Guialani v. Court of Appeals
REITERATIONFacts
The Antecedents: Respondent Oscar Moreno, upon election as Mayor of Cagayan de Oro City, designated respondent Dr. Glenn Bañez as Officer-in-Charge (OIC) of the City Treasurer's Office. Bañez reviewed tax records and issued a Notice of Assessment to Ajinomoto Philippines Corporation (Ajinomoto) for deficiency tax amounting to P2,924,428.34 for the years 2006-2012. Ajinomoto protested the assessment, particularly its retroactive application and the imposition of surcharges. During court-assisted mediation, Ajinomoto and the City Government, represented by Bañez, signed a Settlement Agreement wherein Ajinomoto agreed to pay P300,000.00 as full settlement. A Joint Motion to Dismiss was filed and approved by the Regional Trial Court (RTC). Procedural History: William Guialani filed a complaint before the Office of the Ombudsman charging Moreno and Bañez with Grave Abuse of Authority, Grave Misconduct, and Violation of R.A. 6713, alleging that Bañez lacked authority to enter into the settlement without Sangguniang Panlungsod (Sanggunian) consent, as required by the Local Government Code (LGC). The Ombudsman found Moreno and Bañez guilty of Grave Misconduct and ordered their dismissal. Moreno and Bañez filed petitions for certiorari with the Court of Appeals (CA) seeking to enjoin their dismissal, and the CA issued a Temporary Restraining Order (TRO) and later a Writ of Preliminary Injunction. Subsequently, Moreno and Bañez filed petitions for review assailing the Ombudsman's decision. The CA reversed the Ombudsman's decision, dismissing the administrative charges for lack of merit, and dismissed the certiorari petitions as moot. The Ombudsman and Guialani filed their respective petitions for review on certiorari with the Supreme Court. The Petition: The consolidated petitions before the Supreme Court questioned whether Moreno and Bañez were guilty of grave misconduct, grave abuse of authority, and violation of R.A. 6713 for entering into the settlement agreement without prior Sanggunian authorization. Guialani also assailed the CA's issuance of the TRO and writ of preliminary injunction.
Issue(s)
Whether respondents Oscar S. Moreno and Glenn C. Bañez are guilty of grave misconduct, grave abuse of authority, and violation of R.A. 6713 in entering into a settlement agreement with Ajinomoto Corporation, reducing its deficiency local government tax from P2,924,428.00 to P300,000.00, without prior authorization from the Sangguniang Panlungsod of Cagayan de Oro City; and the related administrative liabilities of Glenn C. Bañez and Oscar S. Moreno. Whether the Court of Appeals gravely erred in issuing a Temporary Restraining Order (TRO) and writ of preliminary injunction enjoining the Department of the Interior and Local Government (DILG) from enforcing the decision of the Office of the Ombudsman.
Ruling
The petitions are partially granted. The Supreme Court affirmed the Court of Appeals' decision in part, finding respondent Glenn C. Bañez guilty of Simple Misconduct and meting the penalty of suspension for three (3) months without pay. The administrative charge against respondent Oscar S. Moreno was dismissed for insufficiency of evidence. The petition assailing the CA's issuance of the TRO and writ of preliminary injunction was dismissed for being moot and academic.
Ratio Decidendi
On the issue of grave misconduct, grave abuse of authority, and violation of R.A. 6713 in entering into the settlement agreement; and the related administrative liabilities of Glenn C. Bañez and Oscar S. Moreno: The Supreme Court ruled that a settlement agreement reducing a taxpayer's deficiency local government tax requires prior authorization from the Sangguniang Panlungsod. The Court emphasized that the power to impose taxes and grant tax exemptions, incentives, or reliefs is a legislative function vested in the Sanggunian through ordinances, as provided in Sections 132 and 192 of the Local Government Code (LGC). A settlement agreement, which effectively waives a portion of government revenue, constitutes a form of tax relief and binds the local government unit to specific terms and conditions, thus falling under the purview of Section 22(c) of the LGC, which requires prior authorization from the Sanggunian for contracts entered into by the local chief executive on behalf of the local government unit. The Court found that the CA erred in ruling that such approval was not necessary, citing that the settlement agreement was not a 'contract' creating new obligations, as it clearly involves reciprocal concessions to resolve differences and put an end to litigation, thereby creating juridical necessity on the part of the City Government to collect the compromised amount. The Court clarified that while the Local Treasurer has the power to assess and decide protests under Section 195 of the LGC, this power is not unbridled and does not extend to unilaterally entering into settlement agreements for duly assessed tax deficiencies, especially after a case has been filed in court questioning the assessment. The Court noted that respondent Bañez failed to decide Ajinomoto's protest within the prescribed period, which led to the filing of an appeal, and thus he was precluded from claiming a residual power to arbitrarily adjust the assessment. The Court found Bañez guilty of simple misconduct, not grave misconduct, because while he failed to seek Sanggunian authority before settling Ajinomoto's tax deficiency, the elements of corruption, clear intent to violate the law, or flagrant disregard of an established rule were absent. There was no evidence that Bañez benefited from the transaction. The Court reasoned that the law requiring Sanggunian approval was intended to prevent abuses by the City Treasurer or Mayor in unilaterally adjusting tax assessments without legal basis. Therefore, Bañez was meted the penalty of suspension for three (3) months without pay, classified as a less grave offense. The Court found insufficient evidence to establish Moreno's liability or culpability. While Moreno, as Mayor, had supervisory powers over Bañez, the records lacked any evidence showing that Bañez's act of executing the settlement agreement was done under Moreno's supervision or instruction. Moreno's signature was not on the agreement, nor was there proof that he authorized Bañez to sign on his behalf. The Court held that Moreno's mere supervision is not sufficient basis for liability, and it must be clearly proven that his acts sanctioned the execution of the agreement, which was absent in this case. Consequently, the administrative charges against Moreno were dismissed. The Court agreed with the Ombudsman that there was no substantial evidence to prove the charges of grave abuse of authority and violation of R.A. 6713 against the respondents. On the issuance of the TRO and writ of preliminary injunction: The Supreme Court affirmed the CA's power to issue TROs and writs of preliminary injunction in aid of its appellate jurisdiction to preserve the subject of the action and give effect to its final judgment. However, the Court found that the CA's issuance of these reliefs in G.R. Nos. 221253-54 was rendered moot and academic. This was because the CA had subsequently dismissed the certiorari petitions filed by Moreno and Bañez on account of mootness, as they were superseded by the filing of their petitions for review under Rule 43. The Court explained that an issue becomes moot when it ceases to present a justiciable controversy, and in this instance, the CA's earlier ruling on the TRO and injunction was superseded by its later dismissal of the certiorari petitions, rendering the issue of the TRO's validity no longer justiciable.
Main Doctrine
A settlement agreement reducing a taxpayer's deficiency local government tax requires prior authorization from the Sangguniang Panlungsod, as it constitutes a form of tax relief and involves obligations binding the local government unit, necessitating compliance with Section 22(c) of the Local Government Code. Failure to secure such authorization may constitute simple misconduct.