Dadole vs. Commission on Audit

Administrative circulars that impose substantive limitations not found in the enabling statute and which fail publication requirements are void; appropriation ordinances not reviewed by the DBM within 90 days from receipt are deemed valid and effective.

The case addresses the constitutional tension between local autonomy guaranteed under the 1987 Constitution and the supervisory powers of the President over local government units, specifically concerning the authority of cities to grant additional allowances to judges stationed within their jurisdiction.

• The Mandaue City Auditor issued notices of disallowance against petitioner judges for receiving monthly allowances exceeding P1,000, based on LBC 55, and required reimbursement for excess amounts received from April to September 1994
• The judges filed a protest with the City Auditor, which was treated as a motion for reconsideration and indorsed to COA Regional Office No. 7
• On September 21, 1995, the COA denied the motion for reconsideration (COA Decision No. 95-568), holding that LBC 55 had the force and effect of law
• On November 27, 1995, the judges filed a motion for reconsideration
• On May 28, 1996, the COA denied the motion (COA Decision No. 96-282)
• The judges filed a petition for certiorari under Rule 64 with the SC

• Since 1986, RTC and MTC judges of Mandaue City received monthly allowances of P1,260 each through yearly appropriation ordinances enacted by the Sangguniang Panlungsod
• In 1991, the Sangguniang Panlungsod increased the amount to P1,500 per judge
• On March 15, 1994, the DBM issued Local Budget Circular No. 55 (LBC 55), limiting additional allowances to national government officials to P1,000 for provinces/cities and P700 for municipalities, subject to conditions including that the grant was not mandatory and that statutory obligations were fully provided in the budget
• LBC 55 provided for immediate effectivity without publication
• Acting on LBC 55, the Mandaue City Auditor reduced the judges’ allowances to P1,000 monthly beginning October 1994 and demanded reimbursement of excess amounts received from April to September 1994

• LBC 55 is void for infringing on local autonomy by dictating a uniform monetary cap on allowances, which exceeds the President’s supervisory powers and constitutes control
• The circular is ultra vires because Section 458(a)(1)(xi) of RA 7160 contains no statutory ceiling on allowances, only requiring that city finances allow the grant
• LBC 55 is void for lack of publication as required by Tañada v. Tuvera, violating due process and the rule that administrative regulations implementing law must be published to be effective

• The constitutional and statutory authority of cities to grant allowances is not absolute; Congress may set limitations, and the President through the DBM may check compliance with these limitations
• Section 458(a)(1)(xi) of RA 7160 subjects the grant of allowances to the condition that city finances allow it; thus, DBM merely enforces this condition by setting a uniform maximum to ensure fiscal responsibility
• Even if LBC 55 were void, the appropriation ordinance is still illegal because the funds came from the Internal Revenue Allotment (IRA), which under the General Appropriations Acts of 1994 and 1995 does not include allowances for judges as an allowable expenditure

• Procedural Issues: N/A
• Substantive Issues:
  • Whether LBC 55 is void for exceeding the President’s supervisory powers over local government units and for lack of publication
  • Whether the yearly appropriation ordinance enacted by Mandaue City providing for additional allowances to judges contravenes annual appropriation laws enacted by Congress regarding the use of IRA funds

• Procedural: N/A
• Substantive:
  • LBC 55 is null and void. The circular exceeded the President’s supervisory authority under Section 4, Article X of the 1987 Constitution by imposing a uniform cap of P1,000 on allowances when Section 458(a)(1)(xi) of RA 7160 contains no such limitation but only requires that "the finances of the city government allow" the grant. Supervision does not include the power to lay down rules, modify local decisions, or substitute the supervisor’s judgment for that of the local government; it is merely the power of oversight to ensure compliance with law.
  • LBC 55 is void for lack of publication. Following Tañada v. Tuvera and De Jesus v. Commission on Audit, administrative rules and regulations implementing existing law must be published in the Official Gazette or a newspaper of general circulation to be effective. LBC 55 is not a mere interpretative or internal regulation but a substantive rule affecting the rights of judges, requiring prior publication.
  • The appropriation ordinance is valid. The COA failed to prove that Mandaue City used IRA funds to pay the allowances; mere showing that locally generated revenues were insufficient to cover total expenditures does not establish that IRA was the source. Moreover, under Sections 326 and 327 of RA 7160, the DBM’s failure to review the appropriation ordinance within 90 days from receipt resulted in the ordinance being deemed reviewed and continuing in full force and effect.

• Supervision vs. Control — Supervision means overseeing or the power to see that subordinate officers perform their duties, with authority to take action prescribed by law if they fail; control means the power to alter, modify, nullify, or set aside what a subordinate has done and substitute one’s judgment. The President exercises only supervision, not control, over local government units.
• Local Autonomy — Local government units are subject to the President’s supervision only, not control, so long as their acts are exercised within the sphere of their legitimate powers. The President cannot withhold or alter any authority or power given them by the Constitution and law, and cannot interfere unless the LGU acts contrary to law.
• Publication Requirement for Administrative Regulations — Administrative rules and regulations promulgated to enforce or implement existing law must be published in the Official Gazette or a newspaper of general circulation to be effective. Interpretative regulations and those merely internal in nature, regulating only agency personnel, need not be published.
• Deemed Approval of Appropriation Ordinances — Under Sections 326 and 327 of RA 7160, if the DBM (for highly urbanized cities) or the Sangguniang Panlalawigan (for component cities) takes no action on an appropriation ordinance within 90 days from receipt, the ordinance is deemed to have been reviewed in accordance with law and continues in full force and effect.

• "Supervisory power, when contrasted with control, is the power of mere oversight over an inferior body; it does not include any restraining authority over such body."
• "Any directive therefore by the President or any of his or her alter egos seeking to alter the wisdom of a law-conforming judgment on local 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 legislative departments in governing municipal corporations."
• "Setting a uniform amount for the grant of additional allowances is an inappropriate way of enforcing the criterion found in Section 458, par. (a)(1)(xi), of RA 7160. The DBM over-stepped its power of supervision over local government units by imposing a prohibition that did not correspond with the law it sought to implement."
• "Prior publication of laws before they become effective cannot be dispensed with, for the reason that it would deny the public knowledge of the laws that are supposed to govern it."

• Pimentel vs. Aguirre — Cited for the definition of the President’s supervisory power over local governments and its distinction from control.
• Mondano v. Silvosa — Cited for contrasting the President’s power of supervision over local officials with the power of control over executive officials.
• Taule v. Santos — Cited for the principle that the Chief Executive wields no more authority than checking whether local governments perform their duties as provided by law.
• Drilon v. Lim — Cited for delineating the difference between control (laying down rules, substituting judgment) and supervision (seeing to it that rules are followed).
• Tañada vs. Tuvera — Cited for the doctrine that administrative rules implementing existing law must be published to be effective.
• De Jesus vs. Commission on Audit — Cited for the ruling that DBM circulars affecting substantive rights must be published, and lack of publication renders them void.
• Philippine International Trading Corporation vs. Commission on Audit — Cited for the principle that subsequent publication cannot cure the defect of non-publication and retroact to the time of disallowance.

• Section 4, Article X of the 1987 Constitution — Provides that the President shall exercise general supervision over local governments.
• Section 458(a)(1)(xi) of RA 7160 (Local Government Code of 1991) — Authorizes the Sangguniang Panlungsod to provide additional allowances and other benefits to judges "when the finances of the city government allow."
• Sections 326 and 327 of RA 7160 — Provide for the review of appropriation ordinances by the DBM or Sangguniang Panlalawigan, and the deemed approval if no action is taken within 90 days.
• Section 348 of RA 7160 — Provides for COA’s auditorial visitation powers over local government units.
• Administrative Order No. 42 (1993) — Clarified the role of DBM in compensation and classification under RA 7160 vis-à-vis RA 6758.