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GOV. LUIS RAYMUND F. VILLAFUERTE v. JESSE M. ROBREDO

FACTS:

The petitioners, former Governor Luis Raymund F. Villafuerte, Jr. and the Province of Camarines Sur, filed a petition for certiorari and prohibition seeking to annul and set aside certain issuances made by the late Secretary Jesse M. Robredo in his capacity as Secretary of the Department of the Interior and Local Government (DILG). The issuances in question are Memorandum Circular No. 2010-83, Memorandum Circular No. 2010-138, and Memorandum Circular No. 2011-08. These issuances were challenged on the grounds that they are unconstitutional and were issued with grave abuse of discretion amounting to lack or excess of jurisdiction.

The case stemmed from an examination and audit conducted by the Commission on Audit on the utilization of the Internal Revenue Allotment (IRA) by local government units (LGUs) in 1993-1994. It was found that a substantial portion of the 20% development fund of some LGUs was not utilized for development projects but instead diverted to expenses chargeable against the Maintenance and Other Operating Expenses. In response, the DILG issued Memorandum Circular No. 95-216, providing policies and guidelines on the utilization of the development fund component of the IRA. Subsequent issuances were made in relation to the appropriation and utilization of the 20% of the IRA for development projects.

The respondent DILG Secretary issued the challenged memoranda to promote good governance through increased transparency and accountability of LGUs. The petitioners argued that these issuances are unconstitutional and were issued with grave abuse of discretion.

The case involves the issuance of Memorandum Circular (MC) No. 2010-101 by the DILG, which requires local government units (LGUs) to make full disclosure of certain financial information. The circular mandates LGUs to disclose various information, including the Statement of Receipts and Expenditures, Trust Fund Utilization, Special Education Fund Utilization, 20% Component of the Internal Revenue Allotment Utilization, Gender and Development Fund Utilization, Statement of Debt Service, Annual Procurement Plan, Items to Bid, Bid Results, and Abstract of Bids.

The circular also states that non-compliance will be met with sanctions in accordance with pertinent laws, rules, and regulations. Subsequently, the respondent issued MC No. 2010-138, which reiterated the utilization of the 20% component of the IRA and enumerated expenses for which the fund must not be used. On January 13, 2011, the respondent issued MC No. 2011-08, which mandated legal and administrative authority for the use and disbursement of the Internal Revenue Allotment of LGUs, as well as the posting of detailed information on their websites and imposed sanctions for non-compliance.

Governor Villafuerte, together with the Provincial Government of Camarines Sur, filed a petition seeking to nullify these memorandum circulars, arguing that they violated the principles of local autonomy and fiscal autonomy enshrined in the Constitution and the Local Government Code (LGC) of 1991. They raised two main issues: first, that the Secretary committed grave abuse of discretion in violation of local and fiscal autonomy, and second, that the Secretary assumed legislative powers beyond the intent of the Constitution and the LGC. The respondent argued that the petition was premature and lacked an actual case or controversy, but the Court disagreed, stating that an actual controversy existed because the respondent had already implemented the circulars, and the petitioners had received an Audit Observation Memorandum requiring them to comment on their non-compliance with the circulars.

ISSUES:

  1. Whether or not the issuance of the Audit Observation Memorandum (AOM) requiring comment on alleged non-compliance violates the right to due process.

  2. Whether or not the petitioners are required to exhaust administrative remedies before filing a court case challenging the validity of the issuances.

  3. Whether or not the respondent exceeded his supervisory powers when he issued MC No. 2010-138.

  4. Whether or not MC No. 2010-138 imposes control over LGUs.

  5. Whether the enumeration of expenses in the circular restricts the discretion of LGUs in the utilization of their funds

  6. Whether the provision of sanctions in the circular indicates interference in the fiscal autonomy of LGUs

  7. Whether the requirement to publicly post budgets, expenditures, contracts, and loans of LGUs goes beyond the letter and spirit of the Local Government Code and the Government Procurement Reform Act

  8. Do the assailed issuances of the respondent violate the fiscal autonomy of local government units (LGUs)?

  9. Do the posting requirements in the assailed issuances interfere with the discretion of LGUs in the specification of their priority projects and the allocation of their budgets?

  10. Does Section 352 of the Local Government Code (LGC) exclude the requirement for the posting of budgets, expenditures, contracts and loans, and procurement plans?

  11. Whether the assailed issuances promoting transparency, accountability and participation are within the constitutional bounds of the respondent's power as alter ego of the President.

RULING:

  1. The issuance of the AOM does not violate the right to due process. It is a clear indication that the assailed issuances are already in the full course of implementation and that the process of investigation for the alleged violation has begun. The investigation is expected to end in a resolution on whether a violation has indeed been committed, together with the appropriate sanctions. Thus, the apprehension of the petitioner is real and well-founded.

  2. The petitioners are not required to exhaust administrative remedies before filing a court case challenging the validity of the issuances. The assailed issuances were issued pursuant to the rule-making or quasi-legislative power of the DILG, and not its quasi-judicial or administrative adjudicatory power. The doctrine of exhaustion of administrative remedies does not apply in cases challenging the validity of administrative issuances carried out pursuant to the agency's rule-making power.

  3. The Court perceives that the respondent did not exceed his supervisory powers when he issued MC No. 2010-138. The circular was a mere reiteration of an existing provision in the Local Government Code (LGC) and was intended to remind LGUs to faithfully observe the directive to utilize the 20% portion of the Internal Revenue Allotment (IRA) for development projects. It was an advisory to LGUs to examine themselves if they have been complying with the law. MC No. 2010-138 was issued in response to the report of the Commission on Audit (COA) that a substantial portion of the 20% development fund of some LGUs was not actually utilized for development projects but was diverted to expenses classified as Maintenance and Other Operating Expenses (MOOE), in violation of Section 287 of the LGC.

  4. The Court also held that MC No. 2010-138 does not impose control over LGUs. The term "development" in the circular does not restrict the nature of expenses that may be charged against the development fund component of the IRA. It was a plain characterization of the concept of development as commonly understood and was only necessary to illustrate the nature of expenses that are properly chargeable against the development fund component. The enumeration of expenses in the circular is not meant to exclude other activities that may bring about desirable social, economic, and environmental outcomes. Rather, it was included to curb the alleged misuse of the development fund and remind LGUs of the nature and purpose of the provision for the IRA.

  5. The enumeration of expenses in the circular does not restrict the discretion of LGUs in utilizing their funds. It is meant to guide LGUs in the proper disposition of the Internal Revenue Allotment (IRA) and prevent further misuse of the funds. LGUs still have the freedom to utilize their IRAs based on their own judgment, as long as 20% is allocated for development projects. They may also spend IRAs on some of the enumerated items if they are indirect costs of undertaking development projects, but they must ensure that applicable rules and regulations on budgetary allocation are followed.

  6. The provision of sanctions in the circular does not indicate interference in the fiscal autonomy of LGUs. The circular does not establish new violations or penalties, but serves as a reminder that existing rules and sanctions in the Local Government Code and other applicable laws will apply if the 20% development fund is used beyond the prescribed purposes.

  7. The requirement to publicly post budgets, expenditures, contracts, and loans of LGUs does not go beyond the letter and spirit of the Local Government Code and the Government Procurement Reform Act. The Local Government Code only requires the posting of a summary of income and expenditures, while the Government Procurement Reform Act requires the posting of specific documents related to procurement. The additional requirement to publicly post such documents in MC Nos. 2010-83 and 2011-08 is not a violation but a reasonable requirement in ensuring transparency and accountability in government spending.

  8. The assailed issuances do not violate the fiscal autonomy of LGUs. The posting requirements are transparency measures that do not interfere with the manner by which LGUs decide the utilization and allocation of their funds.

  9. The posting requirements in the assailed issuances do not interfere with the discretion of LGUs in the specification of their priority projects and the allocation of their budgets.

  10. Section 352 of the LGC does not exclude the requirement for the posting of budgets, expenditures, contracts and loans, and procurement plans. These additional requirements are necessary for an accurate presentation of a summary of appropriations and disbursements that an LGU is required to publish.

  11. Yes, the assailed issuances are within the constitutional bounds of the respondent's power as alter ego of the President. The power to govern is a delegated authority from the people who elected the public official to office. Therefore, the public official must not frown upon accountability checks which aim to show how well he is performing his delegated power. The petition is dismissed for lack of merit.

PRINCIPLES:

  • The principle of due process requires that a party be given the opportunity to be heard and present evidence before any adverse decision is rendered against them. (Issue 1)

  • The doctrine of exhaustion of administrative remedies applies only to cases where the administrative agency's decision was performed pursuant to its quasi-judicial function and not its rule-making or quasi-legislative power. (Issue 2)

  • Local autonomy is a constitutional policy aimed at ensuring the independence and self-reliance of local government units. (Ruling)

  • Decentralization is a process where powers, authority, responsibilities, and resources are devolved from the national government to local government units. (Ruling)

  • Autonomy is either decentralization of administration or decentralization of power. Decentralization of administration occurs when the central government delegates administrative powers to political subdivisions to make local governments more responsive, accountable, and effective partners in national development. Decentralization of power involves the abdication of political power in favor of autonomous local government units. (Limbona v. Mangelin)

  • The President exercises general supervision over local governments to ensure that local affairs are administered according to law. General supervision is different from executive control, which includes the power to revise, alter, or set aside the decisions of subordinate officers. (Province of Negros Occidental v. Commissioners, Commission on Audit)

  • The issuance of circulars or administrative orders that reiterate existing provisions in the law and remind LGUs to comply with the law does not exceed the President's supervisory powers. (MC No. 2010-138 was a reiteration of an existing provision in the LGC)

  • LGUs have the discretion to utilize their funds, but there are limitations and guidelines set by the government to prevent misuse.

  • The power of the President to supervise LGUs is not antithetical to investigation and imposition of sanctions.

  • Fiscal autonomy of LGUs does not sever them from the national government; they are still subject to regulation and accountability.

  • Public office is a public trust and must be discharged for the benefit of the public.

  • The Constitution mandates full disclosure of all transactions involving public interest and the right of access to public information.

  • The Local Government Code and Republic Act No. 9184 established mechanisms of transparency and accountability for local government officials.

  • Fiscal autonomy of LGUs does not preclude national government intervention by way of supervision to ensure consistency with national goals.

  • The President, as head of the economic and planning agency, has broad supervisory powers to require the publication of certain documents for transparency.

  • The Constitution commands strict adherence to full disclosure of information on matters of public concern.

  • The power to govern is a delegated authority from the people who elected the public official to office through the democratic process of election.

  • Public officials must not frown upon accountability checks which aim to show how well they are performing their delegated power.

  • Transparency and accountability mechanisms are essential in proving to the constituency that the public official is worthy of the continued privilege of staying in office.