G.R. No. 127301 - Department of Budget and Management vs. City Government of Cebu

Petitioners, composed of the Department of Budget and Management (DBM) and its Honorable Secretary Salvador M. Enriquez, Jr., sought review on certiorari of a Court of Appeals decision.
The controversy arose from actions taken by the Cebu City Government involving appropriations and adjustments in compensation for its employees.

The Cebu City Government, through an appropriation ordinance, granted additional allowances exceeding ₱1,000 per month to judges and fiscals.
On November 14, 1994, City Auditor Atty. Carmelita P. Cabahug disallowed these additional allowances in a post-audit, citing violation of DBM Local Budget Circular No. 55 (dated March 15, 1994).

On August 9, 1993, the Cebu City Government approved Ordinance No. 1468, which provided appropriations for salary adjustments for department heads and assistant department heads.
The salary adjustment under Ordinance No. 1468 was intended to reflect a “seventh-step” increase (from the second step to the eighth step) in the employees’ salary schedule.
Petitioners argued that this ordinance violated DBM Regional Memorandum Circular No. 92-1 (dated March 23, 1992), which disallowed a “one-shot” full implementation of the eighth step because it contravened Republic Act No. 6758 and CSC-DBM Joint Circular No. 1.

On May 19, 1993, Ordinance No. 1450 was approved, abolishing the positions of Legal Officers III and IV and creating ten positions for Assistant City Attorneys.
This ordinance provided for a salary upgrade from ₱6,798 and ₱8,250 to ₱10,130.20 per month for the affected legal officers, effective June 1, 1993.
A subsequent letter from Cebu City Mayor Tomas R. OsmeAa (dated September 14, 1993) requested DBM Secretary Enriquez’s approval for reclassifying certain Legal Officers based on salary grade implications.
A letter-reply by DBM Secretary Enriquez (dated November 19, 1993) implicitly disallowed the proposed reclassification, noting concerns over overlapping salary grades between the newly created Assistant City Attorneys and the existing City Government Assistant Department Heads.

On February 2, 1995, the Cebu City Government filed a petition for certiorari with the Supreme Court, challenging:

DBM Local Budget Circular No. 55 on the appropriateness of additional allowances;
DBM Regional Memorandum Circular No. 92-1, which governed step increments based on merit and length of service; and
The November 19, 1993, letter-reply regarding the disallowed reclassification.

The Supreme Court resolved en banc (June 20, 1995) to refer the case to the Court of Appeals (CA).
In its Decision of February 22, 1996, the CA:

Held that the additional allowances ordinance was valid because it predated the effectivity of Local Budget Circular No. 55.
Upheld the validity of Regional Memorandum Circular No. 92-1 as consistent with Republic Act No. 6758.
Declared Ordinance No. 1450 void, on the ground that it resulted in overlapping salary grades, thereby violating the equal pay principle under RA 6758.

On July 2, 1996, petitioner DBM filed a motion seeking clarification of the CA’s decision on Ordinance No. 1468 due to its apparent conflict with Bulletin No. 10 (dated March 7, 1991).
The CA, in a Resolution dated November 20, 1996, denied the motion for lack of merit, noting that the petition for clarification was effectively a motion for reconsideration filed beyond the fifteen (15) day period allowed and that the final judgment could not be corrected except for clerical errors.
Subsequently, petitioners filed the current petition for review on certiorari, contending that the CA had committed an "error of law" by not clarifying the ambiguity regarding the salary grade adjustments, particularly the upgrade of the positions of City Government Department Heads and Assistant Department Heads.

Whether Local Budget Circular No. 55 and Regional Memorandum Circular No. 92-1 were issued within the authority of DBM—and thus, validly disallowed certain salary adjustments or additional allowances.
Whether these circulars unduly encroached on the local government unit’s (LGU’s) power of local autonomy in determining the compensation of its employees under R.A. No. 7160.

Whether Ordinance No. 1468, which adjusted the salary and position titles of department heads and assistant department heads, violated the prohibition on unmerited step increments under the Regional Memorandum Circular No. 92-1.
Whether Ordinance No. 1450, regarding the reclassification of legal positions, resulted in an impermissible overlapping of salary grades, thereby violating the equal pay principle set forth in R.A. No. 6758.

Whether the motion for clarification (filed by petitioners regarding Ordinance No. 1468 and its conflict with Bulletin No. 10) should be granted, despite the lapse of the prescribed period for motion for reconsideration.
Whether the clarification sought is a mere adjustment of the textual dispositive portion or an erroneous judgment warranting correction.