G.R. No. 175527 , December 8, 2008
HON. GABRIEL LUIS QUISUMBING, HON. ESTRELLA P. YAPHA, HON. VICTORIA G. COROMINAS, HON. RAUL D. BACALTOS (Members of the Sangguniang Panlalawigan of Cebu), petitioners, vs. HON. GWENDOLYN F. GARCIA (In her capacity as Governor of the Province of Cebu), HON. DELFIN P. AGUILAR (in his capacity as Director IV (Cluster Director) of COA), Cluster IV Visayas Local Government Sector, HON. HELEN S. HILAYO (In her capacity as Regional Cluster Director of COA), and HON. ROY L. URSAL (In his capacity as Regional Legal and Adjudication Director of COA), respondents.

FACTS

The Commission on Audit (COA) conducted a financial audit on the Province of Cebu for the period ending December 2004. Its audit report stated that several contracts totaling P102,092,841.47 were not supported with a Sangguniang Panlalawigan resolution authorizing the Provincial Governor to enter into a contract, as required under Section 22 of the Local Government Code ( R.A. No. 7160 ). The audit team recommended that the local chief executive must henceforth secure such a sanggunian resolution. Governor Gwendolyn F. Garcia sought reconsideration of the COA findings but, without waiting for its resolution, filed an action for Declaratory Relief before the Regional Trial Court (RTC) of Cebu City. She argued that the infrastructure contracts complied with the bidding procedures under the Government Procurement Reform Act ( R.A. No. 9184 ) and were entered into pursuant to general and/or supplemental appropriation ordinances passed by the Sangguniang Panlalawigan, rendering a separate authority unnecessary. The RTC ruled in favor of Gov. Garcia, declaring that pursuant to Sections 22(c) in relation to Sections 306 and 346 of the Local Government Code and Section 37 of the Government Procurement Reform Act, the Governor need not secure prior authorization by way of a resolution from the Sangguniang Panlalawigan before entering into a contract involving monetary obligations when there is a prior appropriation ordinance enacted. The RTC also dismissed the case against the Sangguniang Panlalawigan members, ruling they lacked juridical personality to sue and be sued. Petitioners, members of the Sangguniang Panlalawigan, assailed the RTC Decision, insisting that prior authorization from the Sanggunian is required and that the action for declaratory relief was improper as a breach of law had already been committed.

ISSUE

Whether a local chief executive (the Provincial Governor) is required to secure prior authorization from the Sangguniang Panlalawigan, by way of a resolution, before entering into contracts involving monetary obligations on the part of the local government unit, when there exists a prior appropriation ordinance enacted by the Sanggunian.

RULING

The Supreme Court ruled that prior authorization from the Sanggunian is required. The Court reversed the RTC Decision. The Court held that Section 22(c) of the Local Government Code is clear and mandatory: “Unless otherwise provided in this Code, no contract may be entered into by the local chief executive in behalf of the local government unit without prior authorization by the sanggunian concerned.” The requirement of prior authorization is distinct from the existence of an appropriation ordinance. An appropriation ordinance merely authorizes the expenditure; it does not constitute the specific prior authorization for the local chief executive to enter into a contract, which must be given through a sanggunian resolution. Sections 306 and 346 of the Code, which pertain to the effectivity of the budget and disbursements in accordance with appropriation ordinances, respectively, are not exceptions to the rule in Section 22(c). To hold that an appropriation ordinance suffices as the required authorization would grant the local chief executive unbridled discretion to enter into any contract as long as it is covered by the budget, thereby negating the sanggunian’s vital checking and balancing role. The Court also clarified that the action for declaratory relief was proper as it was filed before any judicial breach occurred, and the subsequent breach merely converted it into an ordinary action. The Court further held that the Sangguniang Panlalawigan, as a collegial body, lacks juridical personality separate from the province itself and cannot sue or be sued in its own name. However, the petitioners, as members of the Sanggunian and as taxpayers, had the standing to file the petition.