amount that a local government unit can procedures employed in budget preparation, authorization, execution and
disburse as additional allowances to judges stationed therein. They maintain that accountability" pursuant to Section 354 of RA 7160. The Solicitor General points
said circular is not supported by any law and therefore goes beyond the out that LBC 55 was not exercised under any of the aforementioned provisions.
supervisory powers of the President. They further allege that said circular is void
for lack of publication.
Respondent COA, on the other hand, insists that the constitutional and statutory of control by Congress and the power of supervision by the President. Section 4 of
authority of a city government to provide allowances to judges stationed therein Article X of the 1987 Philippine Constitution provides that:
is not absolute. Congress may set limitations on the exercise of autonomy. It is for
the President, through the DBM, to check whether these legislative limitations Sec. 4. The President of the Philippines shall exercise general supervision over
are being followed by the local government units. local governments. x x x

One such law imposing a limitation on a local government unit's autonomy is In Pimentel vs. Aguirre7, we defined the supervisory power of the President and
Section 458, par. (a) (1) [xi], of RA 7160, which authorizes the disbursement of distinguished it from the power of control exercised by Congress. Thus:
additional allowances and other benefits to judges subject to the condition that
the finances of the city government should allow the same. Thus, DBM is merely This provision (Section 4 of Article X of the 1987 Philippine Constitution) has been
enforcing the condition of the law when it sets a uniform maximum amount for interpreted to exclude the power of control. In Mondano v. Silvosa,i 5 the Court
the additional allowances that a city government can release to judges stationed contrasted the President's power of supervision over local government officials
therein. with that of his power of control over executive officials of the national
government. It was emphasized that the two terms -- supervision and control --
Assuming arguendo that LBC 55 is void, respondent COA maintains that the differed in meaning and extent. The Court distinguished them as follows:
provisions of the yearly approved ordinance granting additional allowances to
judges are still prohibited by the appropriation laws passed by Congress every "x x x In administrative law, supervision means overseeing or the power or
year. COA argues that Mandaue City gets the funds for the said additional authority of an officer to see that subordinate officers perform their duties. If the
allowances of judges from the Internal Revenue Allotment (IRA). But the General latter fail or neglect to fulfill them, the former may take such action or step as
Appropriations Acts of 1994 and 1995 do not mention the disbursement of prescribed by law to make them perform their duties. Control, on the other hand,
additional allowances to judges as one of the allowable uses of the IRA. Hence, means the power of an officer to alter or modify or nullify or set aside what a
the provisions of said ordinance granting additional allowances, taken from the subordinate officer ha[s] done in the performance of his duties and to substitute
IRA, to herein petitioner judges are void for being contrary to law. the judgment of the former for that of the latter."ii 6

To resolve the instant petition, there are two issues that we must address: (1) In Taule v. Santos,iii 7 we further stated that the Chief Executive wielded no more
whether LBC 55 of the DBM is void for going beyond the supervisory powers of authority than that of checking whether local governments or their officials were
the President and for not having been published and (2) whether the yearly performing their duties as provided by the fundamental law and by statutes. He
appropriation ordinance enacted by the City of Mandaue that provides for cannot interfere with local governments, so long as they act within the scope of
additional allowances to judges contravenes the annual appropriation laws their authority. "Supervisory power, when contrasted with control, is the power
enacted by Congress. of mere oversight over an inferior body; it does not include any restraining
authority over such body,"iv 8 we said.
We rule in favor of the petitioner judges.
In a more recent case, Drilon v. Lim,v 9 the difference between control and
On the first issue, we declare LBC 55 to be null and void. supervision was further delineated. Officers in control lay down the rules in the
performance or accomplishment of an act. If these rules are not followed, they
We recognize that, although our Constitution6 guarantees autonomy to local may, in their discretion, order the act undone or redone by their subordinates or
government units, the exercise of local autonomy remains subject to the power even decide to do it themselves. On the other hand, supervision does not cover
such authority. Supervising officials merely see to it that the rules are followed,
but they themselves do not lay down such rules, nor do they have the discretion government may allow the grant of additional allowances higher than P1,000 if
to modify or replace them. If the rules are not observed, they may order the work the revenues of the said city government exceed its annual expenditures. Thus, to
done or redone, but only to conform to such rules. They may not prescribe their illustrate, a city government with locally generated annual revenues of P40
own manner of execution of the act. They have no discretion on this matter million and expenditures of P35 million can afford to grant additional allowances
except to see to it that the rules are followed. of more than P1,000 each to, say, ten judges inasmuch as the finances of the city
can afford it.
Under our present system of government, executive power is vested in the
President.vi10 The members of the Cabinet and other executive officials are merely Setting a uniform amount for the grant of additional allowances is an
alter egos. As such, they are subject to the power of control of the President, at inappropriate way of enforcing the criterion found in Section 458, par. (a)(1)(xi),
whose will and behest they can be removed from office; or their actions and of RA 7160. The DBM over-stepped its power of supervision over local
decisions changed, suspended or reversed.vii 11 In contrast, the heads of political government units by imposing a prohibition that did not correspond with the law
subdivisions are elected by the people. Their sovereign powers emanate from the it sought to implement. In other words, the prohibitory nature of the circular had
electorate, to whom they are directly accountable. By constitutional fiat, they are no legal basis.
subject to the President's supervision only, not control, so long as their acts are
exercised within the sphere of their legitimate powers. By the same token, the Furthermore, LBC 55 is void on account of its lack of publication, in violation of
President may not withhold or alter any authority or power given them by the our ruling in Tañada vs. Tuvera8where we held that:
Constitution and the law.
xxx. Administrative rules and regulations must also be published if their purpose
Clearly then, the President can only interfere in the affairs and activities of a local is to enforce or implement existing law pursuant to a valid delegation.
government unit if he or she finds that the latter has acted contrary to law. This is
the scope of the President's supervisory powers over local government units. Interpretative regulations and those merely internal in nature, that is, regulating
Hence, the President or any of his or her alter egos cannot interfere in local affairs only the personnel of an administrative agency and the public, need not be
as long as the concerned local government unit acts within the parameters of the published. Neither is publication required of the so-called letters of instruction
law and the Constitution. Any directive therefore by the President or any of his or issued by administrative superiors concerning the rules or guidelines to be
her alter egos seeking to alter the wisdom of a law-conforming judgment on local followed by their subordinates in the performance of their duties.
affairs of a local government unit is a patent nullity because it violates the
principle of local autonomy and separation of powers of the executive and Respondent COA claims that publication is not required for LBC 55 inasmuch as it
legislative departments in governing municipal corporations. is merely an interpretative regulation applicable to the personnel of an LGU. We
disagree. In De Jesus vs. Commission on Audit9 where we dealt with the same
Does LBC 55 go beyond the law it seeks to implement? Yes. issue, this Court declared void, for lack of publication, a DBM circular that
disallowed payment of allowances and other additional compensation to
LBC 55 provides that the additional monthly allowances to be given by a local government officials and employees. In refuting respondent COA's argument that
government unit should not exceed P1,000 in provinces and cities and P700 in said circular was merely an internal regulation, we ruled that:
municipalities. Section 458, par. (a)(1)(xi), of RA 7160, the law that supposedly
serves as the legal basis of LBC 55, allows the grant of additional allowances to On the need for publication of subject DBM-CCC No. 10, we rule in the
judges "when the finances of the city government allow." The said provision does affirmative. Following the doctrine enunciated in Tañada v. Tuvera, publication in
not authorize setting a definite maximum limit to the additional allowances the Official Gazette or in a newspaper of general circulation in the Philippines is
granted to judges. Thus, we need not belabor the point that the finances of a city required since DBM-CCC No. 10 is in the nature of an administrative circular the
purpose of which is to enforce or implement an existing law. Stated differently, before they become effective cannot be dispensed with, for the reason that it
to be effective and enforceable, DBM-CCC No. 10 must go through the requisite would deny the public knowledge of the laws that are supposed to govern it."11
publication in the Official Gazette or in a newspaper of general circulation in the
Philippines. We now resolve the second issue of whether the yearly appropriation ordinance
enacted by Mandaue City providing for fixed allowances for judges contravenes
In the present case under scrutiny, it is decisively clear that DBM-CCC No. 10, any law and should therefore be struck down as null and void.
which completely disallows payment of allowances and other additional
compensation to government officials and employees, starting November 1, According to respondent COA, even if LBC 55 were void, the ordinances enacted
1989, is not a mere interpretative or internal regulation. It is something more by Mandaue City granting additional allowances to the petitioner judges would
than that. And why not, when it tends to deprive government workers of their "still (be) bereft of legal basis for want of a lawful source of funds considering that
allowance and additional compensation sorely needed to keep body and soul the IRA cannot be used for such purposes." Respondent COA showed that
together. At the very least, before the said circular under attack may be Mandaue City's funds consisted of locally generated revenues and the IRA. From
permitted to substantially reduce their income, the government officials and 1989 to 1995, Mandaue City's yearly expenditures exceeded its locally generated
employees concerned should be apprised and alerted by the publication of revenues, thus resulting in a deficit. During all those years, it was the IRA that
subject circular in the Official Gazette or in a newspaper of general circulation in enabled Mandaue City to incur a surplus. Respondent avers that Mandaue City
the Philippines – to the end that they be given amplest opportunity to voice out used its IRA to pay for said additional allowances and this violated paragraph 2 of
whatever opposition they may have, and to ventilate their stance on the the Special Provisions, page 1060, of RA 7845 (The General Appropriations Act of
matter. This approach is more in keeping with democratic precepts and 1995)12 and paragraph 3 of the Special Provision, page 1225, of RA 7663 (The
rudiments of fairness and transparency. (emphasis supplied) General Appropriations Act of 1994)13 which specifically identified the objects of
expenditure of the IRA. Nowhere in said provisions of the two budgetary laws
In Philippine International Trading Corporation vs. Commission on Audit10, we does it say that the IRA can be used for additional allowances of judges.
again declared the same circular as void, for lack of publication, despite the fact Respondent COA thus argues that the provisions in the ordinance providing for
that it was re-issued and then submitted for publication. Emphasizing the such disbursement are against the law, considering that the grant of the subject
importance of publication to the effectivity of a regulation, we therein held that: allowances is not within the specified use allowed by the aforesaid yearly
appropriations acts.
It has come to our knowledge that DBM-CCC No. 10 has been re-issued in its
entirety and submitted for publication in the Official Gazette per letter to the We disagree.
National Printing Office dated March 9, 1999. Would the subsequent publication
thereof cure the defect and retroact to the time that the above-mentioned items Respondent COA failed to prove that Mandaue City used the IRA to spend for the
were disallowed in audit? additional allowances of the judges. There was no evidence submitted by COA
showing the breakdown of the expenses of the city government and the funds
The answer is in the negative, precisely for the reason that publication is required used for said expenses. All the COA presented were the amounts expended, the
as a condition precedent to the effectivity of a law to inform the public of the locally generated revenues, the deficit, the surplus and the IRA received each
contents of the law or rules and regulations before their rights and interests are year. Aside from these items, no data or figures were presented to show that
affected by the same. From the time the COA disallowed the expenses in audit up Mandaue City deducted the subject allowances from the IRA. In other words, just
to the filing of herein petition the subject circular remained in legal limbo due to because Mandaue City's locally generated revenues were not enough to cover its
its non-publication. As was stated in Tañada v. Tuvera, "prior publication of laws expenditures, this did not mean that the additional allowances of petitioner
judges were taken from the IRA and not from the city's own revenues.
Moreover, the DBM neither conducted a formal review nor ordered a disapproval
of Mandaue City's appropriation ordinances, in accordance with the procedure
outlined by Sections 326 and 327 of RA 7160 which provide that:

Section 326. Review of Appropriation Ordinances of Provinces, Highly Urbanized

Cities, Independent Component Cities, and Municipalities within the Metropolitan
Manila Area. The Department of Budget and Management shall review
ordinances authorizing the annual or supplemental appropriations of provinces,
highly-urbanized cities, independent component cities, and municipalities within
the Metropolitan Manila Area in accordance with the immediately succeeding
Section.

Section 327. Review of Appropriation Ordinances of Component Cities and

Municipalities.- The sangguninang panlalawigan shall review the ordinance
authorizing annual or supplemental appropriations of component cities and
municipalities in the same manner and within the same period prescribed for the
review of other ordinances.

If within ninety (90) days from receipt of copies of such ordinance, the
sangguniang panlalawigan takes no action thereon, the same shall be deemed
to have been reviewed in accordance with law and shall continue to be in full
force and effect. (emphasis supplied)

Within 90 days from receipt of the copies of the appropriation ordinance, the
DBM should have taken positive action. Otherwise, such ordinance was deemed
to have been properly reviewed and deemed to have taken effect. Inasmuch as,
in the instant case, the DBM did not follow the appropriate procedure for
reviewing the subject ordinance of Mandaue City and allowed the 90-day period
to lapse, it can no longer question the legality of the provisions in the said
ordinance granting additional allowances to judges stationed in the said city.

WHEREFORE, the petition is hereby GRANTED, and the assailed decision and
resolution, dated September 21, 1995 and May 28, 1996, respectively, of the
Commission on Audit are hereby set aside.

No costs.

SO ORDERED.