Case Digest (G.R. No. 221253-54)
Facts:
Respondent Oscar S. Moreno, then Mayor of Cagayan de Oro City, designated respondent Dr. Glenn Banez as OIC City Treasurer, who later issued a notice of assessment to Ajinomoto Philippines Corporation for deficiency local business tax (P2,924,428.34) arising from the reclassification of MSG. Ajinomoto protested and, through court-assisted mediation, Ajinomoto and the City Government (represented by Banez) executed a Settlement Agreement reducing the tax deficiency to P300,000.00 and moved to dismiss the tax case; the Regional Trial Court granted the motion.
On March 13, 2015, William Guialani filed a verified complaint before the Office of the Ombudsman charging Moreno and Banez with grave misconduct, grave abuse of authority, and violation of R.A. No. 6713, alleging that Banez lacked authority to sign the settlement without Sanggunian approval. The Ombudsman dismissed other charges but found both respondents guilty of grave misconduct and imposed dismissal. On review, the Court of Appeals reversed and dismissed the administrative charges; it likewise dismissed the Rule 65 petitions as moot and academic after later procedural developments involving Rule 43 petitions.
Issues:
- Whether respondents were administratively liable for grave misconduct and related offenses for entering into a settlement reducing Ajinomoto’s assessed local tax deficiency without prior Sanggunian authorization.
- Whether the Court of Appeals acted with jurisdiction in issuing a TRO and a writ of preliminary injunction to enjoin enforcement of the Ombudsman decision, and whether those petitions became moot.
Ruling:
The Supreme Court partially granted the petitions, holding that the Settlement Agreement had the effect of a tax relief and therefore required prior Sanggunian authorization; it found Banez guilty only of simple misconduct and imposed a penalty of three (3) months suspension without pay. As to Moreno, the Court dismissed the administrative charge for insufficiency of evidence, finding no proof of his overt acts or that Banez acted under Moreno’s instruction.
The petitions assailing the CA’s issuance of the TRO and injunction were dismissed for being moot and academic, the CA having dismissed the earlier Rule 65 petitions and the injunctive relief being superseded by subsequent proceedings.
Ratio:
A local tax settlement that reduces what is due operates as a tax relief, a legislative function reserved to the Sanggunian through ordinances; thus, the Settlement Agreement reducing Ajinomoto’s deficiency tax effectively required prior Sanggunian approval. The Court rejected the CA’s view that no approval was needed because the settlement merely followed the treasurer’s assessment power, and it treated the compromise as a contract within Section 22(c) of the Local Government Code, since it bound the local government unit to new obligations arising from the reduction of the assessed liability.
However, the Court ruled that while Banez violated the statutory requirement of prior authorization, the evidence did not show the elements of corruption, willful intent to violate the law, or flagrant disregard needed for grave misconduct; no proof showed he benefited from the transaction, warranting liability for simple misconduct. For Moreno, supervision alone did not establish culpability, and the record lacked substantial evidence of participation, authorization, or sanction of Banez’s act in executing the settlement.
On the provisional relief issue, the Court affirmed that the CA has inherent power to issue injunctive writs to protect its appellate jurisdiction in administrative cases; nevertheless, the Rule 65 petitions no longer presented a justiciable controversy because the CA proceedings had shifted to Rule 43 review and the earlier petitions were dismissed as moot.
Doctrine:
- A tax settlement/compromise that reduces the taxpayer’s assessed liability operates as tax relief and must comply with statutory requirements for legislative action through Sanggunian ordinances.
- Under Section 22(c) of the Local Government Code, contracts entered into by the local chief executive on behalf of the local government unit require prior authorization by the Sanggunian.
- Failure to secure required Sanggunian authorization in executing a local tax settlement may constitute simple misconduct when the elements of grave misconduct—such as corruption, willful intent to violate the law, or flagrant disregard—are not proven.
- Supervision of a subordinate, without proof of overt participation, instruction, or authorization, is insufficient to hold a superior administratively liable.
- The CA has inherent authority to issue TRO or injunctive relief to protect its appellate jurisdiction, but issues may be dismissed as moot and academic when subsequent events render no practical relief available.