G.R. No. 224516, July 06, 2021
MARITES DOMATO-TOGONON, PETITIONER, VS. THE COMMISSION ON AUDIT, THE REGIONAL DIRECTOR FOR LEGAL AND ADJUDICATION OFFICE, AND THE REGIONAL DIRECTOR OF COA REGIONAL OFFICE XII, RESPONDENTS.

FACTS

In 2001, the City Appraisal Committee of Koronadal City sought properties for a new city hall. The heirs of Plomillo offered to sell Lot 80 for P30,000,000.00, inclusive of all costs. They later lowered the offer to P22,000,000.00, provided that the city government shoulder all transfer expenses (Documentation Expenses, Capital Gains Tax, Estate Taxes, Transfer Tax, and Documentary Tax). The Sangguniang Panlungsod passed Resolution No. 746 authorizing the Mayor to enter into a deed of sale under these terms. However, the subsequent Deed of Absolute Sale did not contain a stipulation that the city would shoulder the transfer expenses. Koronadal City paid a total of P24,398,403.02, which included the P22,000,000.00 purchase price and additional amounts for notarial fees, capital gains tax, documentary stamp tax, estate tax, transfer tax, and registration fees. The Commission on Audit (COA) issued Notice of Disallowance Nos. 05-001-101(04) and 05-002-101(03) disallowing the amount of P2,398,403.02, representing the transfer taxes and fees, for being contrary to law and regulations. Petitioner Marites Domato-Togonon, a Sangguniang Panlungsod member held liable, appealed the disallowance.

ISSUE

Whether or not public respondent Commission on Audit gravely abused its discretion in upholding the Notice of Disallowance.

RULING

The Petition is partly meritorious. The Supreme Court upheld the COA’s disallowance but modified the liability of the petitioner.
1. On the payment of taxes and fees as part of the consideration: The COA did not gravely abuse its discretion. The general rule under Article 1486 of the Civil Code is that the seller bears all expenses for the execution and registration of the sale unless otherwise stipulated. The Deed of Absolute Sale, the consummated contract, contained no stipulation shifting these expenses to the city. Therefore, the city’s payment of the seller’s taxes (capital gains tax, documentary stamp tax, estate tax) and registration expenses violated this rule and relevant tax laws (National Internal Revenue Code and Local Government Code) which fix the liability on the seller/transferor. The seller’s initial offer and the Sangguniang resolution were merely preliminary; the final and binding agreement was the deed which was silent on the matter.
2. On Resolution No. 746 as an indirect imposition of tax: The COA did not gravely abuse its discretion. Section 133(o) of the Local Government Code prohibits local government units from imposing taxes, fees, or charges of any kind on the National Government, other local government units, and instrumentalities. By enacting a resolution that effectively assumed the payment of national taxes (capital gains tax, documentary stamp tax) and local fees (transfer tax) due from a private seller, the Sangguniang Panlungsod indirectly imposed a tax burden on the city for the benefit of a private party, which is prohibited.
3. On the hiring of a private lawyer for notarization: The COA did not gravely abuse its discretion. Section 481(b) of the Local Government Code mandates that the city legal officer shall act as the notary public for the city. The payment of notarial fees to a private lawyer was therefore irregular and properly disallowed.
4. On the liability of petitioner Marites Domato-Togonon: The Supreme Court modified the COA’s ruling on liability. Applying the doctrine of good faith in recent jurisprudence, approving officers may be excused from liability if they acted in good faith and there was no showing of gross negligence. Petitioner, as a Sangguniang member who voted for Resolution No. 746, acted in good faith based on the belief that the terms were advantageous to the city. She is not grossly negligent for relying on the City Appraisal Committee’s evaluation and the Mayor’s endorsement. Furthermore, she did not participate in the actual disbursement of funds. Therefore, she is not liable to return the disallowed amount. Liability rests with the payees (the heirs of Plomillo) who received the disallowed payments, and the approving/authorizing officers who were directly responsible for the illegal disbursement.