Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 91649 May 14, 1991
ATTORNEYS HUMBERTO BASCO, EDILBERTO BALCE, SOCRATES
MARANAN AND LORENZO SANCHEZ, petitioners,
vs.
PHILIPPINE AMUSEMENTS AND GAMING CORPORATION
(PAGCOR), respondent.

PARAS, J.:
A TV ad proudly announces:
"The new PAGCOR — responding through responsible gaming."
But the petitioners think otherwise, that is why, they filed the instant petition
seeking to annul the Philippine Amusement and Gaming Corporation (PAGCOR)
Charter — PD 1869, because it is allegedly contrary to morals, public policy
and order, and because —
A. It constitutes a waiver of a right prejudicial to a third person with a right
recognized by law. It waived the Manila City government's right to impose
taxes and license fees, which is recognized by law;
B. For the same reason stated in the immediately preceding paragraph, the law
has intruded into the local government's right to impose local taxes and license
fees. This, in contravention of the constitutionally enshrined principle of local
autonomy;
C. It violates the equal protection clause of the constitution in that it legalizes
PAGCOR — conducted gambling, while most other forms of gambling are
outlawed, together with prostitution, drug trafficking and other vices;
D. It violates the avowed trend of the Cory government away from monopolistic
and crony economy, and toward free enterprise and privatization. (p. 2,
Amended Petition; p. 7, Rollo)
In their Second Amended Petition, petitioners also claim that PD 1869 is
contrary to the declared national policy of the "new restored democracy" and
the people's will as expressed in the 1987 Constitution. The decree is said to
have a "gambling objective" and therefore is contrary to Sections 11, 12 and 13
of Article II, Sec. 1 of Article VIII and Section 3 (2) of Article XIV, of the present
Constitution (p. 3, Second Amended Petition; p. 21, Rollo).
The procedural issue is whether petitioners, as taxpayers and practicing
lawyers (petitioner Basco being also the Chairman of the Committee on Laws
of the City Council of Manila), can question and seek the annulment of PD 1869
on the alleged grounds mentioned above.
The Philippine Amusements and Gaming Corporation (PAGCOR) was created by
virtue of P.D. 1067-A dated January 1, 1977 and was granted a franchise under
P.D. 1067-B also dated January 1, 1977 "to establish, operate and maintain
gambling casinos on land or water within the territorial jurisdiction of the
Philippines." Its operation was originally conducted in the well known floating
casino "Philippine Tourist." The operation was considered a success for it
proved to be a potential source of revenue to fund infrastructure and socio-
economic projects, thus, P.D. 1399 was passed on June 2, 1978 for PAGCOR to
fully attain this objective.
Subsequently, on July 11, 1983, PAGCOR was created under P.D. 1869 to enable
the Government to regulate and centralize all games of chance authorized by
existing franchise or permitted by law, under the following declared policy —
Sec. 1. Declaration of Policy. — It is hereby declared to be the policy of the
State to centralize and integrate all games of chance not heretofore authorized
by existing franchises or permitted by law in order to attain the following
objectives:
(a) To centralize and integrate the right and authority to operate and conduct
games of chance into one corporate entity to be controlled, administered and
supervised by the Government.
(b) To establish and operate clubs and casinos, for amusement and recreation,
including sports gaming pools, (basketball, football, lotteries, etc.) and such
other forms of amusement and recreation including games of chance, which
may be allowed by law within the territorial jurisdiction of the Philippines and
which will: (1) generate sources of additional revenue to fund infrastructure
and socio-civic projects, such as flood control programs, beautification,
sewerage and sewage projects, Tulungan ng Bayan Centers, Nutritional
Programs, Population Control and such other essential public services; (2)
create recreation and integrated facilities which will expand and improve the
country's existing tourist attractions; and (3) minimize, if not totally eradicate,
all the evils, malpractices and corruptions that are normally prevalent on the
conduct and operation of gambling clubs and casinos without direct
government involvement. (Section 1, P.D. 1869)
To attain these objectives PAGCOR is given territorial jurisdiction all over the
Philippines. Under its Charter's repealing clause, all laws, decrees, executive
orders, rules and regulations, inconsistent therewith, are accordingly repealed,
amended or modified.
It is reported that PAGCOR is the third largest source of government revenue,
next to the Bureau of Internal Revenue and the Bureau of Customs. In 1989
alone, PAGCOR earned P3.43 Billion, and directly remitted to the National
Government a total of P2.5 Billion in form of franchise tax, government's
income share, the President's Social Fund and Host Cities' share. In addition,
PAGCOR sponsored other socio-cultural and charitable projects on its own or in
cooperation with various governmental agencies, and other private
associations and organizations. In its 3 1/2 years of operation under the
present administration, PAGCOR remitted to the government a total of P6.2
Billion. As of December 31, 1989, PAGCOR was employing 4,494 employees in
its nine (9) casinos nationwide, directly supporting the livelihood of Four
Thousand Four Hundred Ninety-Four (4,494) families.
But the petitioners, are questioning the validity of P.D. No. 1869. They allege
that the same is "null and void" for being "contrary to morals, public policy and
public order," monopolistic and tends toward "crony economy", and is violative
of the equal protection clause and local autonomy as well as for running
counter to the state policies enunciated in Sections 11 (Personal Dignity and
Human Rights), 12 (Family) and 13 (Role of Youth) of Article II, Section 1
(Social Justice) of Article XIII and Section 2 (Educational Values) of Article XIV
of the 1987 Constitution.
This challenge to P.D. No. 1869 deserves a searching and thorough scrutiny
and the most deliberate consideration by the Court, involving as it does the
exercise of what has been described as "the highest and most delicate function
which belongs to the judicial department of the government." (State v. Manuel,
20 N.C. 144; Lozano v. Martinez, 146 SCRA 323).
As We enter upon the task of passing on the validity of an act of a co-equal and
coordinate branch of the government We need not be reminded of the time-
honored principle, deeply ingrained in our jurisprudence, that a statute is
presumed to be valid. Every presumption must be indulged in favor of its
constitutionality. This is not to say that We approach Our task with diffidence or
timidity. Where it is clear that the legislature or the executive for that matter,
has over-stepped the limits of its authority under the constitution, We should
not hesitate to wield the axe and let it fall heavily, as fall it must, on the
offending statute (Lozano v. Martinez, supra).
In Victoriano v. Elizalde Rope Workers' Union, et al, 59 SCRA 54, the Court
thru Mr. Justice Zaldivar underscored the —
. . . thoroughly established principle which must be followed in all cases where
questions of constitutionality as obtain in the instant cases are involved. All
presumptions are indulged in favor of constitutionality; one who attacks a
statute alleging unconstitutionality must prove its invalidity beyond a
reasonable doubt; that a law may work hardship does not render it
unconstitutional; that if any reasonable basis may be conceived which supports
the statute, it will be upheld and the challenger must negate all possible basis;
that the courts are not concerned with the wisdom, justice, policy or
expediency of a statute and that a liberal interpretation of the constitution in
favor of the constitutionality of legislation should be adopted. (Danner v. Hass,
194 N.W. 2nd 534, 539; Spurbeck v. Statton, 106 N.W. 2nd 660, 663; 59 SCRA
66; see also e.g. Salas v. Jarencio, 46 SCRA 734, 739 [1970]; Peralta v.
Commission on Elections, 82 SCRA 30, 55 [1978]; and Heirs of Ordona v.
Reyes, 125 SCRA 220, 241-242 [1983] cited in Citizens Alliance for Consumer
Protection v. Energy Regulatory Board, 162 SCRA 521, 540)
Of course, there is first, the procedural issue. The respondents are questioning
the legal personality of petitioners to file the instant petition.
Considering however the importance to the public of the case at bar, and in
keeping with the Court's duty, under the 1987 Constitution, to determine
whether or not the other branches of government have kept themselves within
the limits of the Constitution and the laws and that they have not abused the
discretion given to them, the Court has brushed aside technicalities of
procedure and has taken cognizance of this petition. (Kapatiran ng mga
Naglilingkod sa Pamahalaan ng Pilipinas Inc. v. Tan, 163 SCRA 371)
With particular regard to the requirement of proper party as applied in the
cases before us, We hold that the same is satisfied by the petitioners and
intervenors because each of them has sustained or is in danger of sustaining an
immediate injury as a result of the acts or measures complained of. And even if,
strictly speaking they are not covered by the definition, it is still within the
wide discretion of the Court to waive the requirement and so remove the
impediment to its addressing and resolving the serious constitutional questions
raised.
In the first Emergency Powers Cases, ordinary citizens and taxpayers were
allowed to question the constitutionality of several executive orders issued by
President Quirino although they were involving only an indirect and general
interest shared in common with the public. The Court dismissed the objection
that they were not proper parties and ruled that "the transcendental
importance to the public of these cases demands that they be settled promptly
and definitely, brushing aside, if we must technicalities of procedure." We have
since then applied the exception in many other cases. (Association of Small
Landowners in the Philippines, Inc. v. Sec. of Agrarian Reform, 175 SCRA 343).
Having disposed of the procedural issue, We will now discuss the substantive
issues raised.
Gambling in all its forms, unless allowed by law, is generally prohibited. But
the prohibition of gambling does not mean that the Government cannot
regulate it in the exercise of its police power.
The concept of police power is well-established in this jurisdiction. It has been
defined as the "state authority to enact legislation that may interfere with
personal liberty or property in order to promote the general welfare." (Edu v.
Ericta, 35 SCRA 481, 487) As defined, it consists of (1) an imposition or
restraint upon liberty or property, (2) in order to foster the common good. It is
not capable of an exact definition but has been, purposely, veiled in general
terms to underscore its all-comprehensive embrace. (Philippine Association of
Service Exporters, Inc. v. Drilon, 163 SCRA 386).
Its scope, ever-expanding to meet the exigencies of the times, even to
anticipate the future where it could be done, provides enough room for an
efficient and flexible response to conditions and circumstances thus assuming
the greatest benefits. (Edu v. Ericta, supra)
It finds no specific Constitutional grant for the plain reason that it does not owe
its origin to the charter. Along with the taxing power and eminent domain, it is
inborn in the very fact of statehood and sovereignty. It is a fundamental
attribute of government that has enabled it to perform the most vital functions
of governance. Marshall, to whom the expression has been credited, refers to it
succinctly as the plenary power of the state "to govern its citizens". (Tribe,
American Constitutional Law, 323, 1978). The police power of the State is a
power co-extensive with self-protection and is most aptly termed the "law of
overwhelming necessity." (Rubi v. Provincial Board of Mindoro, 39 Phil. 660,
708) It is "the most essential, insistent, and illimitable of powers." (Smith Bell
& Co. v. National, 40 Phil. 136) It is a dynamic force that enables the state to
meet the agencies of the winds of change.
What was the reason behind the enactment of P.D. 1869?
P.D. 1869 was enacted pursuant to the policy of the government to "regulate
and centralize thru an appropriate institution all games of chance authorized
by existing franchise or permitted by law" (1st whereas clause, PD 1869). As
was subsequently proved, regulating and centralizing gambling operations in
one corporate entity — the PAGCOR, was beneficial not just to the Government
but to society in general. It is a reliable source of much needed revenue for the
cash strapped Government. It provided funds for social impact projects and
subjected gambling to "close scrutiny, regulation, supervision and control of
the Government" (4th Whereas Clause, PD 1869). With the creation of PAGCOR
and the direct intervention of the Government, the evil practices and
corruptions that go with gambling will be minimized if not totally eradicated.
Public welfare, then, lies at the bottom of the enactment of PD 1896.
Petitioners contend that P.D. 1869 constitutes a waiver of the right of the City
of Manila to impose taxes and legal fees; that the exemption clause in P.D. 1869
is violative of the principle of local autonomy. They must be referring to Section
13 par. (2) of P.D. 1869 which exempts PAGCOR, as the franchise holder from
paying any "tax of any kind or form, income or otherwise, as well as fees,
charges or levies of whatever nature, whether National or Local."
(2) Income and other taxes. — a) Franchise Holder: No tax of any kind or form,
income or otherwise as well as fees, charges or levies of whatever nature,
whether National or Local, shall be assessed and collected under this franchise
from the Corporation; nor shall any form or tax or charge attach in any way to
the earnings of the Corporation, except a franchise tax of five (5%) percent of
the gross revenues or earnings derived by the Corporation from its operations
under this franchise. Such tax shall be due and payable quarterly to the
National Government and shall be in lieu of all kinds of taxes, levies, fees or
assessments of any kind, nature or description, levied, established or collected
by any municipal, provincial or national government authority (Section 13 [2]).
Their contention stated hereinabove is without merit for the following reasons:
(a) The City of Manila, being a mere Municipal corporation has no inherent
right to impose taxes (Icard v. City of Baguio, 83 Phil. 870; City of Iloilo v.
Villanueva, 105 Phil. 337; Santos v. Municipality of Caloocan, 7 SCRA 643).
Thus, "the Charter or statute must plainly show an intent to confer that power
or the municipality cannot assume it" (Medina v. City of Baguio, 12 SCRA 62).
Its "power to tax" therefore must always yield to a legislative act which is
superior having been passed upon by the state itself which has the "inherent
power to tax" (Bernas, the Revised [1973] Philippine Constitution, Vol. 1, 1983
ed. p. 445).
(b) The Charter of the City of Manila is subject to control by Congress. It
should be stressed that "municipal corporations are mere creatures of
Congress" (Unson v. Lacson, G.R. No. 7909, January 18, 1957) which has the
power to "create and abolish municipal corporations" due to its "general
legislative powers" (Asuncion v. Yriantes, 28 Phil. 67; Merdanillo v. Orandia, 5
SCRA 541). Congress, therefore, has the power of control over Local
governments (Hebron v. Reyes, G.R. No. 9124, July 2, 1950). And if Congress
can grant the City of Manila the power to tax certain matters, it can also
provide for exemptions or even take back the power.
(c) The City of Manila's power to impose license fees on gambling, has long
been revoked. As early as 1975, the power of local governments to regulate
gambling thru the grant of "franchise, licenses or permits" was withdrawn by
P.D. No. 771 and was vested exclusively on the National Government, thus:
Sec. 1. Any provision of law to the contrary notwithstanding, the authority of
chartered cities and other local governments to issue license, permit or other
form of franchise to operate, maintain and establish horse and dog race tracks,
jai-alai and other forms of gambling is hereby revoked.
Sec. 2. Hereafter, all permits or franchises to operate, maintain and establish,
horse and dog race tracks, jai-alai and other forms of gambling shall be issued
by the national government upon proper application and verification of the
qualification of the applicant . . .
Therefore, only the National Government has the power to issue "licenses or
permits" for the operation of gambling. Necessarily, the power to demand or
collect license fees which is a consequence of the issuance of "licenses or
permits" is no longer vested in the City of Manila.
(d) Local governments have no power to tax instrumentalities of the National
Government. PAGCOR is a government owned or controlled corporation with
an original charter, PD 1869. All of its shares of stocks are owned by the
National Government. In addition to its corporate powers (Sec. 3, Title II, PD
1869) it also exercises regulatory powers thus:
Sec. 9. Regulatory Power. — The Corporation shall maintain a Registry of the
affiliated entities, and shall exercise all the powers, authority and the
responsibilities vested in the Securities and Exchange Commission over such
affiliating entities mentioned under the preceding section, including, but not
limited to amendments of Articles of Incorporation and By-Laws, changes in
corporate term, structure, capitalization and other matters concerning the
operation of the affiliated entities, the provisions of the Corporation Code of
the Philippines to the contrary notwithstanding, except only with respect to
original incorporation.
PAGCOR has a dual role, to operate and to regulate gambling casinos. The
latter role is governmental, which places it in the category of an agency or
instrumentality of the Government. Being an instrumentality of the
Government, PAGCOR should be and actually is exempt from local taxes.
Otherwise, its operation might be burdened, impeded or subjected to control
by a mere Local government.
The states have no power by taxation or otherwise, to retard, impede, burden
or in any manner control the operation of constitutional laws enacted by
Congress to carry into execution the powers vested in the federal government.
(MC Culloch v. Marland, 4 Wheat 316, 4 L Ed. 579)
This doctrine emanates from the "supremacy" of the National Government over
local governments.
Justice Holmes, speaking for the Supreme Court, made reference to the entire
absence of power on the part of the States to touch, in that way (taxation) at
least, the instrumentalities of the United States (Johnson v. Maryland, 254 US
51) and it can be agreed that no state or political subdivision can regulate a
federal instrumentality in such a way as to prevent it from consummating its
federal responsibilities, or even to seriously burden it in the accomplishment of
them. (Antieau, Modern Constitutional Law, Vol. 2, p. 140, emphasis supplied)
Otherwise, mere creatures of the State can defeat National policies thru
extermination of what local authorities may perceive to be undesirable
activities or enterprise using the power to tax as "a tool for regulation" (U.S. v.
Sanchez, 340 US 42).
The power to tax which was called by Justice Marshall as the "power to
destroy" (Mc Culloch v. Maryland, supra) cannot be allowed to defeat an
instrumentality or creation of the very entity which has the inherent power to
wield it.
(e) Petitioners also argue that the Local Autonomy Clause of the Constitution
will be violated by P.D. 1869. This is a pointless argument. Article X of the 1987
Constitution (on Local Autonomy) provides:
Sec. 5. Each local government unit shall have the power to create its own
source of revenue and to levy taxes, fees, and other charges subject to such
guidelines and limitation as the congress may provide, consistent with the
basic policy on local autonomy. Such taxes, fees and charges shall accrue
exclusively to the local government. (emphasis supplied)
The power of local government to "impose taxes and fees" is always subject to
"limitations" which Congress may provide by law. Since PD 1869 remains an
"operative" law until "amended, repealed or revoked" (Sec. 3, Art. XVIII, 1987
Constitution), its "exemption clause" remains as an exception to the exercise of
the power of local governments to impose taxes and fees. It cannot therefore
be violative but rather is consistent with the principle of local autonomy.
Besides, the principle of local autonomy under the 1987 Constitution simply
means "decentralization" (III Records of the 1987 Constitutional Commission,
pp. 435-436, as cited in Bernas, The Constitution of the Republic of the
Philippines, Vol. II, First Ed., 1988, p. 374). It does not make local governments
sovereign within the state or an "imperium in imperio."
Local Government has been described as a political subdivision of a nation or
state which is constituted by law and has substantial control of local affairs. In
a unitary system of government, such as the government under the Philippine
Constitution, local governments can only be an intra sovereign subdivision of
one sovereign nation, it cannot be an imperium in imperio. Local government
in such a system can only mean a measure of decentralization of the function of
government. (emphasis supplied)
As to what state powers should be "decentralized" and what may be delegated
to local government units remains a matter of policy, which concerns wisdom.
It is therefore a political question. (Citizens Alliance for Consumer Protection v.
Energy Regulatory Board, 162 SCRA 539).
What is settled is that the matter of regulating, taxing or otherwise dealing
with gambling is a State concern and hence, it is the sole prerogative of the
State to retain it or delegate it to local governments.
As gambling is usually an offense against the State, legislative grant or express
charter power is generally necessary to empower the local corporation to deal
with the subject. . . . In the absence of express grant of power to
enact, ordinance provisions on this subject which are inconsistent with the
state laws are void. (Ligan v. Gadsden, Ala App. 107 So. 733 Ex-Parte Solomon,
9, Cals. 440, 27 PAC 757 following in re Ah You, 88 Cal. 99, 25 PAC 974, 22 Am
St. Rep. 280, 11 LRA 480, as cited in Mc Quinllan Vol. 3 Ibid, p. 548, emphasis
supplied)
Petitioners next contend that P.D. 1869 violates the equal protection clause of
the Constitution, because "it legalized PAGCOR — conducted gambling, while
most gambling are outlawed together with prostitution, drug trafficking and
other vices" (p. 82, Rollo).
We, likewise, find no valid ground to sustain this contention. The petitioners'
posture ignores the well-accepted meaning of the clause "equal protection of
the laws." The clause does not preclude classification of individuals who may
be accorded different treatment under the law as long as the classification is
not unreasonable or arbitrary (Itchong v. Hernandez, 101 Phil. 1155). A law
does not have to operate in equal force on all persons or things to be
conformable to Article III, Section 1 of the Constitution (DECS v. San Diego,
G.R. No. 89572, December 21, 1989).
The "equal protection clause" does not prohibit the Legislature from
establishing classes of individuals or objects upon which different rules shall
operate (Laurel v. Misa, 43 O.G. 2847). The Constitution does not require
situations which are different in fact or opinion to be treated in law as though
they were the same (Gomez v. Palomar, 25 SCRA 827).
Just how P.D. 1869 in legalizing gambling conducted by PAGCOR is violative of
the equal protection is not clearly explained in the petition. The mere fact that
some gambling activities like cockfighting (P.D 449) horse racing (R.A. 306 as
amended by RA 983), sweepstakes, lotteries and races (RA 1169 as amended
by B.P. 42) are legalized under certain conditions, while others are prohibited,
does not render the applicable laws, P.D. 1869 for one, unconstitutional.
If the law presumably hits the evil where it is most felt, it is not to be
overthrown because there are other instances to which it might have been
applied. (Gomez v. Palomar, 25 SCRA 827)
The equal protection clause of the 14th Amendment does not mean that all
occupations called by the same name must be treated the same way; the state
may do what it can to prevent which is deemed as evil and stop short of those
cases in which harm to the few concerned is not less than the harm to the
public that would insure if the rule laid down were made mathematically exact.
(Dominican Hotel v. Arizona, 249 US 2651).
Anent petitioners' claim that PD 1869 is contrary to the "avowed trend of the
Cory Government away from monopolies and crony economy and toward free
enterprise and privatization" suffice it to state that this is not a ground for this
Court to nullify P.D. 1869. If, indeed, PD 1869 runs counter to the government's
policies then it is for the Executive Department to recommend to Congress its
repeal or amendment.
The judiciary does not settle policy issues. The Court can only declare what the
law is and not what the law should be.1âwphi1 Under our system of
government, policy issues are within the domain of the political branches of
government and of the people themselves as the repository of all state power.
(Valmonte v. Belmonte, Jr., 170 SCRA 256).
On the issue of "monopoly," however, the Constitution provides that:
Sec. 19. The State shall regulate or prohibit monopolies when public interest
so requires. No combinations in restraint of trade or unfair competition shall
be allowed. (Art. XII, National Economy and Patrimony)
It should be noted that, as the provision is worded, monopolies are not
necessarily prohibited by the Constitution. The state must still decide whether
public interest demands that monopolies be regulated or prohibited. Again, this
is a matter of policy for the Legislature to decide.
On petitioners' allegation that P.D. 1869 violates Sections 11 (Personality
Dignity) 12 (Family) and 13 (Role of Youth) of Article II; Section 13 (Social
Justice) of Article XIII and Section 2 (Educational Values) of Article XIV of the
1987 Constitution, suffice it to state also that these are merely statements of
principles and, policies. As such, they are basically not self-executing, meaning
a law should be passed by Congress to clearly define and effectuate such
principles.
In general, therefore, the 1935 provisions were not intended to be self-
executing principles ready for enforcement through the courts. They were
rather directives addressed to the executive and the legislature. If the
executive and the legislature failed to heed the directives of the articles the
available remedy was not judicial or political. The electorate could express
their displeasure with the failure of the executive and the legislature through
the language of the ballot. (Bernas, Vol. II, p. 2)
Every law has in its favor the presumption of constitutionality (Yu Cong Eng v.
Trinidad, 47 Phil. 387; Salas v. Jarencio, 48 SCRA 734; Peralta v. Comelec, 82
SCRA 30; Abbas v. Comelec, 179 SCRA 287). Therefore, for PD 1869 to be
nullified, it must be shown that there is a clear and unequivocal breach of the
Constitution, not merely a doubtful and equivocal one. In other words, the
grounds for nullity must be clear and beyond reasonable doubt. (Peralta v.
Comelec, supra) Those who petition this Court to declare a law, or parts
thereof, unconstitutional must clearly establish the basis for such a declaration.
Otherwise, their petition must fail. Based on the grounds raised by petitioners
to challenge the constitutionality of P.D. 1869, the Court finds that petitioners
have failed to overcome the presumption. The dismissal of this petition is
therefore, inevitable. But as to whether P.D. 1869 remains a wise legislation
considering the issues of "morality, monopoly, trend to free enterprise,
privatization as well as the state principles on social justice, role of youth and
educational values" being raised, is up for Congress to determine.
As this Court held in Citizens' Alliance for Consumer Protection v. Energy
Regulatory Board, 162 SCRA 521 —
Presidential Decree No. 1956, as amended by Executive Order No. 137 has, in
any case, in its favor the presumption of validity and constitutionality which
petitioners Valmonte and the KMU have not overturned. Petitioners have not
undertaken to identify the provisions in the Constitution which they claim to
have been violated by that statute. This Court, however, is not compelled to
speculate and to imagine how the assailed legislation may possibly offend some
provision of the Constitution. The Court notes, further, in this respect that
petitioners have in the main put in question the wisdom, justice and expediency
of the establishment of the OPSF, issues which are not properly addressed to
this Court and which this Court may not constitutionally pass upon. Those
issues should be addressed rather to the political departments of government:
the President and the Congress.
Parenthetically, We wish to state that gambling is generally immoral, and this is
precisely so when the gambling resorted to is excessive. This excessiveness
necessarily depends not only on the financial resources of the gambler and his
family but also on his mental, social, and spiritual outlook on life. However, the
mere fact that some persons may have lost their material fortunes, mental
control, physical health, or even their lives does not necessarily mean that the
same are directly attributable to gambling. Gambling may have been the
antecedent, but certainly not necessarily the cause. For the same
consequences could have been preceded by an overdose of food, drink,
exercise, work, and even sex.
WHEREFORE, the petition is DISMISSED for lack of merit.
SO ORDERED.
Fernan, C.J., Narvasa, Gutierrez, Jr., Cruz, Feliciano, Gancayco, Bidin,
Sarmiento, Griño-Aquino, Medialdea, Regalado and Davide, Jr., JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 93252 August 5, 1991
RODOLFO T. GANZON, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and LUIS T.
SANTOS, respondents.
G.R. No. 93746 August 5,1991
MARY ANN RIVERA ARTIEDA, petitioner,
vs.
HON. LUIS SANTOS, in his capacity as Secretary of the Department of
Local Government, NICANOR M. PATRICIO, in his capacity as Chief,
Legal Service of the Department of Local Government and SALVADOR
CABALUNA JR., respondents.
G.R. No. 95245 August 5,1991
 RODOLFO T. GANZON, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and LUIS T. SANTOS, in his
capacity as the Secretary of the Department of Local Government,
respondents.

SARMIENTO, J.:
The petitioners take common issue on the power of the President (acting
through the Secretary of Local Government), to suspend and/or remove local
officials.
The petitioners are the Mayor of Iloilo City (G.R. Nos. 93252 and 95245) and a
member of the Sangguniang Panglunsod thereof (G.R. No. 93746), respectively.
The petitions of Mayor Ganzon originated from a series of administrative
complaints, ten in number, filed against him by various city officials sometime
in 1988, on various charges, among them, abuse of authority, oppression, grave
misconduct, disgraceful and immoral conduct, intimidation, culpable violation
of the Constitution, and arbitrary detention. 1 The personalities involved are
Joceleehn Cabaluna, a clerk at the city health office; Salvador Cabaluna, her
husband; Dr. Felicidad Ortigoza, Assistant City Health Officer; Mansueto
Malabor, Vice-Mayor; Rolando Dabao, Dan Dalido, German Gonzales, Larry
Ong, and Eduardo Pefia Redondo members of the Sangguniang Panglunsod;
and Pancho Erbite, a barangay tanod. The complaints against the Mayor are
set forth in the opinion of the respondent Court of Appeals.2 We quote:
xxx xxx xxx
In her verified complaint (Annex A), Mrs. Cabaluna, a clerk assigned to the City
Health, Office of Iloilo City charged that due to political reasons, having
supported the rival candidate, Mrs. Rosa 0. Caram, the petitioner City Mayor,
using as an excuse the exigency of the service and the interest of the public,
pulled her out from rightful office where her qualifications are best suited and
assigned her to a work that should be the function of a non-career service
employee. To make matters worse, a utility worker in the office of the Public
Services, whose duties are alien to the complainant's duties and functions, has
been detailed to take her place. The petitioner's act are pure harassments
aimed at luring her away from her permanent position or force her to resign.
In the case of Dra. Felicidad Ortigoza, she claims that the petitioner
handpicked her to perform task not befitting her position as Assistant City
Health Officer of Iloilo City; that her office was padlocked without any
explanation or justification; that her salary was withheld without cause since
April 1, 1988; that when she filed her vacation leave, she was given the run-
around treatment in the approval of her leave in connivance with Dr. Rodolfo
Villegas and that she was the object of a well-engineered trumped-up charge in
an administrative complaint filed by Dr. Rodolfo Villegas (Annex B).
On the other hand, Mansuelo Malabor is the duly elected Vice-Mayor of Iloilo
City and complainants Rolando Dabao, Dan Dalido, German Gonzales, Larry
Ong and Eduardo Pefia Pedondo are members of the Sangguniang Panglunsod
of the City of Iloilo. Their complaint arose out from the case where Councilor
Larry Ong, whose key to his office was unceremoniously and without previous
notice, taken by petitioner. Without an office, Councilor Ong had to hold office
at Plaza Libertad, The Vice-Mayor and the other complainants sympathized
with him and decided to do the same. However, the petitioner, together with its
fully-armed security men, forcefully drove them away from Plaza Libertad.
Councilor Ong denounced the petitioner's actuations the following day in the
radio station and decided to hold office at the Freedom Grandstand at Iloilo
City and there were so many people who gathered to witness the incident.
However, before the group could reach the area, the petitioner, together with
his security men, led the firemen using a firetruck in dozing water to the
people and the bystanders.
Another administrative case was filed by Pancho Erbite, a barangay tanod,
appointed by former mayor Rosa O. Caram. On March 13, 1988, without the
benefit of charges filed against him and no warrant of arrest was issued, Erbite
was arrested and detained at the City Jail of Iloilo City upon orders of
petitioner. In jail, he was allegedly mauled by other detainees thereby causing
injuries He was released only the following day.3
The Mayor thereafter answered4 and the cases were shortly set for hearing.
The opinion of the Court of Appeals also set forth the succeeding events:
xxx xxx xxx
The initial hearing in the Cabaluna and Ortigoza cases were set for hearing on
June 20-21, 1988 at the Regional Office of the Department of Local
Government in Iloilo City. Notices, through telegrams, were sent to the parties
(Annex L) and the parties received them, including the petitioner. The
petitioner asked for a postponement before the scheduled date of hearing and
was represented by counsel, Atty. Samuel Castro. The hearing officers, Atty.
Salvador Quebral and Atty. Marino Bermudez had to come all the way from
Manila for the two-day hearings but was actually held only on June 20,1988 in
view of the inability and unpreparedness of petitioner's counsel.
The next hearings were re-set to July 25, 26, 27,1988 in the same venue-Iloilo
City. Again, the petitioner attempted to delay the proceedings and moved for a
postponement under the excuse that he had just hired his counsel.
Nonetheless, the hearing officers denied the motion to postpone, in view of the
fact that the parties were notified by telegrams of the scheduled hearings
(Annex M).
In the said hearings, petitioner's counsel cross-examined the complainants and
their witnesses.
Finding probable grounds and reasons, the respondent issued a preventive
suspension order on August 11, 1988 to last until October 11,1988 for a period
of sixty (60) days.
Then the next investigation was set on September 21, 1988 and the petitioner
again asked for a postponement to September 26,1988. On September 26,
1988, the complainants and petitioner were present, together with their
respective counsel. The petitioner sought for a postponement which was
denied. In these hearings which were held in Mala the petitioner testified in
Adm. Case No. C-10298 and 10299.
The investigation was continued regarding the Malabor case and the
complainants testified including their witnesses.
On October 10, 1988, petitioner's counsel, Atty. Original moved for a
postponement of the October 24, 1988 hearing to November 7 to 11, 1988
which was granted. However, the motion for change of venue as denied due to
lack of funds. At the hearing on November 7, 1988, the parties and counsel
were present. Petitioner reiterated his motion to change venue and moved for
postponement anew. The counsel discussed a proposal to take the deposition of
witnesses in Iloilo City so the hearing was indefinitely postponed. However, the
parties failed to come to terms and after the parties were notified of the
hearing, the investigation was set to December 13 to 15, 1988.
The petitioner sought for another postponement on the ground that his
witnesses were sick or cannot attend the investigation due to lack of
transportation. The motion was denied and the petitioner was given up to
December 14, 1988 to present his evidence.
On December 14,1988, petitioner's counsel insisted on his motion for
postponement and the hearing officers gave petitioner up to December 15,
1988 to present his evidence. On December 15, 1988, the petitioner failed to
present evidence and the cases were considered submitted for resolution.
In the meantime, a prima facie evidence was found to exist in the arbitrary
detention case filed by Pancho Erbite so the respondent ordered the
petitioner's second preventive suspension dated October 11, 1988 for another
sixty (60) days. The petitioner was able to obtain a restraining order and a writ
of preliminary injunction in the Regional Trial Court, Branch 33 of Iloilo City.
The second preventive suspension was not enforced.5
Amidst the two successive suspensions, Mayor Ganzon instituted an action for
prohibition against the respondent Secretary of Local Government (now,
Interior) in the Regional Trial Court, Iloilo City, where he succeeded in
obtaining a writ of preliminary injunction. Presently, he instituted CA-G.R. SP
No. 16417, an action for prohibition, in the respondent Court of Appeals.
Meanwhile, on May 3, 1990, the respondent Secretary issued another order,
preventively suspending Mayor Ganzon for another sixty days, the third time in
twenty months, and designating meantime Vice-Mayor Mansueto Malabor as
acting mayor. Undaunted, Mayor Ganzon commenced CA-G.R. SP No. 20736 of
the Court of Appeals, a petition for prohibition,6 (Malabor it is to be noted, is
one of the complainants, and hence, he is interested in seeing Mayor Ganzon
ousted.)
On September 7, 1989, the Court of Appeals rendered judgment, dismissing
CA-G.R. SP No. 16417. On July 5, 1990, it likewise promulgated a decision,
dismissing CA-G.R. SP No. 20736. In a Resolution dated January 24, 1990, it
issued a Resolution certifying the petition of Mary Ann Artieda, who had been
similary charged by the respondent Secretary, to this Court.
On June 26,1990, we issued a Temporary Restraining Order, barring the
respondent Secretary from implementing the suspension orders, and
restraining the enforcement of the Court of Appeals' two decisions.
In our Resolution of November 29, 1990, we consolidated all three cases. In
our Resolutions of January 15, 1991, we gave due course thereto.
Mayor Ganzon claims as a preliminary (GR No. 93252), that the Department of
Local Government in hearing the ten cases against him, had denied him due
process of law and that the respondent Secretary had been "biased, prejudicial
and hostile" towards him7 arising from his (Mayor Ganzon's) alleged refusal to
join the Laban ng Demokratikong Pilipino party 8 and the running political
rivalry they maintained in the last congressional and local elections; 9 and his
alleged refusal to operate a lottery in Iloilo City. 10 He also alleges that he
requested the Secretary to lift his suspension since it had come ninety days
prior to an election (the barangay elections of November 14,
1988),11 notwithstanding which, the latter proceeded with the hearing and
meted out two more suspension orders of the aforementioned cases. 12 He
likewise contends that he sought to bring the cases to Iloilo City (they were
held in Manila) in order to reduce the costs of proceeding, but the Secretary
rejected his request.13 He states that he asked for postponement on "valid and
justifiable"14 grounds, among them, that he was suffering from a heart ailment
which required confinement; that his "vital"15 witness was also
hospitalized but that the latter unduly denied his request.
16 17

Mayor Ganzon's primary argument (G.R. Nos. 93252 and 95245) is that the
Secretary of Local Government is devoid, in any event, of any authority to
suspend and remove local officials, an argument reiterated by the petitioner
Mary Ann Rivera Artieda (G.R. No. 93746).
As to Mayor Ganzon's charges of denial of due process, the records do not
show very clearly in what manner the Mayor might have been deprived of his
rights by the respondent Secretary. His claims that he and Secretary Luis-
Santos were (are) political rivals and that his "persecution" was politically
motivated are pure speculation and although the latter does not appear to have
denied these contentions (as he, Mayor Ganzon, claims), we can not take his
word for it the way we would have under less political circumstances,
considering furthermore that "political feud" has often been a good excuse in
contesting complaints.
The Mayor has failed furthermore to substantiate his say-so's that Secretary
Santos had attempted to seduce him to join the administration party and to
operate a lottery in Iloilo City. Again, although the Secretary failed to rebut his
allegations, we can not accept them, at face value, much more, as judicial
admissions as he would have us accept them 18 for the same reasons above-
stated and furthermore, because his say so's were never corroborated by
independent testimonies. As a responsible public official, Secretary Santos, in
pursuing an official function, is presumed to be performing his duties regularly
and in the absence of contrary evidence, no ill motive can be ascribed to him.
As to Mayor Ganzon's contention that he had requested the respondent
Secretary to defer the hearing on account of the ninety-day ban prescribed by
Section 62 of Batas Blg. 337, the Court finds the question to be moot and
academic since we have in fact restrained the Secretary from further hearing
the complaints against the petitioners.19
As to his request, finally, for postponements, the Court is afraid that he has not
given any compelling reason why we should overturn the Court of Appeals,
which found no convincing reason to overrule Secretary Santos in denying his
requests. Besides, postponements are a matter of discretion on the part of the
hearing officer, and based on Mayor Ganzon's above story, we are not
convinced that the Secretary has been guilty of a grave abuse of discretion.
The Court can not say, under these circumstances, that Secretary Santos'
actuations deprived Mayor Ganzon of due process of law.
We come to the core question: Whether or not the Secretary of Local
Government, as the President's alter ego, can suspend and/or remove local
officials.
It is the petitioners' argument that the 1987 Constitution 20 no longer allows the
President, as the 1935 and 1973 Constitutions did, to exercise the power of
suspension and/or removal over local officials. According to both petitioners,
the Constitution is meant, first, to strengthen self-rule by local government
units and second, by deleting the phrase 21 as may be provided by law to strip
the President of the power of control over local governments. It is a view, so
they contend, that finds support in the debates of the Constitutional
Commission. The provision in question reads as follows:
Sec. 4. The President of the Philippines shall exercise general supervision over
local governments. Provinces with respect to component cities and
municipalities, and cities and municipalities with respect to component
barangays shall ensure that the acts of their component units are within the
scope of their prescribed powers and functions.22
It modifies a counterpart provision appearing in the 1935 Constitution, which
we quote:
Sec. 10. The President shall have control of all the executive departments,
bureaus, or offices, exercise general supervision over all Local governments as
may be provided by law, and take care that the laws be faithfully executed. 23
The petitioners submit that the deletion (of "as may be provided by law") is
significant, as their argument goes, since: (1) the power of the President is
"provided by law" and (2) hence, no law may provide for it any longer.
It is to be noted that in meting out the suspensions under question, the
Secretary of Local Government acted in consonance with the specific legal
provisions of Batas Blg. 337, the Local Government Code, we quote:
Sec. 62. Notice of Hearing. — Within seven days after the complaint is filed,
the Minister of local Government, or the sanggunian concerned, as the case
may be, shall require the respondent to submit his verified answer within seven
days from receipt of said complaint, and commence the hearing and
investigation of the case within ten days after receipt of such answer of the
respondent. No investigation shall be held within ninety days immediately prior
to an election, and no preventive suspension shall be imposed with the said
period. If preventive suspension has been imposed prior to the aforesaid
period, the preventive suspension shall be lifted.24
Sec. 63. Preventive Suspension. — (1) Preventive suspension may be imposed
by the Minister of Local Government if the respondent is a provincial or city
official, by the provincial governor if the respondent is an elective municipal
official, or by the city or municipal mayor if the respondent is an elective
barangay official.
(2) Preventive suspension may be imposed at any time after the issues are
joined, when there is reasonable ground to believe that the respondent has
committed the act or acts complained of, when the evidence of culpability is
strong, when the gravity of the offense so warrants, or when the continuance in
office of the respondent could influence the witnesses or pose a threat to the
safety and integrity of the records and other evidence. In all cases, preventive
suspension shall not extend beyond sixty days after the start of said
suspension.
(3) At the expiration of sixty days, the suspended official shall be deemed
reinstated in office without prejudice to the continuation of the proceedings
against him until its termination. However ' if the delay in the proceedings of
the case is due to his fault, neglect or request, the time of the delay shall not
be counted in computing the time of suspension.25
The issue, as the Court understands it, consists of three questions: (1) Did the
1987 Constitution, in deleting the phrase "as may be provided by law" intend to
divest the President of the power to investigate, suspend, discipline, and/or
remove local officials? (2) Has the Constitution repealed Sections 62 and 63 of
the Local Government Code? (3) What is the significance of the change in the
constitutional language?
It is the considered opinion of the Court that notwithstanding the change in the
constitutional language, the charter did not intend to divest the legislature of
its right or the President of her prerogative as conferred by existing legislation
to provide administrative sanctions against local officials. It is our opinion that
the omission (of "as may be provided by law") signifies nothing more than to
underscore local governments' autonomy from congress and to break
Congress' "control" over local government affairs. The Constitution did not,
however, intend, for the sake of local autonomy, to deprive the legislature of all
authority over municipal corporations, in particular, concerning discipline.
Autonomy does not, after all, contemplate making mini-states out of local
government units, as in the federal governments of the United States of
America (or Brazil or Germany), although Jefferson is said to have compared
municipal corporations euphemistically to "small republics." 26 Autonomy, in the
constitutional sense, is subject to the guiding star, though not control, of the
legislature, albeit the legislative responsibility under the Constitution and as
the "supervision clause" itself suggest-is to wean local government units from
over-dependence on the central government.
It is noteworthy that under the Charter, "local autonomy" is not instantly self-
executing, but subject to, among other things, the passage of a local
government code,27 a local tax law,28 income distribution legislation,29 and a
national representation law,30 and measures31 designed to realize autonomy at
the local level. It is also noteworthy that in spite of autonomy, the Constitution
places the local government under the general supervision of the Executive. It
is noteworthy finally, that the Charter allows Congress to include in the local
government code provisions for removal of local officials, which suggest that
Congress may exercise removal powers, and as the existing Local Government
Code has done, delegate its exercise to the President. Thus:
Sec. 3. The Congress shall enact a local government code which shall provide
for a more responsive and accountable local government structure instituted
through a system of decentralization with effective mechanisms of recall,
initiative, and referendum, allocate among the different local government units
their powers, responsibilities and resources, and provide for the qualifications,
election, appointment and removal, term, salaries, powers and functions and
duties of local officials, and all other matters relating to the organization and
operation of the local units.32
As hereinabove indicated, the deletion of "as may be provided by law" was
meant to stress, sub silencio, the objective of the framers to strengthen local
autonomy by severing congressional control of its affairs, as observed by the
Court of Appeals, like the power of local legislation. 33 The Constitution did
nothing more, however, and insofar as existing legislation authorizes the
President (through the Secretary of Local Government) to proceed against
local officials administratively, the Constitution contains no prohibition.
The petitioners are under the impression that the Constitution has left the
President mere supervisory powers, which supposedly excludes the power of
investigation, and denied her control, which allegedly embraces disciplinary
authority. It is a mistaken impression because legally, "supervision" is not
incompatible with disciplinary authority as this Court has held, 34 thus:
xxx xxx xxx
It is true that in the case of Mondano vs. Silvosa, 51 Off. Gaz., No. 6 p. 2884,
this Court had occasion to discuss the scope and extent of the power of
supervision by the President over local government officials in contrast to the
power of control given to him over executive officials of our government
wherein it was emphasized that the two terms, control and supervision, are two
different things which differ one from the other in meaning and extent. Thus in
that case the Court has made the following digression: "In administration law
supervision means overseeing or the power or authority of an officer to see
that subordinate officers perform their duties. If the latter fail or neglect to
fulfill them the former may take such action or step as prescribed by law to
make them perform their duties. Control, on the other hand, means the power
of an officer to alter or modify or nullify of set aside what a subordinate officer
had done in the performance of his duties and to substitute the judgment of the
former for that of the latter." But from this pronouncement it cannot be
reasonably inferred that the power of supervision of the President over local
government officials does not include the power of investigation when in his
opinion the good of the public service so requires, as postulated in Section
64(c) of the Revised Administrative Code. ...35
xxx xxx xxx
"Control" has been defined as "the power of an officer to alter or modify or
nullify or set aside what a subordinate officer had done in the performance of
his duties and to substitute the judgment of the former for test of the
latter."36 "Supervision" on the other hand means "overseeing or the power or
authority of an officer to see that subordinate officers perform their duties. 37 As
we held,38 however, "investigating" is not inconsistent with "overseeing",
although it is a lesser power than "altering". The impression is apparently
exacerbated by the Court's pronouncements in at least three cases, Lacson v.
Roque,39 Hebron v. Reyes,40 and Mondano v. Silvosa,41 and possibly, a fourth
one, Pelaez v. Auditor General.42 In Lacson, this Court said that the President
enjoyed no control powers but only supervision "as may be provided by
law,"43 a rule we reiterated in Hebron, and Mondano. In Pelaez, we stated that
the President "may not . . . suspend an elective official of a regular municipality
or take any disciplinary action against him, except on appeal from a decision of
the corresponding provincial board."44 However,
neither Lacson nor Hebron nor Mondano categorically banned the Chief
Executive from exercising acts of disciplinary authority because she did not
exercise control powers, but because no law allowed her to exercise
disciplinary authority. Thus, according to Lacson:
The contention that the President has inherent power to remove or suspend
municipal officers is without doubt not well taken. Removal and suspension of
public officers are always controlled by the particular law applicable and its
proper construction subject to constitutional limitations.45
In Hebron we stated:
Accordingly, when the procedure for the suspension of an officer is specified by
law, the same must be deemed mandatory and adhered to strictly, in the
absence of express or clear provision to the contrary-which does not et with
respect to municipal officers ...46
In Mondano, the Court held:
... The Congress has expressly and specifically lodged the provincial
supervision over municipal officials in the provincial governor who is
authorized to "receive and investigate complaints made under oath against
municipal officers for neglect of duty, oppression, corruption or other form of
maladministration of office, and conviction by final judgment of any crime
involving moral turpitude." And if the charges are serious, "he shall submit
written charges touching the matter to the provincial board, furnishing a copy
of such charges to the accused either personally or by registered mail, and he
may in such case suspend the officer (not being the municipal treasurer)
pending action by the board, if in his opinion the charge by one affecting the
official integrity of the officer in question." Section 86 of the Revised
Administration Code adds nothing to the power of supervision to be exercised
by the Department Head over the administration of ... municipalities ... . If it be
construed that it does and such additional power is the same authority as that
vested in the Department Head by section 79(c) of the Revised Administrative
Code, then such additional power must be deemed to have been abrogated by
Section 110(l), Article VII of the Constitution.47
xxx xxx xxx
In Pelaez, we stated that the President can not impose disciplinary measures
on local officials except on appeal from the provincial board pursuant to the
Administrative Code.48
Thus, in those case that this Court denied the President the power (to
suspend/remove) it was not because we did not think that the President can not
exercise it on account of his limited power, but because the law lodged the
power elsewhere. But in those cases ii which the law gave him the power, the
Court, as in Ganzon v. Kayanan, found little difficulty in sustaining him.49
The Court does not believe that the petitioners can rightfully point to the
debates of the Constitutional Commission to defeat the President's powers. The
Court believes that the deliberations are by themselves inconclusive, because
although Commissioner Jose Nolledo would exclude the power of removal from
the President,50 Commissioner Blas Ople would not.51
The Court is consequently reluctant to say that the new Constitution has
repealed the Local Government Code, Batas Blg. 37. As we said, "supervision"
and "removal" are not incompatible terms and one may stand with the other
notwithstanding the stronger expression of local autonomy under the new
Charter. We have indeed held that in spite of the approval of the Charter, Batas
Blg. 337 is still in force and effect.52
As the Constitution itself declares, local autonomy means "a more responsive
and accountable local government structure instituted through a system of
decentralization."53 The Constitution as we observed, does nothing more than
to break up the monopoly of the national government over the affairs of local
governments and as put by political adherents, to "liberate the local
governments from the imperialism of Manila." Autonomy, however, is not meant
to end the relation of partnership and inter-dependence between the central
administration and local government units, or otherwise, to user in a regime of
federalism. The Charter has not taken such a radical step. Local governments,
under the Constitution, are subject to regulation, however limited, and for no
other purpose than precisely, albeit paradoxically, to enhance self- government.
As we observed in one case,54 decentralization means devolution of national
administration but not power to the local levels. Thus:
Now, autonomy is either decentralization of administration or decentralization
of power. There is decentralization of administration when the central
government delegates administrative powers to political subdivisions in order
to broaden the base of government power and in the process to make local
governments "more responsive and accountable," and "ensure their fullest
development as self-reliant communities and make them more effective
partners in the pursuit of national development and social progress." At the
same time, it relieves the central government of the burden of managing local
affairs and enables it to concentrate on national concerns. The President
exercises "general supervision" over them, but only to "ensure that local affairs
are administered according to law." He has no control over their acts in the
sense that he can substitute their judgments with his own.
Decentralization of power, on the other hand, involves an abdication of political
power in the favor of local governments units declared to be autonomous, In
that case, the autonomous government is free to chart its own destiny and
shape its future with minimum intervention from central authorities. According
to a constitutional author, decentralization of power amounts to "self-
immolation," since in that event, the autonomous government becomes
accountable not to the central authorities but to its constituency. 55
The successive sixty-day suspensions imposed on Mayor Rodolfo Ganzon is
albeit another matter. What bothers the Court, and what indeed looms very
large, is the fact that since the Mayor is facing ten administrative charges, the
Mayor is in fact facing the possibility of 600 days of suspension, in the event
that all ten cases yield prima facie findings. The Court is not of course
tolerating misfeasance in public office (assuming that Mayor Ganzon is guilty
of misfeasance) but it is certainly another question to make him serve 600 days
of suspension, which is effectively, to suspend him out of office. As we held: 56
2. Petitioner is a duly elected municipal mayor of Lianga, Surigao del Sur. His
term of office does not expire until 1986. Were it not for this information and
the suspension decreed by the Sandiganbayan according to the Anti-Graft and
Corrupt Practices Act, he would have been all this while in the full discharge of
his functions as such municipal mayor. He was elected precisely to do so. As of
October 26, 1983, he has been unable to. it is a basic assumption of the
electoral process implicit in the right of suffrage that the people are entitled to
the services of elective officials of their choice. For misfeasance or
malfeasance, any of them could, of course, be proceeded against
administratively or, as in this instance, criminally. In either case, Ms culpability
must be established. Moreover, if there be a criminal action, he is entitled to
the constitutional presumption of innocence. A preventive suspension may be
justified. Its continuance, however, for an unreasonable length of time raises a
due process question. For even if thereafter he were acquitted, in the
meanwhile his right to hold office had been nullified. Clearly, there would be in
such a case an injustice suffered by him. Nor is he the only victim. There is
injustice inflicted likewise on the people of Lianga They were deprived of the
services of the man they had elected to serve as mayor. In that sense, to
paraphrase Justice Cardozo, the protracted continuance of this preventive
suspension had outrun the bounds of reason and resulted in sheer oppression.
A denial of due process is thus quite manifest. It is to avoid such an
unconstitutional application that the order of suspension should be lifted. 57
The plain truth is that this Court has been ill at ease with suspensions, for the
above reasons,58 and so also, because it is out of the ordinary to have a vacancy
in local government. The sole objective of a suspension, as we have held, 59 is
simply "to prevent the accused from hampering the normal cause of the
investigation with his influence and authority over possible witnesses" 60 or to
keep him off "the records and other evidence.61
It is a means, and no more, to assist prosecutors in firming up a case, if any,
against an erring local official. Under the Local Government Code, it can not
exceed sixty days,62 which is to say that it need not be exactly sixty days long if
a shorter period is otherwise sufficient, and which is also to say that it ought to
be lifted if prosecutors have achieved their purpose in a shorter span.
Suspension is not a penalty and is not unlike preventive imprisonment in which
the accused is held to insure his presence at the trial. In both cases, the
accused (the respondent) enjoys a presumption of innocence unless and until
found guilty.
Suspension finally is temporary and as the Local Government Code provides, it
may be imposed for no more than sixty days. As we held, 63 a longer suspension
is unjust and unreasonable, and we might add, nothing less than tyranny.
As we observed earlier, imposing 600 days of suspension which is not a remote
possibility Mayor Ganzon is to all intents and purposes, to make him spend the
rest of his term in inactivity. It is also to make, to all intents and purposes, his
suspension permanent.
It is also, in fact, to mete out punishment in spite of the fact that the Mayor's
guilt has not been proven. Worse, any absolution will be for naught because
needless to say, the length of his suspension would have, by the time he is
reinstated, wiped out his tenure considerably.
The Court is not to be mistaken for obstructing the efforts of the respondent
Secretary to see that justice is done in Iloilo City, yet it is hardly any argument
to inflict on Mayor Ganzon successive suspensions when apparently, the
respondent Secretary has had sufficient time to gather the necessary evidence
to build a case against the Mayor without suspending him a day longer. What is
intriguing is that the respondent Secretary has been cracking down, so to
speak, on the Mayor piecemeal apparently, to pin him down ten times the pain,
when he, the respondent Secretary, could have pursued a consolidated effort.
We reiterate that we are not precluding the President, through the Secretary of
Interior from exercising a legal power, yet we are of the opinion that the
Secretary of Interior is exercising that power oppressively, and needless to say,
with a grave abuse of discretion.
The Court is aware that only the third suspension is under questions, and that
any talk of future suspensions is in fact premature. The fact remains, however,
that Mayor Ganzon has been made to serve a total of 120 days of suspension
and the possibility of sixty days more is arguably around the corner (which
amounts to a violation of the Local Government Code which brings to light a
pattern of suspensions intended to suspend the Mayor the rest of his natural
tenure. The Court is simply foreclosing what appears to us as a concerted
effort of the State to perpetuate an arbitrary act.
As we said, we can not tolerate such a state of affairs.
We are therefore allowing Mayor Rodolfo Ganzon to suffer the duration of his
third suspension and lifting, for the purpose, the Temporary Restraining Order
earlier issued. Insofar as the seven remaining charges are concerned, we are
urging the Department of Local Government, upon the finality of this Decision,
to undertake steps to expedite the same, subject to Mayor Ganzon's usual
remedies of appeal, judicial or administrative, or certiorari, if warranted, and
meanwhile, we are precluding the Secretary from meting out further
suspensions based on those remaining complaints, notwithstanding findings
of prima facie evidence.
In resume the Court is laying down the following rules:
1. Local autonomy, under the Constitution, involves a mere decentralization of
administration, not of power, in which local officials remain accountable to the
central government in the manner the law may provide;
2. The new Constitution does not prescribe federalism;
3. The change in constitutional language (with respect to the supervision
clause) was meant but to deny legislative control over local governments; it did
not exempt the latter from legislative regulations provided regulation is
consistent with the fundamental premise of autonomy;
4. Since local governments remain accountable to the national authority, the
latter may, by law, and in the manner set forth therein, impose disciplinary
action against local officials;
5. "Supervision" and "investigation" are not inconsistent terms; "investigation"
does not signify "control" (which the President does not have);
6. The petitioner, Mayor Rodolfo Ganzon. may serve the suspension so far
ordered, but may no longer be suspended for the offenses he was charged
originally; provided:
a) that delays in the investigation of those charges "due to his fault, neglect or
request, (the time of the delay) shall not be counted in computing the time of
suspension. [Supra, sec. 63(3)]
b) that if during, or after the expiration of, his preventive suspension, the
petitioner commits another or other crimes and abuses for which proper
charges are filed against him by the aggrieved party or parties, his previous
suspension shall not be a bar to his being preventively suspended again, if
warranted under subpar. (2), Section 63 of the Local Government Code.
WHEREFORE, premises considered, the petitions are DISMISSED. The
Temporary Restraining Order issued is LIFTED.1âwphi1 The suspensions of the
petitioners are AFFIRMED, provided that the petitioner, Mayor Rodolfo
Ganzon, may not be made to serve future suspensions on account of any of the
remaining administrative charges pending against him for acts committed prior
to August 11, 1988. The Secretary of Interior is ORDERED to consolidate all
such administrative cases pending against Mayor Ganzon.
The sixty-day suspension against the petitioner, Mary Ann Rivera Artieda, is
AFFIRMED. No costs.
SO ORDERED.
Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano,
Gancayco, Padilla, Bidin, Griño-Aquino, Medialdea, Regalado and Davide, Jr., JJ
concur.
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC

G.R. No. 111097 July 20, 1994

MAYOR PABLO P. MAGTAJAS & THE CITY OF CAGAYAN DE
ORO, petitioners,
vs.
PRYCE PROPERTIES CORPORATION, INC. & PHILIPPINE AMUSEMENT
AND GAMING CORPORATION, respondents.

CRUZ, J.:
There was instant opposition when PAGCOR announced the opening of a casino
in Cagayan de Oro City. Civic organizations angrily denounced the project. The
religious elements echoed the objection and so did the women's groups and the
youth. Demonstrations were led by the mayor and the city legislators. The
media trumpeted the protest, describing the casino as an affront to the welfare
of the city.
The trouble arose when in 1992, flush with its tremendous success in several
cities, PAGCOR decided to expand its operations to Cagayan de Oro City. To
this end, it leased a portion of a building belonging to Pryce Properties
Corporation, Inc., one of the herein private respondents, renovated and
equipped the same, and prepared to inaugurate its casino there during the
Christmas season.
The reaction of the Sangguniang Panlungsod of Cagayan de Oro City was swift
and hostile. On December 7, 1992, it enacted Ordinance No. 3353 reading as
follows:
ORDINANCE NO. 3353
AN ORDINANCE PROHIBITING THE ISSUANCE OF BUSINESS PERMIT AND
CANCELLING EXISTING BUSINESS PERMIT TO ANY ESTABLISHMENT FOR
THE USING AND ALLOWING TO BE USED ITS PREMISES OR PORTION
THEREOF FOR THE OPERATION OF CASINO.
BE IT ORDAINED by the Sangguniang Panlungsod of the City of Cagayan de
Oro, in session assembled that:
Sec. 1. — That pursuant to the policy of the city banning the operation of
casino within its territorial jurisdiction, no business permit shall be issued to
any person, partnership or corporation for the operation of casino within the
city limits.
Sec. 2. — That it shall be a violation of existing business permit by any persons,
partnership or corporation to use its business establishment or portion thereof,
or allow the use thereof by others for casino operation and other gambling
activities.
Sec. 3. — PENALTIES. — Any violation of such existing business permit as
defined in the preceding section shall suffer the following penalties, to wit:
a) Suspension of the business permit for sixty (60) days for the first offense and
a fine of P1,000.00/day
b) Suspension of the business permit for Six (6) months for the second offense,
and a fine of P3,000.00/day
c) Permanent revocation of the business permit and imprisonment of One (1)
year, for the third and subsequent offenses.
Sec. 4. — This Ordinance shall take effect ten (10) days from publication
thereof.
Nor was this all. On January 4, 1993, it adopted a sterner Ordinance No. 3375-
93 reading as follows:
ORDINANCE NO. 3375-93
AN ORDINANCE PROHIBITING THE OPERATION OF CASINO AND
PROVIDING PENALTY FOR VIOLATION THEREFOR.
WHEREAS, the City Council established a policy as early as 1990 against
CASINO under its Resolution No. 2295;
WHEREAS, on October 14, 1992, the City Council passed another Resolution
No. 2673, reiterating its policy against the establishment of CASINO;
WHEREAS, subsequently, thereafter, it likewise passed Ordinance No. 3353,
prohibiting the issuance of Business Permit and to cancel existing Business
Permit to any establishment for the using and allowing to be used its premises
or portion thereof for the operation of CASINO;
WHEREAS, under Art. 3, section 458, No. (4), sub paragraph VI of the Local
Government Code of 1991 (Rep. Act 7160) and under Art. 99, No. (4),
Paragraph VI of the implementing rules of the Local Government Code, the
City Council as the Legislative Body shall enact measure to suppress any
activity inimical to public morals and general welfare of the people and/or
regulate or prohibit such activity pertaining to amusement or entertainment in
order to protect social and moral welfare of the community;
NOW THEREFORE,
BE IT ORDAINED by the City Council in session duly assembled that:
Sec. 1. — The operation of gambling CASINO in the City of Cagayan de Oro is
hereby prohibited.
Sec. 2. — Any violation of this Ordinance shall be subject to the following
penalties:
a) Administrative fine of P5,000.00 shall be imposed against the proprietor,
partnership or corporation undertaking the operation, conduct, maintenance of
gambling CASINO in the City and closure thereof;
b) Imprisonment of not less than six (6) months nor more than one (1) year or a
fine in the amount of P5,000.00 or both at the discretion of the court against
the manager, supervisor, and/or any person responsible in the establishment,
conduct and maintenance of gambling CASINO.
Sec. 3. — This Ordinance shall take effect ten (10) days after its publication in
a local newspaper of general circulation.
Pryce assailed the ordinances before the Court of Appeals, where it was joined
by PAGCOR as intervenor and supplemental petitioner. Their challenge
succeeded. On March 31, 1993, the Court of Appeals declared the ordinances
invalid and issued the writ prayed for to prohibit their
enforcement. 1 Reconsideration of this decision was denied on July 13, 1993. 2
Cagayan de Oro City and its mayor are now before us in this petition for review
under Rule 45 of the Rules of Court. 3 They aver that the respondent Court of
Appeals erred in holding that:
1. Under existing laws, the Sangguniang Panlungsod of the City of Cagayan de
Oro does not have the power and authority to prohibit the establishment and
operation of a PAGCOR gambling casino within the City's territorial limits.
2. The phrase "gambling and other prohibited games of chance" found in Sec.
458, par. (a), sub-par. (1) — (v) of R.A. 7160 could only mean "illegal gambling."
3. The questioned Ordinances in effect annul P.D. 1869 and are therefore
invalid on that point.
4. The questioned Ordinances are discriminatory to casino and partial to
cockfighting and are therefore invalid on that point.
5. The questioned Ordinances are not reasonable, not consonant with the
general powers and purposes of the instrumentality concerned and
inconsistent with the laws or policy of the State.
6. It had no option but to follow the ruling in the case of Basco, et al. v.
PAGCOR, G.R. No. 91649, May 14, 1991, 197 SCRA 53 in disposing of the
issues presented in this present case.
PAGCOR is a corporation created directly by P.D. 1869 to help centralize and
regulate all games of chance, including casinos on land and sea within the
territorial jurisdiction of the Philippines. In Basco v. Philippine Amusements
and Gaming Corporation, 4 this Court sustained the constitutionality of the
decree and even cited the benefits of the entity to the national economy as the
third highest revenue-earner in the government, next only to the BIR and the
Bureau of Customs.
Cagayan de Oro City, like other local political subdivisions, is empowered to
enact ordinances for the purposes indicated in the Local Government Code. It
is expressly vested with the police power under what is known as the General
Welfare Clause now embodied in Section 16 as follows:
Sec. 16. — General Welfare. — Every local government unit shall exercise the
powers expressly granted, those necessarily implied therefrom, as well as
powers necessary, appropriate, or incidental for its efficient and effective
governance, and those which are essential to the promotion of the general
welfare. Within their respective territorial jurisdictions, local government units
shall ensure and support, among other things, the preservation and enrichment
of culture, promote health and safety, enhance the right of the people to a
balanced ecology, encourage and support the development of appropriate and
self-reliant scientific and technological capabilities, improve public morals,
enhance economic prosperity and social justice, promote full employment
among their residents, maintain peace and order, and preserve the comfort and
convenience of their inhabitants.
In addition, Section 458 of the said Code specifically declares that:
Sec. 458. — Powers, Duties, Functions and Compensation. — (a) The
Sangguniang Panlungsod, as the legislative body of the city, shall enact
ordinances, approve resolutions and appropriate funds for the general welfare
of the city and its inhabitants pursuant to Section 16 of this Code and in the
proper exercise of the corporate powers of the city as provided for under
Section 22 of this Code, and shall:
(1) Approve ordinances and pass resolutions necessary for an efficient and
effective city government, and in this connection, shall:
xxx xxx xxx
(v) Enact ordinances intended to prevent, suppress and impose appropriate
penalties for habitual drunkenness in public places, vagrancy, mendicancy,
prostitution, establishment and maintenance of houses of ill
repute, gambling and other prohibited games of chance, fraudulent devices
and ways to obtain money or property, drug addiction, maintenance of drug
dens, drug pushing, juvenile delinquency, the printing, distribution or
exhibition of obscene or pornographic materials or publications, and such other
activities inimical to the welfare and morals of the inhabitants of the city;
This section also authorizes the local government units to regulate properties
and businesses within their territorial limits in the interest of the general
welfare. 5
The petitioners argue that by virtue of these provisions, the Sangguniang
Panlungsod may prohibit the operation of casinos because they involve games
of chance, which are detrimental to the people. Gambling is not allowed by
general law and even by the Constitution itself. The legislative power conferred
upon local government units may be exercised over all kinds of gambling and
not only over "illegal gambling" as the respondents erroneously argue. Even if
the operation of casinos may have been permitted under P.D. 1869, the
government of Cagayan de Oro City has the authority to prohibit them within
its territory pursuant to the authority entrusted to it by the Local Government
Code.
It is submitted that this interpretation is consonant with the policy of local
autonomy as mandated in Article II, Section 25, and Article X of the
Constitution, as well as various other provisions therein seeking to strengthen
the character of the nation. In giving the local government units the power to
prevent or suppress gambling and other social problems, the Local
Government Code has recognized the competence of such communities to
determine and adopt the measures best expected to promote the general
welfare of their inhabitants in line with the policies of the State.
The petitioners also stress that when the Code expressly authorized the local
government units to prevent and suppress gambling and other prohibited
games of chance, like craps, baccarat, blackjack and roulette, it
meant all forms of gambling without distinction. Ubi lex non distinguit, nec nos
distinguere debemos. 6 Otherwise, it would have expressly excluded from the
scope of their power casinos and other forms of gambling authorized by special
law, as it could have easily done. The fact that it did not do so simply means
that the local government units are permitted to prohibit all kinds of gambling
within their territories, including the operation of casinos.
The adoption of the Local Government Code, it is pointed out, had the effect of
modifying the charter of the PAGCOR. The Code is not only a later enactment
than P.D. 1869 and so is deemed to prevail in case of inconsistencies between
them. More than this, the powers of the PAGCOR under the decree are
expressly discontinued by the Code insofar as they do not conform to its
philosophy and provisions, pursuant to Par. (f) of its repealing clause reading as
follows:
(f) All general and special laws, acts, city charters, decrees, executive orders,
proclamations and administrative regulations, or part or parts thereof which
are inconsistent with any of the provisions of this Code are hereby repealed or
modified accordingly.
It is also maintained that assuming there is doubt regarding the effect of the
Local Government Code on P.D. 1869, the doubt must be resolved in favor of
the petitioners, in accordance with the direction in the Code calling for its
liberal interpretation in favor of the local government units. Section 5 of the
Code specifically provides:
Sec. 5. Rules of Interpretation. — In the interpretation of the provisions of this
Code, the following rules shall apply:
(a) Any provision on a power of a local government unit shall be liberally
interpreted in its favor, and in case of doubt, any question thereon shall be
resolved in favor of devolution of powers and of the lower local government
unit. Any fair and reasonable doubt as to the existence of the power shall be
interpreted in favor of the local government unit concerned;
xxx xxx xxx
(c) The general welfare provisions in this Code shall be liberally interpreted to
give more powers to local government units in accelerating economic
development and upgrading the quality of life for the people in the
community; . . . (Emphasis supplied.)
Finally, the petitioners also attack gambling as intrinsically harmful and cite
various provisions of the Constitution and several decisions of this Court
expressive of the general and official disapprobation of the vice. They invoke
the State policies on the family and the proper upbringing of the youth and, as
might be expected, call attention to the old case of U.S. v. Salaveria,7 which
sustained a municipal ordinance prohibiting the playing of panguingue. The
petitioners decry the immorality of gambling. They also impugn the wisdom of
P.D. 1869 (which they describe as "a martial law instrument") in creating
PAGCOR and authorizing it to operate casinos "on land and sea within the
territorial jurisdiction of the Philippines."
This is the opportune time to stress an important point.
The morality of gambling is not a justiciable issue. Gambling is not illegal per
se. While it is generally considered inimical to the interests of the people, there
is nothing in the Constitution categorically proscribing or penalizing gambling
or, for that matter, even mentioning it at all. It is left to Congress to deal with
the activity as it sees fit. In the exercise of its own discretion, the legislature
may prohibit gambling altogether or allow it without limitation or it may
prohibit some forms of gambling and allow others for whatever reasons it may
consider sufficient. Thus, it has prohibited jueteng and monte but permits
lotteries, cockfighting and horse-racing. In making such choices, Congress has
consulted its own wisdom, which this Court has no authority to review, much
less reverse. Well has it been said that courts do not sit to resolve the merits of
conflicting theories. 8 That is the prerogative of the political departments. It is
settled that questions regarding the wisdom, morality, or practicibility of
statutes are not addressed to the judiciary but may be resolved only by the
legislative and executive departments, to which the function belongs in our
scheme of government. That function is exclusive. Whichever way these
branches decide, they are answerable only to their own conscience and the
constituents who will ultimately judge their acts, and not to the courts of
justice.
The only question we can and shall resolve in this petition is the validity of
Ordinance No. 3355 and Ordinance No. 3375-93 as enacted by the
Sangguniang Panlungsod of Cagayan de Oro City. And we shall do so only by
the criteria laid down by law and not by our own convictions on the propriety
of gambling.
The tests of a valid ordinance are well established. A long line of
decisions 9 has held that to be valid, an ordinance must conform to the
following substantive requirements:
1) It must not contravene the constitution or any statute.
2) It must not be unfair or oppressive.
3) It must not be partial or discriminatory.
4) It must not prohibit but may regulate trade.
5) It must be general and consistent with public policy.
6) It must not be unreasonable.
We begin by observing that under Sec. 458 of the Local Government Code,
local government units are authorized to prevent or suppress, among others,
"gambling and other prohibited games of chance." Obviously, this provision
excludes games of chance which are not prohibited but are in fact permitted by
law. The petitioners are less than accurate in claiming that the Code could have
excluded such games of chance but did not. In fact it does. The language of the
section is clear and unmistakable. Under the rule of noscitur a sociis, a word or
phrase should be interpreted in relation to, or given the same meaning of,
words with which it is associated. Accordingly, we conclude that since the word
"gambling" is associated with "and other prohibited games of chance," the
word should be read as referring to only illegal gambling which, like
the other prohibited games of chance, must be prevented or suppressed.
We could stop here as this interpretation should settle the problem quite
conclusively. But we will not. The vigorous efforts of the petitioners on behalf of
the inhabitants of Cagayan de Oro City, and the earnestness of their advocacy,
deserve more than short shrift from this Court.
The apparent flaw in the ordinances in question is that they contravene P.D.
1869 and the public policy embodied therein insofar as they prevent PAGCOR
from exercising the power conferred on it to operate a casino in Cagayan de
Oro City. The petitioners have an ingenious answer to this misgiving. They
deny that it is the ordinances that have changed P.D. 1869 for an ordinance
admittedly cannot prevail against a statute. Their theory is that the change has
been made by the Local Government Code itself, which was also enacted by the
national lawmaking authority. In their view, the decree has been, not really
repealed by the Code, but merely "modified pro tanto" in the sense that
PAGCOR cannot now operate a casino over the objection of the local
government unit concerned. This modification of P.D. 1869 by the Local
Government Code is permissible because one law can change or repeal another
law.
It seems to us that the petitioners are playing with words. While insisting that
the decree has only been "modified pro tanto," they are actually arguing that it
is already dead, repealed and useless for all intents and purposes because the
Code has shorn PAGCOR of all power to centralize and regulate casinos.
Strictly speaking, its operations may now be not only prohibited by the local
government unit; in fact, the prohibition is not only discretionary
but mandated by Section 458 of the Code if the word "shall" as used therein is
to be given its accepted meaning. Local government units have now no choice
but to prevent and suppress gambling, which in the petitioners' view includes
both legal and illegal gambling. Under this construction, PAGCOR will have no
more games of chance to regulate or centralize as they must all be prohibited
by the local government units pursuant to the mandatory duty imposed upon
them by the Code. In this situation, PAGCOR cannot continue to exist except
only as a toothless tiger or a white elephant and will no longer be able to
exercise its powers as a prime source of government revenue through the
operation of casinos.
It is noteworthy that the petitioners have cited only Par. (f) of the repealing
clause, conveniently discarding the rest of the provision which painstakingly
mentions the specific laws or the parts thereof which are repealed (or
modified) by the Code. Significantly, P.D. 1869 is not one of them. A reading of
the entire repealing clause, which is reproduced below, will disclose the
omission:
Sec. 534. Repealing Clause. — (a) Batas Pambansa Blg. 337, otherwise known
as the "Local Government Code," Executive Order No. 112 (1987), and
Executive Order No. 319 (1988) are hereby repealed.
(b) Presidential Decree Nos. 684, 1191, 1508 and such other decrees, orders,
instructions, memoranda and issuances related to or concerning the barangay
are hereby repealed.
(c) The provisions of Sections 2, 3, and 4 of Republic Act No. 1939 regarding
hospital fund; Section 3, a (3) and b (2) of Republic Act. No. 5447 regarding the
Special Education Fund; Presidential Decree No. 144 as amended by
Presidential Decree Nos. 559 and 1741; Presidential Decree No. 231 as
amended; Presidential Decree No. 436 as amended by Presidential Decree No.
558; and Presidential Decree Nos. 381, 436, 464, 477, 526, 632, 752, and 1136
are hereby repealed and rendered of no force and effect.
(d) Presidential Decree No. 1594 is hereby repealed insofar as it governs
locally-funded projects.
(e) The following provisions are hereby repealed or amended insofar as they
are inconsistent with the provisions of this Code: Sections 2, 16, and 29 of
Presidential Decree No. 704; Sections 12 of Presidential Decree No. 87, as
amended; Sections 52, 53, 66, 67, 68, 69, 70, 71, 72, 73, and 74 of Presidential
Decree No. 463, as amended; and Section 16 of Presidential Decree No. 972, as
amended, and
(f) All general and special laws, acts, city charters, decrees, executive orders,
proclamations and administrative regulations, or part or parts thereof which
are inconsistent with any of the provisions of this Code are hereby repealed or
modified accordingly.
Furthermore, it is a familiar rule that implied repeals are not lightly presumed
in the absence of a clear and unmistakable showing of such intention.
In Lichauco & Co. v. Apostol, 10 this Court explained:
The cases relating to the subject of repeal by implication all proceed on the
assumption that if the act of later date clearly reveals an intention on the part
of the lawmaking power to abrogate the prior law, this intention must be given
effect; but there must always be a sufficient revelation of this intention, and it
has become an unbending rule of statutory construction that the intention to
repeal a former law will not be imputed to the Legislature when it appears that
the two statutes, or provisions, with reference to which the question arises
bear to each other the relation of general to special.
There is no sufficient indication of an implied repeal of P.D. 1869. On the
contrary, as the private respondent points out, PAGCOR is mentioned as the
source of funding in two later enactments of Congress, to wit, R.A. 7309,
creating a Board of Claims under the Department of Justice for the benefit of
victims of unjust punishment or detention or of violent crimes, and R.A. 7648,
providing for measures for the solution of the power crisis. PAGCOR revenues
are tapped by these two statutes. This would show that the PAGCOR charter
has not been repealed by the Local Government Code but has in fact been
improved as it were to make the entity more responsive to the fiscal problems
of the government.
It is a canon of legal hermeneutics that instead of pitting one statute against
another in an inevitably destructive confrontation, courts must exert every
effort to reconcile them, remembering that both laws deserve a becoming
respect as the handiwork of a coordinate branch of the government. On the
assumption of a conflict between P.D. 1869 and the Code, the proper action is
not to uphold one and annul the other but to give effect to both by harmonizing
them if possible. This is possible in the case before us. The proper resolution of
the problem at hand is to hold that under the Local Government Code, local
government units may (and indeed must) prevent and suppress all kinds of
gambling within their territories except only those allowed by statutes like P.D.
1869. The exception reserved in such laws must be read into the Code, to make
both the Code and such laws equally effective and mutually complementary.
This approach would also affirm that there are indeed two kinds of gambling,
to wit, the illegal and those authorized by law. Legalized gambling is not a
modern concept; it is probably as old as illegal gambling, if not indeed more so.
The petitioners' suggestion that the Code authorizes them to prohibit all kinds
of gambling would erase the distinction between these two forms of gambling
without a clear indication that this is the will of the legislature. Plausibly,
following this theory, the City of Manila could, by mere ordinance, prohibit the
Philippine Charity Sweepstakes Office from conducting a lottery as authorized
by R.A. 1169 and B.P. 42 or stop the races at the San Lazaro Hippodrome as
authorized by R.A. 309 and R.A. 983.
In light of all the above considerations, we see no way of arriving at the
conclusion urged on us by the petitioners that the ordinances in question are
valid. On the contrary, we find that the ordinances violate P.D. 1869, which has
the character and force of a statute, as well as the public policy expressed in
the decree allowing the playing of certain games of chance despite the
prohibition of gambling in general.
The rationale of the requirement that the ordinances should not contravene a
statute is obvious. Municipal governments are only agents of the national
government. Local councils exercise only delegated legislative powers
conferred on them by Congress as the national lawmaking body. The delegate
cannot be superior to the principal or exercise powers higher than those of the
latter. It is a heresy to suggest that the local government units can undo the
acts of Congress, from which they have derived their power in the first place,
and negate by mere ordinance the mandate of the statute.
Municipal corporations owe their origin to, and derive their powers and rights
wholly from the legislature. It breathes into them the breath of life, without
which they cannot exist. As it creates, so it may destroy. As it may destroy, it
may abridge and control. Unless there is some constitutional limitation on the
right, the legislature might, by a single act, and if we can suppose it capable of
so great a folly and so great a wrong, sweep from existence all of the municipal
corporations in the State, and the corporation could not prevent it. We know of
no limitation on the right so far as to the corporation themselves are
concerned. They are, so to phrase it, the mere tenants at will of the
legislature. 11
This basic relationship between the national legislature and the local
government units has not been enfeebled by the new provisions in the
Constitution strengthening the policy of local autonomy. Without meaning to
detract from that policy, we here confirm that Congress retains control of the
local government units although in significantly reduced degree now than
under our previous Constitutions. The power to create still includes the power
to destroy. The power to grant still includes the power to withhold or recall.
True, there are certain notable innovations in the Constitution, like the direct
conferment on the local government units of the power to tax, 12 which cannot
now be withdrawn by mere statute. By and large, however, the national
legislature is still the principal of the local government units, which cannot
defy its will or modify or violate it.
The Court understands and admires the concern of the petitioners for the
welfare of their constituents and their apprehensions that the welfare of
Cagayan de Oro City will be endangered by the opening of the casino. We share
the view that "the hope of large or easy gain, obtained without special effort,
turns the head of the workman" 13 and that "habitual gambling is a cause of
laziness and ruin." 14 In People v. Gorostiza, 15 we declared: "The social scourge
of gambling must be stamped out. The laws against gambling must be enforced
to the limit." George Washington called gambling "the child of avarice, the
brother of iniquity and the father of mischief." Nevertheless, we must
recognize the power of the legislature to decide, in its own wisdom, to legalize
certain forms of gambling, as was done in P.D. 1869 and impliedly affirmed in
the Local Government Code. That decision can be revoked by this Court only if
it contravenes the Constitution as the touchstone of all official acts. We do not
find such contravention here.
We hold that the power of PAGCOR to centralize and regulate all games of
chance, including casinos on land and sea within the territorial jurisdiction of
the Philippines, remains unimpaired. P.D. 1869 has not been modified by the
Local Government Code, which empowers the local government units to
prevent or suppress only those forms of gambling prohibited by law.
Casino gambling is authorized by P.D. 1869. This decree has the status of a
statute that cannot be amended or nullified by a mere ordinance. Hence, it was
not competent for the Sangguniang Panlungsod of Cagayan de Oro City to
enact Ordinance No. 3353 prohibiting the use of buildings for the operation of
a casino and Ordinance No. 3375-93 prohibiting the operation of casinos. For
all their praiseworthy motives, these ordinances are contrary to P.D. 1869 and
the public policy announced therein and are therefore ultra vires and void.
WHEREFORE, the petition is DENIED and the challenged decision of the
respondent Court of Appeals is AFFIRMED, with costs against the petitioners.
It is so ordered.
Narvasa, C.J., Feliciano, Bidin, Regalado, Romero, Bellosillo, Melo, Quiason,
Puno, Vitug, Kapunan and Mendoza, JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 131255 May 20, 1998
HON. EDUARDO NONATO JOSON, in his capacity as the Governor of the
Province of Nueva Ecija, petitioner,
vs.
EXECUTIVE SECRETARY RUBEN D. TORRES, the DEPARTMENT OF
THE INTERIOR & LOCAL GOVERNMENTS, represented by SECRETARY
ROBERT Z. BARBERS and UNDERSECRETARY MANUEL R. SANCHEZ,
MR. OSCAR C. TINIO, in his capacity as Provincial Vice-Governor of
Nueva Ecija, and MR. LORETO P. PANGILINAN, MR. CRISPULO S.
ESGUERRA, MS. SOLITA C. SANTOS, MR. VICENTE C. PALILIO, and
MR. NAPOLEON G. INTERIOR, in their capacity as Provincial Board
Members of Nueva Ecija, respondents.

PUNO, J.:
The case at bar involves the validity of the suspension from office of petitioner
Eduardo Nonato Joson as Governor of the province of Nueva Ecija. Private
respondent Oscar C. Tinio is the Vice-Governor of said province while private
respondents Loreto P. Pangilinan, Crispulo S. Esguerra, Solita C. Santos,
Vicente C. Palilio and Napoleon Interior are members of the Sangguniang
Panlalawigan.
On September 17, 1996, private respondents filed with the Office of the
President a letter-complaint dated September 13, 1997 charging petitioner
with grave misconduct and abuse of authority. Private respondents alleged that
in the morning of September 12, 1996, they were at the session hall of the
provincial capitol for a scheduled session of the Sangguniang Panlalawigan
when petitioner belligerently barged into the Hall; petitioner angrily kicked the
door and chairs in the Hall and uttered threatening words at them; close
behind petitioner were several men with long and short firearms who encircled
the area. Private respondents claim that this incident was an offshoot of their
resistance to a pending legislative measure supported by petitioner that the
province of Nueva Ecija obtain a loan of P150 million from the Philippine
National Bank; that petitioner's acts were intended to harass them into
approving this loan; that fortunately, no session of the Sangguniang
Panlalawigan was held that day for lack of quorum and the proposed legislative
measure was not considered; that private respondents opposed the loan
because the province of Nueva Ecija had an unliquidated obligation of more
than P70 million incurred without prior authorization from the Sangguniang
Panlalawigan; that the provincial budget officer and treasurer had earlier
disclosed that the province could not afford to contract another obligation; that
petitioner's act of barging in and intimidating private respondents was a
serious insult to the integrity and independence of the Sangguniang
Panlalawigan; and that the presence of his private army posed grave danger to
private respondents' lives and safety. Private respondents prayed for the
suspension or removal of petitioner; for an emergency audit of the provincial
treasury of Nueva Ecija; and for the review of the proposed loan in light of the
financial condition of the province, to wit:
In this regard, we respectfully request for the following assistance from your
good office:
1. To immediately suspend Governor N. [sic] Joson considering the actual
dangers that we are facing now, and provide adequate police security detail for
the Sangguniang Panlalawigan of Nueva Ecija. Should the evidence warrant
after investigation, to order his removal from office.
2. To conduct an emergency audit of the provincial treasury of Nueva Ecija by
the auditors from the Commission on Audit Central Office with adequate police
security assistance. Should the evidence so warrant, to file necessary charges
against responsible and accountable officers.
3. To advise the Philippine National Bank to review the capability of the
province of Nueva Ecija to secure more loans and the feasibility of the same in
the light of the present financial condition of the province. Or if said loan will
be contrary to sound banking practice, recommend its disapproval. 1
The letter-complaint was submitted with the joint affidavit of Elnora Escombien
and Jacqueline Jane Perez, two (2) employees of the Sangguniang Panlalawigan
who witnessed the incident. The letter was endorsed by Congressmen Eleuterio
Violago and Pacifico Fajardo of the Second and Third Districts of Nueva Ecija,
former Congressman Victorio Lorenzo of the Fourth District, and Mayor
Placido Calma, President of the Mayors' League of said province. 2
The President acted on the complaint by writing on its margin the following:
17 Sep 96
To: SILG info Exec. Sec. and Sec. of Justice:
1. Noted. There appears no justification for the use of force, intimidation or
armed followers in the situation of 12 Sep at the Session Hall. 2. Take
appropriate preemptive and investigative actions. 3 BREAK NOT the PEACE.
FIDEL V. RAMOS
(Signed).3
President Ramos noted that the situation of "12 Sep at the Session
Hall," i.e., the refusal of the members of the Sangguniang Panlalawigan to
approve the proposed loan, did not appear to justify "the use of force,
intimidation or armed followers." He thus instructed the then Secretary of the
Interior and Local Governments (SILG) Robert Barbers to "[t]ake appropriate
preemptive and investigative actions," but to "[b]reak not the peace."
The letter-complaint together with the President's marginal notes were sent to
Secretary Robert Z. Barbers on September 20, 1996. Acting upon the
instructions of the President, Secretary Barbers notified petitioner of the case
against him4 and attached to the notice a copy of the complaint and its
annexes. In the same notice, Secretary Barbers directed petitioner "to submit
[his] verified/sworn answer thereto, not a motion to dismiss, together with such
documentary evidence that [he] has in support thereof, within fifteen (15) days
from receipt.5
Immediately thereafter, Secretary Barbers proceeded to Nueva Ecija and
summoned petitioner and private respondents to a conference to settle the
controversy. The parties entered into an agreement whereby petitioner
promised to maintain peace and order in the province while private
respondents promised to refrain from filing cases that would adversely affect
their peaceful co-existence.6
The peace agreement was not respected by the parties and the private
respondents reiterated their letter-complaint. Petitioner was again ordered to
file his answer to the letter-complaint within fifteen days from receipt.
Petitioner received a copy of this order on November 13, 1996. On the same
day, petitioner requested for an extension of thirty (30) days to submit his
answer because he was "trying to secure the services of legal counsel
experienced in administrative law practice. 7 The Department of the Interior
and Local Government (DILG), acting through Director Almario de los Santos,
Officer-In-Charge of the Legal Service, granted the motion, with the thirty-day
extension to be reckoned, however, from November 13, 1996, i.e., the day
petitioner received the order to answer.8
In a letter dated December 9, 1996, petitioner moved for another extension of
thirty (30) days to file his answer. He stated that he had already sent letters to
various law firms in Metro Manila but that he had not yet contracted their
services; that the advent of the Christmas season kept him busy with
"numerous and inevitable official engagements." 9 The DILG granted the
request for extension "for the last time up to January 13 only." 10
On January 7, 1997, petitioner requested for another extension of thirty (30)
days to file his answer. According to him, the Christmas season kept him very
busy and preoccupied with his numerous official engagements; that the law
firms he invited to handle his case have favorably replied but that he needed
time to confer with them personally; and that during this period, he, with the
help of his friends, was exploring the possibility of an amicable settlement of
the case.11 The DILG granted petitioner's request "for the last time" but gave
him an extension of only ten (10) days from January 13, 1997 to January 23,
1997. The DILG also informed him that his "failure to submit answer will be
considered a waiver and that the plaintiff [shall] be allowed to present his
evidence ex parte."12
Petitioner moved for reconsideration of the order. He reiterated his prayer for
an extension of thirty (30) days on the following grounds: (a) that he was still in
the process of choosing competent and experienced counsel; (b) that some law
firms refused to accept his case because it was perceived to be politically
motivated; and (c) the multifarious activities, appointments and official
functions of his office hindered his efforts to secure counsel of choice.13
Three months later, on April 22, 1997, Undersecretary Manuel Sanchez, then
Acting Secretary of the DILG, issued an order declaring petitioner in default
and to have waived his right to present evidence. Private respondents were
ordered to present their evidence ex-parte. The order reads as follows:
ORDER
It appearing that respondent failed to submit his answer to the complaint
despite the grant to him of three (3) extensions, such unreasonable failure is
deemed a waiver of his right to present evidence in his behalf pursuant to
Section 4, Rule 4 of Administrative Order No. 23 dated December 17, 1992, as
amended.
Respondent is hereby declared in default, meanwhile, complainants are
directed to present their evidence ex-parte. however, considering the
prohibition on the conduct of administrative investigation due to the
forthcoming barangay elections, complainants will be notified on the date after
the barangay election for them to present their evidence.
SO ORDERED.14
Two days later, on April 24, 1997, the law firm of Padilla, Jimenez, Kintanar &
Asuncion, representing petitioner, filed with the DILG an "Entry of Appearance
with Motion for Time to File Answer Ad Cautelam."
Petitioner received a copy of the order of default on May 2, 1997. Through
counsel, he moved for reconsideration. On May 19, 1997, Undersecretary
Sanchez reconsidered the order of default in the interest of justice. He noted
the appearance of petitioner's counsel and gave petitioner "for the last time"
fifteen (15) days from receipt to file his answer.15
On June 23, 1997, Undersecretary Sanchez issued an order stating that
petitioner's counsel, whose office is in Manila, should have received a copy of
the May 19, 1997 order ten days after mailing on May 27, 1997. Since
petitioner still failed to file his answer, he was deemed to have waived his right
to present evidence in his behalf. Undersecretary Sanchez reinstated the order
of default and directed private respondents to present their evidence ex-
parte on July 15, 1997.16
The following day, June 24, 1997, petitioner, through counsel, filed a "Motion to
Dismiss." Petitioner alleged that the letter-complaint was not verified on the
day it was filed with the Office of the President; and that the DILG had no
jurisdiction over the case and no authority to require him, to answer the
complaint.
On July 4, 1997, petitioner filed an "Urgent Ex-Parte Motion for
Reconsideration" of the order of June 23, 1997 reinstating the order of default.
Petitioner also prayed that the hearing on the merits of the case be held in
abeyance until after the "Motion to Dismiss" shall have been resolved.
On July 11, 1997, on recommendation of Secretary Barbers, Executive
Secretary Ruben Torres issued an order, by authority of the President, placing
petitioner under preventive suspension for sixty (60) days pending
investigation of the charges against him.17
Secretary Barbers directed the Philippine National Police to assist in the
implementation of the order of preventive suspension. In petitioner's stead,
Secretary Barbers designated Vice-Governor Oscar Tinio as Acting Governor
until such time as petitioner's temporary legal incapacity shall have ceased to
exist.18
Forthwith, petitioner filed a petition for certiorari and prohibition with the
Court of Appeals challenging the order of preventive suspension and the order
of default.19
Meanwhile, the proceedings before the DILG continued. On August 20, 1997,
Undersecretary Sanchez issued an order denying petitioner's "Motion to
Dismiss" and " Urgent Ex-Parte Motion for Reconsideration." In the same
order, he required the parties to submit their position papers within an
inextendible period of ten days from receipt after which the case shall be
deemed submitted for resolution, to wit:
WHEREFORE, for lack of merit, both motions are denied. However, for this
office to have a better appreciation of the issues raised in the instant case, the
parties, through their respective counsels are hereby directed to submit their
position papers within a period of ten (10) days from receipt hereof, which
period is inextendible, after which the case is deemed submitted for
resolution.20
On August 27, 1997, petitioner filed with the DILG a "Motion to Lift Order of
Preventive Suspension." On September 10, 1997, petitioner followed this with
a "Motion to Lift Default Order and Admit Answer Ad Cautelam."21 Attached to
the motion was the "Answer Ad Cautelam".22 and sworn statements of his
witnesses. On the other hand, complainants (private respondents herein)
manifested that they were submitting the case for decision based on the
records, the complaint and affidavits of their witnesses.23
In his Answer Ad Cautelam, petitioner alleged that in the morning of
September 12, 1996, while he was at his district office in the town of Munoz,
he received a phone call from Sangguniang Panlalawigan member Jose del
Mundo. Del Mundo, who belonged to petitioner's political party, informed him
that Vice-Governor Tinio was enraged at the members of the Sangguniang
Panlalawigan who were in petitioner's party because they refused to place on
the agenda the ratification of the proposed P150 million loan of the province.
Petitioner repaired to the provincial capitol to advise his party-mates on their
problem and at the same time attend to his official functions. Upon arrival, he
went to the Session Hall and asked the members present where Vice-Governor
Tinio was. However, without waiting for their reply, he left the Hall and
proceeded to his office.
Petitioner claimed that there was nothing in his conduct that threatened the
members of the Sangguniang Panlalawigan or caused alarm to the employees.
He said that like Vice-Governor Tinio, he was always accompanied by his
official security escorts whenever he reported for work. He also alleged that
the joint affidavit of Elnora Escombien and Jacqueline Jane Perez was false.
Escombien was purportedly not inside the session hall during the incident but
was at her desk at the office and could not in any way have seen petitioner in
the hall. To attest to the truth of his allegations, petitioner submitted three (3)
joint affidavits — two (2) affidavits executed by six (6) and ten (10) employees,
respectively, of the provincial government, and a third by four members of the
Sangguniang Panlalawigan.24
On September 11, 1997, petitioner filed an "Urgent Motion for
Reconsideration" of the order of August 20, 1997 denying his motion to
dismiss. The "Urgent Motion for Reconsideration" was rejected by
Undersecretary Sanchez on October 8, 1997. Undesecretary Sanchez, however,
granted the "Motion to Lift Default Order and to Admit Answer Ad Cautelam"
and admitted the "Answer Ad Cautelam" as petitioner's position paper
pursuant to the order of August 20, 1997.25
On October 15, 1997, petitioner filed a "Motion to Conduct Formal
Investigation." Petitioner prayed that a formal investigation of his case be
conducted pursuant to the provisions of the Local Government Code of 1991
and Rule 7 of Administrative Order No. 23; and that this be held at the
province of Nueva Ecija.26 On October 29, 1997, petitioner submitted a
"Manifestation and Motion" before the DILG reiterating his right to a formal
investigation.
In the meantime, on October 24, 1997, the Court of Appeals dismissed
petitioner's petition.27
Hence this recourse.
The proceedings before the DILG continued however. In an order dated
November 11, 1997, the DILG denied petitioner's "Motion to Conduct Formal
Investigation" declaring that the submission of position papers substantially
complies with the requirements of procedural due process in administrative
proceedings.28
A few days after filing the petition before this Court, petitioner filed a "Motion
for Leave to File Herein Incorporated Urgent Motion for the Issuance of a
Temporary Restraining Order and/or a Writ of Preliminary Injunction."
Petitioner alleged that subsequent to the institution of this petition, the
Secretary of the Interior and Local Governments rendered a resolution on the
case finding him guilty of the offenses charged. 29 His finding was based on the
position papers and affidavits of witnesses submitted by the parties. The DILG
Secretary found the affidavits of complainants' witnesses to be "more natural,
reasonable and probable" than those of herein petitioner Joson's. 30
On January 8, 1998, the Executive Secretary, by authority of the President,
adopted the findings and recommendation of the DILG Secretary. He imposed
on petitioner the penalty of suspension from office for six (6) months without
pay, to wit:
WHEREFORE, as recommended by the Secretary of the Interior and Local
Government, respondent Nueva Ecija Governor Eduardo Nonato Joson is
hereby found guilty of the offenses charged and is meted the penalty of
suspension from office for a period of six (6) months without pay.31
On January 14, 1998, we issued a temporary restraining order enjoining the
implementation of the order of the Executive Secretary.
On January 19, 1998, private respondents submitted a Manifestation informing
this Court that the suspension of petitioner was implemented on January 9,
1998; that on the same day, private respondent Oscar Tinio was installed as
Acting Governor of the province; and that in view of these events, the
temporary restraining order had lost its purpose and effectivity and was
fait accompli.32 We noted this Manifestation.
In his petition, petitioner alleges that:
I THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT RULES OF
PROCEDURE AND EVIDENCE SHOULD NOT BE STRICTLY APPLIED IN THE
ADMINISTRATIVE DISCIPLINARY AND CLEARLY PUNITIVE PROCEEDINGS
IN THE CASE AGAINST PETITIONER GOVERNOR EDNO JOSON;
II THE COURT OF APPEALS GRAVELY ERRED IN APPLYING THE ALTER-EGO
PRINCIPLE BECAUSE, CONTRARY TO LAW, IT WAS THE SECRETARY OF THE
DILG WHO WAS EXERCISING THE POWERS OF THE PRESIDENT WHICH
ARE CLEARLY VESTED BY LAW ONLY UPON HIM OR THE EXECUTIVE
SECRETARY.
III THE COURT OF APPEALS ERRED IN RULING THAT THE PETITIONER
WAS PROPERLY DECLARED IN DEFAULT WHEN HE FILED A MOTION TO
DISMISS INSTEAD OF AN ANSWER, AS DIRECTED BY THE DILG, BECAUSE
A MOTION TO DISMISS BASED ON JURISDICTIONAL GROUNDS IS NOT A
PROHIBITIVE [sic] PLEADING IN ADMINISTRATIVE DISCIPLINARY CASES.
IV THE COURT OF APPEALS ERRED IN RULING THAT THE IMPOSITION OF
PREVENTIVE SUSPENSION AGAINST THE PETITIONER WAS PROPER
BECAUSE THERE WAS NO JOINDER OF ISSUES YET UPON ITS IMPOSITION
AND THERE WAS NO EVIDENCE OF GUILT AGAINST PETITIONER. 33
In his "Motion for Leave to File Herein Incorporated Urgent Motion for the
Issuance of a Temporary Restraining Order and/or a Writ of Preliminary
Injunction," petitioner also claims that:
I THE RESOLUTION OF JANUARY 8, 1998 AND THE MEMORANDA ISSUED
PURSUANT THERETO (i.e., ANNEXES "C," "D," "E," "F," AND "G" HEREOF)
WERE ISSUED WITH UNDUE HASTE, IN VIOLATION OF THE PERTINENT
PROVISIONS OF THE 1991 LOCAL GOVERNMENT CODE AND
ADMINISTRATIVE ORDER NO. 23, AND IN COMPLETE DISREGARD OF
PETITIONER'S CONSTITUTIONAL RIGHT TO DUE PROCESS.
II THE IMPLEMENTATION OF THE INVALID RESOLUTION OF JANUARY 8,
1998 (ANNEX "C" HEREOF) BY THE PUBLIC RESPONDENTS ENTITLES
PETITIONER TO THE IMMEDIATE ISSUANCE OF THE TEMPORARY
RESTRAINING ORDER/WRIT OF PRELIMINARY INJUNCTION HEREIN
PRAYED FOR.34
We find merit in the petition.
Administrative disciplinary proceedings against elective local officials are
governed by the Local Government Code of 1991, the Rules and Regulations
Implementing the Local Government Code of 1991, and Administrative Order
No. 23 entitled "Prescribing the Rules and Procedures on the Investigation of
Administrative Disciplinary Cases Against Elective Local Officials of Provinces,
Highly Urbanized Cities, Independent Component Cities, and Cities and
Municipalities in Metropolitan Manila." 35 In all matters not provided in A.O. No.
23, the Rules of Court and the Administrative Code of 1987 apply in a
suppletory character.36
I
Section 60 of Chapter 4, Title II, Book I of the Local Government Code
enumerates the grounds for which an elective local official may be disciplined,
suspended or removed from office. Section 60 reads:
Sec. 60. Grounds for Disciplinary Actions. — An elective local official may be
disciplined, suspended, or removed from office on any of the following grounds:
(a) Disloyalty to the Republic of the Philippines;
(b) Culpable violation of the Constitution;
(c) Dishonesty, oppression, misconduct in office, gross negligence, or
dereliction of duty;
(d) Commission of any offense involving moral turpitude or an offense
punishable by at least prision mayor;
(e) Abuse of authority;
(f) Unauthorized absence for fifteen (15) consecutive working days, except in
the case of members of the sangguniang panlalawigan, sangguniang
panlunsod, sangguniang bayan, and sangguniang barangay;
(g) Application for, or acquisition of, foreign citizenship or residence or the
status of an immigrant of another country; and
(h) Such other grounds as may be provided in this Code and other laws.
An elective local official may be removed from office on the grounds
enumerated above by order of the proper court.
When an elective local official commits an act that falls under the grounds for
disciplinary action, the administrative complaint against him must be verified
and filed with any of the following:
Sec. 61. Form and Filing of Administrative Complaints. — A verified complaint
against any erring local elective official shall be prepared as follows:
(a) A complaint against any elective official of a province, a highly urbanized
city, an independent component city or component city shall be filed before the
Office of the President.
(b) A complaint against any elective official of a municipality shall be filed
before the sangguniang panlalawigan whose decision may be appealed to the
Office of the President; and
(c) A complaint against any elective barangay official shall be filed before the
sangguniang panlungsod or sangguniang bayan concerned whose decision
shall be final and executory.37

and filed with the proper government office. ℒαwρhi ৷ A complaint against an
An administrative complaint against an erring elective official must be verified

elective provincial or city official must be filed with the Office of the President.
A complaint against an elective municipal official must be filed with the
Sangguniang Panlalawigan while that of a barangay official must be filed
before the Sangguniang Panlungsod or Sangguniang Bayan.
In the instant case, petitioner Joson is an elective official of the province of
Nueva Ecija. The letter-complaint against him was therefore properly filed with
the Office of the President. According to petitioner, however, the letter-
complaint failed to conform with the formal requirements set by the Code. He
alleges that the complaint was not verified by private respondents and was not
supported by the joint affidavit of the two witnesses named therein; that
private respondents later realized these defects and surreptitiously inserted
the verification and sworn statement while the complaint was still pending with
the Office of the President.38 To prove his allegations, petitioner submitted: (a)
the sworn statement of private respondent Solita C. Santos attesting to the
alleged fact that after the letter-complaint was filed, Vice-Governor Tinio made
her and the other members of the Sangguniang Panlalawigan sign an
additional page which he had later notarized; and (b) the fact that the
verification of the letter-complaint and the joint affidavit of the witnesses do
not indicate the document, page or book number of the notarial register of the
notary public before whom they were made.39
We find no merit in the contention of the petitioner. The absence of the
document, page or book number of the notarial register of the subscribing
officer is insufficient to prove petitioner's claim. The lack of these entries may
constitute proof of neglect on the part of the subscribing officer in complying
with the requirements for notarization and proper verification. They may give
grounds for the revocation of his notarial commission. 40 But they do not
indubitably prove that the verification was inserted or intercalated after the
letter-complaint was filed with the Office of the President.
Nor is the fact of intercalation sufficiently established by the affidavit of Solita
C. Santos. Private respondent Santos was one of the signatories to the letter-
complaint. In her affidavit, she prayed that she be dropped as one of the
complainants since she had just joined the political party of petitioner Joson.
She decided to reveal the intercalation because she was disillusioned with the
"dirty tactics" of Vice-Governor Tinio to grab power from petitioner
Joson.41 Private respondent Santos cannot in anyway be considered an
unbiased witness. Her motive and change of heart render her affidavit suspect.
Assuming, nonetheless, that the letter-complaint was unverified when
submitted to the Office of the President, the defect was not fatal. The
requirement of verification was deemed waived by the President himself when
he acted on the complaint.
Verification is a formal, not jurisdictional requisite.42 Verification is mainly
intended to secure an assurance that the allegations therein made are done in
good faith or are true and correct and not mere speculation. 43 The lack of
verification is a mere formal defect.44 The court may order the correction of the
pleading, if not verified, or act on the unverified pleading if the attending
circumstances are such that a strict compliance with the rule may be dispensed
with in order that the ends of justice may be served.45
II
In his second assigned error, petitioner questions the jurisdiction and authority
of the DILG Secretary over the case. He contends that under the law, it is the
Office of the President that has jurisdiction over the letter-complaint and that
the Court of Appeals erred in applying the alter-ego principle because the
power to discipline elective local officials lies with the President, not with the
DILG Secretary.
Jurisdiction over administrative disciplinary actions against elective local
officials is lodged in two authorities: the Disciplining Authority and the
Investigating Authority. This is explicit from A.O. No. 23, to wit:
Sec. 2. Disciplining Authority. All administrative complaints, duly verified,
against elective local officials mentioned in the preceding Section shall be
acted upon by the President. The President, who may act through the
Executive Secretary, shall hereinafter be referred to as the Disciplining
Authority.
Sec. 3. Investigating Authority. The Secretary of the Interior and Local
Government is hereby designated as the Investigating Authority. He may
constitute an Investigating Committee in the Department of the Interior and
Local Government for the purpose.
The Disciplining Authority may, however, in the interest of the service,
constitute a Special Investigating Committee in lieu of the Secretary of the
Interior and Local Government.46
Pursuant to these provisions, the Disciplining Authority is the President of the
Philippines, whether acting by himself or through the Executive Secretary. The
Secretary of the Interior and Local Government is the Investigating Authority,
who may act by himself or constitute an Investigating Committee. The
Secretary of the DILG, however, is not the exclusive Investigating Authority. In
lieu of the DILG Secretary, the Disciplinary Authority may designate a Special
Investigating Committee.
The power of the President over administrative disciplinary cases against
elective local officials is derived from his power of general supervision over
local governments. Section 4, Article X of the 1987 Constitution provides:
Sec. 4. The President of the Philippines shall exercise general supervision over
local governments. Provinces with respect to component cities and
municipalities, and cities and municipalities with respect to component
barangays shall ensure that the acts of their component units are within the
scope of their prescribed powers and functions.47
The power of supervision means "overseeing or the authority of an officer to
see that the subordinate officers perform their duties." 48 If the subordinate
officers fail or neglect to fulfill their duties, the official may take such action or
step as prescribed by law to make them perform their duties. 49 The President's
power of general supervision means no more than the power of ensuring that
laws are faithfully executed, or that subordinate officers act within the
law.50 Supervision is not incompatible with discipline. 51 And the power to
discipline and ensure that the laws be faithfully executed must be construed to
authorize the President to order an investigation of the act or conduct of local
officials when in his opinion the good of the public service so requires. 52 Thus:
Independently of any statutory provision authorizing the President to conduct
an investigation of the nature involved in this proceeding, and in view of the
nature and character of the executive authority with which the President of the
Philippines is invested, the constitutional grant to him of power to exercise
general supervision over all local governments and to take care that the laws
be faithfully executed must be construed to authorize him to order an
investigation of the act or conduct of the petitioner herein. Supervision is not a
meaningless thing. It is an active power. It is certainly not withou t limitation,
but it at least implies authority to inquire into facts and conditions in order to
render the power real and effective. If supervision is to be conscientious and
rational, and not automatic and brutal, it must be founded upon a knowledge of
actual facts and conditions disclosed after careful study and investigation. 53
The power to discipline evidently includes the power to investigate. As the
Disciplining Authority, the President has the power derived from the
Constitution itself to investigate complaints against local government officials.
A.O. No. 23, however, delegates the power to investigate to the DILG or a
Special Investigating Committee, as may be constituted by the Disciplining
Authority. This is not undue delegation, contrary to petitioner Joson's claim.
The President remains the Disciplining Authority. What is delegated is the
power to investigate, not the power to discipline. 54
Moreover, the power of the DILG to investigate administrative complaints is
based on the alter-ego principle or the doctrine of qualified political agency.
Thus:
Under this doctrine, which recognizes the establishment of a single executive,
all executive and administrative organizations are adjuncts of the Executive
Department, the heads of the various executive departments are assistants and
agents of the Chief Executive, and, except in cases where the Chief Executive
is required by the Constitution or law to act in person or the exigencies of the
situation demand that he act personally, the multifarious executive and
administrative functions of the Chief Executive are performed by and through
the executive departments, and the acts of the Secretaries of such
departments, performed and promulgated in the regular course of business,
are, unless disapproved or reprobated by the Chief Executive presumptively
the acts of the Chief Executive.55
This doctrine is corollary to the control power of the President. 56 The power of
control is provided in the Constitution, thus:
Sec. 17. The President shall have control of all the executive departments,
bureaus, and offices. He shall ensure that the laws be faithfully executed. 57
Control is said to be the very heart of the power of the presidency. 58 As head of
the Executive Department, the President, however, may delegate some of his
powers to the Cabinet members except when he is required by the Constitution
to act in person or the exigencies of the situation demand that he acts
personally.59 The members of Cabinet may act for and in behalf of the President
in certain matters because the President cannot be expected to exercise his
control (and supervisory) powers personally all the time. Each head of a
department is, and must be, the President's alter ego in the matters of that
department where the President is required by law to exercise authority. 60
The procedure how the Disciplining and Investigating Authorities should
exercise their powers is distinctly set forth in the Local Government Code and
A.O. No. 23. Section 62 of the Code provides:
Sec. 62. Notice of Hearing. — (a) Within seven (7) days after the administrative
complaint is filed, the Office of the President or the sanggunian concerned, as
the case may be, shall require the respondent to submit his verified answer
within fifteen (15) days from receipt thereof, and commence investigation of
the case within ten (10) days after receipt of such answer of the respondent.
xxx xxx xxx
Sections 1 and 3, Rule 561 of A.O. No. 23 provide:
Sec. 1. Commencement. Within forty-eight (48) hours from receipt of the
answer, the Disciplining Authority shall refer the complaint and answer,
together with their attachments and other relevant papers, to the Investigating
Authority who shall commence the investigation of the case within ten (10)
days from receipt of the same.
xxx xxx xxx
Sec. 3. Evaluation. Within twenty (20) days from receipt of the complaint and
answer, the Investigating Authority shall determine whether there is a prima
facie case to warrant the institution of formal administrative proceedings.
When an administrative complaint is therefore filed, the Disciplining Authority
shall issue an order requiring the respondent to submit his verified answer
within fifteen (15) days from notice. Upon filing of the answer, the Disciplining
Authority shall refer the case to the Investigating Authority for investigation.
In the case at bar, petitioner claims that the DILG Secretary usurped the power
of the President when he required petitioner to answer the complaint.
Undisputably, the letter-complaint was filed with the Office of the President but
it was the DILG Secretary who ordered petitioner to answer.
Strictly applying the rules, the Office of the President did not comply with the
provisions of A.O. No. 23. The Office should have first required petitioner to file
his answer. Thereafter, the complaint and the answer should have been
referred to the Investigating Authority for further proceedings. Be that as it
may, this procedural lapse is not fatal. The filing of the answer is necessary
merely to enable the President to make a preliminary assessment of the
case.62 The President found the complaint sufficient in form and substance to
warrant its further investigation. The judgment of the President on the matter
is entitled to respect in the absence of grave abuse of discretion.
III
In his third assigned error, petitioner also claims that the DILG erred in
declaring him in default for filing a motion to dismiss. He alleges that a motion
to dismiss is not a pleading prohibited by the law or the rules and therefore the
DILG Secretary should have considered it and given him time to file his answer.
It is true that a motion to dismiss is not a pleading prohibited under the Local
Government Code of 1991 nor in A.O. No. 23. Petitioner, however, was
instructed not to file a motion to dismiss in the order to file answer. Thrice, he
requested for extension of time to file his answer citing as reasons the search
for competent counsel and the demands of his official duties. And, thrice, his
requests were granted. Even the order of default was reconsidered and
petitioners was given additional time to file answer. After al the requests and
seven months later, he filed a motion to dismiss!
Petitioner should know that the formal investigation of the case is required by
law to be finished within one hundred twenty (120) days from the time of
formal notice to the respondent. The extensions petitioners requested
consumed fifty-five (55) days of this period. 63 Petitioner, in fact, filed his answer
nine (9) months after the first notice. Indeed, this was more than sufficient
time for petitioner to comply with the order to file answer.
The speedy disposition of administrative complaints is required by public
service. The efficiency of officials under investigation is impaired when a case
hangs over their heads. Officials deserve to be cleared expeditiously if they are
innocent, also expeditiously if guilty, so that the business of government will
not be prejudiced.64
IV
In view of petitioner's inexcusable failure to file answer, the DILG did not err in
recommending to the Disciplining Authority his preventive suspension during
the investigation. Preventive suspension is authorized under Section 63 of the
Local Government Code, viz:
Sec. 63. Preventive Suspension. — (a) Preventive suspension may be imposed:
(1) By the President, if the respondent is an elective official of a province, a
highly urbanized or an independent component city;
xxx xxx xxx
(b) Preventive suspension may be imposed at any time after the issues are
joined, when the evidence of guilt is strong, and given the gravity of the
offense, there is great probability that the continuance in office of the
respondent could influence the witnesses or pose a threat to the safety and
integrity of the records and other evidence; Provided, That, any single
preventive suspension of local elective officials shall not extend beyond sixty
(60) days: Provided, further, That in the event that several administrative cases
are filed against an elective official, he cannot be preventively suspended for
more than ninety (90) days within a single year on the same ground or grounds
existing and known at the time of the first suspension.
xxx xxx xxx
In sum, preventive suspension may be imposed by the Disciplining Authority at
any time (a) after the issues are joined; (b) when the evidence of guilt is strong;
and (c) given the gravity of the offense, there is great probability that the
respondent, who continues to hold office, could influence the witnesses or pose
a threat to the safety and integrity of the records and other evidence.
Executive Secretary Torres, on behalf of the President, imposed preventive
suspension on petitioner Joson after finding that:
xxx xxx xxx
DILG Secretary Robert Z. Barbers, in a memorandum for the President, dated
23 June 1997, recommends that respondent be placed under preventive
suspension considering that all the requisites to justify the same are present.
He stated therein that:
"Preventive suspension may be imposed at any time after the issues are joined,
that is, after respondent has answered the complaint, when the evidence of
guilt is strong and, given the gravity of the offense, there is a great possibility
that the continuance in office of the respondent could influence the witnesses
or pose a threat to the safety and integrity of the records and other evidence
(Sec. 3, Rule 6 of Administrative Order No. 23).
The failure of respondent to file his answer despite several opportunities given
him is construed as a waiver of his right to present evidence in his behalf (Sec.
4, Rule 4 of Administrative Order No. 23). The requisite of joinder of issues is
squarely met with respondent's waiver of right to submit his answer. The act of
respondent in allegedly barging violently into the session hall of the
Sangguniang Panlalawigan in the company of armed men constitutes grave
misconduct. The allegations of complainants are bolstered by the joint-affidavit
of two (2) employees of the Sangguniang Panlalawigan. Respondent who is the
chief executive of the province is in a position to influence the witnesses.
Further, the history of violent confrontational politics in the province dictates
that extreme precautionary measures be taken."
Upon scrutiny of the records and the facts and circumstances attendant to this
case, we concur with the findings of the Secretary of the Interior and Local
Government and find merit in the aforesaid recommendation.
WHEREFORE, and as recommended by the Department of the Interior and
Local Government, respondent EDUARDO N. JOSON, Governor of Nueva Ecija,
is hereby placed under PREVENTIVE SUSPENSION FOR A PERIOD OF SIXTY
(60) DAYS, effective 11 July 1997, pending investigation of the charges filed
against him.
SO ORDERED.65
Executive Secretary Torres found that all the requisites for the imposition of
preventive suspension had been complied with. Petitioner's failure to file his
answer despite several opportunities given him was construed as a waiver of
his right to file answer and present evidence; and as a result of this waiver, the
issues were deemed to have been joined. The Executive Secretary also found
that the evidence of petitioner Joson's guilt was strong and that his
continuance in office during the pendency of the case could influence the
witnesses and pose a threat to the safety and integrity of the evidence against
him.
V
We now come to the validity of the January 8, 1998 Resolution of the Executive
Secretary finding petitioner guilty as charged and imposing on him the penalty
of suspension from office for six (6) months from office without pay.
Petitioner claims that the suspension was made without formal investigation
pursuant to the provisions of Rule 7 of A.O. No. 23. Petitioner filed a "Motion To
Conduct Formal Investigation" three months before the issuance of the order of
suspension and this motion was denied by the DILG for the following reasons:
On November 19, 1997, complainants, through counsel, filed a Manifestation
calling our attention to the Decision dated October 24, 1997 of the Court of
Appeals, Fifth Division in CA-G.R. SP No. 44694, entitled "Eduardo Nonato
Joson versus Executive Secretary Ruben D. Torres, et. al." In the aforestated
decision, the Court of Appeals resolved to sustain the authority of this
Department to investigate this administrative case and has likewise validated
the order of default as well as the order of preventive suspension of the
respondent.
We offer no objection and concur with the assertion of respondent that he has
the right for the conduct of formal investigation. However, before there shall
be a formal investigation, joinder of issues must already be present or
respondent's answer has already been filed. In the case at bar, the admission of
respondent's answer after having been declared in default was conditioned on
the fact of submission of position papers by the parties, after which, the case
shall be deemed submitted for resolution. Respondent, instead of submitting
his position paper filed his subject motion while complainants manifested to
forego the submission of position paper and submit the case for resolution on
the basis of the pleadings on hand.
Settled is the rule that in administrative proceedings, technical rules of
procedure and evidence are not strictly applied (Concerned Officials of the
Metropolitan Waterworks and Sewerage System v. Vasquez, 240 SCRA 502).
The essence of due process is to be found in the reasonable opportunity to be
heard and to submit evidence one may have in support of one's defense
(Tajonera v. Lamaroza, 110 SCRA 438). To be heard does not only mean verbal
arguments in court; one may be heard also through pleadings. Where
opportunity to be heard, either through oral arguments or pleadings, is
accorded, there is no denial of procedural due process (Juanita Y. Say, et. al; vs.
IAC, G.R. No. 73451). Thus, when respondent failed to submit his position
paper as directed and insisted for the conduct of formal investigation, he was
not denied of his right of procedural process.
WHEREFORE, the Motion for the Conduct of Formal Investigation, for lack of
merit, is DENIED.
SO ORDERED.66
The denial of petitioner's Motion to Conduct Formal Investigation is erroneous.
Petitioner's right to a formal investigation is spelled out in the following
provisions of A.O. No. 23, viz:
Sec. 3 Evaluation. Within twenty (20) days from receipt of the complaint and
answer, the Investigating Authority shall determine whether there is a prima
facie case to warrant the institution of formal administrative proceedings.
Sec. 4. Dismissal motu proprio. If the Investigating Authority determines that
there is no prima facie case to warrant the institution of formal administrative
proceedings, it shall, within the same period prescribed under the preceding
Section, submit its recommendation to the Disciplining Authority for the motu
proprio dismissal of the case, together with the recommended decision,
resolution, and order.
Sec. 5. Preliminary conference. If the Investigating Authority determines that
there is prima facie case to warrant the institution of formal administrative
proceedings, it shall, within the same period prescribed under the preceding
Section, summon the parties to a preliminary conference to consider the
following:
a) whether the parties desire a formal investigation or are willing to submit the
case for resolution on the basis of the evidence on record; and
b) If the parties desire a formal investigation, to consider the simplification of
issues, the possibility of obtaining stipulation or admission of facts and of
documents, specifically affidavits and depositions, to avoid unnecessary proof,
the limitation of number of witnesses, and such other matters as may be aid
the prompt disposition of the case.
The Investigating Authority shall encourage the parties and their counsels to
enter, at any stage of the proceedings, into amicable settlement, compromise
and arbitration, the terms and conditions of which shall be subject to the
approval of the Disciplining Authority.
After the preliminary conference, the Investigating Authority shall issue an
order reciting the matters taken up thereon, including the facts stipulated and
the evidences marked, if any. Such order shall limit the issues for hearing to
those not disposed of by agreement or admission of the parties, and shall
schedule the formal investigation within ten (10) days from its issuance, unless
a later date is mutually agreed in writing by the parties concerned. 67
The records show that on August 27, 1997, petitioner submitted his Answer Ad
Cautelam where he disputed the truth of the allegations that he barged into
the session hall of the capitol and committed physical violence to harass the
private respondents who were opposed to any move for the province to
contract a P150 million loan from PNB. In his Order of October 8, 1997,
Undersecretary Sanchez admitted petitioner's Answer Ad Cautelam but treated
it as a position paper. On October 15, 1997, petitioner filed a Motion to
Conduct Formal Investigation. Petitioner reiterated this motion on October 29,
1997. Petitioner's motion was denied on November 11, 1997. Secretary
Barbers found petitioner guilty as charged on the basis of the parties' position
papers. On January 8, 1998, Executive Secretary Torres adopted Secretary
Barbers' findings and recommendations and imposed on petitioner the penalty
of six (6) months suspension without pay.
The rejection of petitioner's right to a formal investigation denied him
procedural due process. Section 5 of A.O. No. 23 provides that at the
preliminary conference, the Investigating Authority shall summon the parties
to consider whether they desire a formal investigation. This provision does not
give the Investigating Authority the discretion to determine whether a formal
investigation would be conducted. The records show that petitioner filed a
motion for formal investigation. As respondent, he is accorded several rights
under the law, to wit:
Sec. 65. Rights of Respondent. — The respondent shall be accorded full
opportunity to appear and defend himself in person or by counsel, to confront
and cross-examine the witnesses against him, and to require the attendance of
witnesses and the production of documentary evidence in his favor through
compulsory process of subpoena or subpoena duces tecum.
An erring elective local official has rights akin to the constitutional rights of an
accused.68 These rights are essentially part of procedural due process. 69 The
local elective official has the (1) the right to appear and defend himself in
person or by counsel; (2) the right to confront and cross-examine the witnesses
against him; and (3) the right to compulsory attendance of witness and the
production of documentary evidence. These rights are reiterated in the Rules
Implementing the Local Government Code70 and in A.O. No. 23.71 Well to note,
petitioner, formally claimed his right to a formal investigation after his
Answer Ad Cautelam has been admitted by Undersecretary Sanchez.
Petitioner's right to a formal investigation was not satisfied when the complaint
against him was decided on the basis of position papers. There is nothing in the
Local Government Code and its Implementing Rules and Regulations nor in
A.O. No. 23 that provide that administrative cases against elective local
officials can be decided on the basis of position papers. A.O. No. 23 states that
the Investigating Authority may require the parties to submit their respective
memoranda but this is only after formal investigation and hearing. 72 A.O. No.
23 does not authorize the Investigating Authority to dispense with a hearing
especially in cases involving allegations of fact which are not only in contrast
but contradictory to each other. These contradictions are best settled by
allowing the examination and cross-examination of witnesses. Position papers
are often-times prepared with the assistance of lawyers and their artful
preparation can make the discovery of truth difficult. The jurisprudence cited
by the DILG in its order denying petitioner's motion for a formal investigation
applies to appointive officials and employees. Administrative disciplinary
proceedings against elective government officials are not exactly similar to
those against appointive officials. In fact, the provisions that apply to elective
local officials are separate and distinct from appointive government officers
and employees. This can be gleaned from the Local Government Code itself.
In the Local Government Code, the entire Title II of Book I of the Code is
devoted to elective officials. It provides for their qualifications and
election,73 vacancies and succession,74 local legislation,75 disciplinary
actions,76 and recall.77 Appointive officers and employees are covered in Title III
of Book I of the Code entitled "Human Resources and Development." All
matters pertinent to human resources and development in local government
units are regulated by "the civil service law and such rules and regulations and
other issuances promulgated thereto, unless otherwise provided in the
Code."78 The "investigation and adjudication of administrative complaints
against appointive local officials and employees as well as their suspension and
removal" are "in accordance with the civil service law and rules and other
pertinent laws," the results of which "shall be reported to the Civil Service
Commission."79
It is the Administrative Code of 1987, specifically Book V on the Civil Service,
that primarily governs appointive officials and employees. Their qualifications
are set forth in the Omnibus Rules Implementing Book V of the said Code. The
grounds for administrative disciplinary action in Book V are much more in
number and are specific than those enumerated in the Local Government Code
against elective local officials.80 The disciplining authority in such actions is the
Civil Service Commission. although the Secretaries and heads of agencies and
instrumentalities, provinces, cities and municipalities are also given the power
to investigate and decide disciplinary actions against officers and employees
under their jurisdiction. When a complaint is filed and the respondent answers,
he must "indicate whether or not he elects a formal investigation if his answer
is not considered satisfactory." If the officer or employee elects a formal
investigation, the direct evidence for the complainant and the respondent
"consist[s] of the sworn statement and documents submitted in support of the
complaint and answer, as the case may be, without prejudice to the
presentation of additional evidence deemed necessary . . ., upon which the
cross-examination by respondent and the complainant, respectively, is based."
The investigation is conducted without adhering to the technical rules
applicable in judicial proceedings." Moreover, the appointive official or
employee may be removed or dismissed summarily if (1) the charge is serious
and the evidence of guilt is strong; (2) when the respondent is a recidivist; and
(3) when the respondent is notoriously undesirable.

officials are markedly different from appointive officials. ℒαwρhi ৷ The rules on
The provisions for administrative disciplinary actions against elective local

the removal and suspension of elective local officials are more stringent. The
procedure of requiring position papers in lieu of a hearing in administrative
cases is expressly allowed with respect to appointive officials but not to those
elected. An elective official, elected by popular vote, is directly responsible to
the community that elected him. The official has a definite term of office fixed
by law which is relatively of short duration. Suspension and removal from
office definitely affects and shortens this term of office. When an elective
official is suspended or removed, the people are deprived of the services of the
man they had elected. Implicit in the right of suffrage is that the people are
entitled to the services of the elective official of their choice. Suspension and
removal are thus imposed only after the elective official is accorded his rights
and the evidence against him strongly dictates their imposition.
IN VIEW WHEREOF, the Resolution of January 8, 1998 of the public
respondent Executive Secretary is declared null and void and is set aside. No
Cost.
SO ORDERED.
Regalado, Melo, Mendoza and Martinez, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 135962 March 27, 2000
METROPOLITAN MANILA DEVELOPMENT AUTHORITY, petitioner,
vs.
BEL-AIR VILLAGE ASSOCIATION, INC., respondent.

PUNO, J.:
Not infrequently, the government is tempted to take legal shortcuts solve
urgent problems of the people. But even when government is armed with the
best of intention, we cannot allow it to run roughshod over the rule of law.
Again, we let the hammer fall and fall hard on the illegal attempt of the MMDA
to open for public use a private road in a private subdivision. While we hold
that the general welfare should be promoted, we stress that it should not be
achieved at the expense of the rule of law.
Petitioner MMDA is a government agency tasked with the delivery of basic
services in Metro Manila. Respondent Bel-Air Village Association, Inc. (BAVA)
is a non-stock, non-profit corporation whose members are homeowners in Bel-
Air Village, a private subdivision in Makati City. Respondent BAVA is the
registered owner of Neptune Street, a road inside Bel-Air Village.
On December 30, 1995, respondent received from petitioner, through its
Chairman, a notice dated December 22, 1995 requesting respondent to open
Neptune Street to public vehicular traffic starting January 2, 1996. The notice
reads:
SUBJECT: NOTICE of the Opening of Neptune Street to Traffic.
Dear President Lindo,
Please be informed that pursuant to the mandate of the MMDA law or Republic
Act No. 7924 which requires the Authority to rationalize the use of roads
and/or thoroughfares for the safe and convenient movement of persons,
Neptune Street shall be opened to vehicular traffic effective January 2, 1996.
In view whereof, the undersigned requests you to voluntarily open the points of
entry and exit on said street.
Thank you for your cooperation and whatever assistance that may be extended
by your association to the MMDA personnel who will be directing traffic in the
area.
Finally, we are furnishing you with a copy of the handwritten instruction of the
President on the matter.
Very truly yours,
PROSPERO I. ORETA
Chairman 1

On the same day, respondent was apprised that the perimeter wall separating
the subdivision from the adjacent Kalayaan Avenue would be demolished.
On January 2, 1996, respondent instituted against petitioner before the
Regional Trial Court, Branch 136, Makati City, Civil Case No. 96-001 for
injunction. Respondent prayed for the issuance of a temporary restraining
order and preliminary injunction enjoining the opening of Neptune Street and
prohibiting the demolition of the perimeter wall. The trial court issued a
temporary restraining order the following day.
On January 23, 1996, after due hearing, the trial court denied issuance of a
preliminary injunction. 2 Respondent questioned the denial before the Court of
Appeals in CA-G.R. SP No. 39549. The appellate court conducted an ocular
inspection of Neptune Street 3 and on February 13, 1996, it issued a writ of
preliminary injunction enjoining the implementation of the MMDA's proposed
action. 4
On January 28, 1997, the appellate court rendered a Decision on the merits of
the case finding that the MMDA has no authority to order the opening of
Neptune Street, a private subdivision road and cause the demolition of its
perimeter walls. It held that the authority is lodged in the City Council of
Makati by ordinance. The decision disposed of as follows:
WHEREFORE, the Petition is GRANTED; the challenged Order dated January
23, 1995, in Civil Case No. 96-001, is SET ASIDE and the Writ of Preliminary
Injunction issued on February 13, 1996 is hereby made permanent.
For want of sustainable substantiation, the Motion to Cite Roberto L. del
Rosario in contempt is denied. 5
No pronouncement as to costs.
SO ORDERED. 6

The Motion for Reconsideration of the decision was denied on September 28,
1998. Hence, this recourse.
Petitioner MMDA raises the following questions:
I
HAS THE METROPOLITAN MANILA DEVELOPMENT AUTHORITY (MMDA)
THE MANDATE TO OPEN NEPTUNE STREET TO PUBLIC TRAFFIC
PURSUANT TO ITS REGULATORY AND POLICE POWERS?
II
IS THE PASSAGE OF AN ORDINANCE A CONDITION PRECEDENT BEFORE
THE MMDA MAY ORDER THE OPENING OF SUBDIVISION ROADS TO
PUBLIC TRAFFIC?
III
IS RESPONDENT BEL-AIR VILLAGE ASSOCIATION, INC. ESTOPPED FROM
DENYING OR ASSAILING THE AUTHORITY OF THE MMDA TO OPEN THE
SUBJECT STREET?
IV
WAS RESPONDENT DEPRIVED OF DUE PROCESS DESPITE THE SEVERAL
MEETINGS HELD BETWEEN MMDA AND THE AFFECTED EEL-AIR
RESIDENTS AND BAVA OFFICERS?
V
HAS RESPONDENT COME TO COURT WITH UNCLEAN HANDS?7
Neptune Street is owned by respondent BAVA. It is a private road inside Bel-Air
Village, a private residential subdivision in the heart of the financial and
commercial district of Makati City. It runs parallel to Kalayaan Avenue, a
national road open to the general public. Dividing the two (2) streets is a
concrete perimeter wall approximately fifteen (15) feet high. The western end
of Neptune Street intersects Nicanor Garcia, formerly Reposo Street, a
subdivision road open to public vehicular traffic, while its eastern end
intersects Makati Avenue, a national road. Both ends of Neptune Street are
guarded by iron gates.
Petitioner MMDA claims that it has the authority to open Neptune Street to
public traffic because it is an agent of the state endowed with police power in
the delivery of basic services in Metro Manila. One of these basic services is
traffic management which involves the regulation of the use of thoroughfares
to insure the safety, convenience and welfare of the general public. It is alleged
that the police power of MMDA was affirmed by this Court in the consolidated
cases of Sangalang v. Intermediate Appellate Court. 8 From the premise that it
has police power, it is now urged that there is no need for the City of Makati to
enact an ordinance opening Neptune street to the public. 9
Police power is an inherent attribute of sovereignty. It has been defined as the
power vested by the Constitution in the legislature to make, ordain, and
establish all manner of wholesome and reasonable laws, statutes and
ordinances, either with penalties or without, not repugnant to the Constitution,
as they shall judge to be for the good and welfare of the commonwealth, and
for the subjects of the same. 10 The power is plenary and its scope is vast and
pervasive, reaching and justifying measures for public health, public safety,
public morals, and the general welfare. 11
It bears stressing that police power is lodged primarily in the National
Legislature. 12 It cannot be exercised by any group or body of individuals not
possessing legislative power. 13 The National Legislature, however, may
delegate this power to the President and administrative boards as well as the
lawmaking bodies of municipal corporations or local government units. 14 Once
delegated, the agents can exercise only such legislative powers as are
conferred on them by the national lawmaking body. 15
A local government is a "political subdivision of a nation or state which is
constituted by law and has substantial control of local affairs." 16 The Local
Government Code of 1991 defines a local government unit as a "body politic
and corporate." 17 — one endowed with powers as a political subdivision of the
National Government and as a corporate entity representing the inhabitants of
its territory. 18 Local government units are the provinces, cities, municipalities
and barangays. 19 They are also the territorial and political subdivisions of the
state. 20
Our Congress delegated police power to the local government units in the
Local Government Code of 1991. This delegation is found in Section 16 of the
same Code, known as the general welfare clause, viz:
Sec. 16. General Welfare. — Every local government unit shall exercise the
powers expressly granted, those necessarily implied therefrom, as well as
powers necessary, appropriate, or incidental for its efficient and effective
governance, and those which are essential to the promotion of the general
welfare. Within their respective territorial jurisdictions, local government units
shall ensure and support, among other things, the preservation and enrichment
of culture, promote health and safety, enhance the right of the people to a
balanced ecology, encourage and support the development of appropriate and
self-reliant scientific and technological capabilities, improve public morals,
enhance economic prosperity and social justice, promote full employment
among their residents, maintain peace and order, and preserve the comfort and
convenience of their inhabitants. 21
Local government units exercise police power through their respective
legislative bodies. The legislative body of the provincial government is
the sangguniang panlalawigan, that of the city government is the sangguniang
panlungsod, that of the municipal government is the sangguniang bayan, and
that of the barangay is the sangguniang barangay. The Local Government Code
of 1991 empowers the sangguniang panlalawigan, sangguniang panlungsod
and sangguniang bayan to "enact ordinances, approve resolutions and
appropriate funds for the general welfare of the [province, city or municipality,
as the case may be], and its inhabitants pursuant to Section 16 of the Code and
in the proper exercise of the corporate powers of the [province, city
municipality] provided under the Code . . . " 22 The same Code gives
the sangguniang barangay the power to "enact ordinances as may be
necessary to discharge the responsibilities conferred upon it by law or
ordinance and to promote the general welfare of the inhabitants thereon." 23
Metropolitan or Metro Manila is a body composed of several local government
units — i.e., twelve (12) cities and five (5) municipalities, namely, the cities of
Caloocan, Manila, Mandaluyong, Makati, Pasay, Pasig, Quezon, Muntinlupa,
Las Pinas, Marikina, Paranaque and Valenzuela, and the municipalities of
Malabon, Navotas, Pateros, San Juan and Taguig. With the passage of Republic
Act (R. A.) No. 7924 24 in 1995, Metropolitan Manila was declared as a "special
development and administrative region" and the Administration of "metro-
wide" basic services affecting the region placed under "a development
authority" referred to as the MMDA. 25
"Metro-wide services" are those "services which have metro-wide impact and
transcend local political boundaries or entail huge expenditures such that it
would not be viable for said services to be provided by the individual local
government units comprising Metro Manila." 26 There are seven (7) basic
metro-wide services and the scope of these services cover the following: (1)
development planning; (2) transport and traffic management; (3) solid waste
disposal and management; (4) flood control and sewerage management; (5)
urban renewal, zoning and land use planning, and shelter services; (6) health
and sanitation, urban protection and pollution control; and (7) public safety.
The basic service of transport and traffic management includes the following:
(b) Transport and traffic management which include the
formulation, coordination, and monitoring of policies, standards, programs and
projects to rationalize the existing transport operations, infrastructure
requirements, the use of thoroughfares, and promotion of safe and convenient
movement of persons and goods; provision for the mass transport system and
the institution of a system to regulate road users; administration and
implementation of all traffic enforcement operations, traffic engineering
services and traffic education programs, including the institution of a single
ticketing system in Metropolitan Manila;" 27
In the delivery of the seven (7) basic services, the MMDA has the following
powers and functions:
Sec. 5. Functions and powers of the Metro Manila Development Authority. —
The MMDA shall:
(a) Formulate, coordinate and regulate the implementation of medium and
long-term plans and programs for the delivery of metro-wide services, land use
and physical development within Metropolitan Manila, consistent with national
development objectives and priorities;
(b) Prepare, coordinate and regulate the implementation of medium-term
investment programs for metro-wide services which shall indicate sources and
uses of funds for priority programs and projects, and which shall include the
packaging of projects and presentation to funding institutions;
(c) Undertake and manage on its own metro-wide programs and projects for
the delivery of specific services under its jurisdiction, subject to the approval of
the Council. For this purpose, MMDA can create appropriate project
management offices;
(d) Coordinate and monitor the implementation of such plans, programs and
projects in Metro Manila; identify bottlenecks and adopt solutions to problems
of implementation;
(e) The MMDA shall set the policies concerning traffic in Metro Manila, and
shall coordinate and regulate the implementation of all programs and projects
concerning traffic management, specifically pertaining to
enforcement, engineering and education. Upon request, it shall be extended
assistance and cooperation, including but not limited to, assignment of
personnel, by all other government agencies and offices concerned;
(f) Install and administer a single ticketing system, fix, impose and collect fines
and penalties for all kinds of violations of traffic rules and regulations, whether
moving or non-moving in nature, and confiscate and suspend or revoke drivers'
licenses in the enforcement of such traffic laws and regulations, the provisions
of RA 4136 and PD 1605 to the contrary notwithstanding. For this purpose, the
Authority shall impose all traffic laws and regulations in Metro Manila, through
its traffic operation center, and may deputize members of the PNP, traffic
enforcers of local government units, duly licensed security guards, or members
of non-governmental organizations to whom may be delegated certain
authority, subject to such conditions and requirements as the Authority may
impose; and
(g) Perform other related functions required to achieve the objectives of the
MMDA, including the undertaking of delivery of basic services to the local
government units, when deemed necessary subject to prior coordination with
and consent of the local government unit concerned.
The implementation of the MMDA's plans, programs and projects is
undertaken by the local government units, national government agencies,
accredited people's organizations, non-governmental organizations, and the
private sector as well as by the MMDA itself. For this purpose, the MMDA has
the power to enter into contracts, memoranda of agreement and other
arrangements with these bodies for the delivery of the required services Metro
Manila. 28
The governing board of the MMDA is the Metro Manila Council. The Council is
composed of the mayors of the component 12 cities and 5 municipalities, the
president of the Metro Manila Vice-Mayors' League and the president of the
Metro Manila Councilors' League. 29 The Council is headed by Chairman who is
appointed by the President and vested with the rank of cabinet member. As the
policy-making body of the MMDA, the Metro Manila Council approves metro-
wide plans, programs and projects, and issues the necessary rules and
regulations for the implementation of said plans; it approves the annual budget
of the MMDA and promulgate the rules and regulations for the delivery of
basic services, collection of service and regulatory fees, fines and penalties.
These functions are particularly enumerated as follows:
Sec. 6. Functions of the Metro Manila Council. —
(a) The Council shall be the policy-making body of the MMDA;
(b) It shall approve metro-wide plans, programs and projects and issue rules
and regulations deemed necessary by the MMDA to carry out the purposes of
this Act;
(c) It may increase the rate of allowances and per diems of the members of the
Council to be effective during the term of the succeeding Council. It shall fix
the compensation of the officers and personnel of the MMDA, and approve the
annual budget thereof for submission to the Department of Budget and
Management (DBM);
(d) It shall promulgate rules and regulations and set policies and standards for
metro-wide application governing the delivery of basic services, prescribe and
collect service and regulatory fees, and impose and collect fines and penalties.
Clearly, the scope of the MMDA's function is limited to the delivery of the seven
(7) basic services. One of these is transport and traffic management which
includes the formulation and monitoring of policies, standards and projects to
rationalize the existing transport operations, infrastructure requirements, the
use of thoroughfares and promotion of the safe movement of persons and
goods. It also covers the mass transport system and the institution of a system
of road regulation, the administration of all traffic enforcement operations,
traffic engineering services and traffic education programs, including the
institution of a single ticketing system in Metro Manila for traffic violations.
Under the service, the MMDA is expressly authorized "to set the policies
concerning traffic" and "coordinate and regulate the implementation of all
traffic management programs." In addition, the MMDA may "install and
administer a single ticketing system," fix, impose and collect fines and
penalties for all traffic violations.
It will be noted that the powers of the MMDA are limited to the following acts:
formulation, coordination, regulation, implementation, preparation,
management, monitoring, setting of policies, installation of a system and
administration. There is no syllable in R.A. No. 7924 that grants the MMDA
police power, let alone legislative power. Even the Metro Manila Council has
not been delegated any legislative power. Unlike the legislative bodies of the
local government units, there is no provision in R.A. No. 7924 that empowers
the MMDA or its Council to "enact ordinances, approve resolutions appropriate
funds for the general welfare" of the inhabitants of Metro Manila. The MMDA
is, as termed in the charter itself, "development authority." 30 It is an agency
created for the purpose of laying down policies and coordinating with the
various national government agencies, people's organizations, non-
governmental organizations and the private sector for the efficient and
expeditious delivery of basic services in the vast metropolitan area. All its
functions are administrative in nature and these are actually summed up in the
charter itself, viz:
Sec. 2. Creation of the Metropolitan Manila Development Authority. — . . . .
The MMDA shall perform planning, monitoring and coordinative functions, and
in the process exercise regulatory and supervisory authority over the delivery
of metro-wide services within Metro Manila, without diminution of the
autonomy of the local government units concerning purely local matters. 31
Petitioner cannot seek refuge in the cases of Sangalang v. Intermediate
Appellate Court 32 where we upheld a zoning ordinance issued by the Metro
Manila Commission (MMC), the predecessor of the MMDA, as an exercise of
police power. The first Sangalang decision was on the merits of the
petition, 33 while the second decision denied reconsideration of the first case
and in addition discussed the case of Yabut v. Court of Appeals. 34
Sangalang v. IAC involved five (5) consolidated petitions filed by respondent
BAVA and three residents of Bel-Air Village against other residents of the
Village and the Ayala Corporation, formerly the Makati Development
Corporation, as the developer of the subdivision. The petitioners sought to
enforce certain restrictive easements in the deeds of sale over their respective
lots in the subdivision. These were the prohibition on the setting up of
commercial and advertising signs on the lots, and the condition that the lots be
used only for residential purposes. Petitioners alleged that respondents, who
were residents along Jupiter Street of the subdivision, converted their
residences into commercial establishments in violation of the "deed
restrictions," and that respondent Ayala Corporation ushered in the full
commercialization" of Jupiter Street by tearing down the perimeter wall that
separated the commercial from the residential section of the village. 35
The petitions were dismissed based on Ordinance No. 81 of the Municipal
Council of Makati and Ordinance No. 81-01 of the Metro Manila Commission
(MMC). Municipal Ordinance No. 81 classified Bel-Air Village as a Class A
Residential Zone, with its boundary in the south extending to the center line of
Jupiter Street. The Municipal Ordinance was adopted by the MMC under the
Comprehensive Zoning Ordinance for the National Capital Region and
promulgated as MMC Ordinance No. 81-01. Bel-Air Village was indicated
therein as bounded by Jupiter Street and the block adjacent thereto was
classified as a High Intensity Commercial Zone. 36
We ruled that since both Ordinances recognized Jupiter Street as the boundary
between Bel-Air Village and the commercial district, Jupiter Street was not for
the exclusive benefit of Bel-Air residents. We also held that the perimeter wall
on said street was constructed not to separate the residential from the
commercial blocks but simply for security reasons, hence, in tearing down said
wall, Ayala Corporation did not violate the "deed restrictions" in the deeds of
sale.
We upheld the ordinances, specifically MMC Ordinance No. 81-01, as a
legitimate exercise of police power. 37 The power of the MMC and the Makati
Municipal Council to enact zoning ordinances for the general welfare prevailed
over the "deed restrictions".
In the second Sangalang/Yabut decision, we held that the opening of Jupiter
Street was warranted by the demands of the common good in terms of "traffic
decongestion and public convenience." Jupiter was opened by the Municipal
Mayor to alleviate traffic congestion along the public streets adjacent to the
Village. 38 The same reason was given for the opening to public vehicular traffic
of Orbit Street, a road inside the same village. The destruction of the gate in
Orbit Street was also made under the police power of the municipal
government. The gate, like the perimeter wall along Jupiter, was a public
nuisance because it hindered and impaired the use of property, hence, its
summary abatement by the mayor was proper and legal. 39
Contrary to petitioner's claim, the two Sangalang cases do not apply to the
case at bar. Firstly, both involved zoning ordinances passed by the municipal
council of Makati and the MMC. In the instant case, the basis for the proposed
opening of Neptune Street is contained in the notice of December 22, 1995
sent by petitioner to respondent BAVA, through its president. The notice does
not cite any ordinance or law, either by the Sangguniang Panlungsod of Makati
City or by the MMDA, as the legal basis for the proposed opening of Neptune
Street. Petitioner MMDA simply relied on its authority under its charter "to
rationalize the use of roads and/or thoroughfares for the safe and convenient
movement of persons." Rationalizing the use of roads and thoroughfares is one
of the acts that fall within the scope of transport and traffic management. By
no stretch of the imagination, however, can this be interpreted as an express or
implied grant of ordinance-making power, much less police power.
Secondly, the MMDA is not the same entity as the MMC in Sangalang.
Although the MMC is the forerunner of the present MMDA, an examination of
Presidential Decree (P. D.) No. 824, the charter of the MMC, shows that the
latter possessed greater powers which were not bestowed on the present
MMDA.
Metropolitan Manila was first created in 1975 by Presidential Decree (P.D.) No.
824. It comprised the Greater Manila Area composed of the contiguous four (4)
cities of Manila, Quezon, Pasay and Caloocan, and the thirteen (13)
municipalities of Makati, Mandaluyong, San Juan, Las Pinas, Malabon,
Navotas, Pasig, Pateros, Paranaque, Marikina, Muntinlupa and Taguig in the
province of Rizal, and Valenzuela in the province of Bulacan. 40 Metropolitan
Manila was created as a response to the finding that the rapid growth of
population and the increase of social and economic requirements in these
areas demand a call for simultaneous and unified development; that the public
services rendered by the respective local governments could be administered
more efficiently and economically if integrated under a system of central
planning; and this coordination, "especially in the maintenance of peace and
order and the eradication of social and economic ills that fanned the flames of
rebellion and discontent [were] part of reform measures under Martial Law
essential to the safety and security of the State." 41
Metropolitan Manila was established as a "public corporation" with the
following powers:
Sec. 1. Creation of the Metropolitan Manila. — There is hereby created
a public corporation, to be known as the Metropolitan Manila, vested with
powers and attributes of a corporation including the power to make
contracts, sue and be sued, acquire, purchase, expropriate, hold, transfer and
dispose of property and such other powers as are necessary to carry out its
purposes. The Corporation shall be administered by a Commission created
under this Decree. 42
The administration of Metropolitan Manila was placed under the Metro Manila
Commission (MMC) vested with the following powers:
Sec. 4. Powers and Functions of the Commission. — The Commission shall have
the following powers and functions:
1. To act as a central government to establish and administer programs and
provide services common to the area;
2. To levy and collect taxes and special assessments, borrow and expend money
and issue bonds, revenue certificates, and other obligations of indebtedness.
Existing tax measures should, however, continue to be operative until
otherwise modified or repealed by the Commission;
3. To charge and collect fees for the use of public service facilities;
4. To appropriate money for the operation of the metropolitan government and
review appropriations for the city and municipal units within its jurisdiction
with authority to disapprove the same if found to be not in accordance with the
established policies of the Commission, without prejudice to any contractual
obligation of the local government units involved existing at the time of
approval of this Decree;
5. To review, amend, revise or repeal all ordinances, resolutions and acts of
cities and municipalities within Metropolitan Manila;
6. To enact or approve ordinances, resolutions and to fix penalties for any
violation thereof which shall not exceed a fine of P10,000.00 or imprisonment
of six years or both such fine and imprisonment for a single offense;
7. To perform general administrative, executive and policy-making functions;
8. To establish a fire control operation center, which shall direct the fire
services of the city and municipal governments in the metropolitan area;
9. To establish a garbage disposal operation center, which shall direct garbage
collection and disposal in the metropolitan area;
10. To establish and operate a transport and traffic center, which shall direct
traffic activities;
11. To coordinate and monitor governmental and private activities pertaining
to essential services such as transportation, flood control and drainage, water
supply and sewerage, social, health and environmental services, housing, park
development, and others;
12. To insure and monitor the undertaking of a comprehensive social, economic
and physical planning and development of the area;
13. To study the feasibility of increasing barangay participation in the affairs of
their respective local governments and to propose to the President of the
Philippines definite programs and policies for implementation;
14. To submit within thirty (30) days after the close of each fiscal year an
annual report to the President of the Philippines and to submit a periodic
report whenever deemed necessary; and
15. To perform such other tasks as may be assigned or directed by the
President of the Philippines.
The MMC was the "central government" of Metro Manila for the purpose of
establishing and administering programs providing services common to the
area. As a "central government" it had the power to levy and collect taxes and
special assessments, the power to charge and collect fees; the power to
appropriate money for its operation, and at the same time, review
appropriations for the city and municipal units within its jurisdiction. It was
bestowed the power to enact or approve ordinances, resolutions and fix
penalties for violation of such ordinances and resolutions. It also had the power
to review, amend, revise or repeal all ordinances, resolutions and acts of any of
the four (4) cities and thirteen (13) municipalities comprising Metro Manila.
P.D. No. 824 further provided:
Sec. 9. Until otherwise provided, the governments of the four cities and
thirteen municipalities in the Metropolitan Manila shall continue to exist in
their present form except as may be inconsistent with this Decree. The
members of the existing city and municipal councils in Metropolitan Manila
shall, upon promulgation of this Decree, and until December 31, 1975, become
members of the Sangguniang Bayan which is hereby created for every city and
municipality of Metropolitan Manila.
In addition, the Sangguniang Bayan shall be composed of as many barangay
captains as may be determined and chosen by the Commission, and such
number of representatives from other sectors of the society as may be
appointed by the President upon recommendation of the Commission.
xxx xxx xxx
The Sangguniang Bayan may recommend to the Commission ordinances,
resolutions or such measures as it may adopt; Provided, that no such
ordinance, resolution or measure shall become effective, until after its approval
by the Commission; and Provided further, that the power to impose taxes and
other levies, the power to appropriate money and the power to pass ordinances
or resolutions with penal sanctions shall be vested exclusively in the
Commission.
The creation of the MMC also carried with it the creation of the Sangguniang
Bayan. This was composed of the members of the component city and
municipal councils, barangay captains chosen by the MMC and sectoral
representatives appointed by the President. The Sangguniang Bayan had the
power to recommend to the MMC the adoption of ordinances, resolutions or
measures. It was the MMC itself, however, that possessed legislative powers.
All ordinances, resolutions and measures recommended by the Sangguniang
Bayan were subject to the MMC's approval. Moreover, the power to impose
taxes and other levies, the power to appropriate money, and the power to pass
ordinances or resolutions with penal sanctions were vested exclusively in the
MMC.
Thus, Metropolitan Manila had a "central government," i.e., the MMC which
fully possessed legislative police powers. Whatever legislative powers the
component cities and municipalities had were all subject to review and
approval by the MMC.
After President Corazon Aquino assumed power, there was a clamor to restore
the autonomy of the local government units in Metro Manila. Hence, Sections 1
and 2 of Article X of the 1987 Constitution provided:
Sec. 1. The territorial and political subdivisions of the Republic of the
Philippines are the provinces, cities, municipalities and barangays. There shall
be autonomous regions in Muslim Mindanao and the Cordilleras as herein
provided.
Sec. 2. The territorial and political subdivisions shall enjoy local autonomy.
The Constitution, however, recognized the necessity of creating metropolitan
regions not only in the existing National Capital Region but also in potential
equivalents in the Visayas and Mindanao. 43 Section 11 of the same Article X
thus provided:
Sec. 11. The Congress may, by law, create special metropolitan political
subdivisions, subject to a plebiscite as set forth in Section 10 hereof. The
component cities and municipalities shall retain their basic autonomy and shall
be entitled to their own local executives and legislative assemblies. The
jurisdiction of the metropolitan authority that will thereby be created shall be
limited to basic services requiring coordination.
Constitution itself expressly provides that Congress may, by law, create "special
metropolitan political subdivisions" which shall be subject to approval by a
majority of the votes cast in a plebiscite in the political units directly affected;
the jurisdiction of this subdivision shall be limited to basic services requiring
coordination; and the cities and municipalities comprising this subdivision shall
retain their basic services requiring coordination; and the cities and
municipalities comprising this subdivision shall retain their basic autonomy
and their own local executive and legislative assemblies. 44 Pending enactment
of this law, the Transitory Provisions of the Constitution gave the President of
the Philippines the power to constitute the Metropolitan Authority, viz:
Sec. 8. Until otherwise provided by Congress, the President may constitute the
Metropolitan Authority to be composed of the heads of all local government
units comprising the Metropolitan Manila area. 45
In 1990, President Aquino issued Executive Order (E. O.) No. 392 and
constituted the Metropolitan Manila Authority (MMA). The powers and
functions of the MMC were devolved to the MMA. 46 It ought to be stressed,
however, that not all powers and functions of the MMC were passed to the
MMA. The MMA's power was limited to the "delivery of basic urban services
requiring coordination in Metropolitan Manila." 47 The MMA's governing body,
the Metropolitan Manila Council, although composed of the mayors of the
component cities and municipalities, was merely given power of: (1)
formulation of policies on the delivery of basic services requiring coordination
and consolidation; and (2) promulgation resolutions and other issuances,
approval of a code of basic services and the exercise of its rule-making
power. 48
Under the 1987 Constitution, the local government units became primarily
responsible for the governance of their respective political subdivisions.
The MMA's jurisdiction was limited to addressing common problems involving
basic services that transcended local boundaries. It did not have legislative
power. Its power was merely to provide the local government units technical
assistance in the preparation of local development plans. Any semblance of
legislative power it had was confined to a "review [of] legislation proposed by
the local legislative assemblies to ensure consistency among local governments
and with the comprehensive development plan of Metro Manila," and to "advise
the local governments accordingly." 49
When R.A. No. 7924 took effect, Metropolitan Manila became a "special
development and administrative region" and the MMDA a "special development
authority" whose functions were "without prejudice to the autonomy of the
affected local government units." The character of the MMDA was clearly
defined in the legislative debates enacting its charter.
R.A. No. 7924 originated as House Bill No. 14170/11116 and was introduced by
several legislators led by Dante Tinga, Roilo Golez and Feliciano Belmonte. It
was presented to the House of Representatives by the Committee on Local
Governments chaired by Congressman Ciriaco R. Alfelor. The bill was a product
of Committee consultations with the local government units in the National
Capital Region (NCR), with former Chairmen of the MMC and MMA, 50 and
career officials of said agencies. When the bill was first taken up by the
Committee on Local Governments, the following debate took place:
THE CHAIRMAN [Hon. Ciriaco Alfelor]: Okay, Let me explain. This has been
debated a long time ago, you know. It's a special . . . we can create a special
metropolitan political subdivision.
Actually, there are only six (6) political subdivisions provided for in the
Constitution: barangay, municipality, city, province, and we have the
Autonomous Region of Mindanao and we have the Cordillera. So we have 6.
Now. . . . .
HON. [Elias] LOPEZ: May I interrupt, Mr. Chairman. In the case of the
Autonomous Region, that is also specifically mandated by the Constitution.
THE CHAIRMAN: That's correct. But it is considered to be a political
subdivision. What is the meaning of a political subdivision? Meaning to say,
that it has its own government, it has its own political personality, it has the
power to tax, and all governmental powers: police power and everything. All
right. Authority is different; because it does not have its own government. It is
only a council, it is an organization of political subdivision, powers, "no, which
is not imbued with any political power.
If you go over Section 6, where the powers and functions of the Metro Manila
Development Authority, it is purely coordinative. And it provides here that the
council is policy-making. All right.
Under the Constitution is a Metropolitan Authority with coordinative power.
Meaning to say, it coordinates all of the different basic services which have to
be delivered to the constituency. All right.
There is now a problem. Each local government unit is given its respective . . .
as a political subdivision. Kalookan has its powers, as provided for and
protected and guaranteed by the Constitution. All right, the exercise. However,
in the exercise of that power, it might be deleterious and disadvantageous to
other local government units. So, we are forming an authority where all of
these will be members and then set up a policy in order that the basic services
can be effectively coordinated. All right.
Of course, we cannot deny that the MMDA has to survive. We have to provide
some funds, resources. But it does not possess any political power. We do not
elect the Governor. We do not have the power to tax. As a matter of fact, I was
trying to intimate to the author that it must have the power to sue and be sued
because it coordinates. All right. It coordinates practically all these basic
services so that the flow and the distribution of the basic services will be
continuous. Like traffic, we cannot deny that. It's before our eyes. Sewerage,
flood control, water system, peace and order, we cannot deny these. It's right
on our face. We have to look for a solution. What would be the right solution?
All right, we envision that there should be a coordinating agency and it is
called an authority. All right, if you do not want to call it an authority, it's
alright. We may call it a council or maybe a management agency.
xxx xxx xxx 51

Clearly, the MMDA is not a political unit of government. The power delegated
to the MMDA is that given to the Metro Manila Council to promulgate
administrative rules and regulations in the implementation of the MMDA's
functions. There is no grant of authority to enact ordinances and regulations
for the general welfare of the inhabitants of the metropolis. This was explicitly
stated in the last Committee deliberations prior to the bill's presentation to
Congress. Thus:
THE CHAIRMAN: Yeah, but we have to go over the suggested revision. I think
this was already approved before, but it was reconsidered in view of the
proposals, set-up, to make the MMDA stronger. Okay, so if there is no objection
to paragraph "f". . . And then next is paragraph "b," under Section 6. "It shall
approve metro-wide plans, programs and projects and issue ordinances or
resolutions deemed necessary by the MMDA to carry out the purposes of this
Act." Do you have the powers? Does the MMDA... because that takes the form
of a local government unit, a political subdivision.
HON. [Feliciano] BELMONTE: Yes, I believe so, your Honor. When we say that
it has the policies, it's very clear that those policies must be followed.
Otherwise, what's the use of empowering it to come out with policies. Now, the
policies may be in the form of a resolution or it may be in the form of a
ordinance. The term "ordinance" in this case really gives it more teeth, your
honor. Otherwise, we are going to see a situation where you have the power to
adopt the policy but you cannot really make it stick as in the case now, and I
think here is Chairman Bunye. I think he will agree that that is the case now.
You've got the power to set a policy, the body wants to follow your policy, then
we say let's call it an ordinance and see if they will not follow it.
THE CHAIRMAN: That's very nice. I like that. However, there is a
constitutional impediment.1âwphi1 You are making this MMDA a political
subdivision. The creation of the MMDA would be subject to a plebiscite. That is
what I'm trying to avoid. I've been trying to avoid this kind of predicament.
Under the Constitution it states: if it is a political subdivision, once it is created
it has to be subject to a plebiscite. I'm trying to make this as administrative.
That's why we place the Chairman as a cabinet rank.
HON. BELMONTE: All right, Mr. Chairman, okay, what you are saying there is .
....
THE CHAIRMAN: In setting up ordinances, it is a political exercise, Believe me.
HON. [Elias] LOPEZ: Mr. Chairman, it can be changed into issuances of rules
and regulations. That would be . . . it shall also be enforced.
HON. BELMONTE: Okay, I will . . . .
HON. LOPEZ: And you can also say that violation of such rule, you impose a
sanction. But you know, ordinance has a different legal connotation.
HON. BELMONTE: All right, I defer to that opinion, your Honor.
THE CHAIRMAN: So instead of ordinances, say rules and regulations.
HON. BELMONTE: Or resolutions. Actually, they are actually considering
resolutions now.
THE CHAIRMAN: Rules and resolutions.
HON. BELMONTE: Rules, regulations and resolutions. 52

The draft of H. B. No. 14170/11116 was presented by the Committee to the

House of Representatives. The explanatory note to the bill stated that the
proposed MMDA is a "development authority" which is a "national agency, not
a political government unit." 53 The explanatory note was adopted as the
sponsorship speech of the Committee on Local Governments. No
interpellations or debates were made on the floor and no amendments
introduced. The bill was approved on second reading on the same day it was
presented. 54
When the bill was forwarded to the Senate, several amendments were
made.1âwphi1 These amendments, however, did not affect the nature of the
MMDA as originally conceived in the House of Representatives. 55
It is thus beyond doubt that the MMDA is not a local government unit or a
public corporation endowed with legislative power. It is not even a "special
metropolitan political subdivision" as contemplated in Section 11, Article X of
the Constitution. The creation of a "special metropolitan political subdivision"
requires the approval by a majority of the votes cast in a plebiscite in the
political units directly affected." 56 R. A. No. 7924 was not submitted to the
inhabitants of Metro Manila in a plebiscite. The Chairman of the MMDA is not
an official elected by the people, but appointed by the President with the rank
and privileges of a cabinet member. In fact, part of his function is to perform
such other duties as may be assigned to him by the President, 57 whereas in
local government units, the President merely exercises supervisory authority.
This emphasizes the administrative character of the MMDA.
Clearly then, the MMC under P.D. No. 824 is not the same entity as the MMDA
under R.A. No. 7924. Unlike the MMC, the MMDA has no power to enact
ordinances for the welfare of the community. It is the local government units,
acting through their respective legislative councils, that possess legislative
power and police power. In the case at bar, the Sangguniang Panlungsod of
Makati City did not pass any ordinance or resolution ordering the opening of
Neptune Street, hence, its proposed opening by petitioner MMDA is illegal and
the respondent Court of Appeals did not err in so ruling. We desist from ruling
on the other issues as they are unnecessary.
We stress that this decision does not make light of the MMDA's noble efforts to
solve the chaotic traffic condition in Metro Manila. Everyday, traffic jams and
traffic bottlenecks plague the metropolis. Even our once sprawling boulevards
and avenues are now crammed with cars while city streets are clogged with
motorists and pedestrians. Traffic has become a social malaise affecting our
people's productivity and the efficient delivery of goods and services in the
country. The MMDA was created to put some order in the metropolitan
transportation system but unfortunately the powers granted by its charter are
limited. Its good intentions cannot justify the opening for public use of a
private street in a private subdivision without any legal warrant. The promotion
of the general welfare is not antithetical to the preservation of the rule of
law.1âwphi1.nêt
IN VIEW WHEREOF, the petition is denied. The Decision and Resolution of the
Court of Appeals in CA-G.R. SP No. 39549 are affirmed.
SO ORDERED.
Davide, Jr., C.J., Kapunan, Pardo and Ynares-Santiago, JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
[ G.R. No. 132988, July 19, 2000 ]
AQUILINO Q. PIMENTEL JR., PETITIONER, VS. HON. ALEXANDER
AGUIRRE IN HIS CAPACITY AS EXECUTIVE SECRETARY, HON. EMILIA
BONCODIN IN HER CAPACITY AS SECRETARY OF THE DEPARTMENT
OF BUDGET AND MANAGEMENT, RESPONDENTS. ROBERTO
PAGDANGANAN, intervenor.

DECISION
PANGANIBAN, J.:
The Constitution vests the President with the power of supervision, not control,
over local government units (LGUs). Such power enables him to see to it that
LGUs and their officials execute their tasks in accordance with law. While he
may issue advisories and seek their cooperation in solving economic
difficulties, he cannot prevent them from performing their tasks and using
available resources to achieve their goals. He may not withhold or alter any
authority or power given them by the law. Thus, the withholding of a portion of
internal revenue allotments legally due them cannot be directed by
administrative fiat.
The Case

Before us is an original Petition for Certiorari and Prohibition seeking (1) to

annul Section 1 of Administrative Order (AO) No. 372, insofar as it requires
local government units to reduce their expenditures by 25 percent of their
authorized regular appropriations for non-personal services; and (2) to enjoin
respondents from implementing Section 4 of the Order, which withholds a
portion of their internal revenue allotments.

On November 17, 1998, Roberto Pagdanganan, through Counsel Alberto C.

Agra, filed a Motion for Intervention/Motion to Admit Petition for Intervention,
[1]
attaching thereto his Petition in Intervention [2] joining petitioner in the reliefs
sought. At the time, intervenor was the provincial governor of Bulacan,
national president of the League of Provinces of the Philippines and chairman
of the League of Leagues of Local Governments. In a Resolution dated
December 15, 1998, the Court noted said Motion and Petition.
The Facts and the Arguments

On December 27, 1997, the President of the Philippines issued AO 372. Its full
text, with emphasis on the assailed provisions, is as follows:
"ADMINISTRATIVE ORDER NO. 372

ADOPTION OF ECONOMY MEASURES

IN GOVERNMENT FOR FY 1998

WHEREAS, the current economic difficulties brought about by the peso

depreciation requires continued prudence in government fiscal management to
maintain economic stability and sustain the country's growth momentum;

WHEREAS, it is imperative that all government agencies adopt cash

management measures to match expenditures with available resources;

NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the

Philippines, by virtue of the powers vested in me by the Constitution, do hereby
order and direct:

SECTION 1. All government departments and agencies, including state

universities and colleges, government-owned and controlled
corporations and local governments units will identify and implement
measures in FY 1998 that will reduce total expenditures for the year by
at least 25% of authorized regular appropriations for non-personal
services items, along the following suggested areas:
1. Continued implementation of the streamlining policy on organization and
staffing by deferring action on the following:
a. Operationalization of new agencies;

b. Expansion of organizational units and/or creation of positions;

c. Filling of positions; and

d. Hiring of additional/new consultants, contractual and casual personnel,

regardless of funding source.
2. Suspension of the following activities:
a. Implementation of new capital/infrastructure projects, except those
which have already been contracted out;
b. Acquisition of new equipment and motor vehicles;
c. All foreign travels of government personnel, except those associated with
scholarships and trainings funded by grants;
d. Attendance in conferences abroad where the cost is charged to the
government except those clearly essential to Philippine commitments in
the international field as may be determined by the Cabinet;
e. Conduct of trainings/workshops/seminars, except those conducted by
government training institutions and agencies in the performance of their
regular functions and those that are funded by grants;
f. Conduct of cultural and social celebrations and sports activities, except
those associated with the Philippine Centennial celebration and those
involving regular competitions/events;
g. Grant of honoraria, except in cases where it constitutes the only source
of compensation from government received by the person concerned;
h. Publications, media advertisements and related items, except those
required by law or those already being undertaken on a regular basis;
i. Grant of new/additional benefits to employees, except those expressly
and specifically authorized by law; and
j. Donations, contributions, grants and gifts, except those given by
institutions to victims of calamities.
3. Suspension of all tax expenditure subsidies to all GOCCs and LGUs

4. Reduction in the volume of consumption of fuel, water, office supplies,

electricity and other utilities

5. Deferment of projects that are encountering significant implementation

problems

6. Suspension of all realignment of funds and the use of savings and reserves
SECTION 2. Agencies are given the flexibility to identify the specific sources of
cost-savings, provided the 25% minimum savings under Section 1 is complied
with.

SECTION 3. A report on the estimated savings generated from these measures

shall be submitted to the Office of the President, through the Department of
Budget and Management, on a quarterly basis using the attached format.

SECTION 4. Pending the assessment and evaluation by the

Development Budget Coordinating Committee of the emerging fiscal
situation, the amount equivalent to 10% of the internal revenue
allotment to local government units shall be withheld.

SECTION 5. The Development Budget Coordination Committee shall conduct a

monthly review of the fiscal position of the National Government and if
necessary, shall recommend to the President the imposition of additional
reserves or the lifting of previously imposed reserves.

SECTION 6. This Administrative Order shall take effect January 1, 1998 and
shall remain valid for the entire year unless otherwise lifted.

DONE in the City of Manila, this 27 th day of December, in the year of our Lord,
nineteen hundred and ninety-seven."
Subsequently, on December 10, 1998, President Joseph E. Estrada issued AO
43, amending Section 4 of AO 372, by reducing to five percent (5%) the amount
of internal revenue allotment (IRA) to be withheld from the LGUs.

Petitioner contends that the President, in issuing AO 372, was in effect

exercising the power of control over LGUs. The Constitution vests in the
President, however, only the power of general supervision over LGUs,
consistent with the principle of local autonomy. Petitioner further argues that
the directive to withhold ten percent (10%) of their IRA is in contravention of
Section 286 of the Local Government Code and of Section 6, Article X of the
Constitution, providing for the automatic release to each of these units its
share in the national internal revenue.
The solicitor general, on behalf of the respondents, claims on the other hand
that AO 372 was issued to alleviate the "economic difficulties brought about by
the peso devaluation" and constituted merely an exercise of the President's
power of supervision over LGUs. It allegedly does not violate local fiscal
autonomy, because it merely directs local governments to identify measures
that will reduce their total expenditures for non-personal services by at least
25 percent. Likewise, the withholding of 10 percent of the LGUs' IRA does not
violate the statutory prohibition on the imposition of any lien or holdback on
their revenue shares, because such withholding is "temporary in nature
pending the assessment and evaluation by the Development Coordination
Committee of the emerging fiscal situation."
The Issues

The Petition[3] submits the following issues for the Court's resolution:
"A. Whether or not the president committed grave abuse of discretion [in]
ordering all LGUS to adopt a 25% cost reduction program in violation of the
LGU[']S fiscal autonomy

"B. Whether or not the president committed grave abuse of discretion in

ordering the withholding of 10% of the LGU[']S IRA"
In sum, the main issue is whether (a) Section 1 of AO 372, insofar as it
"directs" LGUs to reduce their expenditures by 25 percent; and (b) Section 4 of
the same issuance, which withholds 10 percent of their internal revenue
allotments, are valid exercises of the President's power of general supervision
over local governments.

Additionally, the Court deliberated on the question whether petitioner had

the locus standi to bring this suit, despite respondents' failure to raise the
issue.[4] However, the intervention of Roberto Pagdanganan has rendered
academic any further discussion on this matter.
The Court's Ruling

The Petition is partly meritorious.

Main Issue:

Validity of AO 372
Insofar as LGUs Are Concerned

Before resolving the main issue, we deem it important and appropriate to

define certain crucial concepts: (1) the scope of the President's power of
general supervision over local governments and (2) the extent of the local
governments' autonomy.
Scope of President's Power of
Supervision Over LGUs

Section 4 of Article X of the Constitution confines the President's power over

local governments to one of general supervision. It reads as follows:
"Sec. 4. The President of the Philippines shall exercise general supervision
over local governments. x x x"
This provision has been interpreted to exclude the power of control.
In Mondano v. Silvosa,[5] the Court contrasted the President's power of
supervision over local government officials with that of his power of control
over executive officials of the national government. It was emphasized that the
two terms -- supervision and control -- differed in meaning and extent. The
Court distinguished them as follows:
"x x x In administrative law, supervision means overseeing or the power or
authority of an officer to see that subordinate officers perform their duties. If
the latter fail or neglect to fulfill them, the former may take such action or step
as prescribed by law to make them perform their duties. Control, on the other
hand, means the power of an officer to alter or modify or nullify or set aside
what a subordinate officer ha[s] done in the performance of his duties and to
substitute the judgment of the former for that of the latter." [6]
In Taule v. Santos,[7] we further stated that the Chief Executive wielded no
more authority than that of checking whether local governments or their
officials were performing their duties as provided by the fundamental law and
by statutes. He cannot interfere with local governments, so long as they act
within the scope of their authority. "Supervisory power, when contrasted with
control, is the power of mere oversight over an inferior body; it does not
include any restraining authority over such body,"[8] we said.

In a more recent case, Drilon v. Lim,[9] the difference between control and
supervision was further delineated. Officers in control lay down the rules in
the performance or accomplishment of an act. If these rules are not followed,
they may, in their discretion, order the act undone or redone by their
subordinates or even decide to do it themselves. On the other hand,
supervision does not cover such authority. Supervising officials merely see to it
that the rules are followed, but they themselves do not lay down such rules, nor
do they have the discretion to modify or replace them. If the rules are not
observed, they may order the work done or redone, but only to conform to such
rules. They may not prescribe their own manner of execution of the act. They
have no discretion on this matter except to see to it that the rules are followed.

Under our present system of government, executive power is vested in the

President.[10] The members of the Cabinet and other executive officials are
merely alter egos. As such, they are subject to the power of control of the
President, at whose will and behest they can be removed from office; or their
actions and decisions changed, suspended or reversed.[11] In contrast, the
heads of political subdivisions are elected by the people. Their sovereign
powers emanate from the electorate, to whom they are directly accountable.
By constitutional fiat, they are subject to the President's supervision only, not
control, so long as their acts are exercised within the sphere of their legitimate
powers. By the same token, the President may not withhold or alter any
authority or power given them by the Constitution and the law.

Extent of Local Autonomy

Hand in hand with the constitutional restraint on the President's power over
local governments is the state policy of ensuring local autonomy. [12]

In Ganzon v. Court of Appeals,[13] we said that local autonomy signified "a more
responsive and accountable local government structure instituted through a
system of decentralization." The grant of autonomy is intended to "break up
the monopoly of the national government over the affairs of local
governments, x x x not x x x to end the relation of partnership and
interdependence between the central administration and local government
units x x x." Paradoxically, local governments are still subject to regulation,
however limited, for the purpose of enhancing self-government. [14]

Decentralization simply means the devolution of national administration, not

power, to local governments. Local officials remain accountable to the central
government as the law may provide.[15] The difference between decentralization
of administration and that of power was explained in detail in Limbona v.
Mangelin[16] as follows:
"Now, autonomy is either decentralization of administration or decentralization
of power. There is decentralization of administration when the central
government delegates administrative powers to political subdivisions in order
to broaden the base of government power and in the process to make local
governments 'more responsive and accountable,' [17] and 'ensure their fullest
development as self-reliant communities and make them more effective
partners in the pursuit of national development and social progress.' [18] At the
same time, it relieves the central government of the burden of managing local
affairs and enables it to concentrate on national concerns. The President
exercises 'general supervision'[19] over them, but only to 'ensure that local
affairs are administered according to law.'[20] He has no control over their acts
in the sense that he can substitute their judgments with his own. [21]

Decentralization of power, on the other hand, involves an abdication of political

power in the favor of local government units declared to be autonomous. In
that case, the autonomous government is free to chart its own destiny and
shape its future with minimum intervention from central authorities.
According to a constitutional author, decentralization of power amounts to 'self-
immolation,' since in that event, the autonomous government becomes
accountable not to the central authorities but to its constituency." [22]
Under the Philippine concept of local autonomy, the national government has
not completely relinquished all its powers over local governments, including
autonomous regions. Only administrative powers over local affairs are
delegated to political subdivisions. The purpose of the delegation is to make
governance more directly responsive and effective at the local levels. In turn,
economic, political and social development at the smaller political units are
expected to propel social and economic growth and development. But to
enable the country to develop as a whole, the programs and policies effected
locally must be integrated and coordinated towards a common national goal.
Thus, policy-setting for the entire country still lies in the President and
Congress. As we stated in Magtajas v. Pryce Properties Corp., Inc., municipal
governments are still agents of the national government.[23]

The Nature of AO 372

Consistent with the foregoing jurisprudential precepts, let us now look into the
nature of AO 372. As its preambular clauses declare, the Order was a "cash
management measure" adopted by the government "to match expenditures
with available resources," which were presumably depleted at the time due to
"economic difficulties brought about by the peso depreciation." Because of a
looming financial crisis, the President deemed it necessary to "direct all
government agencies, state universities and colleges, government-owned and
controlled corporations as well as local governments to reduce their total
expenditures by at least 25 percent along suggested areas mentioned in AO
372.

Under existing law, local government units, in addition to having administrative

autonomy in the exercise of their functions, enjoy fiscal autonomy as well.
Fiscal autonomy means that local governments have the power to create their
own sources of revenue in addition to their equitable share in the national
taxes released by the national government, as well as the power to allocate
their resources in accordance with their own priorities. It extends to the
preparation of their budgets, and local officials in turn have to work within the
constraints thereof. They are not formulated at the national level and imposed
on local governments, whether they are relevant to local needs and resources
or not. Hence, the necessity of a balancing of viewpoints and the
harmonization of proposals from both local and national officials,[24] who in any
case are partners in the attainment of national goals.

Local fiscal autonomy does not however rule out any manner of national
government intervention by way of supervision, in order to ensure that local
programs, fiscal and otherwise, are consistent with national goals.
Significantly, the President, by constitutional fiat, is the head of the economic
and planning agency of the government,[25] primarily responsible for
formulating and implementing continuing, coordinated and integrated social
and economic policies, plans and programs[26] for the entire country. However,
under the Constitution, the formulation and the implementation of such
policies and programs are subject to "consultations with the appropriate public
agencies, various private sectors, and local government units." The President
cannot do so unilaterally.

Consequently, the Local Government Code provides:[27]

"x x x [I]n the event the national government incurs an unmanaged public
sector deficit, the President of the Philippines is hereby authorized, upon the
recommendation of [the] Secretary of Finance, Secretary of the Interior and
Local Government and Secretary of Budget and Management, and subject to
consultation with the presiding officers of both Houses of Congress and the
presidents of the liga, to make the necessary adjustments in the internal
revenue allotment of local government units but in no case shall the allotment
be less than thirty percent (30%) of the collection of national internal revenue
taxes of the third fiscal year preceding the current fiscal year x x x."
There are therefore several requisites before the President may interfere in
local fiscal matters: (1) an unmanaged public sector deficit of the national
government; (2) consultations with the presiding officers of the Senate and the
House of Representatives and the presidents of the various local leagues; and
(3) the corresponding recommendation of the secretaries of the Department of
Finance, Interior and Local Government, and Budget and Management.
Furthermore, any adjustment in the allotment shall in no case be less than
thirty percent (30%) of the collection of national internal revenue taxes of the
third fiscal year preceding the current one.

Petitioner points out that respondents failed to comply with these requisites
before the issuance and the implementation of AO 372. At the very least, they
did not even try to show that the national government was suffering from an
unmanageable public sector deficit. Neither did they claim having conducted
consultations with the different leagues of local governments. Without these
requisites, the President has no authority to adjust, much less to reduce,
unilaterally the LGU's internal revenue allotment.

The solicitor general insists, however, that AO 372 is merely directory and has
been issued by the President consistent with his power of supervision over
local governments. It is intended only to advise all government agencies and
instrumentalities to undertake cost-reduction measures that will help maintain
economic stability in the country, which is facing economic difficulties.
Besides, it does not contain any sanction in case of noncompliance. Being
merely an advisory, therefore, Section 1 of AO 372 is well within the powers of
the President. Since it is not a mandatory imposition, the directive cannot be
characterized as an exercise of the power of control.

While the wordings of Section 1 of AO 372 have a rather commanding tone,

and while we agree with petitioner that the requirements of Section 284 of the
Local Government Code have not been satisfied, we are prepared to accept the
solicitor general's assurance that the directive to "identify and implement
measures x x x that will reduce total expenditures x x x by at least 25% of
authorized regular appropriation" is merely advisory in character, and does not
constitute a mandatory or binding order that interferes with local autonomy.
The language used, while authoritative, does not amount to a command that
emanates from a boss to a subaltern.

Rather, the provision is merely an advisory to prevail upon local executives to

recognize the need for fiscal restraint in a period of economic difficulty.
Indeed, all concerned would do well to heed the President's call to unity,
solidarity and teamwork to help alleviate the crisis. It is understood, however,
that no legal sanction may be imposed upon LGUs and their officials who do
not follow such advice. It is in this light that we sustain the solicitor general's
contention in regard to Section 1.

Withholding a Part
of LGUs' IRA

Section 4 of AO 372 cannot, however, be upheld. A basic feature of local fiscal

autonomy is the automatic release of the shares of LGUs in the national
internal revenue. This is mandated by no less than the Constitution. [28] The
Local Government Code[29] specifies further that the release shall be made
directly to the LGU concerned within five (5) days after every quarter of the
year and "shall not be subject to any lien or holdback that may be imposed by
the national government for whatever purpose."[30] As a rule, the term "shall" is
a word of command that must be given a compulsory meaning.[31] The provision
is, therefore, imperative.

Section 4 of AO 372, however, orders the withholding, effective January 1,

1998, of 10 percent of the LGUs' IRA "pending the assessment and evaluation
by the Development Budget Coordinating Committee of the emerging fiscal
situation" in the country. Such withholding clearly contravenes the
Constitution and the law. Although temporary, it is equivalent to a holdback,
which means "something held back or withheld, often temporarily." [32] Hence,
the "temporary" nature of the retention by the national government does not
matter. Any retention is prohibited.

In sum, while Section 1 of AO 372 may be upheld as an advisory effected in

times of national crisis, Section 4 thereof has no color of validity at all. The
latter provision effectively encroaches on the fiscal autonomy of local
governments. Concededly, the President was well-intentioned in issuing his
Order to withhold the LGUs' IRA, but the rule of law requires that even the
best intentions must be carried out within the parameters of the Constitution
and the law. Verily, laudable purposes must be carried out by legal methods.

Refutation of Justice Kapunan's Dissent

Mr. Justice Santiago M. Kapunan dissents from our Decision on the grounds
that, allegedly, (1) the Petition is premature; (2) AO 372 falls within the powers
of the President as chief fiscal officer; and (3) the withholding of the LGUs' IRA
is implied in the President's authority to adjust it in case of an unmanageable
public sector deficit.

First, on prematurity. According to the Dissent, when "the conduct has not yet
occurred and the challenged construction has not yet been adopted by the
agency charged with administering the administrative order, the determination
of the scope and constitutionality of the executive action in advance of its
immediate adverse effect involves too remote and abstract an inquiry for the
proper exercise of judicial function."

This is a rather novel theory -- that people should await the implementing evil
to befall on them before they can question acts that are illegal or
unconstitutional. Be it remembered that the real issue here is whether the
Constitution and the law are contravened by Section 4 of AO 372, not whether
they are violated by the acts implementing it. In the unanimous en banc case
Tañada v. Angara,[33] this Court held that when an act of the legislative
department is seriously alleged to have infringed the Constitution, settling the
controversy becomes the duty of this Court. By the mere enactment of the
questioned law or the approval of the challenged action, the dispute is said to
have ripened into a judicial controversy even without any other overt act.
Indeed, even a singular violation of the Constitution and/or the law is enough
to awaken judicial duty. Said the Court:
"In seeking to nullify an act of the Philippine Senate on the ground that it
contravenes the Constitution, the petition no doubt raises a justiciable
controversy. Where an action of the legislative branch is seriously alleged to
have infringed the Constitution, it becomes not only the right but in fact the
duty of the judiciary to settle the dispute. 'The question thus posed is judicial
rather than political. The duty (to adjudicate) remains to assure that the
supremacy of the Constitution is upheld.'[34] Once a 'controversy as to the
application or interpretation of a constitutional provision is raised before this
Court x x x , it becomes a legal issue which the Court is bound by
constitutional mandate to decide.'[35]
xxx xxx xxx
"As this Court has repeatedly and firmly emphasized in many cases, [36] it will
not shirk, digress from or abandon its sacred duty and authority to uphold the
Constitution in matters that involve grave abuse of discretion brought before it
in appropriate cases, committed by any officer, agency, instrumentality or
department of the government."
In the same vein, the Court also held in Tatad v. Secretary of the Department of
Energy:[37]
"x x x Judicial power includes not only the duty of the courts to settle actual
controversies involving rights which are legally demandable and enforceable,
but also the duty to determine whether or not there has been grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of any branch
or instrumentality of government. The courts, as guardians of the Constitution,
have the inherent authority to determine whether a statute enacted by the
legislature transcends the limit imposed by the fundamental law. Where the
statute violates the Constitution, it is not only the right but the duty of the
judiciary to declare such act unconstitutional and void."
By the same token, when an act of the President, who in our constitutional
scheme is a coequal of Congress, is seriously alleged to have infringed the
Constitution and the laws, as in the present case, settling the dispute becomes
the duty and the responsibility of the courts.

Besides, the issue that the Petition is premature has not been raised by the
parties; hence it is deemed waived. Considerations of due process really
prevents its use against a party that has not been given sufficient notice of its
presentation, and thus has not been given the opportunity to refute it. [38]

Second, on the President's power as chief fiscal officer of the country. Justice
Kapunan posits that Section 4 of AO 372 conforms with the President's role as
chief fiscal officer, who allegedly "is clothed by law with certain powers to
ensure the observance of safeguards and auditing requirements, as well as the
legal prerequisites in the release and use of IRAs, taking into account the
constitutional and statutory mandates."[39] He cites instances when the
President may lawfully intervene in the fiscal affairs of LGUs.

Precisely, such powers referred to in the Dissent have specifically been

authorized by law and have not been challenged as violative of the
Constitution. On the other hand, Section 4 of AO 372, as explained earlier,
contravenes explicit provisions of the Local Government Code (LGC) and the
Constitution. In other words, the acts alluded to in the Dissent are indeed
authorized by law; but, quite the opposite, Section 4 of AO 372 is bereft of any
legal or constitutional basis.

Third, on the President's authority to adjust the IRA of LGUs in case of an

unmanageable public sector deficit. It must be emphasized that in striking
down Section 4 of AO 372, this Court is not ruling out any form of reduction in
the IRAs of LGUs. Indeed, as the President may make necessary adjustments
in case of an unmanageable public sector deficit, as stated in the main part of
this Decision, and in line with Section 284 of the LGC, which Justice Kapunan
cites. He, however, merely glances over a specific requirement in the same
provision -- that such reduction is subject to consultation with the presiding
officers of both Houses of Congress and, more importantly, with the presidents
of the leagues of local governments.

Notably, Justice Kapunan recognizes the need for "interaction between the
national government and the LGUs at the planning level," in order to ensure
that "local development plans x x x hew to national policies and standards."
The problem is that no such interaction or consultation was ever held prior to
the issuance of AO 372. This is why the petitioner and the intervenor (who was
a provincial governor and at the same time president of the League of
Provinces of the Philippines and chairman of the League of Leagues of Local
Governments) have protested and instituted this action. Significantly,
respondents do not deny the lack of consultation.

In addition, Justice Kapunan cites Section 287[40] of the LGC as impliedly

authorizing the President to withhold the IRA of an LGU, pending its
compliance with certain requirements. Even a cursory reading of the provision
reveals that it is totally inapplicable to the issue at bar. It directs LGUs to
appropriate in their annual budgets 20 percent of their respective IRAs for
development projects. It speaks of no positive power granted the President to
priorly withhold any amount. Not at all.

WHEREFORE, the Petition is GRANTED. Respondents and their successors

are hereby permanently PROHIBITED from implementing Administrative
Order Nos. 372 and 43, respectively dated December 27, 1997 and December
10, 1998, insofar as local government units are concerned.

SO ORDERED.

Davide, Jr., C.J., Bellosillo, Melo, Puno, Vitug, Mendoza, Quisumbing, Pardo,
Buena, Gonzaga-Reyes, and De Leon, Jr., JJ., concur.
Kapunan, J., see dissenting opinion.
Purisima, and Ynares-Santiago, JJ., join J. Kapunan in his dissenting opinion.
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 152774 May 27, 2004
THE PROVINCE OF BATANGAS, represented by its Governor,
HERMILANDO I. MANDANAS, petitioner,
vs.
HON. ALBERTO G. ROMULO, Executive Secretary and Chairman of the
Oversight Committee on Devolution; HON. EMILIA BONCODIN,
Secretary, Department of Budget and Management; HON. JOSE D.
LINA, JR., Secretary, Department of Interior and Local
Government, respondents.
DECISION

CALLEJO, SR., J.:

The Province of Batangas, represented by its Governor, Hermilando I.
Mandanas, filed the present petition for certiorari, prohibition and mandamus
under Rule 65 of the Rules of Court, as amended, to declare as unconstitutional
and void certain provisos contained in the General Appropriations Acts (GAA)
of 1999, 2000 and 2001, insofar as they uniformly earmarked for each
corresponding year the amount of five billion pesos (₱5,000,000,000.00) of the
Internal Revenue Allotment (IRA) for the Local Government Service
Equalization Fund (LGSEF) and imposed conditions for the release thereof.
Named as respondents are Executive Secretary Alberto G. Romulo, in his
capacity as Chairman of the Oversight Committee on Devolution, Secretary
Emilia Boncodin of the Department of Budget and Management (DBM) and
Secretary Jose Lina of the Department of Interior and Local Government
(DILG).
Background
On December 7, 1998, then President Joseph Ejercito Estrada issued Executive
Order (E.O.) No. 48 entitled "ESTABLISHING A PROGRAM FOR DEVOLUTION
ADJUSTMENT AND EQUALIZATION." The program was established to
"facilitate the process of enhancing the capacities of local government units
(LGUs) in the discharge of the functions and services devolved to them by the
National Government Agencies concerned pursuant to the Local Government
Code."1 The Oversight Committee (referred to as the Devolution Committee in
E.O. No. 48) constituted under Section 533(b) of Republic Act No. 7160 (The
Local Government Code of 1991) has been tasked to formulate and issue the
appropriate rules and regulations necessary for its effective
implementation. Further, to address the funding shortfalls of functions and
2

services devolved to the LGUs and other funding requirements of the program,
the "Devolution Adjustment and Equalization Fund" was created. 3 For 1998,
the DBM was directed to set aside an amount to be determined by the
Oversight Committee based on the devolution status appraisal surveys
undertaken by the DILG.4 The initial fund was to be sourced from the available
savings of the national government for CY 1998. 5 For 1999 and the succeeding
years, the corresponding amount required to sustain the program was to be
incorporated in the annual GAA.6 The Oversight Committee has been
authorized to issue the implementing rules and regulations governing the
equitable allocation and distribution of said fund to the LGUs. 7
The LGSEF in the GAA of 1999
In Republic Act No. 8745, otherwise known as the GAA of 1999, the program
was renamed as the LOCAL GOVERNMENT SERVICE EQUALIZATION FUND
(LGSEF). Under said appropriations law, the amount of ₱96,780,000,000 was
allotted as the share of the LGUs in the internal revenue taxes. Item No. 1,
Special Provisions, Title XXXVI – A. Internal Revenue Allotment of Rep. Act No.
8745 contained the following proviso:
... PROVIDED, That the amount of FIVE BILLION PESOS (₱5,000,000,000) shall
be earmarked for the Local Government Service Equalization Fund for the
funding requirements of projects and activities arising from the full and
efficient implementation of devolved functions and services of local
government units pursuant to R.A. No. 7160, otherwise known as the Local
Government Code of 1991: PROVIDED, FURTHER, That such amount shall be
released to the local government units subject to the implementing rules and
regulations, including such mechanisms and guidelines for the equitable
allocations and distribution of said fund among local government units subject
to the guidelines that may be prescribed by the Oversight Committee on
Devolution as constituted pursuant to Book IV, Title III, Section 533(b) of R.A.
No. 7160. The Internal Revenue Allotment shall be released directly by the
Department of Budget and Management to the Local Government Units
concerned.
On July 28, 1999, the Oversight Committee (with then Executive Secretary
Ronaldo B. Zamora as Chairman) passed Resolution Nos. OCD-99-003, OCD-
99-005 and OCD-99-006 entitled as follows:
OCD-99-005
RESOLUTION ADOPTING THE ALLOCATION SCHEME FOR THE PhP5
BILLION CY 1999 LOCAL GOVERNMENT SERVICE EQUALIZATION FUND
(LGSEF) AND REQUESTING HIS EXCELLENCY PRESIDENT JOSEPH
EJERCITO ESTRADA TO APPROVE SAID ALLOCATION SCHEME.
OCD-99-006
RESOLUTION ADOPTING THE ALLOCATION SCHEME FOR THE PhP4.0
BILLION OF THE 1999 LOCAL GOVERNMENT SERVICE EQUALIZATION
FUND AND ITS CONCOMITANT GENERAL FRAMEWORK, IMPLEMENTING
GUIDELINES AND MECHANICS FOR ITS IMPLEMENTATION AND RELEASE,
AS PROMULGATED BY THE OVERSIGHT COMMITTEE ON DEVOLUTION.
OCD-99-003
RESOLUTION REQUESTING HIS EXCELLENCY PRESIDENT JOSEPH
EJERCITO ESTRADA TO APPROVE THE REQUEST OF THE OVERSIGHT
COMMITTEE ON DEVOLUTION TO SET ASIDE TWENTY PERCENT (20%) OF
THE LOCAL GOVERNMENT SERVICE EQUALIZATION FUND (LGSEF) FOR
LOCAL AFFIRMATIVE ACTION PROJECTS AND OTHER PRIORITY
INITIATIVES FOR LGUs INSTITUTIONAL AND CAPABILITY BUILDING IN
ACCORDANCE WITH THE IMPLEMENTING GUIDELINES AND MECHANICS
AS PROMULGATED BY THE COMMITTEE.
These OCD resolutions were approved by then President Estrada on October 6,
1999.
Under the allocation scheme adopted pursuant to Resolution No. OCD-99-005,
the five billion pesos LGSEF was to be allocated as follows:
1. The PhP4 Billion of the LGSEF shall be allocated in accordance with the
allocation scheme and implementing guidelines and mechanics promulgated
and adopted by the OCD. To wit:
a. The first PhP2 Billion of the LGSEF shall be allocated in accordance with the
codal formula sharing scheme as prescribed under the 1991 Local Government
Code;
b. The second PhP2 Billion of the LGSEF shall be allocated in accordance with
a modified 1992 cost of devolution fund (CODEF) sharing scheme, as
recommended by the respective leagues of provinces, cities and municipalities
to the OCD. The modified CODEF sharing formula is as follows:
Province : 40%
Cities : 20%
Municipalities : 40%
This is applied to the P2 Billion after the approved amounts granted to
individual provinces, cities and municipalities as assistance to cover decrease
in 1999 IRA share due to reduction in land area have been taken out.
2. The remaining PhP1 Billion of the LGSEF shall be earmarked to support
local affirmative action projects and other priority initiatives submitted by
LGUs to the Oversight Committee on Devolution for approval in accordance
with its prescribed guidelines as promulgated and adopted by the OCD.
In Resolution No. OCD-99-003, the Oversight Committee set aside the one
billion pesos or 20% of the LGSEF to support Local Affirmative Action Projects
(LAAPs) of LGUs. This remaining amount was intended to "respond to the
urgent need for additional funds assistance, otherwise not available within the
parameters of other existing fund sources." For LGUs to be eligible for funding
under the one-billion-peso portion of the LGSEF, the OCD promulgated the
following:
III. CRITERIA FOR ELIGIBILITY:
1. LGUs (province, city, municipality, or barangay), individually or by group or
multi-LGUs or leagues of LGUs, especially those belonging to the 5th and 6th
class, may access the fund to support any projects or activities that satisfy any
of the aforecited purposes. A barangay may also access this fund directly or
through their respective municipality or city.
2. The proposed project/activity should be need-based, a local priority, with
high development impact and are congruent with the socio-cultural, economic
and development agenda of the Estrada Administration, such as food security,
poverty alleviation, electrification, and peace and order, among others.
3. Eligible for funding under this fund are projects arising from, but not limited
to, the following areas of concern:
a. delivery of local health and sanitation services, hospital services and other
tertiary services;
b. delivery of social welfare services;
c. provision of socio-cultural services and facilities for youth and community
development;
d. provision of agricultural and on-site related research;
e. improvement of community-based forestry projects and other local projects
on environment and natural resources protection and conservation;
f. improvement of tourism facilities and promotion of tourism;
g. peace and order and public safety;
h. construction, repair and maintenance of public works and infrastructure,
including public buildings and facilities for public use, especially those
destroyed or damaged by man-made or natural calamities and disaster as well
as facilities for water supply, flood control and river dikes;
i. provision of local electrification facilities;
j. livelihood and food production services, facilities and equipment;
k. other projects that may be authorized by the OCD consistent with the
aforementioned objectives and guidelines;
4. Except on extremely meritorious cases, as may be determined by the
Oversight Committee on Devolution, this portion of the LGSEF shall not be
used in expenditures for personal costs or benefits under existing laws
applicable to governments. Generally, this fund shall cover the following
objects of expenditures for programs, projects and activities arising from the
implementation of devolved and regular functions and services:
a. acquisition/procurement of supplies and materials critical to the full and
effective implementation of devolved programs, projects and activities;
b. repair and/or improvement of facilities;
c. repair and/or upgrading of equipment;
d. acquisition of basic equipment;
e. construction of additional or new facilities;
f. counterpart contribution to joint arrangements or collective projects among
groups of municipalities, cities and/or provinces related to devolution and
delivery of basic services.
5. To be eligible for funding, an LGU or group of LGU shall submit to the
Oversight Committee on Devolution through the Department of Interior and
Local Governments, within the prescribed schedule and timeframe, a Letter
Request for Funding Support from the Affirmative Action Program under the
LGSEF, duly signed by the concerned LGU(s) and endorsed by cooperators
and/or beneficiaries, as well as the duly signed Resolution of Endorsement by
the respective Sanggunian(s) of the LGUs concerned. The LGU-proponent shall
also be required to submit the Project Request (PR), using OCD Project
Request Form No. 99-02, that details the following:
(a) general description or brief of the project;
(b) objectives and justifications for undertaking the project, which should
highlight the benefits to the locality and the expected impact to the local
program/project arising from the full and efficient implementation of social
services and facilities, at the local levels;
(c) target outputs or key result areas;
(d) schedule of activities and details of requirements;
(e) total cost requirement of the project;
(f) proponent's counterpart funding share, if any, and identified source(s) of
counterpart funds for the full implementation of the project;
(g) requested amount of project cost to be covered by the LGSEF.
Further, under the guidelines formulated by the Oversight Committee as
contained in Attachment - Resolution No. OCD-99-003, the LGUs were required
to identify the projects eligible for funding under the one-billion-peso portion of
the LGSEF and submit the project proposals thereof and other documentary
requirements to the DILG for appraisal. The project proposals that passed the
DILG's appraisal would then be submitted to the Oversight Committee for
review, evaluation and approval. Upon its approval, the Oversight Committee
would then serve notice to the DBM for the preparation of the Special
Allotment Release Order (SARO) and Notice of Cash Allocation (NCA) to effect
the release of funds to the said LGUs.
The LGSEF in the GAA of 2000
Under Rep. Act No. 8760, otherwise known as the GAA of 2000, the amount of
₱111,778,000,000 was allotted as the share of the LGUs in the internal revenue
taxes. As in the GAA of 1999, the GAA of 2000 contained a proviso earmarking
five billion pesos of the IRA for the LGSEF. This proviso, found in Item No. 1,
Special Provisions, Title XXXVII – A. Internal Revenue Allotment, was similarly
worded as that contained in the GAA of 1999.
The Oversight Committee, in its Resolution No. OCD-2000-023 dated June 22,
2000, adopted the following allocation scheme governing the five billion pesos
LGSEF for 2000:
1. The PhP3.5 Billion of the CY 2000 LGSEF shall be allocated to and shared by
the four levels of LGUs, i.e., provinces, cities, municipalities, and barangays,
using the following percentage-sharing formula agreed upon and jointly
endorsed by the various Leagues of LGUs:
For Provinces 26% or ₱ 910,000,000
For Cities 23% or 805,000,000
For Municipalities 35% or 1,225,000,000
For Barangays 16% or 560,000,000
Provided that the respective Leagues representing the provinces, cities,
municipalities and barangays shall draw up and adopt the horizontal
distribution/sharing schemes among the member LGUs whereby the Leagues
concerned may opt to adopt direct financial assistance or project-based
arrangement, such that the LGSEF allocation for individual LGU shall be
released directly to the LGU concerned;
Provided further that the individual LGSEF shares to LGUs are used in
accordance with the general purposes and guidelines promulgated by the OCD
for the implementation of the LGSEF at the local levels pursuant to Res. No.
OCD-99-006 dated October 7, 1999 and pursuant to the Leagues' guidelines
and mechanism as approved by the OCD;
Provided further that each of the Leagues shall submit to the OCD for its
approval their respective allocation scheme, the list of LGUs with the
corresponding LGSEF shares and the corresponding project categories if
project-based;
Provided further that upon approval by the OCD, the lists of LGUs shall be
endorsed to the DBM as the basis for the preparation of the corresponding
NCAs, SAROs, and related budget/release documents.
2. The remaining ₱1,500,000,000 of the CY 2000 LGSEF shall be earmarked to
support the following initiatives and local affirmative action projects, to be
endorsed to and approved by the Oversight Committee on Devolution in
accordance with the OCD agreements, guidelines, procedures and
documentary requirements:
On July 5, 2000, then President Estrada issued a Memorandum authorizing
then Executive Secretary Zamora and the DBM to implement and release the
2.5 billion pesos LGSEF for 2000 in accordance with Resolution No. OCD-2000-
023.
Thereafter, the Oversight Committee, now under the administration of
President Gloria Macapagal-Arroyo, promulgated Resolution No. OCD-2001-29
entitled "ADOPTING RESOLUTION NO. OCD-2000-023 IN THE ALLOCATION,
IMPLEMENTATION AND RELEASE OF THE REMAINING ₱2.5 BILLION
LGSEF FOR CY 2000." Under this resolution, the amount of one billion pesos of
the LGSEF was to be released in accordance with paragraph 1 of Resolution
No. OCD-2000-23, to complete the 3.5 billion pesos allocated to the LGUs,
while the amount of 1.5 billion pesos was allocated for the LAAP. However, out
of the latter amount, ₱400,000,000 was to be allocated and released as follows:
₱50,000,000 as financial assistance to the LAAPs of LGUs; ₱275,360,227 as
financial assistance to cover the decrease in the IRA of LGUs concerned due to
reduction in land area; and ₱74,639,773 for the LGSEF Capability-Building
Fund.
The LGSEF in the GAA of 2001
In view of the failure of Congress to enact the general appropriations law for
2001, the GAA of 2000 was deemed re-enacted, together with the IRA of the
LGUs therein and the proviso earmarking five billion pesos thereof for the
LGSEF.
On January 9, 2002, the Oversight Committee adopted Resolution No. OCD-
2002-001 allocating the five billion pesos LGSEF for 2001 as follows:

Modified Codal ₱ 3.000

Formula billion

Priority Projects 1.900 billion

Capability Building
.100 billion
Fund

₱ 5.000
 billion

RESOLVED FURTHER, that the ₱3.0 B of the CY 2001 LGSEF which is to be

allocated according to the modified codal formula shall be released to the four
levels of LGUs, i.e., provinces, cities, municipalities and barangays, as follows:

Percenta
LGUs Amount
ge

₱ 0.750
Provinces 25
billion

Cities 25 0.750

Municipaliti
35 1.050
es

Barangays 15 0.450

₱ 3.000
100
billion

RESOLVED FURTHER, that the ₱1.9 B earmarked for priority projects shall be
distributed according to the following criteria:
1.0 For projects of the 4th, 5th and 6th class LGUs; or
2.0 Projects in consonance with the President's State of the Nation Address
(SONA)/summit commitments.
RESOLVED FURTHER, that the remaining ₱100 million LGSEF capability
building fund shall be distributed in accordance with the recommendation of
the Leagues of Provinces, Cities, Municipalities and Barangays, and approved
by the OCD.
Upon receipt of a copy of the above resolution, Gov. Mandanas wrote to the
individual members of the Oversight Committee seeking the reconsideration of
Resolution No. OCD-2002-001. He also wrote to Pres. Macapagal-Arroyo
urging her to disapprove said resolution as it violates the Constitution and the
Local Government Code of 1991.
On January 25, 2002, Pres. Macapagal-Arroyo approved Resolution No. OCD-
2002-001.
The Petitioner's Case
The petitioner now comes to this Court assailing as unconstitutional and void
the provisos in the GAAs of 1999, 2000 and 2001, relating to the LGSEF.
Similarly assailed are the Oversight Committee's Resolutions Nos. OCD-99-
003, OCD-99-005, OCD-99-006, OCD-2000-023, OCD-2001-029 and OCD-2002-
001 issued pursuant thereto. The petitioner submits that the assailed provisos
in the GAAs and the OCD resolutions, insofar as they earmarked the amount of
five billion pesos of the IRA of the LGUs for 1999, 2000 and 2001 for the
LGSEF and imposed conditions for the release thereof, violate the Constitution
and the Local Government Code of 1991.
Section 6, Article X of the Constitution is invoked as it mandates that the "just
share" of the LGUs shall be automatically released to them. Sections 18 and
286 of the Local Government Code of 1991, which enjoin that the "just share"
of the LGUs shall be "automatically and directly" released to them "without
need of further action" are, likewise, cited.
The petitioner posits that to subject the distribution and release of the five-
billion-peso portion of the IRA, classified as the LGSEF, to compliance by the
LGUs with the implementing rules and regulations, including the mechanisms
and guidelines prescribed by the Oversight Committee, contravenes the
explicit directive of the Constitution that the LGUs' share in the national taxes
"shall be automatically released to them." The petitioner maintains that the use
of the word "shall" must be given a compulsory meaning.
To further buttress this argument, the petitioner contends that to vest the
Oversight Committee with the authority to determine the distribution and
release of the LGSEF, which is a part of the IRA of the LGUs, is an anathema to
the principle of local autonomy as embodied in the Constitution and the Local
Government Code of 1991. The petitioner cites as an example the experience in
2001 when the release of the LGSEF was long delayed because the Oversight
Committee was not able to convene that year and no guidelines were issued
therefor. Further, the possible disapproval by the Oversight Committee of the
project proposals of the LGUs would result in the diminution of the latter's
share in the IRA.
Another infringement alleged to be occasioned by the assailed OCD resolutions
is the improper amendment to Section 285 of the Local Government Code of
1991 on the percentage sharing of the IRA among the LGUs. Said provision
allocates the IRA as follows: Provinces – 23%; Cities – 23%; Municipalities –
34%; and Barangays – 20%.8 This formula has been improperly amended or
modified, with respect to the five-billion-peso portion of the IRA allotted for the
LGSEF, by the assailed OCD resolutions as they invariably provided for a
different sharing scheme.
The modifications allegedly constitute an illegal amendment by the executive
branch of a substantive law. Moreover, the petitioner mentions that in the
Letter dated December 5, 2001 of respondent Executive Secretary Romulo
addressed to respondent Secretary Boncodin, the former endorsed to the latter
the release of funds to certain LGUs from the LGSEF in accordance with the
handwritten instructions of President Arroyo. Thus, the LGUs are at a loss as to
how a portion of the LGSEF is actually allocated. Further, there are still
portions of the LGSEF that, to date, have not been received by the petitioner;
hence, resulting in damage and injury to the petitioner.
The petitioner prays that the Court declare as unconstitutional and void the
assailed provisos relating to the LGSEF in the GAAs of 1999, 2000 and 2001
and the assailed OCD resolutions (Resolutions Nos. OCD-99-003, OCD-99-005,
OCD-99-006, OCD-2000-023, OCD-2001-029 and OCD-2002-001) issued by the
Oversight Committee pursuant thereto. The petitioner, likewise, prays that the
Court direct the respondents to rectify the unlawful and illegal distribution and
releases of the LGSEF for the aforementioned years and release the same in
accordance with the sharing formula under Section 285 of the Local
Government Code of 1991. Finally, the petitioner urges the Court to declare
that the entire IRA should be released automatically without further action by
the LGUs as required by the Constitution and the Local Government Code of
1991.
The Respondents' Arguments
The respondents, through the Office of the Solicitor General, urge the Court to
dismiss the petition on procedural and substantive grounds. On the latter, the
respondents contend that the assailed provisos in the GAAs of 1999, 2000 and
2001 and the assailed resolutions issued by the Oversight Committee are not
constitutionally infirm. The respondents advance the view that Section 6,
Article X of the Constitution does not specify that the "just share" of the LGUs
shall be determined solely by the Local Government Code of 1991. Moreover,
the phrase "as determined by law" in the same constitutional provision means
that there exists no limitation on the power of Congress to determine what is
the "just share" of the LGUs in the national taxes. In other words, Congress is
the arbiter of what should be the "just share" of the LGUs in the national taxes.
The respondents further theorize that Section 285 of the Local Government
Code of 1991, which provides for the percentage sharing of the IRA among the
LGUs, was not intended to be a fixed determination of their "just share" in the
national taxes. Congress may enact other laws, including appropriations laws
such as the GAAs of 1999, 2000 and 2001, providing for a different sharing
formula. Section 285 of the Local Government Code of 1991 was merely
intended to be the "default share" of the LGUs to do away with the need to
determine annually by law their "just share." However, the LGUs have no
vested right in a permanent or fixed percentage as Congress may increase or
decrease the "just share" of the LGUs in accordance with what it believes is
appropriate for their operation. There is nothing in the Constitution which
prohibits Congress from making such determination through the
appropriations laws. If the provisions of a particular statute, the GAA in this
case, are within the constitutional power of the legislature to enact, they
should be sustained whether the courts agree or not in the wisdom of their
enactment.
On procedural grounds, the respondents urge the Court to dismiss the petition
outright as the same is defective. The petition allegedly raises factual issues
which should be properly threshed out in the lower courts, not this Court, not
being a trier of facts. Specifically, the petitioner's allegation that there are
portions of the LGSEF that it has not, to date, received, thereby causing it (the
petitioner) injury and damage, is subject to proof and must be substantiated in
the proper venue, i.e., the lower courts.
Further, according to the respondents, the petition has already been rendered
moot and academic as it no longer presents a justiciable controversy. The IRAs
for the years 1999, 2000 and 2001, have already been released and the
government is now operating under the 2003 budget. In support of this, the
respondents submitted certifications issued by officers of the DBM attesting to
the release of the allocation or shares of the petitioner in the LGSEF for 1999,
2000 and 2001. There is, therefore, nothing more to prohibit.
Finally, the petitioner allegedly has no legal standing to bring the suit because
it has not suffered any injury. In fact, the petitioner's "just share" has even
increased. Pursuant to Section 285 of the Local Government Code of 1991, the
share of the provinces is 23%. OCD Nos. 99-005, 99-006 and 99-003 gave the
provinces 40% of ₱2 billion of the LGSEF. OCD Nos. 2000-023 and 2001-029
apportioned 26% of ₱3.5 billion to the provinces. On the other hand, OCD No.
2001-001 allocated 25% of ₱3 billion to the provinces. Thus, the petitioner has
not suffered any injury in the implementation of the assailed provisos in the
GAAs of 1999, 2000 and 2001 and the OCD resolutions.
The Ruling of the Court Procedural Issues
Before resolving the petition on its merits, the Court shall first rule on the
following procedural issues raised by the respondents: (1) whether the
petitioner has legal standing or locus standi to file the present suit; (2) whether
the petition involves factual questions that are properly cognizable by the
lower courts; and (3) whether the issue had been rendered moot and academic.
The petitioner has locus standi to maintain the present suit
The gist of the question of standing is whether a party has "alleged such a
personal stake in the outcome of the controversy as to assure that concrete
adverseness which sharpens the presentation of issues upon which the court so
largely depends for illumination of difficult constitutional
questions." Accordingly, it has been held that the interest of a party assailing
9

the constitutionality of a statute must be direct and personal. Such party must
be able to show, not only that the law or any government act is invalid, but also
that he has sustained or is in imminent danger of sustaining some direct injury
as a result of its enforcement, and not merely that he suffers thereby in some
indefinite way. It must appear that the person complaining has been or is about
to be denied some right or privilege to which he is lawfully entitled or that he
is about to be subjected to some burdens or penalties by reason of the statute
or act complained of.10
The Court holds that the petitioner possesses the requisite standing to
maintain the present suit. The petitioner, a local government unit, seeks relief
in order to protect or vindicate an interest of its own, and of the other LGUs.
This interest pertains to the LGUs' share in the national taxes or the IRA. The
petitioner's constitutional claim is, in substance, that the assailed provisos in
the GAAs of 1999, 2000 and 2001, and the OCD resolutions contravene Section
6, Article X of the Constitution, mandating the "automatic release" to the LGUs
of their share in the national taxes. Further, the injury that the petitioner
claims to suffer is the diminution of its share in the IRA, as provided under
Section 285 of the Local Government Code of 1991, occasioned by the
implementation of the assailed measures. These allegations are sufficient to
grant the petitioner standing to question the validity of the assailed provisos in
the GAAs of 1999, 2000 and 2001, and the OCD resolutions as the petitioner
clearly has "a plain, direct and adequate interest" in the manner and
distribution of the IRA among the LGUs.
The petition involves a significant legal issue
The crux of the instant controversy is whether the assailed provisos contained
in the GAAs of 1999, 2000 and 2001, and the OCD resolutions infringe the
Constitution and the Local Government Code of 1991. This is undoubtedly a
legal question. On the other hand, the following facts are not disputed:
1. The earmarking of five billion pesos of the IRA for the LGSEF in the assailed
provisos in the GAAs of 1999, 2000 and re-enacted budget for 2001;
2. The promulgation of the assailed OCD resolutions providing for the
allocation schemes covering the said five billion pesos and the implementing
rules and regulations therefor; and
3. The release of the LGSEF to the LGUs only upon their compliance with the
implementing rules and regulations, including the guidelines and mechanisms,
prescribed by the Oversight Committee.
Considering that these facts, which are necessary to resolve the legal question
now before this Court, are no longer in issue, the same need not be determined
by a trial court.11 In any case, the rule on hierarchy of courts will not prevent
this Court from assuming jurisdiction over the petition. The said rule may be
relaxed when the redress desired cannot be obtained in the appropriate courts
or where exceptional and compelling circumstances justify availment of a
remedy within and calling for the exercise of this Court's primary jurisdiction. 12
The crucial legal issue submitted for resolution of this Court entails the proper
legal interpretation of constitutional and statutory provisions. Moreover, the
"transcendental importance" of the case, as it necessarily involves the
application of the constitutional principle on local autonomy, cannot be
gainsaid. The nature of the present controversy, therefore, warrants the
relaxation by this Court of procedural rules in order to resolve the case
forthwith.
The substantive issue needs to be resolved notwithstanding the supervening
events
Granting arguendo that, as contended by the respondents, the resolution of the
case had already been overtaken by supervening events as the IRA, including
the LGSEF, for 1999, 2000 and 2001, had already been released and the
government is now operating under a new appropriations law, still, there is
compelling reason for this Court to resolve the substantive issue raised by the
instant petition. Supervening events, whether intended or accidental, cannot
prevent the Court from rendering a decision if there is a grave violation of the
Constitution.13 Even in cases where supervening events had made the cases
moot, the Court did not hesitate to resolve the legal or constitutional issues
raised to formulate controlling principles to guide the bench, bar and public. 14
Another reason justifying the resolution by this Court of the substantive issue
now before it is the rule that courts will decide a question otherwise moot and
academic if it is "capable of repetition, yet evading review." 15 For the GAAs in
the coming years may contain provisos similar to those now being sought to be
invalidated, and yet, the question may not be decided before another GAA is
enacted. It, thus, behooves this Court to make a categorical ruling on the
substantive issue now.
Substantive Issue
As earlier intimated, the resolution of the substantive legal issue in this case
calls for the application of a most important constitutional policy and principle,
that of local autonomy.16 In Article II of the Constitution, the State has
expressly adopted as a policy that:
Section 25. The State shall ensure the autonomy of local governments.
An entire article (Article X) of the Constitution has been devoted to
guaranteeing and promoting the autonomy of LGUs. Section 2 thereof
reiterates the State policy in this wise:
Section 2. The territorial and political subdivisions shall enjoy local autonomy.
Consistent with the principle of local autonomy, the Constitution confines the
President's power over the LGUs to one of general supervision. 17 This provision
has been interpreted to exclude the power of control. The distinction between
the two powers was enunciated in Drilon v. Lim:18
An officer in control lays down the rules in the doing of an act. If they are not
followed, he may, in his discretion, order the act undone or re-done by his
subordinate or he may even decide to do it himself. Supervision does not cover
such authority. The supervisor or superintendent merely sees to it that the
rules are followed, but he himself does not lay down such rules, nor does he
have the discretion to modify or replace them. If the rules are not observed, he
may order the work done or re-done but only to conform to the prescribed
rules. He may not prescribe his own manner for doing the act. He has no
judgment on this matter except to see to it that the rules are followed. 19
The Local Government Code of 199120 was enacted to flesh out the mandate of
the Constitution.21 The State policy on local autonomy is amplified in Section 2
thereof:
Sec. 2. Declaration of Policy. – (a) It is hereby declared the policy of the State
that the territorial and political subdivisions of the State shall enjoy genuine
and meaningful local autonomy to enable them to attain their fullest
development as self-reliant communities and make them more effective
partners in the attainment of national goals. Toward this end, the State shall
provide for a more responsive and accountable local government structure
instituted through a system of decentralization whereby local government units
shall be given more powers, authority, responsibilities, and resources. The
process of decentralization shall proceed from the National Government to the
local government units.
Guided by these precepts, the Court shall now determine whether the assailed
provisos in the GAAs of 1999, 2000 and 2001, earmarking for each
corresponding year the amount of five billion pesos of the IRA for the LGSEF
and the OCD resolutions promulgated pursuant thereto, transgress the
Constitution and the Local Government Code of 1991.
The assailed provisos in the GAAs of 1999, 2000 and 2001 and the OCD
resolutions violate the constitutional precept on local autonomy
Section 6, Article X of the Constitution reads:
Sec. 6. Local government units shall have a just share, as determined by law, in
the national taxes which shall be automatically released to them.
When parsed, it would be readily seen that this provision mandates that (1) the
LGUs shall have a "just share" in the national taxes; (2) the "just share" shall
be determined by law; and (3) the "just share" shall be automatically released
to the LGUs.
The Local Government Code of 1991, among its salient provisions, underscores
the automatic release of the LGUs' "just share" in this wise:
Sec. 18. Power to Generate and Apply Resources. Local government units shall
have the power and authority to establish an organization that shall be
responsible for the efficient and effective implementation of their development
plans, program objectives and priorities; to create their own sources of
revenue and to levy taxes, fees, and charges which shall accrue exclusively for
their use and disposition and which shall be retained by them; to have a just
share in national taxes which shall be automatically and directly released to
them without need of further action;
...
Sec. 286. Automatic Release of Shares. (a) The share of each local government
unit shall be released, without need of any further action, directly to the
provincial, city, municipal or barangay treasurer, as the case may be, on a
quarterly basis within five (5) days after the end of each quarter, and which
shall not be subject to any lien or holdback that may be imposed by the
national government for whatever purpose.
(b) Nothing in this Chapter shall be understood to diminish the share of local
government units under existing laws.
Webster's Third New International Dictionary defines "automatic" as
"involuntary either wholly or to a major extent so that any activity of the will is
largely negligible; of a reflex nature; without volition; mechanical; like or
suggestive of an automaton." Further, the word "automatically" is defined as
"in an automatic manner: without thought or conscious intention." Being
"automatic," thus, connotes something mechanical, spontaneous and
perfunctory. As such, the LGUs are not required to perform any act to receive
the "just share" accruing to them from the national coffers. As emphasized by
the Local Government Code of 1991, the "just share" of the LGUs shall be
released to them "without need of further action." Construing Section 286 of
the LGC, we held in Pimentel, Jr. v. Aguirre,22 viz:
Section 4 of AO 372 cannot, however, be upheld. A basic feature of local fiscal
autonomy is the automatic release of the shares of LGUs in the National
internal revenue. This is mandated by no less than the Constitution. The Local
Government Code specifies further that the release shall be made directly to
the LGU concerned within five (5) days after every quarter of the year and
"shall not be subject to any lien or holdback that may be imposed by the
national government for whatever purpose." As a rule, the term "SHALL" is a
word of command that must be given a compulsory meaning. The provision is,
therefore, IMPERATIVE.
Section 4 of AO 372, however, orders the withholding, effective January 1,
1998, of 10 percent of the LGUs' IRA "pending the assessment and evaluation
by the Development Budget Coordinating Committee of the emerging fiscal
situation" in the country. Such withholding clearly contravenes the Constitution
and the law. Although temporary, it is equivalent to a holdback, which means
"something held back or withheld, often temporarily." Hence, the "temporary"
nature of the retention by the national government does not matter. Any
retention is prohibited.
In sum, while Section 1 of AO 372 may be upheld as an advisory effected in
times of national crisis, Section 4 thereof has no color of validity at all. The
latter provision effectively encroaches on the fiscal autonomy of local
governments. Concededly, the President was well-intentioned in issuing his
Order to withhold the LGUs' IRA, but the rule of law requires that even the
best intentions must be carried out within the parameters of the Constitution
and the law. Verily, laudable purposes must be carried out by legal methods. 23
The "just share" of the LGUs is incorporated as the IRA in the appropriations
law or GAA enacted by Congress annually. Under the assailed provisos in the
GAAs of 1999, 2000 and 2001, a portion of the IRA in the amount of five billion
pesos was earmarked for the LGSEF, and these provisos imposed the condition
that "such amount shall be released to the local government units subject to
the implementing rules and regulations, including such mechanisms and
guidelines for the equitable allocations and distribution of said fund among
local government units subject to the guidelines that may be prescribed by the
Oversight Committee on Devolution." Pursuant thereto, the Oversight
Committee, through the assailed OCD resolutions, apportioned the five billion
pesos LGSEF such that:
For 1999
₱2 billion - allocated according to Sec. 285 LGC
₱2 billion - Modified Sharing Formula (Provinces – 40%;
Cities – 20%; Municipalities – 40%)
₱1 billion – projects (LAAP) approved by OCD.24
For 2000
₱3.5 billion – Modified Sharing Formula (Provinces – 26%;
Cities – 23%; Municipalities – 35%; Barangays – 16%);
₱1.5 billion – projects (LAAP) approved by the OCD.25
For 2001
₱3 billion – Modified Sharing Formula (Provinces – 25%;
Cities – 25%; Municipalities – 35%; Barangays – 15%)
₱1.9 billion – priority projects
₱100 million – capability building fund.26
Significantly, the LGSEF could not be released to the LGUs without the
Oversight Committee's prior approval. Further, with respect to the portion of
the LGSEF allocated for various projects of the LGUs (₱1 billion for 1999; ₱1.5
billion for 2000 and ₱2 billion for 2001), the Oversight Committee, through the
assailed OCD resolutions, laid down guidelines and mechanisms that the LGUs
had to comply with before they could avail of funds from this portion of the
LGSEF. The guidelines required (a) the LGUs to identify the projects eligible
for funding based on the criteria laid down by the Oversight Committee; (b) the
LGUs to submit their project proposals to the DILG for appraisal; (c) the
project proposals that passed the appraisal of the DILG to be submitted to the
Oversight Committee for review, evaluation and approval. It was only upon
approval thereof that the Oversight Committee would direct the DBM to
release the funds for the projects.
To the Court's mind, the entire process involving the distribution and release of
the LGSEF is constitutionally impermissible. The LGSEF is part of the IRA or
"just share" of the LGUs in the national taxes. To subject its distribution and
release to the vagaries of the implementing rules and regulations, including
the guidelines and mechanisms unilaterally prescribed by the Oversight
Committee from time to time, as sanctioned by the assailed provisos in the
GAAs of 1999, 2000 and 2001 and the OCD resolutions, makes the
release not automatic, a flagrant violation of the constitutional and statutory
mandate that the "just share" of the LGUs "shall be automatically released to
them." The LGUs are, thus, placed at the mercy of the Oversight Committee.
Where the law, the Constitution in this case, is clear and unambiguous, it must
be taken to mean exactly what it says, and courts have no choice but to see to
it that the mandate is obeyed. 27 Moreover, as correctly posited by the
petitioner, the use of the word "shall" connotes a mandatory order. Its use in a
statute denotes an imperative obligation and is inconsistent with the idea of
discretion.28
Indeed, the Oversight Committee exercising discretion, even control, over the
distribution and release of a portion of the IRA, the LGSEF, is an anathema to
and subversive of the principle of local autonomy as embodied in the
Constitution. Moreover, it finds no statutory basis at all as the Oversight
Committee was created merely to formulate the rules and regulations for the
efficient and effective implementation of the Local Government Code of 1991 to
ensure "compliance with the principles of local autonomy as defined under the
Constitution."29 In fact, its creation was placed under the title of "Transitory
Provisions," signifying its ad hoc character. According to Senator Aquilino Q.
Pimentel, the principal author and sponsor of the bill that eventually became
Rep. Act No. 7160, the Committee's work was supposed to be done a year from
the approval of the Code, or on October 10, 1992. 30 The Oversight Committee's
authority is undoubtedly limited to the implementation of the Local
Government Code of 1991, not to supplant or subvert the same. Neither can it
exercise control over the IRA, or even a portion thereof, of the LGUs.
That the automatic release of the IRA was precisely intended to guarantee and
promote local autonomy can be gleaned from the discussion below between
Messrs. Jose N. Nolledo and Regalado M. Maambong, then members of the
1986 Constitutional Commission, to wit:
MR. MAAMBONG. Unfortunately, under Section 198 of the Local Government
Code, the existence of subprovinces is still acknowledged by the law, but the
statement of the Gentleman on this point will have to be taken up probably by
the Committee on Legislation. A second point, Mr. Presiding Officer, is that
under Article 2, Section 10 of the 1973 Constitution, we have a provision which
states:
The State shall guarantee and promote the autonomy of local government
units, especially the barrio, to insure their fullest development as self-reliant
communities.
This provision no longer appears in the present configuration; does this mean
that the concept of giving local autonomy to local governments is no longer
adopted as far as this Article is concerned?
MR. NOLLEDO. No. In the report of the Committee on Preamble, National
Territory, and Declaration of Principles, that concept is included and widened
upon the initiative of Commissioner Bennagen.
MR. MAAMBONG. Thank you for that.
With regard to Section 6, sources of revenue, the creation of sources as
provided by previous law was "subject to limitations as may be provided by
law," but now, we are using the term "subject to such guidelines as may be
fixed by law." In Section 7, mention is made about the "unique, distinct and
exclusive charges and contributions," and in Section 8, we talk about
"exclusivity of local taxes and the share in the national wealth." Incidentally, I
was one of the authors of this provision, and I am very thankful. Does this
indicate local autonomy, or was the wording of the law changed to give more
autonomy to the local government units?31
MR. NOLLEDO. Yes. In effect, those words indicate also "decentralization"
because local political units can collect taxes, fees and charges subject merely
to guidelines, as recommended by the league of governors and city mayors,
with whom I had a dialogue for almost two hours. They told me that limitations
may be questionable in the sense that Congress may limit and in effect deny
the right later on.
MR. MAAMBONG. Also, this provision on "automatic release of national tax
share" points to more local autonomy. Is this the intention?
MR. NOLLEDO. Yes, the Commissioner is perfectly right.32
The concept of local autonomy was explained in Ganzon v. Court of Appeals 33 in
this wise:
As the Constitution itself declares, local autonomy 'means a more responsive
and accountable local government structure instituted through a system of
decentralization.' The Constitution, as we observed, does nothing more than to
break up the monopoly of the national government over the affairs of local
governments and as put by political adherents, to "liberate the local
governments from the imperialism of Manila." Autonomy, however, is not meant
to end the relation of partnership and interdependence between the central
administration and local government units, or otherwise, to usher in a regime
of federalism. The Charter has not taken such a radical step. Local
governments, under the Constitution, are subject to regulation, however
limited, and for no other purpose than precisely, albeit paradoxically, to
enhance self-government.
As we observed in one case, decentralization means devolution of national
administration – but not power – to the local levels. Thus:
Now, autonomy is either decentralization of administration or decentralization
of power. There is decentralization of administration when the central
government delegates administrative powers to political subdivisions in order
to broaden the base of government power and in the process to make local
governments 'more responsive and accountable' and 'ensure their fullest
development as self-reliant communities and make them more effective
partners in the pursuit of national development and social progress.' At the
same time, it relieves the central government of the burden of managing local
affairs and enables it to concentrate on national concerns. The President
exercises 'general supervision' over them, but only to 'ensure that local affairs
are administered according to law.' He has no control over their acts in the
sense that he can substitute their judgments with his own.
Decentralization of power, on the other hand, involves an abdication of political
power in the [sic] favor of local governments [sic] units declared to be
autonomous. In that case, the autonomous government is free to chart its own
destiny and shape its future with minimum intervention from central
authorities. According to a constitutional author, decentralization of power
amounts to 'self-immolation,' since in that event, the autonomous government
becomes accountable not to the central authorities but to its constituency. 34
Local autonomy includes both administrative and fiscal autonomy. The fairly
recent case of Pimentel v. Aguirre35 is particularly instructive. The Court
declared therein that local fiscal autonomy includes the power of the LGUs to,
inter alia, allocate their resources in accordance with their own priorities:
Under existing law, local government units, in addition to having administrative
autonomy in the exercise of their functions, enjoy fiscal autonomy as well.
Fiscal autonomy means that local governments have the power to create their
own sources of revenue in addition to their equitable share in the national
taxes released by the national government, as well as the power to allocate
their resources in accordance with their own priorities. It extends to the
preparation of their budgets, and local officials in turn have to work within the
constraints thereof. They are not formulated at the national level and imposed
on local governments, whether they are relevant to local needs and resources
or not ...36
Further, a basic feature of local fiscal autonomy is the constitutionally
mandated automatic release of the shares of LGUs in the national internal
revenue.37
Following this ratiocination, the Court in Pimentel struck down as
unconstitutional Section 4 of Administrative Order (A.O.) No. 372 which
ordered the withholding, effective January 1, 1998, of ten percent of the LGUs'
IRA "pending the assessment and evaluation by the Development Budget
Coordinating Committee of the emerging fiscal situation."
In like manner, the assailed provisos in the GAAs of 1999, 2000 and 2001, and
the OCD resolutions constitute a "withholding" of a portion of the IRA. They
put on hold the distribution and release of the five billion pesos LGSEF and
subject the same to the implementing rules and regulations, including the
guidelines and mechanisms prescribed by the Oversight Committee from time
to time. Like Section 4 of A.O. 372, the assailed provisos in the GAAs of 1999,
2000 and 2001 and the OCD resolutions effectively encroach on the fiscal
autonomy enjoyed by the LGUs and must be struck down. They cannot,
therefore, be upheld.
The assailed provisos in the GAAs of 1999, 2000
and 2001 and the OCD resolutions cannot amend
Section 285 of the Local Government Code of 1991
Section 28438 of the Local Government Code provides that, beginning the third
year of its effectivity, the LGUs' share in the national internal revenue taxes
shall be 40%. This percentage is fixed and may not be reduced except "in the
event the national government incurs an unmanageable public sector deficit"
and only upon compliance with stringent requirements set forth in the same
section:
Sec. 284. ...
Provided, That in the event that the national government incurs an
unmanageable public sector deficit, the President of the Philippines is hereby
authorized, upon recommendation of Secretary of Finance, Secretary of
Interior and Local Government and Secretary of Budget and Management, and
subject to consultation with the presiding officers of both Houses of Congress
and the presidents of the liga, to make the necessary adjustments in the
internal revenue allotment of local government units but in no case shall the
allotment be less than thirty percent (30%) of the collection of the national
internal revenue taxes of the third fiscal year preceding the current fiscal year;
Provided, further That in the first year of the effectivity of this Code, the local
government units shall, in addition to the thirty percent (30%) internal revenue
allotment which shall include the cost of devolved functions for essential public
services, be entitled to receive the amount equivalent to the cost of devolved
personnel services.
Thus, from the above provision, the only possible exception to the mandatory
automatic release of the LGUs' IRA is if the national internal revenue
collections for the current fiscal year is less than 40 percent of the collections
of the preceding third fiscal year, in which case what should be automatically
released shall be a proportionate amount of the collections for the current
fiscal year. The adjustment may even be made on a quarterly basis depending
on the actual collections of national internal revenue taxes for the quarter of
the current fiscal year. In the instant case, however, there is no allegation that
the national internal revenue tax collections for the fiscal years 1999, 2000 and
2001 have fallen compared to the preceding three fiscal years.
Section 285 then specifies how the IRA shall be allocated among the LGUs:
Sec. 285. Allocation to Local Government Units. – The share of local
government units in the internal revenue allotment shall be allocated in the
following manner:
(a) Provinces – Twenty-three (23%)
(b) Cities – Twenty-three percent (23%);
(c) Municipalities – Thirty-four (34%); and
(d) Barangays – Twenty percent (20%).
However, this percentage sharing is not followed with respect to the five billion
pesos LGSEF as the assailed OCD resolutions, implementing the assailed
provisos in the GAAs of 1999, 2000 and 2001, provided for a different sharing
scheme. For example, for 1999, ₱2 billion of the LGSEF was allocated as
follows: Provinces – 40%; Cities – 20%; Municipalities – 40%.39 For 2000, ₱3.5
billion of the LGSEF was allocated in this manner: Provinces – 26%; Cities –
23%; Municipalities – 35%; Barangays – 26%.40 For 2001, ₱3 billion of the
LGSEF was allocated, thus: Provinces – 25%; Cities – 25%; Municipalities –
35%; Barangays – 15%.41
The respondents argue that this modification is allowed since the Constitution
does not specify that the "just share" of the LGUs shall only be determined by
the Local Government Code of 1991. That it is within the power of Congress to
enact other laws, including the GAAs, to increase or decrease the "just share"
of the LGUs. This contention is untenable. The Local Government Code of 1991
is a substantive law. And while it is conceded that Congress may amend any of
the provisions therein, it may not do so through appropriations laws or GAAs.
Any amendment to the Local Government Code of 1991 should be done in a
separate law, not in the appropriations law, because Congress cannot include in
a general appropriation bill matters that should be more properly enacted in a
separate legislation.42
A general appropriations bill is a special type of legislation, whose content is
limited to specified sums of money dedicated to a specific purpose or a
separate fiscal unit.43 Any provision therein which is intended to amend
another law is considered an "inappropriate provision." The category of
"inappropriate provisions" includes unconstitutional provisions and provisions
which are intended to amend other laws, because clearly these kinds of laws
have no place in an appropriations bill.44
Increasing or decreasing the IRA of the LGUs or modifying their percentage
sharing therein, which are fixed in the Local Government Code of 1991, are
matters of general and substantive law. To permit Congress to undertake these
amendments through the GAAs, as the respondents contend, would be to give
Congress the unbridled authority to unduly infringe the fiscal autonomy of the
LGUs, and thus put the same in jeopardy every year. This, the Court cannot
sanction.
It is relevant to point out at this juncture that, unlike those of 1999, 2000 and
2001, the GAAs of 2002 and 2003 do not contain provisos similar to the herein
assailed provisos. In other words, the GAAs of 2002 and 2003 have not
earmarked any amount of the IRA for the LGSEF. Congress had perhaps seen
fit to discontinue the practice as it recognizes its infirmity. Nonetheless, as
earlier mentioned, this Court has deemed it necessary to make a definitive
ruling on the matter in order to prevent its recurrence in future appropriations
laws and that the principles enunciated herein would serve to guide the bench,
bar and public.
Conclusion
In closing, it is well to note that the principle of local autonomy, while
concededly expounded in greater detail in the present Constitution, dates back
to the turn of the century when President William McKinley, in his Instructions
to the Second Philippine Commission dated April 7, 1900, ordered the new
Government "to devote their attention in the first instance to the establishment
of municipal governments in which the natives of the Islands, both in the cities
and in the rural communities, shall be afforded the opportunity to manage their
own affairs to the fullest extent of which they are capable, and subject to the
least degree of supervision and control in which a careful study of their
capacities and observation of the workings of native control show to be
consistent with the maintenance of law, order and loyalty." 45 While the 1935
Constitution had no specific article on local autonomy, nonetheless, it limited
the executive power over local governments to "general supervision ... as may
be provided by law."46 Subsequently, the 1973 Constitution explicitly stated that
"[t]he State shall guarantee and promote the autonomy of local government
units, especially the barangay to ensure their fullest development as self-reliant
communities."47 An entire article on Local Government was incorporated
therein. The present Constitution, as earlier opined, has broadened the
principle of local autonomy. The 14 sections in Article X thereof markedly
increased the powers of the local governments in order to accomplish the goal
of a more meaningful local autonomy.
Indeed, the value of local governments as institutions of democracy is
measured by the degree of autonomy that they enjoy.48 As eloquently put by
M. De Tocqueville, a distinguished French political writer, "[l]ocal assemblies of
citizens constitute the strength of free nations. Township meetings are to
liberty what primary schools are to science; they bring it within the people's
reach; they teach men how to use and enjoy it. A nation may establish a system
of free governments but without the spirit of municipal institutions, it cannot
have the spirit of liberty."49
Our national officials should not only comply with the constitutional provisions
on local autonomy but should also appreciate the spirit and liberty upon which
these provisions are based.50
WHEREFORE, the petition is GRANTED. The assailed provisos in the General
Appropriations Acts of 1999, 2000 and 2001, and the assailed OCD
Resolutions, are declared UNCONSTITUTIONAL.
SO ORDERED.
ROMEO J. CALLEJO, SR.
Associate Justice
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
[ G.R. No. 199802, July 03, 2018 ]
CONGRESSMAN HERMILANDO I. MANDANAS; MAYOR EFREN B.
DIONA; MAYOR ANTONINO A. AURELIO; KAGAWAD MARIO ILAGAN;
BARANGAY CHAIR PERLITO MANALO; BARANGAY CHAIR MEDEL
MEDRANO; BARANGAY KAGAWAD CRIS RAMOS; BARANGAY
KAGAWAD ELISA D. BALBAGO, AND ATTY. JOSE MALVAR VILLEGAS,
PETITIONERS, V. EXECUTIVE SECRETARY PAQUITO N. OCHOA, JR.;
SECRETARY CESAR PURISIMA, DEPARTMENT OF FINANCE;
SECRETARY FLORENCIO H. ABAD, DEPARTMENT OF BUDGET AND
MANAGEMENT; COMMISSIONER KIM JACINTO-HENARES, BUREAU
OF INTERNAL REVENUE; AND NATIONAL TREASURER ROBERTO TAN,
BUREAU OF THE TREASURY, RESPONDENTS.

[G.R. No. 208488, July 3, 2018]

HONORABLE ENRIQUE T. GARCIA, JR., IN HIS PERSONAL AND

OFFICIAL CAPACITY AS REPRESENTATIVE OF THE 2ND DISTRICT OF
THE PROVINCE OF BATAAN, PETITIONER, V. HONORABLE [PAQUITO]
N. OCHOA, JR., EXECUTIVE SECRETARY; HONORABLE CESAR V.
PURISIMA, SECRETARY, DEPARTMENT OF FINANCE; HONORABLE
FLORENCIO H. ABAD, SECRETARY, DEPARTMENT OF BUDGET AND
MANAGEMENT; HONORABLE KIM S. JACINTO-HENARES,
COMMISSIONER, BUREAU OF INTERNAL REVENUE; AND
HONORABLE ROZZANO RUFINO B. BIAZON, COMMISSIONER,
BUREAU OF CUSTOMS, RESPONDENTS.
 DECISION
BERSAMIN, J.:
The petitioners hereby challenge the manner in which the just share in the
national taxes of the local government units (LGUs) has been computed.
Antecedents
One of the key features of the 1987 Constitution is its push towards
decentralization of government and local autonomy. Local autonomy has two
facets, the administrative and the fiscal. Fiscal autonomy means that local
governments have the power to create their own sources of revenue in addition
to their equitable share in the national taxes released by the National
Government, as well as the power to allocate their resources in accordance
with their own priorities.[1] Such autonomy is as indispensable to the viability of
the policy of decentralization as the other.
Implementing the constitutional mandate for decentralization and local
autonomy, Congress enacted Republic Act No. 7160, otherwise known as
the Local Government Code (LGC), in order to guarantee the fiscal autonomy
of the LGUs by specifically providing that:
SECTION 284. Allotment of Internal Revenue Taxes. — Local government units
shall have a share in the national internal revenue taxes based on the
collection of the third fiscal year preceding the current fiscal year as follows:
(a) On the first year of the effectivity of this Code, thirty percent (30%);
(b) On the second year, thirty-five percent (35%); and
(c) On the third year and thereafter, forty percent (40%).
Provided, That in the event that the National Government incurs an
unmanageable public sector deficit, the President of the Philippines is hereby
authorized, upon the recommendation of Secretary of Finance, Secretary of
Interior and Local Government, and Secretary of Budget and Management, and
subject to consultation with the presiding officers of both Houses of Congress
and the presidents of the "liga", to make the necessary adjustments in the
internal revenue allotment of local government units but in no case shall the
allotment be less than thirty percent (30%) of the collection of national internal
revenue taxes of the third fiscal year preceding the current fiscal year:
Provided, further, That in the first year of the effectivity of this Code, the local
government units shall, in addition to the thirty percent (30%) internal revenue
allotment which shall include the cost of devolved functions for essential public
services, be entitled to receive the amount equivalent to the cost of devolved
personal services.
The share of the LGUs, heretofore known as the Internal Revenue Allotment
(IRA), has been regularly released to the LGUs. According to the implementing
rules and regulations of the LGC, the IRA is determined on the basis of the
actual collections of the National Internal Revenue Taxes (NIRTs) as certified
by the Bureau of Internal Revenue (BIR).[2]
G.R. No. 199802 (Mandanas, et al.) is a special civil action for certiorari,
prohibition and mandamus assailing the manner the General Appropriations
Act (GAA) for FY 2012 computed the IRA for the LGUs.
Mandanas, et al. allege herein that certain collections of NIRTs by the Bureau
of Customs (BOC) – specifically: excise taxes, value added taxes (VATs) and
documentary stamp taxes (DSTs) – have not been included in the base amounts
for the computation of the IRA; that such taxes, albeit collected by the BOC,
should form part of the base from which the IRA should be computed because
they constituted NIRTs; that, consequently, the release of the additional
amount of P60,750,000,000.00 to the LGUs as their IRA for FY 2012 should be
ordered; and that for the same reason the LGUs should also be released their
unpaid IRA for FY 1992 to FY 2011, inclusive, totaling P438,103,906,675.73.
In G.R. No. 208488, Congressman Enrique Garcia, Jr., the lone petitioner, seeks
the writ of mandamus to compel the respondents thereat to compute the just
share of the LGUs on the basis of all national taxes. His petition insists on a
literal reading of Section 6, Article X of the 1987 Constitution. He avers that
the insertion by Congress of the words internal revenue in the phrase national
taxes found in Section 284 of the LGC caused the diminution of the base for
determining the just share of the LGUs, and should be declared
unconstitutional; that, moreover, the exclusion of certain taxes and accounts
pursuant to or in accordance with special laws was similarly constitutionally
untenable; that the VATs and excise taxes collected by the BOC should be
included in the computation of the IRA; and that the respondents should
compute the IRA on the basis of all national tax collections, and thereafter
distribute any shortfall to the LGUs.
It is noted that named as common respondents were the then incumbent
Executive Secretary, Secretary of Finance, the Secretary of the Department of
Budget and Management (DBM), and the Commissioner of Internal Revenue. In
addition, Mandanas, et al. impleaded the National Treasurer, while Garcia
added the Commissioner of Customs.
The cases were consolidated on October 22, 2013.[3] In the meanwhile,
Congressman Garcia, Jr. passed away. Jose Enrique Garcia III, who was
subsequently elected to the same congressional post, was substituted for
Congressman Garcia, Jr. as the petitioner in G.R. No. 208488 under the
resolution promulgated on August 23, 2016.[4]
In response to the petitions, the several respondents, represented by the Office
of the Solicitor General (OSG), urged the dismissal of the petitions upon
procedural and substantive considerations.
Anent the procedural considerations, the OSG argues that the petitions are
procedurally defective because, firstly, mandamus does not lie in order to
achieve the reliefs sought because Congress may not be compelled to
appropriate the sums allegedly illegally withheld for to do so will violate the
doctrine of separation of powers; and, secondly, mandamus does not also lie to
compel the DBM to release the amounts to the LGUs because such
disbursements will be contrary to the purposes specified in the GAA; that
Garcia has no clear legal right to sustain his suit for mandamus; that the filing
of Garcia's suit violates the doctrine of hierarchy of courts; and that Garcia's
petition seeks declaratory relief but the Court cannot grant such relief in the
exercise of its original jurisdiction.
On the substantive considerations, the OSG avers that Article 284 of the LGC is
consistent with the mandate of Section 6, Article X of the 1987 Constitution to
the effect that the LGUs shall have a just share in the national taxes; that the
determination of the just share is within the discretion of Congress; that the
limitation under the LGC of the basis for the just share in the NIRTs was within
the powers granted to Congress by the 1987 Constitution; that the LGUs have
been receiving their just share in the national taxes based on the correct base
amount; that Congress has the authority to exclude certain taxes from the base
amount in computing the IRA; that there is a distinction between the VATs,
excise taxes and DSTs collected by the BIR, on one hand, and the VATs, excise
taxes and DSTs collected by the BOC, on the other, thereby warranting their
different treatment; and that Development Budget Coordination Committee
(DBCC) Resolution No. 2003-02 dated September 4, 2003 has limited the base
amount for the computation of the IRA to the "cash collections based on the
BIR data as reconciled with the Bureau of Treasury;" and that the collection of
such national taxes by the BOC should be excluded.
Issues
The issues for resolution are limited to the following, namely:
I.
Whether or not mandamus is the proper vehicle to assail the constitutionality
of the relevant provisions of the GAA and the LGC;
II.
Whether or not Section 284 of the LGC is unconstitutional for being repugnant
to Section 6, Article X of the 1987 Constitution;
III.
Whether or not the existing shares given to the LGUs by virtue of the GAA is
consistent with the constitutional mandate to give LGUs a "just share" to
national taxes following Article X, Section 6 of the 1987 Constitution;
IV.
Whether or not the petitioners are entitled to the reliefs prayed for.
Simply stated, the petitioners raise the novel question of whether or not the
exclusion of certain national taxes from the base amount for the computation of
the just share of the LGUs in the national taxes is constitutional.
Ruling of the Court
The petitions are partly meritorious.
I
Mandamus is an improper remedy
Mandanas, et al. seek the writs of certiorari, prohibition and mandamus, while
Garcia prays for the writ of mandamus. Both groups of petitioners impugn the
validity of Section 284 of the LGC.
The remedy of mandamus is defined in Section 3, Rule 65 of the Rules of Court,
which provides:
Section 3. Petition for mandamus. — When any tribunal, corporation, board,
officer or person unlawfully neglects the performance of an act which the law
specifically enjoins as a duty resulting from an office, trust, or station, or
unlawfully excludes another from the use and enjoyment of a right or office to
which such other is entitled, and there is no other plain, speedy and adequate
remedy in the ordinary course of law, the person aggrieved thereby may file a
verified petition in the proper court, alleging the facts with certainty and
praying that judgment be rendered commanding the respondent, immediately
or at some other time to be specified by the court, to do the act required to be
done to protect the rights of the petitioner, and to pay the damages sustained
by the petitioner by reason of the wrongful acts of the respondent.
The petition shall also contain a sworn certification of non-forum shopping as
provided in the third paragraph of section 3, Rule 46.
For the writ of mandamus to issue, the petitioner must show that the act
sought to be performed or compelled is ministerial on the part of the
respondent. An act is ministerial when it does not require the exercise of
judgment and the act is performed pursuant to a legal mandate. The burden of
proof is on the mandamus petitioner to show that he is entitled to the
performance of a legal right, and that the respondent has a corresponding duty
to perform the act. The writ of mandamus may not issue to compel an official to
do anything that is not his duty to do, or that is his duty not to do, or to obtain
for the petitioner anything to which he is not entitled by law. [5]
Considering that its determination of what constitutes the just share of the
LGUs in the national taxes under the 1987 Constitution is an entirely
discretionary power, Congress cannot be compelled by writ of mandamus to act
either way. The discretion of Congress thereon, being exclusive, is not subject
to external direction; otherwise, the delicate balance underlying our system of
government may be unduly disturbed. This conclusion should at once then
demand the dismissal of the Garcia petition in G.R. No. 208488, but we do not
dismiss it. Garcia has attributed the non-release of some portions of their IRA
balances to an alleged congressional indiscretion – the diminution of the base
amount for computing the LGU's just share. He has asserted that Congress
altered the constitutional base not only by limiting the base to the NIRTs
instead of including therein all national taxes, but also by excluding some
national taxes and revenues that only benefitted a few LGUs to the detriment
of the rest of the LGUs.
Garcia's petition, while dubbed as a petition for mandamus, is also a petition
for certiorari because it alleges that Congress thereby committed grave abuse
of discretion amounting to lack or excess of jurisdiction. It is worth reminding
that the actual nature of every action is determined by the allegations in the
body of the pleading or the complaint itself, not by the nomenclature used to
designate the same.[6] Moreover, neither should the prayer for relief be
controlling; hence, the courts may still grant the proper relief as the facts
alleged in the pleadings and the evidence introduced may warrant even
without a prayer for specific remedy.[7]
In this regard, Garcia's allegation of the unconstitutionality of the insertion by
Congress of the words internal revenue in the phrase national taxes justifies
treating his petition as one for certiorari. It becomes our duty, then, to assume
jurisdiction over his petition. In Araullo v. Aquino III,[8] the Court has
emphatically opined that the Court's certiorari jurisdiction under the expanded
judicial power as stated in the second paragraph of Section 1, Article VIII of
the Constitution can be asserted:
xxxx to set right and undo any act of grave abuse of discretion amounting to
lack or excess of jurisdiction by any branch or instrumentality of the
Government, the Court is not at all precluded from making the inquiry
provided the challenge was properly brought by interested or affected parties.
The Court has been thereby entrusted expressly or by necessary implication
with both the duty and the obligation of determining, in appropriate cases, the
validity of any assailed legislative or executive action. This entrustment is
consistent with the republican system of checks and balances.[9]
Further, observing that one of the reliefs being sought by Garcia is identical to
the main relief sought by Mandanas, et al., the Court should rightly dwell on
the substantive arguments posited by Garcia to the extent that they are
relevant to the ultimate resolution of these consolidated suits.
II.
Municipal corporations and
their relationship with Congress
The correct resolution and fair disposition of the issues interposed for our
consideration require a review of the basic principles underlying our system of
local governments, and of the extent of the autonomy granted to the LGUs by
the 1987 Constitution.
Municipal corporations are now commonly known as local governments. They
are the bodies politic established by law partly as agencies of the State to
assist in the civil governance of the country. Their chief purpose has been to
regulate and administer the local and internal affairs of the cities,
municipalities or districts. They are legal institutions formed by charters from
the sovereign power, whereby the populations within communities living within
prescribed areas have formed themselves into bodies politic and corporate, and
assumed their corporate names with the right of continuous succession and for
the purposes and with the authority of subordinate self-government and
improvement and the local administration of the affairs of the State. [10]
Municipal corporations, being the mere creatures of the State, are subject to
the will of Congress, their creator. Their continued existence and the grant of
their powers are dependent on the discretion of Congress. On this matter,
Judge John F. Dillon of the State of Iowa in the United States of America
enunciated in Merriam v. Moody's Executors[11] the rule of statutory
construction that came to be oft-mentioned as Dillon's Rule, to wit:
[A] municipal corporation possesses and can exercise the following powers and
no others: First, those granted in express words; second, those necessarily
implied or necessarily incident to the powers expressly granted; third, those
absolutely essential to the declared objects and purposes of the corporation-not
simply convenient but indispensible; fourth, any fair doubt as to the existence
of a power is resolved by the courts against the corporation-against the
existence of the powers.[12]
The formulation of Dillon's Rule has since undergone slight modifications.
Judge Dillon himself introduced some of the modifications through his post-
Merriam writings with the objective of alleviating the original formulation's
harshness. The word fairly was added to the second proviso; the word
absolutely was deleted from the third proviso; and the
words reasonable and substantial were added to the fourth proviso, thusly:
x x x second, those necessarily or fairly implied in or incident to the powers
expressly granted; third, those essential to x x x. Any fair, reasonable, doubt. [13]
The modified Dillon's Rule has been followed in this jurisdiction, and has
remained despite both the 1973 Constitution and the 1987 Constitution
mandating autonomy for local governments. This has been made evident in
several rulings of the Court, one of which was that handed down in Magtajas v.
Pryce Properties Corporation, Inc.:[14]
In light of all the above considerations, we see no way of arriving at the
conclusion urged on us by the petitioners that the ordinances in question are
valid. On the contrary, we find that the ordinances violate P.D. 1869, which has
the character and force of a statute, as well as the public policy expressed in
the decree allowing the playing of certain games of chance despite the
prohibition of gambling in general.
The rationale of the requirement that the ordinances should not contravene a
statute is obvious. Municipal governments are only agents of the national
government. Local councils exercise only delegated legislative powers
conferred on them by Congress as the national lawmaking body. The
delegate cannot be superior to the principal or exercise powers higher
than those of the latter. It is a heresy to suggest that the local
government units can undo the acts of Congress, from which they have
derived their power in the first place, and negate by mere ordinance the
mandate of the statute.
Municipal corporations owe their origin to, and derive their powers and
rights wholly from the legislature. It breathes into them the breath of
life, without which they cannot exist. As it creates, so it may destroy. As
it may destroy, it may abridge and control. Unless there is some
constitutional limitation on the right, the legislature might, by a single
act, and if we can suppose it capable of so great a folly and so great a
wrong, sweep from existence all of the municipal corporations in the
State, and the corporation could not prevent it. We know of no
limitation on the right so far as to the corporation themselves are
concerned. They are, so to phrase it, the mere tenants at will of the
legislature.
This basic relationship between the national legislature and the local
government units has not been enfeebled by the new provisions in the
Constitution strengthening the policy of local autonomy. Without
meaning to detract from that policy, we here confirm that Congress
retains control of the local government units although in significantly
reduced degree now than under our previous Constitutions. The power
to create still includes the power to destroy. The power to grant still
includes the power to withhold or recall. True, there are certain notable
innovations in the Constitution, like the direct conferment on the local
government units of the power to tax, which cannot now be withdrawn
by mere statute. By and large, however, the national legislature is still
the principal of the local government units, which cannot defy its will
or modify or violate it. [Bold underscoring supplied for emphasis]
Also, in the earlier ruling in Ganzon v. Court of Appeals,[15] the Court has
pointed out that the 1987 Constitution, in mandating autonomy for the LGUs,
did not intend to deprive Congress of its authority and prerogatives over the
LGUs.
Nonetheless, the LGC has tempered the application of Dillon's Rule in the
Philippines by providing a norm of interpretation in favor of the LGUs in its
Section 5(a), to wit:
xxxx
(a) Any provision on a power of a local government unit shall be liberally
interpreted in its favor, and in case of doubt, any question thereon shall be
resolved in favor of devolution of powers and of the local government
unit. Any fair and reasonable doubt as to the existence of the power
shall be interpreted in favor of the local government unit
concerned; [Bold underscoring supplied for emphasis]
xxxx
III.
The extent of local autonomy in the Philippines
Regardless, there remains no question that Congress possesses and wields
plenary power to control and direct the destiny of the LGUs, subject only to the
Constitution itself, for Congress, just like any branch of the Government,
should bow down to the majesty of the Constitution, which is always supreme.
The 1987 Constitution limits Congress' control over the LGUs by ordaining in
Section 25 of its Article II that: "The State shall ensure the autonomy of local
governments." The autonomy of the LGUs as thereby ensured does not
contemplate the fragmentation of the Philippines into a collection of mini-
states,[16] or the creation of imperium in imperio.[17] The grant of autonomy
simply means that Congress will allow the LGUs to perform certain functions
and exercise certain powers in order not for them to be overly dependent on
the National Government subject to the limitations that the 1987 Constitution
or Congress may impose.[18] Local autonomy recognizes the wholeness of the
Philippine society in its ethnolinguistic, cultural, and even religious diversities.
[19]

The constitutional mandate to ensure local autonomy refers to decentralization.

[20]
In its broad or general sense, decentralization has two forms in the
Philippine setting, namely: the decentralization of power and the
decentralization of administration. The decentralization of power involves the
abdication of political power in favor of the autonomous LGUs as to grant them
the freedom to chart their own destinies and to shape their futures with
minimum intervention from the central government. This amounts to self-
immolation because the autonomous LGUs thereby become accountable not to
the central authorities but to their constituencies. On the other hand, the
decentralization of administration occurs when the central government
delegates administrative powers to the LGUs as the means of broadening the
base of governmental powers and of making the LGUs more responsive and
accountable in the process, and thereby ensure their fullest development as
self-reliant communities and more effective partners in the pursuit of the goals
of national development and social progress. This form of decentralization
further relieves the central government of the burden of managing local affairs
so that it can concentrate on national concerns.[21]
Two groups of LGUs enjoy decentralization in distinct ways. The
decentralization of power has been given to the regional units (namely, the
Autonomous Region for Muslim Mindanao [ARMM] and the constitutionally-
mandated Cordillera Autonomous Region [CAR]). The other group of LGUs
(i.e., provinces, cities, municipalities and barangays) enjoy the decentralization
of administration.[22] The distinction can be reasonably understood. The
provinces, cities, municipalities and barangays are given decentralized
administration to make governance at the local levels more directly responsive
and effective. In turn, the economic, political and social developments of the
smaller political units are expected to propel social and economic growth and
development.[23] In contrast, the regional autonomy of the ARMM and the CAR
aims to permit determinate groups with common traditions and shared social-
cultural characteristics to freely develop their ways of life and heritage, to
exercise their rights, and to be in charge of their own affairs through the
establishment of a special governance regime for certain member communities
who choose their own authorities from within themselves, and exercise the
jurisdictional authority legally accorded to them to decide their internal
community affairs.[24]
It is to be underscored, however, that the decentralization of power in favor of
the regional units is not unlimited but involves only the powers enumerated by
Section 20, Article X of the 1987 Constitution and by the acts of Congress. For,
with various powers being devolved to the regional units, the grant and
exercise of such powers should always be consistent with and limited by the
1987 Constitution and the national laws. [25] In other words, the powers are
guardedly, not absolutely, abdicated by the National Government.
Illustrative of the limitation is what transpired in Sema v. Commission on
Elections,[26] where the Court struck down Section 19, Article VI of Republic
Act No. 9054 (An Act to Strengthen and Expand the Organic Act for the
Autonomous Region in Muslim Mindanao, Amending for the Purpose Republic
Act No. 6734, entitled "An Act Providing for the Autonomous Region in Muslim
Mindanao, " as Amended) insofar as the provision granted to the ARMM the
power to create provinces and cities, and consequently declared as void
Muslim Mindanao Autonomy Act No. 201 creating the Province of Shariff
Kabunsuan for being contrary to Section 5, Article VI and Section 20, Article X
of the 1987 Constitution, as well as Section 3 of the Ordinance appended to the
1987 Constitution. The Court clarified therein that only Congress could create
provinces and cities. This was because the creation of provinces and cities
necessarily entailed the creation of legislative districts, a power that only
Congress could exercise pursuant to Section 5, Article VI of the 1987
Constitution and Section 3 of the Ordinance appended to the Constitution; as
such, the ARMM would be thereby usurping the power of Congress to create
legislative districts and national offices.[27]
The 1987 Constitution has surely encouraged decentralization by mandating
that a system of decentralization be instituted through the LGC in order to
enable a more responsive and accountable local government structure. [28] It has
also delegated the power to tax to the LGUs by authorizing them to create their
own sources of income that would make them self-reliant. [29] It further ensures
that each and every LGU will have a just share in national taxes as well in the
development of the national wealth.[30]
The LGC has further delineated in its Section 3 the different operative
principles of decentralization to be adhered to consistently with the
constitutional policy on local autonomy, viz.:
Sec. 3. Operative Principles of Decentralization –
The formulation and implementation of policies and measures on local
autonomy shall be guided by the following operative principles:
(a) There shall be an effective allocation among the different local government
units of their respective powers, functions, responsibilities, and resources;
(b) There shall be established in every local government unit an accountable,
efficient, and dynamic organizational structure and operating mechanism that
will meet the priority needs and service requirements of its communities;
(c) Subject to civil service law, rules and regulations, local officials and
employees paid wholly or mainly from local funds shall be appointed or
removed, according to merit and fitness, by the appropriate appointing
authority;
(d) The vesting of duty, responsibility, and accountability in local government
units shall be accompanied with provision for reasonably adequate resources
to discharge their powers and effectively carry out their functions: hence, they
shall have the power to create and broaden their own sources of revenue and
the right to a just share in national taxes and an equitable share in the
proceeds of the utilization and development of the national wealth within their
respective areas;
(e) Provinces with respect to component cities and municipalities, and cities
and municipalities with respect to component barangays, shall ensure that the
acts of their component units are within the scope of their prescribed powers
and functions;
(f) Local government units may group themselves, consolidate or coordinate
their efforts, services, and resources commonly beneficial to them;
(g) The capabilities of local government units, especially the municipalities and
barangays, shall be enhanced by providing them with opportunities to
participate actively in the implementation of national programs and projects;
(h) There shall be a continuing mechanism to enhance local autonomy not only
by legislative enabling acts but also by administrative and organizational
reforms;
(i) Local government units shall share with the national government the
responsibility in the management and maintenance of ecological balance within
their territorial jurisdiction, subject to the provisions of this Code and national
policies;
(j) Effective mechanisms for ensuring the accountability of local government
units to their respective constituents shall be strengthened in order to upgrade
continually the quality of local leadership;
(k) The realization of local autonomy shall be facilitated through improved
coordination of national government policies and programs an extension of
adequate technical and material assistance to less developed and deserving
local government units;
(l) The participation of the private sector in local governance, particularly in
the delivery of basic services, shall be encouraged to ensure the viability of
local autonomy as an alternative strategy for sustainable development; and
(m) The national government shall ensure that decentralization contributes to
the continuing improvement of the performance of local government units and
the quality of community life.
Based on the foregoing delineation, decentralization can be considered as the
decision by the central government to empower its subordinates, whether
geographically or functionally constituted, to exercise authority in certain
areas. It involves decision-making by subnational units, and is typically a
delegated power, whereby a larger government chooses to delegate authority
to more local governments.[31] It is also a process, being the set of policies,
electoral or constitutional reforms that transfer responsibilities, resources or
authority from the higher to the lower levels of government. [32] It is often
viewed as a shift of authority towards local governments and away from the
central government, with total government authority over society and economy
imagined as fixed.[33]
As a system of transferring authority and power from the National Government
to the LGUs, decentralization in the Philippines may be categorized into four,
namely: (1) political decentralization or devolution; (2) administrative
decentralization or deconcentration; (3) fiscal decentralization; and (4) policy
or decision-making decentralization.
Political decentralization or devolution occurs when there is a transfer of
powers, responsibilities, and resources from the central government to the
LGUs for the performance of certain functions. It is a more liberal form of
decentralization because there is an actual transfer of powers and
responsibilities. It aims to grant greater autonomy to the LGUs in cognizance
of their right to self-government, to make them self-reliant, and to improve
their administrative and technical capabilities. [34] It is an act by which the
National Government confers power and authority upon the various LGUs to
perform specific functions and responsibilities. [35] It encompasses reforms to
open sub-national representation and policies to "devolve political authority or
electoral capacities to subnational actors." [36] Section 16 to Section 19 of the
LGC characterize political decentralization in the LGC as different LGUs
empowered to address the different needs of their constituents. In contrast,
devolution in favor of the regional units is more expansive because they are
given the authority to regulate a wider array of subjects, including personal,
family and property relations.
Administrative decentralization or deconcentration involves the transfer of
functions or the delegation of authority and responsibility from the national
office to the regional and local offices.[37] Consistent with this concept, the LGC
has created the Local School Boards,[38] the Local Health Boards[39] and the
Local Development Councils,[40] and has transferred some of the authority from
the agencies of the National Government, like the Department of Education
and the Department of Health, to such bodies to better cope up with the needs
of particular localities.
Fiscal decentralization means that the LGUs have the power to create their
own sources of revenue in addition to their just share in the national taxes
released by the National Government. It includes the power to allocate their
resources in accordance with their own priorities. It thus extends to the
preparation of their budgets, so that the local officials have to work within the
constraints of their budgets. The budgets are not formulated at the national
level and imposed on local governments, without regard as to whether or not
they are relevant to local needs and resources. Hence, the necessity of a
balancing of viewpoints and the harmonization of proposals from both local and
national officials, who in any case are partners in the attainment of national
goals, is recognized and addressed.[41]
Fiscal decentralization emanates from a specific constitutional mandate that is
expressed in several provisions of Article X (Local Government) of the 1987
Constitution, specifically: Section 5;[42] Section 6;[43] and Section 7.[44]
The constitutional authority extended to each and every LGU to create its own
sources of income and revenue has been formalized from Section 128 to
Section 133 of the LGC. To implement the LGUs' entitlement to the just share
in the national taxes, Congress has enacted Section 284 to Section 288 of the
LGC. Congress has further enacted Section 289 to Section 294 of the LGC to
define the share of the LGUs in the national wealth. Indeed, the requirement
for the automatic release to the LGUs of their just share in the national taxes is
but the consequence of the constitutional mandate for fiscal decentralization.
[45]

For sure, fiscal decentralization does not signify the absolute freedom of the
LGUs to create their own sources of revenue and to spend their revenues
unrestrictedly or upon their individual whims and caprices. Congress has
subjected the LGUs' power to tax to the guidelines set in Section 130 of the
LGC and to the limitations stated in Section 133 of the LGC. The concept of
local fiscal autonomy does not exclude any manner of intervention by the
National Government in the form of supervision if only to ensure that the local
programs, fiscal and otherwise, are consistent with the national goals. [46]
Lastly, policy- or decision-making decentralization exists if at least one sub-
national tier of government has exclusive authority to make decisions on at
least one policy issue.[47]
In fine, certain limitations are and can be imposed by Congress in all the forms
of decentralization, for local autonomy, whether as to power or as to
administration, is not absolute. The LGUs remain to be the tenants of the will
of Congress subject to the guarantees that the Constitution itself imposes.
IV.
Section 284 of the LGC deviates from
the plain language of Section 6
of Article X of the 1987 Constitution
Section 6, Article X the 1987 Constitution textually commands the allocation to
the LGUs of a just share in the national taxes, viz.:
Section 6. Local government units shall have a just share, as determined by
law, in the national taxes which shall be automatically released to them.
Section 6, when parsed, embodies three mandates, namely: (1) the LGUs shall
have a just share in the national taxes; (2) the just share shall be determined
by law; and (3) the just share shall be automatically released to the LGUs.[48]
Congress has sought to carry out the second mandate of Section 6 by enacting
Section 284, Title III (Shares of Local Government Units in the Proceeds of
National Taxes), of the LGC, which is again quoted for ready reference:
Section 284. Allotment of Internal Revenue Taxes. - Local government units
shall have a share in the national internal revenue taxes based on the
collection of the third fiscal year preceding the current fiscal year as follows:
(a) On the first year of the effectivity of this Code, thirty percent (30%);
(b) On the second year, thirty-five percent (35%); and
(c) On the third year and thereafter, forty percent (40%).
Provided, That in the event that the national government incurs an
unmanageable public sector deficit, the President of the Philippines is hereby
authorized, upon the recommendation of Secretary of Finance, Secretary of
Interior and Local Government and Secretary of Budget and Management, and
subject to consultation with the presiding officers of both Houses of Congress
and the presidents of the "liga", to make the necessary adjustments in the
internal revenue allotment of local government units but in no case shall the
allotment be less than thirty percent (30%) of the collection of national internal
revenue taxes of the third fiscal year preceding the current fiscal year:
Provided, further, That in the first year of the effectivity of this Code, the local
government units shall, in addition to the thirty percent (30%) internal revenue
allotment which shall include the cost of devolved functions for essential public
services, be entitled to receive the amount equivalent to the cost of devolved
personal services.
There is no issue as to what constitutes the LGUs' just share expressed in
percentages of the national taxes (i.e., 30%, 35% and 40% stipulated in
subparagraphs (a), (b), and (c) of Section 284). Yet, Section 6, supra,
mentions national taxes as the source of the just share of the LGUs while
Section 284 ordains that the share of the LGUs be taken from national internal
revenue taxes instead.
Has not Congress thereby infringed the constitutional provision?
Garcia contends that Congress has exceeded its constitutional boundary by
limiting to the NIRTs the base from which to compute the just share of the
LGUs.
We agree with Garcia's contention.
Although the power of Congress to make laws is plenary in nature,
congressional lawmaking remains subject to the limitations stated in the 1987
Constitution.[49] The phrase national internal revenue taxes engrafted in Section
284 is undoubtedly more restrictive than the term national taxes written in
Section 6. As such, Congress has actually departed from the letter of the 1987
Constitution stating that national taxes should be the base from which the just
share of the LGU comes. Such departure is impermissible. Verba legis non est
recedendum (from the words of a statute there should be no departure).
[50]
Equally impermissible is that Congress has also thereby curtailed the
guarantee of fiscal autonomy in favor of the LGUs under the 1987 Constitution.
Taxes are the enforced proportional contributions exacted by the State from
persons and properties pursuant to its sovereignty in order to support the
Government and to defray all the public needs. Every tax has three elements,
namely: (a) it is an enforced proportional contribution from persons and
properties; (b) it is imposed by the State by virtue of its sovereignty; and (c) it
is levied for the support of the Government. [51] Taxes are classified into national
and local. National taxes are those levied by the National Government, while
local taxes are those levied by the LGUs.[52]
What the phrase national internal revenue taxes as used in Section 284
included are all the taxes enumerated in Section 21 of the National Internal
Revenue Code (NIRC), as amended by R.A. No. 8424, viz.:
Section 21. Sources of Revenue. — The following taxes, fees and charges are
deemed to be national internal revenue taxes:
(a) Income tax;
(b) Estate and donor's taxes;
(c) Value-added tax;
(d) Other percentage taxes;
(e) Excise taxes;
(f) Documentary stamp taxes; and
(g) Such other taxes as are or hereafter may be imposed and collected by the
Bureau of Internal Revenue.
In view of the foregoing enumeration of what are the national internal revenue
taxes, Section 284 has effectively deprived the LGUs from deriving their just
share from other national taxes, like the customs duties.
Strictly speaking, customs duties are also taxes because they are exactions
whose proceeds become public funds. According to Garcia v. Executive
Secretary,[53] customs duties is the nomenclature given to taxes imposed on the
importation and exportation of commodities and merchandise to or from a
foreign country. Although customs duties have either or both the generation of
revenue and the regulation of economic or social activity as their moving
purposes, it is often difficult to say which of the two is the principal objective in
a particular instance, for, verily, customs duties, much like internal revenue
taxes, are rarely designed to achieve only one policy objective. [54] We further
note that Section 102(oo) of R.A. No. 10863 (Customs Modernization and Tariff
Act) expressly includes all fees and charges imposed under the Act under the
blanket term of taxes.
It is clear from the foregoing clarification that the exclusion of other national
taxes like customs duties from the base for determining the just share of the
LGUs contravened the express constitutional edict in Section 6, Article X the
1987 Constitution.
Still, the OSG posits that Congress can manipulate, by law, the base of the
allocation of the just share in the national taxes of the LGUs.
The position of the OSG cannot be sustained. Although it has the primary
discretion to determine and fix the just share of the LGUs in the national taxes
(e.g., Section 284 of the LGC), Congress cannot disobey the express mandate
of Section 6, Article X of the 1987 Constitution for the just share of the LGUs to
be derived from the national taxes. The phrase as determined by law in Section
6 follows and qualifies the phrase just share, and cannot be construed as
qualifying the succeeding phrase in the national taxes. The intent of the people
in respect of Section 6 is really that the base for reckoning the just share of the
LGUs should includes all national taxes. To read Section 6 differently as
requiring that the just share of LGUs in the national taxes shall be determined
by law is tantamount to the unauthorized revision of the 1987 Constitution.
V.
Congress can validly exclude taxes
that will constitute the base amount
for the computation of the IRA only if
a Constitutional provision allows such exclusion
Garcia submits that even assuming that the present version of Section 284 of
the LGC is constitutionally valid, the implementation thereof has been
erroneous because Section 284 does not authorize any exclusion or deduction
from the collections of the NIRTs for purposes of the computation of the
allocations to the LGUs. He further submits that the exclusion of certain NIRTs
diminishes the fiscal autonomy granted to the LGUs. He claims that the
following NIRTs have been illegally excluded from the base for determining the
fair share of the LGUs in the IRA, to wit:
(1) NIRTs collected by the cities and provinces and divided exclusively among
the LGUs of the Autonomous Region for Muslim Mindanao (ARMM), the
regional government and the central government, pursuant to Section
15[55] in relation to Section 9, [56] Article IX of R.A. No. 9054 (An Act to
Strengthen and Expand the Organic Act for the Autonomous Region in
Muslim Mindanao, amending for the purpose Republic Act No. 6734,
entitled An Act providing for an Organic Act for the Autonomous Region in
Muslim Mindanao);

(2) The shares in the excise taxes on mineral products of the different LGUs, as
provided in Section 287 of the NIRC[57] in relation to Section 290 of the
LGC;[58]

(3) The shares of the relevant LGUs in the franchise taxes paid by Manila
Jockey Club, Inc.[59] and Philippine Racing Club, Inc.;[60]

(4) The shares of various municipalities in VAT collections under R.A. No. 7643
(An Act to Empower the Commissioner of Internal Revenue to Require the
Payment of the Value Added Tax Every Month and to Allow Local
Government Units to Share in VAT Revenue, Amending for this Purpose
Certain Sections of the National Internal Revenue Code) as embodied in
Section 283 of the NIRC;[61]

(5) The shares of relevant LGUs in the proceeds of the sale and conversion of
former military bases in accordance with R.A. No. 7227 (Bases Conversion
and Development Act of 1992);[62]

(6) The shares of different LGUs in the excise taxes imposed on locally
manufactured Virginia tobacco products as provided in Section 3 of R.A.
No. 7171 (An Act to Promote the Development of the Farmers in the
Virginia Tobacco Producing Provinces), and as now provided in Section 289
 of the NIRC;[63]

(7) The shares of different LGUs in the incremental revenues from Burley and
native tobacco products under Section 8 of R.A. No. 8240 (An Act
Amending Sections 138, 140 and 142 of the National Internal Revenue
Code as Amended and for Other Purposes) and as now provided in Section
288 of the NIRC;[64] and

(8) The share of the Commission of Audit (COA) in the NIRTs as provided in
Section 24(3) of P.D. No. 1445 (Government Auditing Code of the
Philippines)[65] in relation to Section 284 of the NIRC.[66]
Garcia insists that the foregoing taxes and revenues should have been included
by Congress and, by extension, the BIR in the base for computing the IRA on
the strength of the cited provisions; that the LGC did not authorize such
exclusion; and that the continued exclusion has undermined the fiscal
autonomy guaranteed by the 1987 Constitution.
The insistence of Garcia is valid to an extent.
An examination of the above-enumerated laws confirms that the following have
been excluded from the base for reckoning the just share of the LGUs as
required by Section 6, Article X of the 1987 Constitution, namely:
(a) The share of the affected LGUs in the proceeds of the sale and conversion
of former military bases in accordance with R.A. No. 7227;

(b) The share of the different LGUs in the excise taxes imposed on locally
manufactured Virginia tobacco products as provided for in Section 3, R.A.
No. 7171, and as now provided in Section 289of the NIRC;

(c) The share of the different LGUs in incremental revenues from Burley and
native tobacco products under Section 8 of R.A. No. 8240, and as now
provided for in Section 288 of the NIRC;

(d) The share of the COA in the NIRTs as provided in Section 24(3) of P.D. No.
1445[67] in relation to Section 284 of the NIRC;

(e) The shares of the different LGUs in the excise taxes on mineral products, as
provided in Section 287 of the NIRC in relation to Section 290 of the LGC;
(f) The NIRTs collected by the cities and provinces and divided exclusively
among the LGUs of the ARMM, the regional government and the central
government, pursuant to Section 15[68] in relation to Section 9,[69] Article IX
of R. A. No. 9054; and

(g) The shares of the relevant LGUs in the franchise taxes paid by Manila
Jockey Club, Inc., and the Philippine Racing Club, Inc.
Anent the share of the affected LGUs in the proceeds of the sale and
conversion of the former military bases pursuant to R.A. No. 7227, the
exclusion is warranted for the reason that such proceeds do not come from a
tax, fee or exaction imposed on the sale and conversion.
As to the share of the affected LGUs in the excise taxes imposed on locally
manufactured Virginia tobacco products under R.A. No. 7171 (now Section 289
of the NIRC); the share of the affected LGUs in incremental revenues from
Burley and native tobacco products under Section 8, R.A. No. 8240 (now
Section 288 of the NIRC); the share of the COA in the NIRTs pursuant to
Section 24(3) of P.D. No. 1445 in relation to Section 284 of the NIRC; and the
share of the host LGUs in the franchise taxes paid by the Manila Jockey Club,
Inc., and Philippine Racing Club, Inc., under Section 6 of R.A. No. 6631 and
Section 8 of R.A. No. 6632, respectively, the exclusion is also justified. Although
such shares involved national taxes as defined under the NIRC, Congress had
the authority to exclude them by virtue of their being taxes imposed for special
purposes. A reading of Section 288 and Section 289 of the NIRC and Section
24(3) of P.D. No. 1445 in relation to Section 284 of the NIRC reveals that all
such taxes are levied and collected for a special purpose. [70] The same is true
for the franchise taxes paid under Section 6 of R.A. No. 6631 and Section 8 of
R.A. No. 6632, inasmuch as certain percentages of the franchise taxes go to
different beneficiaries. The exclusion conforms to Section 29(3), Article VI of
the 1987 Constitution, which states:
Section 29. x x x
xxxx
(3) All money collected on any tax levied for a special purpose shall be
treated as a special fund and paid out for such purpose only. If the
purpose for which a special fund was created has been fulfilled or abandoned,
the balance, if any, shall be transferred to the general funds of the
Government. [Bold emphasis supplied]
The exclusion of the share of the different LGUs in the excise taxes imposed on
mineral products pursuant to Section 287 of the NIRC in relation to Section
290 of the LGC is premised on a different constitutional provision. Section 7,
Article X of the 1987 Constitution allows affected LGUs to have an equitable
share in the proceeds of the utilization of the nation's national wealth "within
their respective areas," to wit:
Section 7. Local governments shall be entitled to an equitable share in the
proceeds of the utilization and development of the national wealth within their
respective areas, in the manner provided by law, including sharing the same
with the inhabitants by way of direct benefits.
This constitutional provision is implemented by Section 287 of the NIRC and
Section 290 of the LGC thusly:
SEC. 287. Shares of Local Government Units in the Proceeds from the
Development and Utilization of the National Wealth. - Local Government units
shall have an equitable share in the proceeds derived from the utilization and
development of the national wealth, within their respective areas, including
sharing the same with the inhabitants by way of direct benefits.
(A) Amount of Share of Local Government Units. - Local government units
shall, in addition to the internal revenue allotment, have a share of
forty percent (40%) of the gross collection derived by the national
government from the preceding fiscal year from excise taxes on mineral
products, royalties, and such other taxes, fees or charges, including
related surcharges, interests or fines, and from its share in any co-
production, joint venture or production sharing agreement in the
utilization and development of the national wealth within their
territorial jurisdiction.
(B) Share of the Local Governments from Any Government Agency or
Government-owned or - Controlled Corporation. - Local Government Units shall
have a share, based on the preceding fiscal year, from the proceeds derived by
any government agency or government owned or controlled corporation
engaged in the utilization and development of the national wealth based on the
following formula, whichever will produce a higher share for the local
government unit:
(1) One percent (1%) of the gross sales or receipts of the preceding calendar
year, or
(2) Forty percent (40%) of the excise taxes on mineral products, royalties, and
such other taxes, fees or charges, including related surcharges, interests or
fines the government agency or government owned or -controlled corporations
would have paid if it were not otherwise exempt. [Bold emphasis supplied]
SEC. 290. Amount of Share of Local Government Units. - Local government
units shall, in addition to the internal revenue allotment, have a share
of forty percent (40%) of the gross collection derived by the national
government from the preceding fiscal year from mining taxes, royalties,
forestry and fishery charges, and such other taxes, fees, or charges,
including related surcharges, interests, or fines, and from its share in any co-
production, joint venture or production sharing agreement in the utilization
and development of the national wealth within their territorial jurisdiction.
[Bold emphasis supplied]
Lastly, the NIRTs collected by the provinces and Cities within the ARMM whose
portions are distributed to the ARMM's provincial, city and regional
governments are also properly excluded for such taxes are intended to truly
enable a sustainable and feasible autonomous region as guaranteed by the
1987 Constitution. The mandate under Section 15 to Section 21, Article X of
the 1987 Constitution is to allow the separate development of peoples with
distinctive cultures and traditions in the autonomous areas. [71] The grant of
autonomy to the autonomous regions includes the right of self determination –
which in turn ensures the right of the peoples residing therein to the necessary
level of autonomy that will guarantee the support of their own cultural
identities, the establishment of priorities by their respective communities'
internal decision-making processes and the management of collective matters
by themselves.[72] As such, the NIRTs collected by the provinces and cities
within the ARMM will ensure local autonomy and their very existence with a
continuous supply of funding sourced from their very own areas. The ARMM
will become self-reliant and dynamic consistent with the dictates of the 1987
Constitution.
The shares of the municipalities in the VATs collected pursuant to R.A. No.
7643 should be included in determining the base for computing the just
share because such VATs are national taxes, and nothing can validly justify
their exclusion.
In recapitulation, the national taxes to be included in the base for computing
the just share the LGUs shall henceforth be, but shall not be limited to, the
following:
1. The NIRTs enumerated in Section 21 of the NIRC, as amended, to be
inclusive of the VATs, excise taxes, and DSTs collected by the BIR and the
BOC, and their deputized agents;
2. Tariff and customs duties collected by the BOC;
3. 50% of the VATs collected in the ARMM, and 30% of all other national
taxes collected in the ARMM; the remaining 50% of the VATs and 70% of
the collections of the other national taxes in the ARMM shall be the
exclusive share of the ARMM pursuant to Section 9 and Section 15 of
R.A. No. 9054;
4. 60% of the national taxes collected from the exploitation and
development of the national wealth; the remaining 40% will exclusively
accrue to the host LGUs pursuant to Section 290 of the LGC;
5. 85% of the excise taxes collected from locally manufactured Virginia and
other tobacco products; the remaining 15% shall accrue to the special
purpose funds pursuant created in R.A. No. 7171 and R.A. No. 7227;
 6. The entire 50% of the national taxes collected under Section 106, Section
108 and Section 116 of the NIRC in excess of the increase in collections
for the immediately preceding year; and
7. 5% of the franchise taxes in favor of the national government paid by
franchise holders in accordance with Section 6 of R.A. No. 6631 and
Section 8 of R.A. No. 6632.
VI.
Entitlement to the reliefs sought
The petitioners' prayer for the payment of the arrears of the LGUs' just
share on the theory that the computation of the base amount had been
unconstitutional all along cannot be granted.
It is true that with our declaration today that the IRA is not in accordance with
the constitutional determination of the just share of the LGUs in the national
taxes, logic demands that the LGUs should receive the difference between
the just share they should have received had the LGC properly reckoned such
just share from all national taxes, on the one hand, and the share – represented
by the IRA – the LGUs have actually received since the effectivity of the IRA
under the LGC, on the other. This puts the National Government in arrears as
to the just share of the LGUs. A legislative or executive act declared void for
being unconstitutional cannot give rise to any right or obligation. [73]
Yet, the Court has conceded in Araullo v. Aquino III[74] that:
x x x the generality of the rule makes us ponder whether rigidly
applying the rule may at times be impracticable or wasteful. Should we
not recognize the need to except from the rigid application of the rule
the instances in which the void law or executive act produced an almost
irreversible result?
The need is answered by the doctrine of operative fact. The doctrine,
definitely not a novel one, has been exhaustively explained in De Agbayani v.
Philippine National Bank:
The decision now on appeal reflects the orthodox view that an unconstitutional
act, for that matter an executive order or a municipal ordinance likewise
suffering from that infirmity, cannot be the source of any legal rights or duties.
Nor can it justify any official act taken under it. Its repugnancy to the
fundamental law once judicially declared results in its being to all intents and
purposes a mere scrap of paper. As the new Civil Code puts it: 'When the
courts declare a law to be inconsistent with the Constitution, the former shall
be void and the latter shall govern.' Administrative or executive acts, orders
and regulations shall be valid only when they are not contrary to the laws of
the Constitution. It is understandable why it should be so, the Constitution
being supreme and paramount. Any legislative or executive act contrary to its
terms cannot survive.
Such a view has support in logic and possesses the merit of simplicity.
It may not however be sufficiently realistic. It does not admit of doubt
that prior to the declaration of nullity such challenged legislative or
executive act must have been in force and had to be complied with. This
is so as until after the judiciary, in an appropriate case, declares its
invalidity, it is entitled to obedience and respect. Parties may have
acted under it and may have changed their positions. What could be
more fitting than that in a subsequent litigation regard be had to what
has been done while such legislative or executive act was in operation
and presumed to be valid in all respects. It is now accepted as a
doctrine that prior to its being nullified, its existence as a fact must be
reckoned with. This is merely to reflect awareness that precisely
because the judiciary is the governmental organ which has the final say
on whether or not a legislative or executive measure is valid, a period of
time may have elapsed before it can exercise the power of judicial
review that may lead to a declaration of nullity. It would be to deprive
the law of its quality of fairness and justice then, if there be no
recognition of what had transpired prior to such adjudication.
In the language of an American Supreme Court decision: 'The actual existence
of a statute, prior to such a determination [of unconstitutionality], is an
operative fact and may have consequences which cannot justly be ignored. The
past cannot always be erased by a new judicial declaration. The effect of the
subsequent ruling as to invalidity may have to be considered in various
aspects, with respect to particular relations, individual and corporate, and
particular conduct, private and official.'
The doctrine of operative fact recognizes the existence of the law or
executive act prior to the determination of its unconstitutionality as an
operative fact that produced consequences that cannot always be
erased, ignored or disregarded. In short, it nullifies the void law or
executive act but sustains its effects. It provides an exception to the
general rule that a void or unconstitutional law produces no effect.
[75]
But its use must be subjected to great scrutiny and circumspection, and it
cannot be invoked to validate an unconstitutional law or executive act, but is
resorted to only as a matter of equity and fair play. [76] It applies only to cases
where extraordinary circumstances exist, and only when the extraordinary
circumstances have met the stringent conditions that will permit its
application.
Conformably with the foregoing pronouncements in Araullo v. Aquino III, the
effect of our declaration through this decision of the unconstitutionality of
Section 284 of the LGC and its related laws as far as they limited the source of
the just share of the LGUs to the NIRTs is prospective. It cannot be otherwise.
VII.
Automatic release of the LGUs'
just share in the National Taxes
Section 6, Article X of the 1987 Constitution commands that the just share of
the LGUs in national taxes shall be automatically released to them. The
term automatic connotes something mechanical, spontaneous and perfunctory;
and, in the context of this case, the LGUs are not required to perform any act
or thing in order to receive their just share in the national taxes.[77]
Before anything, we must highlight that the 1987 Constitution includes several
provisions that actually deal with and authorize the automatic release of funds
by the National Government.
To begin with, Section 3 of Article VIII favors the Judiciary with the automatic
and regular release of its appropriations:
Section 3. The Judiciary shall enjoy fiscal autonomy. Appropriations for the
Judiciary may not be reduced by the legislature below the amount appropriated
for the previous year and, after approval, shall be automatically and regularly
released.
Then there is Section 5 of Article IX(A), which contains the common provision
in favor of the Constitutional Commissions:
Section 5. The Commission shall enjoy fiscal autonomy. Their approved annual
appropriations shall be automatically and regularly released.
Section 14 of Article XI extends to the Office of the Ombudsman a similar
privilege:
Section 14. The Office of the Ombudsman shall enjoy fiscal autonomy. Its
approved annual appropriations shall be automatically and regularly released.
Section 17(4) of Article XIII replicates the privilege in favour of the
Commission on Human Rights:
Section 17(4) The approved annual appropriations of the Commission shall be
automatically and regularly released.
The foregoing constitutional provisions share two aspects. The first relates to
the grant of fiscal autonomy, and the second concerns the automatic release of
funds.[78] The common denominator of the provisions is that the automatic
release of the appropriated amounts is predicated on the approval of the
annual appropriations of the offices or agencies concerned.
Directly contrasting with the foregoing provisions is Section 6, Article X of the
1987 Constitution because the latter provision forthrightly ordains that the
"(l)ocal government units shall have a just share, as determined by law, in the
national taxes which shall be automatically released to them." Section 6
does not mention of appropriation as a condition for the automatic release of
the just share to the LGUs. This is because Congress not only already
determined the just share through the LGC's fixing the percentage of the
collections of the NIRTs to constitute such fair share subject to the power of
the President to adjust the same in order to manage public sector deficits
subject to limitations on the adjustments, but also explicitly authorized
such just share to be "automatically released" to the LGUs in the proportions
and regularity set under Section 285 [79] of the LGC without need of annual
appropriation. To operationalize the automatic release without need of
appropriation, Section 286 of the LGC clearly provides that the automatic
release of the just share directly to the provincial, city, municipal or barangay
treasurer, as the case may be, shall be "without need of any further
action," viz.:
Section 286. Automatic Release of Shares.— (a) The share of each local
government unit shall be released, without need of any further action;
directly to the provincial, city, municipal or barangay treasurer, as the
case may be, on a quarterly basis within five (5) days after the end of
each quarter, and which shall not be subject to any lien or holdback
that may be imposed by the National Government for whatever
purpose. x x x (Bold emphasis supplied)
The 1987 Constitution is forthright and unequivocal in ordering that the just
share of the LGUs in the national taxes shall be automatically released to them.
With Congress having established the just share through the LGC, it seems to
be beyond debate that the inclusion of the just share of the LGUs in the annual
GAAs is unnecessary, if not superfluous. Hence, the just share of the LGUs in
the national taxes shall be released to them without need of yearly
appropriation.
WHEREFORE, the petitions in G.R. No. 199802 and G.R. No. 208488
are PARTIALLY GRANTED, and, ACCORDINGLY, the Court:
1. DECLARES the phrase "internal revenue" appearing in Section 284 of
Republic Act No. 7160 (Local Government Code) UNCONSTITUTIONAL,
and DELETES the phrase from Section 284.
Section 284, as hereby modified, shall henceforth read as follows:
Section 284. Allotment of Taxes. – Local government units shall have a share
in the national taxes based on the collection of the third fiscal year preceding
the current fiscal year as follows:
(a) On the first year of the effectivity of this Code, thirty percent (30%);
(b) On the second year, thirty-five percent (35%); and
(c) On the third year and thereafter, forty percent (40%).
Provided, That in the event that the national government incurs an
unmanageable public sector deficit, the President of the Philippines is hereby
authorized, upon the recommendation of Secretary of Finance, Secretary of
Interior and Local Government and Secretary of Budget and Management, and
subject to consultation with the presiding officers of both Houses of Congress
and the presidents of the "liga", to make the necessary adjustments in the
allotment of local government units but in no case shall the allotment be less
than thirty percent (30%) of the collection of national taxes of the third fiscal
year preceding the current fiscal year; Provided, further, That in the first year
of the effectivity of this Code, the local government units shall, in addition to
the thirty percent (30%) allotment which shall include the cost of devolved
functions for essential public services, be entitled to receive the amount
equivalent to the cost of devolved personal services.
The phrase "internal revenue" is likewise hereby DELETED from the related
sections of Republic Act No. 7160 (Local Government Code), specifically
Section 285, Section 287, and Section 290, which provisions shall henceforth
read as follows:
Section 285. Allocation to Local Government Units. – The share of local
government units in the allotment shall be collected in the following manner:
(a) Provinces – Twenty-three percent (23%);
(b) Cities – Twenty-three percent (23%);
(c) Municipalities –Thirty-four percent (34%); and
(d) Barangays – Twenty percent (20%)
Provided, however, That the share of each province, city, and municipality shall
be determined on the basis of the following formula:
(a) Population – Fifty percent (50%);
(b) Land Area – Twenty-five percent (25%); and
(c) Equal sharing – Twenty-five percent (25%)
Provided, further, That the share of each barangay with a population of not less
than one hundred (100) inhabitants shall not be less than Eighty thousand
(P80,000.00) per annum chargeable against the twenty percent (20%) share of
the barangay from the allotment, and the balance to be a1located on the basis
of the following formula:
(a) On the first year of the effectivity of this Code:
(1) Population Forty percent (40%); and
(2) Equal sharing – Sixty percent (50%)
(b) On the second year:
(1) Population – Fifty percent (50%); and
(2) Equal sharing – Fifty percent (50%)
(c) On the third year and thereafter:
(1) Population – Sixty percent (60%); and
(2) Equal sharing – Forty percent (40%).
Provided, finally, That the financial requirements of barangays created by local
government units after the effectivity of this Code shall be the responsibility of
the local government unit concerned.
xxxx
Section 287. Local Development Projects. – Each local government unit shall
appropriate in its annual budget no less than twenty percent (20%) of its
annual allotment for development projects. Copies of the development plans of
local government units shall be furnished the Department of Interior and Local
Government.
xxxx
Section 290. Amount of Share of Local Government Units. – Local government
units shall, in addition to the allotment, have a share of forty percent (40%) of
the gross collection derived by the national government from the preceding
fiscal year from mining taxes, royalties, forestry and fishery charges, and such
other taxes, fees, or charges, including related surcharges, interests, or fines,
and from its share in any co-production, joint venture or production sharing
agreement in the utilization and development of the national wealth within
their territorial jurisdiction.
Article 378, Article 379, Article 380, Article 382, Article 409, Article 461, and
related provisions of the Implementing Rules and Regulations of R.A. No. 7160
are hereby MODIFIED to reflect the deletion of the phrase "internal revenue"
as directed herein.
Henceforth, any mention of "Internal Revenue Allotment" or "IRA" in Republic
Act No. 7160 (Local Government Code) and its Implementing Rules and
Regulations shall be understood as pertaining to the allotment of the Local
Government Units derived from the national taxes;
2. ORDERS the SECRETARY OF THE DEPARTMENT OF FINANCE; the
SECRETARY OF THE DEPARTMENT OF BUDGET AND MANAGEMENT;
the COMMISSIONER OF INTERNAL REVENUE; the COMMISSIONER
OF CUSTOMS; and the NATIONAL TREASURER to include ALL
COLLECTIONS OF NATIONAL TAXES in the computation of the base of the
just share of the Local Government Units according to the ratio provided in the
now-modified Section 284 of Republic Act No. 7160 (Local Government Code)
except those accruing to special purpose funds and special allotments for the
utilization and development of the national wealth.
For this purpose, the collections of national taxes for inclusion in the base of
the just share the Local Government Units shall include, but shall not be
limited to, the following:
(a) The national internal revenue taxes enumerated in Section 21 of
the National Internal Revenue Code, as amended, collected by the Bureau of
Internal Revenue and the Bureau of Customs;
(b) Tariff and customs duties collected by the Bureau of Customs;
(c) 50% of the value-added taxes collected in the Autonomous Region in
Muslim Mindanao, and 30% of all other national tax collected in the
Autonomous Region in Muslim Mindanao.
The remaining 50% of the collections of value-added taxes and 70% of the
collections of the other national taxes in the Autonomous Region in Muslim
Mindanao shall be the exclusive share of the Autonomous Region in Muslim
Mindanao pursuant to Section 9 and Section 15 of Republic Act No. 9054.
(d) 60% of the national taxes collected from the exploitation and development
of the national wealth.
The remaining 401% of the national taxes collected from the exploitation and
development of the national wealth shall exclusively accrue to the host Local
Government Units pursuant to Section 290 of Republic Act No. 7160 (Local
Government Code);
(e) 85% of the excise taxes collected from locally manufactured Virginia and
other tobacco products.
The remaining 15% shall accrue to the special purpose funds created by
Republic Act No. 7171 and Republic Act No. 7227;
(f) The entire 50% of the national taxes collected under Sections 106, 108 and
116 of the NIRC as provided under Section 283 of the NIRC; and
(g) 5% of the 25% franchise taxes given to the National Government under
Section 6 of Republic Act No. 6631 and Section 8 of Republic Act No. 6632.
3. DECLARES that:
(a) The apportionment of the 25% of the franchise taxes collected from the
Manila Jockey Club and Philippine Racing Club, Inc. – that is, five percent (5%)
to the National Government; five percent (5%) to the host municipality or city;
seven percent (7%) to the Philippine Charity Sweepstakes Office; six percent
(6%) to the Anti-Tuberculosis Society; and two percent (2%) to the White Cross
pursuant to Section 6 of Republic Act No. 6631 and Section 8 of Republic Act
No. 6632 – is VALID;
(b) Section 8 and Section 12 of Republic Act No. 7227 are VALID;
and, ACCORDINGLY, the proceeds from the sale of the former military bases
converted to alienable lands thereunder are EXCLUDED from the computation
of the national tax allocations of the Local Government Units; and
(c) Section 24(3) of Presidential Decree No. 1445, in relation to Section 284 of
the National Internal Revenue Code, apportioning one-half of one percent (1/2
of 1%) of national tax collections as the auditing fee of the Commission on
Audit is VALID;
4. DIRECTS the Bureau of Internal Revenue and the Bureau of Customs and
their deputized collecting agents to certify all national tax collections, pursuant
to Article 378 of the Implementing Rules and Regulations of R.A. No. 7160;
5. DISMISSES the claims of the Local Government Units for the settlement by
the National Government of arrears in the just share on the ground that this
decision shall have PROSPECTIVE APPLICATION; and
6. COMMANDS the AUTOMATIC RELEASE WITHOUT NEED OF
FURTHER ACTION of the just shares of the Local Government Units in the
national taxes, through their respective provincial, city, municipal, or barangay
treasurers, as the case may be, on a quarterly basis but not beyond five (5)
days from the end of each quarter, as directed in Section 6, Article X of the
1987 Constitution and Section 286 of Republic Act No. 7160 (Local
Government Code), and operationalized by Article 383 of the Implementing
Rules and Regulations of RA 7160.
Let a copy of this decision be furnished to the President of the Republic of the
Philippines, the President of the Senate, and the Speaker of the House of
Representatives for their information and guidance.
SO ORDERED.
Carpio (Acting C.J.) Leonardo-De Castro, Peralta, Del Castillo, Perlas-Bernabe,
Martires, Tijam, and Gesmundo, JJ., concur.
Velasco, Jr., concur. Please see separate opinion.
Leonen, Gaguioa, and Reyes J., JJ., dissent. See separate opinions.
Jardeleza, J., no part prior OSG action.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION
[ G.R. No. 202331, April 22, 2015 ]
THE PROVINCIAL GOVERNMENT OF AURORA, PETITIONER, VS.
HILARIO M. MARCO, RESPONDENT.

DECISION

LEONEN, J.:
The prohibition on midnight appointments only applies to presidential
appointments. It does not apply to appointments made by local chief
executives.

Nevertheless, the Civil Service Commission has the power to promulgate rules
and regulations to professionalize the civil service. It may issue rules and
regulations prohibiting local chief executives from making appointments
during the last days of their tenure. Appointments of local chief executives
must conform to these civil service rules and regulations in order to be valid.

This is a Petition for Review on Certiorari [1] of the Court of Appeals

Decision[2] that denied the appeal of the Provincial Government of Aurora (the
Province). The Province appealed the Resolution [3] of the Civil Service
Commission granting the Motion for Execution filed by Hilario M. Marco
(Marco). The Civil Service Commission had earlier reversed and set aside the
disapproval of Marco's permanent appointment as Cooperative Development
Specialist II.[4]

Governor Ramoncita P. Ong (Governor Ong) permanently appointed [5] Marco as

Cooperative Development Specialist II on June 25, 2004, five (5) days before
the end of her term as Governor of the Province. [6] On June 28, 2004, Marco's
appointment, together with 25 other appointments, was submitted to the Civil
Service Commission Field Office-Aurora (the Field Office). Annexed to Marco's
appointment papers was a certification from Provincial Budget Officer Norma
R. Clemente (Provincial Budget Officer Clemente) and Provincial Accountant
Wilfredo C. Saturno (Provincial Accountant Saturno) stating that funds from
the Province's 2004 Annual Budget were available to cover the position. [7]

On June 30, 2004, newly elected Governor Bellaflor Angara-Castillo assumed

office. The next day, she called to an executive meeting all the department
heads of the Province.[8]

During the executive meeting, Provincial Budget Officer Clemente allegedly

manifested that the Province had no funds available to pay for the salaries of
Governor Ong's 26 appointees.[9] She subsequently issued a Letter recalling the
previously issued certification of the availability of funds:
In view of the result of the dialogue of the concerned offices regarding the
financial status of the Provincial Government of Aurora, we hereby
recall/retrieve our previously issued certification of availability of funds relative
to the appointments issued by Governor Ramoncita P. Ong.[10]
Provincial Budget Officer Clemente's Letter was submitted to the Province's
Human Resource Management-Office. It was then forwarded to the Field
Office.[11]

Due to the recall of the certification, the Field Office disapproved Marco's
appointment in the Letter[12] dated July 5, 2004.[13]

The Province, through Human Resource Management Officer Liwayway G.

Victorio, served Marco a copy of the Letter dated July 5, 2004. Marco was,
thus, advised to refrain from reporting for work beginning July 8, 2004, the day
he received notice of the disapproval of his appointment. [14]

Marco wrote the Civil Service Commission Regional Office No. IV (Regional
Office), moving for the reconsideration of the disapproval of his appointment.
[15]
The Regional Office, however, denied reconsideration in its
Decision [16]
dated April 6, 2005 and affirmed the disapproval of Marco's
appointment. It said that "[t]he lack of funds for the [26 appointments
Governor Ong issued] was established during the meeting of the different
department heads of Aurora Province and their new governor." [17]

Through the Letter dated May 17, 2005, Marco appealed before the Civil
Service Commission.[18] The Province, through its Human Resource
Management Office, received a copy of Marco's Letter on May 23, 2005.
[19]
However, it failed to comment on the appeal within 10 days from receipt as
required by Section 73 of the Uniform Rules on Administrative Cases in the
Civil Service.[20]

In the Resolution[21] dated April 14, 2008, the Civil Service Commission granted
Marco's appeal and set aside the Regional Office's Decision dated April 6,
2005. It ruled that Marco's appointment was valid since it was accompanied by
a certification of availability of funds. [22] As to the Letter withdrawing the
certification, the Civil Service Commission ruled that it did not affect the
validity of Marco's appointment because the Province "failed to submit
documentary evidence to support its claim [that it had no funds to pay for the
services of Governor Ong's appointees]."[23]
The Civil Service Commission added that the Province's withdrawal of the
certification was "unfair to Marco":[24]
It is unfair to Marco who applied for the said position believing in good faith
that funds were available, passed the screening conducted by the Personnel
Selection Board (PSB) on February 12 & 13, 2004, was appointed on June 25,
2004 and was later told to stop reporting for work as his appointment was
disapproved by [the Civil Service Commission Field Office-Aurora] simply
because the provincial government under the new governor realized that it has
no funds to pay for his services.[25]
Thus, the Civil Service Commission ordered the Regional Office to investigate
whether Provincial Budget Officer Clemente and Provincial Accountant Saturno
were administratively liable for certifying that funds were available to cover
the positions filled by Governor Ong's appointees but subsequently
withdrawing this certification.[26] It ordered the. Field Office to reflect the
Resolution in Marco's appointment papers and in his Service Record. [27]

The Province received a copy of the April 14, 2008 Resolution on May 21, 2008.
[28]

On July 22, 2008, Provincial Administrator Alex N. Ocampo (Provincial

Administrator Ocampo), on behalf of the Province, filed before the Civil Service
Commission a Petition for Relief [29] on the ground of extrinsic fraud. According
to him, the Civil Service Commission deprived the Province of an opportunity
to be heard when it failed to implead the Province as an indispensable party.
[30]
He reiterated that Marco's appointment was void since the Province had no
funds to pay for Marco's salaries. [31]

The Civil Service Commission denied outright the Petition for Relief in the
Resolution[32] dated November 4, 2008. It ruled that Provincial Administrator
Ocampo had no legal personality to file the Petition for Relief absent an
authorization from the Provincial Governor. Moreover, a petition for relief was
not allowed under the Uniform Rules on Administrative Cases in the Civil
Service. Thus, Provincial Administrator Ocampo erred in filing a Petition for
Relief.[33]

Provincial Administrator Ocampo filed a Motion for Reconsideration, [34] this

time with a written authority[35] to file from Governor Bellafior Angara-Castillo
annexed to the Motion.[36]

The Civil Service Commission denied the Motion for Reconsideration in the
Resolution[37] dated September 8, 2009. It ruled that its April 14, 2008
Resolution had become final and executory considering that the Province did
not file a motion for reconsideration of this Resolution within the reglementary
period.[38]
Consequently, Marco requested the Civil Service Commission to implement the
April 14, 2008 Resolution.[39] Through the Resolution[40] dated July 6, 2010, the
Commission granted Marco's request.

Provincial Administrator Ocampo filed a Motion for Reconsideration with

Motion to Quash "Execution,"[41] arguing that the April 14, 2008 Resolution had
already been implemented. As the Civil Service Commission had ordered, the
Province reflected the April 14, 2008 Resolution.in Marco's appointment
papers and in his Service Record.[42]

In the Resolution[43] dated January 24, 2011, the Civil Service Commission
denied the Motion for Reconsideration with Motion to Quash "Execution." It
noted that the Province still refused to reinstate Marco despite the April 14,
2008 Resolution and thus clarified that this Resolution necessarily resulted in
the approval of Marco's appointment and his reinstatement as Cooperative
Development Specialist II.[44] The January 24, 2011 Resolution states:
Ocampo, et al. nonchalantly tries to sweep away what is obvious in the ruling
of the Commission in [the April 14, 2008 Resolution], i.e., the reversal of the
disapproval by [the Regional Office] and [the Field Office] of Marco's
appointment. The reversal of the two (2) decisions mean[s] that Marco's
appointment as Cooperative Development Specialist II is in order and should
be approved. Consequently, the approval of Marco's appointment is legal proof
that he is entitled to perform the duties and functions of the said position and
receive the salaries and benefits attached to the position.

WHEREFORE, the Motion for Reconsideration with Motion to Quash of Alex

N. Ocampo, Provincial Administrator, and Manuel Joseph R. Bretana III, Legal
Counsel, Provincial Government of Aurora, is DENIED. Accordingly, [the July
6, 2010 Resolution] which grants the Motion for the Implementation of [the
April 14, 2008 Resolution] filed by Hilario M. Marco, STANDS.

The Provincial Governor of Aurora is directed to reinstate Marco to his

Cooperative Development Specialist II position and pay his back salaries and
other benefits from the time that Marco was actually prohibited from reporting
for work up to his actual reinstatement.[45]
A Petition for Review[46] under Rule 43 with prayer for issuance of a temporary
restraining order[47] was filed before the Court of Appeals. For the first time,
the Province argued that Marco was a midnight appointee since Governor Ong
appointed him during the last five (5) days of her tenure. Therefore, Marco's
appointment was void.[48]

In the Decision dated March 2, 2012, the Court of Appeals denied the Petition
for Review and affirmed the implementation of the Civil Service Commission's
April 14, 2008 Resolution.[49]
The Court of Appeals ruled that the April 14, 2008 Resolution already became
final and executory since there was no motion for reconsideration filed within
the reglementary period. Although the Province filed a Petition for Relief
before the Civil Service Commission, the Court of Appeals held that the remedy
of a petition for relief is not allowed under the Uniform Rules on Administrative
Cases in the Civil Service. Moreover, the Province failed to prove the extrinsic
fraud that allegedly prevented it from filing a motion for reconsideration. Thus,
the Civil Service Commission correctly denied the Petition for Relief. [50]

On the merits, the Court of Appeals affirmed Marco's appointment. The

Province had earlier certified that it had funds to pay for his salary as
Cooperative Development Specialist II.[51] It found that the Sangguniang
Panlalawigan even passed a "Supplemental Budget for 2004 appropriating
P54,014,127.01 in provincial funds."[52] Therefore, the issuance of the Letter
recalling the certification "[did] not change the fact that there [were] funds
available for [Marco's] appointment."[53]

On the claim that Marco was a midnight appointee, the Court of Appeals said
that Marco's case fell within the exception provided under Civil Service
Commission Resolution No. 030918.[54] He was fully qualified for the position
and underwent a screening process on February 12 and 13, 2004, long before
the election ban.[55] Therefore, he was validly appointed.

The Province filed a Motion for Reconsideration, [56] which the Court of Appeals
denied in the Resolution[57] dated June 13, 2012.

The Province filed a Petition for Review on Certiorari before this court. Marco
filed his Comment,[58] after which the Province filed its Reply. [59]

In the Resolution[60] dated January 30, 2013, this court ordered the parties to
file their respective memoranda. The Province filed its Memorandum [61] on
April 25, 2013, while Marco filed his Memorandum [62] on May 2, 2013.

The Province maintains that Marco's appointment was void on the ground that
he was a midnight appointee. Marco was appointed by Governor Ong five (5)
days before the end of her term, in violation of Civil Service Commission
Resolution No. 030918,[63] paragraph 2.1 of which provides:
2.1. All appointments issued by elective appointing officials after elections up to
June 30 shall be disapproved, except if the appointee is fully qualified for
the position and had undergone regular screening processes before the
Election Ban as shown in the Promotion and Selection Board (PSB) report
or minutes of meeting.
On Marco's claim that he underwent a regular screening process, which
exempted his appointment from the prohibition on midnight appointments, the
Province counters that Marco failed to present convincing evidence to prove
this claim. The Minutes of the Meeting of the Promotion Selection Board
showed that Marco was among the 201 applicants allegedly screened by the
Board within two (2) days. According to the Province, two days is a period too
short for the Personnel Selection Board to have carefully considered all the
applications.[64]

As to the claim that the April 14, 2008 Resolution is final and executory and
may no longer be reversed, the Province argues that nothing prevents this
court from setting aside this Resolution. It argues that the promulgation
of Nazareno, et al. v. City of Dumaguete[65] was a supervening event warranting
the reversal of the final and executory decision.[66]

In Nazareno, this court voided 89 appointments made by a city mayor within

the month that he left office, ruling that they were mass appointments
prohibited under Civil Service Commission Resolution No. 010988. [67] The
Province argues that Governor Ong's appointments were analogous to
the Nazareno appointments; hence, Governor Ong's appointments should
likewise be voided.[68]

Finally, the Province insists that Marco's appointment was void due to lack of
funds to pay for the position.[69] In ordering the Province to uphold Marco's
appointment despite the lack of funds, the Civil Service Commission allegedly
"interfered with [the Province's] prerogative to draw up its own budget and to
spend its ... revenues as it deems fit." [70]

For his part, Marco maintains that the Civil Service Commission's Resolution
dated April 14, 2008 has long become final and executory. Therefore, the
Resolution may no longer be disturbed. [71]

On the claim that he was a midnight appointee, Marco pointed out that the
Province belatedly raised this claim. The Province never raised it before the
Civil Service Commission but only did so before the Court of Appeals. [72] By
belatedly raising this claim, the Province should be deemed to have "implicitly
recognized"[73] that he was not a midnight appointee.

In any case, Marco asserts that he was qualified for the position and that he
underwent a selection process as required by Resolution No. 030918. Thus, his
appointment was an exception to the prohibition on midnight appointments. [74]

On the alleged interference of the Civil Service Commission with the Province's
discretionary power to appoint, Marco argues that it "merely upheld the
validity of an existing appointment[.]"[75] The Civil Service Commission did not
"[substitute] its own appointee for the one chosen by the appointing
authority."[76] Therefore, it correctly upheld his appointment.
Lastly, Marco argues that Nazareno does not apply in this case. This court
in Nazareno voided the 89 appointments of the appointing authority based on
the criteria set in Resolution No. 010988.[77] However, Nazareno had been
promulgated even before he was appointed in office. Moreover, Resolution No.
010988 did not set any new criteria for appointments made during the last
days of the appointing authority in office. Therefore, the promulgation
of Nazareno is not a supervening event that can set aside the final and
executory April 14, 2008 Resolution. [78]

The issues for this court's resolution are:

First, whether the Resolution dated July 6, 2010, which ordered the
implementation of the April 14, 2008 Resolution, was void for varying the
terms of the April 14, 2008 Resolution;

Second, whether the withdrawal of the certification of sufficiency of funds

voided Marco's appointment; and

Lastly, whether Marco's appointment was void on the ground that he was a
midnight appointee.

This Petition must be denied.

I

We note that the Province filed an appeal before the Court of Appeals against
the Civil Service Commission's Resolution that ordered the execution of the
April 14, 2008 Resolution.[79]

The Province erred in filing an appeal before the Court of Appeals, as no appeal
may be taken from an order of execution. [80] Instead, it should have filed a
petition for certiorari — the appropriate special civil action under Rule 65 of
the Rules of Court.[81]

The Court of Appeals, therefore, should have dismissed the Province's appeal
outright. Rule 50, Section 1(i) of the Rules of Court allows the Court of Appeals
to dismiss an appeal where the order appealed from is not appealable. [82]

The rule prohibiting appeals from orders of execution is based on the doctrine
of immutability of final judgments. Under this doctrine, a final and executory
judgment "is removed from the power and jurisdiction of the court which
rendered it to further alter or amend it, much less revoke it." [83] The judgment
remains immutable even if it is later on discovered to be erroneous. [84] The
doctrine "is grounded on fundamental considerations of public policy and
sound practice that at the risk of occasional error, the judgments of the courts
must become final at some definite date fixed by law. To allow courts to amend
final [and executory] judgments will result in endless litigation." [85]

The doctrine of immutability of final judgments applies to decisions rendered

by the Civil Service Commission. A decision of the Civil Service Commission
becomes final and executory if no motion for reconsideration is filed within the
15-day reglementary period under Rule VI, Section 80 of the Uniform Rules on
Administrative Cases in the Civil Service:
Section 80. Execution of Decision. - The decisions of the Commission Proper or
its Regional Offices shall be immediately executory after fifteen (15) days from
receipt thereof, unless a motion for reconsideration is seasonably filed, in
which case the execution of the decision shall be held in abeyance.
In Mendiola v. Civil Service Commission,[86] Teodorico Mendiola (Mendiola)
occupied the position of Budget Examiner III when the Economic Intelligence
and Investigation Bureau terminated his employment. [87] On Mendiola's appeal,
the Civil Service Commission ordered his reinstatetment in the resolution
dated September 21, 1988.[88]

The Economic Intelligence and Investigation Bureau failed to file a motion for
reconsideration within the 15-day reglementary period. Consequently,
Mendiola filed a motion for execution of the September 21, 1988 resolution. [89]

Unknown to Mendiola, the Economic Intelligence and Investigation Bureau

belatedly filed a motion for reconsideration, which the Civil Service
Commission granted despite having been filed out of time. [90]

This court reversed the Civil Service Commission's grant of the motion for
reconsideration and ordered Mendiola's reinstatement as the Commission
previously ordered in the September 21, 1998 resolution. This court held that
the September 21, 1998 resolution had become final and executory when the
Economic Intelligence and Investigation Bureau failed to file a motion for
reconsideration within the reglementary period. Thus, the Civil Service
Commission may no longer reverse the resolution.[91]

In Obiasca v. Basallote,[92] Jeane O. Basallote (Basallote) was appointed

Administrative Officer II by the Department of Education and was assigned to
work in Tabaco National High School in Albay. Basallote had assumed the
duties of her office as Administrative Officer II when she learned that Arlin B.
Obiasca (Obiasca) was subsequently appointed to the same position. Obiasca's
appointment was attested to by the Civil Service Commission, while Basallote's
appointment papers were not even forwarded to the Civil Service Commission.
[93]

Basallote protested Obiasca's appointment before the Civil Service Commission

Regional Office V. The Regional Office dismissed the protest. On appeal, the
Civil Service Commission reversed the Regional Office's Decision, thus
approving Basallote's appointment and recalling that of Obiasca. [94]

Without filing a motion for reconsideration before the Civil Service

Commission, Obiasca directly filed an appeal before the Court of Appeals. The
Court of Appeals affirmed the Civil Service Commission's Decision. [95]

Obiasca's Petition for Review on certiorari was likewise denied by this court.
[96]
This court held that Obiasca's failure to file a motion for reconsideration
rendered the Civil Service Commission's Decision approving Basallote's
appointment final and executory. Thus, the Civil Service Commission's Decision
may no longer be disturbed:[97]
[Obiasca] did not file a petition for reconsideration of the [Civil Service
Commission's resolution] before filing a petition for review in the [Court of
Appeals]. Such fatal procedural lapse on [Obiasca]'s part allowed the [Civil
Service Commission's resolution] to become final and executory. Hence, for all
intents and purposes, the [Civil Service Commission's resolution] has become
immutable and can no longer be amended or modified. A final and definitive
judgment can no longer be changed, revised, amended or
reversed. Thus, in praying for the reversal of the assailed Court of Appeals
decision which affirmed the final and executory [Civil Service Commission
resolution], [Obiasca] would want the Court to reverse a final and executory
judgment and disregard the doctrine of immutability of final judgments.
[98]
(Emphasis in the original, citations omitted)
In this case, the Province, through its Human Resource Management Office,
received a copy of the Civil Service Commission's April 14, 2008 Resolution on
May 21, 2008.[99] Thus, the Province had until June 5, 2008 to file a motion for
reconsideration.

However, the Province failed to file a motion for reconsideration of the April
14, 2008 Resolution within the 15-day reglementary period. With no motion for
reconsideration seasonably filed, the April 14, 2008 Resolution-became final
and executory on June 6, 2008.

In addition, the remedy of a petition for relief from judgment is not among
those provided under the Uniform Rules on Administrative Cases in the Civil
Service. This means that the remedy is not allowed under civil service rules.
[100]
Even assuming that a petition for relief may be filed before the Civil Service
Commission, the party must show that the assailed judgment became final
through fraud, accident, mistake, or excusable negligence.[101]

Here, the Province failed to refute that it received a copy of the Civil Service
Commission's April 14, 2008 Resolution. It was given an opportunity to be
heard, which is the essence of administrative due process. [103] It did not even
justify why it failed to file a motion for reconsideration despite its receipt of the
Civil Service Commission's Resolution. Contrary to the Province's claim, there
was no extrinsic fraud since the Province was not prevented "from fully and
fairly presenting [its] defense[.]"[104] The Civil Service Commission correctly
denied the Province's Petition for Relief.

Since the April 14, 2008 Resolution already became final and executory, it may
no longer be reversed. The Civil Service Commission correctly granted Marco's
request for the Resolution's implementation.
II

In implementing the April 14, 2008 Resolution, the Civil Service Commission
ordered the Province to reinstate Marco and to pay him back salaries and other
benefits:
WHEREFORE, the request of Hilario M. Marco, Cooperative Development
Specialist II, Provincial Government of Aurora, for the implementation of CSC
Resolution No. 08-0656 dated April 14, 2008 is GRANTED. Accordingly, the
Provincial Government of Aurora is directed to reinstate Marco to his former
position and the payment of his back salaries and other benefits starting from
the date he was advised to stop reporting for work on July 8, 2004 up to his
actual reinstatement.[105]
According to the Province, the Civil Service Commission went beyond the order
sought to be implemented and "varie[d] the term of the judgment." [106] The
Province claims that nothing in the April 14, 2008 Resolution ordered the
reinstatement of Marco. The dispositive portion of the resolution stated: [107]
WHEREFORE, the appeal of Hilario M. Marco is GRANTED. Accordingly, the
Decision No. 05-0212 dated April 6, 2005 of the Civil Service Commission
Regional Office IV, Quezon City, affirming the disapproval of the appointment of
Marco for lack of certification of availability of funds is REVERSED and SET
ASIDE.

The Civil Service Commission Field Office-Aurora is directed to reflect this

decision in the appointment of Marco and in his Service Record. [108]
Therefore, the Province claims that the order implementing the April 14, 2008
Resolution must be set aside.

We rule that the Civil Service Commission did not vary the terms of the April
14, 2008 Resolution.

Under Rule IV, Section 1 of Civil Service Commission Memorandum Circular

No. 40-98, an appointment takes effect immediately upon issuance by the
appointing authority. Once the appointee has assumed the duties of the
position, he or she is entitled to receive the salaries corresponding with the
position though the Civil Service Commission has not yet approved the
appointment.
Should the appointment be initially disapproved, it nevertheless remains
effective if a motion for reconsideration or an appeal of the disapproval is
seasonably filed with the proper office.[109] Therefore, during the pendency of
the motion for reconsideration, the appointee remains entitled to his or her
salaries until the appointment is finally disapproved by the Civil Service
Commission.[110]

Marco's appointment immediately took effect on June 25, 2004 when Governor
Ong appointed him as Cooperative Development Specialist II. Although his
appointment was initially disapproved by the Field Office, Marco seasonably
filed a Motion for Reconsideration before the Civil Service Commission. Thus,
Marco's appointment remained effective during the pendency of the Motion for
Reconsideration.

Because the Civil Service Commission granted his Motion for Reconsideration
and set aside the disapproval of his appointment, Marco remained entitled to
his position. The necessary consequence of granting reconsideration is his
reinstatement as Cooperative Development Specialist II.

The Civil Service Commission correctly implemented the April 14, 2008
Resolution by ordering Marco's reinstatement and the payment of his back
salaries and other benefits.
III

The Province contends that the Civil Service Commission erred in approving
Marco's appointment as Cooperative Development Specialist II. It allegedly
had no funds to cover the position. Therefore, the appointment was void,
having been issued in violation of Rule V, Section 1(e)(ii) of the Civil Service
Commission Memorandum Circular No. 40-98. The rule states:
SECTION 1. In addition to the common requirements and procedures, the
following requirements and guidelines shall also be observed and the
necessary documents submitted, when applicable.
... ... ...

e. LGU Appointment. Appointment in local government units for submission

to the Commission shall be accompanied, in addition to the common
requirements, by the following

... ... ...

ii. Certification by the Municipal/City/Provincial Accountant/Budget Officer
that funds are available.
The certification ensures that the appointee shall occupy a position adequately
covered by appropriations as required by Section 325(e) of the Local
Government Code:
SECTION 325. General Limitations. - The use of the provincial, city, and
municipal funds shall be subject to the following limitations:
... ... ...

(e) Positions in the official plantilla for career positions which are occupied by
incumbents holding permanent appointments shall be covered by adequate
appropriations[.]
As required by Rule V, Section 1 (e)(ii) of the Civil Service Commission
Memorandum Circular No. 40-98, Marco's appointment was accompanied by a
certification from the Province, through the Provincial Budget Officer and the
Provincial Accountant, that funds were available under the 2004 Annual
Budget of the Province for the 26 positions issued by Governor Ong. Therefore,
there was no violation of Rule V, Section 1(e)(ii) of the Civil Service
Commission Memorandum Circular No. 40-98. There was no violation of
existing Civil Service Law, rules and regulations. Marco's appointment remains
effective.

That the Province suddenly had no funds to pay for Marco's salaries despite its
earlier certification that funds were available under its 2004 Annual Budget
does not affect his appointment.

None of the grounds for disapproval, of an appointment under Rule V, Section

7[111] of the Omnibus Rules Implementing the Civil Service Law exists in this
case. The appointment remains effective, and the local government unit
remains liable for the salaries of the appointee. [112]

Moreover, the earlier certification, if proven false, constitutes intentional

misrepresentation of a material fact concerning a civil service matter. This is
an offense punishable by fine, or imprisonment, or both as provided under
Section 67 of the Civil Service Law:
SEC. 67. Penal Provision. — Whoever makes any appointment or employs any
person in violation of any provision of this Title or the rules made thereunder
or whoever commits fraud, deceit or intentional misrepresentation of material
facts concerning other civil service matters, or whoever violates, refuses or
neglects to comply with any of such provisions or rules, shall upon conviction
be punished by a fine not exceeding one thousand pesos or by imprisonment
not exceeding six (6) months, or both such fine and imprisonment in the
discretion of the court.
We, therefore, agree with the Civil Service Commission in ordering the
Regional Office to commence appropriate administrative proceedings against
Provincial Budget Officer Norma R. Clemente and Provincial Accountant
Wilfredo C. Saturno for issuing the certification of availability of funds:
The Commission disapproves of the conduct of the officials of the Provincial
Government of Aurora in issuing a certification dated June 25, 2004 that funds
are available in the 2004 Annual Budget to support the appointments issued by
outgoing Governor Ong and then later [withdrawing] the same when a new
governor assumes office. As such, the CSCRO No. IV is directed to conduct the
appropriate administrative proceedings to determine whether Norma R.
Clemente (Provincial Budget Officer) and Wilfredo C. Saturno (Provincial
Accountant) violated Civil Service Law, rules and regulations. [113]
IV

The Province claims that Marco was a midnight appointee. Moreover, he was
among those appointed "en masse"[114] by Governor Ong before the end of her
term. Thus, the Civil Service Commission should have disapproved Marco's
appointment.

A midnight appointment "refers to those appointments made within two

months immediately prior to the next presidential election." [115] Midnight
appointments are prohibited under Article VII, Section 15 of the Constitution:
SECTION 15. Two months immediately before the next presidential elections
and up to the end of his term, a President or Acting President shall not make
appointments, except temporary appointments to executive positions when
continued vacancies therein will prejudice public service or endanger public
safety.
Midnight appointments are prohibited because an outgoing President is "duty
bound to prepare for the orderly transfer of authority to the incoming
President, and he [or she] should not do acts which he [or she] ought to know,
would embarrass or obstruct the policies of his [or her] successor." [116] An
outgoing President should not "deprive the new administration of an
opportunity to make the corresponding appointments." [117]

However, the constitutiona prohibition on midnight appointments only applies

to presidential appointments. It does not apply to appointments made by local
chief executives.

In De Rama v. Court of Appeals,[118] Mayor Conrado L. de Rama (Mayor de

Rama) of Pagbilao, Quezon sought to recall 14 appointments made by former
Mayor Ma. Evelyn S. Abeja on the sole ground that they were midnight
appointments.[119] The Civil Service Commission denied Mayor de Rama's
request, ruling that the prohibition on midnight appointments only applies to
outgoing Presidents.[120] On appeal, the Court of Appeals affirmed the Civil
Service Commission's decision.[121]

This court agreed with the Civil Service Commission and the Court of Appeals.
In denying Mayor de Rama's petition for review on certiorari, this court said
that the prohibition on midnight appointments "applies only to presidential
appointments."[122] This court noted that "there is no law that prohibits local
elective officials from making appointments during the last days of his or her
tenure."[123]

Nonetheless, the Civil Service Commission, as the central personnel agency of

the Government,[124] may "establish rules and regulations to promote efficiency
and professionalism in the civil service." [125] Although it conceded that no law
prohibits local elective officials from making appointments during the last days
of their tenure, this court in Nazareno upheld Civil Service Commission
Resolution No. 010988, which prohibited local elective officials from making
appointments immediately before and after elections. [126] In addition,
Resolution No. 010988 prohibited "mass appointments," or those "issued in
bulk or in large number after the elections by an outgoing local chief executive
and there is no apparent need for their immediate issuance." Resolution No.
010988 states:
WHEREAS, the May 14, 2001 national and local elections have just concluded
and the Commission anticipates controversies that would arise involving
appointments issued by outgoing local chief executives immediately before and
after elections;

WHEREAS, the Commission observed the tendency of some outgoing local

chief executives to issue appointments even after the elections, especially
when their successors have already been proclaimed;

WHEREAS, this practice of some outgoing local chief executives causes

animosities between the outgoing and incoming officials and the people who
are immediately affected and made to suffer the consequences thereof are the
ordinary civil servants and eventually, to a larger extent, their constituents
themselves;

WHEREAS, one of the reasons behind the prohibition in issuing appointments

or hiring of new employees during the prohibited period as provided for in CSC
Memorandum Circular No. 7, series of 2001 is to prevent the occurrence of the
foregoing, among others;

WHEREAS, local elective officials, whose terms of office are about to expire,
are deemed as "caretaker" administrators who are duty bound to prepare for
the smooth and orderly transfer of power and authority to the incoming local
chief executives;

WHEREAS, under Section 15, Article VII of the Constitution, the President or
Acting President is prohibited from making appointments two (2) months
immediately before the next presidential elections and up to the end of his
term, except temporary appointments to executive positions when continued
vacancies therein will prejudice public service or endanger public safety;

WHEREAS, while there is no equivalent provision in the Local Government

Code of 1991 (Republic Act No. 7160) or in the Civil Service Law (Book V of
Executive Order No. 292) of the above-stated prohibition, the rationale against
the prohibition on the issuance of "midnight appointments" by the President is
applicable to appointments extended by outgoing local chief executives
immediately before and/or after the elections; and

WHEREAS, the Commission also deems it fit to issue guidelines that would
assist processors in their actions on appointments issued by theses outgoing
local chief executives immediately before and/or after the elections;

NOW THEREFORE, the Commission, pursuant to its constitutional mandate

as the central personnel agency of the government, hereby issues and adopts
the following guidelines:
1. The validity of an appointment issued immediately before or after the
elections by outgoing local chief executives is to be determined on the
basis of the nature, character and merit of the individual appointment
and the particular circumstances surrounding the same.
... ... ...
3. All appointments, whether original, transfer, reemployment,
reappointment, promotion or demotion, except in cases of renewal and
reinstatement, regardless of status, which are issued AFTER the
elections, regardless of their dates of effectivity and/or date of receipt by
the Commission, including its Regional or Field Offices, of said
appointments or the Report of Personnel Actions (ROPA), as the case may
be, shall be disapproved unless the following requisites concur relative to
their issuance:
a) The appointment has gone through the regular screening by the Personnel
Selection Board (PSB) before the prohibited period on the issuance of
appointments as shown by the PSB report or minutes of its meeting;

b) That the appointee is qualified;

c) There is a need to fill up the vacancy immediately in order not to prejudice
public service and/or endanger public safety;

d) That the appointment is not one of those mass appointments issued after
the elections.
4. The term "mass appointments" refers to those issued in bulk or in large
number after the elections by an outgoing local chief executive and there
is no apparent need for their immediate issuance.
This court said that the rationale behind Resolution No. 010988 "is not difficult
to see":[127]
Appointments are banned prior to the elections to ensure that partisan
loyalties will not be a factor in the appointment process, and to prevent
incumbents from gaining any undue advantage during the elections. To this
end, appointments within a certain period of time are proscribed by the
Omnibus Election Code and related issuances. After the elections,
appointments by defeated candidates are prohibited, except under the
circumstances mentioned in CSC Resolution No. 010988, to avoid animosities
between outgoing and incoming officials, to allow the incoming administration
a free hand in implementing its policies, and to ensure that appointments and
promotions are not used as a tool for political patronage or as a reward for
services rendered to the outgoing local officials.[128] (Citation omitted)
In Nazareno, this court affirmed the disapproval of 89 appointments Mayor
Felipe Antonio B. Remollo (Mayor Remollo) of Dumaguete City made within the
month that he left office. This court found that the appointments were issued in
violation of Resolution No. 010988. Particularly, it found no evidence that the
Personnel Selection Board carefully deliberated on the qualifications of Mayor
Remollo's appointees.[129] Moreover, the timing and the large number of
appointments "indicate that the appointments were hurriedly issued by the
outgoing administration."[130]

The Province argues that the 26 appointments Governor Ong issued during the
last days of her tenure were similar to those Mayor Remollo issued
in Nazareno. Governor Ong allegedly issued mass appointments, the immediate
issuance of which the Province had no apparent need.

We note, however, that Resolution No. 010988 — the Resolution effective when
Mayor Remollo issued the appointments in Nazareno — was superseded by
Resolution No. 030918 dated August 28, 2003.[131] Resolution No. 030918 on
"midnight appointments" by local chief executives was effective at the time
Governor Ong issued the disputed appointments. Resolution No. 030918 states,
in part:
WHEREAS, under Section 3, Article IX-B of the 1987 Constitution, the
Commission, as the central personnel agency of the Government, is mandated
to establish a career service and adopt measures to promote efficiency,
integrity, responsiveness, progressiveness and courtesy in the civil service,
among others;

WHEREAS, the Constitution further mandates the Commission to issue its own
rules and regulations for effective and efficient personnel administration in the
Civil Service;

WHEREAS, Section 12(1) and (2), Book V of the Executive Order No. 292
(Administrative Code of 1987) mandates the Commission to administer and
enforce the constitutional and statutory provisions on the merit system for all
ranks and levels in the Civil Service and to prescribe, amend and enforce rules
and regulations for carrying into effect the provision of the Civil Service Law
and other pertinent laws;

WHEREAS, problems and controversies inevitably arise involving

appointments issued by outgoing elective and appointive officials just before
and after election periods;

WHEREAS, personnel morale, office operations, and delivery of public

services are inevitably disrupted by such problem's and controversies;

WHEREAS, there is a need to forestall such problems by defining and making

more stringent the restrictions on personnel appointments to be observed by
outgoing appointing officials, elective or appointive, before they leave office;

NOW, THEREFORE, the Commission, pursuant to its constitutional and

statutory mandates as the central personnel agency of the government, hereby
issues and adopts the following guidelines:
... ... ...

2. Action on Appointments issued by Elective and Appointive Officials

After the Elections Up to June 30
2.1. All appointments issued by elective appointing officials after elections up to
June 30 shall be disapproved, except if the appointee is fully qualified for
the position and had undergone regular screening processes before the
Election Ban as shown in the Promotion and Selection Board (PSB) report
or minutes of meeting.

... ... ...

This Resolution supersedes CSC Resolution No. 010988 dated 4 June 2001 and
shall take effect fifteen (15) days after its publication in a newspaper of general
circulation.

Quezon City, August 28, 2003.

Since Resolution No. 030918 was effective at the time Governor Ong issued the
26 appointments, we must decide this case based on Resolution No.
030918. Nazareno is not applicable, as it was decided based on Resolution No.
0109888.

We agree with the Civil Service Commission and the Court of Appeals that
Governor Ong issued Marco's appointment in accordance with Resolution No.
030918. Although his appointment was made five (5) days before the end of
Governor Ong's term, Marco was fully qualified for the position and had
undergone regular screening processes before the election ban. As the Civil
Service Commission found, Marco "applied for the [position of Cooperative
Development Specialist II] [and] passed the screening conducted by the
Personnel Selection Board (PSB) on February 12 & 13, 2004[.]"[132] The Court of
Appeals reiterated this finding in its Decision dated March 2, 2012. [133] Absent a
showing of grave abuse of discretion, this court will not disturb the findings of
fact of the Civil Service Commission,[134] especially since it has acquired
"specialized knowledge and expertise"[135] in the field of civil service law.

Assuming without conceding that Governor Ong's 26 appointments were issued

in bulk, this per se does not invalidate the appointments. Unlike Resolution No.
010988, Resolution No. 030918 does not prohibit appointments that are large
in number. Moreover, 26 appointments can hardly be classified as "mass
appointments," compared with the 89 appointments this court invalidated
in Nazareno.

Marco's appointment was valid. The Civil Service Commission correctly

approved his appointment.

Considering that Marco had already accepted his appointment by the time the
Province prevented him from assuming his office, his appointment remains
effective up to the present.[136] Consequently, the Civil Service Commission
correctly ordered the Province to reinstate Marco as Cooperative Development
Specialist II and to pay him his back salaries from July 8, 2004 when the
Province prevented him from reporting for work up to his actual reinstatement.

WHEREFORE, the Petition for Review on Certiorari is DENIED. The Court of

Appeals Decision dated March 2, 2012 is affirmed.

SO ORDERED.
Carpio, (Chairperson), Del Castillo, Perez,* and Mendoza, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
[ G.R. No. 118303, January 31, 1996 ]
SENATOR HEHERSON T. ALVAREZ, SENATOR JOSE D. LINA, JR., MR.
NICASIO B. BAUTISTA, MR. JESUS P. GONZAGA, MR. SOLOMON D.
MAYLEM, LEONORA C. MEDINA, CASIANO S. ALIPON, PETITIONERS,
VS. HON. TEOFISTO T. GUINGONA, JR., IN HIS CAPACITY AS
EXECUTIVE SECRETARY, HON. RAFAEL ALUNAN, IN HIS CAPACITY AS
SECRETARY OF LOCAL GOVERNMENT, HON. SALVADOR ENRIQUEZ,
IN HIS CAPACITY AS SECRETARY OF BUDGET, THE COMMISSION ON
AUDIT, HON. JOSE MIRANDA, IN HIS CAPACITY AS MUNICIPAL
MAYOR OF SANTIAGO AND HON. CHARITO MANUBAY, HON.
VICTORINO MIRANDA, JR., HON. ARTEMIO ALVAREZ, HON. DANILO
VERGARA, HON. PETER DE JESUS, HON. NELIA NATIVIDAD, HON.
CELSO CALEON AND HON. ABEL MUSNGI, IN THEIR CAPACITY AS
SANGGUNIANG BAYAN MEMBERS, MR. RODRIGO L. SANTOS, IN HIS
CAPACITY AS MUNICIPAL TREASURER, AND ATTY. ALFREDO S.
DIRIGE, IN HIS CAPACITY AS MUNICIPAL ADMINISTRATOR,
RESPONDENTS.

DECISION

HERMOSISIMA, JR., J.:

Of main concern to the petitioners is whether Republic Act No. 7720, just
recently passed by Congress and signed by the President into law, is
constitutionally infirm.

Indeed, in this Petition for Prohibition with prayer for Temporary Restraining
Order and Preliminary Prohibitory Injunction, petitioners assail the validity of
Republic Act No. 7720, entitled, "An Act Converting the Municipality of
Santiago, Isabela into an Independent Component City to be known as the City
of Santiago," mainly because the Act allegedly did not originate exclusively in
the House of Representatives as mandated by Section 24, Article VI of the 1987
Constitution.

Also, petitioners claim that the Municipality of Santiago has not met the
minimum average annual income required under Section 450 of the Local
Government Code of 1991 in order to be converted into a component city.

Undisputed is the following chronicle of the metamorphosis of House Bill No.

8817 into Republic Act No. 7720:

On April 18, 1993, HB No. 8817, entitled "An Act Converting the Municipality
of Santiago into an Independent Component City to be known as the City of
Santiago," was filed in the House of Representatives with Representative
Antonio Abaya as principal author. Other sponsors included Representatives
Ciriaco Alfelor, Rodolfo Albano, Santiago Respicio and Faustino Dy. The bill was
referred to the House Committee on Local Government and the House
Committee on Appropriations on May 5, 1993.

On May 19, 1993, June 1, 1993, November 28, 1993, and December 1, 1993,
public hearings on HB No. 8817 were conducted by the House Committee on
Local Government. The committee submitted to the House a favorable report,
with amendments, on December 9, 1993.

On December 13, 1993, HB No. 8817 was passed by the House of

Representatives on Second Reading and was approved on Third Reading on
December 17, 1993. On January 28, 1994, HB No. 8817 was transmitted to the
Senate.

Meanwhile, a counterpart of HB No. 8817, Senate Bill No. 1243, entitled, "An
Act Converting the Municipality of Santiago into an Independent] Component
City to be Known as the City of Santiago," was filed in the Senate. It was
introduced by Senator Vicente Sotto III, as principal sponsor, on May 19, 1993.
This was just after the House of Representatives had conducted its first public
hearing on HB No. 8817.

On February 23, 1994, or a little less than a month after HB No. 8817 was
transmitted to the Senate, the Senate Committee on Local Government
conducted public hearings on SB No. 1243. On March 1, 1994, the said
committee submitted Committee Report No. 378 on HB No. 8817, with the
recommendation that it be approved without amendment, taking into
consideration the reality that H.B. No. 8817 was on all fours with SB No. 1243.
Senator Heherson T. Alvarez, one of the herein petitioners, indicated his
approval thereto by signing said report as member of the Committee on Local
Government.

On March 3, 1994, Committee Report No. 378 was passed by the Senate on
Second Reading and was approved on Third Reading on March 14, 1994. On
March 22, 1994, the House of Representatives, upon being apprised of the
action of the Senate, approved the amendments proposed by the Senate.

The enrolled bill, submitted to the President on April 12, 1994, was signed by
the Chief Executive on May 5, 1994 as Republic Act No. 7720. When a
plebiscite on the Act was held on July 13, 1994, a great majority of the
registered voters of Santiago voted in favor of the conversion of Santiago into a
city.

The question as to the validity of Republic Act No. 7720 hinges on the following
twin issues: (I) Whether or not the Internal Revenue Allotments (IRAs) are to
be included in the computation of the average annual income of a municipality
for purposes of its conversion into an independent component city, and (II)
Whether or not, considering that the Senate passed SB No. 1243, its own
version of HB No. 8817, Republic Act No. 7720 can be said to have originated
in the House of Representatives.

I
The annual income of a local
government unit includes the IRAs

-----------------------------------------------------------

Petitioners claim that Santiago could not qualify into a component city because
its average annual income for the last two (2) consecutive years based on 1991
constant prices falls below the required annual income of Twenty Million Pesos
(P20,000,000.00) for its conversion into a city, petitioners having computed
Santiago’s average annual income in the following manner:
Total income (at 1991 constant prices) for 1991 P20,379,057.07
Total income (at 1991 constant prices) for 1992 P21,570,106.87
Total income for 1991 and 1992 P41,949,163.94
Minus:
IRAs for 1991 and 1992 P15,730,043.00
Total income for 1991 and 1992 P26,219,120.94
Average Annual Income P13,109,960.47

By dividing the total income of Santiago for calendar years 1991 and 1992,
after deducting the IRAs, the average annual income arrived at would only be
P13,109,560.47 based on the 1991 constant prices. Thus, petitioners claim that
Santiago’s income is far below the aforesaid Twenty Million Pesos average
annual income requirement.

The certification issued by the Bureau of Local Government Finance of the

Department of Finance, which indicates Santiago’s average annual income to
be P20,974,581.97, is allegedly not accurate as the Internal Revenue
Allotments were not excluded from the computation. Petitioners asseverate
that the IRAs are not actually income but transfers and! or budgetary aid from
the national government and that they fluctuate, increase or decrease,
depending on factors like population, land and equal sharing.

In this regard, we hold that petitioners’ asseverations are untenable because

Internal Revenue Allotments form part of the income of Local Government
Units.

It is true that for a municipality to be converted into a component city, it must,

among others, have an average annual income of at least Twenty Million Pesos
for the last two (2) consecutive years based on 1991 constant prices. [1] Such
income must be duly certified by the Department of Finance. [2]

Resolution of the controversy regarding compliance by the Municipality of

Santiago with the aforecited income requirement hinges on a correlative and
contextual explication of the meaning of internal revenue allotments (IRAs) vis-
a-vis the notion of income of a local government unit and the principles of local
autonomy and decentralization underlying the institutionalization and
intensified empowerment of the local government system.

A Local Government Unit is a political subdivision of the State which is

constituted by law and possessed of substantial control over its own affairs.
[3]
Remaining to be an intra sovereign subdivision of one sovereign nation, but
not intended, however, to be an imperium in imperio, [4]the local government
unit is autonomous in the sense that it is given more powers, authority,
responsibilities and resources.[5] Power which used to be highly centralized in
Manila, is thereby deconcentrated, enabling especially the peripheral local
government units to develop not only at their own pace and discretion but also
with their oWn resources and assets. [6]

The practical side to development through a decentralized local government

system certainly concerns the matter of financial resources. With its broadened
powers and increased responsibilities, a local government unit must now
operate on a much wider scale. More extensive operations, in turn, entail more
expenses. Understandably, the vesting of duty, responsibility and accountability
in every local government unit is accompanied with a provision for reasonably
adequate resources to discharge its powers and effectively carry out its
functions.[7] Availment of such resources is effectuated through the vesting in
every local government unit of (1) the right to create and broaden its own
source of revenue; (2) the right to be allocated a just share in national taxes,
such share being in the form of internal revenue allotments (IRAs); and (3) the
right to be given its equitable share in the proceeds of the utilization and
development of the national wealth, if any, within its territorial boundaries. [8]

The funds generated from local taxes, IRAs and national wealth utilization
proceeds accrue to the general fund of the local government and are used to
finance its operations subject to specified modes of spending the same as
provided for in the Local Government Code and its implementing rules and
regulations. For instance, not less than twenty percent (20%) of the IRAs must
be set aside for local development projects. [9] As such, for purposes of budget
preparation, which budget should reflect the estimates of the income of the
local government unit, among others, the IRAs and the share in the national
wealth utilization proceeds are considered items of income. This is as it should
be, since income is defined in the Local Government Code to be all revenues
and receipts collected or received forming the gross accretions of funds of the
local government unit.[10]

The IRAs are items of income because they form part of the gross accretion of
the funds of the local government unit. The IRAs regularly and automatically
accrue to the local treasury without need of any further action on the part of
the local government unit.[11] They thus constitute income which the local
government can invariably rely upon as the source of much needed funds.

For purposes of converting the Municipality of Santiago into a city, the

Department of Finance certified, among others, that the municipality had an
average annual income of at least Twenty Million Pesos for the last two (2)
consecutive years based on 1991 constant prices. This, the Department of
Finance did after including the IRAs in its computation of said average annual
income.

Furthermore, Section 450 (c) of the Local Government Code provides that "the
average annual income shall include the income accruing to the general fund,
exclusive of special funds, transfers, and non-recurring income." To reiterate,
IRAs are a regular, recurring item of income; nil is there a basis, too, to classify
the same as a special fund or transfer, since IRAs have a technical definition
and meaning all its own as used in the Local Government Code that
unequivocally makes it distinct from special funds or transfers referred to
when the Code speaks of "funding support from the national government, its
instrumentalities and government-owned-or-controlled corporations." [12]

Thus, Department of Finance Order No. 3593 [13] correctly encapsulizes the full
import of the above disquisition when it defined ANNUAL INCOME to be
"revenues and receipts realized by provinces, cities and municipalities from
regular sources of the Local General Fund including the internal revenue
allotment and other shares provided for in Sections 284, 290 and 291 of the
Code, but exclusive of non-recurring receipts, such as other national aids,
grants, financial assistance, loan proceeds, sales of fixed assets, and similar
others" (Italics ours).[14] Such order, constituting executive or contemporaneous
construction of a statute by an administrative agency charged with the task of
interpreting and applying the same, is entitled to full respect and should be
accorded great weight by the courts, unless such construction is clearly shown
to be in sharp conflict with the Constitution, the governing statute, or other
laws.[15]
II
In the enactment of RA No. 7720,
there was compliance with Section 24,
Article VI of the 1987 Constitution

-----------------------------------------------------------

Although a bill of local application like HB No. 8817 should, by constitutional

prescription,[16] originate exclusively in the House of Representatives, the claim
of petitioners that Republic Act No. 7720 did not originate exclusively in the
House of Representatives because a bill of the same import, SB No. 1243, was
passed in the Senate, is untenable because it cannot be denied that HB No.
8817 was filed in the House of Representatives first before SB No. 1243 was
filed in the Senate. Petitioners themselves cannot disavow their own admission
that HB No. 8817 was filed on April 18, 1993 while SB No. 1243 was filed on
May 19, 1993. The filing of HB No. 8817 was thus precursive not only of the
said Act in question but also of SB No. 1243. Thus, HB No. 8817, was the bill
that initiated the legislative process that culminated in the enactment of
Republic Act No. 7720. No violation of Section 24, Article VI, of the 1987
Constitution is perceptible under the circumstances attending the instant
controversy.

Furthermore, petitioners themselves acknowledge that HB No. 8817 was

already approved on Third Reading and duly transmitted to the Senate when
the Senate Committee on Local Government conducted its public hearing on
HB No. 8817. HB No. 8817 was approved on the Third Reading on December
17, 1993 and transmitted to the Senate on January 28, 1994; a little less than a
month thereafter, or on February 23, 1994, the Senate Committee on Local
Government conducted public hearings on SB No. 1243. Clearly, the Senate
held in abeyance any action on SB No. 1243 until it received HB No. 8817,
already approved on the Third Reading, from the House of Representatives.
The filing in the Senate of a substitute bill in anticipation of its receipt of the
bill from the House, does not contravene the constitutional requirement that a
bill of local application should originate in the House of Representatives, for as
long as the Senate does not act thereupon until it receives the House bill.

We have already addressed this issue in the case of Tolentino vs. Secretary of
Finance.17 There, on the matter of the Expanded Value Added Tax (EVAT) Law,
which, as a revenue bill, is nonetheless constitutionally required to originate
exclusively in the House of Representatives, we explained:
"x x x To begin with, it is not the law-but the revenue bill-which is required by
the Constitution to ‘originate exclusively’ in the House of Representatives. It is
important to emphasize this, because a bill originating in the House may
undergo such extensive changes in the Senate that the result may be a
rewriting of the whole. x x x as a result of the Senate action, a distinct bill may
be produced. To insist that a revenue statute-and not only the bill which
initiated the legislative process culminating in the enactment of the law-must
substantially be the same as the House bill would be to deny the Senate’s
power not only to ‘concur with amendments’ but also to ‘propose amendments.’
It would be to violate the coequality of legislative power of the two houses of
Congress and in fact make the House superior to the Senate.

xxx xxx xxx

It is insisted, however, that S. No. 1630 was passed not in substitution of H. No.
11197 but of another Senate bill (S. No. 1129) earlier filed and that what the
Senate did was merely to ‘take [H. No. 11197] into consideration’ in enacting
S. No. 1630. There is really no difference between the Senate preserving H.
No. 11197 up to the enacting clause and then writing its own version following
the enacting clause (which, it would seem petitioners admit is an amendment
by substitution), and, on the other hand, separately presenting a bill of its own
on the same subject matter. In either case the result are two bills on the same
subject.

Indeed, what the Constitution simply means is that the initiative for filing
revenue, tariff, or tax bills, bills authorizing an increase of the public debt,
private bills and bills of local application must come from the House of
Representatives on the theory that, elected as they are from the districts, the
members of the House can be expected to be more sensitive to the local needs
and problems. On the other hand, the senators, who are elected at large, are
expected to approach the same problems from the national perspective. Both
views are thereby made to bear on the enactment of such laws.

Nor does the Constitution prohibit the filing in the Senate of a substitute bill in
anticipation of its receipt of the bill from the House, so long as action by the
Senate as a body is withheld pending receipt of the House bill. x x x"[18]

III
Every law, including RA No. 7720,
has in its favor the presumption
of constitutionality

--------------------------------------------------------------------

It is a well-entrenched jurisprudential rule that on the side of every law lies the
presumption of constitutionality.[19] Consequently, for RA No. 7720 to be
nullified, it must be shown that there is a clear and unequivocal breach of the
Constitution, not merely a doubtful and equivocal one; in other words, the
grounds for nullity must be clear and beyond reasonable doubt.[20] Those who
petition this court to declare a law to be unconstitutional must clearly and fully
establish the basis that will justify such a declaration; otherwise, their petition
must fail. Taking into consideration the justification of our stand on the
immediately preceding ground raised by petitioners to challenge the
constitutionality of RA No. 7720, the Court stands on the holding that
petitioners have failed to overcome the presumption. The dismissal of this
petition is, therefore, inevitable.

WHEREFORE, the instant petition is DISMISSED for lack of merit with costs
against petitioners.

SO ORDERED.

Narvasa, C.J., Padilla, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno,
Vitug, Kapunan, Mendoza, Francisco, and Panganiban, JJ., concur.