Domato-Togonon v. Commission on Audit
REITERATIONFacts
The Antecedents: Koronadal City sought to purchase a property for its new city hall. The heirs of Plomillo offered to sell their property, Lot 80, for P30,000,000.00, inclusive of all costs. Subsequently, they revised their offer to P22,000,000.00, with the condition that the city government would shoulder all transfer expenses except realty taxes. The City Appraisal Committee found the offer reasonable and endorsed it for evaluation. Following a positive recommendation, the Sangguniang Panlungsod authorized Mayor Fernando Q. Miguel to enter into a deed of sale with the heirs of Plomillo, agreeing to the revised terms. A Deed of Absolute Sale was executed, but it did not explicitly state that the city government would bear the transfer expenses. Koronadal City subsequently paid P22,000,000.00 for the purchase price and an additional P2,398,403.02 for various taxes and fees related to the transfer of title. Procedural History: Upon post-audit, the audit team issued Audit Observation Memoranda, finding the payments for taxes and fees irregular and contrary to law. Consequently, the Commission on Audit (COA) issued Notice of Disallowance Nos. 05-001-101(04) and 05-002-101(03), disallowing P2,398,403.02 for violating Bureau of Internal Revenue Regulation No. 13-85. The disallowance held several individuals liable, including Marites Domato-Togonon, a member of the Sangguniang Panlungsod. Appeals and motions for reconsideration were denied, leading to a Petition for Review before the COA. The COA denied this petition, affirming the disallowances. The COA's decision became final, but upon motion, the COA Proper En Banc lifted the notice of finality for Togonon, allowing her to file a motion for reconsideration, which was subsequently dismissed. This led to the filing of the present Petition for Certiorari before the Supreme Court. The Petition: Petitioner Marites Domato-Togonon filed a Petition for Certiorari, arguing that the Commission on Audit gravely abused its discretion. She contends that the COA failed to recognize the payment of taxes and fees as part of the contract's consideration, asserting that the city government was not disadvantaged as the P24,398,403.02 paid was significantly lower than the original offer and the property's estimated fair market value. Petitioner also argues that Resolution No. 746 was not an indirect imposition of tax but merely an authorization for the deed of sale, and that the city acted within its corporate functions. Furthermore, she claims the COA disregarded an Office of the Ombudsman resolution that upheld the deed's validity and the Sangguniang Panlungsod's authority. The petition questions whether the COA gravely abused its discretion in upholding the disallowances, specifically regarding the consideration of taxes, the interpretation of Resolution No. 746 as an indirect tax, the prohibition on hiring private lawyers for notarization, and the liability of petitioner for the disallowed amount.
Issue(s)
Whether or not the Commission on Audit gravely abused its discretion in upholding the Notice of Disallowance, encompassing the consideration of Koronadal City's tax payments. Whether or not the Commission on Audit gravely abused its discretion when it regarded Resolution No. 746 as an indirect imposition of tax. Whether or not the Commission on Audit gravely abused its discretion when it deemed Koronadal City's hiring of a private lawyer prohibited. Whether or not petitioner Marites Domato-Togonon should be held liable to pay the disallowed amount.
Ruling
The Petition is partly meritorious. The Supreme Court affirmed the disallowance of the expenses but modified the ruling by excusing petitioner Marites Domato-Togonon from the civil obligation of returning the disallowed amount.
Ratio Decidendi
On the issue of whether the Commission on Audit gravely abused its discretion in upholding the Notice of Disallowance, encompassing the consideration of Koronadal City's tax payments: The Court ruled that the Deed of Absolute Sale did not contain any stipulation that the vendee (Koronadal City) would shoulder the expenses of the sale's execution and registration. In the absence of such a stipulation, Article 1487 of the Civil Code applies, which states that the expenses for the execution and registration of the sale shall be borne by the vendor. The Court found that the petitioner's reliance on the seller's offer and Resolution No. 746 was unavailing due to the Parol Evidence Rule. The Deed of Absolute Sale was clear and unambiguous, and none of the exceptions to the Parol Evidence Rule applied, thus the written agreement prevailed. On the issue of whether the Commission on Audit gravely abused its discretion when it regarded Resolution No. 746 as an indirect imposition of tax: The Court affirmed the COA's finding that Koronadal City's payment of taxes and fees constituted an indirect imposition of tax against the city, which is prohibited by Section 133(o) of the Local Government Code. This section explicitly prohibits local government units from levying taxes, fees, or charges of any kind on other local government units. The Court emphasized that what cannot be legally done directly cannot be done indirectly, meaning the prohibition against imposing taxes on local government units cannot be circumvented by entering into a contract and assuming responsibility for tax payments. Furthermore, several of the taxes paid were national taxes, and the Local Government Code does not authorize a Sanggunian to legislate exemptions or shift the burden of national taxes, especially to benefit particular individuals. On the issue of whether the Commission on Audit gravely abused its discretion when it deemed Koronadal City's hiring of a private lawyer prohibited: The Court noted that public funds were disbursed for the services of Atty. Joffrey Montefrio in notarizing the deed of sale. COA Circular No. 98-002, amending previous circulars, prohibits the utilization of public funds for the payment of private legal counsel or law firms by local government units, except in specific instances provided in Section 481(b)(3)(i) of the Local Government Code, such as when a component city or municipality is a party adverse to the provincial government or another component city or municipality. The records did not show compliance with these circulars or the existence of any exceptional circumstances justifying the hiring of a private lawyer for notarization. Therefore, the COA's disallowance of the notarial fees was proper. On the issue of whether petitioner Marites Domato-Togonon should be held liable to pay the disallowed amount: The Court ruled that petitioner Togonon should be excused from the civil obligation of returning the disallowed amount. The evidence did not show that her actions were attended by bad faith, malice, or gross negligence. She consistently maintained that the city government was not disadvantaged and was, in fact, benefited by the transaction. Furthermore, the disallowed amount represented taxes that had already accrued to the government, and requiring her to return these amounts would result in the government being twice benefited. The Court applied the guidelines from Madera v. Commission on Audit, which allows excusing the return of disallowed amounts based on undue prejudice, social justice considerations, and other bona fide exceptions, particularly when the disallowed amount represents taxes already paid to the government.
Main Doctrine
The Commission on Audit (COA) correctly disallowed the payment of taxes and fees by the City of Koronadal, as the Deed of Absolute Sale did not stipulate that the vendee would shoulder these expenses, and Article 1487 of the Civil Code presumes the vendor bears such costs unless otherwise agreed. Furthermore, the COA's disallowance was upheld as the city's payment constituted an indirect imposition of tax, prohibited by Section 133(o) of the Local Government Code. However, the petitioner, Marites Domato-Togonon, was excused from returning the disallowed amount due to lack of bad faith, malice, or gross negligence, and the fact that the disallowed taxes had already accrued to the government.