1

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 9321 September 24, 1914
NORBERTO ASUNCION, ET AL., petitioners-appellants,
vs.
MANUEL DE YRIARTE, respondent-appellee.
Modesto Reyes for appellants.
Attorney-General Villamor for appellee.
MORELAND, J.:
This is an action to obtain a writ of mandamus to compel
the chief of the division of achieves of the Executive Bureau
to file a certain articles of incorporation.
The chief of the division of archives, the respondent,
refused to file the articles of incorporation, hereinafter
referred to, upon the ground that the object of the
corporation, as stated in the articles, was not lawful and
that, in pursuance of section 6 of Act No. 1459, they were
not registerable.
The proposed incorporators began an action in the Court of
First Instance of the city of Manila to compel the chief of
the division of archives to receive and register said articles
of incorporation and to do any and all acts necessary for the
complete incorporation of the persons named in the
articles. The court below found in favor of the defendant
and refused to order the registration of the articles
mentioned, maintaining ad holding that the defendant,
under the Corporation Law, had authority to determine
both the sufficiency of the form of the articles and the
legality of the object of the proposed corporation. This
appeal is taken from that judgment.
The first question that arises is whether or not the chief of
the division of archives has authority, under the
Corporation for registration, to decide not only as to the
sufficiency of the form of the articles, but also as to the
lawfulness of the purpose of the proposed corporation.
It is strongly urged on the part of the appellants that the
duties of the defendant are purely ministerial and that he
has no authority to pass upon the lawfulness of the object
for which the incorporators propose to organize. No
authorities are cited to support this proposition and we are
of the opinion that it is not sound.
Section 6 of the Corporation Law reads in part as follows:
Five or more persons, not exceeding fifteen, a
majority of whom are residents of the Philippine
Islands, may form a private corporation for any lawful
purpose by filing with the division of archives,
patents, copyrights, and trademarks if the Executive
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Bureau articles of incorporation duly executed and
acknowledged before a notary public, . . . .
Simply because the duties of an official happens to be
ministerial, it does not necessarily follow that he may not,
in the administration of his office, determine questions of
law. We are of the opinion that it is the duty of the division
of archives, when articles of incorporation are presented
for registration, to determine whether the objects of the
corporation as expressed in the articles are lawful. We do
not believe that, simply because articles of incorporation
presented foe registration are perfect in form, the division
of archives must accept and register them and issue the
corresponding certificate of incorporation no matter what
the purpose of the corporation may be as expressed in the
articles. We do not believe it was intended that the division
of archives should issue a certificate of incorporation to,
and thereby put the seal of approval of the Government
upon, a corporation which was organized for base of
immoral purposes. That such corporation might later, if it
sought to carry out such purposes, be dissolved, or its
officials imprisoned or itself heavily fined furnished no
reason why it should have been created in the first
instance. It seems to us to be not only the right but the duty
of the divisions of archives to determine the lawfulness of
the objects and purposes of the corporation before it issues
a certificate of incorporation.
It having determined that the division of archives, through
its officials, has authority to determine not only the
sufficiency as to form of the articles of incorporation
offered for registration, but also the lawfulness of the
purposes of leads us to the determination of the question
whether or not the chief of the division of archives, who is
the representative thereof and clothed by it with authority
to deal subject to mandamus in the performance of his
duties.
We are of the opinion that he may be mandamused if he
act in violation of law or if he refuses, unduly, to comply
with the law. While we have held that defendant has power
to pass upon the lawfulness of the purposes of the
proposed corporation and that he may, in the fulfillment of
his duties, determine the question of law whether or not
those purposes are lawful and embraced within that class
concerning which the law permits corporations to be
formed, that does not necessarily mean, as we have already
intimated, that his duties are not ministerial. On the
contrary, there is no incompatibility in holding, as we do
hold, that his duties are ministerial and that he has no
authority to exercise discretion in receiving and registering
articles of incorporation. He may exercise judgment that
is, the judicial function in the determination of the
question of law referred to, but he may not use discretion.
The question whether or not the objects of a proposed
corporation are lawful is one that can be decided one way
only. If he err in the determination of that question and
refuse to file articles which should be filed under the law,
the decision is subject to review and correction and, upon
proper showing, he will be ordered to file the articles. This
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is the same kind of determination which a court makes
when it decides a case upon the merits, the court makes
when it decides a case upon the merits. When a case is
presented to a court upon the merits, the court can decide
only one way and be right. As a matter of law, there is only
one way and be right. As a matter of law, there is only one
course to pursue. In a case where the court or other official
has discretion in the resolution of a question, then, within
certain limitations, he may decide the question either way
and still be right. Discretion, it may be said generally, is a
faculty conferred upon a court or other official by which he
may decide a question either way and still be right. The
power conferred upon the division of archives with respect
to the registration of articles of incorporation is not of that
character. It is of the same character as the determination
of a lawsuit by a court upon the merits. It can be decided
only one way correctly.
If, therefore, the defendant erred in determining the
question presented when the articles were offered for
registration, then that error will be corrected by this court
in this action and he will be compelled to register the
articles as offered. If, however, he did not commit an error,
but decided that question correctly, then, of course, his
action will be affirmed to the extent that we will deny the
relief prayed for.
The next question leads us to the determination of whether
or not the purposes of the corporation as stated in the
articles of incorporation are lawful within the meaning of
the Corporation Law.
The purpose of the incorporation as stated in the articles is:
"That the object of the corporation is (a) to organize and
regulate the management, disposition, administration and
control which the barrio of Pulo or San Miguel or its
inhabitants or residents have over the common property of
said residents or inhabitants or property belonging to the
whole barrio as such; and (b) to use the natural products of
the said property for institutions, foundations, and
charitable works of common utility and advantage to the
barrio or its inhabitants."
The municipality of Pasig as recognized by law contains
within its limits several barrios or small settlements, like
Pulo or San Miguel, which have no local government of
their own but are governed by the municipality of Pasig
through its municipal president and council. The president
and members of the municipal council are elected by a
general vote of the municipality, the qualified electors of all
the barrios having the right to participate.
The municipality of Pasig is a municipal corporation
organized by law. It has the control of all property of the
municipality. The various barrios of the municipality have
no right to own or hold property, they not being recognized
as legal entities by any law. The residents of the barrios
participate in the advantages which accrue to the
municipality from public property and receive all the
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benefits incident to residence in a municipality organized by
law. If there is any public property situated in the barrio of
Pulo or San Miguel not belonging to the general
government or the province, it belongs to the municipality
of Pasig and the sole authority to manage and administer
the same resides in that municipality. Until the present laws
upon the subject are charged no other entity can be the
owner of such property or control or administer it.
The object of the proposed corporation, as appears from
the articles offered for registration, is to make of the barrio
of Pulo or San Miguel a corporation which will become the
owner of and have the right to control and administer any
property belonging to the municipality of Pasig found
within the limits of that barrio. This clearly cannot be
permitted. Otherwise municipalities as now established by
law could be deprived of the property which they now own
and administer. Each barrio of the municipality would
become under the scheme proposed, a separate
corporation, would take over the ownership,
administration, and control of that portion of the municipal
territory within its limits. This would disrupt, in a sense, the
municipalities of the Islands by dividing them into a series
of smaller municipalities entirely independent of the
original municipality.
What the law does not permit cannot be obtained by
indirection. The object of the proposed corporation is
clearly repugnant to the provisions of the Municipal Code
and the governments of municipalities as they have been
organized thereunder. (Act No. 82, Philippine Commission.)
The judgment appealed from is affirmed, with costs against
appellants.
Arellano, C.J., Torres, Johnson, Carson and Araullo,
JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-18081 April 30, 1963
SOCIAL SECURITY SYSTEM EMPLOYEES ASSOCIATION
(PAFLU), petitioner,
vs.
THE HON. JUDGE E. SORIANO, ETC., ET AL., respondents.
Cipriano Cid and Associates for petitioner.
Office of the Solicitor General for respondents.
BAUTISTA ANGELO, J.:
The Social Security System Employees Association (PAFLU),
composed of employees of the Social Security Commission,
transmitted on October 20, 1960 to the latter a set of
demands containing terms and conditions of employment
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including a request for recognition as a collective bargaining
agent. Instead of answering the demands, the Commission
filed on December 14, 1960 before the Court of First
Instance of Manila a petition for declaratory relief wherein
it asked that the Social Security System which was created
by Republic Act No. 1161 be declared as a governmental
agency performing governmental functions so that its
employees may be prohibited from joining labor
unions and from compelling petitioners to enter into a
collective bargaining agreement with them as well as from
declaring strikes detrimental to the System.
The union answered the petition with a counter-prayer that
the SSS be declared as an agency of the government
exercising proprietary functions. In the meantime, a
conference was held between the union and the SSC in
connection with the demands submitted by the former and
sensing that the Commission was not disposed to enter into
a collective bargaining agreement with it, the union filed
before the Court of Industrial Relations a change for unfair
labor practice against said Commission pursuant to Section
14, paragraph (b), of Republic Act 875. Two days later, or on
February 16, 1961, the union went on strike and picketed
the premises of the Social Security Commission.
Without losing time, the Commission filed on the very same
date before the Court of First Instance of Manila an urgent
petition with preliminary injunction praying that an order
be immediately issued requiring the union members to
return to work and desist from picketing the premises of
the Commission. The court, presided over by Judge E.
Soriano, issued on the same date an ex parte preliminary
injunction ordering the union members not only to desist
from picketing the above premises but also to refrain from
doing any act of violence. As a consequence, the union filed
before this Court petition for certiorari with preliminary
injunction praying that the respondent judge be restrained
from enforcing his writ of preliminary injunction on the
ground that he had no jurisdiction to issue itex parte. This
Court issued the injunction prayed for. Respondents filed an
urgent petition to dissolve the injunction, but the same was
denied. After respondents had filed their answer, hearing
was held, and later the case was submitted for decision..
The main issue to be determined is whether the SSS is
a government agency exercising governmental functions,
claimed by respondents, or whether it exercises proprietary
functions, as contended by petitioner, on which issue will
necessarily hinge whether respondent judge had acted in
excess of his jurisdiction in issuing the ex parte writ of
preliminary injunction subject of the present petition for
certiorari..
In Bacani v. National Coconut Corporation, 53 O.G., 2798,
this Court said:.
Wherefore, the parties respectfully pray that the foregoing
stipulation of facts be admitted and approved by this
Honorable Court, without prejudice to the parties adducing
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other evidence to prove their case not covered by this
stipulation of facts. 1wph1.t
... There are function which our government is
required to exercise to promote its objective as
expressed in our Constitution and which are
exercised by it as an attribute of sovereignty and
those which it may exercise to promote merely the
welfare, progress and prosperity of the people. To
this latter class belongs the organization of these
corporations owned or controlled by the government
to promote certain aspects of the economic life of
our people such as the National Coconut
Corporation. These are what we may call
government-owned or controlled corporations which
may take the form of private enterprise or one
organized with powers and formal characteristic of
a private corporation under the Corporation Law.
The question that now arises is: Does the fact that
these corporations perform certain functions of the
government make them a part of the Government of
the Philippines?
The answer is simple: they do not acquire that status
for the simple reason that they do not come under
the classification of municipal or public corporations.
Take for instance the National Coconut Corporation.
... it was given a corporate power separate and
distinct from our government, for it was made
subject to the provisions of our Corporation Law in so
far as its corporate existence and the powers it may
exercise are concerned (sections 2 and 4,
Commonwealth Act No. 518). It may sue and be sued
in the same manner as any other private
corporations, and in this sense it is an entity different
from other Government.
x x x x x x x x x
To recapitulate, we may mention that the term
"Government of the Republic of the Philippines' ...
refers only to that government entity through which
the functions of the government are exercised as an
attribute of sovereignty, and in these are included
those arms through which political authority is made
effective whether they be provincial, municipal or
other form of local government. These are what we
call municipal corporations. They do not include
government entities which are given corporate
personality separate and distinct from the
government and which are governed by the
Corporation Law. Their powers, duties and liabilities
have to be determined in the light of that law and of
their corporate charters."
It appears that the National Coconut Corporation was
declared to be an entity separate from the government or
not exercising governmental functions because (1) it is not
a municipal corporation, (2) its powers are not exercised as
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an attribute of sovereignty, (3) it was given a separate
personality and powers separate and distinct from the
government, and (4) it may sue and be sued as any other
private corporations. As evidence of its having been
endowed with powers separate and distinct from those of
the government is the fact that it is made subject to the
provisions of the Corporation Law. But to enjoy such
powers, it is not, however, necessary that it be declared
expressly that it is subject to the provisions of the
Corporation Law, because such may be inferred from the
law creating it and its corporate charter.
It may now be asked: Do these reasons hold true with
regard to the Social Security System?
To begin with, the System is not a municipal corporation. In
its strict and proper sense, a municipal corporation is a
body politic established by law partly as an agency of the
state to assist in the civil government of the country, chiefly
to regulate and administer the local and internal affairs of
the city, town or district which is incorporated.
1
The
Social Security Commission does not regulate or administer
the local affairs of a town, city, or district which is
incorporated.
Again, the Social Security Commission or System has a
personality of its own, by virtue of which it can sue and be
sued. This is clearly inferred from Section 4(k) of Republic
Act No. 1161, as amended. In fact, it is endowed with
practically the same powers that are conferred by law upon
any other private corporations. Hence, we may say that
there is a substantial similarity between the Social Security
Commission on System and the National Coconut
Corporation.
In this connection, it is interesting to note the nature of the
functions that the government may exercise to accomplish
its objectives. These functions are two-fold, constituent and
ministrant: the former constitutes the very bonds of society
and are compulsory in nature; the latter the those that are
undertaken only by way of advancing the general interest
of society, and are merely optional. President Wilson
enumerated the constituent functions as follows:
(1) The keeping of order and providing for the
protection of persons and property from violence
and robbery.
(2) The fixing of the legal relations between man and
wife and between parents and children.
(3) The regulation of the holding, transmission, and
interchange of property, and the determination of its
liabilities for debt or crime.
(4) The determination of contract rights between
individuals.
(5) The definition and punishment of crimes.
(6) The administration of justice in civil cases.
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(7) The determination of the political duties,
privileges, and relations of citizens.
(8) Dealings of the state with foreign powers; the
preservation of the state from external danger or
encroachment and the advancement of its
international interests. (Malcolm, The Government of
the Philippine Islands p. 19) (Bacani v. National
Coconut Corporation, supra).
The most important of the ministrant functions are: public
works, public education, public charity, health and safety
regulations, and regulations of trade and industry. The
principles determining whether or not a government shall
exercise certain of these optional functions are: (1) that a
government should do for the public welfare those things
which private capital would not naturally undertake, and (2)
that the government should do those things which by their
very nature it is better equipped to administer for the
public welfare than is any private individual or group of
individual (Bacani v. National Coconut Corporation, supra).
It is noteworthy to state that the main objective of the SSS
is certainly not one of the constituent functions
enumerated above but one which merely aims advancing
the general interest of society which is optional. In effect,
its main aim is to provide social security to a large group of
employees who are not in the government service because
as a rule private capital cannot undertake it while the
government by its very nature is better equipped to do so
than any individual or group of individuals. It may be true
that social security is generally handled by the government,
but it does not follow that it cannot be exercised or
performed by a private entity or individual, for, as a matter
of fact, before the SSS was established there were already
many private systems adopted by private entities thru
insurance companies and mutual aid associations which
served as forerunners of the SSS (International Labor Office,
Social Security, p. 5).
It is without doubt that the state created the SSS in the
exercise of its police power and that it was for a
governmental purpose, or the promotion of social justice,
but it does not follow that the System should necessarily be
a government function or one in the exercise of its
sovereign powers. In fact, the System is not so essential and
indispensable that the government cannot exist without it.
History shows that our government has existed for a long
time before the creation of the SSS. And this indicates that
its creation is merely optional or a means of promoting the
welfare and general interest of society.
It is true that the SSS is a creation of Congress (Republic Act
No. 1161)and its existence and operation is financed by it. It
is likewise true that the under said Act the insurance is
made compulsory in order that its coverage might be as
universal as possible. We may even say that the
Commission is given by law quasi-judicial powers in order to
have an expeditious adjudication of the benefits of social
insurance. But these government functions are merely
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incidental in the sense that they are necessary to
implement and carry out of the objective of the law. The
fact is that the main bulk of the questions of the SSS is
proprietary in nature judging from its main functions
of investmentand insurance, which were essentially
proprietary, without which its main objective cannot be
carried out.
A factor that is noteworthy are the similarities between the
Social Security System and the Government Service
Insurance System. One is as to their powers and duties. The
Social Security Act gives to the System the power to adopt,
amend, and rescind such rules and regulations as may be
necessary to carry out the provisions and purposes of the
Act. The same power is given to the GSIS by the law of its
creation (Commonwealth Act No. 186, Section 17[a]).The
Commission has the power to enter into agreements for
such services and aids as may be needed. The same power
is given to the GSIS. The Commission has the power to
establish branches whenever and wherever it may be
necessary. Similar power is given to the GSIS. The
Commission is given the power to a adopt a budget of its
expenditures, including the salaries of its personnel. Similar
powers are given to the GSIS. The Commission has the
power to acquire property, real or personal, that may be
necessary for the attainment of its purpose. The GSIS may
also exercise similar powers. The Commission can sue and
be sued in court, so with the GSIS.
As to investments, the SSS is required to invest its funds (1)
in interest-bearing bonds and securities of the Government
of the Philippines or bonds or securities for the payment of
the interest and principal of which the faith and credit of
the Republic of the Philippines is pledged; (2) in interest-
bearing deposits in any domestic bank doing business in the
Philippines provided that said bank shall have been
designated as a depository for this purpose by the
President; (3) in loans or advances to the national
government for the construction of permanent toll bridges
in accordance with law; (4) in housing loans to members up
to a maximum of 60% of the appraised value of the
properties; (5) in loans to members, and (6) in other
projects and investments subject to approval by the
Insurance Commissioner. Similar powers are given by law to
the GSIS.
The appointment of the members of the governing bodies
in both the SSC and the GSIS are the same; they are
appointed by the President of the Philippines, with the
consent of the Commission on Appointments. Their tenure
is the same three years. Their compensation is also the
same a per diem of P25.00 for each day actually
attended by them.
Finally, the funds of the SSS are treated as special funds in
the same manner as those of the GSIS. They are distinct and
separate from those of the government such that the
government cannot dispose of them in any manner.
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To recapitulate, all the above similarities as found in the
charters of both entities cannot but point to one significant
fact: that it was the intention of Congress to pattern the SSS
after that of the GSIS. Consequently, the two entities must
exercise functions of the same nature.
These, functions are proprietary as declared by this; Court
with regard to the GSlS.
2

WHEREFORE, petition is granted. The writ of preliminary
injunction issued ex parte by respondent judge is hereby set
aside. The writ issued by this Court is made permanent. No
costs.
Bengzon, C.J., Labrador, Concepcion, Barrera, Paredes,
Regala and Makalintal, JJ., concur.
Padilla, Reyes, J.B.L. and Dizon, JJ., took no part.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 72807 September 9, 1991
MARILAO WATER CONSUMERS ASSOCIATION,
INC., petitioners,
vs.
INTERMEDIATE APPELLATE COURT, MUNICIPALITY OF
MARILAO, BULACAN, SANGGUNIANG BAYAN, MARILAO,
BULACAN, and MARILAO WATER DISTRICT, respondents.
Magtanggol C. Gunigundo for petitioner.
Prospero A. Crescini for Marilao Water District.

NARVASA, J.:p
Involved in this appeal is the determination of which
triburial has jurisdiction over the dissolution of a water
district organized and operating as a quasi-public
corporation under the provisions of Presidential Decree No.
198, as amended;
1
the Regional Trial Court, or the
Securities & Exchange Commission.
PD 198 authorizes the formation, lays down the powers and
functions, and governs the operation of water districts
throughout the country; it is "the source of authorization
and power to form and maintain a (water) district." Once
formed, it says, a district is subject to its provisions and is
not under the jurisdiction of any political subdivision.
2

Under PD 198, water districts may be created by the
different local legislative bodies by the passage of a
resolution to this effect, subject to the terms of the decree.
The primary function of these water districts is to sell
water to residents within their territory, under such
schedules of rates and charges as may be determined by
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their boards.
3
They shall manage, administer, operate and
maintain all watersheds within their territorial boundaries,
safeguard and protect the use of the waters therein,
supervise and control structures within their service areas,
and prohibit any person from selling or otherwise disposing
of water for public purposes within their service areas
where district facilities are available to provide such
service.
4

The decree specifies the terms under which water districts
may be formed and operate. It prescribes, particularly
a) the name by which a water district shad be known, which
shall be contained in the enabling resolution, and shall
include the name of the city, municipality, or province, or
region thereof, served by said system, followed by the
words, 'Water District;'
5

b) the number and qualifications of the members of
the boards of directors, with the date of expiration of term
of office for each;
6
the manner of their selection and initial
appointment by the head of the local political
subdivision;
7
their terms of office (which shall be in
staggered periods of two, four and six years);
8
the manner
of filling up vacancies in the board;
9
the compensation and
liabilities of members of the board.
10
The resolution shall
contain a "statement that the district may only be dissolved
on the grounds and under the conditions set forth in
Section 44" of the law, but nothing in the resolution of
formation, the decree adds, "shall state or infer that the
local legislative body has the power to dissolve, alter or
affect the district beyond that specifically provided for in
this Act."
11

The juridical entities thus created and organized under PD
198 are considered quasi-public corporations, performing
public services and supplying public wants. They are
authorized not only to "exercise all the powers which are
expressly granted" by said decree, and those "which are
necessarily implied from or incidental to" said powers, but
also "the power of eminent domain, the exercise .. (of
which) shall however be subject to review by the
Administration" (LWUA). In addition to the powers granted
in, and subject to such restrictions imposed under, the Act,
they may also exercise the powers, rights and privileges
given to private corporations under existing laws.
12

The decree also established a government corporation
attached to the Office of the President, known as the Local
Water Utilities Administration (LWUA)
13
to function
primarily as "a specialized lending institution for the
promotion development and financing of local water
utilities." It has the following specific powers and duties;
14

(1) prescribe minimum standards and
regulations in order to assure acceptable
standards ofconstruction materials and
supplies, maintenance, operation, personnel
training, accounting and fiscal practices for
local water utilities;
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(2) furnish technical assistance and personnel
training programs for local water utilities;
(3) monitor and evaluate local water
standards; and
(4) effect systems integration,
joint investment and operations, district
annexation and deannexation whenever
economically warranted.
It was pursuant to the foregoing rules and norms that the
Marilao Water District was formed by Resolution of the
Sangguniang Bayan of the Municipality of Marilao dated
September 18, 1982, which resolution was thereafter
forwarded to the LWUA and "duly filed" by it on October 4,
1982 after ascertaining that it conformed to the
requirements of the law.
15

The claim was thereafter made that the creation of the
Marilao Water District in the manner aforestated was
defective and illegal. The claim was made by a non-stock,
non-profit corporation known as the Marilao Water
Consumers Association, Inc., in a petition dated December
12, 1983 filed with the Regional Trial Court at Malolos,
Bulacan. Impleaded as respondents were the Marilao
Water District, as well as the Municipality of Marilao,
Bulacan; its Sangguniang Bayan; and Mayor Nicanor V.
GUILLERMO. The petition prayed for the dissolution of the
water district on the basis chiefly of the following
allegations, to wit:
1) there had been no real, but only a "farcical" public
hearing prior to the creation of the Water District;
2) not only was the waterworks system turned over to the
Water District without compensation. but a subsidy was
illegally authorized for it;
3) the Water District was being run with "negligence,
apathy, indifference and mismanagement," and was not
providing adequate and efficient service to the community,
but this notwithstanding, the consumers were being billed
in full and threatened with disconnection for failure to pay
bills on time; in fact, one of the consumers who complained
had his water service cut off;
4) the consumers were consequently "forced to organize
themselves into a corporation last October 3, 1983 ... for
the purpose of demanding adequate and sufficient supply
of water and efficient management of the waterworks in
Marilao, Bulacan.
16

Acting on the complaint, particularly on the application
for temporary restraining order and preliminary injunction
set out therein, the Trial Court issued an Order on
December 22, 1983 setting the application for preliminary
hearing, requiring the respondents to answer the petition
and restraining them until further orders from collecting
13

any water bill, disconnecting any water service, transferring
any property of the waterworks, or disbursing any amount
in favor of any person. The order was modified on January
6, 1984 to allow the respondents to pay the district's
outstanding obligations to Meralco, by way of exception to
the restraining order.
On January 13, 1984 the Marilao Water District filed its
Answer with Compulsory Counterclaim, denying the
material allegations of the petition and asserting as
affirmative defenses (a) the Court's lack of jurisdiction of
the subject matter, and (b) the failure of the petition to
state a cause of action. The answer alleged that the matter
of the water district's dissolution fell under the original and
exclusive jurisdiction of the Securities & Exchange
Commission (SEC); and the matter of the propriety of water
rates, within the primary administrative jurisdiction of the
LWUA and the quasi-judicial jurisdiction of the National
Water Resources Council. On the same date, Marilao Water
District filed a motion for admission of its third-party
complaint against the officers and directors of the
petitioner corporation, it being claimed that they had
instigated the filing of the petition simply because one of
them was a political adversary of the respondent Mayor.
The other respondents also filed their answer through the
Provincial Fiscal of Bulacan, setting up the same affirmative
defense of lack of jurisdiction on the part of the Trial Court;
and failure of the petition to state a cause of action since it
admitted that it was by resolution of the Marilao
Sangguniang Bayan that the Marilao Water District was
constituted.
The petitioner the Marilao Consumers Association filed a
reply, and an answer to the counterclaim, on January 26,
1984. It averred that since the Marilao Water District had
not been organized under the Corporation Code, the SEC
had no jurisdiction over a proceeding for its dissolution; and
that under Section 45 of PD 198, the proceeding to
determine if the dissolution of the water district is for the
best interest of the people, is within the competence of a
regular court of justice, and neither the LWUA nor the
National Water Resources Council is competent to take
cognizance of the matter of dissolution of the water district
and recovery of its waterworks system, or the exorbitant
rates imposed by it. The Consumers Association also
opposed admission of the third-party complaint on the
ground that its individual officers are not personally
amenable to suit for acts of the corporation,
17
which has a
personality distinct from theirs.
The Trial Court found for the respondents. It dismissed the
Consumers Association's suit by Order handed down on
June 8, 1984 which pertinently reads as follows:
After a consideration of the arguments raised
by the herein parties, the Court is more
inclined to take the position of the
respondents that the Securities and Exchange
14

Commission has the exclusive and original
jurisdiction over this case.
WHEREFORE, the instant petition, the third-
party complaint, and the compulsory
counterclaim filed herein are hereby
DISMISSED, for lack of jurisdiction.
Its motion for reconsideration having been denied, by
Order dated September 20, 1984, the Consumers
Association filed with this Court a petition for review
on certiorari, which was docketed as G.R. No. 68742. The
case was however referred to the Intermediate Appellate
Court by this Court's Second Division, in a Resolution dated
November 19, 1984, where it was docketed as AC-G.R. S.P.
No. 04862.
But there in the Intermediate Appellate Court, the
Consumers Association's cause also met with failure. The
Appellate Court, in its Decision promulgated on September
10, 1985, ruled that its cause could not prosper because
1) it had availed of the wrong remedy, i.e., the special civil
action of certiorari; the Order of June 8, 1984 being a final
order in the sense that it "left nothing else to be done in
the case the proper remedy was appeal under Rule 41 of
the Rules of Court and not a certiorari suit under Rule 65;
and
2) even if the certiorari action be treated as an appeal, it
was 14 unerringly clear that the controversy ... falls within
the competence of the SEC in virtue of P.D. 902-A
18
Which
provides that said agency "shall have original and exclusive
jurisdiction to hear and decide cases involving:
a) xxx xxx xxx
b) Controversies arising out of intra-corporate
or partnership relations, between and among
stockholders, members or associates; between
any or all of them and the corporation,
partnership or association of which they are
stockholders, members or associates,
respectively; and between such corporation,
partnership or association and the state insofar
as it concerns their individual franchise or right
to exist as such entity ...
The Appellate Court subsequently denied the petitioner's
motion for reconsideration, by Resolution dated November
4, 1985. Hence, the petition for review on certiorari at bar,
in which reversal of the Appellate Tribunal's decision is
sought, the petitioner insisting that the remedy resorted to
by it was correct but misunderstood by the I.A.C. and that
the law does indeed vest exclusive jurisdiction over the
subject matter of the case in the Regional Trial Court, not
the Securities and Exchange Commission.
15

Turning first to the adjective issue, it is quite evident that
the Order of the Trial Court of June 8, 1984, dismissing the
action of the Consumers Association, is really a final order;
it finally disposed of the proceeding and left nothing more
to be done by the Court on the merits. Now, the firmly
settled principle is that the remedy against such
a final order is the ordinary remedy of an appeal, either
solely on questions of law in which case the appeal may
be taken only to the Supreme Court or questions of fact
and law in which event the appeal should be brought to
the Court of Appeals. The extraordinary remedy of a special
civil action of certiorari or prohibition is not the appropriate
recourse because precisely, one of the conditions for
availing of it is that there should be "no appeal, nor any
plain, speedy and adequate remedy in the ordinary course
of law.
19
A resort to the latter instead of the former would
ordinarily be fatal, unless it should appear in a given case
that appeal would otherwise be an inefficacious or
inadequate remedy.
20

In holding that Marilao Water District had resorted to the
wrong remedy against the Trial Court's order dismissing its
suit, i.e., the special civil action of certiorari, instead of an
appeal, the Intermediate Appellate Court quite overlooked
the fact, not seriously disputed by the Marilao Water
District and its co-respondents, that the former had in fact
availed of the remedy of appeal by certiorari under Rule 45
of the Rules of Court, as required by paragraph 25 of the
Interim Rules & Guidelines of this Court,
implementing Batas Pambansa Bilang 129; that before
doing so, it had first asked for and been granted an
extension of thirty (30) days within which to file a petition
for review on certiorari; but that subsequently, by
Resolution of this Court's Second Division dated November
19, 1984, the case was referred to the Intermediate
Appellate Court, evidently because it was felt that certain
factual issues had yet to be determined. In any case, all
things considered, the Court is not prepared to have the
case at bar finally determined on this procedural issue.
The juridical entities known as water districts created by PD
198, although considered as quasi-public corporations and
authorized to exercise the powers, rights and privileges
given to private corporations under existing laws
21
are
entirely distinct from corporations organized under the
Corporation Code, PD 902-A, as amended. The Corporation
Code has nothing whatever to do with their formation and
organization, all the terms and conditions for their
organization and operation being particularly spelled out in
PD 198. The resolutions creating them, their charters, in
other words, are filed not with the Securities and Exchange
Commission but with the LWUA. It is these
resolutions qua charters, and not articles of incorporation
drawn up under the Corporation Code, which set forth the
name of the water districts, the number of their directors,
the manner of their selection and replacement, their
powers, etc. The SEC which is charged with enforcement of
the Corporation Code as regards corporations, partnerships
and associations formed or operating under its provisions,
has no power of supervision or control over the activities of
16

water districts. More particularly, the SEC has no power of
oversight over such activities of water districts as selling
water, fuling the rates and charges therefor
22
or the
management, administration, operation and maintenance
of watersheds within their territorial boundaries, or the
safeguarding and protection of the use of the waters
therein, or the supervision and control of structures within
the service areas of the district, and the prohibition of any
person from selling or otherwise disposing of water for
public purposes within their service areas where district
facilities are available to provide such service.
23
That
function of supervision or control over water districts is
entrusted to the Local Water Utilities
Administration.
24
Consequently, as regards the activities of
water districts just mentioned, the SEC obviously can have
no claim to any expertise.
The "Provincial Water Utilities Act of 1973" has a specific
provision governing dissolution of water districts created
thereunder This is Section 45 of PD 198
25
reading as
follows:
SEC. 45. Dissolution. A district may be
dissolved by resolution of its board of directors
filed in the manner of filing the resolution
forming the district: Provided, however, That
prior to the adoption of any such resolution:
(1) another public entity has acquired the
assets of the district and has assumed all
obligations and liabilities attached thereto; (2)
all bondholders and other creditors have been
notified and they consent to said transfer and
dissolution; and (3) a court of competent
jurisdiction has found that said transfer and
dissolution are in the best interest of the
public.
Under this provision, it is the LWUA which is the
administrative body involved in the voluntary dissolution of
a water district; it is with it that the resolution of dissolution
is filed, not the Securities and Exchange Commission. And
this provision is evidently quite distinct and different from
those on dissolution of corporations "formed or organized
under the provisions of xx (the Corporation) Code" set out
in Sections 117 to 121, inclusive, of said Code, under which
dissolution may be voluntary (by vote of the stockholders
or members), generally effected by the filing of the
corresponding resolution with the Securities and Exchange
Commission, or involuntary, commenced by the filing of a
verified complaint also with the SEC.
All these argue against conceding jurisdiction in the
Securities and Exchange Commission over proceedings for
the dissolution of water districts. For although described as
quasipublic corporations, and granted the same powers as
private corporations, water districts are not really
corporations. They have no incorporators, stockholders or
members, who have the right to vote for directors, or
amend the articles of incorporation or by-laws, or pass
resolutions, or otherwise perform such other acts as are
17

authorized to stockholders or members of corporations by
the Corporation Code. In a word, there can be no such thing
as a relation of corporation and stockholders or members in
a water district for the simple reason that in the latter there
are no stockholders or members. Between the water
district and those who are recipients of its water services
there exists not the relationship of corporation-and-
stockholder, but that of a service agency and users or
customers. There can therefore be no such thing in a water
district as "intra-corporate or partnership relations,
between and among stockholders, members or associates
(or) between any or all of them and the corporation,
partnership or association of which they are stockholders,
members or associates, respectively," within the
contemplation of Section 5 of the Corporation Code so as to
bring controversies involving them within the competence
and cognizance of the SEC.
There can be even less debate about the fact that the SEC
has no jurisdiction over the co-respondents of the Marilao
Water District the Municipality of Marilao, its
Sangguniang Bayan and its Mayor who are accused of a
"conspiracy" with the water district in respect of the
anomalies described in the Consumer Associations'
petition.
26

The controversy, therefore, between the Consumers
Association, on the one hand, and Marilao District and its
co-respondents, on the other, is not within the jurisdiction
of the SEC.
In their answer with counterclaim in the proceedings a quo,
the respondents advocated the theory that the case falls
within the jurisdiction of the LWUA and/or the National
Water Resources Council.
The LWUA does not appear to have any adjudicatory
functions. It is, as already pointed out, "primarily a
specialized lending institution for the promotion,
development and financing of local water utilities,
27
with
power to prescribe minimum standards and regulations
regarding maintenance, operation, personnel training,
accounting and fiscal practices for local water utilities, to
furnish technical assistance and personnel training
programs therefor; monitor and evaluate local water
standards; and effect systems integration, joint investment
and operations, district annexation and deannexation
whenever economically warranted.
28
The LWUA has quasi-
judicial power only as regards rates or charges fixed by
water districts, which it may review to establish compliance
with the provisions of PD 198, without prejudice to appeal
being taken therefrom by a water concessionaire to the
National Water Resources Council whose decision thereon
shall be appealable to the Office of the President.
29
The
rates or charges established by respondent Marilao Water
District do not appear to be at issue in the controversy at
bar.
The National Water Resources Council, on the other hand,
is conferred "original jurisdiction over all disputes relating
to appropriation, utilization, exploitation, development,
18

control, conservation and protection of waters within the
meaning and context of the provisions of ..." (the Code by
which said Council was created, Presidential Decree No.
1067, otherwise known as the Water Code of the
Philippines);
30
and its decision on water rights
controversies may be appealed to the Court of First
Instance of the province where the subject matter of the
controversy is situated.
31
It also has authority to review
questions of annexations and deannexations (addition to or
exclusion from the district of territory). Again it does not
appear that the case at bar is a water rights controversy or
one involving annexation or deannexation.
What essentially is sought by the Consumers Association is
the dissolution of the Marilao Water District, on the ground
that its formation was illegal and invalid; the waterworks
system had been turned over to it without compensation
and a subsidy illegally authorized for it; and the Water
District was being run with "negligence, apathy,
indifference and mismanagement," and was not providing
adequate and efficient service to the community.
32

Now, as already above stated, the dissolution of a water
district is governed by Section 45 of PD 198, as amended,
stating that it "may be dissolved by resolution of its board
of directors filed in the manner of filing the resolution
forming the district," subject to enumerated pre-
requisites.
33
The procedure for dissolution thus consists of
the following steps:
1) the initiation by the board of directors of the water
district motu proprio or at the relation of an interested
party, of proceedings for the dissolution of the water
district, including:
a) the ascertainment by said board that
1) another public entity has acquired the assets of the
district and has assumed all obligations and liabilities
attached thereto; and
2) all bondholders and other creditors have been notified
and consent to said transfer and dissolution;
b) the commencement by the water district in a court of
competent jurisdiction of a proceeding to obtain a
declaration that "said transfer and dissolution are in the
best interest of the public;
2) after compliance with the foregoing requisites, the
adoption by the board of directors of the water district of a
resolution dissolving the water district and its submission to
the Sangguniang Bayan concerned for approval;
3) submission of the resolution of the Sangguniang Bayan
dissolving the water district to the head of the local
government concerned for approval, and ultimately to the
LWUA for final approval and filing.
The Consumer Association's action therefore is, in fine, in
the nature of a mandamus suit, seeking to compel the
19

board of directors of the Marilao Water District, and its
alleged co-conspirators, the Sangguniang Bayan and the
Mayor of Marilao to go through the process above
described for the dissolution of the water district. In this
sense, and indeed, taking account of the nature of the
proceedings for dissolution just described, it seems plain
that the case does not fall within the limited jurisdiction of
the SEC., but within the general jurisdiction of Regional Trial
Courts.
WHEREFORE, the Decision of the Intermediate Appellate
Court of September 10, 1985 affirming that of the
Regional Trial Court of June 8, 1984 is REVERSED and SET
ASIDE, and the case is remanded to the Regional Trial Court
for further proceedings and adjudication in accordance with
law. No costs.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 79182 September 11, 1991
PNOC-ENERGY DEVELOPMENT CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (Third
Division) and DANILO MERCADO, respondents.
Bacorro & Associates for petitioner.
Alberto L. Dalmacion for private respondent.

PARAS, J.:p
This is a petition for certiorari to set aside the
Resolution * dated July 3, 1987 of respondent National
Labor RelationsCommission (NLRC for brevity) which
affirmed the decision dated April 30, 1986 of Labor Arbiter
Vito J. Minoria of the NLRC, Regional Arbitration Branch No.
VII at Cebu City in Case No. RAB-VII-0556-85 entitled
"Danilo Mercado, Complainant, vs. Philippine National Oil
Company-Energy Development Corporation, Respondent",
ordering the reinstatement of complainant Danilo Mercado
and the award of various monetary claims.
The factual background of this case is as follows:
Private respondent Danilo Mercado was first employed by
herein petitioner Philippine National Oil Company-
Energy Development Corporation (PNOC-EDC for brevity)
on August 13, 1979. He held various positions ranging from
clerk, general clerk to shipping clerk during his employment
at its Cebu office until his transfer to its establishment at
Palimpinon, Dumaguete, Oriental Negros on September 5,
1984. On June 30, 1985, private respondent Mercado was
dismissed. His last salary was P1,585.00 a month basic pay
plus P800.00 living allowance (Labor Arbiter's Decision,
Annex "E" of Petition, Rollo, p. 52).
20

The grounds for the dismissal of Mercado are allegedly
serious acts of dishonesty committed as follows:
1. On ApriI 12, 1985, Danilo Mercado was
ordered to purchase 1,400 pieces of
nipa shingles from Mrs. Leonardo Nodado of
Banilad, Dumaguete City, for the total
purchase price of Pl,680.00. Against company
policy, regulations and specific orders, Danilo
Mercado withdrew the nipa shingles from the
supplier but paid the amount of P1,000.00
only. Danilo Mercado appropriated the balance
of P680.00 for his personal use;
2. In the same transaction stated above, the
supplier agreed to give the company a discount
of P70.00 which Danilo Mercado did not report
to the company;
3. On March 28, 1985, Danilo Mercado was
instructed to contract the services of Fred R.
Melon of Dumaguete City, for the fabrication
of rubber stamps, for the total amount of
P28.66. Danilo Mercado paid the amount of
P20.00 to Fred R. Melon and appropriated for
his personal use the balance of P8.66.
In addition, private respondent, Danilo
Mercado violated company rules and
regulations in the following instances:
1. On June 5, 1985, Danilo Mercado was absent
from work without leave, without proper turn-
over of his work, causing disruption and delay
of company work activities;
2. On June 15, 1985, Danilo Mercado went on
vacation leave without prior leave, against
company policy, rules and regulations.
(Petitioner's Memorandum, Rollo, p. 195).
On September 23, 1985, private respondent Mercado filed
a complaint for illegal dismissal, retirement benefits,
separation pay, unpaid wages, etc. against petitioner PNOC-
EDC before the NLRC Regional Arbitration Branch No. VII
docketed as Case No. RAB-VII-0556-85.
After private respondent Mercado filed his position paper
on December 16, 1985 (Annex "B" of the Petition, Rollo, pp.
28-40), petitioner PNOC-EDC filed its Position
Paper/Motion to Dismiss on January 15, 1986, praying for
the dismissal of the case on the ground that the Labor
Arbiter and/or the NLRC had no jurisdiction over the case
(Annex "C" of the Petition, Rollo, pp. 41-45), which was
assailed by private respondent Mercado in his Opposition
to the Position Paper/Motion to Dismiss dated March 12,
1986 (Annex "D" of the Petition, Rollo, pp. 46-50).
The Labor Arbiter ruled in favor of private respondent
Mercado. The dispositive onion of said decision reads as
follows:
21

WHEREFORE, in view of the foregoing,
respondents are hereby ordered:
1) To reinstate complainant to his former
position with full back wages from the date of
his dismissal up to the time of his actual
reinstatement without loss of seniority rights
and other privileges;
2) To pay complainant the amount of
P10,000.00 representing his personal share of
his savings account with the respondents;
3) To pay complainants the amount of
P30,000.00 moral damages; P20,000.00
exemplary damages and P5,000.00 attorney's
fees;
4) To pay complainant the amount of P792.50
as his proportionate 13th month pay for 1985.
Respondents are hereby further ordered to
deposit the aforementioned amounts with this
Office within ten days from receipt of a copy of
this decision for further disposition.
SO ORDERED.
(Labor Arbiter's Decision, Rollo, p. 56)
The appeal to the NLRC was dismissed for lack of merit on
July 3, 1987 and the assailed decision was affirmed.
Hence, this petition.
The issues raised by petitioner in this instant petition are:
1. Whether or not matters of employment
affecting the PNOC-EDC, a government-owned
and controlled corporation, are within the
jurisdiction of the Labor Arbiter and the NLRC.
2. Assuming the affirmative, whether or not
the Labor Arbiter and the NLRC are justified in
ordering the reinstatement of private
respondent, payment of his savings, and
proportionate 13th month pay and payment of
damages as well as attorney's fee.
Petitioner PNOC-EDC alleges that it is a corporation wholly
owned and controlled by the government; that the Energy
Development Corporation is a subsidiary of the Philippine
National Oil Company which is a government entity created
under Presidential Decree No. 334, as amended; that being
a government-owned and controlled corporation, it is
governed by the Civil Service Law as provided for in Section
1, Article XII-B of the 1973 Constitution, Section 56 of
Presidential Decree No. 807 (Civil Service Decree) and
Article 277 of Presidential Decree No. 442, as amended
(Labor Code).
The 1973 Constitution provides:
22

The Civil Service embraces every branch,
agency, subdivision and instrumentality of the
government including government-owned or
controlled corporations.
Petitioner PNOC-EDC argued that since Labor Arbiter
Minoria rendered the decision at the time when the 1973
Constitution was in force, said decision is null and void
because under the 1973 Constitution, government-owned
and controlled corporations were governed by the Civil
Service Law. Even assuming that PNOC-EDC has no original
or special charter and Section 2(i), Article IX-B of the 1987
Constitution provides that:
The Civil Service embraces all branches,
subdivision, instrumentalities and agencies of
the Government, including government-owned
or controlled corporations with original
charters.
such circumstances cannot give validity to the decision of
the Labor Arbiter (Ibid., pp. 192-193).
This issue has already been laid to rest in the case of PNOC-
EDC vs. Leogardo, 175 SCRA 26 (July 5, 1989), involving the
same petitioner and the same issue, where this Court ruled
that the doctrine that employees of government-owned
and/or con controlled corporations, whether created by
special law or formed as subsidiaries under the
General Corporation law are governed by the Civil Service
Law and not by the Labor Code, has been supplanted by the
present Constitution. "Thus, under the present state of the
law, the test in determining whether a government-owned
or controlled corporation is subject to the Civil Service Law
are the manner of its creation, such that government
corporations created by special charter are subject to its
provisions while those incorporated under the General
Corporation Law are not within its coverage."
Specifically, the PNOC-EDC having been incorporated under
the General Corporation Law was held to be a government
owned or controlled corporation whose employees are
subject to the provisions of the Labor Code (Ibid.).
The fact that the case arose at the time when the 1973
Constitution was still in effect, does not deprive the NLRC of
jurisdiction on the premise that it is the 1987 Constitution
that governs because it is the Constitution in place at the
time of the decision (NASECO v. NLRC, G.R. No. 69870, 168
SCRA 122 [1988]).
In the case at bar, the decision of the NLRC was
promulgated on July 3, 1987. Accordingly, this case falls
squarely under the rulings of the aforementioned cases.
As regards the second issue, the record shows that PNOC-
EDC's accusations of dishonesty and violations of company
rules are not supported by evidence. Nonetheless, while
acknowledging the rule that administrative bodies are not
governed by the strict rules of evidence, petitioner PNOC-
23

EDC alleges that the labor arbiter's propensity to decide the
case through the position papers submitted by the parties is
violative of due process thereby rendering the decision null
and void (Ibid., p. 196).
On the other hand, private respondent contends that as can
be seen from petitioner's Motion for Reconsideration
and/or Appeal dated July 28, 1986 (Annex "F" of the
Petition, Rollo, pp. 57- 64), the latter never questioned the
findings of facts of the Labor Arbiter but simply limited its
objection to the lack of legal basis in view of its stand that
the NLRC had no jurisdiction over the case (Private
Respondent's Memorandum, Rollo, p. 104).
Petitioner PNOC-EDC filed its Position Paper/Motion to
Dismiss dated January 15, 1986 (Annex "C" of the Petition
Rollo, pp. 41-45) before the Regional Arbitration Branch No.
VII of Cebu City and its Motion for Reconsideration and/or
Appeal dated July 28, 1986 (Annex "F" of the Petition, Rollo,
pp. 57-64) before the NLRC of Cebu City. Indisputably, the
requirements of due process are satisfied when the parties
are given an opportunity to submit position papers. What
the fundamental law abhors is not the absence of previous
notice but rather the absolute lack of opportunity to
ventilate a party's side. There is no denial of due process
where the party submitted its position paper and flied its
motion for reconsideration (Odin Security Agency vs. De la
Serna, 182 SCRA 472 [February 21, 1990]). Petitioner's
subsequent Motion for Reconsideration and/or Appeal has
the effect of curing whatever irregularity might have been
committed in the proceedings below (T.H. Valderama and
Sons, Inc. vs. Drilon, 181 SCRA 308 [January 22, 1990]).
Furthermore, it has been consistently held that findings of
administrative agencies which have acquired expertise
because their jurisdiction is confined to specific matters are
accorded not only respect but even finality (Asian
Construction and Development Corporation vs. NLRC, 187
SCRA 784 [July 27, 1990]; Lopez Sugar Corporation vs.
Federation of Free Workers, 189 SCRA 179 [August 30,
1990]). Judicial review by this Court does not go so far as to
evaluate the sufficiency of the evidence but is limited to
issues of jurisdiction or grave abuse of discretion (Filipinas
Manufacturers Bank vs. NLRC, 182 SCRA 848 [February 28,
1990]). A careful study of the records shows no substantive
reason to depart from these established principles.
While it is true that loss of trust or breach of confidence is a
valid ground for dismissing an employee, such loss or
breach of trust must have some basis (Gubac v. NLRC, 187
SCRA 412 [July 13, 1990]). As found by the Labor Arbiter,
the accusations of petitioner PNOC-EDC against private
respondent Mercado have no basis. Mrs. Leonardo Nodado,
from whom the nipa shingles were purchased, sufficiently
explained in her affidavit (Rollo, p. 36) that the total
purchase price of P1,680.00 was paid by respondent
Mercado as agreed upon. The alleged discount given by
Mrs. Nodado is not supported by evidence as well as the
alleged appropriation of P8.66 from the cost of fabrication
of rubber stamps. The Labor Arbiter, likewise, found no
24

evidence to support the alleged violation of company rules.
On the contrary, he found respondent Mercado's
explanation in his affidavit (Rollo, pp. 38-40) as to the
alleged violations to be satisfactory. Moreover, these
findings were never contradicted by petitioner petitioner
PNOC-EDC.
PREMISES CONSIDERED, the petition is DENIED and the
resolution of respondent NLRC dated July 3, 1987 is
AFFIRMED with the modification that the moral damages
are reduced to Ten Thousand (P10,000.00) Pesos, and the
exemplary damages reduced to Five Thousand (P5,000.00)
Pesos.
SO ORDERED.
Melencio-Herrera (Chairperson), Padilla and Regalado, JJ.,
concur.
Sarmiento, J., is on leave.
FACT:
PNOC-Energy Development Corporation, to augment its
need for manpower hired persons on varying dates and for
varying purposes. The earliest person who was contracted
for the purpose was Roberto Renzal, as a pipe fitter, in
January 1995, and like the others concerned, his contract
was renewed or extended every time his contract expires.
Later, PNOC-EDC informed DOLE, Regional Sub-branch No.
VII in Dumaguete City, that 6 of its employees will be
terminated. Subsequently, Roberto Renzal and 5 others
were furnished with letters stating that their employment
will be terminated on June 1998.
Renzal, et. al., filed a complaint for illegal dismissal with the
NLRC against PNOC.
The Labor Arbiter found the group of Renzals, claim to lack
merit, hence their termination legal on the ground that
they were dismissed because their contract with PNOC
expired.
The NLRC, upon Renzals appeal, adjudged contrary to the
decision of the Labor Arbiter stating among others that
Renzal and the others were regular non-project employees
for having worked for more than one year in positions that
required them to perform activities necessary and desirable
in the normal business or trade of petitioner. The CA
affirmed the NLRCs decision.
ISSUES:
1. Whether or not Renzal, et.al., were project
employees or regular employees.
2. Whether or not they were illegally dismissed from
employment.
25

HELD:
1. Renzal, et.al, are Regular Employees.
2. Yes, Renzal, et.al, being Regular Employees are
entitled to security of tenure, were unjustly
dismissed from work.
RATIO:
1. PNOCs act of repeatedly and continuously hiring
respondents to do the same kind of work belies its
contention that respondents were hired for a specific
project or undertaking. The absence of a definite
duration for the project/s has led the Court to
conclude that Renzal, et.al, are, in fact, regular
employees.
2. In termination cases, it is incumbent upon the
employer to prove by the quantum of evidence
required by law that the dismissal of an employee is
not illegal; otherwise the dismissal would be
unjustified. In the case at bar, PNOC failed to
discharge the burden.
The notices of termination indicated that PNOC
services were terminated due to the completion of
the project. However, this allegation is contrary to
the statement of petitioner in some of its pleadings
that the project was merely substantially
completed. There is likewise no proof that the
project, or the phase of work to which respondents
had been assigned, was already completed at the
time of their dismissal.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 147402 January 14, 2004
ENGR. RANULFO C. FELICIANO, in his capacity as General
Manager of the Leyte Metropolitan Water District
(LMWD), Tacloban City, petitioner,
vs.
COMMISSION ON AUDIT, Chairman CELSO D. GANGAN,
Commissioners RAUL C. FLORES and EMMANUEL M.
DALMAN, and Regional Director of COA Region
VIII, respondents.


D E C I S I O N


CARPIO, J.:
26

The Case
This is a petition for certiorari
1
to annul the Commission on
Audits ("COA") Resolution dated 3 January 2000 and the
Decision dated 30 January 2001 denying the Motion for
Reconsideration. The COA denied petitioner Ranulfo C.
Felicianos request for COA to cease all audit services, and
to stop charging auditing fees, to Leyte Metropolitan Water
District ("LMWD"). The COA also denied petitioners
request for COA to refund all auditing fees previously paid
by LMWD.
Antecedent Facts
A Special Audit Team from COA Regional Office No. VIII
audited the accounts of LMWD. Subsequently, LMWD
received a letter from COA dated 19 July 1999
requesting payment of auditing fees. As General Manager
of LMWD, petitioner sent a reply dated 12 October 1999
informing COAs Regional Director that the water district
could not pay the auditing fees. Petitioner cited as basis for
his action Sections 6 and 20 of Presidential Decree 198 ("PD
198")
2
, as well as Section 18 of Republic Act No. 6758 ("RA
6758"). The Regional Director referred petitioners reply to
the COA Chairman on 18 October 1999.
On 19 October 1999, petitioner wrote COA through the
Regional Director asking for refund of all auditing fees
LMWD previously paid to COA.
On 16 March 2000, petitioner received COA Chairman Celso
D. Gangans Resolution dated 3 January 2000 denying his
requests. Petitioner filed a motion for reconsideration on
31 March 2000, which COA denied on 30 January 2001.
On 13 March 2001, petitioner filed this instant petition.
Attached to the petition were resolutions of the Visayas
Association of Water Districts (VAWD) and the Philippine
Association of Water Districts (PAWD) supporting the
petition.
The Ruling of the Commission on Audit
The COA ruled that this Court has already settled COAs
audit jurisdiction over local water districts in Davao City
Water District v. Civil Service Commission and Commission
on Audit,
3
as follows:
The above-quoted provision [referring to Section 3(b)
PD 198+ definitely sets to naught petitioners
contention that they are private corporations. It is
clear therefrom that the power to appoint the
members who will comprise the members of the
Board of Directors belong to the local executives of
the local subdivision unit where such districts are
located. In contrast, the members of the Board of
Directors or the trustees of a private corporation are
elected from among members
or stockholders thereof. It would not be amiss at this
point to emphasize that a private corporation is
27

created for the private purpose, benefit, aim and end
of its members or stockholders. Necessarily, said
members or stockholders should be given a free hand
to choose who will compose the governing body of
their corporation. But this is not the case here and
this clearly indicates that petitioners are not private
corporations.
The COA also denied petitioners request for COA to stop
charging auditing fees as well as petitioners request for
COA to refund all auditing fees already paid.
The Issues
Petitioner contends that COA committed grave abuse of
discretion amounting to lack or excess of jurisdiction by
auditing LMWD and requiring it to pay auditing fees.
Petitioner raises the following issues for resolution:
1. Whether a Local Water District ("LWD") created
under PD 198, as amended, is a government-owned
or controlled corporation subject to the audit
jurisdiction of COA;
2. Whether Section 20 of PD 198, as amended,
prohibits COAs certified public accountants from
auditing local water districts; and
3. Whether Section 18 of RA 6758 prohibits the COA
from charging government-owned and controlled
corporations auditing fees.
The Ruling of the Court
The petition lacks merit.
The Constitution and existing laws
4
mandate COA to audit
all government agencies, including government-owned and
controlled corporations ("GOCCs") with original charters. An
LWD is a GOCC with an original charter. Section 2(1), Article
IX-D of the Constitution provides for COAs audit
jurisdiction, as follows:
SECTION 2. (1) The Commission on Audit shall have
the power, authority and duty to examine, audit, and
settle all accounts pertaining to the revenue and
receipts of, and expenditures or uses of funds and
property, owned or held in trust by, or pertaining to,
the Government, or any of its subdivisions, agencies,
or instrumentalities, including government-owned
and controlled corporations with original charters,
and on a post-audit basis: (a) constitutional bodies,
commissions and offices that have been granted
fiscal autonomy under this Constitution; (b)
autonomous state colleges and universities; (c) other
government-owned or controlled corporations and
their subsidiaries; and (d) such non-governmental
entities receiving subsidy or equity, directly or
indirectly, from or through the government, which
are required by law or the granting institution to
submit to such audit as a condition of subsidy or
equity. However, where the internal control system
28

of the audited agencies is inadequate, the
Commission may adopt such measures, including
temporary or special pre-audit, as are necessary and
appropriate to correct the deficiencies. It shall keep
the general accounts of the Government and, for
such period as may be provided by law, preserve the
vouchers and other supporting papers pertaining
thereto. (Emphasis supplied)
The COAs audit jurisdiction extends not only to
government "agencies or instrumentalities," but also to
"government-owned and controlled corporations with
original charters" as well as "other government-owned or
controlled corporations" without original charters.
Whether LWDs are Private or Government-Owned
and Controlled Corporations with Original Charters
Petitioner seeks to revive a well-settled issue. Petitioner
asks for a re-examination of a doctrine backed by a long line
of cases culminating in Davao City Water District v. Civil
Service Commission
5
and just recently reiterated in De
Jesus v. Commission on Audit.
6
Petitioner maintains that
LWDs are not government-owned and controlled
corporations with original charters. Petitioner even argues
that LWDs are private corporations. Petitioner asks the
Court to consider certain interpretations of the applicable
laws, which would give a "new perspective to the issue of
the true character of water districts."
7

Petitioner theorizes that what PD 198 created was the Local
Waters Utilities Administration ("LWUA") and not the
LWDs. Petitioner claims that LWDs are created "pursuant
to" and not created directly by PD 198. Thus, petitioner
concludes that PD 198 is not an "original charter" that
would place LWDs within the audit jurisdiction of COA as
defined in Section 2(1), Article IX-D of the Constitution.
Petitioner elaborates that PD 198 does not create LWDs
since it does not expressly direct the creation of such
entities, but only provides for their formation on an
optional or voluntary basis.
8
Petitioner adds that the
operative act that creates an LWD is the approval of the
Sanggunian Resolution as specified in PD 198.
Petitioners contention deserves scant consideration.
We begin by explaining the general framework under the
fundamental law. The Constitution recognizes two classes
of corporations. The first refers to private corporations
created under a general law. The second refers to
government-owned or controlled corporations created by
special charters. Section 16, Article XII of the Constitution
provides:
Sec. 16. The Congress shall not, except by general law,
provide for the formation, organization, or regulation of
private corporations. Government-owned or controlled
corporations may be created or established by special
charters in the interest of the common good and subject to
the test of economic viability.
29

The Constitution emphatically prohibits the creation of
private corporations except by a general law applicable to
all citizens.
9
The purpose of this constitutional provision is
to ban private corporations created by special charters,
which historically gave certain individuals, families or
groups special privileges denied to other citizens.
10

In short, Congress cannot enact a law creating a private
corporation with a special charter. Such legislation would
be unconstitutional. Private corporations may exist only
under a general law. If the corporation is private, it must
necessarily exist under a general law. Stated differently,
only corporations created under a general law can qualify
as private corporations. Under existing laws, that general
law is the Corporation Code,
11
except that the Cooperative
Code governs the incorporation of cooperatives.
12

The Constitution authorizes Congress to create
government-owned or controlled corporations through
special charters. Since private corporations cannot have
special charters, it follows that Congress can create
corporations with special charters only if such corporations
are government-owned or controlled.
Obviously, LWDs are not private corporations because they
are not created under the Corporation Code. LWDs are not
registered with the Securities and Exchange Commission.
Section 14 of the Corporation Code states that "[A]ll
corporations organized under this code shall file with the
Securities and Exchange Commission articles of
incorporation x x x." LWDs have no articles of incorporation,
no incorporators and no stockholders or members. There
are no stockholders or members to elect the board
directors of LWDs as in the case of all corporations
registered with the Securities and Exchange Commission.
The local mayor or the provincial governor appoints the
directors of LWDs for a fixed term of office. This Court has
ruled that LWDs are not created under the Corporation
Code, thus:
From the foregoing pronouncement, it is clear that
what has been excluded from the coverage of the
CSC are those corporations created pursuant to the
Corporation Code. Significantly, petitioners are not
created under the said code, but on the contrary,
they were created pursuant to a special law and are
governed primarily by its provision.
13
(Emphasis
supplied)
LWDs exist by virtue of PD 198, which constitutes their
special charter. Since under the Constitution only
government-owned or controlled corporations may have
special charters, LWDs can validly exist only if they are
government-owned or controlled. To claim that LWDs are
private corporations with a special charter is to admit that
their existence is constitutionally infirm.
Unlike private corporations, which derive their legal
existence and power from the Corporation Code, LWDs
30

derive their legal existence and power from PD 198.
Sections 6 and 25 of PD 198
14
provide:
Section 6. Formation of District. This Act is the
source of authorization and power to form and
maintain a district. For purposes of this Act, a
district shall be considered as a quasi-public
corporation performing public service and supplying
public wants. As such, a district shall exercise the
powers, rights and privileges given to private
corporations under existing laws, in addition to the
powers granted in, and subject to such restrictions
imposed, under this Act.
(a) The name of the local water district, which shall
include the name of the city, municipality, or
province, or region thereof, served by said system,
followed by the words "Water District".
(b) A description of the boundary of the district. In
the case of a city or municipality, such boundary may
include all lands within the city or municipality. A
district may include one or more municipalities, cities
or provinces, or portions thereof.
(c) A statement completely transferring any and all
waterworks and/or sewerage facilities managed,
operated by or under the control of such city,
municipality or province to such district upon the
filing of resolution forming the district.
(d) A statement identifying the purpose for which the
district is formed, which shall include those purposes
outlined in Section 5 above.
(e) The names of the initial directors of the district
with the date of expiration of term of office for each.
(f) A statement that the district may only be dissolved
on the grounds and under the conditions set forth in
Section 44 of this Title.
(g) A statement acknowledging the powers, rights
and obligations as set forth in Section 36 of this Title.
Nothing in the resolution of formation shall state or
infer that the local legislative body has the power to
dissolve, alter or affect the district beyond that
specifically provided for in this Act.
If two or more cities, municipalities or provinces, or
any combination thereof, desire to form a single
district, a similar resolution shall be adopted in each
city, municipality and province.
x x x
Sec. 25. Authorization. The district may exercise
all the powers which are expressly granted by this
Title or which are necessarily implied from or
incidental to the powers and purposes herein
stated. For the purpose of carrying out the objectives
31

of this Act, a district is hereby granted the power of
eminent domain, the exercise thereof shall, however,
be subject to review by the Administration.
(Emphasis supplied)
Clearly, LWDs exist as corporations only by virtue of PD 198,
which expressly confers on LWDs corporate powers.
Section 6 of PD 198 provides that LWDs "shall exercise the
powers, rights and privileges given to private corporations
under existing laws." Without PD 198, LWDs would have no
corporate powers. Thus, PD 198 constitutes the special
enabling charter of LWDs. The ineluctable conclusion is that
LWDs are government-owned and controlled corporations
with a special charter.
The phrase "government-owned and controlled
corporations with original charters" means GOCCs created
under special laws and not under the general incorporation
law. There is no difference between the term "original
charters" and "special charters." The Court clarified this
in National Service Corporation v. NLRC
15
by citing the
deliberations in the Constitutional Commission, as follows:
THE PRESIDING OFFICER (Mr. Trenas). The session is
resumed.
Commissioner Romulo is recognized.
MR. ROMULO. Mr. Presiding Officer, I am amending
my original proposed amendment to now read as
follows: "including government-owned or controlled
corporations WITH ORIGINAL CHARTERS." The
purpose of this amendment is to indicate that
government corporations such as the GSIS and SSS,
which have original charters, fall within the ambit of
the civil service. However, corporations which are
subsidiaries of these chartered agencies such as the
Philippine Airlines, Manila Hotel and Hyatt are
excluded from the coverage of the civil service.
THE PRESIDING OFFICER (Mr. Trenas). What does the
Committee say?
MR. FOZ. Just one question, Mr. Presiding Officer.
By the term "original charters," what exactly do we
mean?
MR. ROMULO. We mean that they were created by
law, by an act of Congress, or by special law.
MR. FOZ. And not under the general corporation law.
MR. ROMULO. That is correct. Mr. Presiding Officer.
MR. FOZ. With that understanding and clarification,
the Committee accepts the amendment.
MR. NATIVIDAD. Mr. Presiding Officer, so those
created by the general corporation law are out.
MR. ROMULO. That is correct. (Emphasis supplied)
32

Again, in Davao City Water District v. Civil Service
Commission,
16
the Court reiterated the meaning of the
phrase "government-owned and controlled corporations
with original charters" in this wise:
By "government-owned or controlled corporation
with original charter," We mean government owned
or controlled corporation created by a special law
and not under the Corporation Code of the
Philippines. Thus, in the case of Lumanta v. NLRC
(G.R. No. 82819, February 8, 1989, 170 SCRA 79, 82),
We held:
"The Court, in National Service Corporation
(NASECO) v. National Labor Relations
Commission, G.R. No. 69870, promulgated on
29 November 1988, quoting extensively from
the deliberations of the 1986 Constitutional
Commission in respect of the intent and
meaning of the new phrase with original
charter, in effect held that government-
owned and controlled corporations with
original charter refer to corporations
chartered by special law as distinguished from
corporations organized under our general
incorporation statute the Corporation
Code. In NASECO, the company involved had
been organized under the general
incorporation statute and was a subsidiary of
the National Investment Development
Corporation (NIDC) which in turn was a
subsidiary of the Philippine National Bank, a
bank chartered by a special statute. Thus,
government-owned or controlled corporations
like NASECO are effectively, excluded from the
scope of the Civil Service." (Emphasis supplied)
Petitioners contention that the Sangguniang Bayan
resolution creates the LWDs assumes that the Sangguniang
Bayan has the power to create corporations. This is a
patently baseless assumption. The Local Government
Code
17
does not vest in the Sangguniang Bayan the power
to create corporations.
18
What the Local Government Code
empowers the Sangguniang Bayan to do is to provide for
the establishment of a waterworks system "subject to
existing laws." Thus, Section 447(5)(vii) of the Local
Government Code provides:
SECTION 447. Powers, Duties, Functions and
Compensation. (a) The sangguniang bayan, as the
legislative body of the municipality, shall enact
ordinances, approve resolutions and appropriate
funds for the general welfare of the municipality and
its inhabitants pursuant to Section 16 of this Code
and in the proper exercise of the corporate powers of
the municipality as provided for under Section 22 of
this Code, and shall:
x x x
33

(vii) Subject to existing laws, provide for the
establishment, operation, maintenance, and
repair of an efficient waterworks system to
supply water for the inhabitants; regulate the
construction, maintenance, repair and use of
hydrants, pumps, cisterns and reservoirs;
protect the purity and quantity of the water
supply of the municipality and, for this
purpose, extend the coverage of appropriate
ordinances over all territory within the
drainage area of said water supply and within
one hundred (100) meters of the reservoir,
conduit, canal, aqueduct, pumping station, or
watershed used in connection with the water
service; and regulate the consumption, use or
wastage of water;
x x x. (Emphasis supplied)
The Sangguniang Bayan may establish a waterworks system
only in accordance with the provisions of PD 198. The
Sangguniang Bayan has no power to create a corporate
entity that will operate its waterworks system. However,
the Sangguniang Bayan may avail of existing enabling laws,
like PD 198, to form and incorporate a water district.
Besides, even assuming for the sake of argument that the
Sangguniang Bayan has the power to create corporations,
the LWDs would remain government-owned or controlled
corporations subject to COAs audit jurisdiction. The
resolution of the Sangguniang Bayan would constitute an
LWDs special charter, making the LWD a government-
owned and controlled corporation with an original charter.
In any event, the Court has already ruled in Baguio Water
District v. Trajano
19
that the Sangguniang Bayan resolution
is not the special charter of LWDs, thus:
While it is true that a resolution of a local sanggunian
is still necessary for the final creation of a district, this
Court is of the opinion that said resolution cannot be
considered as its charter, the same being intended
only to implement the provisions of said decree.
Petitioner further contends that a law must create directly
and explicitly a GOCC in order that it may have an original
charter. In short, petitioner argues that one special law
cannot serve as enabling law for several GOCCs but only for
one GOCC. Section 16, Article XII of the Constitution
mandates that "Congress shall not, except by general
law,"
20
provide for the creation of private corporations.
Thus, the Constitution prohibits one special law to create
one private corporation, requiring instead a "general law"
to create private corporations. In contrast, the same
Section 16 states that "Government-owned or controlled
corporations may be created or established by special
charters." Thus, the Constitution permits Congress to
create a GOCC with a special charter. There is, however, no
prohibition on Congress to create several GOCCs of the
same class under one special enabling charter.
34

The rationale behind the prohibition on private
corporations having special charters does not apply to
GOCCs. There is no danger of creating special privileges to
certain individuals, families or groups if there is one special
law creating each GOCC. Certainly, such danger will not
exist whether one special law creates one GOCC, or one
special enabling law creates several GOCCs. Thus, Congress
may create GOCCs either by special charters specific to
each GOCC, or by one special enabling charter applicable to
a class of GOCCs, like PD 198 which applies only to LWDs.
Petitioner also contends that LWDs are private corporations
because Section 6 of PD 198
21
declares that LWDs "shall be
considered quasi-public" in nature. Petitioners rationale is
that only private corporations may be deemed "quasi-
public" and not public corporations. Put differently,
petitioner rationalizes that a public corporation cannot be
deemed "quasi-public" because such corporation is already
public. Petitioner concludes that the term "quasi-public"
can only apply to private corporations. Petitioners
argument is inconsequential.
Petitioner forgets that the constitutional criterion on the
exercise of COAs audit jurisdiction depends on the
governments ownership or control of a corporation. The
nature of the corporation, whether it is private, quasi-
public, or public is immaterial.
The Constitution vests in the COA audit jurisdiction over
"government-owned and controlled corporations with
original charters," as well as "government-owned or
controlled corporations" without original charters. GOCCs
with original charters are subject to COA pre-audit, while
GOCCs without original charters are subject to COA post-
audit. GOCCs without original charters refer to corporations
created under the Corporation Code but are owned or
controlled by the government. The nature or purpose of the
corporation is not material in determining COAs audit
jurisdiction. Neither is the manner of creation of a
corporation, whether under a general or special law.
The determining factor of COAs audit jurisdiction
is government ownership or control of the corporation.
InPhilippine Veterans Bank Employees Union-NUBE v.
Philippine Veterans Bank,
22
the Court even ruled that the
criterion of ownership and control is more important than
the issue of original charter, thus:
This point is important because the Constitution
provides in its Article IX-B, Section 2(1) that "the Civil
Service embraces all branches, subdivisions,
instrumentalities, and agencies of the Government,
including government-owned or controlled
corporations with original charters." As the Bank is
not owned or controlled by the Government
although it does have an original charter in the form
of R.A. No. 3518,
23
it clearly does not fall under the
Civil Service and should be regarded as an ordinary
commercial corporation. Section 28 of the said law
so provides. The consequence is that the relations of
35

the Bank with its employees should be governed by
the labor laws, under which in fact they have already
been paid some of their claims. (Emphasis supplied)
Certainly, the government owns and controls LWDs. The
government organizes LWDs in accordance with a specific
law, PD 198. There is no private party involved as co-owner
in the creation of an LWD. Just prior to the creation of
LWDs, the national or local government owns and controls
all their assets. The government controls LWDs because
under PD 198 the municipal or city mayor, or the provincial
governor, appoints all the board directors of an LWD for a
fixed term of six years.
24
The board directors of LWDs are
not co-owners of the LWDs. LWDs have no private
stockholders or members. The board directors and other
personnel of LWDs are government employees subject to
civil service laws
25
and anti-graft laws.
26

While Section 8 of PD 198 states that "[N]o public official
shall serve as director" of an LWD, it only means that the
appointees to the board of directors of LWDs shall come
from the private sector. Once such private sector
representatives assume office as directors, they become
public officials governed by the civil service law and anti-
graft laws. Otherwise, Section 8 of PD 198 would
contravene Section 2(1), Article IX-B of the Constitution
declaring that the civil service includes "government-owned
or controlled corporations with original charters."
If LWDs are neither GOCCs with original charters nor GOCCs
without original charters, then they would fall under the
term "agencies or instrumentalities" of the government and
thus still subject to COAs audit jurisdiction. However, the
stark and undeniable fact is that the government owns
LWDs. Section 45
27
of PD 198 recognizes government
ownership of LWDs when Section 45 states that the board
of directors may dissolve an LWD only on the condition that
"another public entity has acquired the assets of the
district and has assumed all obligations and liabilities
attached thereto." The implication is clear that an LWD is a
public and not a private entity.
Petitioner does not allege that some entity other than the
government owns or controls LWDs. Instead, petitioner
advances the theory that the "Water Districts owner is the
District itself."
28
Assuming for the sake of argument that an
LWD is "self-owned,"
29
as petitioner describes an LWD, the
government in any event controls all LWDs. First,
government officials appoint all LWD directors to a fixed
term of office. Second, any per diem of LWD directors in
excess of P50 is subject to the approval of the Local Water
Utilities Administration, and directors can receive no other
compensation for their services to the LWD.
30
Third, the
Local Water Utilities Administration can require LWDs to
merge or consolidate their facilities or operations.
31
This
element of government control subjects LWDs to COAs
audit jurisdiction.
36

Petitioner argues that upon the enactment of PD 198, LWDs
became private entities through the transfer of ownership
of water facilities from local government units to their
respective water districts as mandated by PD 198.
Petitioner is grasping at straws. Privatization involves the
transfer of government assets to a private entity. Petitioner
concedes that the owner of the assets transferred under
Section 6 (c) of PD 198 is no other than the LWD itself.
32
The
transfer of assets mandated by PD 198 is a transfer of the
water systems facilities "managed, operated by or under
the control of such city, municipality or province to such
(water) district."
33
In short, the transfer is from one
government entity to another government entity. PD 198 is
bereft of any indication that the transfer is to privatize the
operation and control of water systems.
Finally, petitioner claims that even on the assumption that
the government owns and controls LWDs, Section 20 of PD
198 prevents COA from auditing LWDs.
34
Section 20 of PD
198 provides:
Sec. 20. System of Business Administration. The
Board shall, as soon as practicable, prescribe and
define by resolution a system of business
administration and accounting for the district, which
shall be patterned upon and conform to the
standards established by the
Administration. Auditing shall be performed by a
certified public accountant not in the government
service. The Administration may, however, conduct
annual audits of the fiscal operations of the district to
be performed by an auditor retained by the
Administration. Expenses incurred in connection
therewith shall be borne equally by the water district
concerned and the Administration.
35
(Emphasis
supplied)
Petitioner argues that PD 198 expressly prohibits COA
auditors, or any government auditor for that matter, from
auditing LWDs. Petitioner asserts that this is the import of
the second sentence of Section 20 of PD 198 when it states
that "[A]uditing shall be performed by a certified public
accountant not in the government service."
36

PD 198 cannot prevail over the Constitution. No amount of
clever legislation can exclude GOCCs like LWDs from COAs
audit jurisdiction. Section 3, Article IX-C of the Constitution
outlaws any scheme or devise to escape COAs audit
jurisdiction, thus:
Sec. 3. No law shall be passed exempting any entity
of the Government or its subsidiary in any guise
whatever, or any investment of public funds, from
the jurisdiction of the Commission on Audit.
(Emphasis supplied)
The framers of the Constitution added Section 3, Article IX-
D of the Constitution precisely to annul provisions of
Presidential Decrees, like that of Section 20 of PD 198, that
exempt GOCCs from COA audit. The following exchange in
37

the deliberations of the Constitutional Commission
elucidates this intent of the framers:
MR. OPLE: I propose to add a new section on line 9,
page 2 of the amended committee report which
reads: NO LAW SHALL BE PASSED EXEMPTING ANY
ENTITY OF THE GOVERNMENT OR ITS SUBSIDIARY IN
ANY GUISE WHATEVER, OR ANY INVESTMENTS OF
PUBLIC FUNDS, FROM THE JURISDICTION OF THE
COMMISSION ON AUDIT.
May I explain my reasons on record.
We know that a number of entities of the
government took advantage of the absence of a
legislature in the past to obtain presidential decrees
exempting themselves from the jurisdiction of the
Commission on Audit, one notable example of which
is the Philippine National Oil Company which is really
an empty shell. It is a holding corporation by itself,
and strictly on its own account. Its funds were not
very impressive in quantity but underneath that shell
there were billions of pesos in a multiplicity of
companies. The PNOC the empty shell under a
presidential decree was covered by the jurisdiction of
the Commission on Audit, but the billions of pesos
invested in different corporations underneath it were
exempted from the coverage of the Commission on
Audit.
Another example is the United Coconut Planters
Bank. The Commission on Audit has determined that
the coconut levy is a form of taxation; and that,
therefore, these funds attributed to the shares of
1,400,000 coconut farmers are, in effect, public
funds. And that was, I think, the basis of the PCGG in
undertaking that last major sequestration of up to 94
percent of all the shares in the United Coconut
Planters Bank. The charter of the UCPB, through a
presidential decree, exempted it from the jurisdiction
of the Commission on Audit, it being a private
organization.
So these are the fetuses of future abuse that we are
slaying right here with this additional section.
May I repeat the amendment, Madam President: NO
LAW SHALL BE PASSED EXEMPTING ANY ENTITY OF
THE GOVERNMENT OR ITS SUBSIDIARY IN ANY GUISE
WHATEVER, OR ANY INVESTMENTS OF PUBLIC
FUNDS, FROM THE JURISDICTION OF THE
COMMISSION ON AUDIT.
THE PRESIDENT: May we know the position of the
Committee on the proposed amendment of
Commissioner Ople?
MR. JAMIR: If the honorable Commissioner will
change the number of the section to 4, we will accept
the amendment.
38

MR. OPLE: Gladly, Madam President. Thank you.
MR. DE CASTRO: Madam President, point of inquiry
on the new amendment.
THE PRESIDENT: Commissioner de Castro is
recognized.
MR. DE CASTRO: Thank you. May I just ask a few
questions of Commissioner Ople.
Is that not included in Section 2 (1) where it states:
"(c) government-owned or controlled corporations
and their subsidiaries"? So that if these government-
owned and controlled corporations and their
subsidiaries are subjected to the audit of the COA,
any law exempting certain government corporations
or subsidiaries will be already unconstitutional.
So I believe, Madam President, that the proposed
amendment is unnecessary.
MR. MONSOD: Madam President, since this has been
accepted, we would like to reply to the point raised
by Commissioner de Castro.
THE PRESIDENT: Commissioner Monsod will please
proceed.
MR. MONSOD: I think the Commissioner is trying to
avoid the situation that happened in the past,
because the same provision was in the 1973
Constitution and yet somehow a law or a decree was
passed where certain institutions were exempted
from audit. We are just reaffirming, emphasizing, the
role of the Commission on Audit so that this problem
will never arise in the future.
37

There is an irreconcilable conflict between the second
sentence of Section 20 of PD 198 prohibiting COA auditors
from auditing LWDs and Sections 2(1) and 3, Article IX-D of
the Constitution vesting in COA the power to audit all
GOCCs. We rule that the second sentence of Section 20 of
PD 198 is unconstitutional since it violates Sections 2(1) and
3, Article IX-D of the Constitution.
On the Legality of COAs
Practice of Charging Auditing Fees
Petitioner claims that the auditing fees COA charges LWDs
for audit services violate the prohibition in Section 18 of RA
6758,
38
which states:
Sec. 18. Additional Compensation of Commission on
Audit Personnel and of other Agencies. In order to
preserve the independence and integrity of the
Commission on Audit (COA), its officials and
employees are prohibited from receiving salaries,
honoraria, bonuses, allowances or other emoluments
from any government entity, local government unit,
government-owned or controlled corporations, and
39

government financial institutions, except those
compensation paid directly by COA out of its
appropriations andcontributions.
Government entities, including government-owned
or controlled corporations including financial
institutions and local government units are hereby
prohibited from assessing or billing other
government entities, including government-owned or
controlled corporations including financial
institutions or local government units for services
rendered by its officials and employees as part of
their regular functions for purposes of paying
additional compensation to said officials and
employees. (Emphasis supplied)
Claiming that Section 18 is "absolute and leaves no
doubt,"
39
petitioner asks COA to discontinue its practice of
charging auditing fees to LWDs since such practice allegedly
violates the law.
Petitioners claim has no basis.
Section 18 of RA 6758 prohibits COA personnel from
receiving any kind of compensation from any government
entity except "compensation paid directly by COA out of
its appropriations and contributions." Thus, RA 6758 itself
recognizes an exception to the statutory ban on COA
personnel receiving compensation from GOCCs. In Tejada
v. Domingo,
40
the Court declared:
There can be no question that Section 18 of Republic
Act No. 6758 is designed to strengthen further the
policy x x x to preserve the independence and
integrity of the COA, by explicitly PROHIBITING: (1)
COA officials and employees from receiving salaries,
honoraria, bonuses, allowances or other emoluments
from any government entity, local government unit,
GOCCs and government financial institutions, except
such compensation paid directly by the COA out of
its appropriations and contributions, and (2)
government entities, including GOCCs, government
financial institutions and local government units from
assessing or billing other government entities,
GOCCs, government financial institutions or local
government units for services rendered by the
latters officials and employees as part of their
regular functions for purposes of paying additional
compensation to said officials and employees.
x x x
The first aspect of the strategy is directed to the COA
itself, while the second aspect is addressed directly
against the GOCCs and government financial
institutions. Under the first, COA personnel assigned
to auditing units of GOCCs or government financial
institutions can receive only such salaries,
allowances or fringe benefits paid directly by the
COA out of its appropriations and contributions. The
contributions referred to are the cost of audit
40

services earlier mentioned which cannot include the
extra emoluments or benefits now claimed by
petitioners. The COA is further barred from assessing
or billing GOCCs and government financial
institutions for services rendered by its personnel as
part of their regular audit functions for purposes of
paying additional compensation to such personnel. x
x x. (Emphasis supplied)
In Tejada, the Court explained the meaning of the word
"contributions" in Section 18 of RA 6758, which allows COA
to charge GOCCs the cost of its audit services:
x x x the contributions from the GOCCs are limited to
the cost of audit services which are based on the
actual cost of the audit function in the corporation
concerned plus a reasonable rate to cover overhead
expenses. The actual audit cost shall include
personnel services, maintenance and other operating
expenses, depreciation on capital and equipment and
out-of-pocket expenses. In respect to the allowances
and fringe benefits granted by the GOCCs to the COA
personnel assigned to the formers auditing units, the
same shall be directly defrayed by COA from its own
appropriations x x x.
41

COA may charge GOCCs "actual audit cost" but GOCCs must
pay the same directly to COA and not to COA auditors.
Petitioner has not alleged that COA charges LWDs auditing
fees in excess of COAs "actual audit cost." Neither has
petitioner alleged that the auditing fees are paid by LWDs
directly to individual COA auditors. Thus, petitioners
contention must fail.
WHEREFORE, the Resolution of the Commission on Audit
dated 3 January 2000 and the Decision dated 30 January
2001 denying petitioners Motion for Reconsideration are
AFFIRMED. The second sentence of Section 20 of
Presidential Decree No. 198 is declared VOID for being
inconsistent with Sections 2 (1) and 3, Article IX-D of the
Constitution. No costs.
SO ORDERED.
Davide, Jr., C.J., Puno, Vitug, Panganiban, Quisumbing,
Ynares-Santiago, Sandoval-Gutierrez, Austria-Martinez,
Corona, Carpio-Morales, Callejo, Sr., and Azcuna, and Tinga,
JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 145561 June 15, 2005
HONDA PHILS., INC., petitioner,
vs.
SAMAHAN NG MALAYANG MANGGAGAWA SA
HONDA, respondent.
41

D E C I S I O N
YNARES-SANTIAGO, J.:
This petition for review under Rule 45 seeks the reversal of
the Court of Appeals decision
1
dated September 14,
2000
2
and its resolution
3
dated October 18, 2000, in CA-G.R.
SP No. 59052. The appellate court affirmed the decision
dated May 2, 2000 rendered by the Voluntary Arbitrator
who ruled that petitioner Honda Philippines, Inc.s (Honda)
pro-rated payment of the 13th and 14th month pay and
financial assistance to its employees was invalid.
As found by the Court of Appeals, the case stems from
the Collective Bargaining Agreement (CBA) forged between
petitioner Honda and respondent union Samahan ng
Malayang Manggagawa sa Honda (respondent union) which
contained the following provisions:
Section 3. 13th Month Pay
The COMPANY shall maintain the present practice in the
implementation [of] the 13th month pay.
Section 6. 14th Month Pay
The COMPANY shall grant a 14th Month Pay, computed on
the same basis as computation of 13th Month Pay.
Section 7. The COMPANY agrees to continue the practice of
granting, in its discretion, financial assistance to covered
employees in December of each year, of not less than 100%
of basic pay.
This CBA is effective until year 2000. In the latter part of
1998, the parties started re-negotiations for the fourth and
fifth years of their CBA. When the talks between the parties
bogged down, respondent union filed a Notice of Strike on
the ground of bargaining deadlock. Thereafter, Honda filed
a Notice of Lockout. On March 31, 1999, then Department
of Labor and Employment (DOLE) Secretary Laguesma
assumed jurisdiction over the labor dispute and ordered the
parties to cease and desist from committing acts that would
aggravate the situation. Both parties complied accordingly.
On May 11, 1999, however, respondent union filed a
second Notice of Strike on the ground of unfair labor
practice alleging that Honda illegally contracted out work to
the detriment of the workers. Respondent union went on
strike and picketed the premises of Honda on May 19,
1999. On June 16, 1999, DOLE Acting Secretary Felicisimo
Joson, Jr. assumed jurisdiction over the case and certified
the same to the National Labor Relations Commission
(NLRC) for compulsory arbitration. The striking employees
were ordered to return to work and the management
accepted them back under the same terms prior to the
strike staged.
On November 22, 1999, the management of Honda issued a
memorandum
4
announcing its new computation of the
13th and 14th month pay to be granted to all its employees
42

whereby the thirty-one (31)-day long strike shall be
considered unworked days for purposes of computing said
benefits. As per the companys new formula, the amount
equivalent to 1/12 of the employees basic salary shall be
deducted from these bonuses, with a commitment however
that in the event that the strike is declared legal, Honda
shall pay the amount deducted.
Respondent union opposed the pro-rated computation of
the bonuses in a letter dated November 25, 1999. Honda
sought the opinion of the Bureau of Working Conditions
(BWC) on the issue. In a letter dated January 4, 2000,
5
the
BWC agreed with the pro-rata payment of the 13th month
pay as proposed by Honda.
The matter was brought before the Grievance Machinery in
accordance with the parties existing CBA but when the
issue remained unresolved, it was submitted for voluntary
arbitration. In his decision
6
dated May 2, 2000, Voluntary
Arbitrator Herminigildo C. Javen invalidated Hondas
computation, to wit:
WHEREFORE, in view of all foregoing premises being duly
considered and evaluated, it is hereby ruled that the
Companys implementation of pro-rated 13th Month pay,
14th Month pay and Financial Assistance [is] invalid. The
Company is thus ordered to compute each provision in full
month basic pay and pay the amounts in question within
ten (10) days after this Decision shall have become final and
executory.
The three (3) days Suspension of the twenty one (21)
employees is hereby affirmed.
SO ORDERED.
7

Hondas Motion for Partial Reconsideration was denied in a
resolution dated May 22, 2000. Thus, a petition was filed
with the Court of Appeals, however, the petition was
dismissed for lack of merit.
Hence, the instant petition for review on the sole issue of
whether the pro-rated computation of the 13th month pay
and the other bonuses in question is valid and lawful.
The petition lacks merit.
A collective bargaining agreement refers to the negotiated
contract between a legitimate labor organization and the
employer concerning wages, hours of work and all other
terms and conditions of employment in a bargaining
unit.
8
As in all contracts, the parties in a CBA may establish
such stipulations, clauses, terms and conditions as they may
deem convenient provided these are not contrary to law,
morals, good customs, public order or public policy.
9
Thus,
where the CBA is clear and unambiguous, it becomes the
law between the parties and compliance therewith is
mandated by the express policy of the law.
10

In some instances, however, the provisions of a CBA may
become contentious, as in this case. Honda wanted to
implement a pro-rated computation of the benefits based
43

on the "no work, no pay" rule. According to the company,
the phrase "present practice" as mentioned in the CBA
refers to the manner and requisites with respect to the
payment of the bonuses, i.e., 50% to be given in May and
the other 50% in December of each year. Respondent
union, however, insists that the CBA provisions relating to
the implementation of the 13th month pay necessarily
relate to the computation of the same.
We agree with the findings of the arbitrator that the
assailed CBA provisions are far from being unequivocal. A
cursory reading of the provisions will show that they did not
state categorically whether the computation of the 13th
month pay, 14th month pay and the financial assistance
would be based on one full months basic salary of the
employees, or pro-rated based on the compensation
actually received. The arbitrator thus properly resolved the
ambiguity in favor of labor as mandated by Article 1702 of
the Civil Code.
11
The Court of Appeals affirmed the
arbitrators finding and added that the computation of the
13th month pay should be based on the length of
service and not on the actual wage earned by the worker.
We uphold the rulings of the arbitrator and the Court of
Appeals. Factual findings of labor officials, who are deemed
to have acquired expertise in matters within their
respective jurisdiction, are generally accorded not only
respect but even finality, and bind us when supported by
substantial evidence. It is not our function to assess and
evaluate the evidence all over again, particularly where the
findings of both the arbiter and the Court of Appeals
coincide.
12

Presidential Decree No. 851, otherwise known as the 13th
Month Pay Law, which required all employers to pay their
employees a 13
th
month pay, was issued to protect the level
of real wages from the ravages of worldwide inflation. It
was enacted on December 16, 1975 after it was noted that
there had been no increase in the minimum wage since
1970 and the Christmas season was an opportune time for
society to show its concern for the plight of the working
masses so that they may properly celebrate Christmas and
New Year.
13

Under the Revised Guidelines on the Implementation of the
13
th
month pay issued on November 16, 1987, the salary
ceiling of P1,000.00 under P.D. No. 851 was removed. It
further provided that the minimum 13
th
month pay required
by law shall not be less than one-twelfth (1/12) of the total
basic salary earned by an employee within a calendar
year. The guidelines pertinently provides:
The "basic salary" of an employee for the purpose of
computing the 13
th
month pay shall include
allremunerations or earnings paid by his employer for
services rendered but does not include allowances and
monetary benefits which are not considered or integrated
as part of the regular or basic salary, such as the cash
equivalent of unused vacation and sick leave credits,
44

overtime premium, night differential and holiday pay, and
cost-of-living allowances.
14
(Emphasis supplied)
For employees receiving regular wage, we have interpreted
"basic salary" to mean, not the amount actually received by
an employee, but 1/12 of their standard monthly wage
multiplied by their length of service within a given calendar
year. Thus, we exclude from the computation of "basic
salary" payments for sick, vacation and maternity leaves,
night differentials, regular holiday pay and premiums for
work done on rest days and special holidays.
15
In Hagonoy
Rural Bank v. NLRC,
16
St. Michael Academy v.
NLRC,
17
Consolidated Food Corporation v. NLRC,
18
and
similar cases, the 13
th
month pay due an employee was
computed based on the employees basic monthly wage
multiplied by the number of months worked in a calendar
year prior to separation from employment.
The revised guidelines also provided for a pro-ration of this
benefit only in cases of resignation or separation from
work. As the rules state, under these circumstances, an
employee is entitled to a pay in proportion to the length of
time he worked during the year, reckoned from the time he
started working during the calendar year.
19
The Court of
Appeals thus held that:
Considering the foregoing, the computation of the 13th
month pay should be based on the length of service and not
on the actual wage earned by the worker. In the present
case, there being no gap in the service of the workers during
the calendar year in question, the computation of the 13th
month pay should not be pro-rated but should be given in
full.
20
(Emphasis supplied)
More importantly, it has not been refuted that Honda has
not implemented any pro-rating of the 13
th
month pay
before the instant case. Honda did not adduce evidence to
show that the 13
th
month, 14
th
month and financial
assistance benefits were previously subject to deductions
or pro-rating or that these were dependent upon the
companys financial standing. As held by the Voluntary
Arbitrator:
The Company (Honda) explicitly accepted that it was the
strike held that prompt[ed] them to adopt a pro-rata
computation, aside [from] being in [a] state of
rehabilitation due to 227M substantial losses in 1997, 114M
in 1998 and 215M lost of sales in 1999 due to strike. This is
an implicit acceptance that prior to the strike, a full month
basic pay computation was the "present practice" intended
to be maintained in the CBA.
21

The memorandum dated November 22, 1999 which Honda
issued shows that it was the first time a pro-rating scheme
was to be implemented in the company. It was a
convenient coincidence for the company that the work
stoppage held by the employees lasted for thirty-one (31)
days or exactly one month. This enabled them to devise a
formula using 11/12 of the total annual salary as base
45

amount for computation instead of the entire amount for a
12-month period.
That a full month payment of the 13th month pay is the
established practice at Honda is further bolstered by the
affidavits executed by Feliteo Bautista and Edgardo
Cruzada. Both attested that when they were absent from
work due to motorcycle accidents, and after they have
exhausted all their leave credits and were no longer
receiving their monthly salary from Honda, they still
received the full amount of their 13
th
month, 14
th
month
and financial assistance pay.
22

The case of Davao Fruits Corporation v. Associated Labor
Unions, et al.
23
presented an example of a voluntary act of
the employer that has ripened into a company practice. In
that case, the employer, from 1975 to 1981, freely and
continuously included in the computation of the 13
th
month
pay those items that were expressly excluded by the law.
We have held that this act, which was favorable to the
employees though not conforming to law, has ripened into
a practice and therefore can no longer be withdrawn,
reduced, diminished, discontinued or eliminated.
Furthermore, in Sevilla Trading Company v. Semana,
24
we
stated:
With regard to the length of time the company practice
should have been exercised to constitute voluntary
employer practice which cannot be unilaterally withdrawn
by the employer, we hold that jurisprudence has not laid
down any rule requiring a specific minimum number of
years. In the above quoted case of Davao Fruits Corporation
vs. Associated Labor Unions, the company practice lasted
for six (6) years. In another case, Davao Integrated Port
Stevedoring Services vs. Abarquez, the employer, for three
(3) years and nine (9) months, approved the commutation
to cash of the unenjoyed portion of the sick leave with pay
benefits of its intermittent workers. While in Tiangco vs.
Leogardo, Jr. the employer carried on the practice of giving
a fixed monthly emergency allowance from November 1976
to February 1980, or three (3) years and four (4) months. In
all these cases, this Court held that the grant of these
benefits has ripened into company practice or policy which
cannot be peremptorily withdrawn. In the case at bar,
petitioner Sevilla Trading kept the practice of including non-
basic benefits such as paid leaves for unused sick leave and
vacation leave in the computation of their 13th-month pay
for at least two (2) years. This, we rule likewise constitutes
voluntary employer practice which cannot be unilaterally
withdrawn by the employer without violating Art. 100 of
the Labor Code.
25
(Emphasis supplied)
Lastly, the foregoing interpretation of law and
jurisprudence is more in keeping with the underlying
principle for the grant of this benefit. It is primarily given to
alleviate the plight of workers and to help them cope with
the exorbitant increases in the cost of living. To allow the
pro-ration of the 13
th
month pay in this case is to
undermine the wisdom behind the law and the mandate
that the workingmans welfare should be the primordial
46

and paramount consideration.
26
What is more, the factual
milieu of this case is such that to rule otherwise inevitably
results to dissuasion, if not a deterrent, for workers from
the free exercise of their constitutional rights to self-
organization and to strike in accordance with law.
27

WHEREFORE, the instant petition is DENIED. The decision
and the resolution of the Court of Appeals dated September
14, 2000 and October 18, 2000, respectively, in CA-G.R. SP
No. 59052, affirming the decision rendered by the
Voluntary Arbitrator on May 2, 2000, are hereby
AFFIRMED in toto.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Quisumbing, Carpio, and
Azcuna,
ELASCO, JR.,
NACHURA,
LEONARDO-DE CASTRO,
BRION,
PERALTA,
BERSAMIN,
DEL CASTILLO,
ABAD,
VILLARAMA, JR.,
PEREZ,
MENDOZA, and
SERENO, JJ.


Promulgated:

June 7, 2011
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - x


D E C I S I O N


LEONARDO-DE CASTRO, J.:
47



The jurisdiction of the Commission on Audit (COA)
over the Boy Scouts of the Philippines (BSP) is the subject
matter of this controversy that reached us via petition for
prohibition
[1]
filed by the BSP under Rule 65 of the 1997
Rules of Court. In this petition, the BSP seeks that the COA
be prohibited from implementing its June 18,
2002Decision,
[2]
its February 21, 2007 Resolution,
[3]
as well
as all other issuances arising therefrom, and that all of the
foregoing be rendered null and void.
[4]


Antecedent Facts and
Background of the Case

This case arose when the COA issued Resolution No.
99-011
[5]
on August 19, 1999 (the COA Resolution), with
the subject Defining the Commissions policy with respect
to the audit of the Boy Scouts of the Philippines. In its
whereas clauses, the COA Resolution stated that the BSP
was created as a public corporation under Commonwealth
Act No. 111, as amended by Presidential Decree No. 460
and Republic Act No. 7278; that in Boy Scouts of the
Philippines v. National Labor Relations Commission,
[6]
the
Supreme Court ruled that the BSP, as constituted under its
charter, was a government-controlled corporation within
the meaning of Article IX(B)(2)(1) of the Constitution; and
that the BSP is appropriately regarded as a government
instrumentality under the 1987 Administrative
Code.
[7]
The COA Resolution also cited its constitutional
mandate under Section 2(1), Article IX (D). Finally, the COA
Resolution reads:

NOW THEREFORE, in consideration of the
foregoing premises, the COMMISSION PROPER
HAS RESOLVED, AS IT DOES HEREBY
RESOLVE, to conduct an annual financial audit
of the Boy Scouts of the Philippines in
accordance with generally accepted auditing
standards, and express an opinion on whether
the financial statements which include the
Balance Sheet, the Income Statement and the
Statement of Cash Flows present fairly its
financial position and results of operations.

x x x x

BE IT RESOLVED FURTHERMORE, that for
purposes of audit supervision, the Boy Scouts
of the Philippines shall be classified among
the government corporations belonging to the
Educational, Social, Scientific, Civic and
Research Sector under the Corporate Audit
Office I, to be audited, similar to the subsidiary
corporations, by employing the team audit
approach.
[8]
(Emphases supplied.)

48


The BSP sought reconsideration of the COA
Resolution in a letter
[9]
dated November 26, 1999 signed by
the BSP National President Jejomar C. Binay, who is now
the Vice President of the Republic, wherein he wrote:

It is the position of the BSP, with all due respect,
that it is not subject to the Commissions
jurisdiction on the following grounds:

1. We reckon that the ruling in the case of Boy
Scouts of the Philippines vs. National Labor
Relations Commission, et al. (G.R. No. 80767)
classifying the BSP as a government-
controlled corporation is anchored on the
substantial Government participation in the
National Executive Board of the BSP. It is to be
noted that the case was decided when the
BSP Charter is defined by Commonwealth Act
No. 111 as amended by Presidential Decree
460.

However, may we humbly refer you to
Republic Act No. 7278 which amended the
BSPs charter after the cited case was decided.
The most salient of all amendments in RA No.
7278 is the alteration of the composition of
the National Executive Board of the BSP.

The said RA virtually eliminated the
substantial government participation in the
National Executive Board by removing: (i) the
President of the Philippines and executive
secretaries, with the exception of the
Secretary of Education, as members thereof;
and (ii) the appointment and confirmation
power of the President of the Philippines, as
Chief Scout, over the members of the said
Board.

The BSP believes that the cited case has been
superseded by RA 7278. Thereby weakening
the cases conclusion that the BSP is a
government-controlled corporation (sic). The
1987 Administrative Code itself, of which the
BSP vs. NLRC relied on for some terms,
defines government-owned and controlled
corporations as agencies organized as stock or
non-stock corporations which the BSP, under
its present charter, is not.

Also, the Government, like in other GOCCs,
does not have funds invested in the BSP.
What RA 7278 only provides is that the
Government or any of its subdivisions,
branches, offices, agencies and
instrumentalities can from time to time
donate and contribute funds to the BSP.

49

x x x x

Also the BSP respectfully believes that the BSP
is not appropriately regarded as a
government instrumentality under the 1987
Administrative Code as stated in the COA
resolution. As defined by Section 2(10) of the
said code, instrumentality refers to any
agency of the National Government, not
integrated within the department framework,
vested with special functions or jurisdiction by
law, endowed with some if not all corporate
powers, administering special funds, and
enjoying operational autonomy, usually
through a charter.

The BSP is not an entity administering special
funds. It is not even included in the DECS
National Budget. x x x

It may be argued also that the BSP is not an
agency of the Government. The 1987
Administrative Code, merely referred the BSP
as an attached agency of the DECS as
distinguished from an actual line agency of
departments that are included in the National
Budget. The BSP believes that an attached
agency is different from an agency.
Agency, as defined in Section 2(4) of the
Administrative Code, is defined as any of the
various units of the Government including a
department, bureau, office, instrumentality,
government-owned or controlled corporation
or local government or distinct unit therein.

Under the above definition, the BSP is neither
a unit of the Government; a department
which refers to an executive department as
created by law (Section 2[7] of the
Administrative Code); nor a bureau which
refers to any principal subdivision or unit of
any department (Section 2[8], Administrative
Code).
[10]


Subsequently, requests for reconsideration of the COA
Resolution were also made separately by Robert P.
Valdellon, Regional Scout Director, Western Visayas Region,
Iloilo City and Eugenio F. Capreso, Council Scout Executive
of Calbayog City.
[11]


In a letter
[12]
dated July 3, 2000, Director Crescencio
S. Sunico, Corporate Audit Officer (CAO) I of the COA,
furnished the BSP with a copy of the Memorandum
[13]
dated
June 20, 2000 of Atty. Santos M. Alquizalas, the COA
General Counsel. In said Memorandum, the COA General
Counsel opined that Republic Act No. 7278 did not
supersede the Courts ruling in Boy Scouts of the Philippines
v. National Labor Relations Commission, even though said
law eliminated the substantial government participation in
50

the selection of members of the National Executive Board
of the BSP. The Memorandum further provides:

Analysis of the said case disclosed that the
substantial government participation is only
one (1) of the three (3) grounds relied upon by
the Court in the resolution of the case. Other
considerations include the character of the
BSPs purposes and functions which has a
public aspect and the statutory designation of
the BSP as a public corporation. These
grounds have not been deleted by R.A. No.
7278. On the contrary, these were
strengthened as evidenced by the amendment
made relative to BSPs purposes stated in
Section 3 of R.A. No. 7278.

On the argument that BSP is not
appropriately regarded as a government
instrumentality and agency of the
government, such has already been answered
and clarified. The Supreme Court has
elucidated this matter in the BSP case when it
declared that BSP is regarded as, both a
government-controlled corporation with an
original charter and as an instrumentality of
the Government. Likewise, it is not disputed
that the Administrative Code of 1987
designated the BSP as one of the attached
agencies of DECS. Being an attached agency,
however, it does not change its nature as a
government-controlled corporation with
original charter and, necessarily, subject to
COA audit jurisdiction. Besides, Section 2(1),
Article IX-D of the Constitution provides that
COA shall have the power, authority, and duty
to examine, audit and settle all accounts
pertaining to the revenue and receipts of, and
expenditures or uses of funds and property,
owned or held in trust by, or pertaining to, the
Government, or any of its subdivisions,
agencies or instrumentalities, including
government-owned or controlled corporations
with original charters.
[14]



Based on the Memorandum of the COA General
Counsel, Director Sunico wrote:

In view of the points clarified by said
Memorandum upholding COA Resolution No.
99-011, we have to comply with the provisions
of the latter, among which is to conduct an
annual financial audit of the Boy Scouts of the
Philippines.
[15]



51

In a letter dated November 20, 2000 signed by
Director Amorsonia B. Escarda, CAO I, the COA informed
the BSP that a preliminary survey of its organizational
structure, operations and accounting system/records shall
be conducted on November 21 to 22, 2000.
[16]


Upon the BSPs request, the audit was deferred for
thirty (30) days. The BSP then filed a Petition for Review
with Prayer for Preliminary Injunction and/or Temporary
Restraining Order before the COA. This was denied by the
COA in its questioned Decision, which held that the BSP is
under its audit jurisdiction. The BSP moved for
reconsideration but this was likewise denied under its
questioned Resolution.
[17]


This led to the filing by the BSP of this petition for
prohibition with preliminary injunction and temporary
restraining order against the COA.

The Issue

As stated earlier, the sole issue to be resolved in this
case is whether the BSP falls under the COAs audit
jurisdiction.




The Parties Respective
Arguments

The BSP contends that Boy Scouts of the Philippines v.
National Labor Relations Commission is inapplicable for
purposes of determining the audit jurisdiction of the COA as
the issue therein was the jurisdiction of the National Labor
Relations Commission over a case for illegal dismissal and
unfair labor practice filed by certain BSP employees.
[18]


While the BSP concedes that its functions do relate to
those that the government might otherwise completely
assume on its own, it avers that this alone was not
determinative of the COAs audit jurisdiction over it. The
BSP further avers that the Court in Boy Scouts of the
Philippines v. National Labor Relations Commission simply
stated x x x that in respect of functions, the BSP is akin to a
public corporation but this was not synonymous to holding
that the BSP is a government corporation or entity subject
to audit by the COA.
[19]


The BSP contends that Republic Act No. 7278
introduced crucial amendments to its charter; hence, the
findings of the Court in Boy Scouts of the Philippines v.
National Labor Relations Commission are no longer valid as
the government has ceased to play a controlling influence
in it. The BSP claims that the pronouncements of the Court
therein must be taken only within the context of that case;
52

that the Court had categorically found that its assets were
acquired from the Boy Scouts of America and not from the
Philippine government, and that its operations are financed
chiefly from membership dues of the Boy Scouts
themselves as well as from property rentals; and that the
BSP may correctly be characterized as non-governmental,
and hence, beyond the audit jurisdiction of the COA. It
further claims that the designation by the Court of the BSP
as a government agency or instrumentality is mere obiter
dictum.
[20]


The BSP maintains that the provisions of Republic Act
No. 7278 suggest that governance of BSP has come to be
overwhelmingly a private affair or nature, with government
participation restricted to the seat of the Secretary of
Education, Culture and Sports.
[21]
It cites Philippine Airlines
Inc. v. Commission on Audit
[22]
wherein the Court declared
that, PAL, having ceased to be a government-owned or
controlled corporation is no longer under the audit
jurisdiction of the COA.
[23]
Claiming that the amendments
introduced by Republic Act No. 7278 constituted a
supervening event that changed the BSPs corporate
identity in the same way that the governments
privatization program changed PALs, the BSP makes the
case that the government no longer has control over it;
thus, the COA cannot use the Boy Scouts of the Philippines
v. National Labor Relations Commission as its basis for the
exercise of its jurisdiction and the issuance of COA
Resolution No. 99-011.
[24]
The BSP further claims as
follows:

It is not far-fetched, in fact, to concede that
BSPs funds and assets are private in character.
Unlike ordinary public corporations, such as
provinces, cities, and municipalities, or
government-owned and controlled corporations,
such as Land Bank of the Philippines and the
Development Bank of the Philippines, the assets
and funds of BSP are not derived from any
government grant. For its operations, BSP is not
dependent in any way on any government
appropriation; as a matter of fact, it has not even
been included in any appropriations for the
government. To be sure, COA has not alleged, in
its Resolution No. 99-011 or in the Memorandum
of its General Counsel, that BSP received, receives
or continues to receive assets and funds from any
agency of the government. The foregoing simply
point to the private nature of the funds and
assets of petitioner BSP.

x x x x

As stated in petitioners third argument,
BSPs assets and funds were never acquired from
the government. Its operations are not in any way
financed by the government, as BSP has never
53

been included in any appropriations act for the
government. Neither has the government
invested funds with BSP. BSP, has not been, at
any time, a user of government property or
funds; nor have properties of the government
been held in trust by BSP. This is precisely the
reason why, until this time, the COA has not
attempted to subject BSP to its audit jurisdiction.
x x x.
[25]



To summarize its other arguments, the BSP contends
that it is not a government-owned or controlled
corporation; neither is it an instrumentality, agency, or
subdivision of the government.

In its Comment,
[26]
the COA argues as follows:

1. The BSP is a public corporation created
under Commonwealth Act No. 111 dated
October 31, 1936, and whose functions
relate to the fostering of public virtues of
citizenship and patriotism and the general
improvement of the moral spirit and fiber of
the youth. The manner of creation and the
purpose for which the BSP was created
indubitably prove that it is a government
agency.

2. Being a government agency, the funds
and property owned or held in trust by the
BSP are subject to the audit authority of
respondent Commission on Audit pursuant
to Section 2 (1), Article IX-D of the 1987
Constitution.

3. Republic Act No. 7278 did not change
the character of the BSP as a government-
owned or controlled corporation and
government instrumentality.
[27]



The COA maintains that the functions of the BSP that
include, among others, the teaching to the youth of
patriotism, courage, self-reliance, and kindred virtues, are
undeniably sovereign functions enshrined under the
Constitution and discussed by the Court in Boy Scouts of the
Philippines v. National Labor Relations Commission. The
COA contends that any attempt to classify the BSP as a
private corporation would be incomprehensible since no
less than the law which created it had designated it as a
public corporation and its statutory mandate embraces
performance of sovereign functions.
[28]


The COA claims that the only reason why the BSP
employees fell within the scope of the Civil Service
Commission even before the 1987 Constitution was the fact
that it was a government-owned or controlled corporation;
54

that as an attached agency of the Department of Education,
Culture and Sports (DECS), the BSP is an agency of the
government; and that the BSP is a chartered institution
under Section 1(12) of the Revised Administrative Code of
1987, embraced under the term government
instrumentality.
[29]


The COA concludes that being a government agency,
the funds and property owned or held by the BSP are
subject to the audit authority of the COA pursuant to
Section 2(1), Article IX (D) of the 1987 Constitution.

In support of its arguments, the COA cites The
Veterans Federation of the Philippines (VFP) v.
Reyes,
[30]
wherein the Court held that among the reasons
why the VFP is a public corporation is that its charter,
Republic Act No. 2640, designates it as one. Furthermore,
the COA quotes the Court as saying in that case:

In several cases, we have dealt with the issue
of whether certain specific activities can be
classified as sovereign functions. These cases,
which deal with activities not immediately
apparent to be sovereign functions, upheld the
public sovereign nature of operations needed
either to promote social justice or to stimulate
patriotic sentiments and love of country.


x x x x

Petitioner claims that its funds are not public
funds because no budgetary appropriations or
government funds have been released to the VFP
directly or indirectly from the DBM, and because
VFP funds come from membership dues and lease
rentals earned from administering government
lands reserved for the VFP.


The fact that no budgetary appropriations
have been released to the VFP does not prove
that it is a private corporation. The DBM indeed
did not see it fit to propose budgetary
appropriations to the VFP, having itself believed
that the VFP is a private corporation.

If the DBM,
however, is mistaken as to its conclusion
regarding the nature of VFP's incorporation, its
previous assertions will not prevent future
budgetary appropriations to the VFP. The
erroneous application of the law by public officers
does not bar a subsequent correct application of
the law.
[31]
(Citations omitted.)


The COA points out that the government is not
precluded by law from extending financial support to the
BSP and adding to its funds, and that as a government
instrumentality which continues to perform a vital function
imbued with public interest and reflective of the
55

governments policy to stimulate patriotic sentiments and
love of country, the BSPs funds from whatever source are
public funds, and can be used solely for public purpose in
pursuance of the provisions of Republic Act No. *7278+.
[32]


The COA claims that the fact that it has not yet
audited the BSPs funds may not bar the subsequent
exercise of its audit jurisdiction.

The BSP filed its Reply
[33]
on August 29, 2007
maintaining that its statutory designation as a public
corporation and the public character of its purpose and
functions are not determinative of the COAs audit
jurisdiction; reiterating its stand that Boy Scouts of the
Philippines v. National Labor Relations Commission is not
applicable anymore because the aspect of government
ownership and control has been removed by Republic Act
No. 7278; and concluding that the funds and property that
it either owned or held in trust are not public funds and are
not subject to the COAs audit jurisdiction.

Thereafter, considering the BSPs claim that it is a
private corporation, this Court, in a Resolution
[34]
dated July
20, 2010, required the parties to file, within a period of
twenty (20) days from receipt of said Resolution, their
respective comments on the issue of whether
Commonwealth Act No. 111, as amended by Republic Act
No. 7278, is constitutional.

In compliance with the Courts resolution, the parties
filed their respective Comments.

In its Comment
[35]
dated October 22, 2010, the COA
argues that the constitutionality of Commonwealth Act No.
111, as amended, is not determinative of the resolution of
the present controversy on the COAs audit jurisdiction over
petitioner, and in fact, the controversy may be resolved on
other grounds; thus, the requisites before a judicial inquiry
may be made, as set forth in Commissioner of Internal
Revenue v. Court of Tax Appeals,
[36]
have not been fully
met.
[37]
Moreover, the COA maintains that behind every
law lies the presumption of constitutionality.
[38]
The COA
likewise argues that contrary to the BSPs position, repeal
of a law by implication is not favored.
[39]
Lastly, the COA
claims that there was no violation of Section 16, Article XII
of the 1987 Constitution with the creation or declaration of
the BSP as a government corporation. Citing Philippine
Society for the Prevention of Cruelty to Animals v.
Commission on Audit,
[40]
the COA further alleges:

The true criterion, therefore, to determine
whether a corporation is public or private is found
in the totality of the relation of the corporation to
the State. If the corporation is created by the
State as the latters own agency or
instrumentality to help it in carrying out its
56

governmental functions, then that corporation is
considered public; otherwise, it is private. x x x.
[41]



For its part, in its Comment
[42]
filed on December 3,
2010, the BSP submits that its charter, Commonwealth Act
No. 111, as amended by Republic Act No. 7278, is
constitutional as it does not violate Section 16, Article XII of
the Constitution. The BSP alleges that while *it+ is not a
public corporation within the purview of COAs audit
jurisdiction, neither is it a private corporation created by
special law falling within the ambit of the constitutional
prohibition x x x.
[43]
The BSP further alleges:

Petitioners purpose is embodied in Section
3 of C.A. No. 111, as amended by Section 1 of R.A.
No. 7278, thus:

x x x x

A reading of the foregoing provision shows
that petitioner was created to advance the
interest of the youth, specifically of young boys,
and to mold them into becoming good citizens.
Ultimately, the creation of petitioner redounds to
the benefit, not only of those boys, but of the
public good or welfare. Hence, it can be said that
petitioners purpose and functions are more of a
public rather than a private character. Petitioner
caters to all boys who wish to join the
organization without any distinction. It does not
limit its membership to a particular class of boys.
Petitioners members are trained in scoutcraft
and taught patriotism, civic consciousness and
responsibility, courage, self-reliance, discipline
and kindred virtues, and moral values, preparing
them to become model citizens and outstanding
leaders of the country.
[44]


The BSP reiterates its stand that the public character
of its purpose and functions do not place it within the ambit
of the audit jurisdiction of the COA as it lacks the
government ownership or control that the Constitution
requires before an entity may be subject of said
jurisdiction.
[45]
It avers that it merely stated in its Reply that
the withdrawal of government control is akin to
privatization, but it does not necessarily mean that
petitioner is a private corporation.
[46]
The BSP claims that it
has a unique characteristic which neither classifies it as a
purely public nor a purely private corporation;
[47]
that it is
not a quasi-public corporation; and that it may belong to a
different class altogether.
[48]


The BSP claims that assuming arguendo that it is a
private corporation, its creation is not contrary to the
purpose of Section 16, Article XII of the Constitution; and
that the evil sought to be avoided by said provision is
57

inexistent in the enactment of the BSPs charter,
[49]
as, (i) it
was not created for any pecuniary purpose; (ii) those who
will primarily benefit from its creation are not its officers
but its entire membership consisting of boys being trained
in scoutcraft all over the country; (iii) it caters to all boys
who wish to join the organization without any distinction;
and (iv) it does not limit its membership to a particular class
or group of boys. Thus, the enactment of its charter
confers no special privilege to particular individuals,
families, or groups; nor does it bring about the danger of
granting undue favors to certain groups to the prejudice of
others or of the interest of the country, which are the evils
sought to be prevented by the constitutional provision
involved.
[50]


Finally, the BSP states that the presumption of
constitutionality of a legislative enactment prevails absent
any clear showing of its repugnancy to the Constitution.
[51]


The Ruling of the Court

After looking at the legislative history of its amended
charter and carefully studying the applicable laws and the
arguments of both parties, we find that the BSP is a public
corporation and its funds are subject to the COAs audit
jurisdiction.

The BSP Charter (Commonwealth Act No. 111,
approved on October 31, 1936), entitled An Act to Create a
Public Corporation to be Known as the Boy Scouts of the
Philippines, and to Define its Powers and Purposes created
the BSP as a public corporation to serve the following
public interest or purpose:

Sec. 3. The purpose of this corporation
shall be to promote through organization and
cooperation with other agencies, the ability of
boys to do useful things for themselves and
others, to train them in scoutcraft, and to
inculcate in them patriotism, civic
consciousness and responsibility, courage, self-
reliance, discipline and kindred virtues, and
moral values, using the method which are in
common use by boy scouts.


Presidential Decree No. 460, approved on May 17,
1974, amended Commonwealth Act No. 111 and provided
substantial changes in the BSP organizational structure.
Pertinent provisions are quoted below:

Section II. Section 5 of the said Act is also
amended to read as follows:

58

The governing body of the said
corporation shall consist of a National
Executive Board composed of (a) the President
of the Philippines or his representative; (b) the
charter and life members of the Boy Scouts of
the Philippines; (c) the Chairman of the Board
of Trustees of the Philippine Scouting
Foundation; (d) the Regional Chairman of the
Scout Regions of the Philippines; (e) the
Secretary of Education and Culture, the
Secretary of Social Welfare, the Secretary of
National Defense, the Secretary of Labor, the
Secretary of Finance, the Secretary of Youth
and Sports, and the Secretary of Local
Government and Community Development; (f)
an equal number of individuals from the
private sector; (g) the National President of the
Girl Scouts of the Philippines; (h) one Scout of
Senior age from each Scout Region to
represent the boy membership; and (i) three
representatives of the cultural minorities.
Except for the Regional Chairman who shall be
elected by the Regional Scout Councils during
their annual meetings, and the Scouts of their
respective regions, all members of the National
Executive Board shall be either by appointment
or cooption, subject to ratification and
confirmation by the Chief Scout, who shall be
the Head of State. Vacancies in the Executive
Board shall be filled by a majority vote of the
remaining members, subject to ratification and
confirmation by the Chief Scout. The by-laws
may prescribe the number of members of the
National Executive Board necessary to
constitute a quorum of the board, which
number may be less than a majority of the
whole number of the board. The National
Executive Board shall have power to make and
to amend the by-laws, and, by a two-thirds
vote of the whole board at a meeting called for
this purpose, may authorize and cause to be
executed mortgages and liens upon the
property of the corporation.


Subsequently, on March 24, 1992, Republic Act No.
7278 further amended Commonwealth Act No. 111 by
strengthening the volunteer and democratic character of
the BSP and reducing government representation in its
governing body, as follows:

Section 1. Sections 2 and 3 of
Commonwealth Act. No. 111, as amended, is
hereby amended to read as follows:

"Sec. 2. The said corporation shall have
the powers of perpetual succession, to sue and
be sued; to enter into contracts; to acquire,
own, lease, convey and dispose of such real
59

and personal estate, land grants, rights and
choses in action as shall be necessary for
corporate purposes, and to accept and receive
funds, real and personal property by gift,
devise, bequest or other means, to conduct
fund-raising activities; to adopt and use a seal,
and the same to alter and destroy; to have
offices and conduct its business and affairs in
Metropolitan Manila and in the regions,
provinces, cities, municipalities, and barangays
of the Philippines, to make and adopt by-laws,
rules and regulations not inconsistent with this
Act and the laws of the Philippines, and
generally to do all such acts and things,
including the establishment of regulations for
the election of associates and successors, as
may be necessary to carry into effect the
provisions of this Act and promote the
purposes of said corporation: Provided, That
said corporation shall have no power to issue
certificates of stock or to declare or pay
dividends, its objectives and purposes being
solely of benevolent character and not for
pecuniary profit of its members.

"Sec. 3. The purpose of this corporation
shall be to promote through organization and
cooperation with other agencies, the ability of
boys to do useful things for themselves and
others, to train them in scoutcraft, and to
inculcate in them patriotism, civic
consciousness and responsibility, courage,
self-reliance, discipline and kindred virtues,
and moral values, using the method which are
in common use by boy scouts."

Sec. 2. Section 4 of Commonwealth Act
No. 111, as amended, is hereby repealed and
in lieu thereof, Section 4 shall read as follows:

"Sec. 4. The President of the Philippines
shall be the Chief Scout of the Boy Scouts of
the Philippines."

Sec. 3. Sections 5, 6, 7 and 8 of
Commonwealth Act No. 111, as amended, are
hereby amended to read as follows:

"Sec. 5. The governing body of the said
corporation shall consist of a National
Executive Board, the members of which shall
be Filipino citizens of good moral
character. The Board shall be composed of the
following:

"(a) One (1) charter member of the Boy
Scouts of the Philippines who shall be elected
by the members of the National Council at its
meeting called for this purpose;

60

"(b) The regional chairmen of the scout
regions who shall be elected by the
representatives of all the local scout councils of
the region during its meeting called for this
purpose: Provided, That a candidate for
regional chairman need not be the chairman of
a local scout council;

"(c) The Secretary of Education, Culture
and Sports;

"(d) The National President of the Girl
Scouts of the Philippines;

"(e) One (1) senior scout, each from
Luzon, Visayas and Mindanao areas, to be
elected by the senior scout delegates of the
local scout councils to the scout youth forums
in their respective areas, in its meeting called
for this purpose, to represent the boy scout
membership;

"(f) Twelve (12) regular members to be
elected by the members of the National
Council in its meeting called for this purpose;

"(g) At least ten (10) but not more than
fifteen (15) additional members from the
private sector who shall be elected by the
members of the National Executive Board
referred to in the immediately preceding
paragraphs (a), (b), (c), (d), (e) and (f) at the
organizational meeting of the newly
reconstituted National Executive Board which
shall be held immediately after the meeting of
the National Council wherein the twelve (12)
regular members and the one (1) charter
member were elected.

x x x x

"Sec. 8. Any donation or contribution
which from time to time may be made to the
Boy Scouts of the Philippines by the
Government or any of its subdivisions,
branches, offices, agencies or instrumentalities
or by a foreign government or by private,
entities and individuals shall be expended by
the National Executive Board in pursuance of
this Act.


The BSP as a Public
Corporation under Par. 2,
Art. 2 of the Civil Code

There are three classes of juridical persons under
Article 44 of the Civil Code and the BSP, as presently
61

constituted under Republic Act No. 7278, falls under the
second classification. Article 44 reads:

Art. 44. The following are juridical persons:

(1) The State and its political
subdivisions;
(2) Other corporations, institutions and
entities for public interest or purpose created
by law; their personality begins as soon as
they have been constituted according to law;
(3) Corporations, partnerships and
associations for private interest or purpose to
which the law grants a juridical personality,
separate and distinct from that of each
shareholder, partner or member. (Emphases
supplied.)


The BSP, which is a corporation created for a public
interest or purpose, is subject to the law creating it under
Article 45 of the Civil Code, which provides:

Art. 45. Juridical persons mentioned in
Nos. 1 and 2 of the preceding article are
governed by the laws creating or recognizing
them.
Private corporations are regulated by
laws of general application on the subject.
Partnerships and associations for private
interest or purpose are governed by the
provisions of this Code concerning
partnerships. (Emphasis and underscoring
supplied.)


The purpose of the BSP as stated in its amended
charter shows that it was created in order to implement a
State policy declared in Article II, Section 13 of the
Constitution, which reads:

ARTICLE II - DECLARATION OF PRINCIPLES AND
STATE POLICIES
Section 13. The State recognizes the vital
role of the youth in nation-building and shall
promote and protect their physical, moral,
spiritual, intellectual, and social well-being. It
shall inculcate in the youth patriotism and
nationalism, and encourage their involvement
in public and civic affairs.


Evidently, the BSP, which was created by a special
law to serve a public purpose in pursuit of a constitutional
mandate, comes within the class of public corporations
defined by paragraph 2, Article 44 of the Civil Code and
62

governed by the law which creates it, pursuant to Article 45
of the same Code.

The BSPs Classification
Under the Administrative
Code of 1987

The public, rather than private, character of the BSP
is recognized by the fact that, along with the Girl Scouts of
the Philippines, it is classified as an attached agency of the
DECS under Executive Order No. 292, or the Administrative
Code of 1987, which states:

TITLE VI EDUCATION, CULTURE AND
SPORTS

Chapter 8 Attached Agencies

SEC. 20. Attached Agencies. The
following agencies are hereby attached to the
Department:

x x x x

(12) Boy Scouts of the Philippines;

(13) Girl Scouts of the Philippines.


The administrative relationship of an attached agency
to the department is defined in the Administrative Code of
1987 as follows:

BOOK IV

THE EXECUTIVE BRANCH

Chapter 7 ADMINISTRATIVE
RELATIONSHIP

SEC. 38. Definition of Administrative
Relationship. Unless otherwise expressly
stated in the Code or in other laws defining the
special relationships of particular agencies,
administrative relationships shall be
categorized and defined as follows:

x x x x

(3) Attachment. (a) This refers to the
lateral relationship between the department or
its equivalent and the attached agency or
corporation for purposes of policy and
program coordination. The coordination may
be accomplished by having the department
represented in the governing board of the
attached agency or corporation, either as
chairman or as a member, with or without
63

voting rights, if this is permitted by the
charter; having the attached corporation or
agency comply with a system of periodic
reporting which shall reflect the progress of
programs and projects; and having the
department or its equivalent provide general
policies through its representative in the
board, which shall serve as the framework for
the internal policies of the attached
corporation or agency. (Emphasis ours.)


As an attached agency, the BSP enjoys operational
autonomy, as long as policy and program coordination is
achieved by having at least one representative of
government in its governing board, which in the case of
the BSP is the DECS Secretary. In this sense, the BSP is not
under government control or supervision and
control. Still this characteristic does not make the attached
chartered agency a private corporation covered by the
constitutional proscription in question.

Art. XII, Sec. 16 of the
Constitution refers to
private corporations
created by government for
proprietary or
economic/business
purposes


At the outset, it should be noted that the provision of
Section 16 in issue is found in Article XII of the Constitution,
entitled National Economy and Patrimony. Section 1 of
Article XII is quoted as follows:

SECTION 1. The goals of the national
economy are a more equitable distribution of
opportunities, income, and wealth; a sustained
increase in the amount of goods and services
produced by the nation for the benefit of the
people; and an expanding productivity as the
key to raising the quality of life for all,
especially the underprivileged.

The State shall promote industrialization
and full employment based on sound
agricultural development and agrarian reform,
through industries that make full and efficient
use of human and natural resources, and which
are competitive in both domestic and foreign
markets. However, the State shall protect
Filipino enterprises against unfair foreign
competition and trade practices.

In the pursuit of these goals, all sectors
of the economy and all regions of the country
shall be given optimum opportunity to
64

develop. Private enterprises, including
corporations, cooperatives, and similar
collective organizations, shall be encouraged to
broaden the base of their ownership.


The scope and coverage of Section 16, Article XII of
the Constitution can be seen from the aforementioned
declaration of state policies and goals which pertains
tonational economy and patrimony and the interests of
the people in economic development.

Section 16, Article XII deals with the formation,
organization, or regulation of private
corporations,
[52]
which should be done through a general
law enacted by Congress, provides for an exception, that is:
if the corporation is government owned or controlled; its
creation is in the interest of the common good; and it
meets the test of economic viability. The rationale behind
Article XII, Section 16 of the 1987 Constitution was
explained in Feliciano v. Commission on Audit,
[53]
in the
following manner:

The Constitution emphatically prohibits
the creation of private corporations except by
a general law applicable to all citizens. The
purpose of this constitutional provision is to
ban private corporations created by special
charters, which historically gave certain
individuals, families or groups special
privileges denied to other
citizens.
[54]
(Emphasis added.)


It may be gleaned from the above discussion that
Article XII, Section 16 bans the creation of private
corporations by special law. The said constitutional
provision should not be construed so as to prohibit the
creation of public corporations or a corporate agency or
instrumentality of the government intended to serve a
public interest or purpose, which should not be measured
on the basis of economic viability, but according to the
public interest or purpose it serves as envisioned
by paragraph (2), of Article 44 of the Civil Code and the
pertinent provisions of the Administrative Code of 1987.

The BSP is a Public
Corporation Not Subject to
the Test of Government
Ownership or Control and
Economic Viability

The BSP is a public corporation or a government
agency or instrumentality with juridical personality, which
does not fall within the constitutional prohibition in Article
XII, Section 16, notwithstanding the amendments to its
charter. Not all corporations, which are not government
owned or controlled, are ipso facto to be considered private
65

corporations as there exists another distinct class of
corporations or chartered institutions which are otherwise
known as public corporations. These corporations are
treated by law as agencies or instrumentalities of the
government which are not subject to the tests of ownership
or control and economic viability but to different criteria
relating to their public purposes/interests or constitutional
policies and objectives and their administrative relationship
to the government or any of its Departments or Offices.

Classification of
Corporations Under Section
16, Article XII of the
Constitution on National
Economy and Patrimony


The dissenting opinion of Associate Justice Antonio T.
Carpio, citing a line of cases, insists that the Constitution
recognizes only two classes of
corporations: privatecorporations under a general law,
and government-owned or controlled corporations created
by special charters.

We strongly disagree. Section 16, Article XII should
not be construed so as to prohibit Congress from creating
public corporations. In fact, Congress has enacted
numerous laws creating public corporations or government
agencies or instrumentalities vested with corporate
powers. Moreover, Section 16, Article XII, which relates to
National Economy and Patrimony, could not have tied the
hands of Congress in creating public corporations to serve
any of the constitutional policies or objectives.

In his dissent, Justice Carpio contends that
this ponente introduces a totally different species of
corporation, which is neither a private corporation nor a
government owned or controlled corporation and, in so
doing, is missing the fact that the BSP, which was created
as a non-stock, non-profit corporation, can only be either a
private corporation or a government owned or controlled
corporation.

Note that in Boy Scouts of the Philippines v. National
Labor Relations Commission, the BSP, under its former
charter, was regarded as both a government owned or
controlled corporation with original charter and a public
corporation. The said case pertinently stated:

While the BSP may be seen to be a
mixed type of entity, combining aspects of
both public and private entities, we believe
that considering the character of its purposes
and its functions, the statutory designation of
the BSP as "a public corporation" and the
substantial participation of the Government in
66

the selection of members of the National
Executive Board of the BSP, the BSP, as
presently constituted under its charter, is a
government-controlled corporation within the
meaning of Article IX (B) (2) (1) of the
Constitution.

We are fortified in this conclusion when
we note that the Administrative Code of 1987
designates the BSP as one of the attached
agencies of the Department of Education,
Culture and Sports ("DECS"). An "agency of the
Government" is defined as referring to any of
the various units of the Government including
a department, bureau, office, instrumentality,
government-owned or -controlled corporation,
or local government or distinct unit
therein. "Government instrumentality" is in
turn defined in the 1987 Administrative Code
in the following manner:

Instrumentality - refers to
any agency of the National
Government, not integrated
within the department
framework, vested with special
functions or jurisdiction by
law, endowed with some if not all
corporate powers, administering
special funds, and enjoying
operational autonomy usually
through a charter. This term
includes regulatory agencies,
chartered institutions and
government-owned or controlled
corporations.

The same Code describes a "chartered
institution" in the following terms:

Chartered institution - refers
to any agency organized or
operating under a special charter,
and vested by law with functions
relating to specific constitutional
policies or objectives. This term
includes the state universities and
colleges, and the monetary
authority of the State.

We believe that the BSP is appropriately
regarded as "a government instrumentality"
under the 1987 Administrative Code.

It thus appears that the BSP may be
regarded as both a "government controlled
corporation with an original charter" and as
an "instrumentality" of the Government
within the meaning of Article IX (B) (2) (1) of
the Constitution. x x x.
[55]
(Emphases supplied.)
67



The existence of public or government corporate or
juridical entities or chartered institutions by legislative fiat
distinct from private corporations and government owned
or controlled corporation is best exemplified by the 1987
Administrative Code cited above, which we quote in part:

Sec. 2. General Terms Defined. Unless
the specific words of the text, or the context as
a whole, or a particular statute, shall require a
different meaning:

x x x x

(10) "Instrumentality" refers to any
agency of the National Government, not
integrated within the department framework,
vested with special functions or jurisdiction by
law, endowed with some if not all corporate
powers, administering special funds,
and enjoying operational autonomy, usually
through a charter. This term includes
regulatory agencies, chartered institutions and
government-owned or controlled
corporations.

x x x x

(12) "Chartered institution" refers to
any agency organized or operating under a
special charter, and vested by law with
functions relating to specific constitutional
policies or objectives. This term includes the
state universities and colleges and the
monetary authority of the State.

(13) "Government-owned or controlled
corporation" refers to any agency organized as
a stock or non-stock corporation, vested with
functions relating to public needs
whether governmental or proprietary in
nature, and owned by the Government directly
or through its instrumentalities either wholly,
or, where applicable as in the case of stock
corporations, to the extent of at least fifty-one
(51) per cent of its capital stock: Provided, That
government-owned or controlled
corporations may be further categorized by
the Department of the Budget, the Civil
Service Commission, and the Commission on
Audit for purposes of the exercise and
discharge of their respective powers,
functions and responsibilities with respect to
such corporations.


68

Assuming for the sake of argument that the BSP
ceases to be owned or controlled by the government
because of reduction of the number of representatives of
the government in the BSP Board, it does not follow that it
also ceases to be a government instrumentality as it still
retains all the characteristics of the latter as an attached
agency of the DECS under the Administrative Code. Vesting
corporate powers to an attached agency or instrumentality
of the government is not constitutionally prohibited and is
allowed by the above-mentioned provisions of the Civil
Code and the 1987 Administrative Code.

Economic Viability and
Ownership and Control
Tests Inapplicable to Public
Corporations


As presently constituted, the BSP still remains
an instrumentality of the national government. It is a
public corporation created by law for a public purpose,
attached to the DECS pursuant to its Charter and the
Administrative Code of 1987. It is not a private corporation
which is required to be owned or controlled by the
government and be economically viable to justify its
existence under a special law.


The dissent of Justice Carpio also submits that by
recognizing a new class of public corporation(s) created
by special charter that will not be subject to the test of
economic viability, the constitutional provision will be
circumvented.

However, a review of the Record of the 1986
Constitutional Convention reveals the intent of the framers
of the highest law of our land to distinguish
between government corporations performing
governmental functions and corporations involved in
business or proprietary functions:

THE PRESIDENT. Commissioner Foz is
recognized.

MR. FOZ. Madam President, I support
the proposal to insert ECONOMIC VIABILITY
as one of the grounds for organizing
government corporations. x x x.

MR. OPLE. Madam President, the reason
for this concern is really that when the
government creates a corporation, there is a
sense in which this corporation becomes
exempt from the test of economic
performance. We know what happened in the
past. If a government corporation loses, then it
makes its claim upon the taxpayers money
69

through new equity infusions from the
government and what is always invoked is the
common good. x x x

Therefore, when we insert the phrase
ECONOMIC VIABILITY together with the
common good, this becomes a restraint on
future enthusiasts for state capitalism to
excuse themselves from the responsibility of
meeting the market test so that they become
viable. x x x.

x x x x

THE PRESIDENT. Commissioner Quesada
is recognized.

MS. QUESADA. Madam President, may
we be clarified by the committee on what is
meant by economic viability?

THE PRESIDENT. Please proceed.

MR. MONSOD. Economic viability
normally is determined by cost-benefit ratio
that takes into consideration all benefits,
including economic external as well as internal
benefits. These are what they call externalities
in economics, so that these are not strictly
financial criteria. Economic viability involves
what we call economic returns or benefits of
the country that are not quantifiable in
financial terms. x x x.

x x x x

MS. QUESADA. So, would this particular
formulation now really limit the entry of
government corporations into activities
engaged in by corporations?

MR. MONSOD. Yes, because it is also
consistent with the economic philosophy that
this Commission approved that there should
be minimum government participation and
intervention in the economy.

MS. QUESDA. Sometimes this
Commission would just refer to Congress to
provide the particular requirements when the
government would get into corporations. But
this time around, we specifically mentioned
economic viability. x x x.

MR. VILLEGAS. Commissioner Ople will
restate the reason for his introducing that
amendment.

MR. OPLE. I am obliged to repeat what I
said earlier in moving for this particular
70

amendment jointly with Commissioner Foz.
During the past three decades, there had been
a proliferation of government corporations,
very few of which have succeeded, and many
of which are now earmarked by the
Presidential Reorganization Commission for
liquidation because they failed the economic
test. x x x.

x x x x

MS. QUESADA. But would not the
Commissioner say that the reason why many
of the government-owned or controlled
corporations failed to come up with the
economic test is due to the management of
these corporations, and not the idea itself of
government corporations? It is a problem of
efficiency and effectiveness of management of
these corporations which could be remedied,
not by eliminating government corporations or
the idea of getting into state-owned
corporations, but improving management
which our technocrats should be able to do,
given the training and the experience.

MR. OPLE. That is part of the economic
viability, Madam President.

MS. QUESADA. So, is the Commissioner
saying then that the Filipinos will benefit more
if these government-controlled corporations
were given to private hands, and that there will
be more goods and services that will be
affordable and within the reach of the ordinary
citizens?

MR. OPLE. Yes. There is nothing here,
Madam President, that will prevent the
formation of a government corporation in
accordance with a special charter given by
Congress. However, we are raising the
standard a little bit so that, in the future,
corporations established by the government
will meet the test of the common good but
within that framework we should also build a
certain standard of economic viability.

x x x x

THE PRESIDENT. Commissioner Padilla is
recognized.

MR. PADILLA. This is an inquiry to the
committee. With regard to corporations
created by a special charter for government-
owned or controlled corporations, will these
be in the pioneer fields or in places where the
private enterprise does not or cannot enter?
71

Or is this so general that these government
corporations can compete with private
corporations organized under a general law?

MR. MONSOD. Madam President, x x
x. There are two types of government
corporations those that are involved
in performing governmental functions, like
garbage disposal, Manila waterworks, and so
on; and those government corporations that
are involved in business functions. As we said
earlier, there are two criteria that should be
followed for corporations that want to go into
business. First is for government corporations
to first prove that they can be efficient in the
areas of their proper functions. This is one of
the problems now because they go into all
kinds of activities but are not even efficient in
their proper functions. Secondly, they should
not go into activities that the private sector can
do better.

MR. PADILLA. There is no question
about corporations performing governmental
functions or functions that are impressed with
public interest. But the question is with
regard to matters that are covered, perhaps
not exhaustively, by private enterprise. It
seems that under this provision the only
qualification is economic viability and common
good, but shall government, through
government-controlled corporations, compete
with private enterprise?

MR. MONSOD. No, Madam President. As
we said, the government should not engage in
activities that private enterprise is engaged in
and can do better. x x x.
[56]
(Emphases
supplied.)


Thus, the test of economic viability clearly does not
apply to public corporations dealing with governmental
functions, to which category the BSP belongs. The
discussion above conveys the constitutional intent not to
apply this constitutional ban on the creation of public
corporations where the economic viability test would be
irrelevant. The said test would only apply if the corporation
is engaged in some economic activity or business function
for the government.

It is undisputed that the BSP performs functions that
are impressed with public interest. In fact, during the
consideration of the Senate Bill that eventually became
Republic Act No. 7278, which amended the BSP Charter,
one of the bills sponsors, Senator Joey Lina, described the
BSP as follows:

72

Senator Lina. Yes, I can only think of two
organizations involving the masses of our
youth, Mr. President, that should be given this
kind of a privilege the Boy Scouts of the
Philippines and the Girl Scouts of the
Philippines. Outside of these two groups, I do
not think there are other groups similarly
situated.

The Boy Scouts of the Philippines has a
long history of providing value formation to
our young, and considering how huge the
population of the young people is, at this
point in time, and also considering the
importance of having an organization such as
this that will inculcate moral uprightness
among the young people, and further
considering that the development of these
young people at that tender age of seven to
sixteen is vital in the development of the
country producing good citizens, I believe that
we can make an exception of the Boy Scouting
movement of the Philippines from this general
prohibition against providing tax exemption
and privileges.
[57]



Furthermore, this Court cannot agree with the
dissenting opinion which equates the changes introduced
by Republic Act No. 7278 to the BSP Charter as clear
manifestation of the intent of Congress to return the BSP
to the private sector. It was not the intent of Congress in
enacting Republic Act No. 7278 to give up all interests in
this basic youth organization, which has been its partner in
forming responsible citizens for decades.

In fact, as may be seen in the deliberation of the
House Bills that eventually resulted to Republic Act No.
7278, Congress worked closely with the BSP to rejuvenate
the organization, to bring it back to its former glory reached
under its original charter, Commonwealth Act No. 111, and
to correct the perceived ills introduced by the amendments
to its Charter under Presidential Decree No. 460. The BSP
suffered from low morale and decrease in number because
the Secretaries of the different departments in government
who were too busy to attend the meetings of the BSPs
National Executive Board (the Board) sent
representatives who, as it turned out, changed from
meeting to meeting. Thus, the Scouting Councils
established in the provinces and cities were not in touch
with what was happening on the national level, but they
were left to implement what was decided by the Board.
[58]


A portion of the legislators discussion is quoted
below to clearly show their intent:

73

HON. DEL MAR. x x x I need not mention
to you the value and the tremendous good
that the Boy Scout Movement has done not
only for the youth in particular but for the
country in general. And that is why, if we look
around, our past and present national
leaders, prominent men in the various fields
of endeavor, public servants in government
offices, and civic leaders in the communities
all over the land, and not only in our country
but all over the world many if not most of
them have at one time or another been
beneficiaries of the Scouting Movement. And
so, it is along this line, Mr. Chairman, that we
would like to have the early approval of this
measure if only to pay back what we owe
much to the Scouting Movement. Now, going
to the meat of the matter, Mr. Chairman, if I
may just the Scouting Movement was
enacted into law in October 31, 1936 under
Commonwealth Act No. 111. x x x [W]e were
acknowledged as the third biggest scouting
organization in the world x x x. And to our
mind, Mr. Chairman, this erratic growth and
this decrease in membership [number] is
because of the bad policy measures that were
enunciated with the enactment or
promulgation by the President before of
Presidential Decree No. 460 which we feel is
the culprit of the ills that is flagging the Boy
Scout Movement today. And so, this is
specifically what we are attacking, Mr.
Chairman, the disenfranchisement of the
National Council in the election of the national
board. x x x. And so, this is what we would like
to be appraised of by the officers of the Boy
[Scouts] of the Philippines whom we are also
confident, have the best interest of the Boy
Scout Movement at heart and it is in this spirit,
Mr. Chairman, that we see no impediment
towards working together, the Boy Scout of
the Philippines officers working together with
the House of Representatives in coming out
with a measure that will put back the vigor and
enthusiasm of the Boy Scout Movement. x x
x.
[59]
(Emphasis ours.)


The following is another excerpt from the discussion
on the House version of the bill, in the Committee on
Government Enterprises:

HON. AQUINO: x x x Well, obviously, the
two bills as well as the previous laws that have
created the Boy Scouts of the Philippines did
not provide for any direct government support
by way of appropriation from the national
budget to support the activities of this
organization. The point here is, and at the
74

same time they have been subjected to a
governmental intervention, which to their
mind has been inimical to the objectives and to
the institution per se, that is why they are
seeking legislative fiat to restore back the
original mandate that they had under
Commonwealth Act 111. Such having been
the experience in the hands of government,
meaning, there has been negative
interference on their part and inasmuch as
their mandate is coming from a legislative
fiat, then shouldnt it be, this rhetorical
question, shouldnt it be better for this
organization to seek a mandate from, lets
say, the government the Corporation Code of
the Philippines and register with the SEC as
non-profit non-stock corporation so that
government intervention could be very very
minimal. Maybe thats a rhetorical question,
they may or they may not answer, ano. I dont
know what would be the benefit of a charter or
a mandate being provided for by way of
legislation versus a registration with the SEC
under the Corporation Code of the Philippines
inasmuch as they dont get anything from the
government anyway insofar as direct funding.
In fact, the only thing that they got from
government was intervention in their
affairs. Maybe we can solicit some
commentary comments from the resource
persons. Incidentally, dont take that as an
objection, Im not objecting. Im all for the
objectives of these two bills. It just occurred to
me that since you have had very bad
experience in the hands of government and
you will always be open to such possible
intervention even in the future as long as you
have a legislative mandate or your mandate or
your charter coming from legislative action.

x x x x

MR. ESCUDERO: Mr. Chairman, there
may be a disadvantage if the Boy Scouts of
the Philippines will be required to register
with the SEC. If we are registered with the SEC,
there could be a danger of proliferation of
scout organization. Anybody can organize and
then register with the SEC. If there will be a
proliferation of this, then the organization will
lose control of the entire organization. Another
disadvantage, Mr. Chairman, anybody can file a
complaint in the SEC against the Boy Scouts of
the Philippines and the SEC may suspend the
operation or freeze the assets of the
organization and hamper the operation of the
organization. I dont know, Mr. Chairman, how
you look at it but there could be a danger for
anybody filing a complaint against the
organization in the SEC and the SEC might
75

suspend the registration permit of the
organization and we will not be able to
operate.

HON. AQUINO: Well, that I think would
be a problem that will not be exclusive to
corporations registered with the SEC because
even if you are government corporation, court
action may be taken against you in other
judicial bodies because the SEC is simply
another quasi-judicial body. But, I think, the
first point would be very interesting, the first
point that you raised. In effect, what you are
saying is that with the legislative mandate
creating your charter, in effect, you have been
given some sort of a franchise with this
movement.

MR. ESCUDERO: Yes.

HON. AQUINO: Exclusive franchise of
that movement?

MR. ESCUDERO: Yes.

HON. AQUINO: Well, thats very well
taken so I will proceed with other issues, Mr.
Chairman. x x x.
[60]
(Emphases added.)


Therefore, even though the amended BSP charter did
away with most of the governmental presence in the BSP
Board, this was done to more strongly promote the BSPs
objectives, which were not supported under Presidential
Decree No. 460. The BSP objectives, as pointed out earlier,
are consistent with the public purpose of the promotion of
the well-being of the youth, the future leaders of the
country. The amendments were not done with the view of
changing the character of the BSP into a privatized
corporation. The BSP remains an agency attached to a
department of the government, the DECS, and it was not at
all stripped of its public character.

The ownership and control test is likewise irrelevant
for a public corporation like the BSP. To reiterate, the
relationship of the BSP, an attached agency, to the
government, through the DECS, is defined in the Revised
Administrative Code of 1987. The BSP meets the minimum
statutory requirement of an attached government agency
as the DECS Secretary sits at the BSP Board ex officio, thus
facilitating the policy and program coordination between
the BSP and the DECS.

Requisites for Declaration
of Unconstitutionality Not
Met in this Case

76

The dissenting opinion of Justice Carpio improperly
raised the issue of unconstitutionality of certain provisions
of the BSP Charter. Even if the parties were asked to
Comment on the validity of the BSP charter by the Court,
this alone does not comply with the requisites for judicial
review, which were clearly set forth in a recent case:

When questions of constitutional
significance are raised, the Court can exercise
its power of judicial review only if the following
requisites are present: (1) the existence of an
actual and appropriate case; (2) the existence
of personal and substantial interest on the
part of the party raising the constitutional
question; (3) recourse to judicial review is
made at the earliest opportunity; and (4) the
constitutional question is the lis mota of the
case.
[61]
(Emphasis added.)


Thus, when it comes to the exercise of the power of
judicial review, the constitutional issue should be the
very lis mota, or threshold issue, of the case, and that it
should be raised by either of the parties. These
requirements would be ignored under the dissents rather
overreaching view of how this case should have been
decided. True, it was the Court that asked the parties to
comment, but the Court cannot be the one to raise a
constitutional issue. Thus, the Court chooses to once more
exhibit restraint in the exercise of its power to pass upon
the validity of a law.

Re: the COAs Jurisdiction

Regarding the COAs jurisdiction over the BSP,
Section 8 of its amended charter allows the BSP to receive
contributions or donations from the government. Section 8
reads:

Section 8. Any donation or contribution
which from time to time may be made to the
Boy Scouts of the Philippines by the
Government or any of its subdivisions,
branches, offices, agencies or
instrumentalities shall be expended by the
Executive Board in pursuance of this Act.


The sources of funds to maintain the BSP were
identified before the House Committee on Government
Enterprises while the bill was being deliberated, and the
pertinent portion of the discussion is quoted below:

MR. ESCUDERO. Yes, Mr. Chairman. The
question is the sources of funds of the
organization. First, Mr. Chairman, the Boy
Scouts of the Philippines do not receive annual
allotment from the government. The
77

organization has to raise its own funds through
fund drives and fund campaigns or fund raising
activities. Aside from this, we have some
revenue producing projects in the organization
that gives us funds to support the operation. x
x x From time to time, Mr. Chairman, when we
have special activities we request for
assistance or financial assistance from
government agencies, from private business
and corporations, but this is only during special
activities that the Boy Scouts of the Philippines
would conduct during the year. Otherwise, we
have to raise our own funds to support the
organization.
[62]



The nature of the funds of the BSP and the COAs
audit jurisdiction were likewise brought up in said
congressional deliberations, to wit:

HON. AQUINO: x x x Insofar as this
organization being a government created
organization, in fact, a government corporation
classified as such, are your funds or your
finances subjected to the COA audit?

MR. ESCUDERO: Mr. Chairman, we are
not. Our funds is not subjected. We dont fall
under the jurisdiction of the COA.

HON. AQUINO: All right, but before
were you?

MR. ESCUDERO: No, Mr. Chairman.

MR. JESUS: May I? As historical
backgrounder, Commonwealth Act 111 was
written by then Secretary Jorge Vargas and
before and up to the middle of the Martial Law
years, the BSP was receiving a subsidy in the
form of an annual a one draw from the
Sweepstakes. And, this was the case also with
the Girl Scouts at the Anti-TB, but then this
was and the Boy Scouts then because of this
funding partly from government was being
subjected to audit in the contributions being
made in the part of the Sweepstakes. But this
was removed later during the Martial Law
years with the creation of the Human
Settlements Commission. So the situation right
now is that the Boy Scouts does not receive
any funding from government, but then in the
case of the local councils and this legislative
charter, so to speak, enables the local councils
even the national headquarters in view of the
provisions in the existing law to receive
donations from the government or any of its
instrumentalities, which would be difficult if
the Boy Scouts is registered as a private
78

corporation with the Securities and Exchange
Commission. Government bodies would be
estopped from making donations to the Boy
Scouts, which at present is not the case
because there is the Boy Scouts charter, this
Commonwealth Act 111 as amended by PD
463.

x x x x

HON. AMATONG: Mr. Chairman, in
connection with that.

THE CHAIRMAN: Yeah, Gentleman from
Zamboanga.

HON. AMATONG: There is no auditing being
made because theres no money put in the
organization, but how about donated funds to
this organization? What are the remedies of
the donors of how will they know how their
money are being spent?

MR. ESCUDERO: May I answer, Mr.
Chairman?

THE CHAIRMAN: Yes, gentleman.

MR. ESCUDERO: The Boy Scouts of the
Philippines has an external auditor and by the
charter we are required to submit a financial
report at the end of each year to the National
Executive Board. So all the funds donated or
otherwise is accounted for at the end of the
year by our external auditor. In this case the
SGV.
[63]



Historically, therefore, the BSP had been subjected to
government audit in so far as public funds had been infused
thereto. However, this practice should not preclude the
exercise of the audit jurisdiction of COA, clearly set forth
under the Constitution, which pertinently provides:


Section 2. (1) The Commission on Audit
shall have the power, authority, and duty to
examine, audit, and settle all accounts
pertaining to the revenue and receipts of, and
expenditures or uses of funds and property,
owned or held in trust by, or pertaining to,
the Government, or any of its subdivisions,
agencies, or instrumentalities, including
government-owned and controlled
corporations with original charters, and on a
post-audit basis: (a) constitutional bodies,
commissions and offices that have been
granted fiscal autonomy under this
Constitution; (b) autonomous state colleges
79

and universities; (c) other government-owned
or controlled corporations with original
charters and their subsidiaries; and (d) such
non-governmental entities receiving subsidy or
equity, directly or indirectly, from or through
the Government, which are required by law of
the granting institution to submit to such audit
as a condition of subsidy or equity. x x x.
[64]



Since the BSP, under its amended charter, continues
to be a public corporation or a government instrumentality,
we come to the inevitable conclusion that it is subject to
the exercise by the COA of its audit jurisdiction in the
manner consistent with the provisions of the BSP Charter.

WHEREFORE, premises considered, the instant
petition for prohibition is DISMISSED.

SO ORDERED.




TERESITA J. LEONARDO-DE
CASTRO
Associate Justice



WE CONCUR:




RENATO C. CORONA
Commission on Audit; jurisdiction over Boy Scouts. (J.
Abad)

The issue was whether or not the Boy Scouts of the
Philippines (BSP) fall under the jurisdiction of the
Commission on Audit. The BSP contends that it is not a
government-owned or controlledcorporation; neither is it
an instrumentality, agency, or subdivision of the
government. The Supreme Court, however, held that not all
corporations, which are not government owned
or controlled, are ipso facto to be considered private
corporations as there exists another distinct class of
corporations or chartered institutions which are otherwise
known as public corporations. These corporations are
treated by law as agencies or instrumentalities of the
government which are not subject to the tests of ownership
or control and economic viability but to a
different criteria relating to their public purposes/interests
or constitutional policies and objectives and their
administrative relationship to the government or any of its
departments or offices. As presently constituted, the BSP is
a public corporation created by law for a public purpose,
attached to the Department of Education Culture and
80

Sports pursuant to its Charter and the Administrative Code
of 1987. It is not a privatecorporation which is required to
be owned or controlled by the government and be
economically viable to justify its existence under a special
law. The economic viability test would only apply if
thecorporation is engaged in some economic activity or
business function for the government, which is not the case
for BSP. Therefore, being a public corporation, the funds of
the BSP fall under the jurisdiction of the Commission on
Audit
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.
D E C I S I O N
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
81

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;
82

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.
83

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 generalsupervision 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
84

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
85

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 Presidents 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
86

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

87

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."
88

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.
89

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
90

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 Taada 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]

x x x x x x x x x
"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
91

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.
92

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. L-31711 September 30, 1971
ANTONIO J. VILLEGAS as Mayor of the City of Manila and
MANUEL D. LAPID, petitioners-appellants,
vs.
ABELARDO SUBIDO as Civil Service Commissioner,
EDUARDO Z. ROMUALDEZ as Secretary of Finance, JOSE R.
GLORIA as Acting Asst. City Treasurer of Manila, and HON.
CONRADO M. VASQUEZ as Presiding Judge of Branch V,
Court of First Instance of Manila, respondents-appellees.
Gregorio A. Ejercito and Restituto R. Villanueva for
petitioners-appellants.
Office of the Solicitor General Felix Q. Antonio, Acting
Assistant Solicitor General Hector C. Fule and Solicitor
Santiago M. Kapunan for respondents-appellees.

FERNANDO, J.:
Petitioner Antonio J. Villegas, in this appeal from a decision
of the lower court dismissing a special civil action for
prohibition, quo warranto and mandamus would lay claim
as the Mayor of the City of Manila to the power of
appointment of the Assistant City Treasurer to which office
the other petitioner, Manuel D. Lapid, was by him named
even if under its Charter
1
such a prerogative is expressly
vested in the President of the Philippines.
2
He would invoke
a provision in the Decentralization Act to the effect that all
"other employees, except teachers, paid out of provincial,
city or municipal general funds, and other local funds shall,
subject to civil service law, rules and regulations, be
appointed by the provincial governor, city or municipal
mayor upon recommendation of the office head
concerned."
3
He is not deterred by the rather general and
in explicit character of such statutory language as he
93

contends for a construction rather generous, if not
latitudinarian, in scope purportedly in consonance with the
avowed purpose of the Act of enlarging boundaries of local
autonomy. Respondent Abelardo Subido, who was
proceeded against as Commissioner of the Civil
Service,
4
takes a stand diametrically opposite not only
because there is no legal basis for such a claim in the light
of what is expressly ordained in the City Charter but also
because such an interpretation of the provision related
upon would disregard the well-settled doctrine that implied
repeals are not favored. The lower court, in a well-written
decision by the Honorable Conrado M. Vasquez, accepted
such a view. After a careful study of the matter, we cannot
discern any error. We affirm.
The facts as found by the lower court follows: "In a letter
dated June 3, 1968, respondent Eduardo Z. Romualdez,
Secretary of Finance, authorized respondent Jose R. Gloria
of the Office of the City Treasurer of Manila to assume the
duties of Assistant City Treasurer effective June 1, 1968,
vice Felino Fineza who retired from the government service
on May 31, 1968. In administrative Order No. 40, series of
1968, dated June 17, 1968, petitioner Antonio J. Villegas,
Mayor of the City of Manila, directed respondent Gloria to
desist and refrain from exercising the duties and functions
of the Assistant City Treasurer,' on the ground that
respondent Romualdez "is not empowered to make such
designation." On January 1, 1969, Mayor Villegas,
appointed petitioner Manuel D. Lapid, chief of the cash
division of the Office of the City Treasurer of Manila, as
Assistant City Treasurer. In a 1st endorsement dated
February 14, 1969, respondent Abelardo Subido,
Commissioner of Civil Service disapproved the appointment
of Lapid, basing his action, on an opinion of the Secretary of
Justice dated September 19, 1968 to the effect that the
appointment of Assistant Provincial Treasurers is still
governed by Section 2088 (A) of the Revised Administrative
Code, and not by Section 4 of the Decentralization Law,
Republic Act No. 5185."
5

Thereafter on February 25, 1969, to quote anew from the
appealed decision: "Mayor Villegas and Manuel D. Lapid
filed the instant petition for prohibition, quo
warranto and mandamus, with application for writ of
preliminary injunction, praying that judgment be rendered
to declare illegal and void ab initio the authorization given
by respondent Romualdez to respondent Gloria to assume
the duties of assistant city treasurer of Manila, and that
awrit of mandamus be issued to respondent Commissioner
of Civil Service Subido commanding him to approve the
appointment of petitioner Lapid to the said office in
accordance with the civil Service Rules."
6
It was not until
the filing of the petition that respondent Jose R. Gloria was
nominated by the President of the Philippines to the
position of Assistant City treasurer of Manila and thereafter
duly confirmed. After the case was submitted for judgment
on the pleadings and the documentary exhibits stipulated
by the parties, the court rendered its decision on August 4,
1969 dismissing the petition. Hence this appeal by way of
certiorari.
94

With this Tribunal, as with the court below, the decisive
question is the applicable law. The Charter of the City of
Manila, enacted in 1949, in express terms did confer on the
President of the Philippines, with the consent of the
Commission on Appointments, the power to appoint the
Assistant City Treasurer.
7
On the other hand, support for
the petition is premised on the expansive interpretation
that would be accorded the general provisions found in the
Decentralization Act of 1967 to the effect that it is a city
mayor who has the power to appoint all other employees
paid out of city or local funds subject to civil service law,
rules and regulations.
8

It is understandable why the choice for the lower court was
not difficult to make. What has been so clearly ordained in
the Charter is controlling. It survives in the face of the
assertion that the additional power granted local officials to
appoint employees paid out of local funds would suffice to
transfer such authority to petitioner Mayor. A perusal of
the words of the statute, even if far from searching would
not justify such an interpretation. This is allmore evident,
considering the fidelity manifested by this Court to the
doctrine that looks with less than favor on implied appeals.
The decision now on appeal, to repeat, must be affirmed.
1. The inherent weakness of the contention of petitioner
Mayor that would seize upon the vesting of the appointing
power of all other "employees" except teachers paid out of
local funds to justify his choice of petitioner Manuel D.
Lapid as Assistant City Treasurer is readily disclosed. The
Revised Administrative Code distinguishes one in that
category from an "officer" to designate those "whose
duties, not being of a clerical or manual nature, may be
considered to involve the exercise of discretion in the
performance of the function of government, whether such
duties are precisely defined by law or not."
9
Clearly, the
Assistant and City Treasurer is an officer, not an employee.
Then, too, Section 4 of the Decentralization Act relied upon
by petitioner City Mayor specifically enumerates, the
officials and their assistants whom he can appoint,
specifically excluding therefrom city treasurers.
10
The
expansive interpretation contended for is thus
unwarranted.
Nor is the case strengthened for petitioner City Mayor by
the invocation of Pineda v. Claudio.
11
It is not to be denied
that in the opinion of the Court, penned by Justice Castro,
undue interference with the power and prerogatives of a
local executive is sought to be avoided, considering his
primary responsibility for efficient governmental
administration. What is not to be ignored though is that
such a principle was announced in connection with the
appointment of a department head, the chief of police, who
necessarily must enjoy the fullest confidence of the local
executive, one moreover whose appointment is expressly
vested in the city mayor. The principle therein announced
does not extend as far as the choice of an assistant city
treasurer whose functions do not require that much degree
of confidence, not to mention the specific grant of such
authority to the President. Equally unavailing then
95

is Villegas v. Subido,
12
where this Court, through the then
Justice Capistrano, recognized that the choice of who the
city legal officer should be rests solely on the city mayor,
such an office requiring as it does the highest degree of
confidence. It bears repeating that the situation in the case
before us is of a different category. The decision appealed
from, then, is not to be impugned as a failure to abide by
controlling pronouncements of this Tribunal.
2. Much less is reversal of the lower court decision justified
on the plea that the aforesaid provision in the
Decentralization Act had the effect of repealing what is
specifically ordained in the city charter. It has been the
constant holding of this Court that repeals by duplication
are not favored and will not be so declared unless it be
manifest that the legislature so intended. Such a doctrine
goes as far back as United States v. Reyes, a 1908
decision.
13
It is necessary then before such a repeal is
deemed to exist that it be shown that the statutes or
statutory provisions deal with the same subject matter and
that the latter be inconsistent with the former.
14
There
must be a showing of repugnancy clear and convincing in
character. The language used in the latter statute must be
such as to render it irreconcilable with what had been
formerly enacted. An inconsistency that falls short of that
standard does not suffice. What is needed is a manifest
indication of the legislative purpose to repeal.
15

More specifically, a subsequent statute, general in
character as to its terms and application, is not to be
construed as repealing a special or specific enactment,
unless the legislative purpose to do so is manifest. This is so
even if the provisions of the latter are sufficiently
comprehensive to include what was set forth in the special
act. This principle has likewise been consistently applied in
decisions of this Court from Manila Railroad Co. v.
Rafferty,
16
decided as far back as 1919. A citation from an
opinion of Justice Tuason is illuminating. Thus: "From
another angle the presumption against repeal is stronger. A
special law is not regarded as having been amended or
repealed by a general law unless the intent to repeal or
alter is manifest. Generalia specialibus non derogant. And
this is true although the terms of the general act are broad
enough to include the matter in the special statute. ... At
any rate, in the event harmony between provisions of this
type in the same law or in two laws is impossible, the
specific provision controls unless the statute, considered in
its entirety, indicates a contrary intention upon the part of
the legislature. ... A general law is one which embraces a
class of subjects or places and does not omit any subject or
place naturally belonging to such class while a special act is
one which relates to particular persons or things of a
class.
17

WHEREFORE, the lower court decision of August 4, 1969 is
affirmed. Without pronouncement as to costs.
Concepcion, C.J., Reyes, J.B.L., Makalintal, Zaldivar, Castro,
Barredo, Villamor and Makasiar, JJ., concur.
96

Dizon and Teehankee, JJ., took no part.


Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 80391 February 28, 1989
SULTAN ALIMBUSAR P. LIMBONA, petitioner,
vs.
CONTE MANGELIN, SALIC ALI, SALINDATO ALI, PILIMPINAS
CONDING, ACMAD TOMAWIS, GERRY TOMAWIS, JESUS
ORTIZ, ANTONIO DELA FUENTE, DIEGO PALOMARES, JR.,
RAUL DAGALANGIT, and BIMBO SINSUAT, respondents.
Ambrosio Padilla, Mempin & Reyes Law Offices for
petitioner petitioner.
Makabangkit B. Lanto for respondents.

SARMIENTO, J.:
The acts of the Sangguniang Pampook of Region XII are
assailed in this petition. The antecedent facts are as follows:
1. On September 24, 1986, petitioner Sultan
Alimbusar Limbona was appointed as a
member of the Sangguniang Pampook,
Regional Autonomous Government, Region XII,
representing Lanao del Sur.
2. On March 12, 1987 petitioner was elected
Speaker of the Regional Legislative Assembly or
Batasang Pampook of Central Mindanao
(Assembly for brevity).
3. Said Assembly is composed of eighteen (18)
members. Two of said members, respondents
Acmad Tomawis and Pakil Dagalangit, filed on
March 23, 1987 with the Commission on
Elections their respective certificates of
candidacy in the May 11, 1987 congressional
elections for the district of Lanao del Sur but
they later withdrew from the aforesaid
election and thereafter resumed again their
positions as members of the Assembly.
4. On October 21, 1987 Congressman Datu
Guimid Matalam, Chairman of the Committee
on Muslim Affairs of the House of
Representatives, invited Mr. Xavier Razul,
Pampook Speaker of Region XI, Zamboanga
City and the petitioner in his capacity as
Speaker of the Assembly, Region XII, in a letter
which reads:
97

The Committee on Muslim Affairs
well undertake consultations and
dialogues with local
government officials, civic,
religious organizations and
traditional leaders on the recent
and present political
developments and other issues
affecting Regions IX and XII.
The result of the conference,
consultations and dialogues would
hopefully chart the autonomous
governments of the two regions as
envisioned and may prod the
President to constitute
immediately the Regional
Consultative Commission as
mandated by the Commission.
You are requested to invite some
members of the Pampook
Assembly of your respective
assembly on November 1 to 15,
1987, with venue at the Congress
of the Philippines. Your presence,
unstinted support and
cooperation is (sic) indispensable.
5. Consistent with the said invitation,
petitioner sent a telegram to Acting Secretary
Johnny Alimbuyao of the Assembly to wire all
Assemblymen that there shall be no session in
November as "our presence in the house
committee hearing of Congress take (sic)
precedence over any pending business in
batasang pampook ... ."
6. In compliance with the aforesaid instruction
of the petitioner, Acting Secretary Alimbuyao
sent to the members of the Assembly the
following telegram:
TRANSMITTING FOR YOUR
INFORMATION AND GUIDANCE
TELEGRAM RECEIVED FROM
SPEAKER LIMBONA QUOTE
CONGRESSMAN JIMMY MATALAM
CHAIRMAN OF THE HOUSE
COMMITTEE ON MUSLIM AFFAIRS
REQUESTED ME TO ASSIST SAID
COMMITTEE IN THE DISCUSSION
OF THE PROPOSED AUTONOMY
ORGANIC NOV. 1ST TO 15. HENCE
WERE ALL ASSEMBLYMEN THAT
THERE SHALL BE NO SESSION IN
NOVEMBER AS OUR PRESENCE IN
THE HOUSE COMMITTEE HEARING
OF CONGRESS TAKE PRECEDENCE
98

OVER ANY PENDING BUSINESS IN
BATASANG PAMPOOK OF
MATALAM FOLLOWS UNQUOTE
REGARDS.
7. On November 2, 1987, the Assembly held
session in defiance of petitioner's advice, with
the following assemblymen present:
1. Sali, Salic
2. Conding, Pilipinas (sic)
3. Dagalangit, Rakil
4. Dela Fuente, Antonio
5. Mangelen, Conte
6. Ortiz, Jesus
7. Palomares, Diego
8. Sinsuat, Bimbo
9. Tomawis, Acmad
10. Tomawis, Jerry
After declaring the presence of a quorum, the
Speaker Pro-Tempore was authorized to
preside in the session. On Motion to declare
the seat of the Speaker vacant, all
Assemblymen in attendance voted in the
affirmative, hence, the chair declared said seat
of the Speaker vacant. 8. On November 5,
1987, the session of the Assembly resumed
with the following Assemblymen present:
1. Mangelen Conte-Presiding
Officer
2. Ali Salic
3. Ali Salindatu
4. Aratuc, Malik
5. Cajelo, Rene
6. Conding, Pilipinas (sic)
7. Dagalangit, Rakil
8. Dela Fuente, Antonio
9. Ortiz, Jesus
10 Palomares, Diego
11. Quijano, Jesus
12. Sinsuat, Bimbo
99

13. Tomawis, Acmad
14. Tomawis, Jerry
An excerpt from the debates and proceeding of
said session reads:
HON. DAGALANGIT: Mr. Speaker, Honorable
Members of the House, with the presence of
our colleagues who have come to attend the
session today, I move to call the names of the
new comers in order for them to cast their
votes on the previous motion to declare the
position of the Speaker vacant. But before
doing so, I move also that the designation of
the Speaker Pro Tempore as the Presiding
Officer and Mr. Johnny Evangelists as Acting
Secretary in the session last November 2, 1987
be reconfirmed in today's session.
HON. SALIC ALI: I second the motions.
PRESIDING OFFICER: Any comment or
objections on the two motions presented? Me
chair hears none and the said motions are
approved. ...
Twelve (12) members voted in favor of the
motion to declare the seat of the Speaker
vacant; one abstained and none voted
against.
1

Accordingly, the petitioner prays for judgment
as follows:
WHEREFORE, petitioner respectfully prays
that-
(a) This Petition be given due course;
(b) Pending hearing, a restraining order or writ
of preliminary injunction be issued enjoining
respondents from proceeding with their
session to be held on November 5, 1987, and
on any day thereafter;
(c) After hearing, judgment be rendered
declaring the proceedings held by respondents
of their session on November 2, 1987 as null
and void;
(d) Holding the election of petitioner as
Speaker of said Legislative Assembly or Batasan
Pampook, Region XII held on March 12, 1987
valid and subsisting, and
(e) Making the injunction permanent.
Petitioner likewise prays for such
other relief as may be just and equitable.
2

Pending further proceedings, this Court, on January 19,
1988, received a resolution filed by the Sangguniang
100

Pampook, "EXPECTING ALIMBUSAR P. LIMBONA FROM
MEMBERSHIP OF THE SANGGUNIANG PAMPOOK
AUTONOMOUS REGION XII,"
3
on the grounds, among other
things, that the petitioner "had caused to be prepared and
signed by him paying [sic] the salaries and emoluments of
Odin Abdula, who was considered resigned after filing his
Certificate of Candidacy for Congressmen for the First
District of Maguindanao in the last May 11, elections. . . and
nothing in the record of the Assembly will show that any
request for reinstatement by Abdula was ever made . .
."
4
and that "such action of Mr. Lim bona in paying Abdula
his salaries and emoluments without authority from the
Assembly . . . constituted a usurpation of the power of the
Assembly,"
5
that the petitioner "had recently caused
withdrawal of so much amount of cash from the Assembly
resulting to the non-payment of the salaries and
emoluments of some Assembly [sic],"
6
and that he had
"filed a case before the Supreme Court against some
members of the Assembly on question which should have
been resolved within the confines of the Assembly,"
7
for
which the respondents now submit that the petition had
become "moot and academic".
8

The first question, evidently, is whether or not the
expulsion of the petitioner (pending litigation) has made
the case moot and academic.
We do not agree that the case has been rendered moot and
academic by reason simply of the expulsion resolution so
issued. For, if the petitioner's expulsion was done purposely
to make this petition moot and academic, and to preempt
the Court, it will not make it academic.
On the ground of the immutable principle of due process
alone, we hold that the expulsion in question is of no force
and effect. In the first place, there is no showing that the
Sanggunian had conducted an investigation, and whether
or not the petitioner had been heard in his defense,
assuming that there was an investigation, or otherwise
given the opportunity to do so. On the other hand, what
appears in the records is an admission by the Assembly (at
least, the respondents) that "since November, 1987 up to
this writing, the petitioner has not set foot at the
Sangguniang Pampook."
9
"To be sure, the private
respondents aver that "[t]he Assemblymen, in a conciliatory
gesture, wanted him to come to Cotabato City,"
10
but that
was "so that their differences could be threshed out and
settled."
11
Certainly, that avowed wanting or desire to
thresh out and settle, no matter how conciliatory it may be
cannot be a substitute for the notice and hearing
contemplated by law.
While we have held that due process, as the term is known
in administrative law, does not absolutely require notice
and that a party need only be given the opportunity to be
heard,
12
it does not appear herein that the petitioner had,
to begin with, been made aware that he had in fact stood
charged of graft and corruption before his collegues. It
cannot be said therefore that he was accorded any
opportunity to rebut their accusations. As it stands, then,
101

the charges now levelled amount to mere accusations that
cannot warrant expulsion.
In the second place, (the resolution) appears strongly to be
a bare act of vendetta by the other Assemblymen against
the petitioner arising from what the former perceive to be
abduracy on the part of the latter. Indeed, it (the
resolution) speaks of "a case [having been filed] [by the
petitioner] before the Supreme Court . . . on question which
should have been resolved within the confines of the
Assemblyman act which some members claimed
unnecessarily and unduly assails their integrity and
character as representative of the people"
13
an act that
cannot possibly justify expulsion. Access to judicial
remedies is guaranteed by the Constitution,
14
and, unless
the recourse amounts to malicious prosecution, no one
may be punished for seeking redress in the courts.
We therefore order reinstatement, with the caution that
should the past acts of the petitioner indeed warrant his
removal, the Assembly is enjoined, should it still be so
minded, to commence proper proceedings therefor in line
with the most elementary requirements of due process.
And while it is within the discretion of the members of the
Sanggunian to punish their erring colleagues, their acts are
nonetheless subject to the moderating band of this Court in
the event that such discretion is exercised with grave
abuse.
It is, to be sure, said that precisely because the Sangguniang
Pampook(s) are "autonomous," the courts may not
rightfully intervene in their affairs, much less strike down
their acts. We come, therefore, to the second issue: Are the
so-called autonomous governments of Mindanao, as they
are now constituted, subject to the jurisdiction of the
national courts? In other words, what is the extent of self-
government given to the two autonomous governments of
Region IX and XII?
The autonomous governments of Mindanao were
organized in Regions IX and XII by Presidential Decree No.
1618
15
promulgated on July 25, 1979. Among other things,
the Decree established "internal autonomy"
16
in the two
regions "[w]ithin the framework of the national sovereignty
and territorial integrity of the Republic of the Philippines
and its Constitution,"
17
with legislative and executive
machinery to exercise the powers and
responsibilities
18
specified therein.
It requires the autonomous regional governments to
"undertake all internal administrative matters for the
respective regions,"
19
except to "act on matters which are
within the jurisdiction and competence of the National
Government,"
20
"which include, but are not limited to, the
following:
(1) National defense and security;
(2) Foreign relations;
102

(3) Foreign trade;
(4) Currency, monetary affairs, foreign
exchange, banking and quasi-banking, and
external borrowing,
(5) Disposition, exploration, development,
exploitation or utilization of all natural
resources;
(6) Air and sea transport
(7) Postal matters and telecommunications;
(8) Customs and quarantine;
(9) Immigration and deportation;
(10) Citizenship and naturalization;
(11) National economic, social and educational
planning; and
(12) General auditing.
21

In relation to the central government, it provides that "[t]he
President shall have the power of general supervision and
control over the Autonomous Regions ..."
22

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,"
23
"and ensure their fullest development as
self-reliant communities and make them more effective
partners in the pursuit of national development and social
progress."
24
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"
25
over them, but
only to "ensure that local affairs are administered according
to law."
26
He has no control over their acts in the sense
that he can substitute their judgments with his own.
27

Decentralization of power, on the other hand, involves an
abdication of political power in the favor of local
governments units declare 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.
28

But the question of whether or not the grant of autonomy
Muslim Mindanao under the 1987 Constitution involves,
truly, an effort to decentralize power rather than mere
administration is a question foreign to this petition, since
what is involved herein is a local government unit
103

constituted prior to the ratification of the present
Constitution. Hence, the Court will not resolve that
controversy now, in this case, since no controversy in fact
exists. We will resolve it at the proper time and in the
proper case.
Under the 1987 Constitution, local government units enjoy
autonomy in these two senses, thus:
Section 1. The territorial and political
subdivisions of the Republic of the Philippines
are the provinces, cities, municipalities, and
barangays. Here shall be autonomous regions
in Muslim Mindanao ,and the Cordilleras as
hereinafter provided.
29

Sec. 2. The territorial and political subdivisions
shall enjoy local autonomy.
30

xxx xxx xxx
See. 15. Mere shall be created autonomous
regions in Muslim Mindanao and in the
Cordilleras consisting of provinces, cities,
municipalities, and geographical areas sharing
common and distinctive historical and cultural
heritage, economic and social structures, and
other relevant characteristics within the
framework of this Constitution and the
national sovereignty as well as territorial
integrity of the Republic of the Philippines.
31

An autonomous government that enjoys autonomy of the
latter category [CONST. (1987), art. X, sec. 15.] is subject
alone to the decree of the organic act creating it and
accepted principles on the effects and limits of "autonomy."
On the other hand, an autonomous government of the
former class is, as we noted, under the supervision of the
national government acting through the President (and the
Department of Local Government).
32
If the Sangguniang
Pampook (of Region XII), then, is autonomous in the latter
sense, its acts are, debatably beyond the domain of this
Court in perhaps the same way that the internal acts, say,
of the Congress of the Philippines are beyond our
jurisdiction. But if it is autonomous in the former category
only, it comes unarguably under our jurisdiction. An
examination of the very Presidential Decree creating the
autonomous governments of Mindanao persuades us that
they were never meant to exercise autonomy in the second
sense, that is, in which the central government commits an
act of self-immolation. Presidential Decree No. 1618, in the
first place, mandates that "[t]he President shall have the
power of general supervision and control over Autonomous
Regions."
33
In the second place, the Sangguniang Pampook,
their legislative arm, is made to discharge chiefly
administrative services, thus:
SEC. 7. Powers of the Sangguniang Pampook.
The Sangguniang Pampook shall exercise local
104

legislative powers over regional affairs within
the framework of national development plans,
policies and goals, in the following areas:
(1) Organization of regional administrative
system;
(2) Economic, social and cultural development
of the Autonomous Region;
(3) Agricultural, commercial and industrial
programs for the Autonomous Region;
(4) Infrastructure development for the
Autonomous Region;
(5) Urban and rural planning for the
Autonomous Region;
(6) Taxation and other revenue-raising
measures as provided for in this Decree;
(7) Maintenance, operation and administration
of schools established by the Autonomous
Region;
(8) Establishment, operation and maintenance
of health, welfare and other social services,
programs and facilities;
(9) Preservation and development of customs,
traditions, languages and culture indigenous to
the Autonomous Region; and
(10) Such other matters as may be authorized
by law,including the enactment of such
measures as may be necessary for the
promotion of the general welfare of the people
in the Autonomous Region.
The President shall exercise such powers as
may be necessary to assure that enactment
and acts of the Sangguniang Pampook and the
Lupong Tagapagpaganap ng Pook are in
compliance with this Decree, national
legislation, policies, plans and programs.
The Sangguniang Pampook shall maintain
liaison with the Batasang Pambansa.
34

Hence, we assume jurisdiction. And if we can make an
inquiry in the validity of the expulsion in question, with
more reason can we review the petitioner's removal as
Speaker.
Briefly, the petitioner assails the legality of his ouster as
Speaker on the grounds that: (1) the Sanggunian, in
convening on November 2 and 5, 1987 (for the sole
purpose of declaring the office of the Speaker vacant), did
so in violation of the Rules of the Sangguniang Pampook
105

since the Assembly was then on recess; and (2) assuming
that it was valid, his ouster was ineffective nevertheless for
lack of quorum.
Upon the facts presented, we hold that the November 2
and 5, 1987 sessions were invalid. It is true that under
Section 31 of the Region XII Sanggunian Rules, "[s]essions
shall not be suspended or adjourned except by direction of
the Sangguniang Pampook,"
35
but it provides likewise that
"the Speaker may, on [sic] his discretion, declare a recess of
"short intervals."
36
Of course, there is disagreement
between the protagonists as to whether or not the recess
called by the petitioner effective November 1 through 15,
1987 is the "recess of short intervals" referred to; the
petitioner says that it is while the respondents insist that, to
all intents and purposes, it was an adjournment and that
"recess" as used by their Rules only refers to "a recess when
arguments get heated up so that protagonists in a debate
can talk things out informally and obviate dissenssion [sic]
and disunity.
37
The Court agrees with the respondents on
this regard, since clearly, the Rules speak of "short
intervals." Secondly, the Court likewise agrees that the
Speaker could not have validly called a recess since the
Assembly had yet to convene on November 1, the date
session opens under the same Rules.
38
Hence, there can be
no recess to speak of that could possibly interrupt any
session. But while this opinion is in accord with the
respondents' own, we still invalidate the twin sessions in
question, since at the time the petitioner called the
"recess," it was not a settled matter whether or not he
could. do so. In the second place, the invitation tendered by
the Committee on Muslim Affairs of the House of
Representatives provided a plausible reason for the
intermission sought. Thirdly, assuming that a valid recess
could not be called, it does not appear that the respondents
called his attention to this mistake. What appears is that
instead, they opened the sessions themselves behind his
back in an apparent act of mutiny. Under the
circumstances, we find equity on his side. For this reason,
we uphold the "recess" called on the ground of good faith.
It does not appear to us, moreover, that the petitioner had
resorted to the aforesaid "recess" in order to forestall the
Assembly from bringing about his ouster. This is not
apparent from the pleadings before us. We are convinced
that the invitation was what precipitated it.
In holding that the "recess" in question is valid, we are not
to be taken as establishing a precedent, since, as we said, a
recess can not be validly declared without a session having
been first opened. In upholding the petitioner herein, we
are not giving him a carte blanche to order recesses in the
future in violation of the Rules, or otherwise to prevent the
lawful meetings thereof.
Neither are we, by this disposition, discouraging the
Sanggunian from reorganizing itself pursuant to its lawful
prerogatives. Certainly, it can do so at the proper time. In
the event that be petitioner should initiate obstructive
106

moves, the Court is certain that it is armed with enough
coercive remedies to thwart them.
39

In view hereof, we find no need in dwelling on the issue of
quorum.
WHEREFORE, premises considered, the petition is
GRANTED. The Sangguniang Pampook, Region XII, is
ENJOINED to (1) REINSTATE the petitioner as Member,
Sangguniang Pampook, Region XII; and (2) REINSTATE him
as Speaker thereof. No costs.
SO ORDERED.
Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz,
Paras, Feliciano, Gancayco, Bidin, Cortes, Grio-Aquino,
Medialdea and Regalado, JJ., concur.
Padilla, J., took no part.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 79956 January 29, 1990
CORDILLERA BROAD COALITION, petitioner,
vs.
COMMISSION ON AUDIT, respondent.
G.R. No. 82217 January 29, 1990
LILIA YARANON and BONA BAUTISTA, assisted by their
spouses, BRAULIO D. YARANON and DEMETRIO D.
BAUTISTA, JR., respectively; JAMES BRETT and SINAI C.
HAMADA, petitioners,
vs.
THE COMMISSION ON AUDIT, HON. CATALINO MACARAIG,
Executive Secretary, HON. VICENTE JAYME, Secretary of
Finance, HON. GUILLERMO N. CARAGUE, Secretary of
Budget and Management, and HON. ROSALINA S.
CAJUCOM, OIC National Treasurer, respondents.

CORTES, J.:
In these consolidated petitions, the constitutionality of
Executive Order No. 220, dated July 15, 1987, which
created the (Cordillera Administrative Region, is assailed
on the primary ground that it pre-empts the enactment of
an organic act by the Congress and the creation of' the
autonomous region in the Cordilleras conditional on the
approval of the act through a plebiscite.
Relative to the creation of autonomous regions, the
constitution, in Article X, provides:
AUTONOMOUS REGIONS
107

Sec. 15. There shall be created autonomous
regions in Muslim Mindanao and in the
Cordilleras consisting of provinces, cities,
municipalities, and geographical areas sharing
common and distinctive historical and cultural
heritage, economic and social structures, and
other relevant characteristics within the
framework of this Constitution and the
national sovereignty as well as territorial
integrity of the Republic of the Philippines.
SEC. 16. The President shall exercise general
supervision over autonomous regions to
ensure that laws are faithfully executed.
Sec. 17. All powers, functions, and
responsibilities not granted Constitution or by
law to the autonomous regions shall be
vested in the National Government.
Sec. 18. The Congress shall enact an organic
act for each autonomous region with the
assistance and participation of the regional
consultative commission composed of
representatives appointed by the President
from a list of nominees from multi-sectoral
bodies. The organic act shall define the basic
structure of government for the region
consisting of the executive department and
legislative assembly, both of which shall be
elective and representative of the constituent
political units. The organic acts shall likewise
provide for special courts with personal,
family and property law jurisdiction
consistent with the provisions of this
Constitution and national laws.
The creation of the autonomous region shall
be effective when approved by majority of
the votes cast by the constituent units in a
plebiscite called for the purpose, provided
that only provinces, cities, and geographic
areas voting favorably in such plebiscite shall
be included in the autonomous region.
Sec. 19. The first Congress elected under this
Constitution shall, within eighteen months
from the time of organization of both Houses,
pass the organic acts for the autonomous
regions in Muslim Mindanao and the
Cordilleras.
Sec. 20. Within its territorial jurisdiction and
subject to the provisions of this Constitution
and national laws, the organic act of
autonomous regions shall provide for
legislative powers over:
(1) Administrative organization;
108

(2) Creation of sources of revenues;
(3) Ancestral domain and natural resources;
(4) Personal, family and property relations;
(5) Regional urban and rural planning
development;
(6) Economic, social and tourism development
;
(7) Educational policies;
(8) Preservation and development of the
cultural heritage; and
(9) Such other matters as may be authorized
by law for the promotion of the general
welfare of the people of the region.
Sec. 21. The preservation of peace and order
within the regions shall be the responsibility
of the local police agencies which shall be
organized, maintained, supervised, and
utilized in accordance with applicable laws.
The defense and security of the regions shall
be the responsibility of the National
Government.
A study of E.O. No. 220 would be incomplete Without
reference to its historical background.
In April 1986, just after the EDSA Revolution,
Fr. Conrado M. Balweg, S.V.D., broke off on
ideological grounds from the Communist
Party of the Philippines (CPP) and its military
arm the New People's Army. (NPA).
After President Aquino was installed into
office by People Power, she advocated a
policy of national reconciliation. She called on
all revolutionary forces to a peace dialogue.
The CPLA heeded this call of the President.
After the preliminary negotiations, President
Aquino and some members of her Cabinet
flew to Mt. Data in the Mountain Province on
September 13, 1986 and signed with Fr.
Conrado M. Balweg (As Commander of the
CPLA and Ama Mario Yag-ao (as President of
Cordillera Bodong Administration, the civil
government of the CPLA a ceasefire
agreement that signified the cessation of
hostilities (WHEREAS No. 7, E.O. 220).
The parties arrived at an agreement in
principle: the Cordillera people shall not
undertake their demands through armed and
violent struggle but by peaceful means, such
as political negotiations. The negotiations
109

shall be a continuing process until the
demands of the Cordillera people shall have
been substantially granted.
On March 27, 1987, Ambassador Pelaez
[Acting as Chief Negotiator of the
government], in pursuance of the September
13, 1986 agreement, flew to the Mansion
House, Baguio City, and signed with Fr.
Balweg (as Chairman of the Cordillera panel) a
joint agreement, paragraphs 2 and 3 of which
state:
Par. 2- Work together in drafting an Executive
Order to create a preparatory body that could
perform policy-making and administrative
functions and undertake consultations and
studies leading to a draft organic act for the
Cordilleras.
Par. 3- Have representatives from the
Cordillera panel join the study group of the
R.P. Panel in drafting the Executive Order.
Pursuant to the above joint agreement, E.O.
220 was drafted by a panel of the Philippine
government and of the representatives of the
Cordillera people.
On July 15, 1987, President Corazon C. Aquino
signed the joint draft into law, known now as
E.O. 220. [Rejoinder G.R. No. 82217, pp. 2-3].
Executive Order No. 220, issued by the President in the
exercise of her legislative powers under Art. XVIII, sec. 6 of
the 1987 Constitution, created the Cordillera
Administrative Region (CAR) , which covers the provinces
of Abra, Benguet, Ifugao, Kalinga-Apayao and Mountain
Province and the City of Baguio [secs. 1 and 2]. It was
created to accelerate economic and social growth in the
region and to prepare for the establishment of the
autonomous region in the Cordilleras [sec. 3]. Its main
function is to coordinate the planning and implementation
of programs and services in the region, particularly, to
coordinate with the local government units as well as with
the executive departments of the National Government in
the supervision of field offices and in identifying, planning,
monitoring, and accepting projects and activities in the
region [sec. 5]. It shall also monitor the implementation of
all ongoing national and local government projects in the
region [sec. 20]. The CAR shall have a Cordillera Regional
Assembly as a policy-formulating body and a Cordillera
Executive Board as an implementing arm [secs. 7, 8 and
10]. The CAR and the Assembly and Executive Board shall
exist until such time as the autonomous regional
government is established and organized [sec. 17].
Explaining the rationale for the issuance of E.O. No. 220,
its last "Whereas" clause provides:
110

WHEREAS, pending the convening of the first
Congress and the enactment of the organic
act for a Cordillera autonomous region, there
is an urgent need, in the interest of national
security and public order, for the President to
reorganize immediately the existing
administrative structure in the Cordilleras to
suit it to the existing political realities therein
and the Government's legitimate concerns in
the areas, without attempting to pre-empt
the constitutional duty of the first Congress to
undertake the creation of an autonomous
region on a permanent basis.
During the pendency of this case, Republic Act No. 6766
entitled "An Act Providing for an Organic Act for the
Cordillera Autonomous Region," was enacted and signed
into law. The Act recognizes the CAR and the offices and
agencies created under E.O. No. 220 and its transitory
nature is reinforced in Art. XXI of R.A. No. 6766, to wit:
SEC. 3. The Cordillera Executive Board, the
Cordillera Region Assembly as well as all
offices and agencies created under Execute
Order No. 220 shall cease to exist
immediately upon the ratification of this
Organic Act.
All funds, properties and assets of the
Cordillera Executive Board and the Cordillera
Regional Assembly shall automatically be
transferred to the Cordillera Autonomous
Government.
I
It is well-settled in our jurisprudence that respect for the
inherent and stated powers and prerogatives of the law-
making body, as well as faithful adherence to the principle
of separation of powers, require that its enactment be
accorded the presumption of constitutionality. Thus, in
any challenge to the constitutionality of a statute, the
burden of clearly and unequivocally proving its
unconstitutionality always rests upon the challenger.
Conversely, failure to so prove will necessarily defeat the
challenge.
We shall be guided by these principles in considering these
consolidated petitions.
In these cases, petitioners principally argue that by issuing
E.O. No. 220 the President, in the exercise of her
legislative powers prior to the convening of the first
Congress under the 1987 Constitution, has virtually pre-
empted Congress from its mandated task of enacting an
organic act and created an autonomous region in the
Cordilleras. We have carefully studied the Constitution
and E.O. No. 220 and we have come to the conclusion that
petitioners' assertions are unfounded. Events subsequent
111

to the issuance of E.O. No. 220 also bear out this
conclusion.
1. A reading of E.O. No. 220 will easily reveal that what it
actually envisions is the consolidation and coordination of
the delivery of services of line departments and agencies
of the National Government in the areas covered by the
administrative region as a step preparatory to the grant of
autonomy to the Cordilleras. It does not create the
autonomous region contemplated in the Constitution. It
merely provides for transitory measures in anticipation of
the enactment of an organic act and the creation of an
autonomous region. In short, it prepares the ground for
autonomy. This does not necessarily conflict with the
provisions of the Constitution on autonomous regions, as
we shall show later.
The Constitution outlines a complex procedure for the
creation of an autonomous region in the Cordilleras. A
regional consultative commission shall first be created.
The President shall then appoint the members of a
regional consultative commission from a list of nominees
from multi-sectoral bodies. The commission shall assist
the Congress in preparing the organic act for the
autonomous region. The organic act shall be passed by the
first Congress under the 1987 Constitution within eighteen
months from the time of its organization and enacted into
law. Thereafter there shall be held a plebiscite for the
approval of the organic act [Art. X, sec. 18]. Only then,
after its approval in the plebiscite, shall the autonomous
region be created.
Undoubtedly, all of these will take time. The President, in
1987 still exercising legislative powers, as the first
Congress had not yet convened, saw it fit to provide for
some measures to address the urgent needs of the
Cordilleras in the meantime that the organic act had not
yet been passed and the autonomous region created.
These measures we find in E.O. No. 220. The steps taken
by the President are obviously perceived by petitioners,
particularly petitioner Yaranon who views E.O. No. 220 as
capitulation to the Cordillera People's Liberation Army
(CPLA) of Balweg, as unsound, but the Court cannot
inquire into the wisdom of the measures taken by the
President, We can only inquire into whether or not the
measures violate the Constitution. But as we have seen
earlier, they do not.
2. Moreover, the transitory nature of the CAR does not
necessarily mean that it is, as petitioner Cordillera Broad
Coalition asserts, "the interim autonomous region in the
Cordilleras" [Petition, G.R. No. 79956, p. 25].
The Constitution provides for a basic structure of
government in the autonomous region composed of an
elective executive and legislature and special courts with
personal, family and property law jurisdiction [Art. X, sec.
18]. Using this as a guide, we find that E.O. No. 220 did not
establish an autonomous regional government. It created
112

a region, covering a specified area, for administrative
purposes with the main objective of coordinating the
planning and implementation of programs and services
[secs. 2 and 5]. To determine policy, it created a
representative assembly, to convene yearly only for a five-
day regular session, tasked with, among others,
identifying priority projects and development programs
[sec. 9]. To serve as an implementing body, it created the
Cordillera Executive Board composed of the Mayor of
Baguio City, provincial governors and representatives of
the Cordillera Bodong Administration, ethno-linguistic
groups and non-governmental organizations as regular
members and all regional directors of the line
departments of the National Government as ex-
officio members and headed by an Executive Director
[secs. 10 and 11]. The bodies created by E.O. No. 220 do
not supplant the existing local governmental structure,
nor are they autonomous government agencies. They
merely constitute the mechanism for an "umbrella" that
brings together the existing local governments, the
agencies of the National Government, the ethno-linguistic
groups or tribes, and non-governmental organizations in a
concerted effort to spur development in the Cordilleras.
The creation of the CAR for purposes of administrative
coordination is underscored by the mandate of E.O. No.
220 for the President and appropriate national
departments and agencies to make available sources of
funds for priority development programs and projects
recommended by the CAR [sec. 21] and the power given to
the President to call upon the appropriate executive
departments and agencies of the National Government to
assist the CAR [sec. 24].
3. Subsequent to the issuance of E.O. No. 220, the
Congress, after it was convened, enacted Republic Act No.
6658 which created the Cordillera Regional Consultative
Commission. The President then appointed its members.
The commission prepared a draft organic act which
became the basis for the deliberations of the Senate and
the House of Representatives. The result was Republic Act
No. 6766, the organic act for the Cordillera autonomous
region, which was signed into law on October 23, 1989. A
plebiscite for the approval of the organic act, to be
conducted shortly, shall complete the process outlined in
the Constitution.
In the meantime, E.O. No. 220 had been in force and effect
for more than two years and we find that, despite E.O. No.
220, the autonomous region in the Cordilleras is still to be
created, showing the lack of basis of petitioners' assertion.
Events have shown that petitioners' fear that E.O. No. 220
was a "shortcut" for the creation of the autonomous
region in the Cordilleras was totally unfounded.
Clearly, petitioners' principal challenge has failed.
II
113

A collateral issue raised by petitioners is the nature of the
CAR: whether or not it is a territorial and political
subdivision. The Constitution provides in Article X:
Section 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 hereinafter provided.
xxx xxx xxx
Sec. 10. No province, city, municipality, or
barangay may be created, divided, merged,
abolished, or its boundary substantially
altered, except in accordance with the criteria
established in the local government code and
subject to approval by a majority of the votes
cast in a plebiscite in the political units
directly affected.
We have seen earlier that the CAR is not the autonomous
region in the Cordilleras contemplated by the
Constitution, Thus, we now address petitioners' assertion
that E. 0. No. 220 contravenes the Constitution by creating
a new territorial and political subdivision.
After carefully considering the provisions of E.O. No. 220,
we find that it did not create a new territorial and political
subdivision or merge existing ones into a larger
subdivision.
1. Firstly, the CAR is not a public corporation or a
territorial and political subdivision. It does not have a
separate juridical personality, unlike provinces, cities and
municipalities. Neither is it vested with the powers that
are normally granted to public corporations, e.g. the
power to sue and be sued, the power to own and dispose
of property, the power to create its own sources of
revenue, etc. As stated earlier, the CAR was created
primarily to coordinate the planning and implementation
of programs and services in the covered areas.
The creation of administrative regions for the purpose of
expediting the delivery of services is nothing new. The
Integrated Reorganization Plan of 1972, which was made
as part of the law of the land by virtue of Presidential
Decree No. 1, established eleven (11) regions, later
increased to twelve (12), with definite regional centers
and required departments and agencies of the Executive
Branch of the National Government to set up field offices
therein. The functions of the regional offices to be
established pursuant to the Reorganization Plan are: (1) to
implement laws, policies, plans, programs, rules and
regulations of the department or agency in the regional
areas; (2) to provide economical, efficient and effective
service to the people in the area; (3) to coordinate with
regional offices of other departments, bureaus and
agencies in the area; (4) to coordinate with local
114

government units in the area; and (5) to perform such
other functions as may be provided by law. [See Part II,
chap. III, art. 1, of the Reorganization Plan].
We can readily see that the CAR is in the same genre as
the administrative regions created under the
Reorganization Plan, albeit under E.O. No. 220 the
operation of the CAR requires the participation not only of
the line departments and agencies of the National
Government but also the local governments, ethno-
linguistic groups and non-governmental organizations in
bringing about the desired objectives and the
appropriation of funds solely for that purpose.
2. Then, considering the control and supervision exercised
by the President over the CAR and the offices created
under E.O. No. 220, and considering further the
indispensable participation of the line departments of the
National Government, the CAR may be considered more
than anything else as a regional coordinating agency of the
National Government, similar to the regional development
councils which the President may create under the
Constitution [Art. X, sec. 14]. These councils are
"composed of local government officials, regional heads of
departments and other government offices, and
representatives from non-governmental organizations
within the region for purposes of administrative
decentralization to strengthen the autonomy of the units
therein and to accelerate the economic and social growth
and development of the units in the region." [Ibid.] In this
wise, the CAR may be considered as a more sophisticated
version of the regional development council.
III
Finally, petitioners incidentally argue that the creation of
the CAR contravened the constitutional guarantee of the
local autonomy for the provinces (Abra, Benguet, Ifugao,
Kalinga-Apayao and Mountain Province) and city (Baguio
City) which compose the CAR.
We find first a need to clear up petitioners' apparent
misconception of the concept of local autonomy.
It must be clarified that the constitutional guarantee of
local autonomy in the Constitution [Art. X, sec. 2] refers to
the administrative autonomy of local government units or,
cast in more technical language, the decentralization of
government authority [Villegas v. Subido, G.R. No. L-
31004, January 8, 1971, 37 SCRA 1]. Local autonomy is not
unique to the 1987 Constitution, it being guaranteed also
under the 1973 Constitution [Art. II, sec. 10]. And while
there was no express guarantee under the 1935
Constitution, the Congress enacted the Local Autonomy
Act (R.A. No. 2264) and the Decentralization Act (R.A. No.
5185), which ushered the irreversible march towards
further enlargement of local autonomy in the country
[Villegas v. Subido, supra.]
115

On the other hand, the creation of autonomous regions in
Muslim Mindanao and the Cordilleras, which is peculiar to
the 1987 Constitution contemplates the grant
of political autonomy and not just administrative
autonomy these regions. Thus, the provision in the
Constitution for an autonomous regional government with
a basic structure consisting of an executive department
and a legislative assembly and special courts with
personal, family and property law jurisdiction in each of
the autonomous regions [Art. X, sec. 18].
As we have said earlier, the CAR is a mere transitory
coordinating agency that would prepare the stage for
political autonomy for the Cordilleras. It fills in the
resulting gap in the process of transforming a group of
adjacent territorial and political subdivisions already
enjoying local or administrative autonomy into an
autonomous region vested with political autonomy.
Anent petitioners' objection, we note the obvious failure
to show how the creation of the CAR has actually
diminished the local autonomy of the covered provinces
and city. It cannot be over-emphasized that pure
speculation and a resort to probabilities are insufficient to
cause the invalidation of E.O. No. 220.
WHEREFORE, the petitions are DISMISSED for lack of
merit.
SO ORDERED.
Fernan, C.J., Narvasa, Melencio-Herrera, Cruz, Paras,
Feliciano, Gancayco, Padilla, Bidin, Sarmiento, Grio-
Aquino, Medialdea and Regalado, JJ., concur.



Separate Opinions

Republic of the Philippines
SUPREME COURT
Manila
EN BANC

G.R. No. 96754 June 22, 1995
CONGRESSMAN JAMES L. CHIONGBIAN (Third District,
South Cotobato) ADELBERT W. ANTONINO (First District,
South Cotobato), WILFREDO G. CAINGLET (Third District,
Zamboanga del Norte), HILARION RAMIRO, JR. (Second
Division, Misamis Occidental), ERNESTO S. AMATONG
(Second District, Zamboanga del Norte), ALVIN G. DANS
(Lone District, Basilan), ABDULLAH M. DIMAPORO (Second
116

District, Lanao del Norte), and CONGRESSWOMAN MARIA
CLARA A. LOBREGAT (Lone District, Zamboanga
City) petitioners,
vs.
HON. OSCAR M. ORBOS, Executive Secretary; COMMITTEE
CHAIRMAN SEC. FIDEL V. RAMOS, CABINET OFFICERS FOR
REGIONAL DEVELOPMENT FOR REGIONS X AND XII,
CHAIRMAN OF THE REGIONAL DEVELOPMENT COUNCIL
FOR REGION X, CHAIRMAN JESUS V. AYALA, CABINET
OFFICERS FOR REGIONAL DEVELOPMENT FOR REGIONS XI
and XII, DEPARTMENT OF LOCAL GOVERNMENT,
NATIONAL ECONOMIC AND DEVELOPMENT AUTHORITY
SECRETARIAT, PRESIDENTIAL MANAGEMENT STAFF, HON.
GUILLERMO CARAGUE, Secretary of the DEPARTMENT OF
BUDGET and MANAGEMENT; and HON. ROSALINA S.
CAJUCUM, OIC National Treasurer, respondents.
IMMANUEL JALDON, petitioner,
vs.
HON. EXECUTIVE SECRETARY OSCAR M. ORBOS, HON.
FIDEL RAMOS, HON. SECRETARY LUIS SANTOS, AND HON.
NATIONAL TREASURER ROSALINA CAJUCOM, respondents.

MENDOZA, J.:
These suits challenge the validity of a provision of the
Organic Act for the Autonomous Region in Muslim
Mindanao (R.A. No. 6734), authorizing the President of the
Philippines to "merge" by administrative determination the
regions remaining after the establishment of the
Autonomous Region, and the Executive Order issued by the
President pursuant to such authority, "Providing for the
Reorganization of Administrative Regions in Mindanao."
Atemporary restraining order prayed for by the petitioners
was issued by this Court on January 29, 1991, enjoining the
respondents from enforcing the Executive Order and
statute in question.
The facts are as follows:
Pursuant to Art. X, 18 of the 1987 Constitution, Congress
passed R.A. No. 6734, the Organic Act for the Autonomous
Region in Muslim Mindanao, calling for a plebiscite to be
held in the provinces of Basilan, Cotobato, Davao del Sur,
Lanao del Norte, Lanao del Sur, Maguindanao, Palawan,
South Cotabato, Sultan Kudarat, Sulu, Tawi-Tawi,
Zamboanga del Norte, and Zamboanga del Sur, and the
cities of Cotabato, Dapitan, Dipolog, General Santos, Iligan,
Marawi, Pagadian, Puerto Princesa and Zamboanga. In the
ensuing plebiscite held on November 16, 1989, four
provinces voted in favor of creating an autonomous region.
These are the provinces of Lanao del Sur, Maguindanao,
Sulu and Tawi-Tawi. In accordance with the constitutional
provision, these provinces became the Autonomous Region
in Muslim Mindanao.
117

On the other hand, with respect to provinces and cities not
voting in favor of the Autonomous Region, Art. XIX, 13 of
R.A. No. 6734 provides,
That only the provinces and cities voting
favorably in such plebiscites shall be included
in the Autonomous Region in Muslim
Mindanao. The provinces and cities which in
the plebiscite do not vote for inclusion in the
Autonomous Region shall remain in the
existing administrative regions. Provided,
however, that the President may, by
administrative determination, merge the
existing regions.
Pursuant to the authority granted by this provision, then
President Corazon C. Aquino issued on October 12, 1990
Executive Order No. 429, "providing for the Reorganization
of the Administrative Regions in Mindanao." Under this
Order, as amended by E.O. No. 439
(1) Misamis Occidental, at present part of
Region X, will become part of Region IX.
(2) Oroquieta City, Tangub City and Ozamiz
City, at present parts of Region X will become
parts of Region IX.
(3) South Cotobato, at present a part of Region
XI, will become part of Region XII.
(4) General Santos City, at present part of
Region XI, will become part of Region XII.
(5) Lanao del Norte, at present part of Region
XII, will become part of Region IX.
(6) Iligan City and Marawi City, at present part
of Region XII, will become part of Region IX.
Petitioners in G.R. No. 96754 are, or at least at the time of
the filing of their petition, members of Congress
representing various legislative districts in South Cotobato,
Zamboanga del Norte, Basilan, Lanao del Norte
andZamboanga City. On November 12, 1990, they wrote
then President Aquino protesting E.O. No. 429. They
contended that
There is no law which authorizes the President
to pick certain provinces and cities within the
existing regions some of which did not even
take part in the plebiscite as in the case of the
province of Misamis Occidental and the cities
of Oroquieta, Tangub and Ozamiz and
restructure them to new administrative
regions. On the other hand, the law (Sec. 13,
Art. XIX, R.A. 6734) is specific to the point, that
is, that "the provinces and cities which in the
plebiscite do not vote for inclusion in the
Autonomous Region shall remain in the
existing administrative regions."
118

The transfer of the provinces of Misamis
Occidental from Region X to Region IX; Lanao
del Norte from Region XII to Region IX, and
South Cotobato from Region XI to Region XII
are alterations of theexisting structures of
governmental units, in other
words, reorganization. This can be gleaned
from Executive Order No. 429, thus
Whereas, there is an urgent need
to reorganize the administrative
regions in Mindanao to guarantee
the effective delivery of field
services of government agencies
taking into consideration the
formation of the Autonomous
Region in Muslim Mindanao.
With due respect to Her Excellency, we submit
that while the authority necessarily includes
the authority to merge, the authority to merge
does not include the authority to reorganize.
Therefore, the President's authority under RA
6734 to "merge existing regions" cannot be
construed to include the authority to
reorganize them. To do so will violate the rules
of statutory construction.
The transfer of regional centers under
Executive Order 429 is actually a restructuring
(reorganization) of administrative regions.
While this reorganization, as in Executive Order
429, does not affect the apportionment of
congressional representatives, the same is not
valid under the penultimate paragraph of Sec.
13, Art. XIX of R.A. 6734 and Ordinance
appended to the 1986 Constitution
apportioning the seats of the House of
Representatives of Congress of the Philippines
to the different legislative districts in provinces
and cities.
1

As their protest went unheeded, while Inauguration
Ceremonies of the New Administrative Region IX were
scheduled on January 26, 1991, petitioners brought this suit
for certiorari and prohibition.
On the other hand, the petitioner in G.R. No. 96673,
Immanuel Jaldon, is a resident of Zamboanga City, who is
suing in the capacity of taxpayer and citizen of the Republic
of the Philippines.
Petitioners in both cases contend that Art. XIX, 13 of R.A.
No. 6734 is unconstitutional because (1) it unduly delegates
legislative power to the President by authorizing him to
"merge [by administrative determination] the existing
regions" or at any rate provides no standard for the
exercise of the power delegated and (2) the power granted
is not expressed in the title of the law.
119

In addition, petitioner in G.R. No. 96673 challenges the
validity of E.O. No. 429 on the ground that the power
granted by Art. XIX, 13 to the President is only to "merge
regions IX and XII" but not to reorganize the entire
administrative regions in Mindanao and certainly not to
transfer the regional center of Region IX from Zamboanga
City to Pagadian City.
The Solicitor General defends the reorganization of regions
in Mindanao by E.O. No. 429 as merely the exercise of a
power "traditionally lodged in the President," as held
in Abbas v. Comelec,
2
and as a mere incident of his power
of general supervision over local governments and control
of executive departments, bureaus and offices under Art. X,
16 and Art. VII, 17, respectively, of the Constitution.
He contends that there is no undue delegation of legislative
power but only a grant of the power to "fill up" or provide
the details of legislation because Congress did not have the
facility to provide for them. He cites by analogy the case
of Municipality of Cardona v. Municipality of
Binangonan,
3
in which the power of the Governor-General
to fix municipal boundaries was sustained on the ground
that
[such power] is simply a transference of certain
details with respect to provinces,
municipalities, and townships, many of them
newly created, and all of them subject to a
more or less rapid change both in development
and centers of population, the proper
regulation of which might require not only
prompt action but action of such a detailed
character as not to permit the legislative body,
as such, to take it efficiently.
The Solicitor General justifies the grant to the President of
the power "to merge the existing regions" as something
fairly embraced in the title of R.A. No. 6734, to wit, "An Act
Providing for an Organic Act for the Autonomous Region in
Muslim Mindanao," because it is germane to it.
He argues that the power is not limited to the merger of
those regions in which the provinces and cities which took
part in the plebiscite are located but that it extends to all
regions in Mindanao as necessitated by the establishment
of the autonomous region.
Finally, he invokes P.D. No. 1416, as amended by P.D. No.
1772 which provides:
1. The President of the Philippines shall have
the continuing authority to reorganize the
National Government. In exercising this
authority, the President shall be guided by
generally acceptable principles of good
government and responsive national
government, including but not limited to the
following guidelines for a more efficient,
120

effective, economical and development-
oriented governmental framework:
(a) More effective planning
implementation, and review
functions;
(b) Greater decentralization and
responsiveness in decision-making
process;
(c) Further minimization, if not,
elimination, of duplication or
overlapping of purposes,
functions, activities, and
programs;
(d) Further development of as
standardized as possible
ministerial, sub-ministerial and
corporate organizational
structures;
(e) Further development of the
regionalization process; and
(f) Further rationalization of the
functions of and administrative
relationships among government
entities.
For purposes of this Decree, the
coverage of the continuing
authority of the President to
reorganize shall be interpreted to
encompass all agencies, entities,
instrumentalities, and units of the
National Government, including all
government owned or controlled
corporations as well as the entire
range of the powers, functions,
authorities, administrative
relationships, acid related aspects
pertaining to these agencies,
entities, instrumentalities, and
units.
2. [T]he President may, at his discretion, take
the following actions:
xxx xxx xxx
f. Create, abolish, group,
consolidate, merge, or integrate
entities, agencies,
instrumentalities, and units of the
National Government, as well as
expand, amend, change, or
otherwise modify their powers,
functions and authorities,
including, with respect to
121

government-owned or controlled
corporations, their corporate life,
capitalization, and other relevant
aspects of their charters.
g. Take such other related actions
as may be necessary to carry out
the purposes and objectives of
this Decree.
Considering the arguments of the parties, the issues are:
(1) whether the power to "merge" administrative regions is
legislative in character, as petitioners contend, or whether
it is executive in character, as respondents claim it is, and,
in any event, whether Art. XIX, 13 is invalid because it
contains no standard to guide the President's discretion;
(2) whether the power given is fairly expressed in the title
of the statute; and
(3) whether the power granted authorizes the
reorganization even of regions the provinces and cities in
which either did not take part in the plebiscite on the
creation of the Autonomous Region or did not vote in favor
of it; and
(4) whether the power granted to the President includes
the power to transfer the regional center of Region IX from
Zamboanga City to Pagadian City.
It will be useful to recall first the nature of administrative
regions and the basis and purpose for their creation. On
September 9, 1968, R.A. No. 5435 was passed "authorizing
the President of the Philippines, with the help of a
Commission on Reorganization, to reorganize the different
executive departments, bureaus, offices, agencies and
instrumentalities of the government, including banking or
financial institutions and corporations owned or controlled
by it." The purpose was to promote "simplicity, economy
and efficiency in the government."
4
The Commission on
Reorganization created under the law was required to
submit an integrated reorganization plan not later than
December 31, 1969 to the President who was in turn
required to submit the plan to Congress within forty days
after the opening of its next regular session. The law
provided that any reorganization plan submitted would
become effective only upon the approval of Congress.
5

Accordingly, the Reorganization Commission prepared an
Integrated Reorganization Plan which divided the country
into eleven administrative regions.
6
By P.D. No. 1, the Plan
was approved and made part of the law of the land on
September 24, 1972. P.D. No. 1 was twice amended in
1975, first by P.D. No. 742 which "restructur[ed] the
regional organization of Mindanao, Basilan, Sulu and Tawi-
Tawi" and later by P.D. No. 773 which further
"restructur[ed] the regional organization of Mindanao and
divid[ed] Region IX into two sub-regions." In 1978, P.D. No.
1555 transferred the regional center of Region IX from Jolo
to Zamboanga City.
122

Thus the creation and subsequent reorganization of
administrative regions have been by the President pursuant
to authority granted to him by law. In conferring on the
President the power "to merge [by administrative
determination] the existing regions" following the
establishment of the Autonomous Region in Muslim
Mindanao, Congress merely followed the pattern set in
previous legislation dating back to the initial organization of
administrative regions in 1972. The choice of the President
as delegate is logical because the division of the country
into regions is intended to facilitate not only the
administration of local governments but also the direction
of executive departments which the law requires should
have regional offices. As this Court observed in Abbas,
"while the power to merge administrative regions is not
expressly provided for in the Constitution, it is a power
which has traditionally been lodged with the President to
facilitate the exercise of the power of general supervision
over local governments [see Art. X, 4 of the Constitution]."
The regions themselves are not territorial and political
divisions like provinces, cities, municipalities and barangays
but are "mere groupings of contiguous provinces for
administrative purposes."
7
The power conferred on the
President is similar to the power to adjust municipal
boundaries
8
which has been described in Pelaez v. Auditor
General
9
or as "administrative in nature."
There is, therefore, no abdication by Congress of its
legislative power in conferring on the President the power
to merge administrative regions. The question is whether
Congress has provided a sufficient standard by which the
President is to be guided in the exercise of the power
granted and whether in any event the grant of power to
him is included in the subject expressed in the title of the
law.
First, the question of standard. A legislative standard need
not be expressed. It may simply be gathered or
implied.
10
Nor need it be found in the law challenged
because it may be embodied in other statutes on the same
subject as that of the challenged legislation.
11

With respect to the power to merge existing administrative
regions, the standard is to be found in the same policy
underlying the grant to the President in R.A. No. 5435 of
the power to reorganize the Executive Department, to wit:
"to promote simplicity, economy and efficiency in the
government to enable it to pursue programs consistent
with national goals for accelerated social and economic
development and to improve the service in the transaction
of the public business."
12
Indeed, as the original eleven
administrative regions were established in accordance with
this policy, it is logical to suppose that in authorizing the
President to "merge [by administrative determination] the
existing regions" in view of the withdrawal from some of
those regions of the provinces now constituting the
Autonomous Region, the purpose of Congress was to
reconstitute the original basis for the organization of
administrative regions.
123

Nor is Art. XIX, 13 susceptible to charge that its subject is
not embraced in the title of R.A. No. 6734. The
constitutional requirement that "every bill passed by the
Congress shall embrace only one subject which shall be
expressed in the title thereof"
13
has always been given a
practical rather than a technical construction. The title is
not required to be an index of the content of the bill. It is a
sufficient compliance with the constitutional requirement if
the title expresses the general subject and all provisions of
the statute are germane to that subject.
14
Certainly the
reorganization of the remaining administrative regions is
germane to the general subject of R.A. No. 6734, which is
the establishment of the Autonomous Region in Muslim
Mindanao.
Finally, it is contended that the power granted to the
President is limited to the reorganization of administrative
regions in which some of the provinces and cities which
voted in favor of regional autonomy are found, because Art.
XIX, 13 provides that those which did not vote for
autonomy "shall remain in the existing administrative
regions." More specifically, petitioner in G.R. No. 96673
claims:
The questioned Executive Order No. 429
distorted and, in fact, contravened the clear
intent of this provision by moving out or
transferring certain political subdivisions
(provinces/cities) out of their legally
designated regions. Aggravating this
unacceptable or untenable situation is EO No.
429's effecting certain movements on areas
which did not even participate in the
November 19, 1989 plebiscite. The
unauthorized action of the President, as
effected by and under the questioned EO No.
429, is shown by the following dispositions: (1)
Misamis Occidental, formerly of Region X and
which did not even participate in the
plebiscite, was moved from said Region X to
Region IX; (2) the cities of Ozamis, Oroquieta,
and Tangub, all formerly belonging to Region X,
which likewise did not participate in the said
plebiscite, were transferred to Region IX; (3)
South Cotobato, from Region XI to Region XII;
(4) General Santos City: from Region XI to
Region XII; (5) Lanao del Norte, from Region XII
to Region IX; and (6) the cities of Marawi and
Iligan from Region XII to Region IX. All of the
said provinces and cities voted "NO", and
thereby rejected their entry into the
Autonomous Region in Muslim Mindanao, as
provided under RA No. 6734.
15

The contention has no merit. While Art. XIX, 13 provides
that "The provinces and cities which do not vote for
inclusion in the Autonomous Region shall remain in the
existing administrative regions," this provision is subject to
the qualification that "the President may by administrative
determination merge the existing regions." This means that
124

while non-assenting provinces and cities are to remain in
the regions as designated upon the creation of the
Autonomous Region, they may nevertheless be regrouped
with contiguous provinces forming other regions as the
exigency of administration may require.
The regrouping is done only on paper. It involves no more
than are definition or redrawing of the lines separating
administrative regions for the purpose of facilitating the
administrative supervision of local government units by the
President and insuring the efficient delivery of essential
services. There will be no "transfer" of local governments
from one region to another except as they may thus be
regrouped so that a province like Lanao del Norte, which is
at present part of Region XII, will become part of Region IX.
The regrouping of contiguous provinces is not even
analogous to a redistricting or to the division or merger of
local governments, which all have political consequences on
the right of people residing in those political units to vote
and to be voted for. It cannot be overemphasized that
administrative regions are mere groupings of contiguous
provinces for administrative purposes, not for political
representation.
Petitioners nonetheless insist that only those regions, in
which the provinces and cities which voted for inclusion in
the Autonomous Region are located, can be "merged" by
the President.
To be fundamental reason Art. XIX, 13 is not so limited.
But the more fundamental reason is that the President's
power cannot be so limited without neglecting the
necessities of administration. It is noteworthy that the
petitioners do not claim that the reorganization of the
regions in E.O. No. 429 is irrational. The fact is that, as they
themselves admit, the reorganization of administrative
regions in E.O. No. 429 is based on relevant criteria, to wit:
(1) contiguity and geographical features; (2) transportation
and communication facilities; (3) cultural and language
groupings; (4) land area and population; (5) existing
regional centers adopted by several agencies; (6) socio-
economic development programs in the regions and (7)
number of provinces and cities.
What has been said above applies to the change of the
regional center from Zamboanga City to Pagadian City.
Petitioners contend that the determination of provincial
capitals has always been by act of Congress. But as, this
Court said in Abbas,
16
administrative regions are mere
"groupings of contiguous provinces for administrative
purposes, . . . [They] are not territorial and political
subdivisions like provinces, cities, municipalities and
barangays." There is, therefore, no basis for contending
that only Congress can change or determine regional
centers. To the contrary, the examples of P.D. Nos. 1, 742,
773 and 1555 suggest that the power to reorganize
administrative regions carries with it the power to
determine the regional center.
125

It may be that the transfer of the regional center in Region
IX from Zamboanga City to Pagadian City may entail the
expenditure of large sums of money for the construction of
buildings and other infrastructure to house regional offices.
That contention is addressed to the wisdom of the transfer
rather than to its legality and it is settled that courts are not
the arbiters of the wisdom or expediency of legislation. In
any event this is a question that we will consider only if fully
briefed and upon a more adequate record than that
presented by petitioners.
WHEREFORE, the petitions for certiorari and prohibition are
DISMISSED for lack of merit.
SO ORDERED.
Narvasa, C.J., Feliciano, Padilla, Regalado, Davide, Jr.,
Romero, Bellosillo, Melo, Quiason, Puno, Vitug, Kapunan
and Francisco, JJ., concur.

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 89651 November 10, 1989
DATU FIRDAUSI I.Y. ABBAS, DATU BLO UMPAR ADIONG,
DATU MACALIMPOWAC DELANGALEN, CELSO PALMA, ALI
MONTANA BABAO, JULMUNIR JANNARAL, RASHID SABER,
and DATU JAMAL ASHLEY ABBAS, representing the other
taxpayers of Mindanao, petitioners,
vs.
COMMISSION ON ELECTIONS, and HONORABLE
GUILLERMO C. CARAGUE, DEPARTMENT SECRETARY OF
BUDGET AND MANAGEMENT, respondents.
G.R. No. 89965 November 10, 1989
ATTY. ABDULLAH D. MAMA-O, petitioner,
vs.
HON. GUILLERMO CARAGUE, in his capacity as the
Secretary of the Budget, and the COMMISSION ON
ELECTIONS, respondents.
Abbas, Abbas, Amora, Alejandro-Abbas & Associates for
petitioners in G.R. Nos. 89651 and 89965.
Abdullah D. Mama-o for and in his own behalf in 89965.

CORTES, J.:
The present controversy relates to the plebiscite in thirteen
(13) provinces and nine (9) cities in Mindanao and
Palawan,
1
scheduled for November 19, 1989, in
implementation of Republic Act No. 6734, entitled "An Act
126

Providing for an Organic Act for the Autonomous Region in
Muslim Mindanao."
These consolidated petitions pray that the Court: (1) enjoin
the Commission on Elections (COMELEC) from conducting
the plebiscite and the Secretary of Budget and
Management from releasing funds to the COMELEC for that
purpose; and (2) declare R.A. No. 6734, or parts thereof,
unconstitutional .
After a consolidated comment was filed by Solicitor General
for the respondents, which the Court considered as the
answer, the case was deemed submitted for decision, the
issues having been joined. Subsequently, petitioner Mama-
o filed a "Manifestation with Motion for Leave to File Reply
on Respondents' Comment and to Open Oral Arguments,"
which the Court noted.
The arguments against R.A. 6734 raised by petitioners may
generally be categorized into either of the following:
(a) that R.A. 6734, or parts thereof, violates the
Constitution, and
(b) that certain provisions of R.A. No. 6734 conflict with the
Tripoli Agreement.
The Tripoli Agreement, more specifically, the Agreement
Between the government of the Republic of the Philippines
of the Philippines and Moro National Liberation Front with
the Participation of the Quadripartie Ministerial
Commission Members of the Islamic Conference and the
Secretary General of the Organization of Islamic
Conference" took effect on December 23, 1976. It provided
for "[t]he establishment of Autonomy in the southern
Philippines within the realm of the sovereignty and
territorial integrity of the Republic of the Philippines" and
enumerated the thirteen (13) provinces comprising the
"areas of autonomy."
2

In 1987, a new Constitution was ratified, which the for the
first time provided for regional autonomy, Article X, section
15 of the charter provides that "[t]here shall be created
autonomous regions in Muslim Mindanao and in the
Cordilleras consisting of provinces, cities, municipalities,
and geographical areas sharing common and distinctive
historical and cultural heritage, economic and social
structures, and other relevant characteristics within the
framework of this Constitution and the national
sovereignty as well as territorial integrity of the Republic of
the Philippines."
To effectuate this mandate, the Constitution further
provides:
Sec. 16. The President shall exercise general
supervision over autonomous regions to
ensure that the laws are faithfully executed.
Sec. 17. All powers, functions, and
responsibilities not granted by this Constitution
127

or by law to the autonomous regions shall be
vested in the National Government.
Sec. 18. The Congress shall enact an organic act
for each autonomous region with the
assistance and participation of the regional
consultative commission composed of
representatives appointed by the President
from a list of nominees from multisectoral
bodies. The organic act shall define the basic
structure of government for the region
consisting of the executive and representative
of the constituent political units. The organic
acts shall likewise provide for special courts
with personal, family, and property
law jurisdiction consistent with the provisions
of this Constitution and national laws.
The creation of the autonomous region shall
be effective when approved by majority of the
votes cast by the constituent units in a
plebiscite called for the purpose, provided that
only the provinces, cities, and geographic areas
voting favorably in such plebiscite shall be
included in the autonomous region.
Sec. 19 The first Congress elected under this
Constitution shall, within eighteen months
from the time of organization of both Houses,
pass the organic acts for the autonomous
regions in Muslim Mindanao and the
Cordilleras.
Sec. 20. Within its territorial jurisdiction and
subject to the provisions of this Constitution
and national laws, the organic act of
autonomous regions shall provide for
legislative powers over:
(1) Administrative organization;
(2) Creation of sources of
revenues;
(3) Ancestral domain and natural
resources;
(4) Personal, family, and property
relations;
(5) Regional urban and rural
planning development;
(6) Economic, social and tourism
development;
(7) Educational policies;
(8) Preservation and development
of the cultural heritage; and
128

(9) Such other matters as may be
authorized by law for the
promotion of the general welfare
of the people of the region.
Sec. 21. The preservation of peace and order
within the regions shall be the responsibility of
the localpolice agencies which shall be
organized, maintained, supervised, and utilized
in accordance with applicable laws. The
defense and security of the region shall be the
responsibility of the National Government.
Pursuant to the constitutional mandate, R.A. No. 6734 was
enacted and signed into law on August 1, 1989.
1. The Court shall dispose first of the second category of
arguments raised by petitioners, i.e. that certain provisions
of R.A. No. 6734 conflict with the provisions of the Tripoli
Agreement.
Petitioners premise their arguments on the assumption that
the Tripoli Agreement is part of the law of the land, being a
binding international agreement . The Solicitor General
asserts that the Tripoli Agreement is neither a binding
treaty, not having been entered into by the Republic of the
Philippines with a sovereign state and ratified according to
the provisions of the 1973 or 1987 Constitutions, nor a
binding international agreement.
We find it neither necessary nor determinative of the case
to rule on the nature of the Tripoli Agreement and its
binding effect on the Philippine Government whether under
public international or internal Philippine law. In the first
place, it is now the Constitution itself that provides for the
creation of an autonomous region in Muslim Mindanao.
The standard for any inquiry into the validity of R.A. No.
6734 would therefore be what is so provided in the
Constitution. Thus, any conflict between the provisions of
R.A. No. 6734 and the provisions of the Tripoli Agreement
will not have the effect of enjoining the implementation of
the Organic Act. Assuming for the sake of argument that
the Tripoli Agreement is a binding treaty or international
agreement, it would then constitute part of the law of the
land. But as internal law it would not be superior to R.A. No.
6734, an enactment of the Congress of the Philippines,
rather it would be in the same class as the latter [SALONGA,
PUBLIC INTERNATIONAL LAW 320 (4th ed., 1974), citing
Head Money Cases, 112 U.S. 580 (1884) and Foster v.
Nelson, 2 Pet. 253 (1829)]. Thus, if at all, R.A. No. 6734
would be amendatory of the Tripoli Agreement, being a
subsequent law. Only a determination by this Court that
R.A. No. 6734 contravened the Constitution would result in
the granting of the reliefs sought.
3

2. The Court shall therefore only pass upon the
constitutional questions which have been raised by
petitioners.
129

Petitioner Abbas argues that R.A. No. 6734 unconditionally
creates an autonomous region in Mindanao, contrary to the
aforequoted provisions of the Constitution on the
autonomous region which make the creation of such region
dependent upon the outcome of the plebiscite.
In support of his argument, petitioner cites Article II,
section 1(1) of R.A. No. 6734 which declares that "[t]here is
hereby created the Autonomous Region in Muslim
Mindanao, to be composed of provinces and cities voting
favorably in the plebiscite called for the purpose, in
accordance with Section 18, Article X of the Constitution."
Petitioner contends that the tenor of the above provision
makes the creation of an autonomous region absolute, such
that even if only two provinces vote in favor of autonomy,
an autonomous region would still be created composed of
the two provinces where the favorable votes were
obtained.
The matter of the creation of the autonomous region and
its composition needs to be clarified.
Firs, the questioned provision itself in R.A. No. 6734 refers
to Section 18, Article X of the Constitution which sets forth
the conditions necessary for the creation of the
autonomous region. The reference to the constitutional
provision cannot be glossed over for it clearly indicates that
the creation of the autonomous region shall take place only
in accord with the constitutional requirements. Second,
there is a specific provision in the Transitory Provisions
(Article XIX) of the Organic Act, which incorporates
substantially the same requirements embodied in the
Constitution and fills in the details, thus:
SEC. 13. The creation of the Autonomous
Region in Muslim Mindanao shall take effect
when approved by a majority of the votes cast
by the constituent units provided in paragraph
(2) of Sec. 1 of Article II of this Act in a
plebiscite which shall be held not earlier than
ninety (90) days or later than one hundred
twenty (120) days after the approval of this
Act: Provided, That only the provinces and
cities voting favorably in such plebiscite shall
be included in the Autonomous Region in
Muslim Mindanao. The provinces and cities
which in the plebiscite do not vote for inclusion
in the Autonomous Region shall remain the
existing administrative determination, merge
the existing regions.
Thus, under the Constitution and R.A. No 6734, the creation
of the autonomous region shall take effect only when
approved by a majority of the votes cast by the constituent
units in a plebiscite, and only those provinces and cities
where a majority vote in favor of the Organic Act shall be
included in the autonomous region. The provinces and
cities wherein such a majority is not attained shall not be
included in the autonomous region. It may be that even if
an autonomous region is created, not all of the thirteen
130

(13) provinces and nine (9) cities mentioned in Article II,
section 1 (2) of R.A. No. 6734 shall be included therein. The
single plebiscite contemplated by the Constitution and R.A.
No. 6734 will therefore be determinative of (1) whether
there shall be an autonomous region in Muslim Mindanao
and (2) which provinces and cities, among those
enumerated in R.A. No. 6734, shall compromise it. [See III
RECORD OF THE CONSTITUTIONAL COMMISSION 482-492
(1986)].
As provided in the Constitution, the creation of the
Autonomous region in Muslim Mindanao is made effective
upon the approval "by majority of the votes cast by the
constituent units in a plebiscite called for the purpose" [Art.
X, sec. 18]. The question has been raised as to what this
majority means. Does it refer to a majority of the total
votes cast in the plebiscite in all the constituent units, or a
majority in each of the constituent units, or both?
We need not go beyond the Constitution to resolve this
question.
If the framers of the Constitution intended to require
approval by a majority of all the votes cast in the plebiscite
they would have so indicated. Thus, in Article XVIII, section
27, it is provided that "[t]his Constitution shall take effect
immediately upon its ratification by a majority of the votes
cast in a plebiscite held for the purpose ... Comparing this
with the provision on the creation of the autonomous
region, which reads:
The creation of the autonomous region shall
be effective when approved by majority of the
votes cast by the constituent units in a
plebiscite called for the purpose, provided that
only provinces, cities and geographic areas
voting favorably in such plebiscite shall be
included in the autonomous region. [Art. X,
sec, 18, para, 2].
it will readily be seen that the creation of the autonomous
region is made to depend, not on the total majority vote in
the plebiscite, but on the will of the majority in each of the
constituent units and the proviso underscores this. for if the
intention of the framers of the Constitution was to get the
majority of the totality of the votes cast, they could have
simply adopted the same phraseology as that used for the
ratification of the Constitution, i.e. "the creation of the
autonomous region shall be effective when approved by a
majority of the votes cast in a plebiscite called for the
purpose."
It is thus clear that what is required by the Constitution is a
simple majority of votes approving the organic Act in
individual constituent units and not a double majority of
the votes in all constituent units put together, as well as in
the individual constituent units.
More importantly, because of its categorical language, this
is also the sense in which the vote requirement in the
plebiscite provided under Article X, section 18 must have
131

been understood by the people when they ratified the
Constitution.
Invoking the earlier cited constitutional provisions,
petitioner Mama-o, on the other hand, maintains that only
those areas which, to his view, share common and
distinctive historical and cultural heritage, economic and
social structures, and other relevant characteristics should
be properly included within the coverage of the
autonomous region. He insists that R.A. No. 6734 is
unconstitutional because only the provinces of Basilan,
Sulu, Tawi-Tawi, Lanao del Sur, Lanao del Norte and
Maguindanao and the cities of Marawi and Cotabato, and
not all of the thirteen (13) provinces and nine (9) cities
included in the Organic Act, possess such concurrence in
historical and cultural heritage and other relevant
characteristics. By including areas which do not strictly
share the same characteristics. By including areas which do
not strictly share the same characteristic as the others,
petitioner claims that Congress has expanded the scope of
the autonomous region which the constitution itself has
prescribed to be limited.
Petitioner's argument is not tenable. The Constitution lays
down the standards by which Congress shall determine
which areas should constitute the autonomous region.
Guided by these constitutional criteria, the ascertainment
by Congress of the areas that share common attributes is
within the exclusive realm of the legislature's discretion.
Any review of this ascertainment would have to go into the
wisdom of the law. This the Court cannot do without doing
violence to the separation of governmental powers.
[Angara v. Electoral Commission, 63 Phil 139 (1936); Morfe
v. Mutuc, G.R. No. L-20387, January 31, 1968, 22 SCRA 424].
After assailing the inclusion of non-Muslim areas in the
Organic Act for lack of basis, petitioner Mama-o would then
adopt the extreme view that other non-Muslim areas in
Mindanao should likewise be covered. He argues that since
the Organic Act covers several non-Muslim areas, its scope
should be further broadened to include the rest of the non-
Muslim areas in Mindanao in order for the other non-
Muslim areas denies said areas equal protection of the law,
and therefore is violative of the Constitution.
Petitioner's contention runs counter to the very same
constitutional provision he had earlier invoked. Any
determination by Congress of what areas in Mindanao
should compromise the autonomous region, taking into
account shared historical and cultural heritage, economic
and social structures, and other relevant characteristics,
would necessarily carry with it the exclusion of other areas.
As earlier stated, such determination by Congress of which
areas should be covered by the organic act for the
autonomous region constitutes a recognized legislative
prerogative, whose wisdom may not be inquired into by
this Court.
Moreover, equal protection permits of reasonable
classification [People v. Vera, 65 Phil. 56 (1963); Laurel v.
132

Misa, 76 Phil. 372 (1946); J.M. Tuason and Co. v. Land
tenure Administration, G.R. No. L-21064, February 18, 1970,
31 SCRA 413]. In Dumlao v. Commission on Elections G.R.
No. 52245, January 22, 1980, 95 SCRA 392], the Court ruled
that once class may be treated differently from another
where the groupings are based on reasonable and real
distinctions. The guarantee of equal protection is thus not
infringed in this case, the classification having been made
by Congress on the basis of substantial distinctions as set
forth by the Constitution itself.
Both petitions also question the validity of R.A. No. 6734 on
the ground that it violates the constitutional guarantee on
free exercise of religion [Art. III, sec. 5]. The objection
centers on a provision in the Organic Act which mandates
that should there be any conflict between the Muslim Code
[P.D. No. 1083] and the Tribal Code (still be enacted) on the
one had, and the national law on the other hand, the
Shari'ah courts created under the same Act should apply
national law. Petitioners maintain that the islamic law
(Shari'ah) is derived from the Koran, which makes it part of
divine law. Thus it may not be subjected to any "man-
made" national law. Petitioner Abbas supports this
objection by enumerating possible instances of conflict
between provisions of the Muslim Code and national law,
wherein an application of national law might be offensive
to a Muslim's religious convictions.
As enshrined in the Constitution, judicial power includes the
duty to settle actual controversies involving rights which
are legally demandable and enforceable. [Art. VIII, Sec. 11.
As a condition precedent for the power to be exercised, an
actual controversy between litigants must first exist
[Angara v. Electoral Commission, supra; Tan v. Macapagal,
G.R. No. L-34161, February 29, 1972, 43 SCRA 677]. In the
present case, no actual controversy between real litigants
exists. There are no conflicting claims involving the
application of national law resulting in an alleged violation
of religious freedom. This being so, the Court in this case
may not be called upon to resolve what is merely a
perceived potential conflict between the provisions the
Muslim Code and national law.
Petitioners also impugn the constitutionality of Article XIX,
section 13 of R.A. No. 6734 which, among others, states:
. . . Provided, That only the provinces and cities
voting favorably in such plebiscite shall be
included in the Autonomous Region in Muslim
Mindanao. The provinces and cities which in
the plebiscite do not vote for inclusion in the
Autonomous Region shall remain in the
existing administrative regions:Provided,
however, that the President may, by
administrative determination, merge the
existing regions.
According to petitioners, said provision grants the President
the power to merge regions, a power which is not
conferred by the Constitution upon the President. That the
133

President may choose to merge existing regions pursuant to
the Organic Act is challenged as being in conflict with
Article X, Section 10 of the Constitution which provides:
No province, city, municipality, or barangay
may be created, divided, merged, abolished, or
its boundary substantially altered, except in
accordance with the criteria established in the
local government code and subject to approval
by a majority of the votes cast in a plebiscite in
the political units directly affected.
It must be pointed out that what is referred to in R.A. No.
6734 is the merger of administrative regions, i.e. Regions I
to XII and the National Capital Region, which are mere
groupings of contiguous provinces for administrative
purposes [Integrated Reorganization Plan (1972), which was
made as part of the law of the land by Pres. dec. No. 1,
Pres. Dec. No. 742]. Administrative regions are not
territorial and political subdivisions like provinces, cities,
municipalities and barangays [see Art. X, sec. 1 of the
Constitution]. While the power to merge administrative
regions is not expressly provided for in the Constitution, it is
a power which has traditionally been lodged with the
President to facilitate the exercise of the power of general
supervision over local governments [see Art. X, sec. 4 of the
Constitution]. There is no conflict between the power of the
President to merge administrative regions with the
constitutional provision requiring a plebiscite in the merger
of local government units because the requirement of a
plebiscite in a merger expressly applies only to provinces,
cities, municipalities or barangays, not to administrative
regions.
Petitioners likewise question the validity of provisions in the
Organic Act which create an Oversight Committee to
supervise the transfer to the autonomous region of the
powers, appropriations, and properties vested upon the
regional government by the organic Act [Art. XIX, Secs. 3
and 4]. Said provisions mandate that the transfer of certain
national government offices and their properties to the
regional government shall be made pursuant to a schedule
prescribed by the Oversight Committee, and that such
transfer should be accomplished within six (6) years from
the organization of the regional government.
It is asserted by petitioners that such provisions are
unconstitutional because while the Constitution states that
the creation of the autonomous region shall take effect
upon approval in a plebiscite, the requirement of organizing
an Oversight committee tasked with supervising the
transfer of powers and properties to the regional
government would in effect delay the creation of the
autonomous region.
Under the Constitution, the creation of the autonomous
region hinges only on the result of the plebiscite. if the
Organic Act is approved by majority of the votes cast by
constituent units in the scheduled plebiscite, the creation of
134

the autonomous region immediately takes effect delay the
creation of the autonomous region.
Under the constitution, the creation of the autonomous
region hinges only on the result of the plebiscite. if the
Organic Act is approved by majority of the votes cast by
constituent units in the scheduled plebiscite, the creation of
the autonomous region immediately takes effect. The
questioned provisions in R.A. No. 6734 requiring an
oversight Committee to supervise the transfer do not
provide for a different date of effectivity. Much less would
the organization of the Oversight Committee cause an
impediment to the operation of the Organic Act, for such is
evidently aimed at effecting a smooth transition period for
the regional government. The constitutional objection on
this point thus cannot be sustained as there is no bases
therefor.
Every law has in its favor the presumption of
constitutionality [Yu Cong Eng v. Trinidad, 47 Phil. 387
(1925); Salas v. Jarencio, G.R. No. L-29788, August 30, 1979,
46 SCRA 734; Morfe v. Mutuc, supra; Peralta v. COMELEC,
G.R. No. L-47771, March 11, 1978, 82 SCRA 30]. 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 R.A. No. 6734, the Court finds that
petitioners have failed to overcome the presumption. The
dismissal of these two petitions is, therefore, inevitable.
WHEREFORE, the petitions are DISMISSED for lack of merit.
SO ORDERED.
Fernan, C.J., Narvasa, Gutierrez, Jr., Cruz, Paras, Feliciano,
Gancayco, Padilla, Bidin, Sarmiento, Grio-Aquino,
Medialdea and Regalado, JJ., concur.
Melencio-Herrera, J., is on leave.

Footnotes
SECOND DIVISION
[G.R. No. 129093. August 30, 2001]
HON. JOSE D. LINA, JR., SANGGUNIANG PANLALAWIGAN
OF LAGUNA, and HON. CALIXTO
CATAQUIZ, petitioners, vs. HON. FRANCISCO DIZON
PAO and TONY CALVENTO, respondents.
D E C I S I O N
QUISUMBING, J.:
For our resolution is a petition for review
on certiorari seeking the reversal of the decision
[1]
dated
135

February 10, 1997 of the Regional Trial Court of San Pedro,
Laguna, Branch 93, enjoining petitioners from
implementing or enforcing Kapasiyahan Bilang 508, Taon
1995, of the Sangguniang Panlalawigan of Laguna and its
subsequent Order
[2]
dated April 21, 1997 denying
petitioners motion for reconsideration.
On December 29, 1995, respondent Tony Calvento was
appointed agent by the Philippine Charity Sweepstakes
Office (PCSO) to install Terminal OM 20 for the operation of
lotto. He asked Mayor Calixto Cataquiz, Mayor of San
Pedro, Laguna, for a mayors permit to open the lotto
outlet. This was denied by Mayor Cataquiz in a letter dated
February 19, 1996. The ground for said denial was an
ordinance passed by theSangguniang Panlalawigan of
Laguna entitled Kapasiyahan Blg. 508, T. 1995 which was
issued on September 18, 1995. The ordinance reads:
ISANG KAPASIYAHAN TINUTUTULAN ANG MGA ILLEGAL
GAMBLING LALO NA ANG LOTTO SA LALAWIGAN NG
LAGUNA
SAPAGKAT, ang sugal dito sa lalawigan ng Laguna ay
talamak na;
SAPAGKAT, ang sugal ay nagdudulot ng masasamang
impluwensiya lalot higit sa mga kabataan;
KUNG KAYAT DAHIL DITO, at sa mungkahi nina Kgg. Kgd.
Juan M. Unico at Kgg. Kgd. Gat-Ala A. Alatiit,
pinangalawahan ni Kgg. Kgd. Meliton C. Larano at buong
pagkakaisang sinangayunan ng lahat ng dumalo sa pulong;
IPINASIYA, na tutulan gaya ng dito ay mahigpit na
TINUTUTULAN ang ano mang uri ng sugal dito sa lalawigan
ng Laguna lalot higit ang Lotto;
IPINASIYA PA RIN na hilingin tulad ng dito ay hinihiling sa
Panlalawigang pinuno ng Philippine National Police (PNP)
Col. [illegible] na mahigpit na pag-ibayuhin ang pagsugpo
sa lahat ng uri ng illegal na sugal sa buong lalawigan ng
Laguna lalo na ang Jueteng.
[3]

As a result of this resolution of denial, respondent
Calvento filed a complaint for declaratory relief with prayer
for preliminary injunction and temporary restraining
order. In the said complaint, respondent Calvento asked
the Regional Trial Court of San Pedro Laguna, Branch 93, for
the following reliefs: (1) a preliminary injunction or
temporary restraining order, ordering the defendants to
refrain from implementing or enforcingKapasiyahan Blg.
508, T. 1995; (2) an order requiring Hon. Municipal Mayor
Calixto R. Cataquiz to issue a business permit for the
operation of a lotto outlet; and (3) an order annulling or
declaring as invalidKapasiyahan Blg. 508, T. 1995.
On February 10, 1997, the respondent judge, Francisco
Dizon Pao, promulgated his decision enjoining the
petitioners from implementing or enforcing resolution
or Kapasiyahan Blg. 508, T. 1995. The dispositive portion of
said decision reads:
136

WHEREFORE, premises considered, defendants, their
agents and representatives are hereby enjoined from
implementing or enforcing resolution or kapasiyahan blg.
508, T. 1995 of the Sangguniang Panlalawigan ng Laguna
prohibiting the operation of the lotto in the province of
Laguna.
SO ORDERED.
[4]

Petitioners filed a motion for reconsideration which was
subsequently denied in an Order dated April 21, 1997,
which reads:
Acting on the Motion for Reconsideration filed by
defendants Jose D. Lina, Jr. and the Sangguniang
Panlalawigan of Laguna, thru counsel, with the opposition
filed by plaintiffs counsel and the comment thereto filed by
counsel for the defendants which were duly noted, the
Court hereby denies the motion for lack of merit.
SO ORDERED.
[5]

On May 23, 1997, petitioners filed this petition alleging
that the following errors were committed by the
respondent trial court:
I
THE TRIAL COURT ERRED IN ENJOINING THE PETITIONERS
FROM IMPLEMENTING KAPASIYAHAN BLG. 508, T. 1995 OF
THE SANGGUNIANG PANLALAWIGAN OF LAGUNA
PROHIBITING THE OPERATION OF THE LOTTO IN THE
PROVINCE OF LAGUNA.
II
THE TRIAL COURT FAILED TO APPRECIATE THE ARGUMENT
POSITED BY THE PETITIONERS THAT BEFORE ANY
GOVERNMENT PROJECT OR PROGRAM MAY BE
IMPLEMENTED BY THE NATIONAL AGENCIES OR OFFICES,
PRIOR CONSULTATION AND APPROVAL BY THE LOCAL
GOVERNMENT UNITS CONCERNED AND OTHER
CONCERNED SECTORS IS REQUIRED.
Petitioners contend that the assailed resolution is a
valid policy declaration of the Provincial Government of
Laguna of its vehement objection to the operation of lotto
and all forms of gambling. It is likewise a valid exercise of
the provincial governments police power under the
General Welfare Clause of Republic Act 7160, otherwise
known as the Local Government Code of 1991.
[6]
They also
maintain that respondents lotto operation is illegal
because no prior consultations and approval by the local
government were sought before it was implemented
contrary to the express provisions of Sections 2 (c) and 27
of R.A. 7160.
[7]

For his part, respondent Calvento argues that the
questioned resolution is, in effect, a curtailment of the
power of the state since in this case the national legislature
itself had already declared lotto as legal and permitted its
operations around the country.
[8]
As for the allegation that
137

no prior consultations and approval were sought from
the sangguniang panlalawigan of Laguna, respondent
Calvento contends this is not mandatory since such a
requirement is merely stated as a declaration of policy and
not a self-executing provision of the Local Government
Code of 1991.
[9]
He also states that his operation of the
lotto system is legal because of the authority given to him
by the PCSO, which in turn had been granted a franchise to
operate the lotto by Congress.
[10]

The Office of the Solicitor General (OSG), for the State,
contends that the Provincial Government of Laguna has no
power to prohibit a form of gambling which has been
authorized by the national government.
[11]
He argues that
this is based on the principle that ordinances should not
contravene statutes as municipal governments are merely
agents of the national government. The local councils
exercise only delegated legislative powers which have been
conferred on them by Congress. This being the case, these
councils, as delegates, cannot be superior to the principal
or exercise powers higher than those of the latter. The OSG
also adds that the question of whether gambling should be
permitted is for Congress to determine, taking into account
national and local interests. Since Congress has allowed the
PCSO to operate lotteries which PCSO seeks to conduct in
Laguna, pursuant to its legislative grant of authority, the
provinces Sangguniang Panlalawigan cannot nullify the
exercise of said authority by preventing something already
allowed by Congress.
The issues to be resolved now are the following: (1)
whether Kapasiyahan Blg. 508, T. 1995 of the Sangguniang
Panlalawigan of Laguna and the denial of a mayors permit
based thereon are valid; and (2) whether prior
consultations and approval by the
concerned Sanggunian are needed before a lotto system
can be operated in a given local government unit.
The entire controversy stemmed from the refusal of
Mayor Cataquiz to issue a mayors permit for the operation
of a lotto outlet in favor of private respondent. According
to the mayor, he based his decision on an existing
ordinance prohibiting the operation of lotto in the province
of Laguna. The ordinance, however, merely states the
objection of the council to the said game. It is but a mere
policy statement on the part of the local council, which is
not self-executing. Nor could it serve as a valid ground to
prohibit the operation of the lotto system in the province of
Laguna. Even petitioners admit as much when they stated
in their petition that:
5.7. The terms of the Resolution and the validity thereof
are express and clear. The Resolution is a policy declaration
of the Provincial Government of Laguna of its vehement
opposition and/or objection to the operation of and/or all
forms of gambling including the Lotto operation in the
Province of Laguna.
[12]

As a policy statement expressing the local governments
objection to the lotto, such resolution is valid. This is part
138

of the local governments autonomy to air its views which
may be contrary to that of the national
governments. However, this freedom to exercise contrary
views does not mean that local governments may actually
enact ordinances that go against laws duly enacted by
Congress. Given this premise, the assailed resolution in this
case could not and should not be interpreted as a measure
or ordinance prohibiting the operation of lotto.
The game of lotto is a game of chance duly authorized
by the national government through an Act of
Congress. Republic Act 1169, as amended by Batas
Pambansa Blg. 42, is the law which grants a franchise to the
PCSO and allows it to operate the lotteries. The pertinent
provision reads:
Section 1. The Philippine Charity Sweepstakes Office.- The
Philippine Charity Sweepstakes Office, hereinafter
designated the Office, shall be the principal government
agency for raising and providing for funds for health
programs, medical assistance and services and charities of
national character, and as such shall have the general
powers conferred in section thirteen of Act Numbered One
thousand four hundred fifty-nine, as amended, and shall
have the authority:
A. To hold and conduct charity sweepstakes races, lotteries,
and other similar activities, in such frequency and manner,
as shall be determined, and subject to such rules and
regulations as shall be promulgated by the Board of
Directors.
This statute remains valid today. While lotto is clearly a
game of chance, the national government deems it wise
and proper to permit it. Hence, the Sangguniang
Panlalawigan of Laguna, a local government unit, cannot
issue a resolution or an ordinance that would seek to
prohibit permits. Stated otherwise, what the national
legislature expressly allows by law, such as lotto, a
provincial board may not disallow by ordinance or
resolution.
In our system of government, the power of local
government units to legislate and enact ordinances and
resolutions is merely a delegated power coming from
Congress. As held in Tatel vs. Virac,
[13]
ordinances should
not contravene an existing statute enacted by
Congress. The reasons for this is obvious, as elucidated
in Magtajas v. Pryce Properties Corp.
[14]

Municipal governments are only agents of the national
government. Local councils exercise only delegated
legislative powers conferred upon 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.
139

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 the corporation themselves are concerned. They
are, so to phrase it, the mere tenants at will of the
legislature (citing Clinton vs. Ceder Rapids, etc. Railroad Co.,
24 Iowa 455).
Nothing in the present constitutional provision
enhancing local autonomy dictates a different conclusion.
The 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 (citing Art. X, Sec. 5,
Constitution), 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.
[15]

Ours is still a unitary form of government, not a federal
state. Being so, any form of autonomy granted to local
governments will necessarily be limited and confined within
the extent allowed by the central authority. Besides, the
principle of local autonomy under the 1987 Constitution
simply means decentralization. It does not make local
governments sovereign within the state or an imperium in
imperio.
[16]

To conclude our resolution of the first issue, respondent
mayor of San Pedro, cannot avail of Kapasiyahan Bilang
508, Taon 1995, of the Provincial Board of Laguna as
justification to prohibit lotto in his municipality. For said
resolution is nothing but an expression of the local
legislative unit concerned. The Boards enactment, like
spring water, could not rise above its source of power, the
national legislature.
As for the second issue, we hold that petitioners erred
in declaring that Sections 2 (c) and 27 of Republic Act 7160,
otherwise known as the Local Government Code of 1991,
apply mandatorily in the setting up of lotto outlets around
the country. These provisions state:
Section 2. Declaration of Policy. x x x
140

(c) It is likewise the policy of the State to require all national
agencies and offices to conduct periodic consultations with
appropriate local government units, non-governmental and
peoples organizations, and other concerned sectors of the
community before any project or program is implemented
in their respective jurisdictions.
Section 27. Prior Consultations Required. No project or
program shall be implemented by government authorities
unless the consultations mentioned in Section 2 (c) and 26
hereof are complied with, and prior approval of the
sanggunian concerned is obtained; Provided, that
occupants in areas where such projects are to be
implemented shall not be evicted unless appropriate
relocation sites have been provided, in accordance with the
provisions of the Constitution.
From a careful reading of said provisions, we find that
these apply only to national programs and/or projects
which are to be implemented in a particular local
community. Lotto is neither a program nor a project of the
national government, but of a charitable institution, the
PCSO. Though sanctioned by the national government, it is
far fetched to say that lotto falls within the contemplation
of Sections 2 (c) and 27 of the Local Government Code.
Section 27 of the Code should be read in conjunction
with Section 26 thereof.
[17]
Section 26 reads:
Section 26. Duty of National Government Agencies in the
Maintenance of Ecological Balance. It shall be the duty of
every national agency or government-owned or controlled
corporation authorizing or involved in the planning and
implementation of any project or program that may cause
pollution, climatic change, depletion of non-renewable
resources, loss of crop land, range-land, or forest cover, and
extinction of animal or plant species, to consult with the
local government units, nongovernmental organizations,
and other sectors concerned and explain the goals and
objectives of the project or program, its impact upon the
people and the community in terms of environmental or
ecological balance, and the measures that will be
undertaken to prevent or minimize the adverse effects
thereof.
Thus, the projects and programs mentioned in Section
27 should be interpreted to mean projects and programs
whose effects are among those enumerated in Section 26
and 27, to wit, those that: (1) may cause pollution; (2) may
bring about climatic change; (3) may cause the depletion of
non-renewable resources; (4) may result in loss of crop
land, range-land, or forest cover; (5) may eradicate certain
animal or plant species from the face of the planet; and (6)
other projects or programs that may call for the eviction of
a particular group of people residing in the locality where
these will be implemented. Obviously, none of these
effects will be produced by the introduction of lotto in the
province of Laguna.
Moreover, the argument regarding lack of consultation
raised by petitioners is clearly an afterthought on their
141

part. There is no indication in the letter of Mayor Cataquiz
that this was one of the reasons for his refusal to issue a
permit. That refusal was predicated solely but erroneously
on the provisions of Kapasiyahan Blg. 508, Taon 1995, of
the Sangguniang Panlalawigan of Laguna.
In sum, we find no reversible error in the RTC decision
enjoining Mayor Cataquiz from enforcing or implementing
the Kapasiyahan Blg. 508, T. 1995, of the Sangguniang
Panlalawigan of Laguna. That resolution expresses merely
a policy statement of the Laguna provincial board. It
possesses no binding legal force nor requires any act of
implementation. It provides no sufficient legal basis for
respondent mayors refusal to issue the permit sought by
private respondent in connection with a legitimate business
activity authorized by a law passed by Congress.
WHEREFORE, the petition is DENIED for lack of
merit. The Order of the Regional Trial Court of San Pedro,
Laguna enjoining the petitioners from implementing or
enforcing Resolution or Kapasiyahan Blg. 508, T. 1995, of
the Provincial Board of Laguna is hereby AFFIRMED. No
costs.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Buena, and De Leon,
Jr., JJ., concur.



[1]
Rollo, pp. 18-20.
[2]
Id. at 21.
[3]
Records, pp. 8-8-A.
EN BANC
[G.R. No. 143596. December 11, 2003]
JUDGE TOMAS C. LEYNES, petitioner, vs. THE COMMISSION
ON AUDIT (COA), HON. GREGORIA S. ONG,
DIRECTOR, COMMISSION ON AUDIT and HON.
SALVACION DALISAY, PROVINCIAL
AUDITOR, respondents.
D E C I S I O N
CORONA, J.:
Before us is a petition for certiorari under Rule 65 in
relation to Section 2, Rule 64 of the Rules of Court, seeking
to reverse and set aside the decision
[1]
dated September 14,
1999 of the Commission on Audit (COA), affirming the
resolution of COA Regional Director Gregoria S. Ong dated
March 29, 1994 which in turn affirmed the opinion dated
October 19, 1993 of the Provincial Auditor of
Oriental Mindoro, Salvacion M. Dalisay. All three denied the
grant of P1,600 monthly allowance to petitioner Judge
142

Tomas C. Leynes by the Municipality of Naujan,
Oriental Mindoro.
FACTUAL ANTECEDENTS
Petitioner Judge Tomas C. Leynes who, at present, is the
presiding judge of the Regional Trial Court of Calapan City,
Oriental Mindoro, Branch 40 was formerly assigned to
the Municipalityof Naujan, Oriental Mindoro as the sole
presiding judge of the Municipal Trial Court thereof. As
such, his salary and representation and transportation
allowance (RATA) were drawn from the budget of the
Supreme Court. In addition, petitioner received a monthly
allowance of P944 from the local funds
[2]
of
the Municipality of Naujan starting 1984.
[3]

On March 15, 1993, the Sangguniang Bayan of Naujan,
through Resolution No. 057, sought the opinion of the
Provincial Auditor and the Provincial Budget Officer
regarding any budgetary limitation on the grant of a
monthly allowance by the municipality to petitioner judge.
On May 7, 1993, the Sangguniang Bayan unanimously
approved Resolution No. 101 increasing petitioner judges
monthly allowance from P944 to P1,600 (an increase
of P656) starting May 1993.
[4]
By virtue of said resolution,
the municipal government (the Municipal Mayor and
the SangguniangBayan) approved a supplemental budget
which was likewise approved by
the Sangguniang Panlalawigan and the Office of Provincial
Budget and Management of Oriental Mindoro. In 1994, the
Municipal Government of Naujan again provided for
petitioner judges P1,600 monthly allowance in its annual
budget which was again approved by
the Sangguniang Panlalawigan and the Office of Provincial
Budget and Management of Oriental Mindoro.
[5]

On February 17, 1994, Provincial
Auditor Salvacion M. Dalisay sent a letter to the Municipal
Mayor and the Sangguniang Bayan of Naujan directing
them to stop the payment of the P1,600 monthly allowance
or RATA to petitioner judge and to require the immediate
refund of the amounts previously paid to the latter. She
opined that the Municipality of Naujan could not grant
RATA to petitioner judge in addition to the RATA the latter
was already receiving from the Supreme Court. Her
directive was based on the following:
Section 36, RA No. 7645, General Appropriations Act of
1993
Representation and Transportation Allowances. The
following officials and those of equivalent rank as may be
determined by the Department of Budget and Management
(DBM) while in the actual performance of their respective
functions are hereby granted monthly commutable
representation and transportation allowances payable from
the programmed appropriations provided for their
respective offices, not exceeding the rates indicated below
. . .
143

National Compensation Circular No. 67 dated January 1,
1992, of the Department of Budget and Management
Subject: Representation and Transportation Allowances of
National Government Officials and Employees
x x x x x x x x x
4. Funding Source: In all cases, commutable and
reimbursable RATA shall be paid from the amount
appropriated for the purpose and other personal services
savings of the agency or project from where the officials
and employees covered under this Circular draw their
salaries. No one shall be allowed to collect RATA from more
than one source.
[6]
(emphasis supplied)
Petitioner judge appealed to COA Regional
Director Gregoria S. Ong who, however, upheld the opinion
of Provincial Auditor Dalisay and who added that Resolution
No. 101, Series of 1993 of
the Sangguniang Bayan of Naujan failed to comply with
Section 3 of Local Budget Circular No. 53 dated September
1, 1993 outlining the conditions for the grant of allowances
to judges and other national officials or employees by the
local government units (LGUs). Section 3 of the said budget
circular provides that:
Sec. 3 Allowances. LGUs may grant allowances/additional
compensation to the national government
officials/employees assigned to their locality at rates
authorized by law, rules and regulations and subject to the
following preconditions:
a. That the annual income or finances of the
municipality, city or province as certified by the
Accountant concerned will allow the grant of
the allowances/additional compensation
without exceeding the general limitations for
personal services under Section 325 of RA
7160;
b. That the budgetary requirements under Sec
tion 324 of RA 7160 including the full
requirement of RA 6758 have been satisfied
and provided fully in the budget as certified by
the Budget Officer and COA representative in
the LGU concerned;
c. That the LGU has fully implemented the
devolution of personnel/functions in
accordance with the provisions of RA 7160;
d. That the LGU has already created mandatory
positions prescribed in RA 7160; and
e. That similar allowances/additional
compensation are not granted by the national
government to the officials/employees
assigned to the LGU.
[7]

144

Petitioner judge appealed the unfavorable resolution of
the Regional Director to the Commission on Audit. In the
meantime, a disallowance of the payment of the P1,600
monthly allowance to petitioner was issued. Thus he
received his P1,600 monthly allowance from
the Municipality of Naujan only for the period May 1993 to
January 1994.
On September 14, 1999, the COA issued its decision
affirming the resolution of Regional
Director Gregoria S. Ong:
The main issue . . . is whether or not the Municipality
of Naujan, Oriental Mindoro can validly provide RATA to its
Municipal Judge, in addition to that provided by the
Supreme Court.
Generally, the grant of (RATA) [sic] to qualified national
government officials and employees pursuant to Section 36
of R.A. 7645 [General Appropriations Act of 1993] and NCC
No. 67 dated 01 January 1992 is subject to the following
conditions to wit:
1. Payable from the programmed /appropriated
amount and others from personal services
savings of the respective offices where the
officials or employees draw their salaries;
2. Not exceeding the rates prescribed by the
Annual General Appropriations Act;
3. Officials /employees on detail with other
offices or assigned to serve other offices or
agencies shall be paid from their parent
agencies;
4. No one shall be allowed to collect RATA from
more than one source.
On the other hand, the municipal government may provide
additional allowances and other benefits to judges and
other national government officials or employees assigned
or stationed in the municipality, provided, that the finances
of the municipality allow the grant thereof pursuant to
Section 447, Par. 1 (xi), R.A. 7160, and provided further,
that similar allowance/additional compensation are not
granted by the national government to the
official/employee assigned to the local government unit as
provided under Section 3(e) of Local Budget Circular No. 53,
dated 01 September 1993.
The conflicting provisions of Section 447, Par. (1) (xi) of the
Local Government Code of 1991 and Section 36 of the
General Appropriations Act of 1993 [RA 7645] have been
harmonized by the Local Budget Circular No. 53 dated 01
September 1993, issued by the Department of Budget and
Management pursuant to its powers under Section 25 and
Section 327 of the Local Government Code. The said circular
must be adhered to by the local government units
particularly Section 3 thereof which provides the
implementing guidelines of Section 447, Par. (1) (xi) of the
145

Local Government Code of 1991 in the grant of allowances
to national government officials/employees assigned or
stationed in their respective local government units.
Consequently, the subject SB Resolution No. 101 dated 11
May 1993 of the Sangguniang Bayan of Naujan,
Oriental Mindoro, having failed to comply with the inherent
precondition as defined in Section 3 (e). . . is null and
void. Furthermore, the Honorable Judge Tomas C. Leynes,
being a national government official is prohibited to receive
additional RATA from the local government fund pursuant
to Section 36 of the General Appropriations Act (R.A. 7645
for 1993) and National Compensation Circular No. 67
dated 1 January 1992.
[8]
(emphasis ours)
ASSIGNMENTS OF ERROR
Petitioner judge filed a motion for reconsideration of
the above decision but it was denied by the Commission in
a resolution dated May 30, 2000. Aggrieved, petitioner filed
the instant petition, raising the following assignments of
error for our consideration:
I
WHETHER OR NOT RESOLUTION NO. 1O1, SERIES OF 1993
OF NAUJAN, ORIENTAL MINDORO, WHICH GRANTED
ADDITIONAL ALLOWANCE TO THE MUNICIPAL TRIAL JUDGE
OF NAUJAN, ORIENTAL MINDORO AND INCREASING HIS
CURRENT REPRESENTATION AND TRAVELLING ALLOWANCE
(RATA) TO AN AMOUNT EQUIVALENT TO THAT RECEIVED
MONTHLY BY SANGGUNIANG MEMBERS IN PESOS: ONE
THOUSAND SIX HUNDRED (P1,600.00) EFFECTIVE 1993, IS
VALID.
II
WHETHER OR NOT THE POWER OF MUNICIPAL
GOVERNMENTS TO GRANT ADDITIONAL ALLOWANCES AND
OTHER BENEFITS TO NATIONAL GOVERNMENT EMPLOYEES
STATIONED IN THEIR MUNICIPALITY IS VERY EXPLICIT AND
UNEQUIVOCAL UNDER THE LOCAL GOVERNMENT CODE OF
1991 PARTICULARLY SECTION 447 IN RELATION TO
SECTIONS 17 AND 22 THEREOF.
III
WHETHER OR NOT THE DEPARTMENT OF BUDGET AND
MANAGEMENT (DBM) CAN, BY THE ISSUANCE OF BUDGET
CIRCULARS, RESTRICT A MUNICIPAL GOVERNMENT FROM
EXERCISING ITS GIVEN LEGISLATIVE POWERS OF PROVIDING
ADDITIONAL ALLOWANCES AND OTHER BENEFITS TO
NATIONAL EMPLOYEES STATIONED OR ASSIGNED TO THEIR
MUNICIPALITY FOR AS LONG AS THEIR FINANCES SO
ALLOW.
IV
WHETHER OR NOT THE LOCAL GOVERNMENT CODE OF
1991 PARTICULARLY SECTION 447 (a) (1) (xi) WAS
EXPRESSLY OR IMPLIEDLY REPEALED OR MODIFIED BY
146

REPUBLIC ACT 7645 AND THE GENERAL APPROPRIATIONS
ACT OF 1993.
V
WHETHER OR NOT PETITIONER WAS ENTITLED TO RECEIVE
THE ADDITIONAL ALLOWANCES GRANTED TO HIM BY THE
MUNICIPALITY OF NAUJAN, ORIENTAL MINDORO BY VIRTUE
OF ITS RESOLUTION NO. 101, SERIES OF 1993.
POSITION OF COA
Respondent Commission on Audit opposes the grant by
the Municipality of Naujan of the P1,600 monthly allowance
to petitioner Judge Leynes for the reason that the
municipality could not grant RATA to judges in addition to
the RATA already received from the Supreme
Court.
[9]
Respondent bases its contention on the following:
1. National Compensation Circular No. 67 (hereafter
NCC No. 67) dated January 1, 1992 of the
Department of Budget and Management (DBM)
which provides that (a) the RATA of national
officials and employees shall be payable from the
programmed appropriations or personal services
savings of the agency where such officials or
employees draw their salary and (b) no one shall be
allowed to collect RATA from more than one
source;
2. the General Appropriations Act of 1993 (RA 7645)
which provided that the RATA of national officials
shall be payable from the programmed
appropriations of their respective offices and
3. Local Budget Circular No. 53 (hereafter LBC No. 53)
dated September 1, 1993 of the DBM which
prohibits local government units from granting
allowances to national government officials or
employees stationed in their localities when such
allowances are also granted by the national
government or are similar to the allowances
granted by the national government to such
officials or employees.
[10]

POSITION OF PETITIONER
Petitioner judge, on the other hand, asserts that the
municipality is expressly and unequivocally empowered by
RA 7160 (the Local Government Code of 1991) to enact
appropriation ordinances granting allowances and other
benefits to judges stationed in its territory. Section
447(a)(1)(xi) of the Local Government Code of 1991
imposes only one condition, that is, when the finances of
the municipal government allow. The Code does not
impose any other restrictions in the exercise of such power
by the municipality. Petitioner also asserts that the DBM
cannot amend or modify a substantive law like the Local
Government Code of 1991 through mere budget circulars.
147

Petitioner emphasizes that budget circulars must conform
to, not modify or amend, the provisions of the law it seeks
to implement.
[11]

HISTORY OF GRANT OF
ALLOWANCES TO JUDGES
The power of local government units (LGUs) to grant
allowances to judges stationed in their respective territories
was originally provided by Letter of Instruction No. 1418
dated July 18, 1984 (hereafter LOI No. 1418):
WHEREAS, the State is cognizant of the need to maintain
the independence of the Judiciary;
WHEREAS, the budgetary allotment of the Judiciary
constitutes only a small percentage of the national budget;
WHEREAS, present economic conditions adversely affected
the livelihood of the members of the Judiciary;
WHEREAS, some local government units are ready, willing
and able to pay additional allowances to Judges of various
courts within their respective territorial jurisdiction;
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of
the Republic of the Philippines, do hereby direct:
1. Section 3 of Letter of Implementation
No. 96 is hereby amended to read as
follows:
3. The allowances provided in this letter
shall be borne exclusively by the
National Government. However,
provincial, city and municipal
governments may pay additional
allowances to the members and
personnel of the Judiciary assigned in
their respective areas out of available
local funds but not to exceed P1,500.00;
Provided, that in Metropolitan Manila,
the city and municipal governments
therein may pay additional allowances
not exceeding P3,000.00. (emphasis
ours)
[12]

On June 25, 1991, the DBM issued Circular No. 91-7
outlining the guidelines for the continued receipt of
allowances by judges from LGUs:
Consistent with the constitutional provision on the fiscal
autonomy of the judiciary and the policy of the National
Government of allowing greater autonomy to local
government units, judges of the Judiciary are hereby
allowed to continue to receive allowances at the same rates
which they have been receiving from the Local Government
148

Units as of June 30, 1989, subject to the following
guidelines:
1. That the continuance of payment of subject
allowance to the recipient judge shall be
entirely voluntary and non-compulsory on the
part of the Local Government Units;
2. That payment of the above shall always be
subject to the availability of local funds;
3. That it shall be made only in compliance with
the policy of non-diminution of compensation
received by the recipient judge before the
implementation of the salary standardization;
4. That the subject allowance shall be given only
to judges who were receiving the same as
of June 30, 1989 and shall be co-
terminous with the incumbent judges; and
5. That the subject allowance shall automatically
terminate upon transfer of a judge from one
local government unit to another local
government unit. (emphasis ours)
On October 10, 1991, Congress enacted RA 7160,
otherwise known as the Local Government Code of
1991.
[13]
The power of the LGUs to grant allowances and
other benefits to judges and other national officials
stationed in their respective territories was expressly
provided in Sections 447(a)(1)(xi), 458(a)(1)(xi) and
468(a)(1)(xi) of the Code.
On March 15, 1994, the DBM issued Local Budget
Circular No. 55 (hereafter LBC No. 55) setting out the
maximum amount of allowances that LGUs may grant to
judges. For provinces and cities, the amount should not
exceed P1,000 and for municipalities, P700.
On December 3, 2002, we struck down the above
circular in Dadole, et al. vs. COA.
[14]
We ruled there that the
Local Government Code of 1991 clearly provided
that LGUs could grant allowances to judges, subject only to
the condition that the finances of the LGUs allowed it. We
held that setting a uniform amount for the grant of
allowances (was) an inappropriate way of enforcing said
criterion. Accordingly, we declared that the DBM exceeded
its power of supervision over LGUs by imposing a
prohibition that did not jibe with the Local Government
Code of 1991.
[15]

ESTABLISHED PRINCIPLES INVOLVED
From the foregoing history of the power of LGUs to
grant allowances to judges, the following principles should
be noted:
1. the power of LGUs to grant allowances to judges
has long been recognized (since 1984 by virtue of
LOI No. 1418) and, at present, it is expressly and
149

unequivocally provided in Sections 447, 458 and
468 of the Local Government Code of 1991;
2. the issuance of DBM Circular No. 91-7 dated June
25, 1991 and LBC No. 55 dated March 15,
1994 indicates that the national government
recognizes the power of LGUs to grant such
allowances to judges;
3. in Circular No. 91-7, the national government
merely provides the guidelines for the continue
d receipt of allowances by judges from LGUs while
in LBC No. 55, the national government merely
tries to limit the amount of allowances LGUs may
grant to judges and
4. in the recent case of Dadole, et al. vs. COA, the
Court upheld the constitutionally enshrined
autonomy of LGUs to grant allowances to judges in
any amount deemed appropriate, depending on
availability of funds, in accordance with the Local
Government Code of 1991.
OUR RULING
We rule in favor of petitioner judge. Respondent COA
erred in opposing the grant of the P1,600 monthly
allowance by the Municipality of Naujan to petitioner
Judge Leynes.
DISCUSSION OF OUR RULING
Section 447(a)(1)(xi) of RA 7160, the Local Government
Code of 1991, provides:
(a) The sangguniang bayan, as the legislative body of the
municipality, shall enact ordinances, approve resolutions
and appropriate funds for the general welfare of the
municipality and its inhabitants . . ., and shall:
(1) Approve ordinances and pass resolutions necessary
for an efficient and effective municipal government, and in
this connection shall:
x x x x x x x x x
(xi) When the finances of the municipal government allow,
provide for additional allowances and other benefits to
judges, prosecutors, public elementary and high school
teachers, and other national government officials stationed
in or assigned to the municipality; (emphasis ours)
Respondent COA, however, contends that the above
section has been repealed, modified or amended by NCC
No. 67 dated January 1, 1992, RA 7645 (the General
Appropriations Act of 1993) and LBC No. 53
dated September 1, 1993.
[16]

It is elementary in statutory construction that an
administrative circular cannot supersede, abrogate, modify
or nullify a statute. A statute is superior to an
150

administrative circular, thus the latter cannot repeal or
amend it.
[17]
In the present case, NCC No. 67, being a mere
administrative circular, cannot repeal a substantive law like
RA 7160.
It is also an elementary principle in statutory
construction that repeal of statutes by implication is not
favored, unless it is manifest that the legislature so
intended. The legislature is assumed to know the existing
laws on the subject and cannot be presumed to have
enacted inconsistent or conflicting statutes.
[18]
Respondent
COA alleges that Section 36 of RA 7645 (the GAA of 1993)
repealed Section 447(a)(l)(xi) of RA 7160 (the LGC of
1991). A review of the two laws, however, shows that this
was not so. Section 36 of RA 7645 merely provided for the
different rates of RATA payable to national government
officials or employees, depending on their position, and
stated that these amounts were payable from the
programmed appropriations of the parent agencies to
which the concerned national officials or employees
belonged. Furthermore, there was no other provision in RA
7645 from which a repeal of Section 447(a) (l)(xi) of RA
7160 could be implied. In the absence, therefore, of any
clear repeal of Section 447(a)(l)(xi) of RA 7160, we cannot
presume such intention on the part of the legislature.
Moreover, the presumption against implied repeal
becomes stronger when, as in this case, one law is special
and the other is general.
[19]
The principle is expressed in the
maxim generaliaspecialibus non derogant, a general law
does not nullify a specific or special law. The reason for this
is that the legislature, in passing a law of special character,
considers and makes special provisions for the particular
circumstances dealt with by the special law. This being so,
the legislature, by adopting a general law containing
provisions repugnant to those of the special law and
without making any mention of its intention to amend or
modify such special law, cannot be deemed to have
intended an amendment, repeal or modification of the
latter.
[20]

In this case, RA 7160 (the LGC of 1991) is a special
law
[21]
which exclusively deals with local government units
(LGUs), outlining their powers and functions in consonance
with the constitutionally mandated policy of local
autonomy. RA 7645 (the GAA of 1993), on the other hand,
was a general law
[22]
which outlined the share in the
national fund of all branches of the national government.
RA 7645 therefore, being a general law, could not have, by
mere implication, repealed RA 7160. Rather, RA 7160
should be taken as the exception to RA 7645 in the absence
of circumstances warranting a contrary conclusion.
[23]

The controversy actually centers on the seemingly
sweeping provision in NCC No. 67 which states that no one
shall be allowed to collect RATA from more than one
source. Does this mean that judges cannot receive
allowances from LGUs in addition to the RATA from the
Supreme Court? For reasons that will hereinafter be
discussed, we answer in the negative.
The pertinent provisions of NCC No. 67 read:
151

3. Rules and Regulations:
3.1.1 Payment of RATA, whether
commutable or reimbursable, shall be in
accordance with the rates prescribed for
each of the following officials and
employees and those of equivalent
ranks, and the conditions enumerated
under the pertinent sections of the
General Provisions of the annual General
Appropriations Act (GAA):
x x x x x x x x x
4. Funding Source:
In all cases, commutable and reimbursable RATA shall be
paid from the amount appropriated for the purpose and
other personal services savings of the agency or project
from where the officials and employees covered under this
Circular draw their salaries. No one shall be allowed to
collect RATA from more than one source. (emphasis ours)
In construing NCC No. 67, we apply the principle in
statutory construction that force and effect should not be
narrowly given to isolated and disjoined clauses of the law
but to its spirit, broadly taking all its provisions together in
one rational view.
[24]
Because a statute is enacted as a
whole and not in parts or sections, that is, one part is as
important as the others, the statute should be construed
and given effect as a whole. A provision or section which is
unclear by itself may be clarified by reading and construing
it in relation to the whole statute.
[25]

Taking NCC No. 67 as a whole then, what it seeks to
prevent is the dual collection of RATA by a national official
from the budgets of more than one national agency. We
emphasize that theother source referred to in the
prohibition is another national agency. This can be gleaned
from the fact that the sentence no one shall be allowed to
collect RATA from more than one source (the
controversial prohibition) immediately follows the
sentence that RATA shall be paid from the budget of the
national agency where the concerned national officials and
employees draw their salaries. The fact that the other
source is another national agency is supported by RA 7645
(the GAA of 1993) invoked by respondent COA itself and, in
fact, by all subsequent GAAs for that matter, because
the GAAs all essentially provide that (1) the RATA of
national officials shall be payable from the budgets of their
respective national agencies and (2) those officials on detail
with other national agencies shall be paid their RATA only
from the budget of their parent national agency:
Section 36, RA 7645, General Appropriations Act of 1993:
Representation and Transportation Allowances. The
following officials and those of equivalent rank as may be
determined by the Department of Budget and Management
(DBM) while in the actual performance of their respective
152

functions are hereby granted monthly commutable
representation and transportation allowances payable from
the programmed appropriations provided for their
respective offices, not exceeding the rates indicated below,
which shall apply to each type of allowance:
x x x x x x x x x
Officials on detail with other offices, including officials of
the Commission of Audit assigned to serve other offices or
agencies, shall be paid the allowance herein authorized
from the appropriations of their parent agencies. (emphasis
ours)
Clearly therefore, the prohibition in NCC No. 67 is only
against the dual or multiple collection of RATA by a national
official from the budgets of two or more national
agencies. Stated otherwise, when a national official is on
detail with another national agency, he should get his RATA
only from his parent national agency and not from the other
national agency he is detailed to.
Since the other source referred in the controversial
prohibition is another national agency, said prohibition
clearly does not apply to LGUs like
the Municipality of Naujan. National agency of course refers
to the different offices, bureaus and departments
comprising the national government. The budgets of these
departments or offices are fixed annually by Congress in
the General Appropriations Act.
[26]
An LGU is obviously not
a national agency. Its annual budget is fixed by its own
legislative council
(Sangguniang Bayan, Panlungsod or Panlalawigan), not by
Congress. Without doubt, NCC No. 67 does not apply
to LGUs.
The prohibition in NCC No. 67 is in fact an
administrative tool of the DBM to prevent the much-abused
practice of multiple allowances, thus standardizing the
grant of RATA by national agencies. Thus, the purpose
clause of NCC No. 67 reads:
This Circular is being issued to ensure uniformity and
consistency of actions on claims for representation and
transportation allowance (RATA) which is primarily granted
by law to national government officials and employees to
cover expenses incurred in the discharge or performance of
their duties and responsibilities.
By no stretch of the imagination can NCC No. 67 be
construed as nullifying the power of LGUs to grant
allowances to judges under the Local Government Code of
1991. It was issued primarily to make the grant of RATA to
national officials under the national budget uniform. In
other words, it applies only to the national funds
administered by the DBM, not the local funds ofLGUs.
To rule against the power of LGUs to grant allowances
to judges as what respondent COA would like us to do will
subvert the principle of local autonomy zealously
guaranteed by the Constitution.
[27]
The Local Government
Code of 1991 was specially promulgated by Congress to
153

ensure the autonomy of local governments as mandated by
the Constitution. By upholding, in the present case, the
power of LGUs to grant allowances to judges and leaving to
their discretion the amount of allowances they may want to
grant, depending on the availability of local funds, we
ensure the genuine and meaningful local autonomy
of LGUs.
We now discuss the next contention of respondent
COA: that the resolution of
the Sangguniang Bayan of Naujan granting the P1,600
monthly allowance to petitioner judge was null and void
because it failed to comply with LBC No. 53
dated September 1, 1993:
Sec. 3 Allowances. LGUs may grant allowances/additional
compensation to the national government
officials/employees assigned to their locality at rates
authorized by law, rules and regulations and subject to the
following preconditions:
a. That the annual income or finances of
the municipality, city or province as
certified by the Accountant concerned
will allow the grant of the
allowances/additional compensation
without exceeding the general
limitations for personal services under
Section 325 of RA 7160;
b. That the budgetary requirements under
Section 324 of RA 7160 including the full
requirement of RA 6758 have been
satisfied and provided fully in the budget
as certified by the Budget Officer and
COA representative in the LGU
concerned;
c. That the LGU has fully implemented the
devolution of personnel/functions in
accordance with the provisions of RA
7160;
d. That the LGU has already created
mandatory positions prescribed in RA
7160.
e. That similar allowances/additional
compensation are not granted by the
national government to the
officials/employees assigned to the LGU.
Though LBC No. 53 of the DBM may be considered
within the ambit of the President's power of general
supervision over LGUs,
[28]
we rule that Section 3, paragraph
(e) thereof is invalid. RA 7160, the Local Government Code
of 1991, clearly provides that provincial, city and municipal
governments may grant allowances to judges as long as
their finances allow. Section 3, paragraph (e) of LBC No. 53,
by outrightly prohibiting LGUs from granting allowances to
154

judges whenever such allowances are (1) also granted by
the national government or (2) similar to the allowances
granted by the national government, violates Section
447(a)(l)(xi) of the Local Government Code of 1991.
[29]
As
already stated, a circular must conform to the law it seeks
to implement and should not modify or amend it.
[30]

Moreover, by prohibiting LGUs from granting
allowances similar to the allowances granted by the
national government, Section 3 (e) of LBC No. 53 practically
prohibits LGUs from granting allowances to judges and, in
effect, totally nullifies their statutory power to do so. Being
unduly restrictive therefore of the statutory power
of LGUs to grant allowances to judges and being violativeof
their autonomy guaranteed by the Constitution, Section 3,
paragraph (e) of LBC No. 53 is hereby declared null and
void.
Paragraphs (a) to (d) of said circular, however, are valid
as they are in accordance with Sections 324
[31]
and 325
[32]
of
the Local Government Code of 1991; these respectively
provide for the budgetary requirements and general
limitations on the use of provincial, city and municipal
funds. Paragraphs (a) to (d) are proper guidelines for the
condition provided in Sections 447, 458 and 468 of the
Local Government Code of 1991 that LGUs may grant
allowances to judges if their funds allow.
[33]

Respondent COA also argues that Resolution No. 101 of
the Sangguniang Bayan of Naujan failed to comply with
paragraphs (a) to (d) of LBC No. 53, thus it was null and
void.
The argument is misplaced.
Guidelines (a) to (d) were met when
the Sangguniang Panlalawigan of
Oriental Mindoro approved Resolution No. 101 of
the Sangguniang Bayan of Naujan granting the P1,600
monthly allowance to petitioner judge as well as the
corresponding budgets of the municipality providing for the
said monthly allowance to petitioner judge. Under Section
327 of the Local Government Code of 1991,
the Sangguniang Panlalawigan was specifically tasked to
review the appropriation ordinances of its component
municipalities to ensure compliance with Sections 324 and
325 of the Code. Considering said duty of
the Sangguniang Panlalawigan, we will assume, in the
absence of proof to the contrary, that
the Sangguniang Panlalawigan of
Oriental Mindoro performed what the law required it to do,
that is, review the resolution and the corresponding
budgets of the Municipality of Naujan to make sure that
they complied with Sections 324 and 325 of the Code.
[34]
We
presume the regularity of
the Sangguniang Panlalawigans official act.
Moreover, it is well-settled that an ordinance must be
presumed valid in the absence of evidence showing that it
is not in accordance with the law.
[35]
Respondent COA had
the burden of proving that Resolution No. 101 of
155

the Sangguniang Bayan of Naujan did not comply with the
condition provided in Section 447 of the Code, the
budgetary requirements and general limitations on the use
of municipal funds provided in Sections 324 and 325 of the
Code and the implementing guidelines issued by the DBM,
i.e., paragraphs (a) to (d), Section 3 of LBC No.
53. Respondent COA also had the burden of showing that
the Sangguniang Panlalawigan of
Oriental Mindoro erroneously approved said resolution
despite its non-compliance with the requirements of the
law. It failed to discharge such burden. On the contrary, we
find that the resolution of
the Municipality of Naujan granting the P1,600 monthly
allowance to petitioner judge fully complied with the law.
Thus, we uphold its validity.
In sum, we hereby affirm the power of
the Municipality of Naujan to grant the questioned
allowance to petitioner Judge Leynes in accordance with
the constitutionally mandated policy of local autonomy and
the provisions of the Local Government Code of 1991. We
also sustain the validity of Resolution No. 101, Series of
1993, of the Sangguniang Bayan of Naujan for being in
accordance with the law.
WHEREFORE, the petition is hereby GRANTED. The
assailed decision dated September 14, 1999 of the
Commission of Audit is hereby SET ASIDE and Section 3,
paragraph (e) of LBC No. 53 is hereby declared NULL and
VOID.
No costs.
SO ORDERED.
Davide, Jr., C.J., Puno, Vitug, Panganiban, Quisumbing,
Ynares-Santiago, Sandoval-Gutierrez, Carpio, Austria-
Martinez, Carpio-Morales, Callejo, Sr., Azcuna, and Tinga,
JJ., con
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 149848 November 25, 2004
ARSADI M. DISOMANGCOP and RAMIR M.
DIMALOTANG, petitioners,
vs.
THE SECRETARY OF THE DEPARTMENT OF PUBLIC WORKS
AND HIGHWAYS SIMEON A. DATUMANONG and THE
SECRETARY OF BUDGET and MANAGEMENT EMILIA T.
BONCODIN, respondents.


D E C I S I O N


156

TINGA, J.:
At stake in the present case is the fate of regional
autonomy for Muslim Mindanao which is the epoch-
making, Constitution-based project for achieving
national unity in diversity.
Challenged in the instant petition for certiorari, prohibition
and mandamus with prayer for a temporary restraining
order and/or writ of preliminary injunction
1
(Petition) are
the constitutionality and validity of Republic Act No. 8999
(R.A. 8999),
2
entitled "An Act Establishing An Engineering
District in the First District of the Province of Lanao del Sur
and Appropriating Funds Therefor," and Department of
Public Works and Highways (DPWH) Department Order No.
119 (D.O. 119)
3
on the subject, "Creation of Marawi Sub-
District Engineering Office."
The Background
The uncontested legal and factual antecedents of the case
follow.
For the first time in its history after three Constitutions, the
Philippines ordained the establishment of regional
autonomy with the adoption of the 1987 Constitution.
Sections 1
4
and 15, Article X mandate the creation of
autonomous regions in Muslim Mindanao and in the
Cordilleras. Section 15 specifically provides that "[t]here
shall be created autonomous regions in Muslim Mindanao
and in the Cordilleras consisting of provinces, cities,
municipalities, and geographical areas sharing common and
distinctive historical and cultural heritage, economic and
social structures, and other relevant characteristics within
the framework of this Constitution and the national
sovereignty as well as territorial integrity of the Republic of
the Philippines." To effectuate this mandate, the Charter
devotes a number of provisions under Article X.
5

Pursuant to the constitutional mandate, Republic Act No.
6734 (R.A. 6734), entitled "An Act Providing for An Organic
Act for the Autonomous Region in Muslim Mindanao," was
enacted and signed into law on 1 August 1989. The law
called for the holding of a plebiscite in the provinces of
Basilan, Cotabato, Davao del Sur, Lanao del Norte, Lanao
del Sur, Maguindanao, Palawan, South Cotabato, Sultan
Kudarat, Sulu, Tawi-Tawi, Zamboanga del Norte, and
Zamboanga del Sur, and the cities of Cotabato, Dapitan,
Dipolog, General Santos, Iligan, Marawi, Pagadian, Puerto
Princesa and Zamboanga.
6
In the ensuing plebiscite held on
19 November 1989, only four (4) provinces voted for the
creation of an autonomous region, namely: Lanao del Sur,
Maguindanao, Sulu and Tawi-Tawi. These provinces became
the Autonomous Region in Muslim Mindanao
(ARMM).
7
The law contains elaborate provisions on the
powers of the Regional Government and the areas of
jurisdiction which are reserved for the National
Government.
8

157

In accordance with R.A. 6734, then President Corazon C.
Aquino issued on 12 October 1990, Executive OrderNo. 426
(E.O. 426), entitled "Placing the Control and Supervision of
the Offices of the Department of Public Works and
Highways within the Autonomous Region in Muslim
Mindanao under the Autonomous Regional Government,
and for other purposes." Sections 1 to 3
9
of the Executive
Order are its operative provisions.
ARMM was formally organized on 6 November 1990.
President Corazon C. Aquino flew to Cotabato, the seat of
the Regional Government, for the inauguration. At that
point, she had already signed seven (7) Executive Orders
devolving to ARMM the powers of seven (7) cabinet
departments, namely: (1) local government; (2) labor and
employment; (3) science and technology; (4) public works
and highways; (5) social welfare and development; (6)
tourism; and (7) environment and national resources.
10

Nearly nine (9) years later, on 20 May 1999, then
Department of Public Works and Highways (DPWH)
Secretary Gregorio R. Vigilar issued D.O. 119 which reads,
thus:
Subject: Creation of Marawi Sub-District Engineering
Office
Pursuant to Sections 6 and 25 of Executive Order No.
124 dated 30 January 1987, there is hereby created a
DPWH Marawi Sub-District Engineering Office which
shall have jurisdiction over all national infrastructure
projects and facilities under the DPWH within Marawi
City and the province of Lanao del Sur. The
headquarters of the Marawi Sub-District Engineering
Office shall be at the former quarters of the Marawi
City Engineering Office.
Personnel of the above-mentioned Sub-District
Engineering Office shall be made up of employees of
the National Government Section of the former
Marawi City Engineering Office who are now assigned
with the Iligan City Sub-District Engineering Office as
may be determined by the DPWH Region XII Regional
Director. (Emphasis supplied)
Almost two (2) years later, on 17 January 2001, then
President Joseph E. Estrada approved and signed into law
R.A. 8999. The text of the law reads:
AN ACT ESTABLISHING AN ENGINEERING DISTRICT IN
THE FIRST DISTRICT OF THE PROVINCE OF LANAO DEL
SUR AND APPROPRIATING FUNDS THEREFOR
Be it enacted by the Senate and House of
Representatives of the Philippines in Congress
assembled:
SECTION 1. The City of Marawi and the municipalities
comprising the First District of the Province of Lanao
del Sur are hereby constituted into an engineering
158

district to be known as the First Engineering District
of the Province of Lanao del Sur.
SEC. 2. The office of the engineering district hereby
created shall be established in Marawi City, Province
of Lanao del Sur.
SEC. 3. The amount necessary to carry out the
provisions of this Act shall be included in the General
Appropriations Act of the year following its
enactment into law. Thereafter, such sums as may be
necessary for the maintenance and continued
operation of the engineering district office shall be
included in the annual General Appropriations Act.
SEC. 4. This Act shall take effect upon its approval.
(Emphasis supplied)
Congress later passed Republic Act No. 9054 (R.A. 9054),
entitled "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." Like its forerunner, R.A. 9054
contains detailed provisions on the powers of the Regional
Government and the retained areas of governance of the
National Government.
11

R.A. 9054 lapsed into law
12
on 31 March 2001. It was
ratified in a plebiscite held on 14 August 2001. The province
of Basilan and the City of Marawi also voted to join ARMM
on the same date. R.A. 6734 and R.A. 9054 are collectively
referred to as the ARMM Organic Acts.
On 23 July 2001, petitioners Arsadi M. Disomangcop
(Disomangcop) and Ramir M. Dimalotang (Dimalotang)
addressed a petition to then DPWH Secretary Simeon A.
Datumanong, seeking the revocation of D.O. 119 and the
non-implementation of R.A. 8999. No action, however, was
taken on the petition.
13

Consequently, petitioners Disomangcop and Dimalotang
filed the instant petition, in their capacity as Officer-in-
Charge and District Engineer/Engineer II, respectively, of
the First Engineering District of the Department of Public
Works and Highways, Autonomous Region in Muslim
Mindanao (DPWH-ARMM) in Lanao del Sur.
Petitioners seek the following principal reliefs: (1) to annul
and set aside D.O. 119; (2) to prohibit respondent DPWH
Secretary from implementing D.O. 119 and R.A. 8999 and
releasing funds for public works projects intended for Lanao
del Sur and Marawi City to the Marawi Sub-District
Engineering Office and other administrative regions of
DPWH; and (3) to compel the Secretary of the Department
of Budget and Management (DBM) to release all funds for
public works projects intended for Marawi City and the First
District of Lanao del Sur to the DPWH-ARMM First
Engineering District in Lanao del Sur only; and to compel
respondent DPWH Secretary to let the DPWH-ARMM First
159

Engineering District in Lanao del Sur implement all public
works projects within its jurisdictional area.
14

The petition includes an urgent application for the issuance
of a temporary restraining order (TRO) and, after hearing, a
writ of preliminary injunction, to enjoin respondent DBM
Secretary from releasing funds for public works projects in
Lanao del Sur to entities other than the DPWH-ARMM First
Engineering District in Lanao del Sur, and also to restrain
the DPWH Secretary from allowing others besides the
DPWH-ARMM First Engineering District in Lanao del Sur to
implement public works projects in Lanao del Sur.
15

To support their petition, petitioners allege that D.O. 119
was issued with grave abuse of discretion and that it
violates the constitutional autonomy of the ARMM. They
point out that the challenged Department Order has tasked
the Marawi Sub-District Engineering Office with functions
that have already been devolved to the DPWH-ARMM First
Engineering District in Lanao del Sur.
16

Petitioners also contend that R.A. 8999 is a piece of
legislation that was not intelligently and thoroughly
studied, and that the explanatory note to House Bill No. 995
(H.B. 995) from which the law originated is questionable.
Petitioners assert as well that prior to the sponsorship of
the law, no public hearing nor consultation with the DPWH-
ARMM was made. The House Committee on Public Works
and Highways (Committee) failed to invite a single official
from the affected agency. Finally, petitioners argue that the
law was skillfully timed for signature by former President
Joseph E. Estrada during the pendency of the impeachment
proceedings.
17

In its resolution of 8 October 2001, the Court required
respondents to file their comment.
18
In compliance,
respondents DPWH Secretary and DBM Secretary, through
the Solicitor General, filed on 7 January 2002, their
Comment.
In their Comment,
19
respondents, through the Office of the
Solicitor General, maintain the validity of D.O. 119, arguing
that it was issued in accordance with Executive Order No.
124 (E.O. 124).
20
In defense of the constitutionality of R.A.
8999, they submit that the powers of the autonomous
regions did not diminish the legislative power of
Congress.
21
Respondents also contend that the petitioners
have no locus standi or legal standing to assail the
constitutionality of the law and the department order. They
note that petitioners have no personal stake in the
outcome of the controversy.
22

Asserting their locus standi, petitioners in their
Memorandum
23
point out that they will suffer actual injury
as a result of the enactments complained of.
24

Jurisdictional Considerations
First, the jurisdictional predicates.
160

The 1987 Constitution is explicit in defining the scope of
judicial power. It establishes the authority of the courts to
determine in an appropriate action the validity of acts of
the political departments. It speaks of judicial prerogative in
terms of duty.
25

Jurisprudence has laid down the following requisites for the
exercise of judicial power: First, there must be before the
Court an actual case calling for the exercise of judicial
review. Second, the question before the Court must be ripe
for adjudication. Third, the person challenging the validity
of the act must have standing to challenge. Fourth, the
question of constitutionality must have been raised at the
earliest opportunity. Fifth, the issue of constitutionality
must be the very lis mota of the case.
26

In seeking to nullify acts of the legislature and the executive
department on the ground that they contravene the
Constitution, the petition no doubt raises a justiciable
controversy. As held in Taada v. Angara,
27
"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." But in
deciding to take jurisdiction over this petition questioning
acts of the political departments of government, the Court
will not review the wisdom, merits, or propriety thereof,
but will strike them down only on either of two grounds: (1)
unconstitutionality or illegality and (2) grave abuse of
discretion.
28

For an abuse to be grave, the power must be exercised in
an arbitrary or despotic manner by reason of passion or
personal hostility. The abuse of discretion must be patent
and gross as to amount to an evasion of a positive duty, or
a virtual refusal to perform the duty enjoined or to act in
contemplation of law. There is grave abuse of discretion
when respondent acts in a capricious or whimsical manner
in the exercise of its judgment as to be equivalent to lack of
jurisdiction.
29

The challenge to the legal standing of petitioners cannot
succeed. Legal standing or locus standi is defined as a
personal and substantial interest in the case such that the
party has sustained or will sustain direct injury as a result of
the governmental act that is being challenged. The term
"interest" means a material interest, an interest in issue
affected by the decree, as distinguished from a mere
interest in the question involved, or a mere incidental
interest.
30

A party challenging the constitutionality of a law, act, or
statute must show "not only that the law is invalid, but also
that he has sustained or is in immediate, or imminent
danger of sustaining some direct injury as a result of its
enforcement, and not merely that he suffers thereby in
some indefinite way." He must show that he 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
complained of.
31

161

But following the new trend, this Court is inclined to take
cognizance of a suit although it does not satisfy the
requirement of legal standing when paramount interests
are involved. In several cases, the Court has adopted a
liberal stance on the locus standi of a petitioner where the
petitioner is able to craft an issue of transcendental
significance to the people.
32

In the instant case, petitioner Disomangcop holds the
position of Engineer IV. When he filed this petition, he was
the Officer-in-Charge, Office of the District Engineer of the
First Engineering District of DPWH-ARMM, Lanao del Sur.
On the other hand, petitioner Dimalotang is an Engineer II
and President of the rank and file employees also of the
First Engineering District of DPWH-ARMM in Lanao del Sur.
Both are charged with the duty and responsibility of
supervising and implementing all public works projects to
be undertaken and being undertaken in Lanao del Sur
which is the area of their jurisdiction.
33

It is thus not far-fetched that the creation of the Marawi
Sub-District Engineering Office under D.O. 119 and the
creation of and appropriation of funds to the First
Engineering District of Lanao del Sur as directed under R.A.
8999 will affect the powers, functions and responsibilities
of the petitioners and the DPWH-ARMM. As the two offices
have apparently been endowed with functions almost
identical to those of DPWH-ARMM First Engineering District
in Lanao del Sur, it is likely that petitioners are in imminent
danger of being eased out of their duties and, not remotely,
even their jobs. Their material and substantial interests will
definitely be prejudiced by the enforcement of D.O. 119
and R.A. 8999. Such injury is direct and immediate. Thus,
they can legitimately challenge the validity of the
enactments subject of the instant case.
Points of Contention
In the petition before us, petitioners contend that R.A. 8999
and D.O. 119 are unconstitutional and were issued with
grave abuse of discretion.
We agree in part.
Republic Act No. 8999
At the outset, let it be made clear that it is not necessary to
declare R.A. No. 8999 unconstitutional for the adjudication
of this case. The accepted rule is that the Court will not
resolve a constitutional question unless it is the lis mota of
the case, or if the case can be disposed of or settled on
other grounds.
34

The plain truth is the challenged law never became
operative and was superseded or repealed by a subsequent
enactment.
The ARMM Organic Acts are deemed a part of the regional
autonomy scheme. While they are classified as statutes, the
Organic Acts are more than ordinary statutes because they
enjoy affirmation by a plebiscite.
35
Hence, the provisions
162

thereof cannot be amended by an ordinary statute, such as
R.A. 8999 in this case. The amendatory law has to be
submitted to a plebiscite.
We quote excerpts of the deliberations of the
Constitutional Commission:
FR. BERNAS. Yes, that is the reason I am bringing this
up. This thing involves some rather far-reaching
consequences also in relation to the issue raised by
Commissioner Romulo with respect to federalism.
Are we, in effect, creating new categories of laws?
Generally, we have statutes and constitutional
provisions. Is this organic act equivalent to a
constitutional provision? If it is going to be equivalent
to a constitutional provision, it would seem to me
that the formulation of the provisions of the organic
act will have to be done by the legislature, acting as a
constituent assembly, and therefore, subject to the
provisions of the Article on Amendments. That is the
point that I am trying to bring up. In effect, if we opt
for federalism, it would really involve an act of the
National Assembly or Congress acting as a
constituent assembly and present amendments to
this Constitution, and the end product itself would be
a constitutional provision which would only be
amendable according to the processes indicated in
the Constitution.
MR. OPLE. Madam President, may I express my
personal opinion in this respect.
I think to require Congress to act as a constituent
body before enacting an organic act would be to raise
an autonomous region to the same level as the
sovereign people of the whole country. And I think
the powers of the Congress should be quite sufficient
in enacting a law, even if it is now exalted to the level
of an organic act for the purpose of providing a basic
law for an autonomous region without having to
transform itself into a constituent assembly. We are
dealing still with one subordinate subdivision of the
State even if it is now vested with certain
autonomous powers on which its own legislature can
pass laws.
FR. BERNAS. So the questions I have raised so far with
respect to this organic act are: What segment of the
population will participate in the plebiscite? In what
capacity would the legislature be acting when it
passes this? Will it be a constituent assembly or
merely a legislative body? What is the nature,
therefore, of this organic act in relation to ordinary
statutes and the Constitution? Finally, if we are going
to amend this organic act, what process will be
followed?
MR. NOLLEDO. May I answer that, please, in the light
of what is now appearing in our report.
163

First, only the people who are residing in the units
composing the regions should be allowed to
participate in the plebiscite. Second, the organic act
has the character of a charter passed by the
Congress, not as a constituent assembly, but as an
ordinary legislature and, therefore, the organic act
will still be subject to amendments in the ordinary
legislative process as now constituted, unless the
Gentlemen has another purpose.
FR. BERNAS. But with plebiscite again.
MR. NOLLEDO. Those who will participate in the
plebiscite are those who are directly affected, the
inhabitants of the units constitutive of the region.
(Emphasis supplied)
36

Although R.A. 9054 was enacted later, it reaffirmed the
imperativeness of the plebiscite requirement.
37
In fact, R.A.
9054 itself, being the second or later ARMM Organic Act,
was subjected to and ratified in a plebiscite.
The first ARMM Organic Act, R.A. 6074, as implemented by
E.O. 426, devolved the functions of the DPWH in the ARMM
which includes Lanao del Sur (minus Marawi City at the
time)
38
to the Regional Government. By creating an office
with previously devolved functions, R.A. 8999, in essence,
sought to amend R.A. 6074. The amendatory law should
therefore first obtain the approval of the people of the
ARMM before it could validly take effect. Absent
compliance with this requirement, R.A. 8999 has not even
become operative.
From another perspective, R.A. 8999 was repealed and
superseded by R.A. 9054. Where a statute of later date
clearly reveals an intention on the part of the legislature to
abrogate a prior act on the subject, that intention must be
given effect.
Of course, the intention to repeal must be clear and
manifest.
39
Implied repeal by irreconcilable inconsistency
takes place when the two statutes cover the same subject
matter; they are clearly inconsistent and incompatible with
each other that they cannot be reconciled or harmonized;
and both cannot be given effect, that is, that one law
cannot be enforced without nullifying the other.
40

The Court has also held that statutes should be construed in
light of the objective to be achieved and the evil or mischief
to be suppressed, and they should be given such
construction as will advance the object, suppress the
mischief and secure the benefits intended.
41

R.A. 9054 is anchored on the 1987 Constitution. It advances
the constitutional grant of autonomy by detailing the
powers of the ARG covering, among others, Lanao del Sur
and Marawi City, one of which is its jurisdiction over
regional urban and rural planning. R.A. 8999, however,
ventures to reestablish the National Government's
jurisdiction over infrastructure programs in Lanao del Sur.
164

R.A. 8999 is patently inconsistent with R.A. 9054, and it
destroys the latter law's objective.
Clearly, R.A. 8999 is antagonistic to and cannot be
reconciled with both ARMM Organic Acts, R.A. 6734 and
R.A. 9054. The kernel of the antagonism and disharmony
lies in the regional autonomy which the ARMM Organic
Acts ordain pursuant to the Constitution. On the other
hand, R.A. 8999 contravenes true decentralization which is
the essence of regional autonomy.
Regional Autonomy Under
R.A. 6734 and R.A. 9054
The 1987 Constitution mandates regional autonomy to give
a bold and unequivocal answer to the cry for a meaningful,
effective and forceful autonomy.
42
According to
Commissioner Jose Nolledo, Chairman of the Committee
which drafted the provisions, it "is an indictment against
the status quo of a unitary system that, to my mind, has
ineluctably tied the hands of progress in our country . . . our
varying regional characteristics are factors to capitalize on
to attain national strength through decentralization."
43

The idea behind the Constitutional provisions for
autonomous regions is to allow the separate development
of peoples with distinctive cultures and traditions.
44
These
cultures, as a matter of right, must be allowed to flourish.
45

Autonomy, as a national policy, recognizes the wholeness
of the Philippine society in its ethnolinguistic, cultural, and
even religious diversities. It strives to free Philippine society
of the strain and wastage caused by the assimilationist
approach.
46
Policies emanating from the legislature are
invariably assimilationist in character despite channels
being open for minority representation. As a result,
democracy becomes an irony to the minority group.
47

Several commissioners echoed the pervasive sentiment in
the plenary sessions in their own inimitable way. Thus,
Commissioner Blas Ople referred to the recognition that the
Muslim Mindanao and the Cordilleras "do not belong to the
dominant national community" as the justification for
conferring on them a "measure of legal self-sufficiency,
meaning self-government, so that they will flourish
politically, economically and culturally," with the hope that
after achieving parity with the rest of the country they
would "give up their own autonomous region in favor of
joining the national mainstream."
48
For his part, the Muslim
delegate, Commissioner Ahmad Alonto, spoke of the
diversity of cultures as the framework for nation-
building.
49
Finally, excerpts of the poignant plea of
Commissioner Ponciano Bennagen deserve to be quoted
verbatim:
. . . They see regional autonomy as the answer to
their centuries of struggle against oppression and
exploitation. For so long, their names and identities
have been debased. Their ancestral lands have been
165

ransacked for their treasures, for their wealth. Their
cultures have been defiled, their very lives
threatened, and worse, extinguished, all in the name
of national development; all in the name of public
interest; all in the name of common good; all in the
name of the right to property; all in the name of
Regalian Doctrine; all in the name of national
security. These phrases have meant nothing to our
indigenous communities, except for the violation of
their human rights.
. . .
Honorable Commissioners, we wish to impress upon
you the gravity of the decision to be made by every
single one of us in this Commission. We have the
overwhelming support of the Bangsa Moro and the
Cordillera Constitution. By this we mean meaningful
and authentic regional autonomy. We propose that
we have a separate Article on the autonomous
regions for the Bangsa Moro and Cordillera people
clearly spelled out in this Constitution, instead of
prolonging the agony of their vigil and their struggle.
This, too is a plea for national peace. Let us not pass
the buck to the Congress to decide on this. Let us not
wash our hands of our responsibility to attain
national unity and peace and to settle this problem
and rectify past injustices, once and for all.
50

The need for regional autonomy is more pressing in the
case of the Filipino Muslims and the Cordillera people who
have been fighting for it. Their political struggle highlights
their unique cultures and the unresponsiveness of the
unitary system to their aspirations.
51
The Moros' struggle
for self-determination dates as far back as the Spanish
conquest in the Philippines. Even at present, the struggle
goes on.
52

Perforce, regional autonomy is also a means towards
solving existing serious peace and order problems and
secessionist movements. Parenthetically, autonomy,
decentralization and regionalization, in international law,
have become politically acceptable answers to intractable
problems of nationalism, separatism, ethnic conflict and
threat of secession.
53

However, the creation of autonomous regions does not
signify the establishment of a sovereignty distinct from that
of the Republic, as it can be installed only "within the
framework of this Constitution and the national sovereignty
as well as territorial integrity of the Republic of the
Philippines."
54

Regional autonomy is the degree of self-determination
exercised by the local government unit vis--vis the central
government.
In international law, the right to self-determination need
not be understood as a right to political separation, but
166

rather as a complex net of legal-political relations between
a certain people and the state authorities. It ensures the
right of peoples to the necessary level of autonomy that
would guarantee the support of their own cultural identity,
the establishment of priorities by the community's internal
decision-making processes and the management of
collective matters by themselves.
55

If self-determination is viewed as an end in itself reflecting
a preference for homogeneous, independent nation-states,
it is incapable of universal application without massive
disruption. However, if self-determination is viewed as a
means to an endthat end being a democratic,
participatory political and economic system in which the
rights of individuals and the identity of minority
communities are protectedits continuing validity is more
easily perceived.
56

Regional autonomy refers to the granting of basic internal
government powers to the people of a particular area or
region with least control and supervision from the central
government.
57

The objective of the autonomy system is to permit
determined groups, with a common tradition and shared
social-cultural characteristics, to develop freely their ways
of life and heritage, exercise their rights, and be in charge
of their own business. This is achieved through the
establishment of a special governance regime for certain
member communities who choose their own authorities
from within the community and exercise the jurisdictional
authority legally accorded to them to decide internal
community affairs.
58

In the Philippine setting, regional autonomy implies the
cultivation of more positive means for national integration.
It would remove the wariness among the Muslims, increase
their trust in the government and pave the way for the
unhampered implementation of the development programs
in the region.
59
Again, even a glimpse of the deliberations of
the Constitutional Commission could lend a sense of the
urgency and the inexorable appeal of true decentralization:
MR. OPLE. . . . We are writing a Constitution, of
course, for generations to come, not only for the
present but for our posterity. There is no harm in
recognizing certain vital pragmatic needs for national
peace and solidarity, and the writing of this
Constitution just happens at a time when it is
possible for this Commission to help the cause of
peace and reconciliation in Mindanao and the
Cordilleras, by taking advantage of a heaven-sent
opportunity. . . .
60

. . .
MR. ABUBAKAR. . . . So in order to foreclose and
convince the rest of the of the Philippines that
Mindanao autonomy will be granted to them as soon
as possible, more or less, to dissuade these armed
167

men from going outside while Mindanao will be
under the control of the national government, let us
establish an autonomous Mindanao within our effort
and capacity to do so within the shortest possible
time. This will be an answer to the Misuari clamor,
not only for autonomy but for independence.
61

. . .
MR. OPLE. . . . The reason for this abbreviation of the
period for the consideration of the Congress of the
organic acts and their passage is that we live in
abnormal times. In the case of Muslim Mindanao and
the Cordilleras, we know that we deal with questions
of war and peace. These are momentous issues in
which the territorial integrity and the solidarity of
this country are being put at stake, in a manner of
speaking.
We are writing a peace Constitution. We hope that
the Article on Social Justice can contribute to a
climate of peace so that any civil strife in the
countryside can be more quickly and more justly
resolved. We are providing for autonomous regions
so that we give constitutional permanence to the just
demands and grievances of our own fellow
countrymen in the Cordilleras and in Mindanao. One
hundred thousand lives were lost in that struggle in
Mindanao, and to this day, the Cordilleras is being
shaken by an armed struggle as well as a peaceful
and militant struggle.
. . .
Rather than give opportunity to foreign bodies, no
matter how sympathetic to the Philippines, to
contribute to the settlement of this issue, I think the
Constitutional Commission ought not to forego the
opportunity to put the stamp of this Commission
through definitive action on the settlement of the
problems that have nagged us and our forefathers for
so long.
62

A necessary prerequisite of autonomy is decentralization.
63

Decentralization is a decision by the central government
authorizing its subordinates, whether geographically or
functionally defined, to exercise authority in certain areas.
It involves decision-making by subnational units. It is
typically a delegated power, wherein a larger government
chooses to delegate certain authority to more local
governments. Federalism implies some measure of
decentralization, but unitary systems may also decentralize.
Decentralization differs intrinsically from federalism in that
the sub-units that have been authorized to act (by
delegation) do not possess any claim of right against the
central government.
64

168

Decentralization comes in two formsdeconcentration and
devolution. Deconcentration is administrative in nature; it
involves the transfer of functions or the delegation of
authority and responsibility from the national office to the
regional and local offices. This mode of decentralization is
also referred to as administrative decentralization.
65

Devolution, on the other hand, connotes political
decentralization, or the transfer of powers, responsibilities,
and resources for the performance of certain functions
from the central government to local government
units.
66
This is a more liberal form of decentralization since
there is an actual transfer of powers and
responsibilities.
67
It aims to grant greater autonomy to local
government units in cognizance of their right to self-
government, to make them self-reliant, and to improve
their administrative and technical capabilities.
68

This Court elucidated the concept of autonomy in Limbona
v. Mangelin,
69
thus:
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 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.
In the case, the Court reviewed the expulsion of a member
from the Sangguniang Pampook, Autonomous Region. It
held that the Court may assume jurisdiction as the local
government unit, organized before 1987, enjoys autonomy
of the former category. It refused, though, to resolve
whether the grant of autonomy to Muslim Mindanao under
the 1987 Constitution involves, truly, an effort to
decentralize power rather than mere administration.
70

169

A year later, in Cordillera Broad Coalition v. Commission on
Audit,
71
the Court, with the same composition, ruled
without any dissent that the creation of autonomous
regions contemplates the grant of political autonomyan
autonomy which is greater than the administrative
autonomy granted to local government units. It held that
"the constitutional guarantee of local autonomy in the
Constitution (Art. X, Sec. 2) refers to administrative
autonomy of local government units or, cast in more
technical language, the decentralization of government
authority. On the other hand, the creation of autonomous
regions in Muslim Mindanao and the Cordilleras, which is
peculiar to the 1987 Constitution, contemplates the grant
of political autonomy and not just administrative autonomy
to these regions."
72

And by regional autonomy, the framers intended it to mean
"meaningful and authentic regional autonomy."
73
As
articulated by a Muslim author, substantial and meaningful
autonomy is "the kind of local self-government which
allows the people of the region or area the power to
determine what is best for their growth and development
without undue interference or dictation from the central
government."
74

To this end, Section 16, Article X
75
limits the power of the
President over autonomous regions.
76
In essence, the
provision also curtails the power of Congress over
autonomous regions.
77
Consequently, Congress will have to
re-examine national laws and make sure that they reflect
the Constitution's adherence to local autonomy. And in
case of conflicts, the underlying spirit which should guide its
resolution is the Constitution's desire for genuine local
autonomy.
78

The diminution of Congress' powers over autonomous
regions was confirmed in Ganzon v. Court of
Appeals,
79
wherein this Court held 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."
This is true to subjects over which autonomous regions
have powers, as specified in Sections 18 and 20, Article X of
the 1987 Constitution. Expressly not included therein are
powers over certain areas. Worthy of note is that the area
of public works is not excluded and neither is it reserved for
the National Government. The key provisions read, thus:
SEC. 18. The Congress shall enact an organic act for
each autonomous region with the assistance and
participation of the regional consultative commission
composed of representatives appointed by the
President from a list of nominees from multisectoral
bodies. The organic act shall define the basic
structure of government for the region consisting of
the executive department and legislative assembly,
both of which shall be elective and representative of
the constituent political units. The organic acts shall
170

likewise provide for special courts with personal,
family and property law jurisdiction consistent with
the provisions of the Constitution and national laws.
The creation of the autonomous region shall be
effective when approved by majority of the votes
cast by the constituent units in a plebiscite called for
the purpose, provided that only provinces, cities, and
geographic areas voting favorably in such plebiscite
shall be included in the autonomous region.
SEC. 20. Within its territorial jurisdiction and subject
to the provisions of this Constitution and national
laws, the organic act of autonomous regions shall
provide for legislative powers over:
(1) Administrative organization;
(2) Creation of sources of revenues;
(3) Ancestral domain and natural resources;
(4) Personal, family and property relations;
(5) Regional urban and rural planning development;
(6) Economic, social, and tourism development;
(7) Educational policies;
(8) Preservation and development of the cultural
heritage; and
(9) Such other matters as may be authorized by law
for the promotion of general welfare of the people of
the region. (Emphasis supplied)
E.O. 426 officially devolved the powers and functions of the
DPWH in ARMM to the Autonomous Regional Government
(ARG). Sections 1 and 2 of E.O. 426 provide:
SECTION 1. Transfer of Control and Supervision. The
offices of the Department of Public Works and
Highways (DPWH) within the Autonomous Region in
Muslim Mindanao (ARMM) including their functions,
powers and responsibilities, personnel, equipment,
properties, budgets and liabilities are hereby placed
under the control and supervision of the
Autonomous Regional Government.
In particular, these offices are identified as the four
(4) District Engineering Offices (DEO) in each of the
four provinces respectively and the three (3) Area
Equipment Services (AES) located in Tawi-Tawi, Sulu
and Maguindanao (Municipality of Sultan Kudarat).
SEC. 2. Functions Transferred. The Autonomous Regional
Government shall be responsible for highways, flood
control and water resource development systems, and
171

other public works within the ARMM and shall exercise the
following functions:
1. Undertake and evaluate the planning, design,
construction and works supervision for the
infrastructure projects whose location and impact are
confined within the ARMM;
2. Undertake the maintenance of infrastructure
facilities within the ARMM and supervise the
maintenance of such local roads and other
infrastructure facilities receiving financial assistance
from the National Government;
3. Ensure the implementation of laws, policies,
programs, rules and regulations regarding
infrastructure projects as well as all public and
private physical structures within the ARMM;
4. Provide technical assistance related to their
functions to other agencies within the ARMM,
especially the local government units;
5. Coordinate with other national and regional
government departments, agencies, institutions and
organizations, especially the local government units
within the ARMM in the planning and
implementation of infrastructure projects;
6. Conduct continuing consultations with the local
communities, take appropriate measures to make the
services of the Autonomous Regional Government
responsive to the needs of the general public and
recommend such appropriate actions as may be
necessary; and
7. Perform such other related duties and
responsibilities within the ARMM as may be assigned
or delegated by the Regional Governor or as may be
provided by law. (Emphasis supplied)
More importantly, Congress itself through R.A. 9054
transferred and devolved the administrative and fiscal
management of public works and funds for public works to
the ARG. Section 20, Article VI of R.A. 9054 provides:
ARTICLE VI
THE LEGISLATIVE DEPARTMENT

SEC. 20. Annual Budget and Infrastructure
Funds. The annual budget of the Regional
Government shall be enacted by Regional
Assembly. Funds for infrastructure in the
autonomous region allocated by the central
government or national government shall be
appropriated through a Regional Assembly
Public Works Act.
172

Unless approved by the Regional Assembly, no
public works funds allocated by the central
government or national government for the
Regional Government or allocated by the
Regional Government from its own revenues
may be disbursed, distributed, realigned, or
used in any manner.
The aim of the Constitution is to extend to the
autonomous peoples, the people of Muslim
Mindanao in this case, the right to self-
determinationa right to choose their own path of
development; the right to determine the political,
cultural and economic content of their development
path within the framework of the sovereignty and
territorial integrity of the Philippine Republic.
80
Self-
determination refers to the need for a political
structure that will respect the autonomous peoples'
uniqueness and grant them sufficient room for self-
expression and self-construction.
81

In treading their chosen path of development, the
Muslims in Mindanao are to be given freedom and
independence with minimum interference from the
National Government. This necessarily includes the
freedom to decide on, build, supervise and maintain
the public works and infrastructure projects within
the autonomous region. The devolution of the
powers and functions of the DPWH in the ARMM and
transfer of the administrative and fiscal management
of public works and funds to the ARG are meant to be
true, meaningful and unfettered. This unassailable
conclusion is grounded on a clear consensus, reached
at the Constitutional Commission and ratified by the
entire Filipino electorate, on the centrality of
decentralization of power as the appropriate vessel
of deliverance for Muslim Filipinos and the ultimate
unity of Muslims and Christians in this country.
With R.A. 8999, however, this freedom is taken away,
and the National Government takes control again.
The hands, once more, of the autonomous peoples
are reined in and tied up.
The challenged law creates an office with functions
and powers which, by virtue of E.O. 426, have been
previously devolved to the DPWH-ARMM, First
Engineering District in Lanao del Sur.
E.O. 426 clearly ordains the transfer of the control
and supervision of the offices of the DPWH within the
ARMM, including their functions, powers and
responsibilities, personnel, equipment, properties,
and budgets to the ARG. Among its other functions,
the DPWH-ARMM, under the control of the Regional
Government shall be responsible for highways, flood
control and water resource development systems,
and other public works within the ARMM. Its scope
of power includes the planning, design, construction
and supervision of public works. According to R.A.
173

9054, the reach of the Regional Government enables
it to appropriate, manage and disburse all public
work funds allocated for the region by the central
government.
The use of the word "powers" in E.O. 426 manifests
an unmistakable case of devolution.
In this regard, it is not amiss to cite Opinion No. 120,
S. 1991
82
of the Secretary of Justice on whether the
national departments or their counterpart
departments in the ARG are responsible for
implementation of roads, rural water supply, health,
education, women in development, agricultural
extension and watershed management. Referring to
Section 2, Article V of R.A. 6734 which enumerates
the powers of the ARG, he states:
It is clear from the foregoing provision of law that
except for the areas of executive power mentioned
therein, all other such areas shall be exercised by the
Autonomous Regional Government ("ARG") of the
Autonomous Region in Muslim Mindanao. It is noted
that programs relative to infrastructure facilities,
health, education, women in development,
agricultural extension and watershed management
do not fall under any of the exempted areas listed in
the abovequoted provision of law. Thus, the
inevitable conclusion is that all these spheres of
executive responsibility have been transferred to the
ARG.
Reinforcing the aboveview (sic) are the various
executive orders issued by the President providing
for the devolution of the powers and functions of
specified executive departments of the National
Government to the ARG. These are E.O. Nos. 425
(Department of Labor and Employment, Local
Government, Tourism, Environment and Natural
Resources, Social Welfare and Development and
Science and Technology), 426 (Department of Public
Works and Highways), 459 (Department of
Education, Culture and Sports) and 460 (Department
of Agriculture). The execution of projects on
infrastructure, education, women, agricultural
extension and watershed management within the
Autonomous Region of Muslim Mindanao normally
fall within the responsibility of one of the
aforementioned executive departments of the
National Government, but by virtue of the
aforestated EOs, such responsibility has been
transferred to the ARG.
E.O. 426 was issued to implement the provisions of the first
ARMM Organic Act, R.A. 6734the validity of which this
Court upheld in the case of Abbas v. Commission on
Elections.
83
In Section 4, Article XVIII of said Act, "central
government or national government offices and agencies in
the autonomous region which are not excluded under
174

Section 3, Article IV
84
of this Organic Act, shall be placed
under the control and supervision of the Regional
Government pursuant to a schedule prescribed by the
oversight committee."
Evidently, the intention is to cede some, if not most, of the
powers of the national government to the autonomous
government in order to effectuate a veritable autonomy.
The continued enforcement of R.A. 8999, therefore, runs
afoul of the ARMM Organic Acts and results in the recall of
powers which have previously been handed over. This
should not be sanctioned, elsewise the Organic Acts' desire
for greater autonomy for the ARMM in accordance with the
Constitution would be quelled. It bears stressing that
national laws are subject to the Constitution one of whose
state policies is to ensure the autonomy of autonomous
regions. Section 25, Article II of the 1987 Constitution
states:
Sec. 25. The State shall ensure the autonomy of local
governments.
R.A. 8999 has made the DPWH-ARMM effete and rendered
regional autonomy illusory with respect to infrastructure
projects. The Congressional Record shows, on the other
hand, that the "lack of an implementing and monitoring
body within the area" has hindered the speedy
implementation, of infrastructure projects.
85
Apparently, in
the legislature's estimation, the existing DPWH-ARMM
engineering districts failed to measure up to the task. But if
it was indeed the case, the problem could not be solved
through the simple legislative creation of an incongruous
engineering district for the central government in the
ARMM. As it was, House Bill No. 995 which ultimately
became R.A. 8999 was passed in record time on second
reading (not more than 10 minutes), absolutely without the
usual sponsorship speech and debates.
86
The precipitate
speed which characterized the passage of R.A. 8999 is
difficult to comprehend since R.A. 8999 could have resulted
in the amendment of the first ARMM Organic Act and,
therefore, could not take effect without first being ratified
in a plebiscite. What is more baffling is that in March 2001,
or barely two (2) months after it enacted R.A. 8999 in
January 2001, Congress passed R.A. 9054, the second
ARMM Organic Act, where it reaffirmed the devolution of
the DPWH in ARMM, including Lanao del Sur and Marawi
City, to the Regional Government and effectively repealed
R.A. 8999.
DPWH Department Order No. 119
Now, the question directly related to D.O. 119.
D.O. 119 creating the Marawi Sub-District Engineering
Office which has jurisdiction over infrastructure projects
within Marawi City and Lanao del Sur is violative of the
provisions of E.O. 426. The Executive Order was issued
pursuant to R.A. 6734which initiated the creation of the
constitutionally-mandated autonomous region
87
and which
defined the basic structure of the autonomous
175

government.
88
E.O. 426 sought to implement the transfer of
the control and supervision of the DPWH within the ARMM
to the Autonomous Regional Government. In particular, it
identified four (4) District Engineering Offices in each of the
four (4) provinces, namely: Lanao del Sur, Maguindanao,
Sulu and Tawi-Tawi.
89
Accordingly, the First Engineering
District of the DPWH-ARMM in Lanao del Sur has
jurisdiction over the public works within the province.
The office created under D.O. 119, having essentially the
same powers, is a duplication of the DPWH-ARMM First
Engineering District in Lanao del Sur formed under the aegis
of E.O. 426. The department order, in effect, takes back
powers which have been previously devolved under the
said executive order. D.O. 119 runs counter to the
provisions of E.O. 426. The DPWH's order, like spring water,
cannot rise higher than its source of powerthe Executive.
The fact that the department order was issued pursuant to
E.O. 124signed and approved by President Aquino in her
residual legislative powersis of no moment. It is a finely-
imbedded principle in statutory construction that a special
provision or law prevails over a general one.
90
Lex specialis
derogant generali. As this Court expressed in the case of
Leveriza v. Intermediate Appellate Court,
91
"another basic
principle of statutory construction mandates that general
legislation must give way to special legislation on the same
subject, and generally be so interpreted as to embrace only
cases in which the special provisions are not applicable,
that specific statute prevails over a general statute and that
where two statutes are of equal theoretical application to a
particular case, the one designed therefor specially should
prevail."
E.O. No. 124, upon which D.O. 119 is based, is a general law
reorganizing the Ministry of Public Works and Highways
while E.O. 426 is a special law transferring the control and
supervision of the DPWH offices within ARMM to the
Autonomous Regional Government. The latter statute
specifically applies to DPWH-ARMM offices. E.O. 124 should
therefore give way to E.O. 426 in the instant case.
In any event, the ARMM Organic Acts and their ratification
in a plebiscite in effect superseded E.O. 124. In case of an
irreconcilable conflict between two laws of different
vintages, the later enactment prevails because it is the later
legislative will.
92

Further, in its repealing clause, R.A. 9054 states that "all
laws, decrees, orders, rules and regulations, and other
issuances or parts thereof, which are inconsistent with this
Organic Act, are hereby repealed or modified
accordingly."
93
With the repeal of E.O. 124 which is the
basis of D.O. 119, it necessarily follows that D.O. 119 was
also rendered functus officio by the ARMM Organic Acts.
Grave abuse of discretion
Without doubt, respondents committed grave abuse of
discretion. They implemented R.A. 8999 despite its
176

inoperativeness and repeal. They also put in place and
maintained the DPWH Marawi Sub-District Engineering
Office in accordance with D.O. 119 which has been
rendered functus officio by the ARMM Organic Acts.
Still, on the issue of grave abuse of discretion, this Court,
however, cannot uphold petitioners' argument that R.A.
8999 was signed into law under suspicious circumstances to
support the assertion that there was a capricious and
whimsical exercise of legislative authority. Once more, this
Court cannot inquire into the wisdom, merits, propriety or
expediency of the acts of the legislative branch.
Likewise, the alleged lack of consultation or public hearing
with the affected agency during the inception of the law
does not render the law infirm. This Court holds that the
Congress did not transgress the Constitution nor any
statute or House Rule in failing to invite a resource person
from the DPWH-ARMM during the Committee meeting.
Section 27, Rule VII of the Rules of the House
94
only
requires that a written notice be given to all the members
of a Committee seven (7) calendar days before a regularly
scheduled meeting, specifying the subject matter of the
meeting and the names of the invited resource persons.
And it must be emphasized that the questions of who to
invite and whether there is a need to invite resource
persons during Committee meetings should be addressed
solely to Congress in its plenary legislative powers.
95

Conclusion
The repeal of R.A. 8999 and the functus officio state of D.O.
119 provide the necessary basis for the grant of the writs of
certiorari and prohibition sought by the petitioners.
However, there is no similar basis for the issuance of a writ
of mandamus to compel respondent DBM Secretary to
release funds appropriated for public works projects in
Marawi City and Lanao del Sur to the DPWH-ARMM First
Engineering District in Lanao del Sur and to compel
respondent DPWH Secretary to allow the DPWH-ARMM,
First Engineering District in Lanao del Sur to implement all
public works projects within its jurisdictional area. Section
20, Article VI of R.A. 9054 clearly provides that "(f)unds for
infrastructure in the autonomous region allocated by the
central government or national government shall only be
appropriated through a Regional Assembly Public Works
Act" passed by the Regional Assembly. There is no showing
that such Regional Assembly Public Works Act has been
enacted.
WHEREFORE, considering that Republic Act No. 9054
repealed Republic Act No. 8999 and rendered DPWH
Department Order No. 119 functus officio, the petition
insofar as it seeks the writs of certiorari and prohibition is
GRANTED. Accordingly, let a writ of prohibition ISSUE
commanding respondents to desist from implementing R.A.
8999 and D.O. 119, and maintaining the DPWH Marawi Sub-
District Engineering Office and the First Engineering District
of the Province of Lanao del Sur comprising the City of
Marawi and the municipalities within the First District of
177

Lanao del Sur. However, the petition insofar as it seeks a
writ of mandamus against respondents is DENIED.
No costs.
SO ORDERED.
Puno, (Acting C.J.), Panganiban, Quisumbing, Ynares-
Santiago, Sandoval-Gutierrez, Carpio, Austria-Martinez,
Carpio-Morales, Callejo, Sr., Azcuna, Chico-Nazario, and
Garcia, JJ., concur.
Davide, Jr., C.J., on official leave.
Corona, J., on leave.
THIRD DIVISION
[G. R. No. 136809. July 27, 2004]
DEMOCRITO D. PLAZA II and VIRGINIA V.
TUAZON, petitioners, vs. CAROLINA M. CASSION,
ALBERTA M. SAMPAYAN, JOSEPHINE NATALIA U.
LOPEZ, JOCELYN M. ALMANZOR, LUZVIMINDA G.
ARDECER, MAGDALENA S. BALACUIT, WINDELYN B.
CABUSAO, JULIETA R. JANDAYAN, NERI O. SAMUYA,
INES V. YAOYAO, TERESITA I. ROSALES, MARIA
DEBRA M. LANAJA, RUTH O.
NICOLASURA, respondents.
D E C I S I O N
SANDOVAL-GUTIERREZ, J.:
Republic Act No. 7160, otherwise known as The Local
Government Code of 1991, aims to transform local
government units into self-reliant communities and active
partners of the national government in the attainment of
effective services to the people. As a result of the
devolution of concerned personnel from the national
government to the various local government units pursuant
to the same Code, the interest of the service demands that
their working relations with the local employees should be
harmonious.
This is a petition for review on certiorari
[1]
assailing the
Decision
[2]
of the Court of Appeals dated February 14, 1996
and its Resolution dated December 9, 1998 in CA-G.R. SP
No. 55052, Carolina M. Cassion, et al. vs. Civil Service
Commission, et al.
Before the passage of Republic Act No. 7160, the task
of delivering basic social services was dispensed by the
national government through the Department of Social
Welfare and Development (DSWD). Upon the promulgation
and implementation of the Local Government Code, some
of the functions of the DSWD were transferred to the local
government units.
The City of Butuan, through its Sangguniang
Panglungsod (Sanggunian) passed SP Resolution 427-
92,
[3]
entitled Resolution Authorizing the City Mayor,
178

Honorable Democrito D. Plaza II, to Sign the Memorandum
of Agreement for the Devolution of the DSWD to the City
of Butuan.
Pursuant to the Memorandum of Agreement
(MOA)
[4]
entered into between the City of Butuan, through
then Mayor Democrito Plaza II, petitioner, and the DSWD,
the latters services, personnel, assets and liabilities, and
technical support systems were transferred to its city
counterpart.
By virtue of the same MOA, Mayor Plaza issued
Executive Order (EO) No. 06-92
[5]
dated October 5,
1992 reconstituting the City Social Services Development
Office (CSSDO), devolving or adding thereto 19 national
DSWD employees headed by petitioner Virginia
Tuazon, Social Welfare Officer V. Mayor Plaza designated
her Officer-in-Charge of the reconstituted CSSDO. Its office
was transferred from the original CSSDO building to
the DSWD building.
The CSSDO was originally composed of herein
respondents, headed by Carolina M. Cassion, Social Welfare
Officer IV. Aggrieved by such development, they refused to
recognize petitioner Tuazon as their new head and to
report at the DSWD building. They contended that the
issuance of EO No. 06-92 by Mayor Plaza and the
designation of petitioner Tuazon as Officer-in-charge of the
CSSDO are illegal.
Despite Mayor Plazas series of orders to respondents
to report for work at the DSWD building, they failed to do
so.
On January 18, 1993, Mayor Plaza issued a
memorandum to the City Legal Officer directing him to
conduct an administrative investigation against
respondents. They then submitted their respective
explanations. Thereafter, they were charged
administratively for grave misconduct and insubordination
and were preventively suspended for 60 days. This
prompted them to file with the Civil Service Regional Office
No. 10 a complaint against Mayor Plaza for violation of the
Civil Service Law. However, their complaint was dismissed
for lack of merit.
Upon expiration of their preventive suspension,
respondents informed Mayor Plaza that they are willing to
return to work, but to their old office, not to the DSWD
building.
For the last time, or on April 14,
1993, Mayor Plaza notified respondents to report to
petitioner Tuazon at the new office in the DSWD building,
but they remained obstinate.
On February 9, 1994, Mayor Plaza inquired from the
Civil Service Commission (CSC) on what appropriate action
could be taken against respondents for their continued
refusal to report for work since April 1993. In turn, the
CSC, through Atty. Lorea, Director II, informed the Mayor
179

that respondents could be dropped from the rolls pursuant
to CSC Memorandum Circular No. 38, Series of 1993.
On February 16, 1994, Mayor Plaza issued an Order
dropping respondents from the rolls pursuant to the said
CSC Memorandum Circular.
Forthwith, respondents appealed to the CSC.
On August 22, 1994, the CSC issued Resolution Nos. 94-
4626 and 94-6243 dismissing respondents appeal. In
affirming Mayor Plazas Order dropping respondents from
the rolls, the CSC held:
CSC Memorandum Circular No. 38, series of 1993
dated September 10, 1993 provides as follows:
Officers and employees who are absent for at least thirty
(30) days without approved leave are considered on
Absence Without Official Leave (AWOL) and may be
dropped from the service without prior notice.
A notice or order of the dropping from the rolls of an
employee shall be issued by the appointing authority and
submitted to the CSC Office concerned for record
purposes.
Based on the above-quoted provision, it is undeniable that
the appointing authority has the legal right to drop from
the rolls a civil service officer or employee. Nowhere in the
quoted provision is it stated that only the Commission has
the exclusive authority to drop from the rolls civil service
officers or employees. Hence, contrary to the first
contention of the appellants, Mayor Plaza acted in
conformity with the law when he ordered the dropping
from the rolls of herein appellants. The records of the case
show the fact that appellants did not report for work from
April 1993 up to the time they were dropped from the
rolls. Although they manifested intention to return to work
upon expiration of their preventive suspension, still they
adamantly insisted that they would report only in their old
office and not in the new one created by Executive Order
No. 06-92. The legal excuse being given by the appellants is
highly untenable. The Executive Order issued by the Mayor
is presumed valid until annulled by the proper
authorities. The same presumption shall also apply insofar
as the designation of Mrs. Tuazon as OIC is concerned. The
proper course of action for the appellants is to comply with
the Mayors directives and then challenge the questioned
Executive Order before the proper forum, otherwise, the
appellants should suffer the consequence of their acts.
We find without merit the contention of the appellants
that they were denied due process for lack of notice and
opportunity to be heard before they were dropped from
the rolls. The separation of an employee who is dropped
from the rolls is a non-disciplinary action wherein the
respondent is entitled to notice and hearing. In the above-
quoted provision, an officer or employee may be dropped
from the rolls if he was continuously absent without official
leave for a period of at least thirty days. Prior notice is not
necessary.
180

As to the last contention of the appellants that it was
really the intention of the mayor to systematically remove
them, the Commission likewise finds it without merit. No
evidence was submitted by the appellants to support such
contention.
Respondents then filed with the Court of Appeals a
petition for review.
On February 14, 1996, the Appellate Court rendered its
Decision setting aside the assailed CSC Resolutions and EO
No. 06-92 issued by Mayor Plaza and reinstating
respondents to their former positions without loss of
seniority rights and emoluments with full back wages and
other benefits corresponding to the period from January
1993 up to actual reinstatement. Petitioners filed a motion
for reconsideration but was denied.
The Court of Appeals ratiocinated as follows:
The fundamental rule of due process, on the other hand,
requires that a person be accorded notice and opportunity
to be heard (Rebuena v. Civil Service Commission, G.R. No.
115942, 31 May 1995; Klaveness Maritime Agency, Inc. v.
Palmos, 232 SCRA 448 [1994]). Ample opportunity
contemplated by law connotes every kind of assistance
which must be accorded to the employee to enable him to
prepare adequately for his defense including legal
representation (Segismundo v. NLRC, G.R. No. 112203, 13
December 1994, 329 SCRA 167, citing Abiera v. NLRC, 215
SCRA 476 [1992]). Non-compliance with the twin
requirements of notice and hearing is fatal because these
requirements are conditions sine qua non before a
dismissal may be validly effected (Maneho v. NLRC, 229
SCRA 240 [1994], citing Tiu v. NLRC, 215 SCRA 540
[1992]). In fact, notice and hearing must be accorded an
employee even though the employee does not affirmatively
demand it (Century Textile Mills v. NLRC, 161 SCRA 528
[1988]).
A circumspect scrutiny of the record leaves Us
unconvinced that petitioners were accorded this
opportunity to be heard when they sought relief before
respondent CSCs Regional Office No. X which dismissed
their complaint, docketed as ADM. Case No. ND 93-023,
against respondents City Mayor and Virginia V. Tuazon for
violation of the Civil Service Law and its implementing rules
and regulations. x x x
x x x
As regards the validity of the issuance of E.O. No. 06-92,
there can be no dispute over the power of the government
to reorganize, whether traditional, progressive or whatever
adjective is appended to it. However, the essence of
constitutional government is adherence to basic rules. The
rule of law requires that no government official should feel
free to do as he pleases using only his avowedly sincere
intentions and conscience to guide him. The fundamental
standards of fairness embodied in the bona fide rule can
not be disregarded (Mendoza v. Quisumbing, 186 SCRA 108
181

[1990]; see also Romualdez-Yap v. CSC, 225 SSCRA 285
*1993+.
In the main, petitioners contend that the Court of
Appeals erred in setting aside the CSC Resolutions dropping
respondents from the rolls and EO No. 06-92 directing the
devolution of 19 national DSWD employees to the local or
city DSWD to be headed by petitioner Virginia Tuazon.
Private respondents, on the other hand, aver that their
refusal to report for work is justified since EO No. 06-92 is
not valid as it was issued without prior approval by
the Sanggunian in violation of Article 164, Rule XXII of the
Rules and Regulations Implementing the Local Government
Code.
Section 17 of the Local Government Code authorizes
the devolution of personnel, assets and liabilities, records
of basic services, and facilities of a national government
agency to local government units. Under this Code, the
term devolution refers to the act by which the national
government confers power and authority upon the various
local government units to perform specific functions and
responsibilities.
As a consequence of the devolution of national
agencies, Executive Order No. 503 was enacted by then
President Corazon C. Aquino to govern and ensure the
efficient transfer of responsibilities to the local government
unit concerned. Section 2 (g) provides:
The local chief executive shall be responsible for all
devolved functions. He may delegate such powers and
functions to his duly authorized representative whose
position shall preferably not be lower than the rank of a
local government department head. In all cases of
delegated authority, the local chief executive shall at all
times observe the principle of command responsibility.
Section 2 (a) states that:
Except as herein otherwise provided, devolved permanent
personnel shall be automatically reappointed by the local
chief executive concerned immediately upon their transfer
which shall not go beyond June 30, 1992.
Likewise, Section 22 of CSC Memorandum Circular No.
19, Series of 1992, specifies that:
The positions absorbed by the local government units from
the national government agencies shall be automatically
created upon transfer of their corresponding budgetary
allocation.
Devolved permanent personnel shall be automatically
reappointed by the local chief executive concerned
immediately upon their transfer.
However, pending the completion of the new
organizational structure and staffing pattern, the local
government executives may assign devolved personnel to
182

divisions/sections/units where their qualifications are best
suited or appropriate.
It is thus clear that Mayor Plaza is empowered to issue
EO No. 06-92 in order to give effect to the devolution
decreed by the Local Government Code. As the local chief
executive of ButuanCity, Mayor Plaza has the authority to
reappoint devolved personnel and may designate an
employee to take charge of a department until the
appointment of a regular head, as was done by the Mayor
here.
CSC Memorandum Circular No. 19, Series of 1992,
provides further that heads of departments appointed by
the local chief executive must have the concurrence of the
majority of all the members of
the Sanggunian concerned. While initially,
the Sanggunian rejected petitioner Tuazons appointment
as the City Government Department Head II of the CSSDO,
however, it later confirmed her appointment.
The Court Appeals erred in ruling that EO No. 06-92
violated respondents security of tenure as they were
transferred to another office without their consent. There
was no such transfer. Transfer is a movement from one
position to another which is of equivalent rank, level or
salary without break in service and may be imposed as an
administrative penalty.
[6]
The change of respondents place
of work from the original CSSDO office to the DSWD
building is not a transfer. It was only a physical transfer of
their office to a new one done in the interest of public
service. There were no new movements or appointments
from one position to another.
Private respondents argue that they were denied due
process when they were dropped from the rolls.
CSC Memorandum Circular No. 38, Series of 1993,
provides:
VI. Requirements For Certain Mode of Separation.
Dropping from the Rolls Non-disciplinary in nature,
executory but appealable to the CSC office concerned
within fifteen (15) days from receipt of the order or notice.
Officers and employees who are absent for at least thirty
(30) days without approved leave are considered on
Absence Without Leave (AWOL) and may be dropped from
the service without prior notice.
A notice or order of the dropping from the rolls of an
employee shall be issued by the appointing authority and
submitted to the CSC office concerned for record
purposes.
Pursuant to the above provisions and as ruled by the
CSC, the dropping from the rolls of private respondents is
not disciplinary in nature. Thus, their assertion that they
were denied due process is untenable. Since the dropping
from the rolls is not an administrative sanction, they need
not be notified or be heard.
183

WHEREFORE, the Decision dated February 14, 1996 of
the Court of Appeals is REVERSED. The CSC Resolution No.
94-4626 dated August 22, 1994, and Resolution No. 94-
6243 datedNovember 17, 1994 dropping private
respondents from the rolls are AFFIRMED.
SO ORDERED.
Panganiban, (Chairman), and Carpio-Morales,
JJ., concur.
Corona, J., on leave.
EN BANC
[G.R. No. 138810. September 29, 2004]
BATANGAS CATV, INC., petitioner, vs. THE COURT OF
APPEALS, THE BATANGAS CITY SANGGUNIANG
PANLUNGSOD and BATANGAS CITY
MAYOR, respondents.
D E C I S I O N
SANDOVAL-GUTIERREZ, J.:
In the late 1940s, John Walson, an appliance dealer in
Pennsylvania, suffered a decline in the sale of television (tv)
sets because of poor reception of signals in his community.
Troubled, he built an antenna on top of a nearby mountain.
Using coaxial cable lines, he distributed the tv signals from
the antenna to the homes of his customers. Walsons
innovative idea improved his sales and at the same time
gave birth to a new telecommunication system -- the
Community Antenna Television (CATV) or Cable
Television.
[1]

This technological breakthrough found its way in our
shores and, like in its country of origin, it spawned legal
controversies, especially in the field of regulation. The case
at bar is just another occasion to clarify a shady area. Here,
we are tasked to resolve the inquiry -- may a local
government unit (LGU) regulate the subscriber rates
charged by CATV operators within its territorial jurisdiction?
This is a petition for review on certiorari filed by
Batangas CATV, Inc. (petitioner herein) against
the Sangguniang Panlungsod and the Mayor of Batangas
City (respondents herein) assailing the Court of Appeals (1)
Decision
[2]
dated February 12, 1999 and (2)
Resolution
[3]
dated May 26, 1999, in CA-G.R. CV No.
52361.
[4]
The Appellate Court reversed and set aside the
Judgment
[5]
dated October 29, 1995 of the Regional Trial
Court (RTC), Branch 7, Batangas City in Civil Case No.
4254,
[6]
holding that neither of the respondents has the
power to fix the subscriber rates of CATV operators, such
being outside the scope of the LGUs power.
The antecedent facts are as follows:
On July 28, 1986, respondent Sangguniang
Panlungsod enacted Resolution No. 210
[7]
granting
petitioner a permit to construct, install, and operate a CATV
184

system in Batangas City. Section 8 of the Resolution
provides that petitioner is authorized to charge its
subscribers the maximum rates specified therein,
provided, however, that any increase of rates shall be
subject to the approval of the Sangguniang Panlungsod.
[8]

Sometime in November 1993, petitioner increased its
subscriber rates from P88.00 to P180.00 per month. As a
result, respondent Mayor wrote petitioner a
letter
[9]
threatening to cancel its permit unless it secures
the approval of respondent Sangguniang Panlungsod,
pursuant to Resolution No. 210.
Petitioner then filed with the RTC, Branch 7, Batangas
City, a petition for injunction docketed as Civil Case No.
4254. It alleged that respondent Sangguniang
Panlungsod has no authority to regulate the subscriber
rates charged by CATV operators because under Executive
Order No. 205, the National Telecommunications
Commission (NTC) has the sole authority to regulate the
CATV operation in the Philippines.
On October 29, 1995, the trial court decided in favor of
petitioner, thus:
WHEREFORE, as prayed for, the defendants, their
representatives, agents, deputies or other persons acting
on their behalf or under their instructions, are hereby
enjoined from canceling plaintiffs permit to operate a
Cable Antenna Television (CATV) system in the City of
Batangas or its environs or in any manner, from interfering
with the authority and power of the National
Telecommunications Commission to grant franchises to
operate CATV systems to qualified applicants, and the
right of plaintiff in fixing its service rates which needs no
prior approval of the Sangguniang Panlungsod of
Batangas City.
The counterclaim of the plaintiff is hereby dismissed. No
pronouncement as to costs.
IT IS SO ORDERED.
[10]

The trial court held that the enactment of Resolution
No. 210 by respondent violates the States deregulation
policy as set forth by then NTC Commissioner Jose Luis A.
Alcuaz in his Memorandum dated August 25, 1989. Also, it
pointed out that the sole agency of the government which
can regulate CATV operation is the NTC, and that the LGUs
cannot exercise regulatory power over it without
appropriate legislation.
Unsatisfied, respondents elevated the case to the Court
of Appeals, docketed as CA-G.R. CV No. 52361.
On February 12, 1999, the Appellate Court reversed and
set aside the trial courts Decision, ratiocinating as follows:
Although the Certificate of Authority to operate a Cable
Antenna Television (CATV) System is granted by the
National Telecommunications Commission pursuant to
Executive Order No. 205, this does not preclude the
185

Sangguniang Panlungsod from regulating the operation of
the CATV in their locality under the powers vested upon it
by Batas Pambansa Bilang 337, otherwise known as the
Local Government Code of 1983. Section 177 (now Section
457 paragraph 3 (ii) of Republic Act 7160) provides:
Section 177. Powers and Duties The Sangguniang
Panlungsod shall:
a) Enact such ordinances as may be necessary to carry into
effect and discharge the responsibilities conferred upon it
by law, and such as shall be necessary and proper to
provide for health and safety, comfort and convenience,
maintain peace and order, improve the morals, and
promote the prosperity and general welfare of the
community and the inhabitants thereof, and the protection
of property therein;
x x x
d) Regulate, fix the license fee for, and tax any business or
profession being carried on and exercised within the
territorial jurisdiction of the city, except travel agencies,
tourist guides, tourist transports, hotels, resorts, de luxe
restaurants, and tourist inns of international standards
which shall remain under the licensing and regulatory
power of the Ministry of Tourism which shall exercise such
authority without infringement on the taxing and
regulatory powers of the city government;
Under cover of the General Welfare Clause as provided in
this section, Local Government Units can perform just
about any power that will benefit their constituencies.
Thus, local government units can exercise powers that
are: (1) expressly granted; (2) necessarily implied from the
power that is expressly granted; (3) necessary, appropriate
or incidental for its efficient and effective governance;
and (4) essential to the promotion of the general welfare of
their inhabitants. (Pimentel, The Local Government Code of
1991, p. 46)
Verily, the regulation of businesses in the locality is
expressly provided in the Local Government Code. The
fixing of service rates is lawful under the General Welfare
Clause.
Resolution No. 210 granting appellee a permit to construct,
install and operate a community antenna television (CATV)
system in Batangas City as quoted earlier in this decision,
authorized the grantee to impose charges which cannot be
increased except upon approval of the Sangguniang Bayan.
It further provided that in case of violation by the grantee
of the terms and conditions/requirements specifically
provided therein, the City shall have the right to withdraw
the franchise.
Appellee increased the service rates from EIGHTY EIGHT
PESOS (P88.00) to ONE HUNDRED EIGHTY PESOS (P180.00)
(Records, p. 25) without the approval of appellant. Such act
186

breached Resolution No. 210 which gives appellant the
right to withdraw the permit granted to appellee.
[11]

Petitioner filed a motion for reconsideration but was
denied.
[12]

Hence, the instant petition for review on certiorari
anchored on the following assignments of error:
I
THE COURT OF APPEALS ERRED IN HOLDING THAT THE
GENERAL WELFARE CLAUSE OF THE LOCAL GOVERNMENT
CODE AUTHORIZES RESPONDENT SANGGUNIANG
PANLUNGSOD TO EXERCISE THE REGULATORY FUNCTION
SOLELY LODGED WITH THE NATIONAL
TELECOMMUNICATIONS COMMISSION UNDER EXECUTIVE
ORDER NO. 205, INCLUDING THE AUTHORITY TO FIX
AND/OR APPROVE THE SERVICE RATES OF CATV
OPERATORS; AND
II
THE COURT OF APPEALS ERRED IN REVERSING THE
DECISION APPEALED FROM AND DISMISSING
PETITIONERS COMPLAINT.
[13]

Petitioner contends that while Republic Act No. 7160,
the Local Government Code of 1991, extends to the LGUs
the general power to perform any act that will benefit their
constituents, nonetheless, it does not authorize them to
regulate the CATV operation. Pursuant to E.O. No. 205,
only the NTC has the authority to regulate the CATV
operation, including the fixing of subscriber rates.
Respondents counter that the Appellate Court did not
commit any reversible error in rendering the assailed
Decision. First, Resolution No. 210 was enacted pursuant to
Section 177(c) and (d) of Batas Pambansa Bilang 337, the
Local Government Code of 1983, which authorizes LGUs to
regulate businesses. The term businesses necessarily
includes the CATV industry. Andsecond, Resolution No. 210
is in the nature of a contract between petitioner and
respondents, it being a grant to the former of a franchise to
operate a CATV system. To hold that E.O. No. 205 amended
its terms would violate the constitutional prohibition
against impairment of contracts.
[14]

The petition is impressed with merit.
Earlier, we posed the question -- may a local
government unit (LGU) regulate the subscriber rates
charged by CATV operators within its territorial
jurisdiction? A review of pertinent laws and jurisprudence
yields a negative answer.
President Ferdinand E. Marcos was the first one to
place the CATV industry under the regulatory power of the
national government.
[15]
On June 11, 1978, he
issued Presidential Decree (P.D.) No. 1512
[16]
establishing a
monopoly of the industry by granting Sining Makulay,
Inc., an exclusive franchise to operate CATV system in any
place within the Philippines. Accordingly, it terminated all
franchises, permits or certificates for the operation of
187

CATV system previously granted by local governments or
by any instrumentality or agency of the national
government.
[17]
Likewise, it prescribed the subscriber rates
to be charged by Sining Makulay, Inc. to its customers.
[18]

On July 21, 1979, President Marcos issued Letter of
Instruction (LOI) No. 894 vesting upon the Chairman of the
Board of Communications direct supervision over the
operations of Sining Makulay, Inc. Three days after, he
issued E.O. No. 546
[19]
integrating the Board of
Communications
[20]
and the Telecommunications Control
Bureau
[21]
to form a single entity to be known as the
National Telecommunications Commission. Two of its
assigned functions are:
a. Issue Certificate of Public Convenience for the
operation of communications utilities and services, radio
communications systems, wire or wireless telephone or
telegraph systems, radio and television broadcasting
system and other similar public utilities;
b. Establish, prescribe and regulate areas of operation of
particular operators of public service communications;
and determine and prescribe charges or rates pertinent to
the operation of such public utility facilities and
services except in cases where charges or rates are
established by international bodies or associations of which
the Philippines is a participating member or by bodies
recognized by the Philippine Government as the proper
arbiter of such charges or rates;
Although Sining Makulay Inc.s exclusive franchise had a
life term of 25 years, it was cut short by the advent of the
1986 Revolution. Upon President Corazon C. Aquinos
assumption of power, she issued E.O. No. 205
[22]
opening
the CATV industry to all citizens of the Philippines. It
mandated the NTC to grant Certificates of Authority to
CATV operators and to issue the necessary implementing
rules and regulations.
On September 9, 1997, President Fidel V. Ramos
issued E.O. No. 436
[23]
prescribing policy guidelines to
govern CATV operation in the Philippines. Cast in more
definitive terms, it restated the NTCs regulatory powers
over CATV operations, thus:
SECTION 2. The regulation and supervision of the cable
television industry in the Philippines shall remain vested
solely with the National Telecommunications Commission
(NTC).
SECTION 3. Only persons, associations, partnerships,
corporations or cooperatives, granted a Provisional
Authority or Certificate of Authority by the
Commission may install, operate and maintain a cable
television system or render cable television service within a
service area.
Clearly, it has been more than two decades now since
our national government, through the NTC, assumed
regulatory power over the CATV industry. Changes in the
political arena did not alter the trend. Instead, subsequent
188

presidential issuances further reinforced the NTCs power.
Significantly, President Marcos and President Aquino, in the
exercise of their legislative power, issued P.D. No. 1512,
E.O. No. 546 and E.O. No. 205. Hence, they have the force
and effect of statutes or laws passed by Congress.
[24]
That
the regulatory power stays with the NTC is also clear from
President Ramos E.O. No. 436 mandating that the
regulation and supervision of the CATV industry shall
remain vested solely in the NTC. Blacks Law Dictionary
defines sole as without another or others.
[25]
The logical
conclusion, therefore, is that in light of the above laws and
E.O. No. 436, the NTC exercises regulatory power over
CATV operators to the exclusion of other bodies.
But, lest we be misunderstood, nothing herein should
be interpreted as to strip LGUs of their general power to
prescribe regulations under the general welfare clause of
the Local Government Code. It must be emphasized that
when E.O. No. 436 decrees that the regulatory power
shall be vested solely in the NTC, it pertains to the
regulatory power over those matters which are peculiarly
within the NTCs competence, such as,
the: (1) determination of rates, (2) issuance of certificates
of authority, (3) establishment of areas of
operation, (4) examination and assessment of the legal,
technical and financial qualifications of applicant
operators, (5) granting of permits for the use of
frequencies, (6) regulation of ownership and
operation, (7) adjudication of issues arising from its
functions, and (8) other similar matters.
[26]
Within these
areas, the NTC reigns supreme as it possesses the exclusive
power to regulate -- a power comprising varied acts, such
as to fix, establish, or control; to adjust by rule, method or
established mode; to direct by rule or restriction; or to
subject to governing principles or laws.
[27]

Coincidentally, respondents justify their exercise of
regulatory power over petitioners CATV operation under
the general welfare clause of the Local Government Code of
1983. The Court of Appeals sustained their stance.
There is no dispute that respondent Sangguniang
Panlungsod, like other local legislative bodies, has been
empowered to enact ordinances and approve resolutions
under the general welfare clause of B.P. Blg. 337, the Local
Government Code of 1983. That it continues to posses such
power is clear under the new law, R.A. No. 7160 (the Local
Government Code of 1991). Section 16 thereof provides:
SECTION 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 others, 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
189

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 same Code specifically
mandates:
SECTION 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, x x x:
The general welfare clause is the delegation in
statutory form of the police power of the State to
LGUs.
[28]
Through this, LGUs may prescribe regulations to
protect the lives, health, and property of their constituents
and maintain peace and order within their respective
territorial jurisdictions. Accordingly, we have upheld
enactments providing, for instance, the regulation of
gambling,
[29]
the occupation of rig drivers,
[30]
the installation
and operation of pinball machines,
[31]
the maintenance and
operation of cockpits,
[32]
the exhumation and transfer of
corpses from public burial grounds,
[33]
and the operation of
hotels, motels, and lodging houses
[34]
as valid exercises by
local legislatures of the police power under the general
welfare clause.
Like any other enterprise, CATV operation maybe
regulated by LGUs under the general welfare clause. This is
primarily because the CATV system commits the
indiscretion of crossing public properties. (It uses public
properties in order to reach subscribers.) The physical
realities of constructing CATV system the use of public
streets, rights of ways, the founding of structures, and the
parceling of large regions allow an LGU a certain degree
of regulation over CATV operators.
[35]
This is the same
regulation that it exercises over all private enterprises
within its territory.
But, while we recognize the LGUs power under the
general welfare clause, we cannot sustain Resolution No.
210. We are convinced that respondents strayed from the
well recognized limits of its power. The flaws in Resolution
No. 210 are: (1) it violates the mandate of existing laws and
(2) it violates the States deregulation policy over the CATV
industry.
I.
Resolution No. 210 is an enactment of an LGU acting
only as agent of the national legislature. Necessarily, its act
must reflect and conform to the will of its principal. To test
its validity, we must apply the particular requisites of a valid
ordinance as laid down by the accepted principles
governing municipal corporations.
[36]

190

Speaking for the Court in the leading case of United
States vs. Abendan,
[37]
Justice Moreland said: An ordinance
enacted by virtue of the general welfare clause is valid,
unless it contravenes the fundamental law of the Philippine
Islands, or an Act of the Philippine Legislature, or unless it is
against public policy, or is unreasonable, oppressive, partial,
discriminating, or in derogation of common right. In De la
Cruz vs. Paraz,
[38]
we laid the general rule that ordinances
passed by virtue of the implied power found in the general
welfare clause must be reasonable, consonant with the
general powers and purposes of the corporation, and not
inconsistent with the laws or policy of the State.
The apparent defect in Resolution No. 210 is that it
contravenes E.O. No. 205 and E.O. No. 436 insofar as it
permits respondent Sangguniang Panlungsod to usurp a
power exclusively vested in the NTC, i.e., the power to fix
the subscriber rates charged by CATV operators. As earlier
discussed, the fixing of subscriber rates is definitely one of
the matters within the NTCs exclusive domain.
In this regard, it is appropriate to stress that where the
state legislature has made provision for the regulation of
conduct, it has manifested its intention that the subject
matter shall be fully covered by the statute, and that a
municipality, under its general powers, cannot regulate the
same conduct.
[39]
In Keller vs. State,
[40]
it was held
that: Where there is no express power in the charter of a
municipality authorizing it to adopt ordinances regulating
certain matters which are specifically covered by a general
statute, a municipal ordinance, insofar as it attempts to
regulate the subject which is completely covered by a
general statute of the legislature, may be rendered
invalid. x x x Where the subject is of statewide concern,
and the legislature has appropriated the field and declared
the rule, its declaration is binding throughout the
State. A reason advanced for this view is that such
ordinances are in excess of the powers granted to the
municipal corporation.
[41]

Since E.O. No. 205, a general law, mandates that the
regulation of CATV operations shall be exercised by the
NTC, an LGU cannot enact an ordinance or approve a
resolution in violation of the said law.
It is a fundamental principle that municipal ordinances
are inferior in status and subordinate to the laws of the
state. An ordinance in conflict with a state law of general
character and statewide application is universally held to be
invalid.
[42]
The principle is frequently expressed in the
declaration that municipal authorities, under a general
grant of power, cannot adopt ordinances which infringe the
spirit of a state law or repugnant to the general policy of
the state.
[43]
In every power to pass ordinances given to a
municipality, there is an implied restriction that the
ordinances shall be consistent with the general law.
[44]
In
the language of Justice Isagani Cruz (ret.), this Court,
in Magtajas vs. Pryce Properties Corp., Inc.,
[45]
ruled that:
The rationale of the requirement that the ordinances
should not contravene a statute is obvious. Municipal
governments are only agents of the national government.
191

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.
Respondents have an ingenious retort against the
above disquisition. Their theory is that the regulatory
power of the LGUs is granted by R.A. No. 7160 (the Local
Government Code of 1991), a handiwork of the national
lawmaking authority. They contend that R.A. No. 7160
repealed E.O. No. 205 (issued by President Aquino).
Respondents argument espouses a bad precedent. To say
that LGUs exercise the same regulatory power over matters
which are peculiarly within the NTCs competence is to
promote a scenario of LGUs and the NTC locked in constant
clash over the appropriate regulatory measure on the same
subject matter. LGUs must recognize that technical
matters concerning CATV operation are within the
exclusive regulatory power of the NTC.
At any rate, we find no basis to conclude that R.A. No.
7160 repealed E.O. No. 205, either expressly or impliedly. It
is noteworthy that R.A. No. 7160 repealing clause, which
painstakingly mentions the specific laws or the parts
192

thereof which are repealed, does not include E.O. No. 205,
thus:
SECTION 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; Section 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.
Neither is there an indication that E.O. No. 205 was
impliedly repealed by R.A. No. 7160. It is a settled rule that
implied repeals are not lightly presumed in the absence of a
clear and unmistakable showing of such intentions.
In Mecano vs. Commission on Audit,
[46]
we ruled:
Repeal by implication proceeds on the premise that where
a statute of later date clearly reveals an intention on the
part of the legislature to abrogate a prior act on the subject,
that intention must be given effect. Hence, before there
can be a repeal, there must be a clear showing on the part
of the lawmaker that the intent in enacting the new law
was to abrogate the old one. The intention to repeal must
be clear and manifest; otherwise, at least, as a general rule,
the later act is to be construed as a continuation of, and not
a substitute for, the first act and will continue so far as the
two acts are the same from the time of the first
enactment.
193

As previously stated, E.O. No. 436 (issued by President
Ramos) vests upon the NTC the power to regulate the CATV
operation in this country. So also Memorandum Circular
No. 8-9-95, the Implementing Rules and Regulations of R.A.
No. 7925 (the Public Telecommunications Policy Act of the
Philippines). This shows that the NTCs regulatory power
over CATV operation is continuously recognized.
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 coordinate branches
of the government.
[47]
On the assumption of a conflict
between E.O. No. 205 and R.A. No. 7160, the proper action
is not to uphold one and annul the other but to give effect
to both by harmonizing them if possible. This recourse
finds application here. Thus, we hold that the NTC, under
E.O. No. 205, has exclusive jurisdiction over matters
affecting CATV operation, including specifically the fixing of
subscriber rates, but nothing herein precludes LGUs from
exercising its general power, under R.A. No. 7160, to
prescribe regulations to promote the health, morals, peace,
education, good order or safety and general welfare of their
constituents. In effect, both laws become equally effective
and mutually complementary.
The grant of regulatory power to the NTC is easily
understandable. CATV system is not a mere local concern.
The complexities that characterize this new technology
demand that it be regulated by a specialized agency. This is
particularly true in the area of rate-fixing. Rate fixing
involves a series of technical operations.
[48]
Consequently,
on the hands of the regulatory body lies the ample
discretion in the choice of such rational processes as might
be appropriate to the solution of its highly complicated and
technical problems. Considering that the CATV industry is
so technical a field, we believe that the NTC, a specialized
agency, is in a better position than the LGU, to regulate it.
Notably, in United States vs. Southwestern Cable Co.,
[49]
the
US Supreme Court affirmed the Federal Communications
Commissions (FCCs) jurisdiction over CATV operation. The
Court held that the FCCs authority over cable systems
assures the preservation of the local broadcast service and
an equitable distribution of broadcast services among the
various regions of the country.
II.
Resolution No. 210 violated the States deregulation
policy.
Deregulation is the reduction of government regulation
of business to permit freer markets and
competition.
[50]
Oftentimes, the State, through its
regulatory agencies, carries out a policy of deregulation to
attain certain objectives or to address certain problems. In
the field of telecommunications, it is recognized that many
areas in the Philippines are still unserved or
underserved. Thus, to encourage private sectors to
venture in this field and be partners of the government in
stimulating the growth and development of
194

telecommunications, the State promoted the policy of
deregulation.
In the United States, the country where CATV
originated, the Congress observed, when it adopted the
Telecommunications Act of 1996, that there was a need to
provide a pro-competitive, deregulatory national policy
framework designed to accelerate rapidly private sector
deployment of advanced telecommunications and
information technologies and services to all Americans by
opening all telecommunications markets to competition.
The FCC has adopted regulations to implement the
requirements of the 1996 Act and the intent of the
Congress.
Our country follows the same policy. The fifth Whereas
Clause of E.O. No. 436 states:
WHEREAS, professionalism and self-regulation among
existing operators, through a nationally recognized cable
television operators association, have enhanced the
growth of the cable television industry and must therefore
be maintained along with minimal reasonable government
regulations;
This policy reaffirms the NTCs mandate set forth in the
Memorandum dated August 25, 1989 of Commissioner Jose
Luis A. Alcuaz, to wit:
In line with the purpose and objective of MC 4-08-88,
Cable Television System or Community Antenna Television
(CATV) is made part of the broadcast media to promote the
orderly growth of the Cable Television Industry it being in
its developing stage. Being part of the Broadcast Media,
the service rates of CATV are likewise considered
deregulated in accordance with MC 06-2-81 dated 25
February 1981, the implementing guidelines for the
authorization and operation of Radio and Television
Broadcasting stations/systems.
Further, the Commission will issue Provisional Authority to
existing CATV operators to authorize their operations for a
period of ninety (90) days until such time that the
Commission can issue the regular Certificate of Authority.
When the State declared a policy of deregulation, the
LGUs are bound to follow. To rule otherwise is to render
the States policy ineffective. Being mere creatures of the
State, LGUs cannot defeat national policies through
enactments of contrary measures. Verily, in the case at bar,
petitioner may increase its subscriber rates without
respondents approval.
At this juncture, it bears emphasizing that municipal
corporations are bodies politic and corporate, created not
only as local units of local self-government, but as
governmental agencies of the state.
[51]
The legislature, by
establishing a municipal corporation, does not divest the
State of any of its sovereignty; absolve itself from its right
and duty to administer the public affairs of the entire state;
or divest itself of any power over the inhabitants of the
195

district which it possesses before the charter was
granted.
[52]

Respondents likewise argue that E.O. No. 205 violates
the constitutional prohibition against impairment of
contracts, Resolution No. 210 of Batangas City Sangguniang
Panlungsod being a grant of franchise to petitioner.
We are not convinced.
There is no law specifically authorizing the LGUs to
grant franchises to operate CATV system. Whatever
authority the LGUs had before, the same had been
withdrawn when President Marcos issued P.D. No.
1512 terminating all franchises, permits or certificates for
the operation of CATV system previously granted by local
governments. Today, pursuant to Section 3 of E.O. No.
436, only persons, associations, partnerships,
corporations or cooperatives granted a Provisional
Authority or Certificate of Authority by the NTC may
install, operate and maintain a cable television system or
render cable television service within a service area. It is
clear that in the absence of constitutional or legislative
authorization, municipalities have no power to grant
franchises.
[53]
Consequently, the protection of the
constitutional provision as to impairment of the obligation
of a contract does not extend to privileges, franchises and
grants given by a municipality in excess of its powers,
or ultra vires.
[54]

One last word. The devolution of powers to the LGUs,
pursuant to the Constitutional mandate of ensuring their
autonomy, has bred jurisdictional tension between said
LGUs and the State. LGUs must be reminded that they
merely form part of the whole. Thus, when the Drafters of
the 1987 Constitution enunciated the policy of ensuring the
autonomy of local governments,
[55]
it was never their
intention to create an imperium in imperio and install an
intra-sovereign political subdivision independent of a single
sovereign state.
WHEREFORE, the petition is GRANTED. The assailed
Decision of the Court of Appeals dated February 12, 1999 as
well as its Resolution dated May 26, 1999 in CA-G.R. CV No.
52461, are hereby REVERSED. The RTC Decision in Civil
Case No. 4254 is AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
Davide, Jr., C.J., Puno, Panganiban, Quisumbing, Ynares-
Santiago, Carpio, Austria-Martinez, Corona, Carpio-
Morales, Callejo, Sr., and Tinga, JJ., concur.
Azcuna, and Chico-Nazario, JJ., on leave.



[1]
Mary Alice Mayer, John Walson: An Oral History, August
1987 (USA).
[2]
Rollo at 51-56. Per Associate Justice Buenaventura O.
Guerrero (retired) and concurred in by Associate
196

Justices Portia Alio-Hormachuelos and Teodoro P.
Regino (retired).
[3]
Rollo at 58.
[G.R. No. 149743. February 18, 2005]
LEONARDO TAN, ROBERT UY and LAMBERTO
TE, petitioners, vs. SOCORRO Y.
PEREA, respondent.
D E C I S I O N
TINGA, J.:
The resolution of the present petition effectively settles
the question of how many cockpits may be allowed to
operate in a city or municipality.
There are two competing values of high order that
come to fore in this casethe traditional power of the
national government to enact police power measures, on
one hand, and the vague principle of local autonomy now
enshrined in the Constitution on the other. The facts are
simple, but may be best appreciated taking into account the
legal milieu which frames them.
In 1974, Presidential Decree (P.D.) No. 449, otherwise
known as the Cockfighting Law of 1974, was enacted.
Section 5(b) of the Decree provided for limits on the
number of cockpits that may be established in cities and
municipalities in the following manner:
Section 5. Cockpits and Cockfighting in General.
(b) Establishment of Cockpits. Only one cockpit shall be
allowed in each city or municipality, except that in cities or
municipalities with a population of over one hundred
thousand, two cockpits may be established, maintained and
operated.
With the enactment of the Local Government Code of
1991,
[1]
the municipal sangguniang bayan were
empowered, *a+ny law to the contrary notwithstanding,
to authorize and license the establishment, operation and
maintenance of cockpits, and regulate cockfighting and
commercial breeding of gamecocks.
[2]

In 1993, the Sangguniang Bayan of the municipality of
Daanbantayan,
[3]
Cebu Province, enacted Municipal
Ordinance No. 6 (Ordinance No. 6), Series of 1993, which
served as the Revised Omnibus Ordinance prescribing and
promulgating the rules and regulations governing cockpit
operations in Daanbantayan.
[4]
Section 5 thereof, relative to
the number of cockpits allowed in the municipality, stated:
Section 5. There shall be allowed to operate in the
Municipality of Daanbantayan, Province of Cebu, not more
than its equal number of cockpits based upon the
population provided for in PD 449, provided however, that
this specific section can be amended for purposes of
197

establishing additional cockpits, if the Municipal population
so warrants.
[5]

Shortly thereafter, the Sangguniang Bayan passed an
amendatory ordinance, Municipal Ordinance No. 7
(Ordinance No. 7), Series of 1993, which amended the
aforequoted Section 5 to now read as follows:
Section 5. Establishment of Cockpit. There shall be allowed
to operate in the Municipality of Daanbantayan, Province of
Cebu, not more than three (3) cockpits.
[6]

On 8 November 1995, petitioner Leonardo Tan (Tan)
applied with the Municipal Gamefowl Commission for the
issuance of a permit/license to establish and operate a
cockpit in Sitio Combado, Bagay, in Daanbantayan. At the
time of his application, there was already another cockpit in
operation in Daanbantayan, operated by respondent
Socorro Y. Perea (Perea), who was the duly franchised
and licensed cockpit operator in the municipality since the
1970s. Pereas franchise, per records, was valid until
2002.
[7]

The Municipal Gamefowl Commission favorably
recommended to the mayor of Daanbantayan, petitioner
Lamberto Te (Te), that a permit be issued to Tan. On 20
January 1996, Te issued a mayors permit allowing Tan to
establish/operate/conduct the business of a cockpit in
Combado, Bagay, Daanbantayan, Cebu for the period from
20 January 1996 to 31 December 1996.
[8]

This act of the mayor served as cause for Perea to file
a Complaint for damages with a prayer for injunction
against Tan, Te, and Roberto Uy, the latter allegedly an
agent of Tan.
[9]
Perea alleged that there was no lawful
basis for the establishment of a second cockpit. She claimed
that Tan conducted his cockpit fights not in Combado, but
in Malingin, at a site less than five kilometers away from her
own cockpit. She insisted that the unlawful operation of
Tans cockpit has caused injury to her own legitimate
business, and demanded damages of at least Ten Thousand
Pesos (P10,000.00) per month as actual damages, One
Hundred Fifty Thousand Pesos (P150,000.00) as moral
damages, and Fifty Thousand Pesos (P50,000.00) as
exemplary damages. Perea also prayed that the permit
issued by Te in favor of Tan be declared as null and void,
and that a permanent writ of injunction be issued against
Te and Tan preventing Tan from conducting cockfights
within the municipality and Te from issuing any authority
for Tan to pursue such activity.
[10]

The case was heard by the Regional Trial Court
(RTC),
[11]
Branch 61 of Bogo, Cebu, which initially granted a
writ of preliminary injunction.
[12]
During trial, herein
petitioners asserted that under the Local Government Code
of 1991, the sangguniang bayan of each municipality now
had the power and authority to grant franchises and enact
ordinances authorizing the establishment, licensing,
operation and maintenance of cockpits.
[13]
By virtue of such
authority, the Sangguniang Bayan of Daanbantayan
promulgated Ordinance Nos. 6 and 7. On the other hand,
198

Perea claimed that the amendment authorizing the
operation of not more than three (3) cockpits in
Daanbantayan violated Section 5(b) of the Cockfighting Law
of 1974, which allowed for only one cockpit in a
municipality with a population as Daanbantayan.
[14]

In a Decision dated 10 March 1997, the RTC dismissed
the complaint. The court observed that Section 5 of
Ordinance No. 6, prior to its amendment, was by specific
provision, an implementation of the Cockfighting
Law.
[15]
Yet according to the RTC, questions could be raised
as to the efficacy of the subsequent amendment under
Ordinance No. 7, since under the old Section 5, an
amendment allowing additional cockpits could be had only
if the municipal population so warrants.
[16]
While the RTC
seemed to doubt whether this condition had actually been
fulfilled, it nonetheless declared that since the case was
only for damages, the *RTC+ cannot grant more relief than
that prayed for.
[17]
It ruled that there was no evidence,
testimonial or documentary, to show that plaintiff had
actually suffered damages. Neither was there evidence that
Te, by issuing the permit to Tan, had acted in bad faith,
since such issuance was pursuant to municipal ordinances
that nonetheless remained in force.
[18]
Finally, the RTC
noted that the assailed permit had expired on 31 December
1996, and there was no showing that it had been
renewed.
[19]

Perea filed a Motion for Reconsideration which was
denied in an Order dated 24 February 1998. In this Order,
the RTC categorically stated that Ordinance Nos. 6 and 7
were valid and legal for all intents and purpose*s+.
[20]
The
RTC also noted that the Sangguniang Bayan had also
promulgated Resolution No. 78-96, conferring on Tan a
franchise to operate a cockpit for a period of ten (10) years
from February 1996 to 2006.
[21]
This Resolution was
likewise affirmed as valid by the RTC. The RTC noted that
while the ordinances seemed to be in conflict with the
Cockfighting Law, any doubt in interpretation should be
resolved in favor of the grant of more power to the local
government unit, following the principles of devolution
under the Local Government Code.
[22]

The Decision and Order of the RTC were assailed by
Perea on an appeal with the Court of Appeals which on 21
May 2001, rendered the Decision now assailed.
[23]
The
perspective from which the Court of Appeals viewed the
issue was markedly different from that adopted by the RTC.
Its analysis of the Local Government Code, particularly
Section 447(a)(3)(V), was that the provision vesting unto
the sangguniang bayan the power to authorize and license
the establishment of cockpits did not do away with the
Cockfighting Law, as these two laws are not necessarily
inconsistent with each other. What the provision of the
Local Government Code did, according to the Court of
Appeals, was to transfer to the sangguniang bayan powers
that were previously conferred on the Municipal Gamefowl
Commission.
[24]

Given these premises, the appellate court declared as
follows:
199

Ordinance No. 7 should [be] held invalid for allowing, in
unconditional terms, the operation of not more than three
cockpits in Daan Bantayan (sic), clearly dispensing with the
standard set forth in PD 449. However, this issue appears to
have been mooted by the expiration of the Mayors Permit
granted to the defendant which has not been renewed.
[25]

As to the question of damages, the Court of Appeals
agreed with the findings of the RTC that Perea was not
entitled to damages. Thus, it affirmed the previous ruling
denying the claim for damages. However, the Court of
Appeals modified the RTCs Decision in that it now ordered
that Tan be enjoined from operating a cockpit and
conducting any cockfights within Daanbantayan.
[26]

Thus, the present Petition for Review on Certiorari.
Petitioners present two legal questions for
determination: whether the Local Government Code has
rendered inoperative the Cockfighting Law; and whether
the validity of a municipal ordinance may be determined in
an action for damages which does not even contain a
prayer to declare the ordinance invalid.
[27]
As the denial of
the prayer for damages by the lower court is not put in
issue before this Court, it shall not be passed upon on
review.
The first question raised is particularly interesting, and
any definitive resolution on that point would have obvious
ramifications not only to Daanbantayan, but all other
municipalities and cities. However, we must first determine
the proper scope of judicial inquiry that we could engage in,
given the nature of the initiatory complaint and the rulings
rendered thereupon, the exact point raised in the second
question.
Petitioners claim that the Court of Appeals, in declaring
Ordinance No. 7 as invalid, embarked on an unwarranted
collateral attack on the validity of a municipal
ordinance.
[28]
Pereas complaint, which was for damages
with preliminary injunction, did not pray for the nullity of
Ordinance No. 7. The Municipality of Daanbantayan as a
local government unit was not made a party to the case,
nor did any legal counsel on its behalf enter any
appearance. Neither was the Office of the Solicitor General
given any notice of the case.
[29]

These concerns are not trivial.
[30]
Yet, we must point out
that the Court of Appeals did not expressly nullify
Ordinance No. 7, or any ordinance for that matter. What
the appellate court did was to say that Ordinance No.
7 should therefore be held invalid for being in violation
of the Cockfighting Law.
[31]
In the next breath though, the
Court of Appeals backtracked, saying that this issue
appears to have been mooted by the expiration of the
Mayors Permit granted to Tan.
[32]

But our curiosity is aroused by the dispositive portion of
the assailed Decision, wherein the Court of Appeals
enjoined Tan from operating a cockpit and conducting any
cockfights within Daanbantayan.
[33]
Absent the invalidity of
Ordinance No. 7, there would be no basis for this
200

injunction. After all, any future operation of a cockpit by
Tan in Daanbantayan, assuming all other requisites are
complied with, would be validly authorized should
Ordinance No. 7 subsist.
So it seems, for all intents and purposes, that the Court
of Appeals did deem Ordinance No. 7 a nullity. Through
such resort, did the appellate court in effect allow a
collateral attack on the validity of an ordinance through an
action for damages, as the petitioners argue?
The initiatory Complaint filed by Perea deserves close
scrutiny. Immediately, it can be seen that it is not only an
action for damages, but also one for injunction. An action
for injunction will require judicial determination whether
there exists a right in esse which is to be protected, and if
there is an act constituting a violation of such right against
which injunction is sought. At the same time, the mere fact
of injury alone does not give rise to a right to recover
damages. To warrant the recovery of damages, there must
be both a right of action for a legal wrong inflicted by the
defendant, and damage resulting to the plaintiff therefrom.
In other words, in order that the law will give redress for an
act causing damage, there must be damnum et injuriathat
act must be not only hurtful, but wrongful.
[34]

Indubitably, the determination of whether injunction or
damages avail in this case requires the ascertainment of
whether a second cockpit may be legally allowed in
Daanbantayan. If this is permissible, Perea would not be
entitled either to injunctive relief or damages.
Moreover, an examination of the specific allegations in
the Complaint reveals that Perea therein puts into
question the legal basis for allowing Tan to operate another
cockpit in Daanbantayan. She asserted that there is no
lawful basis for the establishment of a second cockpit
considering the small population of *Daanbantayan+,
[35]
a
claim which alludes to Section 5(b) of the Cockfighting Law
which prohibits the establishment of a second cockpit in
municipalities of less than ten thousand (10,000) in
population. Perea likewise assails the validity of the permit
issued to Tan and prays for its annulment, and also seeks
that Te be enjoined from issuing any special permit not only
to Tan, but also to any other person outside of a duly
licensed cockpit in Daanbantayan, Cebu.
[36]

It would have been preferable had Perea expressly
sought the annulment of Ordinance No. 7. Yet it is apparent
from her Complaint that she sufficiently alleges that there is
no legal basis for the establishment of a second cockpit.
More importantly, the petitioners themselves raised the
valid effect of Ordinance No. 7 at the heart of their defense
against the complaint, as adverted to in
their Answer.
[37]
The averment in the Answer that
Ordinance No. 7 is valid can be considered as an affirmative
defense, as it is the allegation of a new matter which, while
hypothetically admitting the material allegations in the
complaint, would nevertheless bar recovery.
[38]
Clearly
then, the validity of Ordinance No. 7 became a justiciable
matter for the RTC, and indeed Perea squarely raised the
201

argument during trial that said ordinance violated the
Cockfighting Law.
[39]

Moreover, the assailed rulings of the RTC,
its Decision and subsequent Order denying Pereas Motion
for Reconsideration, both discuss the validity of Ordinance
No. 7. In the Decision, the RTC evaded making a categorical
ruling on the ordinances validity because the case was
only for damages, *thus the RTC could+ not grant more
relief than that prayed for. This reasoning is unjustified,
considering that Perea also prayed for an injunction, as
well as for the annulment of Tans permit. The resolution of
these two questions could very well hinge on the validity of
Ordinance No. 7.
Still, in the Order denying Pereas Motion for
Reconsideration, the RTC felt less inhibited and promptly
declared as valid not only Ordinance No. 7, but also
Resolution No. 78-96 of the Sangguniang Bayan dated 23
February 1996, which conferred on Tan a franchise to
operate a cockpit from 1996 to 2006.
[40]
In the Order, the
RTC ruled that while Ordinance No. 7 was in apparent
conflict with the Cockfighting Law, the ordinance was
justified under Section 447(a)(3)(v) of the Local
Government Code.
This express affirmation of the validity of Ordinance No.
7 by the RTC was the first assigned error in Pereas appeal
to the Court of Appeals.
[41]
In their Appellees Brief before
the appellate court, the petitioners likewise argued that
Ordinance No. 7 was valid and that the Cockfighting Law
was repealed by the Local Government Code.
[42]
On the
basis of these arguments, the Court of Appeals rendered its
assailed Decision, including its ruling that the Section 5(b) of
the Cockfighting Law remains in effect notwithstanding the
enactment of the Local Government Code.
Indubitably, the question on the validity of Ordinance
No. 7 in view of the continuing efficacy of Section 5(b) of
the Cockfighting Law is one that has been fully litigated in
the courts below. We are comfortable with reviewing that
question in the case at bar and make dispositions
proceeding from that key legal question. This is militated by
the realization that in order to resolve the question
whether injunction should be imposed against the
petitioners, there must be first a determination whether
Tan may be allowed to operate a second cockpit in
Daanbantayan. Thus, the conflict between Section 5(b) of
the Cockfighting Law and Ordinance No. 7 now ripens for
adjudication.
In arguing that Section 5(b) of the Cockfighting Law has
been repealed, petitioners cite the following provisions of
Section 447(a)(3)(v) of the Local Government Code:
Section 447. Powers, Duties, Functions and Compensation.
(a) The sangguniang bayan, as the legislative body of the
municipality, shall enact ordinances, approve resolutions
and appropriate funds for the general welfare of the
municipality and its inhabitants pursuant to Section 16 of
this Code and in the proper exercise of the corporate
202

powers of the municipality as provided for under Section 22
of this Code, and shall:
. . . .
(3) Subject to the provisions of Book II of this Code, grant
franchises, enact ordinances authorizing the issuance of
permits or licenses, or enact ordinances levying taxes, fees
and charges upon such conditions and for such purposes
intended to promote the general welfare of the inhabitants
of the municipality, and pursuant to this legislative
authority shall:
. . . .
(v) Any law to the contrary notwithstanding,
authorize and license the establishment,
operation, and maintenance of cockpits, and
regulate cockfighting and commercial
breeding of gamecocks; Provided, that existing
rights should not be prejudiced;
For the petitioners, Section 447(a)(3)(v) sufficiently
repeals Section 5(b) of the Cockfighting Law, vesting as it
does on LGUs the power and authority to issue franchises
and regulate the operation and establishment of cockpits in
their respective municipalities, any law to the contrary
notwithstanding.
However, while the Local Government Code expressly
repealed several laws, the Cockfighting Law was not among
them. Section 534(f) of the Local Government Code
declares that all general and special laws or decrees
inconsistent with the Code are hereby repealed or modified
accordingly, but such clause is not an express repealing
clause because it fails to identify or designate the acts that
are intended to be repealed.
[43]
It is a cardinal rule in
statutory construction that implied repeals are disfavored
and will not be so declared unless the intent of the
legislators is manifest.
[44]
As laws are presumed to be
passed with deliberation and with knowledge of all existing
ones on the subject, it is logical to conclude that in passing
a statute it is not intended to interfere with or abrogate a
former law relating to the same subject matter, unless the
repugnancy between the two is not only irreconcilable but
also clear and convincing as a result of the language used,
or unless the latter Act fully embraces the subject matter of
the earlier.
[45]

Is the one-cockpit-per-municipality rule under the
Cockfighting Law clearly and convincingly irreconcilable
with Section 447(a)(3)(v) of the Local Government Code?
The clear import of Section 447(a)(3)(v) is that it is the
sangguniang bayan which is empowered to authorize and
license the establishment, operation and maintenance of
cockpits, and regulate cockfighting and commercial
breeding of gamecocks, notwithstanding any law to the
contrary. The necessity of the qualifying phrase any law to
the contrary notwithstanding can be discerned by
examining the history of laws pertaining to the
authorization of cockpit operation in this country.
203

Cockfighting, or sabong in the local parlance, has a long
and storied tradition in our culture and was prevalent even
during the Spanish occupation. When the newly-arrived
Americans proceeded to organize a governmental structure
in the Philippines, they recognized cockfighting as an
activity that needed to be regulated, and it was deemed
that it was the local municipal council that was best suited
to oversee such regulation. Hence, under Section 40 of Act
No. 82, the general act for the organization of municipal
governments promulgated in 1901, the municipal council
was empowered to license, tax or close cockpits. This
power of the municipal council to authorize or license
cockpits was repeatedly recognized even after the
establishment of the present Republic in 1946.
[46]
Such
authority granted unto the municipal councils to license the
operation of cockpits was generally unqualified by
restrictions.
[47]
The Revised Administrative Code did impose
restrictions on what days cockfights could be held.
[48]

However, in the 1970s, the desire for stricter licensing
requirements of cockpits started to see legislative fruit. The
Cockfighting Law of 1974 enacted several of these
restrictions. Apart from the one-cockpit-per-municipality
rule, other restrictions were imposed, such as the limitation
of ownership of cockpits to Filipino citizens.
[49]
More
importantly, under Section 6 of the Cockfighting Law, it was
the city or municipal mayor who was authorized to issue
licenses for the operation and maintenance of cockpits,
subject to the approval of the Chief of Constabulary or his
authorized representatives.
[50]
Thus, the sole discretion to
authorize the operation of cockpits was removed from the
local government unit since the approval of the Chief of
Constabulary was now required.
P.D. No. 1802 reestablished the Philippine Gamefowl
Commission
[51]
and imposed further structure in the
regulation of cockfighting. Under Section 4 thereof, city and
municipal mayors with the concurrence of their respective
sangguniang panglunsod or sangguniang bayan, were given
the authority to license and regulate cockfighting, under
the supervision of the City Mayor or the Provincial
Governor. However, Section 4 of P.D. No. 1802 was
subsequently amended, removing the supervision exercised
by the mayor or governor and substituting in their stead the
Philippine Gamefowl Commission. The amended provision
ordained:
Sec. 4. City and Municipal Mayors with the concurrence of
their respective Sanggunians shall have the authority to
license and regulate regular cockfighting pursuant to the
rules and regulations promulgated by the Commission and
subject to its review and supervision.
The Court, on a few occasions prior to the enactment of
the Local Government Code in 1991, had opportunity to
expound on Section 4 as amended. A discussion of these
cases will provide a better understanding of the qualifier
any law to the contrary notwithstanding provided in
Section 447(a)(3)(v).
204

In Philippine Gamefowl Commission v. Intermediate
Appellate Court,
[52]
the Court, through Justice Cruz, asserted
that the conferment of the power to license and regulate
municipal cockpits in municipal authorities is in line with
the policy of local autonomy embodied in the
Constitution.
[53]
The Court affirmed the annulment of a
resolution of the Philippine Gamefowl Commission which
ordered the revocation of a permit issued by a municipal
mayor for the operation of a cockpit and the issuance of a
new permit to a different applicant. According to the Court,
the Philippine Gamefowl Commission did not possess the
power to issue cockpit licenses, as this was vested by
Section 4 of P.D. No. 1802, as amended, to the municipal
mayor with the concurrence of the sanggunian. It
emphasized that the Philippine Gamefowl Commission only
had review and supervision powers, as distinguished from
control, over ordinary cockpits.
[54]
The Court also noted that
the regulation of cockpits was vested in municipal officials,
subject only to the guidelines laid down by the Philippine
Gamefowl Commission.
[55]
The Court conceded that *if+ at
all, the power to review includes the power to disapprove;
but it does not carry the authority to substitute ones own
preferences for that chosen by the subordinate in the
exercise of its sound discretion.
The twin pronouncements that it is the municipal
authorities who are empowered to issue cockpit licenses
and that the powers of the Philippine Gamefowl
Commission were limited to review and supervision were
affirmed in Deang v. Intermediate Appellate
Court,
[56]
Municipality of Malolos v. Libangang Malolos
Inc.
[57]
and Adlawan v. Intermediate Appellate Court.
[58]
But
notably in Cootauco v. Court of Appeals,
[59]
the Court
especially noted that Philippine Gamefowl Commission did
indicate that the Commissions power of review includes
the power to disapprove.
[60]
Interestingly, Justice Cruz, the
writer of Philippine Gamefowl Commission, qualified his
concurrence in Cootauco subject to the reservations made
in [Philippine Gamefowl Commission]regarding the review
powers of the PGC over cockpit licenses issued by city and
municipal mayors.
[61]

These cases reiterate what has been the traditional
prerogative of municipal officials to control the issuances of
licenses for the operation of cockpits. Nevertheless, the
newly-introduced role of the Philippine Gamefowl
Commission vis--vis the operation of cockpits had caused
some degree of controversy, as shown by the cases above
cited.
Then, the Local Government Code of 1991 was enacted.
There is no more forceful authority on this landmark
legislation than Senator Aquilino Pimentel, Jr., its principal
author. In his annotations to the Local Government Code,
he makes the following remarks relating to Section
447(a)(3)(v):
12. Licensing power. In connection with the power to grant
licenses lodged with it, the Sangguniang Bayan may now
regulate not only businesses but also occupations,
professions or callings that do not require government
205

examinations within its jurisdiction. It may also authorize
and license the establishment, operation and maintenance
of cockpits, regulate cockfighting, and the commercial
breeding of gamecocks. Existing rights however, may not be
prejudiced. The power to license cockpits and permits for
cockfighting has been removed completely from the
Gamefowl Commission.
Thus, that part of the ruling of the Supreme Court in the
case of Municipality of Malolos v. Libangang Malolos, Inc.
et al., which held that the regulation of cockpits is
vested in the municipal councils guidelines laid down by
the Philippine Gamefowl Commission is no longer
controlling. Under [Section 447(a)(3)(v)], the power of the
Sanggunian concerned is no longer subject to the
supervision of the Gamefowl Commission.
[62]

The above observations may be faulted somewhat in
the sense that they fail to acknowledge the Courts
consistent position that the licensing power over cockpits
belongs exclusively to the municipal authorities and not the
Philippine Gamefowl Commission. Yet these views of
Senator Pimentel evince the apparent confusion regarding
the role of the Philippine Gamefowl Commission as
indicated in the cases previously cited, and accordingly
bring the phrase Section 447(a)(3)(v) used in any law to
the contrary notwithstanding into its proper light. The
qualifier serves notice, in case it was still doubtful, that it is
the sanggunian bayan concerned alone which has the
power to authorize and license the establishment,
operation and maintenance of cockpits, and regulate
cockfighting and commercial breeding of gamecocks within
its territorial jurisdiction.
Given the historical perspective, it becomes evident
why the legislature found the need to use the phrase any
law to the contrary notwithstanding in Section
447(a)(3)(v). However, does the phrase similarly allow the
Sangguniang Bayan to authorize more cockpits than
allowed under Section 5(d) of the Cockfighting Law?
Certainly, applying the test of implied repeal, these two
provisions can stand together. While the sanggunian retains
the power to authorize and license the establishment,
operation, and maintenance of cockpits, its discretion is
limited in that it cannot authorize more than one cockpit
per city or municipality, unless such cities or municipalities
have a population of over one hundred thousand, in which
case two cockpits may be established. Considering that
Section 447(a)(3)(v) speaks essentially of the identity of the
wielder of the power of control and supervision over
cockpit operation, it is not inconsistent with previous
enactments that impose restrictions on how such power
may be exercised. In short, there is no dichotomy between
affirming the power and subjecting it to limitations at the
same time.
Perhaps more essential than the fact that the two
controverted provisions are not inconsistent when put
together, the Court recognizes that Section 5(d) of the
Cockfighting Law arises from a valid exercise of police
power by the national government. Of course, local
206

governments are similarly empowered under Section 16 of
the Local Government Code. The national government
ought to be attuned to the sensitivities of devolution and
strive to be sparing in usurping the prerogatives of local
governments to regulate the general welfare of their
constituents.
We do not doubt, however, the ability of the national
government to implement police power measures that
affect the subjects of municipal government, especially if
the subject of regulation is a condition of universal
character irrespective of territorial jurisdictions.
Cockfighting is one such condition. It is a traditionally
regulated activity, due to the attendant gambling
involved
[63]
or maybe even the fact that it essentially
consists of two birds killing each other for public
amusement. Laws have been enacted restricting the days
when cockfights could be held,
[64]
and legislation has even
been emphatic that cockfights could not be held on
holidays celebrating national honor such as Independence
Day
[65]
and Rizal Day.
[66]

The Whereas clauses of the Cockfighting Law emphasize
that cockfighting should neither be exploited as an object
of commercialism or business enterprise, nor made a tool
of uncontrolled gambling, but more as a vehicle for the
preservation and perpetuation of native Filipino heritage
and thereby enhance our national identity.
[67]
The obvious
thrust of our laws designating when cockfights could be
held is to limit cockfighting and imposing the one-cockpit-
per-municipality rule is in line with that aim. Cockfighting is
a valid matter of police power regulation, as it is a form of
gambling essentially antagonistic to the aims of enhancing
national productivity and self-reliance.
[68]
Limitation on the
number of cockpits in a given municipality is a reasonably
necessary means for the accomplishment of the purpose of
controlling cockfighting, for clearly more cockpits equals
more cockfights.
If we construe Section 447(a)(3)(v) as vesting an
unlimited discretion to the sanggunian to control all aspects
of cockpits and cockfighting in their respective jurisdiction,
this could lead to the prospect of daily cockfights in
municipalities, a certain distraction in the daily routine of
life in a municipality. This certainly goes against the grain of
the legislation earlier discussed. If the arguments of the
petitioners were adopted, the national government would
be effectively barred from imposing any future regulatory
enactments pertaining to cockpits and cockfighting unless it
were to repeal Section 447(a)(3)(v).
A municipal ordinance must not contravene the
Constitution or any statute, otherwise it is
void.
[69]
Ordinance No. 7 unmistakably contravenes the
Cockfighting Law in allowing three cockpits in
Daanbantayan. Thus, no rights can be asserted by the
petitioners arising from the Ordinance. We find the grant of
injunction as ordered by the appellate court to be well-
taken.
WHEREFORE, the petition is DENIED. Costs against
petitioners.
207

SO ORDERED.
Davide, Jr., CJ., Puno, Panganiban, Quisumbing, Ynares-
Santiago, Sandoval-Guti
FIRST DIVISION

SOCIAL JUSTICE SOCIETY G.R. No. 156052
(SJS), VLADIMIR ALARIQUE T.
CABIGAO and BONIFACIO S.
TUMBOKON,
Petitioners, Present:

PUNO, C.J., Chairperson,
SANDOVAL-GUTIERREZ,
- v e r s u s - CORONA,
AZCUNA and
LEONARDO-DE
CASTRO, JJ.

HON. JOSE L. ATIENZA, JR.,
in his capacity as Mayor of the
City of Manila,
Respondent.

x - - - - - - - - - - - - - - - - - - - - - - x


CHEVRON PHILIPPINES INC.,
PETRON CORPORATION and
PILIPINAS SHELL PETROLEUM
CORPORATION,
Movants-Intervenors.


x - - - - - - - - - - - - - - - - - - - - - - x


DEPARTMENT OF ENERGY,
208

Movant-Intervenor. Promulgated:

February 13,
2008

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x


R E S O L U T I O N

CORONA, J.:


After we promulgated our decision in this case on
March 7, 2007, Chevron Philippines Inc. (Chevron), Petron
Corporation (Petron) and Pilipinas Shell Petroleum
Corporation (Shell) (collectively, the oil companies) and the
Republic of the Philippines, represented by the Department
of Energy (DOE), filed their respective motions for leave to
intervene and for reconsideration of the decision.

Chevron
[1]
is engaged in the business of importing,
distributing and marketing of petroleum products in the
Philippines while Shell and Petron are engaged in the
business of manufacturing, refining and likewise importing,
distributing and marketing of petroleum products in the
Philippines.
[2]
The DOE is a governmental agency created
under Republic Act (RA) No. 7638
[3]
and tasked to prepare,
integrate, coordinate, supervise and control all plans,
programs, projects and activities of the government relative
to energy exploration, development, utilization, distribution
and conservation.
[4]


The facts are restated briefly as follows:

Petitioners Social Justice Society, Vladimir Alarique T.
Cabigao and Bonifacio S. Tumbokon, in an original petition
209

for mandamus under Rule 65 of the Rules of Court, sought
to compel respondent Hon. Jose L. Atienza, Jr., then mayor
of the City of Manila, to enforce Ordinance No. 8027. This
ordinance was enacted by the Sangguniang Panlungsod of
Manila on November 20, 2001,
[5]
approved by respondent
Mayor on November 28, 2001,
[6]
and became effective on
December 28, 2001 after publication.
[7]
Sections 1 and 3
thereof state:

SECTION 1. For the purpose of promoting
sound urban planning and ensuring health,
public safety, and general welfare of the
residents of Pandacan and Sta. Ana as well as
its adjoining areas, the land use of [those]
portions of land bounded by the Pasig River in
the north, PNR Railroad Track in the east,
Beata St. in the south, Palumpong St. in the
southwest, and Estero de Pandacan in the
west[,] PNR Railroad in the northwest area,
Estero de Pandacan in the [n]ortheast, Pasig
River in the southeast and Dr. M.L. Carreon in
the southwest. The area of Punta, Sta. Ana
bounded by the Pasig River, Marcelino Obrero
St., Mayo 28 St., and F. Manalo Street, are
hereby reclassified from Industrial II to
Commercial I.

xxx xxx xxx

SEC. 3. Owners or operators of industries and
other businesses, the operation of which are
no longer permitted under Section 1 hereof,
are hereby given a period of six (6) months
from the date of effectivity of this Ordinance
within which to cease and desist from the
operation of businesses which are hereby in
consequence, disallowed.

Ordinance No. 8027 reclassified the area described
therein from industrial to commercial and directed the
owners and operators of businesses disallowed under the
reclassification to cease and desist from operating their
businesses within six months from the date of effectivity of
the ordinance. Among the businesses situated in the area
210

are the so-called Pandacan Terminals of the oil
companies.

On June 26, 2002, the City of Manila and the
Department of Energy (DOE) entered into a memorandum
of understanding (MOU)
[8]
with the oil companies. They
agreed that the scaling down of the Pandacan Terminals
*was+ the most viable and practicable option.
TheSangguniang Panlungsod ratified the MOU in
Resolution No. 97.
[9]
In the same resolution,
the Sanggunian declared that the MOU was effective only
for a period of six months starting July 25,
2002.
[10]
Thereafter, on January 30, 2003,
the Sanggunian adopted Resolution No. 13
[11]
extending the
validity of Resolution No. 97 to April 30, 2003 and
authorizing the mayor of Manila to issue special business
permits to the oil companies.
[12]


This was the factual backdrop presented to the Court
which became the basis of our March 7, 2007 decision. We
ruled that respondent had the ministerial duty under the
Local Government Code (LGC) to enforce all laws and
ordinances relative to the governance of the
city,
[13]
including Ordinance No. 8027. We also held that
we need not resolve the issue of whether the MOU entered
into by respondent with the oil companies and the
subsequent resolutions passed by the Sanggunian could
amend or repeal Ordinance No. 8027 since the resolutions
which ratified the MOU and made it binding on the City of
Manila expressly gave it full force and effect only until April
30, 2003. We concluded that there was nothing that legally
hindered respondent from enforcing Ordinance No. 8027.

After we rendered our decision on March 7, 2007,
the oil companies and DOE sought to intervene and filed
motions for reconsideration in intervention on March 12,
2007 and March 21, 2007 respectively. On April 11, 2007,
we conducted the oral arguments in Baguio City to hear
petitioners, respondent and movants-intervenors oil
companies and DOE.
211


The oil companies called our attention to the fact
that on April 25, 2003, Chevron had filed a complaint
against respondent and the City of Manila in the Regional
Trial Court (RTC) of Manila, Branch 39, for the annulment of
Ordinance No. 8027 with application for writs of
preliminary prohibitory injunction and preliminary
mandatory injunction.
[14]
The case was docketed as civil
case no. 03-106377. On the same day, Shell filed a petition
for prohibition and mandamus likewise assailing the validity
of Ordinance No. 8027 and with application for writs of
preliminary prohibitory injunction and preliminary
mandatory injunction.
[15]
This was docketed as civil case no.
03-106380. Later on, these two cases were consolidated
and the RTC of Manila, Branch 39 issued an order dated
May 19, 2003 granting the applications for writs of
preliminary prohibitory injunction and preliminary
mandatory injunction:

WHEREFORE, upon the filing of a total
bond of TWO MILLION (Php 2,000,000.00)
PESOS, let a Writ of Preliminary Prohibitory
Injunction be issued ordering [respondent] and
the City of Manila, their officers, agents,
representatives, successors, and any other
persons assisting or acting in their behalf,
during the pendency of the case, to REFRAIN
from taking steps to enforce Ordinance No.
8027, and let a Writ of Preliminary Mandatory
Injunction be issued ordering [respondent] to
issue [Chevron and Shell] the necessary
Business Permits to operate at the Pandacan
Terminal.
[16]




Petron likewise filed its own petition in the RTC of
Manila, Branch 42, also attacking the validity of
Ordinance No. 8027 with prayer for the issuance of a
writ of preliminary injunction and/or temporary
restraining order (TRO). This was docketed as civil case
212

no. 03-106379. In an order dated August 4, 2004, the
RTC enjoined the parties to maintain the status quo.
[17]


Thereafter, in 2006, the city council of Manila
enacted Ordinance No. 8119, also known as the Manila
Comprehensive Land Use Plan and Zoning Ordinance of
2006.
[18]
This was approved by respondent on June 16,
2006.
[19]


Aggrieved anew, Chevron and Shell filed a
complaint in the RTC of Manila, Branch 20, asking for the
nullification of Ordinance No. 8119.
[20]
This was
docketed as civil case no. 06-115334. Petron filed its
own complaint on the same causes of action in the RTC
of Manila, Branch 41.
[21]
This was docketed as civil case
no. 07-116700.
[22]
The court issued a TRO in favor of
Petron, enjoining the City of Manila and respondent
from enforcing Ordinance No. 8119.
[23]


Meanwhile, in civil case no. 03-106379, the parties
filed a joint motion to withdraw complaint and
counterclaim on February 20, 2007.
[24]
In an order dated
April 23, 2007, the joint motion was granted and all the
claims and counterclaims of the parties were
withdrawn.
[25]


Given these additional pieces of information, the
following were submitted as issues for our resolution:

1. whether movants-intervenors should be
allowed to intervene in this case;
[26]

2. whether the following are impediments to the
execution of our March 7, 2007 decision:
(a) Ordinance No. 8119, the
enactment and existence of which
were not previously brought by
the parties to the attention of the
Court and
(b) writs of preliminary prohibitory
injunction and preliminary
213

mandatory injunction and status
quo order issued by the RTC of
Manila, Branches 39 and 42 and
3. whether the implementation of Ordinance No.
8027 will unduly encroach upon the DOEs powers
and functions involving energy resources.

During the oral arguments, the parties submitted to
this Courts power to rule on the constitutionality and
validity of Ordinance No. 8027 despite the pendency of
consolidated cases involving this issue in the RTC.
[27]
The
importance of settling this controversy as fully and as
expeditiously as possible was emphasized, considering its
impact on public interest. Thus, we will also dispose of this
issue here. The parties were after all given ample
opportunity to present and argue their respective
positions. By so doing, we will do away with the delays
concomitant with litigation and completely adjudicate an
issue which will most likely reach us anyway as the final
arbiter of all legal disputes.

Before we resolve these issues, a brief review of the
history of the Pandacan Terminals is called for to put our
discussion in the proper context.


HISTORY OF THE
PANDACAN
OIL TERMINALS

Pandacan (one of the districts of the City of Manila)
is situated along the banks of the Pasig river. At the turn of
the twentieth century, Pandacan was unofficially
designated as the industrial center of Manila. The area,
then largely uninhabited, was ideal for various emerging
industries as the nearby river facilitated the transportation
of goods and products. In the 1920s, it was classified as an
industrial zone.
[28]
Among its early industrial settlers were
the oil companies. Shell established its installation there on
214

January 30, 1914.
[29]
Caltex (now Chevron) followed suit in
1917 when the company began marketing its products in
the country.
[30]
In 1922, it built a warehouse depot which
was later converted into a key distribution terminal.
[31]
The
corporate presence in the Philippines of Esso (Petrons
predecessor) became more keenly felt when it won a
concession to build and operate a refinery in Bataan in
1957.
[32]
It then went on to operate a state-of-the-art lube
oil blending plant in the Pandacan Terminals where it
manufactures lubes and greases.
[33]


On December 8, 1941, the Second World War
reached the shores of the Philippine Islands. Although
Manila was declared an open city, the Americans had no
interest in welcoming the Japanese. In fact, in their zealous
attempt to fend off the Japanese Imperial Army, the United
States Army took control of the Pandacan Terminals and
hastily made plans to destroy the storage facilities to
deprive the advancing Japanese Army of a valuable logistics
weapon.
[34]
The U.S. Army burned unused petroleum,
causing a frightening conflagration. Historian Nick Joaquin
recounted the events as follows:

After the USAFFE evacuated the City late in
December 1941, all army fuel storage dumps
were set on fire. The flames spread,
enveloping the City in smoke, setting even the
rivers ablaze, endangering bridges and all
riverside buildings. For one week longer, the
open city blazeda cloud of smoke by day, a
pillar of fire by night.
[35]


The fire consequently destroyed the Pandacan Terminals
and rendered its network of depots and service stations
inoperative.
[36]


After the war, the oil depots were
reconstructed. Pandacan changed as Manila rebuilt
itself. The three major oil companies resumed the
operation of their depots.
[37]
But the district was no longer
a sparsely populated industrial zone; it had evolved into a
215

bustling, hodgepodge community. Today, Pandacan has
become a densely populated area inhabited by about
84,000 people, majority of whom are urban poor who call it
home.
[38]
Aside from numerous industrial installations,
there are also small businesses, churches, restaurants,
schools, daycare centers and residences situated
there.
[39]
Malacaang Palace, the official residence of the
President of the Philippines and the seat of governmental
power, is just two kilometers away.
[40]
There is a private
school near the Petron depot. Along the walls of the Shell
facility are shanties of informal settlers.
[41]
More than
15,000 students are enrolled in elementary and high
schools situated near these facilities.
[42]
A university with a
student population of about 25,000 is located directly
across the depot on the banks of the Pasig river.
[43]


The 36-hectare Pandacan Terminals house the oil
companies distribution terminals and depot
facilities.
[44]
The refineries of Chevron and Shell in
Tabangao and Bauan, both in Batangas, respectively, are
connected to the Pandacan Terminals through a 114-
kilometer
[45]
underground pipeline system.
[46]
Petrons
refinery in Limay, Bataan, on the other hand, also services
the depot.
[47]
The terminals store fuel and other petroleum
products and supply 95% of the fuel requirements of Metro
Manila,
[48]
50% of Luzons consumption and 35%
nationwide.
[49]
Fuel can also be transported through
barges along the Pasig river or tank trucks via the South
Luzon Expressway.

We now discuss the first issue: whether movants-
intervenors should be allowed to intervene in this case.

INTERVENTION
OF THE OIL
COMPANIES
AND THE DOE
SHOULD BE
ALLOWED IN
THE INTEREST
OF JUSTICE
216


Intervention is a remedy by which a third party, not
originally impleaded in the proceedings, becomes a
litigant therein to enable him, her or it to protect or
preserve a right or interest which may be affected by
such proceedings.
[50]
The pertinent rules are Sections 1
and 2, Rule 19 of the Rules of Court:

SEC. 1. Who may intervene. A
person who has a legal interest in the matter in
litigation, or in the success of either of the
parties, or an interest against both, or is so
situated as to be adversely affected by a
distribution or other disposition of property in
the custody of the court or of an officer
thereof may, with leave of court, be allowed to
intervene in the action. The court shall
consider whether or not the intervention will
unduly delay or prejudice the adjudication of
the rights of the original parties, and whether
or not the intervenors rights may be fully
protected in a separate proceeding.

SEC. 2. Time to intervene. The motion
to intervene may be filed at any time before
rendition of judgment by the trial court. A copy
of the pleading-in-intervention shall be
attached to the motion and served on the
original parties.


Thus, the following are the requisites for
intervention of a non-party:
(1) Legal interest

(a) in the matter in controversy; or
(b) in the success of either of the
parties; or
I against both parties; or
(d) person is so situated as to be
adversely affected by a
distribution or other disposition of
property in the custody of the
court or of an officer thereof;
217


(2) Intervention will not unduly delay or
prejudice the adjudication of rights of
original parties;

(3) Intervenors rights may not be fully
protected in a separate
proceeding
[51]
and

(g)The motion to intervene may be filed at any
time before rendition of judgment by the
trial court.


For both the oil companies and DOE, the last
requirement is definitely absent. As a rule, intervention is
allowed before rendition of judgment as Section 2, Rule
19 expressly provides. Both filed their separate motions
after our decision was promulgated. In Republic of the
Philippines v. Gingoyon,
[52]
a recently decided case which
was also an original action filed in this Court, we declared
that the appropriate time to file the motions-in-
intervention was before and not after resolution of the
case.
[53]


The Court, however, has recognized exceptions to
Section 2, Rule 19 in the interest of substantial justice:

The rule on intervention, like all other
rules of procedure, is intended to make the
powers of the Court fully and completely
available for justice. It is aimed to facilitate a
comprehensive adjudication of rival claims
overriding technicalities on the timeliness of
the filing thereof.
[54]


The oil companies assert that they have a legal
interest in this case because the implementation of
218

Ordinance No. 8027 will directly affect their business and
property rights.
[55]


[T]he interest which entitles a person to
intervene in a suit between other parties must
be in the matter in litigation and of such direct
and immediate character that the intervenor
will either gain or lose by direct legal operation
and effect of the judgment. Otherwise, if
persons not parties to the action were allowed
to intervene, proceedings would become
unnecessarily complicated, expensive and
interminable. And this would be against the
policy of the law. The words an interest in the
subject means a direct interest in the cause of
action as pleaded, one that would put the
intervenor in a legal position to litigate a fact
alleged in the complaint without the
establishment of which plaintiff could not
recover.
[56]



We agree that the oil companies have a direct and
immediate interest in the implementation of Ordinance No.
8027. Their claim is that they will need to spend billions of
pesos if they are compelled to relocate their oil depots out
of Manila. Considering that they admitted knowing about
this case from the time of its filing on December 4, 2002,
they should have intervened long before our March 7, 2007
decision to protect their interests. But they did
not.
[57]
Neither did they offer any worthy explanation to
justify their late intervention.

Be that as it may, although their motion for
intervention was not filed on time, we will allow it
because they raised and presented novel issues and
arguments that were not considered by the Court in its
March 7, 2007 decision. After all, the allowance or
disallowance of a motion to intervene is addressed to
the sound discretion of the court before which the case
is pending.
[58]
Considering the compelling reasons
favoring intervention, we do not think that this will
unduly delay or prejudice the adjudication of rights of
the original parties. In fact, it will be expedited since
their intervention will enable us to rule on the
219

constitutionality of Ordinance No. 8027 instead of
waiting for the RTCs decision.

The DOE, on the other hand, alleges that its interest
in this case is also direct and immediate as Ordinance No.
8027 encroaches upon its exclusive and national authority
over matters affecting the oil industry. It seeks to intervene
in order to represent the interests of the members of the
public who stand to suffer if the Pandacan Terminals
operations are discontinued. We will tackle the issue of the
alleged encroachment into DOEs domain later on. Suffice
it to say at this point that, for the purpose of hearing all
sides and considering the transcendental importance of this
case, we will also allow DOEs intervention.




THE
INJUNCTIV
E WRITS
ARE NOT
IMPEDIME
NTS TO
THE
ENFORCEM
ENT OF
ORDINANC
E NO.
8027


Under Rule 65, Section 3
[59]
of the Rules of Court, a
petition for mandamus may be filed 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. According to the oil companies, respondent did not
unlawfully fail or neglect to enforce Ordinance No. 8027
because he was lawfully prevented from doing so by virtue
of the injunctive writs and status quo order issued by the
RTC of Manila, Branches 39 and 42.

220

First, we note that while Chevron and Shell still have
in their favor the writs of preliminary injunction and
preliminary mandatory injunction, the status quo order in
favor of Petron is no longer in effect since the court granted
the joint motion of the parties to withdraw the complaint
and counterclaim.
[60]


Second, the original parties failed to inform the Court
about these injunctive writs. Respondent (who was also
impleaded as a party in the RTC cases) defends himself by
saying that he informed the court of the pendency of the
civil cases and that a TRO was issued by the RTC in the
consolidated cases filed by Chevron and Shell. It is true that
had the oil companies only intervened much earlier, the
Court would not have been left in the dark about these
facts. Nevertheless, respondent should have updated the
Court, by way of manifestation, on such a relevant matter.

In his memorandum, respondent mentioned the
issuance of a TRO. Under Section 5 of Rule 58 of the Rules
of Court, a TRO issued by the RTC is effective only for a
period of 20 days. This is why, in our March 7, 2007
decision, we presumed with certainty that this had already
lapsed.
[61]
Respondent also mentioned the grant of
injunctive writs in his rejoinder which the Court, however,
expunged for being a prohibited pleading. The parties and
their counsels were clearly remiss in their duties to this
Court.

In resolving controversies, courts can only consider
facts and issues pleaded by the parties.
[62]
Courts, as well as
magistrates presiding over them are not omniscient. They
can only act on the facts and issues presented before them
in appropriate pleadings. They may not even substitute
their own personal knowledge for evidence. Nor may they
take notice of matters except those expressly provided as
subjects of mandatory judicial notice.

221

We now proceed to the issue of whether the
injunctive writs are legal impediments to the enforcement
of Ordinance No. 8027.

Section 3, Rule 58 of the Rules of Court enumerates
the grounds for the issuance of a writ of preliminary
injunction:

SEC. 3. Grounds for issuance of preliminary
injunction. A preliminary injunction may be
granted when it is established:

(a) That the applicant is entitled to the
relief demanded, and the whole or part of
such relief consists in restraining
the commission or continuance of the act
or acts complained of, or in requiring the
performance of an act or acts, either for
a limited period or perpetually;

(b) That the commission, continuance or
nonperformance of the act or acts
complained of during the litigation would
probably work injustice to the applicant; or

(g) IThat a party, court, agency or a
person is doing, threatening, or is
attempting to do, or is procuring or
suffering to be done, some act or
acts probably in violation of the rights of
the applicant respecting the subject of
the action or proceeding, and tending
to render the judgment ineffectual.


There are two requisites for the issuance of a
preliminary injunction: (1) the right to be protected
exists prima facie and (2) the acts sought to be enjoined are
violative of that right. It must be proven that the violation
sought to be prevented will cause an irreparable injustice.

222

The act sought to be restrained here was the
enforcement of Ordinance No. 8027. It is a settled rule that
an ordinance enjoys the presumption of validity and, as
such, cannot be restrained by injunction.
[63]
Nevertheless,
when the validity of the ordinance is assailed, the courts are
not precluded from issuing an injunctive writ against its
enforcement. However, we have declared that the
issuance of said writ is proper only when:

... the petitioner assailing the ordinance has
made out a case of unconstitutionality strong
enough to overcome, in the mind of the
judge, the presumption of validity, in addition
to a showing of a clear legal right to the
remedy sought....
[64]
(Emphasis supplied)

Judge Reynaldo G. Ros, in his order dated May 19,
2003, stated his basis for issuing the injunctive writs:

The Court, in resolving whether or not a
Writ of Preliminary Injunction or Preliminary
Mandatory Injunction should be issued, is
guided by the following requirements: (1) a
clear legal right of the complainant; (2) a
violation of that right; and (3) a permanent and
urgent necessity for the Writ to prevent serious
damage. The Court believes that these
requisites are present in these cases.

There is no doubt that the
plaintiff/petitioners have been legitimately
operating their business in the Pandacan
Terminal for many years and they have made
substantial capital investment therein. Every
year they were issued Business Permits by the
City of Manila. Its operations have not been
declared illegal or contrary to law or morals. In
fact, because of its vital importance to the
national economy, it was included in the
Investment Priorities Plan as mandated under
the Downstream Oil Industry Deregulation Act
of 1988 (R.A. 8479). As a lawful business, the
plaintiff/petitioners have a right, therefore, to
continue their operation in the Pandacan
223

Terminal and the right to protect their
investments. This is a clear and unmistakable
right of the plaintiff/petitioners.

The enactment, therefore, of City
Ordinance No. 8027 passed by the City Council
of Manila reclassifying the area where the
Pandacan Terminal is located from Industrial II
to Commercial I and requiring the
plaintiff/petitioners to cease and desist from
the operation of their business has certainly
violated the rights of the plaintiff/petitioners to
continue their legitimate business in the
Pandacan Terminal and deprived them of their
huge investments they put up therein. Thus,
before the Court, therefore, determines
whether the Ordinance in question is valid or
not, a Writ of Preliminary Injunction and a Writ
of Mandatory Injunction be issued to prevent
serious and irreparable damage to
plaintiff/petitioners.
[65]



Nowhere in the judges discussion can we see that,
in addition to a showing of a clear legal right of Chevron
and Shell to the remedy sought, he was convinced that
they had made out a case of unconstitutionality or
invalidity strong enough to overcome the presumption of
validity of the ordinance. Statutes and ordinances are
presumed valid unless and until the courts declare the
contrary in clear and unequivocal terms.
[66]
The mere fact
that the ordinance is alleged to be unconstitutional or
invalid will not entitle a party to have its enforcement
enjoined.
[67]
The presumption is all in favor of validity. The
reason for this is obvious:

The action of the elected representatives of
the people cannot be lightly set aside. The
councilors must, in the very nature of things,
be familiar with the necessities of their
particular municipality and with all the facts
and circumstances which surround the subject
and necessitate action. The local legislative
body, by enacting the ordinance, has in effect
given notice that the regulations are essential
224

to the well being of the people . . . The
Judiciary should not lightly set aside legislative
action when there is not a clear invasion of
personal or property rights under the guise of
police regulation.
[68]


X x x

...[Courts] accord the presumption of
constitutionality to legislative enactments, not
only because the legislature is presumed to
abide by the Constitution but also because the
judiciary[,] in the determination of actual cases
and controversies[,] must reflect the wisdom
and justice of the people as expressed through
their representatives in the executive and
legislative departments of the government.
[69]


The oil companies argue that this presumption must
be set aside when the invalidity or unreasonableness
appears on the face of the ordinance itself.
[70]
We see no
reason to set aside the presumption. The ordinance, on its
face, does not at all appear to be unconstitutional. It
reclassified the subject area from industrial to
commercial. Prima facie, this power is within the power of
municipal corporations:

The power of municipal corporations to divide
their territory into industrial, commercial and
residential zones is recognized in almost all
jurisdictions inasmuch as it is derived from the
police power itself and is exercised for the
protection and benefit of their inhabitants.
[71]


X x x

There can be no doubt that the
City of Manila has the power to divide its
territory into residential and industrial zones,
and to prescribe that offensive and
unwholesome trades and occupations are to be
established exclusively in the latter zone.
225


Xxx xxx
xxx

Likewise, it cannot be denied that
the City of Manila has the authority, derived
from the police power, of forbidding the
appellant to continue the manufacture
of toyo in the zone where it is now situated,
which has been declared residential....
[72]


Courts will not invalidate an ordinance unless it
clearly appears that it is unconstitutional. There is no such
showing here. Therefore, the injunctive writs issued in the
Manila RTCs May 19, 2003 order had no leg to stand on.

We are aware that the issuance of these injunctive
writs is not being assailed as tainted with grave abuse of
discretion. However, we are confronted with the question
of whether these writs issued by a lower court are
impediments to the enforcement of Ordinance No. 8027
(which is the subject of the mandamus petition). As already
discussed, we rule in the negative.



ORDINANCE NO.
8027 WAS NOT
SUPERSEDED BY
ORDINANCE NO.
8119


The March 7, 2007 decision did not take into
consideration the passage of Ordinance No. 8119 entitled
An Ordinance Adopting the Manila Comprehensive Land
Use Plan and Zoning Regulations of 2006 and Providing for
the Administration, Enforcement and Amendment thereto
which was approved by respondent on June 16, 2006. The
226

simple reason was that the Court was never informed about
this ordinance.

While courts are required to take judicial notice of the
laws enacted by Congress, the rule with respect to local
ordinances is different. Ordinances are not included in the
enumeration of matters covered by mandatory judicial
notice under Section 1, Rule 129 of the Rules of Court.
[73]

Although, Section 50 of RA 409
[74]
provides that:

SEC. 50 Judicial notice of ordinances. -
All courts sitting in the city shall take judicial
notice of the ordinances passed by the
[Sangguniang Panglungsod].


This cannot be taken to mean that this Court, since it has its
seat in the City of Manila, should have taken steps to
procure a copy of the ordinance on its own, relieving the
party of any duty to inform the Court about it.

Even where there is a statute that requires a court to
take judicial notice of municipal ordinances, a court is not
required to take judicial notice of ordinances that are not
before it and to which it does not have access. The party
asking the court to take judicial notice is obligated to supply
the court with the full text of the rules the party desires it
to have notice of.
[75]
Counsel should take the initiative in
requesting that a trial court take judicial notice of an
ordinance even where a statute requires courts to take
judicial notice of local ordinances.
[76]

The intent of a statute requiring a court to take judicial
notice of a local ordinance is to remove any discretion a
court might have in determining whether or not to take
notice of an ordinance. Such a statute does not direct the
court to act on its own in obtaining evidence for the record
and a party must make the ordinance available to the court
for it to take notice.
[77]

227


In its defense, respondent claimed that he did not
inform the Court about the enactment of Ordinance No.
8119 because he believed that it was different from
Ordinance No. 8027 and that the two were not inconsistent
with each other.
[78]


In the same way that we deem the intervenors late
intervention in this case unjustified, we find the failure of
respondent, who was an original party here, inexcusable.


THE RULE
ON JUDICIAL
ADMISSIONS
IS NOT
APPLICABLE
AGAINST
RESPONDEN
T

The oil companies assert that respondent judicially
admitted that Ordinance No. 8027 was repealed by
Ordinance No. 8119 in civil case no. 03-106379 (where
Petron assailed the constitutionality of Ordinance No. 8027)
when the parties in their joint motion to withdraw
complaint and counterclaim stated that the issue ...has
been rendered moot and academic by virtue of the passage
of *Ordinance No. 8119+.
[79]
They contend that such
admission worked as an estoppel against the respondent.

Respondent countered that this stipulation simply
meant that Petron was recognizing the validity and legality
of Ordinance No. 8027 and that it had conceded the issue
of said ordinances constitutionality, opting instead to
question the validity of Ordinance No. 8119.
[80]
The oil
companies deny this and further argue that respondent, in
his answer in civil case no. 06-115334 (where Chevron and
Shell are asking for the nullification of Ordinance No. 8119),
expressly stated that Ordinance No. 8119 replaced
Ordinance No. 8027:
[81]

228


... Under Ordinance No. 8027, businesses
whose uses are not in accord with the
reclassification were given six months to cease
[their] operation. Ordinance No. 8119, which
in effect, replaced Ordinance [No.] 8027,
merely took note of the time frame provided
for in Ordinance No. 8119.... Ordinance No.
8119 thus provided for an even longer term,
that is[,] seven years;
[82]
(Emphasis supplied)

Rule 129, Section 4 of the Rules of Court provides:

Section 4. Judicial admissions. An
admission, verbal or written, made by a party
in the course of the proceedings in the same
case, does not require proof. The admission
may be contradicted only by showing that it
was made through palpable mistake or that no
such admission was made. (Emphasis
supplied)

While it is true that a party making a judicial admission
cannot subsequently take a position contrary to or
inconsistent with what was pleaded,
[83]
the aforestated rule
is not applicable here. Respondent made the statements
regarding the ordinances in civil case nos. 03-106379 and
06-115334 which are not the same as this case before
us.
[84]
To constitute a judicial admission, the admission
must be made in the same case in which it is offered.

Hence, respondent is not estopped from claiming that
Ordinance No. 8119 did not supersede Ordinance No.
8027. On the contrary, it is the oil companies which should
be considered estopped. They rely on the argument that
Ordinance No. 8119 superseded Ordinance No. 8027 but, at
the same time, also impugn its (8119s) validity. We frown
on the adoption of inconsistent positions and distrust any
attempt at clever positioning under one or the other on the
basis of what appears advantageous at the moment. Parties
cannot take vacillating or contrary positions regarding the
229

validity of a statute
[85]
or ordinance. Nonetheless, we will
look into the merits of the argument of implied repeal.


ORDINANCE NO.
8119 DID NOT
IMPLIEDLY
REPEAL
ORDINANCE NO.
8027

Both the oil companies and DOE argue that Ordinance
No. 8119 repealed Ordinance No. 8027. They assert that
although there was no express repeal
[86]
of Ordinance No.
8027, Ordinance No. 8119 impliedly repealed it.

According to the oil companies, Ordinance No. 8119
reclassified the area covering the Pandacan Terminals to
High Density Residential/Mixed Use Zone (R-
3/MXD)
[87]
whereas Ordinance No. 8027 reclassified the
same area from Industrial II to Commercial I:

SECTION 1. For the purpose of promoting
sound urban planning and ensuring health,
public safety, and general welfare of the
residents of Pandacan and Sta. Ana as well as
its adjoining areas, the land use of [those]
portions of land bounded by the Pasig River in
the north, PNR Railroad Track in the east,
Beata St. in the south, Palumpong St. in the
southwest, and Estero de Pancacan in the
west[,] PNR Railroad in the northwest area,
Estero de Pandacan in the [n]ortheast, Pasig
River in the southeast and Dr. M.L. Carreon in
the southwest. The area of Punta, Sta. Ana
bounded by the Pasig River, Marcelino Obrero
St., Mayo 28 St., and F. Manalo Street, are
hereby reclassified from Industrial II to
Commercial I. (Emphasis supplied)


Moreover, Ordinance No. 8119 provides for a phase-out of
seven years:

230

SEC. 72. Existing Non-Conforming Uses and
Buildings. - The lawful use of any building,
structure or land at the time of the adoption of
this Ordinance may be continued, although
such use does not conform with the provision
of the Ordinance, provided:

xxx xxx xxx

(g) In case the non-conforming use is an
industrial use:

xxx xxx xxx

d. The land use classified as non-
conforming shall program the phase-
out and relocation of the non-
conforming use within seven (7) years
from the date of effectivity of this
Ordinance. (Emphasis supplied)


This is opposed to Ordinance No. 8027 which compels
affected entities to vacate the area within six months from
the effectivity of the ordinance:

SEC. 3. Owners or operators of industries and
other businesses, the operation of which are
no longer permitted under Section 1 hereof,
are hereby given a period of six (6) months
from the date of effectivity of this Ordinance
within which to cease and desist from the
operation of businesses which are hereby in
consequence, disallowed.

Ordinance No. 8119 also designated the Pandacan oil
depot area as a Planned Unit Development/Overlay Zone
(O-PUD):

SEC. 23. Use Regulations in Planned Unit
Development/Overlay Zone (O-PUD). O-PUD
Zones are identified specific sites in the City of
231

Manila wherein the project site is
comprehensively planned as an entity via
unitary site plan which permits flexibility in
planning/ design, building siting,
complementarily of building types and land
uses, usable open spaces and the preservation
of significant natural land features, pursuant to
regulations specified for each particular
PUD. Enumerated below are identified PUD:

xxx xxx xxx


6. Pandacan Oil Depot Area

xxx xxx xxx


Enumerated below are the allowable uses:
1. all uses allowed in all zones where
it is located
2. the [Land Use Intensity Control
(LUIC)] under which zones are located
shall, in all instances be complied with
3. the validity of the prescribed LUIC
shall only be [superseded] by the
development controls and regulations
specified for each PUD as provided for
each PUD as provided for by the
masterplan of respective
PUDs.
[88]
(Emphasis supplied)

Respondent claims that in passing Ordinance No.
8119, the Sanggunian did not intend to repeal Ordinance
No. 8027 but meant instead to carry over 8027s provisions
to 8119 for the purpose of making Ordinance No. 8027
applicable to the oil companies even after the passage of
Ordinance No. 8119.
[89]
He quotes an excerpt from the
minutes of the July 27, 2004 session of
232

the Sanggunian during the first reading of Ordinance No.
8119:

Member GARCIA: Your Honor, iyong
patungkol po roon sa oil depot doon sa amin
sa Sixth District sa Pandacan, wala pong
nakalagay eith sa ordinansa rito na taliwas o
kakaiba roon sa ordinansang ipinasa noong
nakaraang Konseho, iyong Ordinance No.
8027. So kung ano po ang nandirito sa
ordinansa na ipinasa ninyo last time, iyon lang
po ang ni-lift eithe at inilagay eith. At eith eith
ordinansang iyong naipasa ng huling
Konseho, niri-classify [ninyo] from Industrial II
to Commercial C-1 ang area ng Pandacan kung
nasaan ang oil depot. So ini-lift lang po [eithe]
iyong definition, density, at saka po yon pong
ng noong ordinansa ninyo na siya eith
naming inilagay eith, iniba lang po naming
iyong title. So wala po kaming binago na
taliwas o nailagay na taliwas doon sa
ordinansang ipinasa ninyo, ni-lift lang po
[eithe] from Ordinance No.
8027.
[90]
(Emphasis supplied)

We agree with respondent.

Repeal by implication proceeds on the premise that
where a statute of later date clearly reveals the intention of
the legislature to abrogate a prior act on the subject, that
intention must be given effect.
[91]


There are two kinds of implied repeal. The first is:
where the provisions in the two acts on the same subject
matter are irreconcilably contradictory, the latter act, to the
extent of the conflict, constitutes an implied repeal of the
earlier one.
[92]
The second is: if the later act covers the
whole subject of the earlier one and is clearly intended as a
substitute, it will operate to repeal the earlier law.
[93]
The oil
companies argue that the situation here falls under the first
category.

233

Implied repeals are not favored and will not be so
declared unless the intent of the legislators is
manifest.
[94]
As statutes and ordinances are presumed to
be passed only after careful deliberation and with
knowledge of all existing ones on the subject, it follows
that, in passing a law, the legislature did not intend to
interfere with or abrogate a former law relating to the same
subject matter.
[95]
If the intent to repeal is not clear, the
later act should be construed as a continuation of, and not
a substitute for, the earlier act.
[96]


These standards are deeply enshrined in our
jurisprudence. We disagree that, in enacting Ordinance No.
8119, there was any indication of the legislative purpose to
repeal Ordinance No. 8027.
[97]
The excerpt quoted above is
proof that there was never such an intent. While it is true
that both ordinances relate to the same subject
matter, i.e. classification of the land use of the area where
Pandacan oil depot is located, if there is no intent to repeal
the earlier enactment, every effort at reasonable
construction must be made to reconcile the ordinances so
that both can be given effect:

The fact that a later enactment may
relate to the same subject matter as that of an
earlier statute is not of itself sufficient to cause
an implied repeal of the prior act, since the
new statute may merely be cumulative or a
continuation of the old one. What is necessary
is a manifest indication of legislative purpose
to repeal.
[98]



For the first kind of implied repeal, there must be an
irreconcilable conflict between the two ordinances. There is
no conflict between the two ordinances. Ordinance No.
8027 reclassified the Pandacan area from Industrial II to
Commercial I. Ordinance No. 8119, in Section 23,
designated it as a Planned Unit Development/Overlay
Zone (O-PUD). In its Annex C which defined the zone
boundaries,
[99]
the Pandacan area was shown to be within
234

the High Density Residential/Mixed Use Zone (R-3/MXD).
These zone classifications in Ordinance No. 8119 are not
inconsistent with the reclassification of the Pandacan area
from Industrial to Commercial in Ordinance No. 8027. The
O-PUD classification merely made Pandacan a project
site ... comprehensively planned as an entity via unitary site
plan which permits flexibility in planning/design, building
siting, complementarity of building types and land uses,
usable open spaces and the preservation of significant
natural land features....
[100]
Its classification as R-3/MXD
means that it should be used primarily for high-rise
housing/dwelling purposes and limited
complementary/supplementary trade, services and
business activities.
[101]
There is no conflict since both
ordinances actually have a common objective, i.e., to shift
the zoning classification from industrial to commercial
(Ordinance No. 8027) or mixed residential/commercial
(Ordinance No. 8119).

Moreover, it is a well-settled rule in statutory
construction that a subsequent general law does not repeal
a prior special law on the same subject unless it clearly
appears that the legislature has intended by the latter
general act to modify or repeal the earlier special
law.Generalia specialibus non derogant (a general law does
not nullify a specific or special law).
[102]
This is so even if the
provisions of the general law are sufficiently comprehensive
to include what was set forth in the special act.
[103]
The
special act and the general law must stand together, one as
the law of the particular subject and the other as the law of
general application.
[104]
The special law must be taken as
intended to constitute an exception to, or a qualification of,
the general act or provision.
[105]


The reason for this is that the legislature, in
passing a law of special character, considers
and makes special provisions for the particular
circumstances dealt with by the special law.
This being so, the legislature, by adopting a
general law containing provisions repugnant to
those of the special law and without making
235

any mention of its intention to amend or
modify such special law, cannot be deemed to
have intended an amendment, repeal or
modification of the latter.
[106]



Ordinance No. 8027 is a special law
[107]
since it deals
specifically with a certain area described therein (the
Pandacan oil depot area) whereas Ordinance No. 8119 can
be considered a general law
[108]
as it covers the entire city
of Manila.

The oil companies assert that even if Ordinance No.
8027 is a special law, the existence of an all-encompassing
repealing clause in Ordinance No. 8119 evinces an intent on
the part of the Sanggunian to repeal the earlier ordinance:

Sec. 84. Repealing Clause. All ordinances,
rules, regulations in conflict with the provisions
of this Ordinance are hereby
repealed; PROVIDED, That the rights that are
vested upon the effectivity of this Ordinance
shall not be impaired.


They cited Hospicio de San Jose de Barili, Cebu City v.
Department of Agrarian Reform:
[109]


The presence of such general repealing clause
in a later statute clearly indicates the legislative
intent to repeal all prior inconsistent laws on
the subject matter, whether the prior law is a
general law or a special law... Without such a
clause, a later general law will ordinarily not
repeal a prior special law on the same
subject. But with such clause contained in the
subsequent general law, the prior special law
will be deemed repealed, as the clause is a
clear legislative intent to bring about that
result.
[110]



236

This ruling in not applicable here. The repealing
clause of Ordinance No. 8119 cannot be taken to indicate
the legislative intent to repeal all prior inconsistent laws on
the subject matter, including Ordinance No. 8027, a special
enactment, since the aforequoted minutes (an official
record of the discussions in the Sanggunian) actually
indicated the clear intent to preserve the provisions of
Ordinance No. 8027.

To summarize, the conflict between the two
ordinances is more apparent than real. The two ordinances
can be reconciled. Ordinance No. 8027 is applicable to the
area particularly described therein whereas Ordinance No.
8119 is applicable to the entire City of Manila.

MANDAMUS LIES TO
COMPEL RESPONDENT
MAYOR TO ENFORCE
ORDINANCE NO. 8027


The oil companies insist that mandamus does not lie
against respondent in consideration of the separation of
powers of the executive and judiciary.
[111]
This
argument is misplaced. Indeed,

[the] Courts will not interfere
by mandamus proceedings with the legislative
[or executive departments] of the government
in the legitimate exercise of its powers, except
to enforce mere ministerial acts required by
law to be performed by some officer
thereof.
[112]
(Emphasis Supplied)
since this is the function of a writ of mandamus, which is
the power to compel the performance of an act which
the law specifically enjoins as a duty resulting from
office, trust or station.
[113]


They also argue that petitioners had a plain, speedy
and adequate remedy to compel respondent to enforce
Ordinance No. 8027 which was to seek relief from the
237

President of the Philippines through the Secretary of the
Department of Interior and Local Government (DILG) by
virtue of the Presidents power of supervision over local
government units. Again, we disagree. A party need not
go first to the DILG in order to compel the enforcement
of an ordinance. This suggested process would be
unreasonably long, tedious and consequently injurious
to the interests of the local government unit (LGU) and
its constituents whose welfare is sought to be
protected. Besides, petitioners resort to an original
action for mandamus before this Court is undeniably
allowed by the Constitution.
[114]




ORDINA
NCE NO.
8027 IS
CONSTIT
UTIONAL
AND
VALID

Having ruled that there is no impediment to the
enforcement of Ordinance No. 8027, we now proceed to
make a definitive ruling on its constitutionality and
validity.

The tests of a valid ordinance are well
established. For an ordinance to be valid, it must not
only be within the corporate powers of the LGU to enact
and be passed according to the procedure prescribed by
law, it must also conform to the following substantive
requirements: (1) must not contravene the Constitution
or any statute; (2) must not be unfair or oppressive; (3)
must not be partial or discriminatory; (4) must not
prohibit but may regulate trade; (5) must be general and
consistent with public policy and (6) must not be
unreasonable.
[115]



THE CITY OF
MANILA HAS
THE POWER
238

TO ENACT
ORDINANCE
NO. 8027


Ordinance No. 8027 was passed by
the Sangguniang Panlungsod of Manila in the exercise of
its police power. Police power is the plenary power
vested in the legislature to make statutes and
ordinances to promote the health, morals, peace,
education, good order or safety and general welfare of
the people.
[116]
This power flows from the recognition
that salus populi est suprema lex (the welfare of the
people is the supreme law).
[117]
While police power rests
primarily with the national legislature, such power may
be delegated.
[118]
Section 16 of the LGC, known as the
general welfare clause, encapsulates the delegated
police power to local governments:
[119]


Section 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.



239

LGUs like the City of Manila exercise police power through
their respective legislative bodies, in this case,
the Sangguniang Panlungsod or the city
council. Specifically, the Sanggunian can enact ordinances
for the general welfare of the city:

Section. 458. Powers, Duties, Functions and
Compensation. (a) The sangguniang
panglungsod, as the legislative branch 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 xxxx


This police power was also provided for in RA 409 or the
Revised Charter of the City of Manila:

Section 18. Legislative powers. The [City
Council] shall have the following legislative
powers:

xxx xxx
xxx

(g) To enact all ordinances it may deem
necessary and proper for the sanitation
and safety, the furtherance of the
prosperity, and the promotion of the
morality, peace, good order, comfort,
convenience, and general welfare of the
city and its inhabitants, and such others
as may be necessary to carry into effect
and discharge the powers and duties
conferred by this chapter xxxx
[120]



Specifically, the Sanggunian has the power to
reclassify land within the jurisdiction of the city.
[121]





THE
ENACTMENT OF
ORDINANCE NO.
8027 IS A
240

LEGITIMATE
EXERCISE OF
POLICE POWER


As with the State, local governments may be
considered as having properly exercised their police power
only if the following requisites are met: (1) the interests of
the public generally, as distinguished from those of a
particular class, require its exercise and (2) the means
employed are reasonably necessary for the
accomplishment of the purpose and not unduly oppressive
upon individuals. In short, there must be a concurrence of
a lawful subject and a lawful method.
[122]


Ordinance No. 8027 was enacted for the purpose of
promoting sound urban planning, ensuring health, public
safety and general welfare
[123]
of the residents of
Manila. The Sanggunian was impelled to take measures to
protect the residents of Manila from catastrophic
devastation in case of a terrorist attack on the Pandacan
Terminals. Towards this objective,
the Sanggunian reclassified the area defined in the
ordinance from industrial to commercial.

The following facts were found by the Committee on
Housing, Resettlement and Urban Development of the City
of Manila which recommended the approval of the
ordinance:

(1) the depot facilities contained 313.5 million liters
of highly flammable and highly volatile
products which include petroleum gas,
liquefied petroleum gas, aviation fuel, diesel,
gasoline, kerosene and fuel oil among others;
(2) the depot is open to attack through land, water
or air;
(3) it is situated in a densely populated place and
near Malacaang Palace and
(4) in case of an explosion or conflagration in the
depot, the fire could spread to the neighboring
communities.
[124]


The ordinance was intended to safeguard the rights to
life, security and safety of all the inhabitants of Manila and
not just of a particular class.
[125]
The depot is perceived,
rightly or wrongly, as a representation of western interests
which means that it is a terrorist target. As long as it there
241

is such a target in their midst, the residents of Manila are
not safe. It therefore became necessary to remove these
terminals to dissipate the threat. According to respondent:

Such a public need became apparent after the
9/11 incident which showed that what was
perceived to be impossible to happen, to the
most powerful country in the world at that, is
actually possible. The destruction of property
and the loss of thousands of lives on that
fateful day became the impetus for a public
need. In the aftermath of the 9/11 tragedy,
the threats of terrorism continued [such] that
it became imperative for governments to take
measures to combat their effects.
[126]



Wide discretion is vested on the legislative authority
to determine not only what the interests of the public
require but also what measures are necessary for the
protection of such interests.
[127]
Clearly,
the Sanggunian was in the best position to determine the
needs of its constituents.

In the exercise of police power, property rights of
individuals may be subjected to restraints and burdens in
order to fulfill the objectives of the
government.
[128]
Otherwise stated, the government may
enact legislation that may interfere with personal liberty,
property, lawful businesses and occupations to promote
the general welfare.
[129]
However, the interference must be
reasonable and not arbitrary. And to forestall arbitrariness,
the methods or means used to protect public health,
morals, safety or welfare must have a reasonable relation
to the end in view.
[130]


The means adopted by the Sanggunian was the
enactment of a zoning ordinance which reclassified the area
where the depot is situated from industrial to
commercial. A zoning ordinance is defined as a local city or
municipal legislation which logically arranges, prescribes,
242

defines and apportions a given political subdivision into
specific land uses as present and future projection of
needs.
[131]
As a result of the zoning, the continued
operation of the businesses of the oil companies in their
present location will no longer be permitted. The power to
establish zones for industrial, commercial and residential
uses is derived from the police power itself and is exercised
for the protection and benefit of the residents of a
locality.
[132]
Consequently, the enactment of Ordinance No.
8027 is within the power of the Sangguniang Panlungsod of
the City of Manila and any resulting burden on those
affected cannot be said to be unjust:

There can be no doubt that the City of Manila
has the power to divide its territory into
residential and industrial zones, and to
prescribe that offensive and unwholesome
trades and occupations are to be established
exclusively in the latter zone.

The benefits to be derived by cities
adopting such regulations (zoning) may be
summarized as follows: They attract a
desirable and assure a permanent citizenship;
they foster pride in and attachment to the city;
they promote happiness and contentment;
they stabilize the use and value of property
and promote the peace, [tranquility], and good
order of the city. We do not hesitate to say
that the attainment of these objects affords a
legitimate field for the exercise of the police
power. He who owns property in such a district
is not deprived of its use by such regulations.
He may use it for the purposes to which the
section in which it is located is dedicated. That
he shall not be permitted to use it to the
desecration of the community constitutes no
unreasonable or permanent hardship and
results in no unjust burden.

Xxx xxx
xxx

243

The 14
th
Amendment protects the
citizen in his right to engage in any lawful
business, but it does not prevent legislation
intended to regulate useful occupations which,
because of their nature or location, may prove
injurious or offensive to the public.
[133]


We entertain no doubt that Ordinance No. 8027 is a
valid police power measure because there is a concurrence
of lawful subject and lawful method.


ORDINANCE NO. 8027
IS NOT UNFAIR,
OPPRESSIVE OR
CONFISCATORY WHICH
AMOUNTS TO TAKING
WITHOUT
COMPENSATION

According to the oil companies, Ordinance No. 8027 is
unfair and oppressive as it does not only regulate but also
absolutely prohibits them from conducting operations in
the City of Manila. Respondent counters that this is not
accurate since the ordinance merely prohibits the oil
companies from operating their businesses in the Pandacan
area.

Indeed, the ordinance expressly delineated in its title
and in Section 1 what it pertained to. Therefore, the oil
companies contention is not supported by the text of the
ordinance. Respondent succinctly stated that:

The oil companies are not forbidden to do
business in the City of Manila. They may still
very well do so, except that their oil storage
facilities are no longer allowed in the Pandacan
area. Certainly, there are other places in the
City of Manila where they can conduct this
specific kind of business. Ordinance No. 8027
did not render the oil companies illegal. The
244

assailed ordinance affects the oil companies
business only in so far as the Pandacan area is
concerned.
[134]



The oil companies are not prohibited from doing business in
other appropriate zones in Manila. The City of Manila
merely exercised its power to regulate the businesses and
industries in the zones it established:

As to the contention that the power to
regulate does not include the power to
prohibit, it will be seen that the ordinance
copied above does not prohibit the installation
of motor engines within the municipality of
Cabanatuan but only within the zone therein
fixed. If the municipal council of Cabanatuan is
authorized to establish said zone, it is also
authorized to provide what kind of engines
may be installed therein. In banning the
installation in said zone of all engines not
excepted in the ordinance, the municipal
council of Cabanatuan did no more than
regulate their installation by means of
zonification.
[135]



The oil companies aver that the ordinance is unfair and
oppressive because they have invested billions of pesos in
the depot.
[136]
Its forced closure will result in huge losses in
income and tremendous costs in constructing new
facilities.

Their contention has no merit. In the exercise of police
power, there is a limitation on or restriction of property
interests to promote public welfare which involves no
compensable taking. Compensation is necessary only when
the states power of eminent domain is exercised. In
eminent domain, property is appropriated and applied to
some public purpose. Property condemned under the
exercise of police power, on the other hand, is noxious or
intended for a noxious or forbidden purpose and,
245

consequently, is not compensable.
[137]
The restriction
imposed to protect lives, public health and safety from
danger is not a taking. It is merely the prohibition or
abatement of a noxious use which interferes with
paramount rights of the public.
Property has not only an individual function, insofar as
it has to provide for the needs of the owner, but also a
social function insofar as it has to provide for the needs of
the other members of society.
[138]
The principle is this:


Police power proceeds from the principle that
every holder of property, however absolute
and unqualified may be his title, holds it under
the implied liability that his use of it shall not
be injurious to the equal enjoyment of others
having an equal right to the enjoyment of their
property, nor injurious to the right of the
community. Rights of property, like all other
social and conventional rights, are subject to
reasonable limitations in their enjoyment as
shall prevent them from being injurious, and
to such reasonable restraints and regulations
established by law as the legislature, under the
governing and controlling power vested in
them by the constitution, may think necessary
and expedient.
[139]



In the regulation of the use of the property, nobody
else acquires the use or interest therein, hence there is no
compensable taking.
[140]
In this case, the properties of the oil
companies and other businesses situated in the affected
area remain theirs. Only their use is restricted although
they can be applied to other profitable uses permitted in
the commercial zone.


ORDINANCE NO. 8027 IS
NOT
PARTIAL AND
DISCRIMINATORY
246



The oil companies take the position that the ordinance
has discriminated against and singled out the Pandacan
Terminals despite the fact that the Pandacan area is
congested with buildings and residences that do not comply
with the National Building Code, Fire Code and Health and
Sanitation Code.
[141]


This issue should not detain us for long. An ordinance
based on reasonable classification does not violate the
constitutional guaranty of the equal protection of the
law.
[142]
The requirements for a valid and reasonable
classification are: (1) it must rest on substantial distinctions;
(2) it must be germane to the purpose of the law; (3) it
must not be limited to existing conditions only and (4) it
must apply equally to all members of the same class.
[143]


The law may treat and regulate one class differently
from another class provided there are real and substantial
differences to distinguish one class from another.
[144]
Here,
there is a reasonable classification. We reiterate that what
the ordinance seeks to prevent is a catastrophic devastation
that will result from a terrorist attack. Unlike the depot, the
surrounding community is not a high-value terrorist
target. Any damage caused by fire or explosion occurring in
those areas would be nothing compared to the damage
caused by a fire or explosion in the depot itself.
Accordingly, there is a substantial distinction. The
enactment of the ordinance which provides for the
cessation of the operations of these terminals removes the
threat they pose. Therefore it is germane to the purpose of
the ordinance. The classification is not limited to the
conditions existing when the ordinance was enacted but to
future conditions as well. Finally, the ordinance is
applicable to all businesses and industries in the area it
delineated.

247

ORDINANCE NO.
8027 IS NOT
INCONSISTENT
WITH RA 7638
AND RA 8479


The oil companies and the DOE assert that
Ordinance No. 8027 is unconstitutional because it
contravenes RA 7638 (DOE Act of 1992)
[145]
and RA 8479
(Downstream Oil Industry Deregulation Law of
1998).
[146]
They argue that through RA 7638, the national
legislature declared it a policy of the state to ensure a
continuous, adequate, and economic supply of
energy
[147]
and created the DOE to implement this
policy. Thus, under Section 5 I, DOE is empowered to
establish and administer programs for the exploration,
transportation, marketing, distribution, utilization,
conservation, stockpiling, and storage of energy
resources. Considering that the petroleum products
contained in the Pandacan Terminals are major and critical
energy resources, they conclude that their administration,
storage, distribution and transport are of national interest
and fall under DOEs primary and exclusive jurisdiction.
[148]


They further assert that the terminals are necessary for
the delivery of immediate and adequate supply of oil to its
recipients in the most economical way.
[149]
Local legislation
such as Ordinance No. 8027 (which effectively calls for the
removal of these terminals) allegedly frustrates the state
policy of ensuring a continuous, adequate, and economic
supply of energy expressed in RA 7638, a national
law.
[150]
Likewise, the ordinance thwarts the determination
of the DOE that the terminals operations should be merely
scaled down and not discontinued.
[151]
They insist that this
should not be allowed considering that it has a nationwide
economic impact and affects public interest transcending
the territorial jurisdiction of the City of Manila.
[152]


248

According to them, the DOEs supervision over the oil
industry under RA 7638 was subsequently underscored by
RA 8479, particularly in Section 7 thereof:

SECTION 7. Promotion of Fair Trade Practices.
The Department of Trade and Industry (DTI)
and DOE shall take all measures to promote fair
trade and prevent cartelization, monopolies,
combinations in restraint of trade, and any
unfair competition in the Industry as defined in
Article 186 of the Revised Penal Code, and
Articles 168 and 169 of Republic Act No. 8293,
otherwise known as the Intellectual Property
Rights Law. The DOE shall continue
to encourage certain practices in the Industry
which serve the public interest and
are intended to achieve efficiency and cost
reduction, ensure continuous supply of
petroleum products, and enhance
environmental protection. These practices may
include borrow-and-loan agreements,
rationalized depot and manufacturing
operations, hospitality agreements, joint tanker
and pipeline utilization, and joint actions on oil
spill control and fire prevention. (Emphasis
supplied)

Respondent counters that DOEs regulatory power
does not preclude LGUs from exercising their police
power.
[153]


Indeed, ordinances should not contravene existing
statutes enacted by Congress. The rationale for this was
clearly explained inMagtajas vs. Pryce Properties Corp.,
Inc.:
[154]


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
249

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.
[155]



The question now is whether Ordinance No.
8027 contravenes RA 7638 and RA 8479. It does not.
250


Under Section 5 I of RA 7638, DOE was given the power
to establish and administer programs for the exploration,
transportation, marketing, distribution, utilization,
conservation, stockpiling, and storage of energy
resources. On the other hand, under Section 7 of RA 8749,
the DOE shall continue to encourage certain practices in
the Industry which serve the public interest and are
intended to achieve efficiency and cost reduction, ensure
continuous supply of petroleum products. Nothing in
these statutes prohibits the City of Manila from enacting
ordinances in the exercise of its police power.

The principle of local autonomy is enshrined in and
zealously protected under the Constitution. In Article II,
Section 25 thereof, the people expressly adopted the
following policy:




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. The LGC was specially promulgated by Congress to
ensure the autonomy of local governments as mandated by
the Constitution:

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
251

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. (Emphasis supplied)



We do not see how the laws relied upon by the oil
companies and DOE stripped the City of Manila of its power
to enact ordinances in the exercise of its police power and
to reclassify the land uses within its jurisdiction. To guide
us, we shall make a brief survey of our decisions where the
police power measure of the LGU clashed with national
laws.

In Tan v. Perea,
[156]
the Court ruled that Ordinance No.
7 enacted by the municipality of Daanbantayan, Cebu
allowing the operation of three cockpits was invalid for
violating PD 449 (or the Cockfighting Law of 1974) which
permitted only one cockpit per municipality.

In Batangas CATV, Inc. v. Court of
Appeals,
[157]
the Sangguniang Panlungsod of Batangas City
enacted Resolution No. 210 granting Batangas CATV, Inc. a
permit to operate a cable television (CATV) system in
Batangas City. The Court held that the LGU did not have
the authority to grant franchises to operate a CATV system
because it was the National Telecommunications
Commission (NTC) that had the power under EO Nos. 205
and 436 to regulate CATV operations. EO 205 mandated
the NTC to grant certificates of authority to CATV operators
while EO 436 vested on the NTC the power to regulate and
supervise the CATV industry.

In Lina, Jr. v. Pao,
[158]
we held that Kapasiyahan Bilang
508, Taon 1995 of the Sangguniang Panlalawigan of Laguna
could not be used as justification to prohibit lotto in the
252

municipality of San Pedro, Laguna because lotto was duly
authorized by RA 1169, as amended by BP 42. This law
granted a franchise to the Philippine Charity Sweepstakes
Office and allowed it to operate lotteries.

In Magtajas v. Pryce Properties Corp.,
Inc.,
[159]
the Sangguniang Panlungsod of Cagayan de Oro
City passed Ordinance Nos. 3353 and 3375-93 prohibiting
the operation of casinos in the city. We ruled that these
ordinances were void for contravening PD 1869 or the
charter of the Philippine Amusements and Gaming
Corporation which had the power to operate casinos.

The common dominator of all of these cases is that the
national laws were clearly and expressly in conflict with the
ordinances/resolutions of the LGUs. The inconsistencies
were so patent that there was no room for doubt. This is
not the case here.

The laws cited merely gave DOE general powers to
establish and administer programs for the exploration,
transportation, marketing, distribution, utilization,
conservation, stockpiling, and storage of energy resources
and to encourage certain practices in the *oil+ industry
which serve the public interest and are intended to achieve
efficiency and cost reduction, ensure continuous supply of
petroleum products. These powers can be exercised
without emasculating the LGUs of the powers granted
them. When these ambiguous powers are pitted against
the unequivocal power of the LGU to enact police power
and zoning ordinances for the general welfare of its
constituents, it is not difficult to rule in favor of the
latter. Considering that the powers of the DOE regarding
the Pandacan Terminals are not categorical, the doubt must
be resolved in favor of the City of Manila:

SECTION 5. Rules of Interpretation. In the
interpretation of the provisions of this Code,
the following rules shall apply:

253

(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

(g) IThe 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 xxxx


The least we can do to ensure genuine and
meaningful local autonomy is not to force an interpretation
that negates powers explicitly granted to local
governments. To rule against the power of LGUs to
reclassify areas within their jurisdiction will subvert the
principle of local autonomy guaranteed by the
Constitution.
[160]
As we have noted in earlier decisions, 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.
[161]




THE DOE
CANNOT
EXERCISE THE
POWER OF
CONTROL OVER
LGUS


254

Another reason that militates against the DOEs
assertions is that Section 4 of Article X of the Constitution
confines the Presidents power over LGUs to one of general
supervision:

SECTION 4. The President of the Philippines
shall exercise general supervision over local
governments. Xxxx

Consequently, the Chief Executive or his or her alter egos,
cannot exercise the power of control over them.
[162]
Control
and supervision are distinguished as follows:

[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.
[163]


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.
[164]
It
does not allow the supervisor to annul the acts of the
subordinate.
[165]
Here, what the DOE seeks to do is to set
aside an ordinance enacted by local officials, a power that
not even its principal, the President, has. This is because:

Under our present system of
government, executive power is vested in the
President. 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. In contrast, the heads of political
subdivisions are elected by the people. Their
255

sovereign powers emanate from the electorate,
to whom they are directly accountable. By
constitutional fiat, they are subject to the
Presidents 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.
[166]

Thus, the President and his or her alter egos, the
department heads, cannot interfere with the activities of
local governments, so long as they act within the scope of
their authority. Accordingly, the DOE cannot substitute its
own discretion for the discretion exercised by
thesanggunian of the City of Manila. In local affairs, the
wisdom of local officials must prevail as long as they are
acting within the parameters of the Constitution and the
law.
[167]



ORDINANCE NO.
8027 IS NOT
INVALID FOR
FAILURE TO
COMPLY WITH RA
7924 AND EO 72


The oil companies argue that zoning ordinances of
LGUs are required to be submitted to the Metropolitan
Manila Development Authority (MMDA) for review and if
found to be in compliance with its metropolitan physical
framework plan and regulations, it shall endorse the same
to the Housing and Land Use Regulatory Board
(HLURB). Their basis is Section 3 (e) of RA 7924:
[168]



SECTION 3. Scope of MMDA Services.
Metro-wide services under the jurisdiction
of the MMDA are those services which have
metro-wide impact and transcend local
256

political boundaries or entail huge
expenditures such that it would not be viable
for said services to be provided by the
individual [LGUs] comprising Metropolitan
Manila. These services shall include:

xxx xxx
xxx

(g) Urban renewal, zoning, and land use
planning, and shelter services which
include the formulation, adoption and
implementation of policies, standards,
rules and regulations, programs and
projects to rationalize and optimize
urban land use and provide direction to
urban growth and expansion, the
rehabilitation and development of slum
and blighted areas, the development of
shelter and housing facilities and the
provision of necessary social services
thereof. (Emphasis supplied)

Reference was also made to Section 15 of its
implementing rules:

Section 15. Linkages with HUDCC,
HLURB, NHA, LGUs and Other National
Government Agencies Concerned on Urban
Renewal, Zoning and Land Use Planning and
Shelter Services. Within the context of the
National Housing and Urban Development
Framework, and pursuant to the national
standards, guidelines and regulations
formulated by the Housing and Land Use
Regulatory Board [HLURB] on land use planning
and zoning, the [MMDA] shall prepare a
metropolitan physical framework plan and
regulations which shall complement and
translate the socio-economic development plan
for Metro Manila into physical or spatial terms,
and provide the basis for the preparation,
review, integration and implementation of local
land use plans and zoning, ordinance of cities
and municipalities in the area.

257

Said framework plan and regulations shall
contain, among others, planning and zoning
policies and procedures that shall be observed
by local government units in the preparation of
their own plans and ordinances pursuant to
Section 447 and 458 of RA 7160, as well as the
identification of sites and projects that are
considered to be of national or metropolitan
significance.

Cities and municipalities shall prepare
their respective land use plans and zoning
ordinances and submit the same for review
and integration by the [MMDA] and
indorsement to HLURB in accordance with
Executive Order No. 72 and other pertinent
laws.

In the preparation of a Metropolitan
Manila physical framework plan and
regulations, the [MMDA] shall coordinate with
the Housing and Urban Development
Coordinating Council, HLURB, the National
Housing Authority, Intramuros Administration,
and all other agencies of the national
government which are concerned with land use
and zoning, urban renewal and shelter
services. (Emphasis supplied)


They also claim that EO 72
[169]
provides that zoning
ordinances of cities and municipalities of Metro Manila are
subject to review by the HLURB to ensure compliance with
national standards and guidelines. They cite Section 1,
paragraphs I, (e), (f) and (g):

SECTION 1. Plan formulation or updating.

xxx xxx
xxx

(g) Cities and municipalities of
Metropolitan Manila shall continue
to formulate or update their
258

respective comprehensive land use
plans, in accordance with the land
use planning and zoning standards
and guidelines prescribed by the
HLURB pursuant to EO 392, S. of
1990, and other pertinent national
policies.

Xxx xxx
xxx


(e) Pursuant to LOI 729, S. of 1978, EO
648, S. of 1981, and RA 7279,
the comprehensive land use plans of
provinces, highly urbanized cities and
independent component cities shall be
reviewed and ratified by the HLURB to ensure
compliance with national standards and
guidelines.

(f) Pursuant to EO 392, S. of 1999,
the comprehensive land use plans of cities and
municipalities of Metropolitan Manila shall be
reviewed by the HLURB to ensure compliance
with national standards and guidelines.

(g) Said review shall be completed
within three (3) months upon
receipt thereof otherwise, the same
shall be deemed consistent with law,
and, therefore, valid. (Emphasis
supplied)


They argue that because Ordinance No. 8027 did not
go through this review process, it is invalid.

The argument is flawed.

259

RA 7942 does not give MMDA the authority to review
land use plans and zoning ordinances of cities and
municipalities. This was only found in its implementing
rules which made a reference to EO 72. EO 72 expressly
refers to comprehensive land use plans (CLUPs)
only. Ordinance No. 8027 is admittedly not a CLUP nor
intended to be one. Instead, it is a very specific ordinance
which reclassified the land use of a defined area in order to
prevent the massive effects of a possible terrorist attack. It
is Ordinance No. 8119 which was explicitly formulated as
the Manila *CLUP+ and Zoning Ordinance of 2006. CLUPs
are the ordinances which should be submitted to the
MMDA for integration in its metropolitan physical
framework plan and approved by the HLURB to ensure that
they conform with national guidelines and policies.

Moreover, even assuming that the MMDA review and
HLURB ratification are necessary, the oil companies did not
present any evidence to show that these were not complied
with. In accordance with the presumption of validity in
favor of an ordinance, its constitutionality or legality should
be upheld in the absence of proof showing that the
procedure prescribed by law was not observed. The burden
of proof is on the oil companies which already had notice
that this Court was inclined to dispose of all the issues in
this case. Yet aside from their bare assertion, they did not
present any certification from the MMDA or the HLURB nor
did they append these to their pleadings. Clearly, they
failed to rebut the presumption of validity of Ordinance No.
8027.
[170]





CONCLUSION

Essentially, the oil companies are fighting for their
right to property. They allege that they stand to lose
billions of pesos if forced to relocate. However, based on
260

the hierarchy of constitutionally protected rights, the right
to life enjoys precedence over the right to property.
[171]
The
reason is obvious: life is irreplaceable, property is
not. When the state or LGUs exercise of police power
clashes with a few individuals right to property, the former
should prevail.
[172]


Both law and jurisprudence support the
constitutionality and validity of Ordinance No. 8027.
Without a doubt, there are no impediments to its
enforcement and implementation. Any delay is unfair to
the inhabitants of the City of Manila and its leaders who
have categorically expressed their desire for the relocation
of the terminals. Their power to chart and control their own
destiny and preserve their lives and safety should not be
curtailed by the intervenors warnings of doomsday
scenarios and threats of economic disorder if the ordinance
is enforced.

Secondary to the legal reasons supporting the
immediate implementation of Ordinance No. 8027 are the
policy considerations which drove Manilas government to
come up with such a measure:

... [The] oil companies still were not able to
allay the apprehensions of the city regarding
the security threat in the area in general. No
specific action plan or security measures were
presented that would prevent a possible large-
scale terrorist or malicious attack especially an
attack aimed at Malacaang. The measures
that were installed were more directed
towards their internal security and did not
include the prevention of an external attack
even on a bilateral level of cooperation
between these companies and the police and
military.

Xxx xxx xxx

261

It is not enough for the city
government to be told by these oil companies
that they have the most sophisticated fire-
fighting equipments and have invested millions
of pesos for these equipments. The city
government wants to be assured that its
residents are safe at any time from these
installations, and in the three public hearings
and in their position papers, not one statement
has been said that indeed the absolute safety
of the residents from the hazards posed by
these installations is assured.
[173]



We are also putting an end to the oil companies
determination to prolong their stay in Pandacan despite the
objections of Manilas residents. As early as October 2001,
the oil companies signed a MOA with the DOE obliging
themselves to:
... undertake a comprehensive and
comparative study ... [which] shall include the
preparation of a Master Plan, whose aim is to
determine the scope and timing of the feasible
location of the Pandacan oil terminals and all
associated facilities and infrastructure
including government support essential for the
relocation such as the necessary transportation
infrastructure, land and right of way
acquisition, resettlement of displaced residents
and environmental and social acceptability
which shall be based on mutual benefit of the
Parties and the public.
[174]


Now that they are being compelled to discontinue their
operations in the Pandacan Terminals, they cannot feign
unreadiness considering that they had years to prepare for
this eventuality.

Just the same, this Court is not about to provoke a
crisis by ordering the immediate relocation of the Pandacan
Terminals out of its present site. The enforcement of a
decision of this Court, specially one with far-reaching
consequences, should always be within the bounds of
reason, in accordance with a comprehensive and well-
262

coordinated plan, and within a time-frame that complies
with the letter and spirit of our resolution. To this end, the
oil companies have no choice but to obey the law.

A WARNING TO PETITIONERS COUNSEL

We draw the attention of the parties to a matter of
grave concern to the legal profession.

Petitioners and their counsel, Atty. Samson
Alcantara, submitted a four-page memorandum that clearly
contained either substance nor research. It is absolutely
insulting to this Court.

We have always tended towards judicial leniency,
temperance and compassion to those who suffer from a
wrong perception of what the majesty of the law
means. But for a member of the bar, an officer of the
court, to file in this Court a memorandum of such
unacceptable quality is an entirely different matter.

It is indicative less of a personal shortcoming or
contempt of this Court and more of a lawyers sorry
descent from a high sense of duty and responsibility. As a
member of the bar and as an officer of the court, a lawyer
ought to be keenly aware that the chief safeguard of the
body politic is respect for the law and its magistrates.

There is nothing more effective than the written
word by which counsel can persuade this Court of the
righteousness of his cause. For if truth were self-evident, a
memorandum would be completely unnecessary and
superfluous.

The inability of counsel to prepare a memorandum
worthy of this Courts consideration is an ejemplo malo to
the legal profession as it betrays no genuine interest in the
263

cause he claims to espouse. Or did counsel think he can
earn his moment of glory without the hard work and
dedication called for by his petition?
A FINAL WORD

On Wednesday, January 23, 2008, a defective tanker
containing 2,000 liters of gasoline and 14,000 liters of diesel
exploded in the middle of the street a short distance from
the exit gate of the Pandacan Terminals, causing death,
extensive damage and a frightening conflagration in the
vicinity of the incident. Need we say anthing about what
will happen if it is the estimated 162 to 211 million
liters
[175]
of petroleum products in the terminal complex
which blow up?

WHEREFORE, the motions for leave to intervene of
Chevron Philippines Inc., Petron Corporation and Pilipinas
Shell Petroleum Corporation, and the Republic of the
Philippines, represented by the Department of Energy, are
hereby GRANTED. Their respective motions for
reconsideration are hereby DENIED. The Regional Trial
Court, Manila, Branch 39 is ORDERED to DISMISS the
consolidated cases of Civil Case No. 03-106377 and Civil
Case No. 03-106380.

We reiterate our order to respondent Mayor of the
City of Manila to enforce Ordinance No. 8027. In
coordination with the appropriate agencies and other
parties involved, respondent Mayor is hereby ordered to
oversee the relocation and transfer of the Pandacan
Terminals out of its present site.

To ensure the orderly transfer, movement and
relocation of assets and personnel, the intervenors Chevron
Philippines Inc., Petron Corporation and Pilipinas Shell
Petroleum Corporation shall, within a non-extendible
period of ninety (90) days, submit to the Regional Trial
Court of Manila, Branch 39, the comprehensive plan and
relocation schedule which have allegedly been
264

prepared. The presiding judge of Manila RTC, Branch 39
will monitor the strict enforcement of this resolution.

Atty. Samson Alcantara is hereby ordered to explain
within five (5) days from notice why he should not be
disciplined for his refusal, or inability, to file a
memorandum worthy of the consideration of this Court.

Treble costs against petitioners counsel, Atty.
Samson Alcantara.
EN BANC


DATU ZALDY UY AMPATUAN, G.R. No. 190259
ANSARUDDIN ADIONG, REGIE
SAHALI-GENERALE
Petitioners, Present:

CORONA, C.J.,
CARPIO,
CARPIO MORALES,
VELASCO, JR.,
NACHURA,
LEONARDO-DE
CASTRO,
- versus - BRION,
PERALTA,
BERSAMIN,
DEL CASTILLO,
ABAD,
VILLARAMA,
JR.,
PEREZ,
MENDOZA,
and
SERENO, JJ.
HON. RONALDO PUNO, in his capacity
as Secretary of the Department of Interior
and Local Government and alter-ego of
265

President Gloria Macapagal-Arroyo,
and anyone acting in his stead and on
behalf of the President of the Philippines,
ARMED FORCES OF THE PHILIPPINES
(AFP), or any of their units operating in
the Autonomous Region in Muslim
Mindanao (ARMM), and PHILIPPINE
NATIONAL POLICE, or any of their Promulgated:
units operating in ARMM,
Respondents. June 7,
2011

x -----------------------------------------------------------------------------
----------- x




DECISION

ABAD, J.:


On November 24, 2009, the day after the gruesome
massacre of 57 men and women, including some news
reporters, then President Gloria Macapagal-Arroyo issued
Proclamation 1946,
[1]
placing the Provinces of
Maguindanao and Sultan Kudarat and the City
of Cotabato under a state of emergency. She directed the
Armed Forces of the Philippines (AFP) and the Philippine
National Police (PNP) to undertake such measures as may
be allowed by the Constitution and by law to prevent and
suppress all incidents of lawless violence in the named
places.

Three days later or on November 27, President
Arroyo also issued Administrative Order 273 (AO
273)
[2]
transferring supervision of the Autonomous
Region of Muslim Mindanao (ARMM) from the Office of the
President to the Department of Interior and Local
Government (DILG). But, due to issues raised over the
266

terminology used in AO 273, the President issued
Administrative Order 273-A (AO 273-A) amending the
former, by delegating instead of transferring
supervision of the ARMM to the DILG.
[3]


Claiming that the Presidents issuances encroached on
the ARMMs autonomy, petitioners Datu Zaldy Uy
Ampatuan, Ansaruddin Adiong, and Regie Sahali-Generale,
all ARMM officials,
[4]
filed this petition for prohibition under
Rule 65. They alleged that the proclamation and the orders
empowered the DILG Secretary to take over ARMMs
operations and seize the regional governments powers, in
violation of the principle of local autonomy under Republic
Act 9054 (also known as the Expanded ARMM Act) and the
Constitution. The President gave the DILG Secretary the
power to exercise, not merely administrative supervision,
but control over the ARMM since the latter could suspend
ARMM officials and replace them.
[5]


Petitioner ARMM officials claimed that the President
had no factual basis for declaring a state of emergency,
especially in the Province of Sultan Kudarat and the City
ofCotabato, where no critical violent incidents occurred.
The deployment of troops and the taking over of the ARMM
constitutes an invalid exercise of the Presidents emergency
powers.
[6]
Petitioners asked that Proclamation 1946 as well
as AOs 273 and 273-A be declared unconstitutional and that
respondents DILG Secretary, the AFP, and the PNP be
enjoined from implementing them.

In its comment for the respondents,
[7]
the Office of
the Solicitor General (OSG) insisted that the President
issued Proclamation 1946, not to deprive the ARMM of its
autonomy, but to restore peace and order in subject
places.
[8]
She issued the proclamation pursuant to her
calling out power
[9]
as Commander-in-Chief under the
first sentence of Section 18, Article VII of the
Constitution. The determination of the need to exercise
this power rests solely on her wisdom.
[10]
She must use her
judgment based on intelligence reports and such best
information as are available to her to call out the armed
forces to suppress and prevent lawless violence wherever
and whenever these reared their ugly heads.

On the other hand, the President merely delegated
through AOs 273 and 273-A her supervisory powers over
the ARMM to the DILG Secretary who was her alter ego any
way. These orders did not authorize a take over of the
ARMM. They did not give him blanket authority to suspend
or replace ARMM officials.
[11]
The delegation was necessary
to facilitate the investigation of the mass killings.
[12]
Further,
267

the assailed proclamation and administrative orders did not
provide for the exercise of emergency powers.
[13]


Although normalcy has in the meantime returned to
the places subject of this petition, it might be relevant to
rule on the issues raised in this petition since some acts
done pursuant to Proclamation 1946 and AOs 273 and 273-
A could impact on the administrative and criminal cases
that the government subsequently filed against those
believed affected by such proclamation and orders.

The Issues Presented

The issues presented in this case are:

1. Whether or not Proclamation 1946 and AOs
273 and 273-A violate the principle of local autonomy
under Section 16, Article X of the Constitution, and Section
1, Article V of the Expanded ARMM Organic Act;

2. Whether or not President Arroyo invalidly
exercised emergency powers when she called out the AFP
and the PNP to prevent and suppress all incidents of lawless
violence in Maguindanao, Sultan Kudarat, and Cotabato
City; and

3. Whether or not the President had factual bases
for her actions.

The Rulings of the Court

We dismiss the petition.

One. The claim of petitioners that the subject
proclamation and administrative orders violate the
principle of local autonomy is anchored on the allegation
that, through them, the President authorized the DILG
Secretary to take over the operations of the ARMM and
assume direct governmental powers over the region.

But, in the first place, the DILG Secretary did not take
over control of the powers of the ARMM. After law
enforcement agents took respondent Governor of ARMM
into custody for alleged complicity in the Maguindanao
268

massacre, the ARMM Vice-Governor, petitioner Ansaruddin
Adiong, assumed the vacated post on December 10, 2009
pursuant to the rule on succession found in Article VII,
Section 12,
[14]
of RA 9054. In turn, Acting Governor Adiong
named the then Speaker of the ARMM Regional Assembly,
petitioner Sahali-Generale, Acting ARMM Vice-
Governor.
[15]
In short, the DILG Secretary did not take over
the administration or operations of the ARMM.

Two. Petitioners contend that the President
unlawfully exercised emergency powers when she ordered
the deployment of AFP and PNP personnel in the places
mentioned in the proclamation.
[16]
But such deployment is
not by itself an exercise of emergency powers as
understood under Section 23 (2), Article VI of the
Constitution, which provides:

SECTION 23. x x x (2) In times of war or
other national emergency, the Congress may,
by law, authorize the President, for a limited
period and subject to such restrictions as it
may prescribe, to exercise powers necessary
and proper to carry out a declared national
policy. Unless sooner withdrawn by resolution
of the Congress, such powers shall cease upon
the next adjournment thereof.

The President did not proclaim a national emergency,
only a state of emergency in the three places
mentioned. And she did not act pursuant to any law
enacted by Congress that authorized her to exercise
extraordinary powers. The calling out of the armed forces
to prevent or suppress lawless violence in such places is a
power that the Constitution directly vests in the
President. She did not need a congressional authority to
exercise the same.

Three. The Presidents call on the armed forces to
prevent or suppress lawless violence springs from the
power vested in her under Section 18,

Article VII of the
Constitution, which provides.
[17]


SECTION 18. The President shall be the
Commander-in-Chief of all armed forces of
the Philippines and whenever it becomes
necessary, he may call out such armed forces
to prevent or suppress lawless violence,
invasion or rebellion. x x x

While it is true that the Court may inquire into the
factual bases for the Presidents exercise of the above
269

power,
[18]
it would generally defer to her judgment on the
matter. As the Court acknowledged in Integrated Bar of the
Philippines v. Hon. Zamora,
[19]
it is clearly to the President
that the Constitution entrusts the determination of the
need for calling out the armed forces to prevent and
suppress lawless violence. Unless it is shown that such
determination was attended by grave abuse of discretion,
the Court will accord respect to the Presidents judgment.
Thus, the Court said:

If the petitioner fails, by way of proof,
to support the assertion that the President
acted without factual basis, then this Court
cannot undertake an independent
investigation beyond the pleadings. The
factual necessity of calling out the armed
forces is not easily quantifiable and cannot be
objectively established since matters
considered for satisfying the same is a
combination of several factors which are not
always accessible to the courts. Besides the
absence of textual standards that the court
may use to judge necessity, information
necessary to arrive at such judgment might
also prove unmanageable for the
courts. Certain pertinent information might
be difficult to verify, or wholly unavailable to
the courts. In many instances, the evidence
upon which the President might decide that
there is a need to call out the armed forces
may be of a nature not constituting technical
proof.

On the other hand, the President, as
Commander-in-Chief has a vast intelligence
network to gather information, some of which
may be classified as highly confidential or
affecting the security of the state. In the
exercise of the power to call, on-the-spot
decisions may be imperatively necessary in
emergency situations to avert great loss of
human lives and mass destruction of
property. Indeed, the decision to call out the
military to prevent or suppress lawless
violence must be done swiftly and decisively if
it were to have any effect at all. x x x.
[20]


Here, petitioners failed to show that the declaration
of a state of emergency in the Provinces of Maguindanao,
Sultan Kudarat and Cotabato City, as well as the Presidents
270

exercise of the calling out power had no factual basis.
They simply alleged that, since not all areas under the
ARMM were placed under a state of emergency, it follows
that the take over of the entire ARMM by the DILG
Secretary had no basis too.
[21]


But, apart from the fact that there was no such take
over to begin with, the OSG also clearly explained the
factual bases for the Presidents decision to call out the
armed forces, as follows:

The Ampatuan and Mangudadatu clans
are prominent families engaged in the
political control of Maguindanao. It is also a
known fact that both families have an arsenal
of armed followers who hold elective
positions in various parts of the ARMM and
the rest of Mindanao.

Considering the fact that the principal
victims of the brutal bloodshed are members
of the Mangudadatu family and the main
perpetrators of the brutal killings are
members and followers of the Ampatuan
family, both the military and police had to
prepare for and prevent reported retaliatory
actions from the Mangudadatu clan and
additional offensive measures from the
Ampatuan clan.

x x x x

The Ampatuan forces are estimated to
be approximately two thousand four hundred
(2,400) persons, equipped with about two
thousand (2,000) firearms, about four
hundred (400) of which have been accounted
for. x x x

As for the Mangudadatus, they have an
estimated one thousand eight hundred
(1,800) personnel, with about two hundred
(200) firearms. x x x

Apart from their own personal forces,
both clans have Special Civilian Auxiliary Army
271

(SCAA) personnel who support them: about
five hundred (500) for the Ampatuans and
three hundred (300) for the Mangudadatus.

What could be worse than the armed
clash of two warring clans and their armed
supporters, especially in light of intelligence
reports on the potential involvement of rebel
armed groups (RAGs).

One RAG was reported to have planned
an attack on the forces of Datu Andal
Ampatuan, Sr. to show support and sympathy
for the victims. The said attack shall worsen
the age-old territorial dispute between the
said RAG and the Ampatuan family.

x x x x

On the other hand, RAG faction which is
based in Sultan Kudarat was reported to have
received three million pesos (P3,000,000.00)
from Datu Andal Ampatuan, Sr. for the
procurement of ammunition. The said faction
is a force to reckon with because the group is
well capable of launching a series of violent
activities to divert the attention of the people
and the authorities away from the multiple
murder case. x x x

In addition, two other factions of a RAG
are likely to support the Mangudadatu family.
The Cotabato-based faction has the strength
of about five hundred (500) persons and three
hundred seventy-two (372) firearms while the
Sultan Kudarat-based faction has the strength
of about four hundred (400) persons and
three hundred (300) firearms and was
reported to be moving towards Maguindanao
to support the Mangudadatu clan in its armed
fight against the Ampatuans.
[22]


In other words, the imminence of violence and
anarchy at the time the President issued Proclamation 1946
was too grave to ignore and she had to act to prevent
further bloodshed and hostilities in the places
272

mentioned. Progress reports also indicated that there was
movement in these places of both high-powered firearms
and armed men sympathetic to the two clans.
[23]
Thus, to
pacify the peoples fears and stabilize the situation, the
President had to take preventive action. She called out the
armed forces to control the proliferation of loose firearms
and dismantle the armed groups that continuously
threatened the peace and security in the affected places.

Notably, the present administration of President
Benigno Aquino III has not withdrawn the declaration of a
state of emergency under Proclamation 1946. It has been
reported
[24]
that the declaration would not be lifted soon
because there is still a need to disband private armies and
confiscate loose firearms. Apparently, the presence of
troops in those places is still necessary to ease fear and
tension among the citizenry and prevent and suppress any
violence that may still erupt, despite the passage of more
than a year from the time of the Maguindanao massacre.

Since petitioners are not able to demonstrate that
the proclamation of state of emergency in the subject
places and the calling out of the armed forces to prevent or
suppress lawless violence there have clearly no factual
bases, the Court must respect the Presidents actions.

WHEREFORE, the petition is DISMISSED for lack of
merit.

SO ORDERED.

ROBERTO A. ABAD
Associate Justice


WE CONCUR:

Republic of the Philippines
Supreme Court
Manila

EN BANC

273

LUCIANO VELOSO, ABRAHAM
CABOCHAN, JOCELYN DAWIS-
ASUNCION and MARLON M. LACSON,
Petitioners,






- versus -






G.R. No. 193677

Present:

CORONA, C.J.,
CARPIO,
VELASCO, JR.,
LEONARDO-DE CASTRO,
BRION,
PERALTA,
BERSAMIN,
DEL CASTILLO,
ABAD,
VILLARAMA, JR.,
PEREZ,
MENDOZA,
SERENO,
*
and

COMMISSION ON AUDIT,
Respondent.
REYES,
**
JJ.

Promulgated:

September 6, 2011
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - x


D E C I S I O N


PERALTA, J.:

This is a Petition for Review on Certiorari under Rule
65 of the Rules of Court assailing Decision No. 2008-
088
[1]
dated September 26, 2008 and Decision No. 2010-
077
[2]
dated August 23, 2010 of the Commission on Audit
(COA) sustaining Notice of Disallowance (ND) No. 06-010-
100-05
[3]
dated May 24, 2006 disallowing the payment of
monetary reward as part of the Exemplary Public Service
274

Award (EPSA) to former three-term councilors of the City of
Manila authorized by City Ordinance No. 8040.

The facts of the case are as follows:

On December 7, 2000, the City Council of Manila
enacted Ordinance No. 8040 entitled An Ordinance
Authorizing the Conferment of Exemplary Public Service
Award to Elective Local Officials of Manila Who Have Been
Elected for Three (3) Consecutive Terms in the Same
Position. Section 2 thereof provides:

SEC. 2. The EPSA shall consist of a Plaque
of Appreciation, retirement and gratuity pay
remuneration equivalent to the actual time
served in the position for three (3) consecutive
terms, subject to the availability of funds as
certified by the City Treasurer. PROVIDED, That
[it] shall be accorded to qualified elected City
Officials on or before the first day of service in
an appropriated public ceremony to be
conducted for the purpose. PROVIDED
FURTHER, That this Ordinance shall only cover
the Position of Mayor, Vice-Mayor and
Councilor: PROVIDED FURTHERMORE, That
those who were elected for this term and run
for higher elective position thereafter, after
being elected shall still be eligible for this
award for the actual time served: PROVIDED
FINALLY That the necessary and incidental
expenses needed to implement the provisions
of this Ordinance shall be appropriated and be
included in the executive budget for the year
when any city official will qualify for the
Award.
[4]



The ordinance was deemed approved on August 23, 2002.

Pursuant to the ordinance, the City made partial
payments in favor of the following former councilors:

Councilor/Recipient
s
Check Date Amount
Abraham C.
Cabochan
35301
0
06/07/0
5
P1,658,989.09
Julio E. Logarta, Jr. 35315 06/14/0 P1,658,989.08
275

6 5
Luciano M. Veloso 35377
8
06/30/0
5
P1,658,989.08
Jocelyn Dawis-
Asuncion
35315
5
06/14/0
5
P1,658,989.08
Marlon M. Lacson 35315
7
06/14/0
5
P1,658,989.08
Heirs of Hilarion C.
Silva
35309
3
06/09/0
5
P1,628,311.59
TOTAL P9,923,257.00
[5
]



On August 8, 2005, Atty. Gabriel J. Espina (Atty.
Espina), Supervising Auditor of the City of Manila, issued
Audit Observation Memorandum (AOM) No. 2005-
100(05)07(05)
[6]
with the following observations:

1. The initial payment of monetary
reward as part of Exemplary Public Service
Award (EPSA) amounting to P9,923,257.00 to
former councilors of the City Government of
Manila who have been elected for three (3)
consecutive terms to the same position as
authorized by City Ordinance No. 8040 is
without legal basis.

2. The amount granted as monetary
reward is excessive and tantamount to double
compensation in contravention to Article 170
(c) of the IRR of RA 7160 which provides that
no elective or appointive local official shall
receive additional, double or indirect
compensation unless specifically authorized by
law.

3. The appropriations for retirement
gratuity to implement EPSA ordinance was
classified as Maintenance and Other Operating
Expenses instead of Personal Services contrary
to Section 7, Volume III of the Manual on the
New Government Accounting System (NGAS)
for local government units and COA Circular
No. 2004-008 dated September 20, 2004 which
provide the updated description of accounts
under the NGAS.
[7]


276

After evaluation of the AOM, the Director, Legal and
Adjudication Office (LAO)-Local of the COA issued ND No.
06-010-100-05
[8]
dated May 24, 2006.

On November 9, 2006, former councilors Jocelyn
Dawis-Asuncion (Dawis-Asuncion), Luciano M. Veloso
(Veloso), Abraham C. Cabochan (Cabochan), Marlon M.
Lacson (Lacson), Julio E. Logarta, Jr., and Monina U. Silva,
City Accountant Gloria C. Quilantang, City Budget Officer
Alicia Moscaya and then Vice Mayor and Presiding Officer
Danilo B. Lacuna filed a Motion to Lift the Notice of
Disallowance.
[9]
In its Decision No. 2007-171
[10]
dated
November 29, 2007, the LAO-Local decided in favor of the
movants, the pertinent portion of which reads:

WHEREFORE, premises considered, the
motion of former Vice- Mayor Danilo B.
Lacuna, et al., is GRANTED and ND No. 06-010-
100-05 dated May 24, 2006 is hereby ordered
lifted as the reasons for the disallowance have
been sufficiently explained. This decision,
however, should not be taken as precedence
(sic) to other or similar personal benefits that a
local government unit may extend which
should be appreciated based on their separate
and peculiar circumstances.
[11]



Citing Article 170 of the Implementing Rules and
Regulations (IRR) of Republic Act (RA) No. 7160, the LAO-
Local held that the monetary reward given to the former
councilors can be one of gratuity and, therefore, cannot be
considered as additional, double or indirect compensation.
Giving importance to the principle of local autonomy, the
LAO-local upheld the power of local government units
(LGUs) to grant allowances. More importantly, it
emphasized that the Department of Budget and
Management (DBM) did not disapprove the appropriation
for the EPSA of the City which indicate that the same is
valid.
[12]


Upon review, the COA rendered the assailed Decision
No. 2008-088 sustaining ND No. 06-010-100-05.
[13]
The
motion for reconsideration was likewise denied in Decision
No. 2010-077.
[14]
The COA opined that the monetary reward
under the EPSA is covered by the term compensation.
Though it recognizes the local autonomy of LGUs, it
emphasized the limitations thereof set forth in the Salary
Standardization Law (SSL). It explained that the SSL does
277

not authorize the grant of such monetary reward or
gratuity. It also stressed the absence of a specific law
passed by Congress which ordains the conferment of such
monetary reward or gratuity to the former councilors.
[15]
In
Decision No. 2010-077, in response to the question on its
jurisdiction to rule on the legality of the disbursement, the
COA held that it is vested by the Constitution the power to
determine whether government entities comply with laws
and regulations in disbursing government funds and to
disallow irregular disbursements.
[16]


Aggrieved, petitioners Veloso, Cabochan, Dawis-
Asuncion and Lacson come before the Court in this special
civil action for certiorari alleging grave abuse of discretion
on the part of the COA. Specifically, petitioners claim that:

The respondent Commission on Audit
did not only commit a reversible error but was,
in fact, guilty of grave abuse of discretion
amounting to lack or excess of jurisdiction
when it ruled that the monetary award given
under the EPSA partakes of the nature of an
additional compensation prohibited under the
Salary Standardization Law, and other existing
laws, rules and regulations, and not a
GRATUITY voluntarily given in return for a
favor or services rendered purely out of
generosity of the giver or grantor. (Plastic
Tower Corporation vs. NLRC, 172 SCRA 580-
581).

Apart from being totally oblivious of the
fact that the monetary award given under the
EPSA was intended or given in return for the
exemplary service rendered by its recipient(s),
the respondent COA further committed grave
abuse of discretion when it effectively nullified
a duly-enacted ordinance which is essentially a
judicial function. In other words, in the guise of
disallowing the disbursement in question, the
respondent Commission arrogated unto itself
an authority it did not possess, and a
prerogative it did not have.
[17]



On November 30, 2010, the Court issued a Status
Quo Ante Order
[18]
requiring the parties to maintain
278

the status quo prevailing before the implementation of the
assailed COA decisions.

There are two issues for resolution: (1) whether the
COA has the authority to disallow the disbursement of local
government funds; and (2) whether the COA committed
grave abuse of discretion in affirming the disallowance
of P9,923,257.00 covering the EPSA of former three-term
councilors of the City of Manila authorized by Ordinance
No. 8040.

In their Reply,
[19]
petitioners insist that the power and
authority of the COA to audit government funds and
accounts does not carry with it in all instances the power to
disallow a particular disbursement.
[20]
Citing Guevara v.
Gimenez,
[21]
petitioners claim that the COA has no
discretion or authority to disapprove payments on the
ground that the same was unwise or that the amount is
unreasonable. The COA's remedy, according to petitioners,
is to bring to the attention of the proper administrative
officer such expenditures that, in its opinion, are irregular,
unnecessary, excessive or extravagant.
[22]
While admitting
that the cited case was decided by the Court under the
1935 Constitution, petitioners submit that the same
principle applies in the present case.

We do not agree.

As held in National Electrification Administration v.
Commission on Audit,
[23]
the ruling in Guevara cited by
petitioners has already been overturned by the Court
inCaltex Philippines, Inc. v. Commission on Audit.
[24]
The
Court explained
[25]
that under the 1935 Constitution, the
Auditor General could not correct irregular, unnecessary,
excessive or extravagant expenditures of public funds, but
could only bring the matter to the attention of the proper
administrative officer. Under the 1987 Constitution,
however, the COA is vested with the authority to determine
whether government entities, including LGUs, comply with
laws and regulations in disbursing government funds, and
to disallow illegal or irregular disbursements of these funds.

Section 2, Article IX-D of the Constitution gives a
broad outline of the powers and functions of the COA, to
wit:

Section 2. (1) The Commission on Audit
shall have the power, authority, and duty to
examine, audit, and settle all accounts
279

pertaining to the revenue and receipts of, and
expenditures or uses of funds and property,
owned or held in trust by, or pertaining to, the
Government, or any of its subdivisions,
agencies, or instrumentalities, including
government-owned or controlled corporations
with original charters, and on a post-audit
basis: (a) constitutional bodies, commissions
and offices that have been granted fiscal
autonomy under this Constitution; (b)
autonomous state colleges and universities; (c)
other government-owned or controlled
corporations and their subsidiaries; and (d)
such non-governmental entities receiving
subsidy or equity, directly or indirectly, from or
through the Government, which are required
by law or the granting institution to submit to
such audit as a condition of subsidy or equity.
However, where the internal control system of
the audited agencies is inadequate, the
Commission may adopt such measures,
including temporary or special pre-audit, as are
necessary and appropriate to correct the
deficiencies. It shall keep the general accounts
of the Government and, for such period as may
be provided by law, preserve the vouchers and
other supporting papers pertaining thereto.

(2) The Commission shall have
exclusive authority, subject to the limitations in
this Article, to define the scope of its audit and
examination, establish the techniques and
methods required therefor, and promulgate
accounting and auditing rules and regulations,
including those for the prevention and
disallowance of irregular, unnecessary,
excessive, extravagant, or unconscionable
expenditures, or uses of government funds
and properties.
[26]



Section 11, Chapter 4, Subtitle B, Title I, Book V of the
Administrative Code of 1987 echoes this constitutional
mandate to COA.

Under the first paragraph of the above provision, the
COA's audit jurisdiction extends to the government, or any
of its subdivisions, agencies, or instrumentalities,including
government-owned or controlled corporations with original
charters. Its jurisdiction likewise covers, albeit on a post-
audit basis, the constitutional bodies, commissions and
offices that have been granted fiscal autonomy,
280

autonomous state colleges and universities, other
government-owned or controlled corporations and their
subsidiaries, and such non-governmental entities receiving
subsidy or equity from or through the government. The
power of the COA to examine and audit government
agencies cannot be taken away from it as Section 3, Article
IX-D of the Constitution mandates that no law shall be
passed exempting any entity of the Government or its
subsidiary in any guise whatever, or any investment of
public funds, from the jurisdiction of the *COA+.

Pursuant to its mandate as the guardian of public
funds, the COA is vested with broad powers over all
accounts pertaining to government revenue and
expenditures and the uses of public funds and
property.
[27]
This includes the exclusive authority to define
the scope of its audit and examination, establish the
techniques and methods for such review, and promulgate
accounting and auditing rules and regulations.
[28]
The COA is
endowed with enough latitude to determine, prevent and
disallow irregular, unnecessary, excessive, extravagant or
unconscionable expenditures of government funds.
[29]
It is
tasked to be vigilant and conscientious in safeguarding the
proper use of the government's, and ultimately the
people's, property.
[30]
The exercise of its general audit
power is among the constitutional mechanisms that gives
life to the check and balance system inherent in our form of
government.
[31]


The Court had therefore previously upheld the
authority of the COA to disapprove payments which it finds
excessive and disadvantageous to the Government; to
determine the meaning of public bidding and when there
is failure in the bidding; to disallow expenditures which it
finds unnecessary according to its rules even if disallowance
will mean discontinuance of foreign aid; to disallow a
contract even after it has been executed and goods have
been delivered.
[32]


Thus, LGUs, though granted local fiscal autonomy,
are still within the audit jurisdiction of the COA.

Now on the more important issue of whether the COA
properly exercised its jurisdiction in disallowing the
disbursement of the City of Manila's funds for the EPSA of
its former three-term councilors.

It is the general policy of the Court to sustain the
decisions of administrative authorities, especially one which
is constitutionally-created not only on the basis of the
281

doctrine of separation of powers but also for their
presumed expertise in the laws they are entrusted to
enforce. Findings of administrative agencies are accorded
not only respect but also finality when the decision and
order are not tainted with unfairness or arbitrariness that
would amount to grave abuse of discretion.
[33]
It is only
when the COA has acted without or in excess of jurisdiction,
or with grave abuse of discretion amounting to lack or
excess of jurisdiction, that this Court entertains a petition
questioning its rulings.
[34]
There is grave abuse of discretion
when there is an evasion of a positive duty or a virtual
refusal to perform a duty enjoined by law or to act in
contemplation of law as when the judgment rendered is
not based on law and evidence but on caprice, whim and
despotism.
[35]


In this case, we find no grave abuse of discretion on
the part of the COA in issuing the assailed decisions as will
be discussed below.


Petitioners claim that the grant of the retirement and
gratuity pay remuneration is a valid exercise of the powers
of the Sangguniang Panlungsod set forth in RA 7160.

We disagree.

Indeed, Section 458 of RA 7160 defines the power,
duties, functions and compensation of the Sangguniang
Panlungsod, to wit:

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:

x x x x

(viii) Determine the
positions and salaries, wages,
allowances and other emoluments
282

and benefits of officials and
employees paid wholly or mainly
from city funds and provide for
expenditures necessary for the
proper conduct of programs,
projects, services, and activities of
the city government.


In the exercise of the above power, the City Council
of Manila enacted on December 7, 2000 Ordinance No.
8040, but the same was deemed approved on August 23,
2002. The ordinance authorized the conferment of the
EPSA to the former three-term councilors and, as part of
the award, the qualified city officials were to be given
retirement and gratuity pay remuneration. We believe
that the award is a gratuity which is a free gift, a present,
or benefit of pecuniary value bestowed without claim or
demand, or without consideration.
[36]


However, as correctly held by the COA, the above
power is not without limitations. These limitations are
embodied in Section 81 of RA 7160, to wit:

SEC. 81. Compensation of Local Officials
and Employees. The compensation of local
officials and personnel shall be determined by
the sanggunian concerned: Provided, That the
increase in compensation of elective local
officials shall take effect only after the terms of
office of those approving such increase shall
have expired: Provided, further, That the
increase in compensation of the appointive
officials and employees shall take effect as
provided in the ordinance authorizing such
increase; Provided however, That said increases
shall not exceed the limitations on budgetary
allocations for personal services provided
under Title Five, Book II of this Code: Provided
finally, That such compensation may be based
upon the pertinent provisions of Republic Act
Numbered Sixty-seven fifty-eight (R.A. No.
6758), otherwise known as the Compensation
and Position Classification Act of 1989.


Moreover, the IRR of RA 7160 reproduced the
Constitutional provision that no elective or appointive
283

local official or employee shall receive additional, double, or
indirect compensation, unless specifically authorized by
law, nor accept without the consent of the Congress, any
present, emoluments, office, or title of any kind from any
foreign government. Section 325 of the law limit the total
appropriations for personal services
[37]
of a local
government unit to not more than 45% of its total annual
income from regular sources realized in the next preceding
fiscal year.

While it may be true that the above appropriation did
not exceed the budgetary limitation set by RA 7160, we find
that the COA is correct in sustaining ND No. 06-010-100-05.

Section 2 of Ordinance No. 8040 provides for the
payment of retirement and gratuity pay remuneration
equivalent to the actual time served in the position for
three (3) consecutive terms as part of the EPSA. The
recomputation of the award disclosed that it is equivalent
to the total compensation received by each awardee for
nine years that includes basic salary, additional
compensation, Personnel Economic Relief Allowance,
representation and transportation allowance, rice
allowance, financial assistance, clothing allowance,
13
th
month pay and cash gift.
[38]
This is not disputed by
petitioners. There is nothing wrong with the local
government granting additional benefits to the officials and
employees. The laws even encourage the granting of
incentive benefits aimed at improving the services of these
employees. Considering, however, that the payment of
these benefits constitute disbursement of public funds, it
must not contravene the law on disbursement of public
funds.
[39]


As clearly explained by the Court in Yap v. Commission
on Audit,
[40]
the disbursement of public funds, salaries and
benefits of government officers and employees should be
granted to compensate them for valuable public services
rendered, and the salaries or benefits paid to such officers
or employees must be commensurate with services
rendered. In the same vein, additional allowances and
benefits must be shown to be necessary or relevant to the
fulfillment of the official duties and functions of the
government officers and employees. Without this
limitation, government officers and employees may be paid
enormous sums without limit or without justification
necessary other than that such sums are being paid to
someone employed by the government. Public funds are
the property of the people and must be used prudently at
all times with a view to prevent dissipation and waste.
[41]


284

Undoubtedly, the above computation of the
awardees' reward is excessive and tantamount to double
and additional compensation. This cannot be justified by
the mere fact that the awardees have been elected for
three (3) consecutive terms in the same position. Neither
can it be justified that the reward is given as a gratuity at
the end of the last term of the qualified elective official. The
fact remains that the remuneration is equivalent to
everything that the awardees received during the entire
period that he served as such official. Indirectly, their
salaries and benefits are doubled, only that they receive
half of them at the end of their last term.

The purpose of the prohibition against additional or
double compensation is best expressed in Peralta v. Auditor
General,
[42]
to wit:

This is to manifest a commitment to the
fundamental principle that a public office is a
public trust. It is expected of a government
official or employee that he keeps uppermost
in mind the demands of public welfare. He is
there to render public service. He is of course
entitled to be rewarded for the performance of
the functions entrusted to him, but that should
not be the overriding consideration. The
intrusion of the thought of private gain should
be unwelcome. The temptation to further
personal ends, public employment as a means
for the acquisition of wealth, is to be resisted.
That at least is the idea. There is then to be an
awareness on the part of the officer or
employee of the government that he is to
receive only such compensation as may be
fixed by law. With such a realization, he is
expected not to avail himself of devious or
circuitous means to increase the
remuneration attached to his position.
[43]



Verily, the COA's assailed decisions were made in
faithful compliance with its mandate and in judicious
exercise of its general audit power as conferred on it by the
Constitution.
[44]
The COA adheres to the policy that
government funds and property should be fully protected
and conserved and that irregular, unnecessary, excessive or
extravagant expenditures or uses of such funds and
property should be prevented.
[45]


285

However, in line with existing jurisprudence,
[46]
we
need not require the refund of the disallowed amount
because all the parties acted in good faith. In this case, the
questioned disbursement was made pursuant to an
ordinance enacted as early as December 7, 2000 although
deemed approved only on August 22, 2002. The city
officials disbursed the retirement and gratuity pay
remuneration in the honest belief that the amounts given
were due to the recipients and the latter accepted the
same with gratitude, confident that they richly deserve
such reward.

WHEREFORE, the petition is DISMISSED. Decision No.
2008-088 dated September 26, 2008 and Decision No.
2010-077 dated August 23, 2010 of the Commission on
Audit, are AFFIRMED WITH MODIFICATION. The recipients
need not refund the retirement and gratuity pay
remuneration that they already received.

Accordingly, the Status Quo Ante Order issued by the
Court on November 30, 2010 is hereby RECALLED. In view,
however, of this Court's decision not to require the refund
of the amounts already received, the Commission on Audit
is ORDERED to cease and desist from enforcing the Notice
of Finality of Decision
[47]
dated October 5, 2010.

SO ORDERED.

Republic of the Philippines
SUPREME COURT
Manila
EN BANC

G.R. No. 112497 August 4, 1994
HON. FRANKLIN M. DRILON, in his capacity as SECRETARY
OF JUSTICE, petitioner,
vs.
MAYOR ALFREDO S. LIM, VICE-MAYOR JOSE L. ATIENZA,
CITY TREASURER ANTHONY ACEVEDO, SANGGUNIANG
PANGLUNSOD AND THE CITY OF MANILA, respondents.
The City Legal Officer for petitioner.
Angara, Abello, Concepcion, Regala & Cruz for Caltex
(Phils.).
Joseph Lopez for Sangguniang Panglunsod of Manila.
L.A. Maglaya for Petron Corporation.
286


CRUZ, J.:
The principal issue in this case is the constitutionality of
Section 187 of the Local Government Code reading as
follows:
Procedure For Approval And Effectivity Of Tax
Ordinances And Revenue Measures;
Mandatory Public Hearings. The procedure
for approval of local tax ordinances and
revenue measures shall be in accordance with
the provisions of this Code: Provided, That
public hearings shall be conducted for the
purpose prior to the enactment thereof;
Provided, further, That any question on the
constitutionality or legality of tax ordinances or
revenue measures may be raised on appeal
within thirty (30) days from the effectivity
thereof to the Secretary of Justice who shall
render a decision within sixty (60) days from
the date of receipt of the appeal: Provided,
however, That such appeal shall not have the
effect of suspending the effectivity of the
ordinance and the accrual and paymentof the
tax, fee, or charge levied therein: Provided,
finally, That within thirty (30) days after receipt
of the decision or the lapse of the sixty-day
period without the Secretary of Justice acting
upon the appeal, the aggrieved party may file
appropriate proceedings with a court of
competent jurisdiction.
Pursuant thereto, the Secretary of Justice had, on appeal to
him of four oil companies and a taxpayer, declared
Ordinance No. 7794, otherwise known as the Manila
Revenue Code, null and void for non-compliance with the
prescribed procedure in the enactment of tax ordinances
and for containing certain provisions contrary to law
andpublic policy.
1

In a petition for certiorari filed by the City of Manila, the
Regional Trial Court of Manila revoked the Secretary's
resolution and sustained the ordinance, holding inter
alia that the procedural requirements had been
observed.More importantly, it declared Section 187 of the
Local Government Code as unconstitutional because of its
vesture in the Secretary of Justice of the power of control
over local governments in violation of the policy of local
autonomy mandated in the Constitution and of the specific
provision therein conferring on the President of the
Philippines only the power of supervision over local
governments.
2

The present petition would have us reverse that decision.
The Secretary argues that the annulled Section 187 is
constitutional and that the procedural requirements for the
enactment of tax ordinances as specified in the Local
Government Code had indeed not been observed.
287

Parenthetically, this petition was originally dismissed by the
Court for non-compliance with Circular 1-88, the Solicitor
General having failed to submit a certified true copy of the
challenged decision.
3
However, on motion for
reconsideration with the required certified true copy of the
decision attached, the petition was reinstated in view of the
importance of the issues raised therein.
We stress at the outset that the lower court had jurisdiction
to consider the constitutionality of Section 187, this
authority being embraced in the general definition of the
judicial power to determine what are the valid and binding
laws by the criterion of their conformity to the fundamental
law. Specifically, BP 129 vests in the regional trial courts
jurisdiction over all civil cases in which the subject of the
litigation is incapable of pecuniary estimation,
4
even as the
accused in a criminal action has the right to question in his
defense the constitutionality of a law he is charged with
violating and of the proceedings taken against him,
particularly as they contravene the Bill of Rights. Moreover,
Article X, Section 5(2), of the Constitution vests in the
Supreme Court appellate jurisdiction over final judgments
and orders of lower courts in all cases in which the
constitutionality or validity of any treaty, international or
executive agreement, law, presidential decree,
proclamation, order, instruction, ordinance, or regulation is
in question.
In the exercise of this jurisdiction, lower courts are advised
to act with the utmost circumspection, bearing in mind the
consequences of a declaration of unconstitutionality upon
the stability of laws, no less than on the doctrine of
separation of powers. As the questioned act is usually the
handiwork of the legislative or the executive departments,
or both, it will be prudent for such courts, if only out of a
becoming modesty, to defer to the higher judgment of this
Court in the consideration of its validity, which is better
determined after a thorough deliberation by a collegiate
body and with the concurrence of the majority of those
who participated in its discussion.
5

It is also emphasized that every court, including this Court,
is charged with the duty of a purposeful hesitation before
declaring a law unconstitutional, on the theory that the
measure was first carefully studied by the executive and the
legislative departments and determined by them to be in
accordance with the fundamental law before it was finally
approved. To doubt is to sustain. The presumption of
constitutionality can be overcome only by the clearest
showing that there was indeed an infraction of the
Constitution, and only when such a conclusion is reached by
the required majority may the Court pronounce, in the
discharge of the duty it cannot escape, that the challenged
act must be struck down.
In the case before us, Judge Rodolfo C. Palattao declared
Section 187 of the Local Government Code unconstitutional
insofar as it empowered the Secretary of Justice to review
tax ordinances and, inferentially, to annul them. He cited
the familiar distinction between control and supervision,
288

the first being "the power of an officer to alter or modify or
set aside what a subordinate officer had done in the
performance of his duties and to substitute the judgment of
the former for the latter," while the second is "the power of
a superior officer to see to it that lower officers perform
their functions in accordance with law."
6
His conclusion
was that the challenged section gave to the Secretary the
power of control and not of supervision only as vested by
the Constitution in the President of the Philippines. This
was, in his view, a violation not only of Article X, specifically
Section 4 thereof,
7
and of Section 5 on the taxing powers of
local governments,
8
and the policy of local autonomy in
general.
We do not share that view. The lower court was rather
hasty in invalidating the provision.
Section 187 authorizes the Secretary of Justice to review
only the constitutionality or legality of the tax ordinance
and, if warranted, to revoke it on either or both of these
grounds. When he alters or modifies or sets aside a tax
ordinance, he is not also permitted to substitute his own
judgment for the judgment of the local government that
enacted the measure. Secretary Drilon did set aside the
Manila Revenue Code, but he did not replace it with his
own version of what the Code should be. He did not
pronounce the ordinance unwise or unreasonable as a basis
for its annulment. He did not say that in his judgment it was
a bad law. What he found only was that it was illegal. All he
did in reviewing the said measure was determine if the
petitioners were performing their functions in accordance
with law, that is, with the prescribed procedure for the
enactment of tax ordinances and the grant of powers to the
city government under the Local Government Code. As we
see it, that was an act not of control but of mere
supervision.
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 the doing of the act. He has no judgment on this matter
except to see to it that the rules are followed. In the
opinion of the Court, Secretary Drilon did precisely this, and
no more nor less than this, and so performed an act not of
control but of mere supervision.
The case of Taule v. Santos
9
cited in the decision has no
application here because the jurisdiction claimed by the
Secretary of Local Governments over election contests in
the Katipunan ng Mga Barangay was held to belong to the
Commission on Elections by constitutional provision. The
conflict was over jurisdiction, not supervision or control.
289

Significantly, a rule similar to Section 187 appeared in the
Local Autonomy Act, which provided in its Section 2 as
follows:
A tax ordinance shall go into effect on the
fifteenth day after its passage, unless the
ordinance shall provide otherwise: Provided,
however, That the Secretary of Finance shall
have authority to suspend the effectivity of any
ordinance within one hundred and twenty days
after receipt by him of a copy thereof, if, in his
opinion, the tax or fee therein levied or
imposed is unjust, excessive, oppressive, or
confiscatory, or when it is contrary to declared
national economy policy, and when the said
Secretary exercises this authority the
effectivity of such ordinance shall be
suspended, either in part or as a whole, for a
period of thirty days within which period the
local legislative body may either modify the tax
ordinance to meet the objections thereto, or
file an appeal with a court of competent
jurisdiction; otherwise, the tax ordinance or
the part or parts thereof declared suspended,
shall be considered as revoked. Thereafter, the
local legislative body may not reimpose the
same tax or fee until such time as the grounds
for the suspension thereof shall have ceased to
exist.
That section allowed the Secretary of Finance to suspend
the effectivity of a tax ordinance if, in his opinion, the tax or
fee levied was unjust, excessive, oppressive or confiscatory.
Determination of these flaws would involve the exercise
of judgment or discretion and not merely an examination of
whether or not the requirements or limitations of the law
had been observed; hence, it would smack of control rather
than mere supervision. That power was never questioned
before this Court but, at any rate, the Secretary of Justice is
not given the same latitude under Section 187. All he is
permitted to do is ascertain the constitutionality or legality
of the tax measure, without the right to declare that, in his
opinion, it is unjust, excessive, oppressive or confiscatory.
He has no discretion on this matter. In fact, Secretary Drilon
set aside the Manila Revenue Code only on two grounds, to
with, the inclusion therein of certain ultra vires provisions
and non-compliance with the prescribed procedure in its
enactment. These grounds affected the legality, not
the wisdom or reasonableness, of the tax measure.
The issue of non-compliance with the prescribed procedure
in the enactment of the Manila Revenue Code is another
matter.
In his resolution, Secretary Drilon declared that there were
no written notices of public hearings on the proposed
Manila Revenue Code that were sent to interested parties
as required by Art. 276(b) of the Implementing Rules of the
Local Government Code nor were copies of the proposed
ordinance published in three successive issues of a
290

newspaper of general circulation pursuant to Art. 276(a).
No minutes were submitted to show that the obligatory
public hearings had been held. Neither were copies of the
measure as approved posted in prominent places in the city
in accordance with Sec. 511(a) of the Local Government
Code. Finally, the Manila Revenue Code was not translated
into Pilipino or Tagalog and disseminated among the people
for their information and guidance, conformably to Sec.
59(b) of the Code.
Judge Palattao found otherwise. He declared that all the
procedural requirements had been observed in the
enactment of the Manila Revenue Code and that the City of
Manila had not been able to prove such compliance before
the Secretary only because he had given it only five days
within which to gather and present to him all the evidence
(consisting of 25 exhibits) later submitted to the trial court.
To get to the bottom of this question, the Court acceded to
the motion of the respondents and called for the elevation
to it of the said exhibits. We have carefully examined every
one of these exhibits and agree with the trial court that the
procedural requirements have indeed been observed.
Notices of the public hearings were sent to interested
parties as evidenced by Exhibits G-1 to 17. The minutes of
the hearings are found in Exhibits M, M-1, M-2, and M-3.
Exhibits B and C show that the proposed ordinances were
published in the Balita and the Manila Standard on April 21
and 25, 1993, respectively, and the approved ordinance
was published in the July 3, 4, 5, 1993 issues of the Manila
Standard and in the July 6, 1993 issue of Balita, as shown by
Exhibits Q, Q-1, Q-2, and Q-3.
The only exceptions are the posting of the ordinance as
approved but this omission does not affect its validity,
considering that its publication in three successive issues of
a newspaper of general circulation will satisfy due process.
It has also not been shown that the text of the ordinance
has been translated and disseminated, but this requirement
applies to the approval of local development plans and
public investment programs of the local government unit
and not to tax ordinances.
We make no ruling on the substantive provisions of the
Manila Revenue Code as their validity has not been raised
in issue in the present petition.
WHEREFORE, the judgment is hereby rendered REVERSING
the challenged decision of the Regional Trial Court insofar
as it declared Section 187 of the Local Government Code
unconstitutional but AFFIRMING its finding that the
procedural requirements in the enactment of the Manila
Revenue Code have been observed. No pronouncement as
to costs.
SO ORDERED.
Narvasa, C.J., Feliciano, Padilla, Bidin, Regalado,
Davide, Jr., Romero, Bellosillo, Melo, Quiason, Puno,
Vitug, Kapunan and Mendoza, JJ., concur.
291

EN BANC
[G.R. No. 125350. December 3, 2002]
HON. RTC JUDGES MERCEDES G. DADOLE (Executive
Judge, Branch 28), ULRIC R. CAETE (Presiding
Judge, Branch 25), AGUSTINE R. VESTIL (Presiding
Judge, Branch 56), HON. MTC JUDGES TEMISTOCLES
M. BOHOLST (Presiding Judge, Branch 1), VICENTE C.
FANILAG (Judge Designate, Branch 2), and
WILFREDO A. DAGATAN (Presiding Judge, Branch 3),
all of Mandaue City, petitioners, vs. COMMISSION
ON AUDIT, respondent.
D E C I S I O N
CORONA, J.:
Before us is a petition for certiorari under Rule 64 to
annul the decision
[1]
and resolution
[2]
, dated September 21,
1995 and May 28, 1996, respectively, of the respondent
Commission on Audit (COA) affirming the notices of the
Mandaue City Auditor which diminished the monthly
additional allowances received by the petitioner judges of
the Regional Trial Court (RTC) and Municipal Trial Court
(MTC) stationed in Mandaue City.
The undisputed facts are as follows:
In 1986, the RTC and MTC judges of Mandaue City
started receiving monthly allowances of P1,260 each
through the yearly appropriation ordinance enacted by the
Sangguniang Panlungsod of the said city. In 1991, Mandaue
City increased the amount to P1,500 for each judge.
On March 15, 1994, the Department of Budget and
Management (DBM) issued the disputed Local Budget
Circular No. 55 (LBC 55) which provided that:
xxx xxx xxx
2.3.2. In the light of the authority granted to the local
government units under the Local Government Code to
provide for additional allowances and other benefits to
national government officials and employees assigned in
their locality, such additional allowances in the form of
honorarium at rates not exceeding P1,000.00 in provinces
and cities and P700.00 in municipalities may be
granted subject to the following conditions:
a) That the grant is not mandatory on the part of the LGUs;
b) That all contractual and statutory obligations of the LGU
including the implementation of R.A. 6758 shall have been
fully provided in the budget;
c) That the budgetary requirements/limitations under
Section 324 and 325 of R.A. 7160 should be satisfied and/or
complied with; and
292

d) That the LGU has fully implemented the devolution of
functions/personnel in accordance with R.A. 7160.
[3]

(italics supplied)
xxx xxx xxx
The said circular likewise provided for its immediate
effectivity without need of publication:
5.0 EFFECTIVITY
This Circular shall take effect immediately.
Acting on the DBM directive, the Mandaue City Auditor
issued notices of disallowance to herein petitioners,
namely, Honorable RTC Judges Mercedes G. Dadole, Ulric R.
Caete, Agustin R. Vestil, Honorable MTC Judges
Temistocles M. Boholst, Vicente C. Fanilag and Wilfredo A.
Dagatan, in excess of the amount authorized by LBC 55.
Beginning October, 1994, the additional monthly
allowances of the petitioner judges were reduced to P1,000
each. They were also asked to reimburse the amount they
received in excess of P1,000 from April to September, 1994.
The petitioner judges filed with the Office of the City
Auditor a protest against the notices of disallowance. But
the City Auditor treated the protest as a motion for
reconsideration and indorsed the same to the COA Regional
Office No. 7. In turn, the COA Regional Office referred the
motion to the head office with a recommendation that the
same be denied.
On September 21, 1995, respondent COA rendered a
decision denying petitioners motion for
reconsideration. The COA held that:
The issue to be resolved in the instant appeal is whether or
not the City Ordinance of Mandaue which provides a higher
rate of allowances to the appellant judges may prevail over
that fixed by the DBM under Local Budget Circular No. 55
dated March 15, 1994.
xxx xxx xxx
Applying the foregoing doctrine, appropriation ordinance of
local government units is subject to the organizational,
budgetary and compensation policies of budgetary
authorities (COA 5
th
Ind., dated March 17, 1994 re: Province
of Antique; COA letter dated May 17, 1994 re: Request of
Hon. Renato Leviste, Cong. 1
st
Dist. Oriental Mindoro). In
this regard, attention is invited to Administrative Order No.
42 issued on March 3, 1993 by the President of the
Philippines clarifying the role of DBM in the compensation
and classification of local government positions under RA
No. 7160 vis-avis the provisions of RA No. 6758 in view of
the abolition of the JCLGPA. Section 1 of said Administrative
Order provides that:
Section 1. The Department of Budget and Management as
the lead administrator of RA No. 6758 shall, through its
Compensation and Position Classification Bureau, continue
293

to have the following responsibilities in connection with the
implementation of the Local Government Code of 1991:
a) Provide guidelines on the classification of
local government positions and on the
specific rates of pay therefore;
b) Provide criteria and guidelines for the
grant of all allowances and additional forms
of compensation to local government
employees; xxx. (underscoring supplied)
To operationalize the aforecited presidential directive, DBM
issued LBC No. 55, dated March 15, 1994, whose effectivity
clause provides that:
xxx xxx xxx
5.0 EFFECTIVITY
This Circular shall take effect immediately.
It is a well-settled rule that implementing rules and
regulations promulgated by administrative or executive
officer in accordance with, and as authorized by law, has
the force and effect of law or partake the nature of a
statute (Victorias Milling Co., Inc., vs. Social Security
Commission, 114 Phil. 555, cited in Agpalos Statutory
Construction, 2
nd
Ed. P. 16; Justice Cruzs Phil. Political Law,
1984 Ed., p. 103; Espanol vs. Phil Veterans Administration,
137 SCRA 314; Antique Sawmills Inc. vs. Tayco, 17 SCRA
316).
xxx xxx xxx
There being no statutory basis to grant additional allowance
to judges in excess of P1,000.00 chargeable against the
local government units where they are stationed, this
Commission finds no substantial grounds or cogent reason
to disturb the decision of the City Auditor, Mandaue City,
disallowing in audit the allowances in question. Accordingly,
the above-captioned appeal of the MTC and RTC Judges of
Mandaue City, insofar as the same is not covered by
Circular Letter No. 91-7, is hereby dismissed for lack of
merit.
xxx xxx xxx
[4]

On November 27, 1995, Executive Judge Mercedes
Gozo-Dadole, for and in behalf of the petitioner judges,
filed a motion for reconsideration of the decision of the
COA. In a resolution dated May 28, 1996, the COA denied
the motion.
Hence, this petition for certiorari by the petitioner
judges, submitting the following questions for resolution:
I
HAS THE CITY OF MANDAUE STATUTORY AND
CONSTITUTIONAL BASIS TO PROVIDE ADDITIONAL
294

ALLOWANCES AND OTHER BENEFITS TO JUDGES
STATIONED IN AND ASSIGNED TO THE CITY?
II
CAN AN ADMINISTRATIVE CIRCULAR OR GUIDELINE SUCH
AS LOCAL BUDGET CIRCULAR NO. 55 RENDER INOPERATIVE
THE POWER OF THE LEGISLATIVE BODY OF A CITY BY
SETTING A LIMIT TO THE EXTENT OF THE EXERCISE OF SUCH
POWER?
III
HAS THE COMMISSION ON AUDIT CORRECTLY
INTERPRETED LOCAL BUDGET CIRCULAR NO. 55 TO
INCLUDE MEMBERS OF THE JUDICIARY IN FIXING THE
CEILING OF ADDITIONAL ALLOWANCES AND BENEFITS TO
BE PROVIDED TO JUDGES STATIONED IN AND ASSIGNED TO
MANDAUE CITY BY THE CITY GOVERNMENT AT P1,000.00
PER MONTH NOTWITHSTANDING THAT THEY HAVE BEEN
RECEIVING ALLOWANCES OF P1,500.00 MONTHLY FOR THE
PAST FIVE YEARS?
IV
IS LOCAL BUDGET CIRCULAR NO. 55 DATED MARCH 15,
1994 ISSUED BY THE DEPARTMENT OF BUDGET AND
MANAGEMENT VALID AND ENFORCEABLE CONSIDERING
THAT IT WAS NOT DULY PUBLISHED IN ACCODANCE WITH
LAW?
[5]

Petitioner judges argue that LBC 55 is void for infringing
on the local autonomy of Mandaue City by dictating a
uniform amount that a local government unit can disburse
as additional allowances to judges stationed therein. They
maintain that said circular is not supported by any law and
therefore goes beyond the supervisory powers of the
President. They further allege that said circular is void for
lack of publication.
On the other hand, the yearly appropriation ordinance
providing for additional allowances to judges is allowed by
Section 458, par. (a)(1)[xi], of RA 7160, otherwise known as
the Local Government Code of 1991, which provides 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
(xi) When the finances of the city government allow, provide
for additional allowances and other benefits to judges,
prosecutors, public elementary and high school teachers,
295

and other national government officials stationed in or
assigned to the city; (italics supplied)
Instead of filing a comment on behalf of respondent
COA, the Solicitor General filed a manifestation supporting
the position of the petitioner judges. The Solicitor General
argues that (1) DBM only enjoys the power to review and
determine whether the disbursements of funds were made
in accordance with the ordinance passed by a local
government unit while (2) the COA has no more than
auditorial visitation powers over local government units
pursuant to Section 348 of RA 7160 which provides for the
power to inspect at any time the financial accounts of local
government units.
Moreover, the Solicitor General opines that the DBM
and the respondent are only authorized under RA 7160 to
promulgate a Budget Operations Manual for local
government units, to improve and systematize methods,
techniques and procedures employed in budget
preparation, authorization, execution and
accountability pursuant to Section 354 of RA 7160. The
Solicitor General points out that LBC 55 was not exercised
under any of the aforementioned provisions.
Respondent COA, on the other hand, insists that the
constitutional and statutory authority of a city government
to provide allowances to judges stationed therein is not
absolute. Congress may set limitations on the exercise of
autonomy. It is for the President, through the DBM, to
check whether these legislative limitations are being
followed by the local government units.
One such law imposing a limitation on a local
government units autonomy is Section 458, par. (a) (1) *xi+,
of RA 7160, which authorizes the disbursement of
additional allowances and other benefits to judges subject
to the condition that the finances of the city government
should allow the same. Thus, DBM is merely enforcing the
condition of the law when it sets a uniform maximum
amount for the additional allowances that a city
government can release to judges stationed therein.
Assuming arguendo that LBC 55 is void, respondent
COA maintains that the provisions of the yearly approved
ordinance granting additional allowances to judges are still
prohibited by the appropriation laws passed by Congress
every year. COA argues that Mandaue City gets the funds
for the said additional allowances of judges from the
Internal Revenue Allotment (IRA). But the General
Appropriations Acts of 1994 and 1995 do not mention the
disbursement of additional allowances to judges as one of
the allowable uses of the IRA. Hence, the provisions of said
ordinance granting additional allowances, taken from the
IRA, to herein petitioner judges are void for being contrary
to law.
To resolve the instant petition, there are two issues that
we must address: (1) whether LBC 55 of the DBM is void for
going beyond the supervisory powers of the President and
for not having been published and (2) whether the yearly
296

appropriation ordinance enacted by the City of Mandaue
that provides for additional allowances to judges
contravenes the annual appropriation laws enacted by
Congress.
We rule in favor of the petitioner judges.
On the first issue, we declare LBC 55 to be null and void.
We recognize that, although our
Constitution
[6]
guarantees autonomy to local government
units, the exercise of local autonomy remains subject to the
power of control by Congress and the power of supervision
by the President. Section 4 of Article X of the 1987
Philippine Constitution provides that:
Sec. 4. The President of the Philippines shall exercise
general supervision over local governments. x x x
In Pimentel vs. Aguirre
[7]
, we defined the supervisory
power of the President and distinguished it from the power
of control exercised by Congress. Thus:
This provision (Section 4 of Article X of the 1987 Philippine
Constitution) has been interpreted to exclude the power of
control. In Mondano v. Silvosa,
[i][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."
[ii][6]

In Taule v. Santos,
[iii][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,"
[iv][8]
we said.
In a more recent case, Drilon v. Lim,
[v][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
297

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.
[vi][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.
[vii][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 Presidents 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.
Clearly then, the President can only interfere in the
affairs and activities of a local government unit if he or she
finds that the latter has acted contrary to law. This is the
scope of the Presidents supervisory powers over local
government units. Hence, the President or any of his or
her alter egos cannot interfere in local affairs as long as the
concerned local government unit acts within the
parameters of the law and the Constitution. Any directive
therefore by the President or any of his or her alter
egos seeking to alter the wisdom of a law-conforming
judgment on local affairs of a local government unit is a
patent nullity because it violates the principle of local
autonomy and separation of powers of the executive and
legislative departments in governing municipal
corporations.
Does LBC 55 go beyond the law it seeks to implement?
Yes.
LBC 55 provides that the additional monthly allowances
to be given by a local government unit should not
exceed P1,000 in provinces and cities and P700 in
municipalities. Section 458, par. (a)(1)(xi), of RA 7160, the
law that supposedly serves as the legal basis of LBC 55,
allows the grant of additional allowances to judges when
the finances of the city government allow. The said
provision does not authorize setting a definite maximum
limit to the additional allowances granted to judges. Thus,
we need not belabor the point that the finances of a city
government may allow the grant of additional allowances
higher than P1,000 if the revenues of the said city
government exceed its annual expenditures. Thus, to
illustrate, a city government with locally generated annual
revenues of P40 million and expenditures of P35 million can
afford to grant additional allowances of more than P1,000
each to, say, ten judges inasmuch as the finances of the city
can afford it.
298

Setting a uniform amount for the grant of additional
allowances is an inappropriate way of enforcing the
criterion found in Section 458, par. (a)(1)(xi), of RA 7160.
The DBM over-stepped its power of supervision over local
government units by imposing a prohibition that did not
correspond with the law it sought to implement. In other
words, the prohibitory nature of the circular had no legal
basis.
Furthermore, LBC 55 is void on account of its lack of
publication, in violation of our ruling in Taada vs.
Tuvera
[8]
where we held that:
xxx. Administrative rules and regulations must also be
published if their purpose is to enforce or implement
existing law pursuant to a valid delegation.
Interpretative regulations and those merely internal in
nature, that is, regulating only the personnel of an
administrative agency and the public, need not be
published. Neither is publication required of the so-called
letters of instruction issued by administrative superiors
concerning the rules or guidelines to be followed by their
subordinates in the performance of their duties.
Respondent COA claims that publication is not required
for LBC 55 inasmuch as it is merely an interpretative
regulation applicable to the personnel of an LGU. We
disagree. In De Jesus vs. Commission on Audit
[9]
where we
dealt with the same issue, this Court declared void, for lack
of publication, a DBM circular that disallowed payment of
allowances and other additional compensation to
government officials and employees. In refuting respondent
COAs argument that said circular was merely an internal
regulation, we ruled that:
On the need for publication of subject DBM-CCC No. 10, we
rule in the affirmative. Following the doctrine enunciated
in Taada v. Tuvera, publication in the Official Gazette or in
a newspaper of general circulation in the Philippines is
required since DBM-CCC No. 10 is in the nature of an
administrative circular the purpose of which is to enforce
or implement an existing law. Stated differently, to be
effective and enforceable, DBM-CCC No. 10 must go
through the requisite publication in the Official Gazette or
in a newspaper of general circulation in the Philippines.
In the present case under scrutiny, it is decisively clear that
DBM-CCC No. 10, which completely disallows payment of
allowances and other additional compensation to
government officials and employees, starting November 1,
1989, is not a mere interpretative or internal regulation. It
is something more than that. And why not, when it tends to
deprive government workers of their allowance and
additional compensation sorely needed to keep body and
soul together. At the very least, before the said circular
under attack may be permitted to substantially reduce
their income, the government officials and employees
concerned should be apprised and alerted by the
publication of subject circular in the Official Gazette or in a
newspaper of general circulation in the Philippines to
299

the end that they be given amplest opportunity to voice
out whatever opposition they may have, and to ventilate
their stance on the matter. This approach is more in
keeping with democratic precepts and rudiments of
fairness and transparency. (emphasis supplied)
In Philippine International Trading Corporation vs.
Commission on Audit
[10]
, we again declared the same
circular as void, for lack of publication, despite the fact that
it was re-issued and then submitted for publication.
Emphasizing the importance of publication to the effectivity
of a regulation, we therein held that:
It has come to our knowledge that DBM-CCC No. 10 has
been re-issued in its entirety and submitted for publication
in the Official Gazette per letter to the National Printing
Office dated March 9, 1999. Would the subsequent
publication thereof cure the defect and retroact to the time
that the above-mentioned items were disallowed in audit?
The answer is in the negative, precisely for the reason that
publication is required as a condition precedent to the
effectivity of a law to inform the public of the contents of
the law or rules and regulations before their rights and
interests are affected by the same. From the time the COA
disallowed the expenses in audit up to the filing of herein
petition the subject circular remained in legal limbo due to
its non-publication. As was stated inTaada v. Tuvera,
prior publication of laws before they become effective
cannot be dispensed with, for the reason that it would deny
the public knowledge of the laws that are supposed to
govern it.
[11]

We now resolve the second issue of whether the yearly
appropriation ordinance enacted by Mandaue City
providing for fixed allowances for judges contravenes any
law and should therefore be struck down as null and void.
According to respondent COA, even if LBC 55 were void,
the ordinances enacted by Mandaue City granting
additional allowances to the petitioner judges would still
(be) bereft of legal basis for want of a lawful source of
funds considering that the IRA cannot be used for such
purposes. Respondent COA showed that Mandaue Citys
funds consisted of locally generated revenues and the IRA.
From 1989 to 1995, Mandaue Citys yearly expenditures
exceeded its locally generated revenues, thus resulting in a
deficit. During all those years, it was the IRA that enabled
Mandaue City to incur a surplus. Respondent avers that
Mandaue City used its IRA to pay for said additional
allowances and this violated paragraph 2 of the Special
Provisions, page 1060, of RA 7845 (The General
Appropriations Act of 1995)
[12]
and paragraph 3 of the
Special Provision, page 1225, of RA 7663 (The General
Appropriations Act of 1994)
[13]
which specifically identified
the objects of expenditure of the IRA. Nowhere in said
provisions of the two budgetary laws does it say that the
IRA can be used for additional allowances of judges.
Respondent COA thus argues that the provisions in the
ordinance providing for such disbursement are against the
300

law, considering that the grant of the subject allowances is
not within the specified use allowed by the aforesaid yearly
appropriations acts.
We disagree.
Respondent COA failed to prove that Mandaue City
used the IRA to spend for the additional allowances of the
judges. There was no evidence submitted by COA showing
the breakdown of the expenses of the city government and
the funds used for said expenses. All the COA presented
were the amounts expended, the locally generated
revenues, the deficit, the surplus and the IRA received each
year. Aside from these items, no data or figures were
presented to show that Mandaue City deducted the subject
allowances from the IRA. In other words, just because
Mandaue Citys locally generated revenues were not
enough to cover its expenditures, this did not mean that
the additional allowances of petitioner judges were taken
from the IRA and not from the citys own revenues.
Moreover, the DBM neither conducted a formal review
nor ordered a disapproval of Mandaue Citys appropriation
ordinances, in accordance with the procedure outlined by
Sections 326 and 327 of RA 7160 which provide that:
Section 326. Review of Appropriation Ordinances of
Provinces, Highly Urbanized Cities, Independent
Component Cities, and Municipalities within the
Metropolitan Manila Area. The Department of Budget and
Management shall review ordinances authorizing the
annual or supplemental appropriations of provinces, highly-
urbanized cities, independent component cities, and
municipalities within the Metropolitan Manila Area in
accordance with the immediately succeeding Section.
Section 327. Review of Appropriation Ordinances of
Component Cities and Municipalities.- The sangguninang
panlalawigan shall review the ordinance authorizing annual
or supplemental appropriations of component cities and
municipalities in the same manner and within the same
period prescribed for the review of other ordinances.
If within ninety (90) days from receipt of copies of such
ordinance, the sangguniang panlalawigan takes no action
thereon, the same shall be deemed to have been reviewed
in accordance with law and shall continue to be in full
force and effect. (emphasis supplied)
Within 90 days from receipt of the copies of the
appropriation ordinance, the DBM should have taken
positive action. Otherwise, such ordinance was deemed to
have been properly reviewed and deemed to have taken
effect. Inasmuch as, in the instant case, the DBM did not
follow the appropriate procedure for reviewing the subject
ordinance of Mandaue City and allowed the 90-day period
to lapse, it can no longer question the legality of the
provisions in the said ordinance granting additional
allowances to judges stationed in the said city.
WHEREFORE, the petition is hereby GRANTED, and the
assailed decision and resolution, dated September 21, 1995
301

and May 28, 1996, respectively, of the Commission on Audit
are hereby set aside.
No costs.
SO ORDERED.
Davide, Jr., C.J., Bellosillo, Vitug, Mendoza, Panganiban,
Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio,
Austria-Martinez, Carpio-Morales, and Callejo, Sr.,
JJ., concur.
Puno, J., on official business.
Azcuna, J., on leave.
Torntv V9.0
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 182574 September 28, 2010
THE PROVINCE OF NEGROS OCCIDENTAL, represented by
its Governor ISIDRO P. ZAYCO, Petitioner,
vs.
THE COMMISSIONERS, COMMISSION ON AUDIT; THE
DIRECTOR, CLUSTER IV-VISAYAS; THE REGIONAL CLUSTER
DIRECTORS; and THE PROVINCIAL AUDITOR, NEGROS
OCCIDENTAL, Respondents.
D E C I S I O N
CARPIO, J.:
The Case
Before the Court is a petition for certiorari
1
assailing
Decision No. 2006-044
2
dated 14 July 2006 and Decision No.
2008-010
3
dated 30 January 2008 of the Commission on
Audit (COA) disallowing premium payment for the
hospitalization and health care insurance benefits of 1,949
officials and employees of the Province of Negros
Occidental.
The Facts
On 21 December 1994, the Sangguniang
Panlalawigan of Negros Occidental passed Resolution No.
720-A
4
allocating P4,000,000 of its retained earnings for the
hospitalization and health care insurance benefits of 1,949
officials and employees of the province. After a public
bidding, the Committee on Awards granted the insurance
coverage to Philam Care Health System Incorporated
(Philam Care).
Petitioner Province of Negros Occidental, represented by its
then Governor Rafael L. Coscolluela, and Philam Care
entered into a Group Health Care Agreement involving a
total payment of P3,760,000 representing the insurance
premiums of its officials and employees. The total premium
amount was paid on 25 January 1996.
302

On 23 January 1997, after a post-audit investigation, the
Provincial Auditor issued Notice of Suspension No. 97-001-
101
5
suspending the premium payment because of lack of
approval from the Office of the President (OP) as provided
under Administrative Order No. 103
6
(AO 103) dated 14
January 1994. The Provincial Auditor explained that the
premium payment for health care benefits violated
Republic Act No. 6758 (RA 6758),
7
otherwise known as the
Salary Standardization Law.
Petitioner complied with the directive post-facto and sent a
letter-request dated 12 January 1999 to the OP. In a
Memorandum dated 26 January 1999,
8
then President
Joseph E. Estrada directed the COA to lift the suspension
but only in the amount of P100,000. The Provincial Auditor
ignored the directive of the President and instead issued
Notice of Disallowance No. 99-005-101(96)
9
dated 10
September 1999 stating similar grounds as mentioned in
Notice of Suspension No. 97-001-101.
Petitioner appealed the disallowance to the COA. In a
Decision dated 14 July 2006, the COA affirmed the
Provincial Auditors Notice of Disallowance dated 10
September 1999.
10
The COA ruled that under AO 103, no
government entity, including a local government unit, is
exempt from securing prior approval from the President
granting additional benefits to its personnel. This is in
conformity with the policy of standardization of
compensation laid down in RA 6758. The COA added that
Section 468(a)(1)(viii)
11
of Republic Act No. 7160 (RA 7160)
or the Local Government Code of 1991 relied upon by
petitioner does not stand on its own but has to be
harmonized with Section 12
12
of RA 6758.
Further, the COA stated that the insurance benefits from
Philam Care, a private insurance company, was a
duplication of the benefits provided to employees under
the Medicare program which is mandated by law. Being
merely a creation of a local legislative body, the provincial
health care program should not contravene but instead be
consistent with national laws enacted by Congress from
where local legislative bodies draw their authority.
The COA held the following persons liable: (1) all the 1,949
officials and employees of the province who benefited from
the hospitalization and health care insurance benefits with
regard to their proportionate shares; (2) former Governor
Rafael L. Coscolluela, being the person who signed the
contract on behalf of petitioner as well as the person who
approved the disbursement voucher; and (3)
the Sangguniang Panlalawigan members who passed
Resolution No. 720-A. The COA did not hold Philam Care
and Provincial Accountant Merly P. Fortu liable for the
disallowed disbursement. The COA explained that it was
unjust to require Philam Care to refund the amount
received for services it had duly rendered since insurance
law prohibits the refund of premiums after risks had
already attached to the policy contract. As for the Provincial
Accountant, the COA declared that the Sangguniang
Panlalawigan resolution was sufficient basis for the
303

accountant to sign the disbursement voucher since there
were adequate funds available for the purpose. However,
being one of the officials who benefited from the subject
disallowance, the inclusion of the accountants name in the
persons liable was proper with regard to her proportionate
share of the premium.
The dispositive portion of the COAs 14 July 2006 decision
states:
WHEREFORE, premises considered, and finding no
substantial ground or cogent reason to disturb the subject
disallowance, the instant appeal is hereby denied for lack of
merit. Accordingly, Notice of Disallowance No. 99-005-
101(96) dated 10 September 1999 in the total amount
of P3,760,000.00 representing the hospitalization and
insurance benefits of the officials and employees of the
Province of Negros Occidental is hereby AFFIRMED and the
refund thereof is hereby ordered.
The Cluster Director, Cluster IV-Visayas, COA Regional
Office No. VII, Cebu City shall ensure the proper
implementation of this decision.
13

Petitioner filed a Motion for Reconsideration dated 23
October 2006 which the COA denied in a Resolution dated
30 January 2008.
Hence, the instant petition.
The Issue
The main issue is whether COA committed grave abuse of
discretion in affirming the disallowance of P3,760,000 for
premium paid for the hospitalization and health care
insurance benefits granted by the Province of Negros
Occidental to its 1,949 officials and employees.
The Courts Ruling
Petitioner insists that the payment of the insurance
premium for the health benefits of its officers and
employees was not unlawful and improper since it was paid
from an allocation of its retained earnings pursuant to a
valid appropriation ordinance. Petitioner states that such
enactment was a clear exercise of its express powers under
the principle of local fiscal autonomy which includes the
power of Local Government Units (LGUs) to allocate their
resources in accordance with their own priorities. Petitioner
adds that while it is true that LGUs are only agents of the
national government and local autonomy simply means
decentralization, it is equally true that an LGU has fiscal
control over its own revenues derived solely from its own
tax base.
Respondents, on the other hand, maintain that although
LGUs are afforded local fiscal autonomy, LGUs are still
bound by RA 6758 and their actions are subject to the
scrutiny of the Department of Budget and Management
(DBM) and applicable auditing rules and regulations
enforced by the COA. Respondents add that the grant of
additional compensation, like the hospitalization and health
304

care insurance benefits in the present case, must have prior
Presidential approval to conform with the state policy on
salary standardization for government workers.
AO 103 took effect on 14 January 1994 or eleven months
before the Sangguniang Panlalawigan of the Province of
Negros Occidental passed Resolution No. 720-A. The main
purpose of AO 103 is to prevent discontentment,
dissatisfaction and demoralization among government
personnel, national or local, who do not receive, or who
receive less, productivity incentive benefits or other forms
of allowances or benefits. This is clear in the Whereas
Clauses of AO 103 which state:
WHEREAS, the faithful implementation of statutes,
including the Administrative Code of 1987 and all laws
governing all forms of additional compensation and
personnel benefits is a Constitutional prerogative vested in
the President of the Philippines under Section 17, Article VII
of the 1987 Constitution;
WHEREAS, the Constitutional prerogative includes the
determination of the rates, the timing and schedule of
payment, and final authority to commit limited resources of
government for the payment of personal incentives, cash
awards, productivity bonus, and other forms of additional
compensation and fringe benefits;
WHEREAS, the unilateral and uncoordinated grant of
productivity incentive benefits in the past gave rise to
discontentment, dissatisfaction and demoralization
among government personnel who have received less or
have not received at all such benefits;
NOW, THEREFORE, I, FIDEL V. RAMOS, President of the
Republic of the Philippines, by virtue of the powers vested
in me by law and in order to forestall further
demoralization of government personnel do hereby direct:
x x x (Emphasis supplied)
Sections 1 and 2 of AO 103 state:
SECTION 1. All agencies of the National Government
including government-owned and/or -controlled
corporations and government financial institutions, and
local government units, are hereby authorized to grant
productivity incentive benefit in the maximum amount of
TWO THOUSAND PESOS (P2,000.00) each to their
permanent and full-time temporary and casual employees,
including contractual personnel with employment in the
nature of a regular employee, who have rendered at least
one (1) year of service in the Government as of December
31, 1993.
SECTION 2. All heads of government offices/agencies,
including government owned and/or controlled
corporations, as well as their respective governing
boards are hereby enjoined and prohibited from
authorizing/granting Productivity Incentive Benefits or any
and all forms of allowances/benefits without prior approval
305

and authorization via Administrative Order by the Office of
the President. Henceforth, anyone found violating any of
the mandates in this Order, including all officials/agency
found to have taken part thereof, shall be accordingly and
severely dealt with in accordance with the applicable
provisions of existing administrative and penal laws.
Consequently, all administrative authorizations to grant any
form of allowances/benefits and all forms of additional
compensation usually paid outside of the prescribed basic
salary under R.A. 6758, the Salary Standardization Law, that
are inconsistent with the legislated policy on the matter or
are not covered by any legislative action are hereby
revoked. (Emphasis supplied)
It is clear from Section 1 of AO 103 that the President
authorized all agencies of the national government as well
as LGUs to grant the maximum amount of P2,000
productivity incentive benefit to each employee who has
rendered at least one year of service as of 31 December
1993. In Section 2, the President enjoined all heads of
government offices and agencies from granting productivity
incentive benefits or any and all similar forms of allowances
and benefits without the Presidents prior approval.
In the present case, petitioner, through an
approved Sangguniang Panlalawigan resolution, granted
and released the disbursement for the hospitalization and
health care insurance benefits of the provinces officials and
employees without any prior approval from the President.
The COA disallowed the premium payment for such
benefits since petitioner disregarded AO 103 and RA 6758.
We disagree with the COA. From a close reading of the
provisions of AO 103, petitioner did not violate the rule of
prior approval from the President since Section 2 states
that the prohibition applies only to "government
offices/agencies, including government-owned and/or
controlled corporations, as well as their respective
governing boards." Nowhere is it indicated in Section 2 that
the prohibition also applies to LGUs. The requirement then
of prior approval from the President under AO 103 is
applicable only to departments, bureaus, offices and
government-owned and controlled corporations under the
Executive branch. In other words, AO 103 must be observed
by government offices under the Presidents control as
mandated by Section 17, Article VII of the Constitution
which states:
Section 17. The President shall have control of
all executive departments, bureaus and offices. He shall
ensure that the laws be faithfully executed. (Emphasis
supplied)1awphi1
Being an LGU, petitioner is merely under the Presidents
general supervision pursuant to Section 4, Article X of the
Constitution:
Sec. 4. The President of the Philippines shall exercise
general supervision over local governments.Provinces with
306

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.
(Emphasis supplied)
The Presidents power of general supervision means the
power of a superior officer to see to it that subordinates
perform their functions according to law.
14
This is
distinguished from the Presidents power of control which
is the power to alter or modify or set aside what a
subordinate officer had done in the performance of his
duties and to substitute the judgment of the President over
that of the subordinate officer.
15
The power of control gives
the President the power to revise or reverse the acts or
decisions of a subordinate officer involving the exercise of
discretion.
16

Since LGUs are subject only to the power of general
supervision of the President, the Presidents authority is
limited to seeing to it that rules are followed and laws are
faithfully executed. The President may only point out that
rules have not been followed but the President cannot lay
down the rules, neither does he have the discretion to
modify or replace the rules. Thus, the grant of additional
compensation like hospitalization and health care insurance
benefits in the present case does not need the approval of
the President to be valid.
Also, while it is true that LGUs are still bound by RA 6758,
the COA did not clearly establish that the medical care
benefits given by the government at the time under
Presidential Decree No. 1519
17
were sufficient to cover the
needs of government employees especially those employed
by LGUs.
Petitioner correctly relied on the Civil Service Commissions
(CSC) Memorandum Circular No. 33 (CSC MC No. 33), series
of 1997, issued on 22 December 1997 which provided the
policy framework for working conditions at the workplace.
In this circular, the CSC pursuant to CSC Resolution No. 97-
4684 dated 18 December 1997 took note of the inadequate
policy on basic health and safety conditions of work
experienced by government personnel. Thus, under CSC MC
No. 33, all government offices including LGUs were directed
to provide a health program for government employees
which included hospitalization services and annual mental,
medical-physical examinations.
Later, CSC MC No. 33 was further reiterated in
Administrative Order No. 402
18
(AO 402) which took effect
on 2 June 1998. Sections 1, 2, and 4 of AO 402 state:
Section 1. Establishment of the Annual Medical Check-up
Program. An annual medical check-up for government of
officials and employees is hereby authorized to be
established starting this year, in the meantime that this
benefit is not yet integrated under the National Health
307

Insurance Program being administered by the Philippine
Health Insurance Corporation (PHIC).
Section 2. Coverage. x x x Local Government Units are
also encouraged to establish a similar program for their
personnel.
Section 4. Funding. x x x Local Government Units, which
may establish a similar medical program for their
personnel, shall utilize local funds for the purpose.
(Emphasis supplied)
The CSC, through CSC MC No. 33, as well as the President,
through AO 402, recognized the deficiency of the state of
health care and medical services implemented at the time.
Republic Act No. 7875
19
or the National Health Insurance
Act of 1995 instituting a National Health Insurance Program
(NHIP) for all Filipinos was only approved on 14 February
1995 or about two months after petitioners Sangguniang
Panlalawigan passed Resolution No. 720-A. Even with the
establishment of the NHIP, AO 402 was still issued three
years later addressing a primary concern that basic health
services under the NHIP either are still inadequate or have
not reached geographic areas like that of petitioner.
Thus, consistent with the state policy of local autonomy as
guaranteed by the 1987 Constitution, under Section 25,
Article II
20
and Section 2, Article X,
21
and the Local
Government Code of 1991,
22
we declare that the grant and
release of the hospitalization and health care insurance
benefits given to petitioners officials and employees were
validly enacted through an ordinance passed by
petitioners Sangguniang Panlalawigan.
In sum, since petitioners grant and release of the
questioned disbursement without the Presidents approval
did not violate the Presidents directive in AO 103, the COA
then gravely abused its discretion in applying AO 103 to
disallow the premium payment for the hospitalization and
health care insurance benefits of petitioners officials and
employees.
WHEREFORE, we GRANT the petition. We REVERSE AND
SET ASIDE Decision No. 2006-044 dated 14 July 2006 and
Decision No. 2008-010 dated 30 January 2008 of the
Commission on Audit.
SO ORDERED.
ANTONIO T. CARPIO
Associate Justice
WE CONCUR:
RENATO C. CORONA
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
308

G.R. No. L-23825 December 24, 1965
EMMANUEL PELAEZ, petitioner,
vs.
THE AUDITOR GENERAL, respondent.
Zulueta, Gonzales, Paculdo and Associates for petitioner.
Office of the Solicitor General for respondent.
CONCEPCION, J.:
During the period from September 4 to October 29, 1964
the President of the Philippines, purporting to act pursuant
to Section 68 of the Revised Administrative Code, issued
Executive Orders Nos. 93 to 121, 124 and 126 to 129;
creating thirty-three (33) municipalities enumerated in the
margin.
1
Soon after the date last mentioned, or on
November 10, 1964 petitioner Emmanuel Pelaez, as Vice
President of the Philippines and as taxpayer, instituted the
present special civil action, for a writ of prohibition with
preliminary injunction, against the Auditor General, to
restrain him, as well as his representatives and agents, from
passing in audit any expenditure of public funds in
implementation of said executive orders and/or any
disbursement by said municipalities.
Petitioner alleges that said executive orders are null and
void, upon the ground that said Section 68 has been
impliedly repealed by Republic Act No. 2370 and
constitutes an undue delegation of legislative power.
Respondent maintains the contrary view and avers that the
present action is premature and that not all proper parties
referring to the officials of the new political subdivisions
in question have been impleaded. Subsequently, the
mayors of several municipalities adversely affected by the
aforementioned executive orders because the latter
have taken away from the former the barrios composing
the new political subdivisions intervened in the case.
Moreover, Attorneys Enrique M. Fernando and Emma
Quisumbing-Fernando were allowed to and did appear
asamici curiae.
The third paragraph of Section 3 of Republic Act No. 2370,
reads:
Barrios shall not be created or their boundaries
altered nor their names changed except under the
provisions of this Act or by Act of Congress.
Pursuant to the first two (2) paragraphs of the same Section
3:
All barrios existing at the time of the passage of this
Act shall come under the provisions hereof.
Upon petition of a majority of the voters in the areas
affected, a new barrio may be created or the name of
an existing one may be changed by the provincial
board of the province, upon recommendation of the
council of the municipality or municipalities in which
309

the proposed barrio is stipulated. The
recommendation of the municipal council shall be
embodied in a resolution approved by at least two-
thirds of the entire membership of the said council:
Provided, however, That no new barrio may be
created if its population is less than five hundred
persons.
Hence, since January 1, 1960, when Republic Act No. 2370
became effective, barrios may "not be created or their
boundaries altered nor their names changed" except by Act
of Congress or of the corresponding provincial board "upon
petition of a majority of the voters in the areas affected"
and the "recommendation of the council of the municipality
or municipalities in which the proposed barrio is situated."
Petitioner argues, accordingly: "If the President, under
this new law, cannot even create a barrio, can he create a
municipality which is composed of several barrios,
since barrios are units of municipalities?"
Respondent answers in the affirmative, upon the theory
that a new municipality can be created without creating
new barrios, such as, by placing old barrios under the
jurisdiction of the new municipality. This theory overlooks,
however, the main import of the petitioner's argument,
which is that the statutory denial of the presidential
authority to create a new barrio implies a negation of the
bigger power to create municipalities, each of which
consists of several barrios. The cogency and force of this
argument is too obvious to be denied or even questioned.
Founded upon logic and experience, it cannot be offset
except by a clear manifestation of the intent of Congress to
the contrary, and no such manifestation, subsequent to the
passage of Republic Act No. 2379, has been brought to our
attention.
Moreover, section 68 of the Revised Administrative Code,
upon which the disputed executive orders are based,
provides:
The (Governor-General) President of the Philippines
may by executive order define the boundary, or
boundaries, of any province, subprovince,
municipality, [township] municipal district, or other
political subdivision, and increase or diminish the
territory comprised therein, may divide any province
into one ormore subprovinces, separate any political
division other than a province, into such portions as
may be required, merge any of such subdivisions or
portions with another, name any new subdivision so
created, and may change the seat of government
within any subdivision to such place therein as the
public welfare may require: Provided, That the
authorization of the (Philippine Legislature) Congress
of the Philippines shall first be obtained whenever
the boundary of any province or subprovince is to be
defined or any province is to be divided into one or
more subprovinces. When action by the (Governor-
General) President of the Philippines in accordance
herewith makes necessary a change of the territory
310

under the jurisdiction of any administrative officer or
any judicial officer, the (Governor-General) President
of the Philippines, with the recommendation and
advice of the head of the Department having
executive control of such officer, shall redistrict the
territory of the several officers affected and assign
such officers to the new districts so formed.
Upon the changing of the limits of political divisions
in pursuance of the foregoing authority, an equitable
distribution of the funds and obligations of the
divisions thereby affected shall be made in such
manner as may be recommended by the (Insular
Auditor) Auditor General and approved by the
(Governor-General) President of the Philippines.
Respondent alleges that the power of the President to
create municipalities under this section does not amount to
an undue delegation of legislative power, relying
upon Municipality of Cardona vs. Municipality of
Binagonan (36 Phil. 547), which, he claims, has settled it.
Such claim is untenable, for said case involved, not the
creation of a new municipality, but a mere transfer of
territory from an already existing municipality (Cardona)
to another municipality (Binagonan), likewise, existing at
the time of and prior to said transfer (See Gov't of the P.I.
ex rel. Municipality of Cardona vs. Municipality, of
Binagonan [34 Phil. 518, 519-5201) in consequence of
the fixing and definition, pursuant to Act No. 1748, of the
common boundaries of two municipalities.
It is obvious, however, that, whereas the power to fix such
common boundary, in order to avoid or settle conflicts of
jurisdiction between adjoining municipalities, may partake
of an administrative nature involving, as it does, the
adoption of means and ways to carry into effect the law
creating said municipalities the authority to create
municipal corporations is essentially legislative in nature. In
the language of other courts, it is "strictly a legislative
function" (State ex rel. Higgins vs. Aicklen, 119 S. 425,
January 2, 1959) or "solely and exclusively the exercise
oflegislative power" (Udall vs. Severn, May 29, 1938, 79 P.
2d 347-349). As the Supreme Court of Washington has put
it (Territory ex rel. Kelly vs. Stewart, February 13, 1890, 23
Pac. 405, 409), "municipal corporations are purely the
creatures of statutes."
Although
1a
Congress may delegate to another branch of the
Government the power to fill in the details in the execution,
enforcement or administration of a law, it is essential, to
forestall a violation of the principle of separation of powers,
that said law: (a) be complete in itself it must set forth
therein the policy to be executed, carried out or
implemented by the delegate
2
and (b) fix a standard
the limits of which are sufficiently determinate or
determinable to which the delegate must conform in the
performance of his functions.
2a
Indeed, without a statutory
declaration of policy, the delegate would in effect, make or
formulate such policy, which is the essence of every law;
and, without the aforementioned standard, there would be
no means to determine, with reasonable certainty, whether
311

the delegate has acted within or beyond the scope of his
authority.
2b
Hence, he could thereby arrogate upon himself
the power, not only to make the law, but, also and this is
worse to unmake it, by adopting measures inconsistent
with the end sought to be attained by the Act of Congress,
thus nullifying the principle of separation of powers and the
system of checks and balances, and, consequently,
undermining the very foundation of our Republican system.
Section 68 of the Revised Administrative Code does not
meet these well settled requirements for a valid delegation
of the power to fix the details in the enforcement of a law.
It does not enunciate any policy to be carried out or
implemented by the President. Neither does it give a
standard sufficiently precise to avoid the evil effects above
referred to. In this connection, we do not overlook the fact
that, under the last clause of the first sentence of Section
68, the President:
... may change the seat of the government within any
subdivision to such place therein as the public welfare
may require.
It is apparent, however, from the language of this clause,
that the phrase "as the public welfare may require"
qualified, not the clauses preceding the one just quoted,
but only the place to which the seat of the government may
be transferred. This fact becomes more apparent when we
consider that said Section 68 was originally Section 1 of Act
No. 1748,
3
which provided that, "whenever in the judgment
of the Governor-General the public welfare requires, he
may, by executive order," effect the changes enumerated
therein (as in said section 68), including the change of the
seat of the government "to such place ... as the public
interest requires." The opening statement of said Section 1
of Act No. 1748 which was not included in Section 68 of
the Revised Administrative Code governed the time at
which, or the conditions under which, the powers therein
conferred could be exercised; whereas the last part of the
first sentence of said section referred exclusively to
the place to which the seat of the government was to be
transferred.
At any rate, the conclusion would be the same, insofar as
the case at bar is concerned, even if we assumed that the
phrase "as the public welfare may require," in said Section
68, qualifies all other clauses thereof. It is true that
in Calalang vs. Williams (70 Phil. 726) and People vs.
Rosenthal (68 Phil. 328), this Court had upheld "public
welfare" and "public interest," respectively, as sufficient
standards for a valid delegation of the authority to execute
the law. But, the doctrine laid down in these cases as all
judicial pronouncements must be construed in relation
to the specific facts and issues involved therein, outside of
which they do not constitute precedents and have no
binding effect.
4
The law construed in the Calalang case
conferred upon the Director of Public Works, with the
approval of the Secretary of Public Works and
Communications, the power to issue rules and regulations
topromote safe transit upon national roads and streets.
312

Upon the other hand, the Rosenthal case referred to the
authority of the Insular Treasurer, under Act No. 2581, to
issue and cancel certificates or permits for the
sale ofspeculative securities. Both cases involved grants
to administrative officers of powers related to the exercise
of their administrative functions, calling for the
determination of questions of fact.
Such is not the nature of the powers dealt with in section
68. As above indicated, the creation of municipalities, is not
an administrative function, but one which is essentially
and eminently legislative in character. The question of
whether or not "public interest" demands the exercise of
such power is not one of fact. it is "purely a
legislativequestion "(Carolina-Virginia Coastal Highway vs.
Coastal Turnpike Authority, 74 S.E. 2d. 310-313, 315-318),
or apolitical question (Udall vs. Severn, 79 P. 2d. 347-349).
As the Supreme Court of Wisconsin has aptly characterized
it, "the question as to whether incorporation is for the best
interest of the community in any case is emphatically
a question of public policy and statecraft" (In re Village of
North Milwaukee, 67 N.W. 1033, 1035-1037).
For this reason, courts of justice have annulled, as
constituting undue delegation of legislative powers, state
laws granting the judicial department, the power to
determine whether certain territories should be annexed to
a particular municipality (Udall vs. Severn, supra, 258-359);
or vesting in a Commission the right to determine the plan
and frame of government of proposed villages and what
functions shall be exercised by the same, although the
powers and functions of the village are specifically limited
by statute (In re Municipal Charters, 86 Atl. 307-308); or
conferring upon courts the authority to declare a given
town or village incorporated, and designate its metes and
bounds, upon petition of a majority of the taxable
inhabitants thereof, setting forth the area desired to be
included in such village (Territory ex rel Kelly vs. Stewart, 23
Pac. 405-409); or authorizing the territory of a town,
containing a given area and population, to be incorporated
as a town, on certain steps being taken by the inhabitants
thereof and on certain determination by a court and
subsequent vote of the inhabitants in favor thereof, insofar
as the court is allowed to determine whether the lands
embraced in the petition "ought justly" to be included in
the village, and whether the interest of the inhabitants will
be promoted by such incorporation, and to enlarge and
diminish the boundaries of the proposed village "as justice
may require" (In re Villages of North Milwaukee, 67 N.W.
1035-1037); or creating a Municipal Board of Control which
shall determine whether or not the laying out, construction
or operation of a toll road is in the "public interest" and
whether the requirements of the law had been complied
with, in which case the board shall enter an order creating a
municipal corporation and fixing the name of the same
(Carolina-Virginia Coastal Highway vs. Coastal Turnpike
Authority, 74 S.E. 2d. 310).
Insofar as the validity of a delegation of power by Congress
to the President is concerned, the case of Schechter Poultry
313

Corporation vs. U.S. (79 L. Ed. 1570) is quite relevant to the
one at bar. The Schechter case involved the
constitutionality of Section 3 of the National Industrial
Recovery Act authorizing the President of the United States
to approve "codes of fair competition" submitted to him by
one or more trade or industrial associations or corporations
which "impose no inequitable restrictions on admission to
membership therein and are truly representative,"
provided that such codes are not designed "to promote
monopolies or to eliminate or oppress small enterprises
and will not operate to discriminate against them, and will
tend to effectuate the policy" of said Act. The Federal
Supreme Court held:
To summarize and conclude upon this point: Sec. 3 of
the Recovery Act is without precedent. It supplies no
standards for any trade, industry or activity. It does
not undertake to prescribe rules of conduct to be
applied to particular states of fact determined by
appropriate administrative procedure. Instead of
prescribing rules of conduct, it authorizes the making
of codes to prescribe them. For that legislative
undertaking, Sec. 3 sets up no standards, aside from
the statement of the general aims of rehabilitation,
correction and expansion described in Sec. 1. In view
of the scope of that broad declaration, and of the
nature of the few restrictions that are imposed, the
discretion of the President in approving or
prescribing codes, and thus enacting laws for the
government of trade and industry throughout the
country, is virtually unfettered. We think that the
code making authority thus conferred is an
unconstitutional delegation of legislative power.
If the term "unfair competition" is so broad as to vest in the
President a discretion that is "virtually unfettered." and,
consequently, tantamount to a delegation of legislative
power, it is obvious that "public welfare," which has even a
broader connotation, leads to the same result. In fact, if the
validity of the delegation of powers made in Section 68
were upheld, there would no longer be any legal
impediment to a statutory grant of authority to the
President to do anything which, in his opinion, may be
required by public welfare or public interest. Such grant of
authority would be a virtual abdication of the powers of
Congress in favor of the Executive, and would bring about a
total collapse of the democratic system established by our
Constitution, which it is the special duty and privilege of this
Court to uphold.
It may not be amiss to note that the executive orders in
question were issued after the legislative bills for the
creation of the municipalities involved in this case had failed
to pass Congress. A better proof of the fact that the
issuance of said executive orders entails the exercise of
purely legislative functions can hardly be given.
Again, Section 10 (1) of Article VII of our fundamental law
ordains:
314

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.
The power of control under this provision implies the right
of the President to interfere in the exercise of such
discretion as may be vested by law in the officers of the
executive departments, bureaus, or offices of the national
government, as well as to act in lieu of such officers. This
power is denied by the Constitution to the Executive,
insofar as local governments are concerned. With respect
to the latter, the fundamental law permits him to wield no
more authority than that of checking whether said local
governments or the officers thereof perform their duties as
provided by statutory enactments. Hence, the President
cannot interfere with local governments, so long as the
same or its officers act Within the scope of their authority.
He may not enact an ordinance which the municipal council
has failed or refused to pass, even if it had thereby violated
a duty imposed thereto by law, although he may see to it
that the corresponding provincial officials take appropriate
disciplinary action therefor. Neither may he vote, set aside
or annul an ordinance passed by said council within the
scope of its jurisdiction, no matter how patently unwise it
may be. He may not even 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.
5

Upon the other hand if the President could create a
municipality, he could, in effect, remove any of its officials,
by creating a new municipality and including therein
the barrio in which the official concerned resides, for his
office would thereby become vacant.
6
Thus, by merely
brandishing the power to create a new municipality (if he
had it), without actually creating it, he could compel local
officials to submit to his dictation, thereby, in effect,
exercising over them the power of control denied to him by
the Constitution.
Then, also, the power of control of the President over
executive departments, bureaus or offices implies no
morethan the authority to assume directly the functions
thereof or to interfere in the exercise of discretion by its
officials. Manifestly, such control does not include the
authority either to abolish an executive department or
bureau, or to create a new one. As a consequence, the
alleged power of the President to create municipal
corporations would necessarily connote the exercise by him
of an authority even greater than that of control which he
has over the executive departments, bureaus or offices. In
other words, Section 68 of the Revised Administrative Code
does not merely fail to comply with the constitutional
mandate above quoted. Instead of giving the President less
power over local governments than that vested in him over
the executive departments, bureaus or offices, it reverses
the process and does the exact opposite, by conferring
upon him more power over municipal corporations than
315

that which he has over said executive departments,
bureaus or offices.
In short, even if it did entail an undue delegation of
legislative powers, as it certainly does, said Section 68, as
part of the Revised Administrative Code, approved on
March 10, 1917, must be deemed repealed by the
subsequent adoption of the Constitution, in 1935, which is
utterly incompatible and inconsistent with said statutory
enactment.
7

There are only two (2) other points left for consideration,
namely, respondent's claim (a) that "not all the proper
parties" referring to the officers of the newly created
municipalities "have been impleaded in this case," and
(b) that "the present petition is premature."
As regards the first point, suffice it to say that the records
do not show, and the parties do not claim, that the officers
of any of said municipalities have been appointed or
elected and assumed office. At any rate, the Solicitor
General, who has appeared on behalf of
respondent Auditor General, is the officer authorized by
law "to act and represent the Government of the
Philippines, its offices and agents, in any official
investigation, proceeding or matter requiring the services of
a lawyer" (Section 1661, Revised Administrative Code), and,
in connection with the creation of the aforementioned
municipalities, which involves a political, not proprietary,
function, said local officials, if any, are mere agents or
representatives of the national government. Their interest
in the case at bar has, accordingly, been, in effect, duly
represented.
8

With respect to the second point, respondent alleges that
he has not as yet acted on any of the executive order & in
question and has not intimated how he would act in
connection therewith. It is, however, a matter of common,
public knowledge, subject to judicial cognizance, that the
President has, for many years, issued executive orders
creating municipal corporations and that the same have
been organized and in actual operation, thus indicating,
without peradventure of doubt, that the expenditures
incidental thereto have been sanctioned, approved or
passed in audit by the General Auditing Office and its
officials. There is no reason to believe, therefore, that
respondent would adopt a different policy as regards the
new municipalities involved in this case, in the absence of
an allegation to such effect, and none has been made by
him.
WHEREFORE, the Executive Orders in question are hereby
declared null and void ab initio and the respondent
permanently restrained from passing in audit any
expenditure of public funds in implementation of said
Executive Orders or any disbursement by the municipalities
above referred to. It is so ordered.
Bengzon, C.J., Bautista Angelo, Reyes, J.B.L., Barrera and
Dizon, JJ., concur.
316

Zaldivar, J., took no part.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-28113 March 28, 1969
THE MUNICIPALITY OF MALABANG, LANAO DEL SUR, and
AMER MACAORAO BALINDONG, petitioners,
vs.
PANGANDAPUN BENITO, HADJI NOPODIN MACAPUNUNG,
HADJI HASAN MACARAMPAD, FREDERICK V. DUJERTE
MONDACO ONTAL, MARONSONG ANDOY, MACALABA
INDAR LAO. respondents.
L. Amores and R. Gonzales for petitioners.
Jose W. Diokno for respondents.
CASTRO, J.:
The petitioner Amer Macaorao Balindong is the mayor of
Malabang, Lanao del Sur, while the respondent
Pangandapun Bonito is the mayor, and the rest of the
respondents are the councilors, of the municipality of
Balabagan of the same province. Balabagan was formerly a
part of the municipality of Malabang, having been created
on March 15, 1960, by Executive Order 386 of the then
President Carlos P. Garcia, out of barrios and sitios
1
of the
latter municipality.
The petitioners brought this action for prohibition to
nullify Executive Order 386 and to restrain the respondent
municipal officials from performing the functions of their
respective office relying on the ruling of this Court inPelaez
v. Auditor General
2
and Municipality of San Joaquin v.
Siva.
3

In Pelaez this Court, through Mr. Justice (now Chief
Justice) Concepcion, ruled: (1) that section 23 of Republic
Act 2370 [Barrio Charter Act, approved January 1, 1960], by
vesting the power to create barrios in the provincial board,
is a "statutory denial of the presidential authority to create
a new barrio [and] implies a negation of thebigger power to
create municipalities," and (2) that section 68 of the
Administrative Code, insofar as it gives the President the
power to create municipalities, is unconstitutional (a)
because it constitutes an undue delegation of legislative
power and (b) because it offends against section 10 (1) of
article VII of the Constitution, which limits the President's
power over local governments to mere supervision. As this
Court summed up its discussion: "In short, even if it did not
entail an undue delegation of legislative powers, as it
certainly does, said section 68, as part of the Revised
Administrative Code, approved on March 10, 1917, must be
deemed repealed by the subsequent adoption of the
Constitution, in 1935, which is utterly incompatible and
inconsistent with said statutory enactment."
317

On the other hand, the respondents, while admitting the
facts alleged in the petition, nevertheless argue that the
rule announced in Pelaez can have no application in this
case because unlike the municipalities involved inPelaez,
the municipality of Balabagan is at least a de
facto corporation, having been organized under color of a
statute before this was declared unconstitutional, its
officers having been either elected or appointed, and the
municipality itself having discharged its corporate
functions for the past five years preceding the institution of
this action. It is contended that as a de facto corporation,
its existence cannot be collaterally attacked, although it
may be inquired into directly in an action for quo
warranto at the instance of the State and not of an
individual like the petitioner Balindong.
It is indeed true that, generally, an inquiry into the legal
existence of a municipality is reserved to the State in a
proceeding for quo warranto or other direct proceeding,
and that only in a few exceptions may a private person
exercise this function of government.
4
But the rule
disallowing collateral attacks applies only where the
municipal corporation is at least a de
facto corporations.
5
For where it is neither a corporation de
jure nor de facto, but a nullity, the rule is that its existence
may be, questioned collaterally or directly in any action or
proceeding by any one whose rights or interests ate
affected thereby, including the citizens of the territory
incorporated unless they are estopped by their conduct
from doing so.
6

And so the threshold question is whether the municipality
of Balabagan is a de facto corporation. As earlier stated, the
claim that it is rests on the fact that it was organized before
the promulgation of this Court's decision inPelaez.
7

Accordingly, we address ourselves to the question
whether a statute can lend color of validity to an attempted
organization of a municipality despite the fact that such
statute is subsequently declared
unconstitutional.lawphi1.et
This has been a litigiously prolific question, sharply dividing
courts in the United States. Thus, some hold that ade
facto corporation cannot exist where the statute or charter
creating it is unconstitutional because there can be no de
facto corporation where there can be no de jure one,
8
while
others hold otherwise on the theory that a statute is
binding until it is condemned as unconstitutional.
9

An early article in the Yale Law Journal offers the following
analysis:
It appears that the true basis for denying to the
corporation a de facto status lay in the absence of
any legislative act to give vitality to its creation. An
examination of the cases holding, some of them
unreservedly, that a de facto office or municipal
corporation can exist under color of an
unconstitutional statute will reveal that in no
instance did the invalid act give life to the
318

corporation, but that either in other valid acts or in
the constitution itself the office or the corporation
was potentially created....
The principle that color of title under an
unconstitutional statute can exist only where there is
some other valid law under which the organization
may be effected, or at least an authority in
potentia by the state constitution, has its counterpart
in the negative propositions that there can be no
color of authority in an unconstitutional statute that
plainly so appears on its face or that attempts to
authorize the ousting of a de jure or de
facto municipal corporation upon the same territory;
in the one case the fact would imply the imputation
of bad faith, in the other the new organization must
be regarded as a mere usurper....
As a result of this analysis of the cases the following
principles may be deduced which seem to reconcile
the apparently conflicting decisions:
I. The color of authority requisite to the
organization of a de facto municipal
corporation may be:
1. A valid law enacted by the legislature.
2. An unconstitutional law, valid on its
face, which has either (a) been upheld
for a time by the courts or (b) not yet
been declared void; provided that a
warrant for its creation can be found in
some other valid law or in the
recognition of its potential existence by
the general laws or constitution of the
state.
II. There can be no de facto municipal
corporation unless either directly or
potentially, such a de jurecorporation is
authorized by some legislative fiat.
III. There can be no color of authority in an
unconstitutional statute alone, the invalidity of
which is apparent on its face.
IV. There can be no de facto corporation created to
take the place of an existing de jure corporation, as
such organization would clearly be a usurper.
10

In the cases where a de facto municipal corporation was
recognized as such despite the fact that the statute creating
it was later invalidated, the decisions could fairly be made
to rest on the consideration that there was some other
valid law giving corporate vitality to the organization.
Hence, in the case at bar, the mere fact that Balabagan was
organized at a time when the statute had not been
invalidated cannot conceivably make it a de
facto corporation, as, independently of the Administrative
319

Code provision in question, there is no other valid statute
to give color of authority to its creation. Indeed,
in Municipality of San Joaquin v. Siva,
11
this Court granted a
similar petition for prohibition and nullified an executive
order creating the municipality of Lawigan in Iloilo on the
basis of the Pelaez ruling, despite the fact that the
municipality was created in 1961, before section 68 of the
Administrative Code, under which the President had acted,
was invalidated. 'Of course the issue of de factomunicipal
corporation did not arise in that case.
In Norton v. Shelby Count,
12
Mr. Justice Field said: "An
unconstitutional act is not a law; it confers no rights; it
imposes no duties; it affords no protection; it creates no
office; it is, in legal contemplation, as inoperative as though
it had never been passed." Accordingly, he held that bonds
issued by a board of commissioners created under an
invalid statute were unenforceable.
Executive Order 386 "created no office." This is not to say,
however, that the acts done by the municipality of
Balabagan in the exercise of its corporate powers are a
nullity because the executive order "is, in legal
contemplation, as inoperative as though it had never been
passed." For the existence of Executive, Order 386 is "an
operative fact which cannot justly be ignored." As Chief
Justice Hughes explained in Chicot County Drainage District
v. Baxter State Bank:
13

The courts below have proceeded on the theory
that the Act of Congress, having been found to be
unconstitutional, was not a law; that it was
inoperative, conferring no rights and imposing no
duties, and hence affording no basis for the
challenged decree. Norton v. Shelby County, 118 U.S.
425, 442; Chicago, I. & L. Ry. Co. v. Hackett, 228 U.S.
559, 566. It is quite clear, however, that such broad
statements as to the effect of a determination of
unconstitutionality must be taken with qualifications.
The actual existence of a statute, prior to such a
determination, 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. Questions of rights claimed to
have become vested, of status of prior
determinations deemed to have finality and acted
upon accordingly, of public policy in the light of the
nature both of the statute and of its previous
application, demand examination. These questions
are among the most difficult of those which have
engaged the attention of courts, state and federal,
and it is manifest from numerous decisions that an
all-inclusive statement of a principle of absolute
retroactive invalidity cannot be justified.
320

There is then no basis for the respondents' apprehension
that the invalidation of the executive order creating
Balabagan would have the effect of unsettling many an act
done in reliance upon the validity of the creation of that
municipality.
14

ACCORDINGLY, the petition is granted, Executive Order
386 is declared void, and the respondents are hereby
permanently restrained from performing the duties and
functions of their respective offices. No pronouncement as
to costs.
Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez and
Capistrano, JJ., concur.
Teehankee and Barredo, JJ., took no part.


Separate Opinions
Republic of the Philippines
SUPREME COURT
Manila
EN BANC

G.R. No. 103702 December 6, 1994
MUNICIPALITY OF SAN NARCISO, QUEZON; MAYOR JUAN
K. UY; COUNCILORS: DEOGRACIAS R. ARGOSINO III,
BENITO T. CAPIO, EMMANUEL R. CORTEZ, NORMANDO
MONTILLA, LEONARDO C. UY, FIDEL C. AURELLANA,
PEDRO C. CARABIT, LEONARDO D. AURELLANA, FABIAN M.
MEDENILLA, TRINIDAD F. CORTEZ, SALVADOR M.
MEDENILLA, CERELITO B. AUREADA and FRANCISCA A.
BAMBA, petitioners,
vs.
HON. ANTONIO V. MENDEZ, SR., Presiding Judge, Regional
Trial Court, Branch 62, 4th Judicial Region, Gumaca,
Quezon; MUNICIPALITY OF SAN ANDRES, QUEZON;
MAYOR FRANCISCO DE LEON; COUNCILORS: FE LUPINAC,
TOMAS AVERIA, MANUEL O. OSAS, WILFREDO O.
FONTANIL, ENRICO U. NADRES, RODELITO LUZOIR, LENAC,
JOSE L. CARABOT, DOMING AUSA, VIDAL BANQUELES and
CORAZON M. MAXIMO, respondents.
Manuel Laserna, Jr. for petitioners.
Florante Pamfilo for private respondents.

VITUG, J.:
On 20 August 1959, President Carlos P. Garcia, issued,
pursuant to the then Sections 68 and 2630 of the Revised
Administrative Code, as amended, Executive Order No. 353
creating the municipal district of San Andres, Quezon, by
321

segregating from the municipality of San Narciso of the
same province, the barrios of San Andres, Mangero,
Alibijaban, Pansoy, Camflora and Tala along with their
respective sitios.
Executive Order No. 353 was issued upon the request,
addressed to the President and coursed through the
Provincial Board of Quezon, of the municipal council of
San Narciso, Quezon, in its Resolution No. 8 of 24 May
1959.
1

By virtue of Executive Order No. 174, dated 05 October
1965, issued by President Diosdado Macapagal, the
municipal district of San Andres was later officially
recognized to have gained the status of a fifth class
municipality beginning 01 July 1963 by operation of Section
2 of Republic Act No. 1515.
2
The executive order added
that "(t)he conversion of this municipal district into (a)
municipality as proposed in House Bill No. 4864 was
approved by the House of Representatives."
On 05 June 1989, the Municipality of San Narciso filed a
petition for quo warranto with the Regional Trial Court,
Branch 62, in Gumaca, Quezon, against the officials of the
Municipality of San Andres. Docketed Special Civil
Action No. 2014-G, the petition sought the declaration of
nullity of Executive Order No. 353 and prayed that the
respondent local officials of the Municipality of San Andres
be permanently ordered to refrain from performing the
duties and functions of their respective offices.
3
Invoking
the ruling of this Court in Pelaez v. Auditor General,
4
the
petitioning municipality contended that Executive Order
No. 353, a presidential act, was a clear usurpation of the
inherent powers of the legislature and in violation of the
constitutional principle of separation of powers. Hence,
petitioner municipality argued, the officials of the
Municipality or Municipal District of San Andres had no
right to exercise the duties and functions of their respective
offices that righfully belonged to the corresponding officials
of the Municipality of San Narciso.
In their answer, respondents asked for the dismissal of the
petition, averring, by way of affirmative and special
defenses, that since it was at the instance of petitioner
municipality that the Municipality of San Andres was given
life with the issuance of Executive Order No. 353, it
(petitioner municipality) should be deemed estopped from
questioning the creation of the new municipality;
5
that
because the Municipality of San Andred had been in
existence since 1959, its corporate personality could no
longer be assailed; and that, considering the petition to be
one for quo warranto, petitioner municipality was not the
proper party to bring the action, that prerogative being
reserved to the State acting through the Solicitor General.
6

On 18 July 1991, after the parties had submitted their
respective pre-trial briefs, the trial court resolved to defer
action on the motion to dismiss and to deny a judgment on
the pleadings.
322

On 27 November 1991, the Municipality of San Andres filed
anew a motion to dismiss alleging that the case had
become moot and academic with the enactment of
Republic Act No. 7160, otherwise known as the Local
Government Code of 1991, which took effect on 01 January
1991. The movant municipality cited Section 442(d) of the
law, reading thusly:
Sec. 442. Requisites for Creation. . . .
(d) Municipalities existing as of the date of the
effectivity of this Code shall continue to exist
and operate as such. Existing municipal
districts organized pursuant to presidential
issuances or executive orders and which have
their respective set of elective municipal
officials holding office at the time of the
effectivity of this Code shall henceforth be
considered as regular municipalities.
The motion was opposed by petitioner municipality,
contending that the above provision of law was
inapplicable to the Municipality of San Andres since
the enactment referred to legally existing
municipalities and not to those whose mode of
creation had been void ab initio.
7

In its Order of 02 December 1991, the lower court
8
finally
dismissed the petition
9
for lack of cause of action on what
it felt was a matter that belonged to the State, adding that
"whatever defects (were) present in the creation of
municipal districts by the President pursuant to presidential
issuances and executive orders, (were) cured by the
enactment of R.A. 7160, otherwise known as Local
Government Code of 1991." In an order, dated 17 January
1992, the same court denied petitioner municipality's
motion for reconsideration.
Hence, this petition "for review on certiorari."
Petitioners
10
argue that in issuing the orders of 02
December 1991 and 17 January 1992, the lower court has
"acted with grave abuse of discretion amounting to lack of
or in excess of jurisdiction." Petitioners assert that the
existence of a municipality created by a null and void
presidential order may be attacked either directly or even
collaterally by anyone whose interests or rights are
affected, and that an unconstitutional act is not a law,
creates no office and is inoperative such as though its has
never been passed.
11

Petitioners consider the instant petition to be one for
"review on certiorari" under Rules 42 and 45 of the Rules of
Court; at the same time, however, they question the orders
of the lower court for having been issued with "grave abuse
of discretion amounting to lack of or in excess of
jurisdiction, and that there is no other plain, speedy and
adequate remedy in the ordinary course of law available to
petitioners to correct said Orders, to protect their rights
and to secure a final and definitive interpretation of the
legal issues involved."
12
Evidently, then, the petitioners
323

intend to submit their case in this instance under Rule 65.
We shall disregard the procedural incongruence.
The special civil action of quo warranto is a "prerogative
writ by which the Government can call upon any person to
show by what warrant he holds a public office or exercises
a public franchise."
13
When the inquiry is focused on the
legal existence of a body politic, the action is reserved to
the State in a proceeding for quo warranto or any
other creditproceeding.
14
It must be brought "in the name
of the Republic of the Philippines"
15
and commenced by
the Solicitor General or the fiscal "when directed by the
President of the Philippines . . . ."
16
Such officers may,
under certain circumstances, bring such an action "at the
request and upon the relation of another person" with the
permission of the court.
17
The Rules of Court also allows an
individual to commence an action for quo warranto in his
own name but this initiative can be done when he claims to
be "entitled to a public office or position usurped or
unlawfully held or exercised by another."
18
While the quo
warranto proceedings filed below by petitioner municipality
has so named only the officials of the Municipality of San
Andres as respondents, it is virtually, however, a
denunciation of the authority of the Municipality or
Municipal District of San Andres to exist and to act in that
capacity.
At any rate, in the interest of resolving any further doubt on
the legal status of the Municipality of San Andres, the Court
shall delve into the merits of the petition.
While petitioners would grant that the enactment of
Republic Act
No. 7160 may have converted the Municipality of San
Andres into a de facto municipality, they, however, contend
that since the petition for quo warranto had been filed prior
to the passage of said law, petitioner municipality had
acquired a vested right to seek the nullification of Executive
Order No. 353, and any attempt to apply Section 442 of
Republic Act 7160 to the petition would perforce be
violative of due process and the equal protection clause of
the Constitution.
Petitioners' theory might perhaps be a point to consider
had the case been seasonably brought. Executive Order No.
353 creating the municipal district of San Andres was issued
on 20 August 1959 but it was only after almost thirty (30)
years, or on 05 June 1989, that the municipality of San
Narciso finally decided to challenge the legality of the
executive order. In the meantime, the Municipal District,
and later the Municipality, of San Andres, began and
continued to exercise the powers and authority of a duly
created local government unit. In the same manner that the
failure of a public officer to question his ouster or the right
of another to hold a position within a one-year period can
abrogate an action belatedly filed,
19
so also, if not indeed
with greatest imperativeness, must a quo
warrantoproceeding assailing the lawful authority of a
political subdivision be timely raised.
20
Public interest
demands it.
324

Granting the Executive Order No. 353 was a complete
nullity for being the result of an unconstitutional delegation
of legislative power, the peculiar circumstances obtaining in
this case hardly could offer a choice other than to consider
the Municipality of San Andres to have at least attained a
status uniquely of its own closely approximating, if not in
fact attaining, that of a de facto municipal corporation.
Conventional wisdom cannot allow it to be otherwise.
Created in 1959 by virtue of Executive Order No. 353, the
Municipality of San Andres had been in existence for more
than six years when, on 24 December 1965, Pelaez v.
Auditor General was promulgated. The ruling could have
sounded the call for a similar declaration of the
unconstitutionality of Executive Order No. 353 but it was
not to be the case. On the contrary, certain governmental
acts all pointed to the State's recognition of the continued
existence of the Municipality of San Andres. Thus, after
more than five years as a municipal district, Executive Order
No. 174 classified the Municipality of San Andres as a fifth
class municipality after having surpassed the income
requirement laid out in Republic Act No. 1515. Section 31 of
Batas Pambansa Blg. 129, otherwise known as the Judiciary
Reorganization Act of 1980, constituted as municipal
circuits, in the establishment of Municipal Circuit Trial
Courts in the country, certain municipalities that comprised
the municipal circuits organized under Administrative Order
No. 33, dated 13 June 1978, issued by this Court pursuant
to Presidential Decree No. 537. Under this administrative
order, the Municipality of San Andres had been covered by
the 10th Municipal Circuit Court of San Francisco-San
Andres for the province of Quezon.
At the present time, all doubts on the de jure standing of
the municipality must be dispelled. Under the Ordinance
(adopted on 15 October 1986) apportioning the seats of the
House of Representatives, appended to the 1987
Constitution, the Municipality of San Andres has been
considered to be one of the twelve (12) municipalities
composing the Third District of the province of Quezon.
Equally significant is Section 442(d) of the Local
Government Code to the effect that municipal districts
"organized pursuant to presidential issuances or executive
orders and which have their respective sets of elective
municipal officials holding office at the time of the
effectivity of (the) Code shall henceforth be considered as
regular municipalities." No pretension of
unconstitutionality per seof Section 442(d) of the Local
Government Code is proferred. It is doubtful whether such
a pretext, even if made, would succeed. The power to
create political subdivisions is a function of the legislature.
Congress did just that when it has incorporated Section
442(d) in the Code. Curative laws, which in essence are
retrospective,
21
and aimed at giving "validity to acts done
that would have been invalid under existing laws, as if
existing laws have been complied with," are validly
accepted in this jurisdiction, subject to the usual
qualification against impairment of vested rights.
22

325

All considered, the de jure status of the Municipality of San
Andres in the province of Quezon must now be conceded.
WHEREFORE, the instant petition for certiorari is hereby
DISMISSED. Costs against petitioners.
SO ORDERED.
Narvasa, C.J., Padilla, Bidin, Regalado, Davide, Jr., Romero,
Bellosillo, Melo, Quiason, Puno, Kapunan and Mendoza, JJ.
concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-59180 January 29, 1987
CLEMENTINO TORRALBA and RESOLUTION L.
RUGAY, petitioners,
vs.
THE MUNICIPALITY OF SIBAGAT, PROVINCE OF AGUSAN
DEL SUR and ITS MUNICIPAL OFFICERS,respondents.

MELENCIO-HERRERA, J.:
Challenged in the instant Petition, as violative of Section 3,
Article XI of the 1973 Constitution, is Batas Pambansa Blg.
56, enacted on 1 February 1980, creating the Municipality
of Sibagat, Province of Agusan del Sur. The pertinent
provisions of BP 56 read:
Sec. 1. The barangays of Ilihan, Sinai, Sibagat, El Rio, Afga,
Tabontabon, Perez, Magsaysay, Santa Cruz, Santa Maria,
San Isidro, Villangit, Del Rosario, Anahauan Mahayahay, and
San Vicente, all in the Municipality of Bayugan, Province of
Agusan del Sur, are hereby separated from said
municipality to form and constitute an independent
Municipality of Sibagat without affecting in any manner the
legal existence of the mother Municipality of Bayugan.
Sec. 2. The boundaries of the new Municipality of Sibagat
will be: Beginning at the point of intersection of the
Cabadbaran-Old Bayugan and Surigao del Sur boundaries;
thence in a southernly direction following the Old Bayugan
and Cabadbaran, Old Bayugan and Butuan City, Old
Bayugan and Las Nieves boundaries, until it reaches the
point of intersection of Old Bayugan, Esperanza and the
Municipality of Las Nieves; ...
Sec. 3. The seat of government of the newly created
municipality shall be in Barangay Sibagat.
Sec. 4. Except as herein provided, all provisions of laws,
now or hereafter applicable to regular municipalities shall
be applicable to the new Municipality of Sibagat.
326

Sec. 5. After ratification by the majority of the votes cast in
a plebiscite to be conducted in the area or areas affected
within a period of ninety (90) days after the approval of this
Act, the President (Prime Minister) shall appoint the Mayor
and other Officials of the new Municipality of Sibagat.
Petitioners are residents and taxpayers of Butuan City, with
petitioner, Clementino Torralba, being a member of the
Sangguniang Panglunsod of the same City. Respondent
municipal officers are the local public officials of the new
Municipality.
Section 3, Article XI of the 1973 Constitution, said to have
been infringed, is reproduced hereunder:
Sec. 3. No province, city, municipality, or barrio may be
created, divided, merged, abolished, or its boundary
substantially altered, except in accordance with the criteria
established in the Local Government Code, and subject to
the approval by a majority of the votes cast in a plebiscite in
the unit or units affected.
The thrust of petitioners' argument is that under the
aforequoted provision, the Local Government Code must
first be enacted to determine the criteria for the creation,
division, merger, abolition, or substantial alteration of the
boundary of any province, city, municipality, or barrio; and
that since no Local Government Code had as yet been
enacted as of the date BP 56 was passed, that statute could
not have possibly complied with any criteria when
respondent Municipality was created, hence, it is null and
void.
It is a fact that the Local Government Code came into being
only on 10 February 1983 so that when BP 56 was enacted,
the code was not yet in existence. The evidence likewise
discloses that a plebiscite had been conducted among the
people of the unit/units affected by the creation of the new
Municipality, who expressed approval thereof; and that
officials of the newly created Municipality had been
appointed and had assumed their respective positions as
such.
We find no trace of invalidity of BP 56. The absence of the
Local Government Code at the time of its enactment did
not curtail nor was it intended to cripple legislative
competence to create municipal corporations. Section 3,
Article XI of the 1973 Constitution does not proscribe nor
prohibit the modification of territorial and political
subdivisions before the enactment of the Local Government
Code. It contains no requirement that the Local
Government Code is a condition sine qua non for the
creation of a municipality, in much the same way that the
creation of a new municipality does not preclude the
enactment of a Local Government Code. What the
Constitutional provision means is that once said Code is
enacted, the creation, modification or dissolution of local
government units should conform with the criteria thus laid
down. In the interregnum before the enactment of such
Code, the legislative power remains plenary except that the
327

creation of the new local government unit should be
approved by the people concerned in a plebiscite called for
the purpose.
The creation of the new Municipality of Sibagat conformed
to said requisite. A plebiscite was conducted and the people
of the unit/units affected endorsed and approved the
creation of the new local government unit (parag. 5,
Petition; p. 7, Memorandum).lwphl@it In fact, the conduct
of said plebiscite is not questioned herein. The officials of
the new Municipality have effectively taken their oaths
of office and are performing their functions. A dejure entity
has thus been created.
It is a long-recognized principle that the power to create
a municipal corporation is essentially legislative in nature.
In the absence of any constitutional limitations a legislative
body may Create any corporation it deems essential for
the more efficient administration of government (I
McQuillin, Municipal Corporations, 3rd ed., 509). The
creation of the new Municipality of Sibagat was a valid
exercise of legislative power then vested by the 1973
Constitution in the Interim Batasang Pambansa.
We are not unmindful of the case of Tan vs. COMELEC (142
SCRA 727 [1986]), striking down as unconstitutional BP Blg.
885 creating a new province in the Island of Negros known
as the Province of Negros del Norte, and declaring the
plebiscite held in connection therewith as illegal There are
significant differences, however, in the two cases among
which may be mentioned the following. in the Tan case, the
Local Government Code already existed at the time that the
challenged statute was enacted on 3 December 1985; not
so in the case at bar. Secondly, BP Blg. 885 in the Tan case
confined the plebiscite to the "proposed new province" to
the exclusion of the voters in the remaining areas, in
contravention of the Constitutional mandate and of the
Local Government Code that the plebiscite should be held
"in the unit or units affected." In contrast, BP 56 specifically
provides for a plebiscite "in the area or areas affected." In
fact, as previously stated, no question is raised herein as to
the legality of the plebiscite conducted. Thirdly, in
the Tan case, even the requisite area for the creation of a
new province was not complied with in BP Blg. 885. No such
issue in the creation of the new municipality has been
raised here. And lastly, "indecent haste" attended the
enactment of BP Blg. 885 and the holding of the plebiscite
thereafter in the Tan case; on the other hand, BP 56
creating the Municipality of Sibagat, was enacted in the
normal course of legislation, and the plebiscite was held
within the period specified in that law.
WHEREFORE, the Petition is hereby dismissed. No costs.
SO ORDERED.
Teehankee, C.J., Yap, Fernan, Narvasa, Alampay, Gutierrez,
Jr., Paras, Feliciano, Gancayco, Padilla and Bidin, JJ., concur.

328

EN BANC
[G.R. No. 105746. December 2, 1996]
MUNICIPALITY OF JIMENEZ, through its MAYOR
ELEUTERIO A. QUIMBO, VICE MAYOR ROBINSON B.
LOMO, COUNCILORS TEOFILO GALORIO, CASIANO
ADORABLE, MARIO APAO, ANTONIO BIENES, VEDE
SULLANO, MARIETO TAN, SR., HERMINIO SERINO,
BENJAMIN DANO, and CRISPULO MUNAR, and
ELEUTERIO A. QUIMBO, ROBINSON B. LOMO,
TEOFILI GALORIO, CASIANO ADORABLE, MARIO
APAO, ANTONIO BIENES, VEDE SULLANO, MARIETO
TAN SR., HERMINI SERINO, BENJAMIN DANO, and
CRISPULO MUNAR, in their private capacities as
taxpayer in the Province of Misamis Occidental and
the Municipality of Jimenez, Misamis Occidental,
and BENJAMIN C. GALINDO and BENHUR B.
BAUTISTA, in their private capacities as taxpayers in
the Province of Misamis Occidental and the
Municipality of Jimenez, Misamis
Occidental, petitioners, vs., HON. VICENTE T. BAZ,
JR., Presiding Judge REGIONAL TRIAL COURT,
BRANCH 14, 10
th
JUDICIAL REGION, OROQUIETA
CITY, and MUNICIPALITY OF SINACABAN through its
MAYOR EUFRACIO D. LOOD, VICE MAYOR BASILIO
M. BANAAG, COUNCILORS CONCEPCION E. LAGA-
AC, MIGUEL F. ABCEDE, JUANITO B. TIU, CLAUDIO T.
REGIL, ANCIETO S. MEJARES NAZIANCINO B.
MARIQUIT, and FEDERICO QUINIMON, and THE
PROVINCE OF MISAMIS OCCIDENTAL through the
PROVINCIAL BOARD OF MISAMIS OCCIDENTAL and
its members, VICE-GOVERNOR FLORENCIO L.
GARCIA, BOARD MEMBERS MARIVIC S. CHIONG,
PACITA M. YAP, ALEGRIA V. CARINO, JULIO L. TIU,
LEONARDO R. REGALADO II, CONSTACIO C. BALAIS
and ERNESTO P. IRA, and THE COMMISSION ON
AUDIT, through its Chairman, HON. EUFEMIO
DOMINGO, and THE DEPARTMENT OF LOCAL
GOVERNMENT through its Secretary, HON. LUIS
SANTOS (now HON. CESAR SARINO), and THE
DEPARTMENT OF BUDGET AND MANAGEMENT,
through its Secretary, HON. GUILLERMO CARAGUE
(now HON. SALVADOR ENRIQUEZ), and The Hon.
CATALINO MACARAOG (now HON. FRAKLIN
DRILON), EXECUTIVE SECRETARY, OFFICE OF THE
PRESIDENT, respondents.
D E C I S I O N
MENDOZA, J.:
This is a petition for review of the decision dated March
4, 1992 of the Regional Trial Court, Branch 14 of Oroquieta
City,
[1]
affirming the legal existence of the Municipality of
Sinacaban in Misamis Occidental and ordering the
329

relocation of its boundary for the purpose of determining
whether certain areas claimed by it belong to it.
The antecedent facts are as follows:
The Municipality of Sinacaban was created by Executive
Order No. 258 of then President Elpidio Quirino, pursuant
to 68 of the Revised Administrative Code of 1917. The full
text of the Order reads:
EXECUTIVE ORDER NO. 258
CREATING THE MUNICIPALITY OF SINACABAN,
IN THE PROVINCE OF MISAMIS OCCIDENTAL
Upon the recommendation of the Secretary of the Interior,
and pursuant to the provisions of Section 68 of the Revised
Administrative Code, there is hereby created, in the
Province of Misamis Occidental, a municipality to be known
as the municipality of Sinacaban, which shall consist of the
southern portion of the municipality of Jimenez, Misamis
Occidental, more particularly described and bounded as
follows:
On the north by a line starting from point 1, the center of
the lighthouse on the Tabo-o point S. 84
0
30W., 7,250
meters to point 2 which is on the bank of Palilan River
branch; thence following Palilan River branch 2,400 meters
southwesterly 'to point 3, thence a straight line S 87
0
00 W,
22,550 meters to point 4, where this intersects the Misamis
Occidental-Zamboanga boundary; on the west, by the
present Misamis Occidental-Zamboanga boundary; and on
the south by the present Jimenez-Tudela boundary; and on
the east, by the limits of the municipal waters which the
municipality of Sinacaban shall have pursuant to section
2321 of the Revised Administrative Code, (Description
based on data shown in Enlarged Map of Poblacion of
Jimenez, Scale 1:8:000).
The municipality of Sinacabn contains the barrios of
Sinacaban, which shall be the seat of the municipal
government, Sinonoc, Libertad, the southern portion of the
barrio of Macabayao, and the sitios of Tipan, Katipunan,
Estrella, Flores, Senior, Adorable, San Isidro, Cagayanon,
Kamanse, Kulupan and Libertad Alto.
The municipality of Jimenez shall have its present territory,
minus the portion thereof included in the municipality of
Sinacaban.
The municipality of Sinacaban shall begin to exist upon the
appointment and qualification of the mayor, vice-mayor,
and a majority of the councilors thereof. The new
municipality shall, however, assume payment of a
proportionate share of the loan of the municipality of
Jimenez with the Rehabilitation Finance Corporation as may
be outstanding on the date of its organization, the
proportion of such payment to be determined by the
Department of Finance.
330

Done in the City of Manila, this 30
th
day of August, in the
year of Our Lord, nineteen hundred and forty-nine, and of
the Independence of the Philippines, the fourth.
(SGD.) ELPIDIO QUIRINO
President of the Philippines
By the President:
(SGD.) TEODORO EVANGELISTA
Executive Secretary
By virtue of Municipal Council Resolution No.
171,
[2]
dated November 22, 1988, Sinacaban laid claim to a
portion of Barrio Tabo-o and to Barrios Macabayao,
Adorable, Sinara Baja, and Sinara Alto,
[3]
based on the
technical description in E.O. No. 258. The claim was filed
with the Provincial Board of Misamis Occidental against the
Municipality of Jimenez.
In its answer, the Municipality of Jimenez, while
conceding that under E.O. No. 258 the disputed area is part
of Sinacaban, nonetheless asserted jurisdiction on the basis
of an agreement it had with the Municipality of
Sinacaban. This agreement was approved by the Provincial
Board of Misamis Occidental, in its Resolution No. 77, dated
February 18, 1950, which fixed the common boundary of
Sinacaban and Jimenez as follows:
[4]

From a point at Cagayanon Beach follow Macabayao Road
until it intersects Tabangag Creek at the back of the
Macabayao Elementary school. Follow the Tabangag Creek
until it intersect the Macabayao River at upper
Adorable. Follow the Macabayao River such that the barrio
of Macabayao, Sitio Adorable and site will be a part of the
Jimenez down and the sitios of San Vicente, Donan, Estrella,
Mapula will be a part of Sinacaban. (Emphasis added)
In its decision dated October 11, 1989,
[5]
the Provincial
Board declared the disputed area to be part of
Sinacaban. It held that the previous resolution approving
the agreement between the municipalities was void
because the Board had no power to alter the boundaries of
Sinacaban as fixed in E.O. No. 258, that power being vested
in Congress pursuant to the Constitution and the Local
Government Code of 1983 (B.P. Blg. 337), 134.
[6]
The
Provincial Board denied in its Resolution No. 13-90 dated
January 30, 1990 the motion of Jimenez seeking
reconsideration.
[7]

On March 20, 1990, Jimenez filed a petition
for certiorari, prohibition, and mandamus in the Regional
Trial Court of Oroquieta City, Branch 14. The suit was filed
against Sinacaban, the Province of Misamis Occidental and
its Provincial Board, the Commission on Audit, the
Departments of Local Government, Budget and
Management, and the Executive Secretary. Jimenez alleged
that, in accordance with the decision in Pelaez v. Auditor
General,
[8]
the power to create municipalities is essentially
legislative and consequently Sinacaban, which was created
by an executive order, had no legal personality and no right
331

to assert a territorial claim vis--vis Jimenez, of which it
remains part. Jimenez prayed that Sinacaban be enjoined
from assuming control and supervision over the disputed
barrios; that the Provincial Board be enjoined from
assuming jurisdiction over the claim of Sinacaban; that E.O.
No. 258 be declared null and void; that the decision dated
October 11, 1989 and Resolution No. 13-90 of the Provincial
Board be set aside for having been rendered without
jurisdiction; that the Commission on Audit be enjoined from
passing in audit any expenditure of public funds by
Sinacaban; that the Department of Budget and
Management be enjoined from allotting public funds to
Sinacaban; and that the Executive Secretary be enjoined
from exercising control and supervision over said
municipality.
During pre-trial, the parties agreed to limit the issues to
the following:
A. Whether the Municipality of Sinacaban is a legal
juridical entity, duly created in accordance with
law;
B. If not, whether it is a de facto juridical entity;
C. Whether the validity of the existence of the
Municipality can be properly questioned in this
action on certiorari;
D. Whether the Municipality of Jimenez which had
recognized the existence of the municipality for
more than 40 years is estopped to question its
existence;
E. Whether the existence of the municipality has
been recognized by the laws of the land; and
F. Whether the decision of the Provincial Board had
acquired finality.
On February 10, 1992, the RTC rendered its decision,
the dispositive portion of which reads:
WHEREFORE, premises considered, it is the finding of this
Court that the petition must be denied and judgment is
hereby rendered declaring a STATUS QUO, that is, the
municipality of Sinacaban shall continue to exist and
operate as a regular municipality; declaring the decision
dated October 11, 1989 rendered by the Sangguniang
Panlalawigan fixing the boundaries between Sinacaban and
Jimenez, Missamis Occi. as null and void, the same not
being in accordance with the boundaries provided for in
Executive order No. 258 creating
the municipality of Sinacaban; dismissing the petition for
lack of merit, without pronouncement as to cost and
damages. With respect to the counterclaim, the same is
hereby ordered dismissed.
The Commissioners are hereby ordered to conduct the
relocation survey of the boundary of Sinacaban within 60
days from the time the decision shall have become final and
executory and another 60 days within which to submit their
report from the completion of the said relocation survey.
332

SO ORDERED.
The RTC, inter alia, held that Sinacaban is a de
facto corporation since it had completely organized itself
even prior to the Pelaez case and exercised corporate
powers for forty years before the existence was
questioned; that Jimenez did not have the legal standing to
question the existence of Sinacaban, the same being
reserved to he State as represented by the Office of the
Solicitor General in a quo warranto proceeding; that
Jimenez was estopped from questioning the legal existence
of Sinacaban by entering into an agreement with it
concerning their common boundary; and that any question
as to the legal existence of Sinacaban had been rendered
moot by 442 (d) of the Local Government Code of 1991
(R.A. No. 7160), which provides:
Municipalities existing as of the date of the effectivity of
this Code shall continue to exist and operate as
such. Existing municipal districts organized pursuant to
presidential issuances or executive orders and which
have their respective set of elective municipal officials
holding office at the time of the effectivity of this Code
shall henceforth be considered as regular
municipalities.
On March 17, 1990, petitioner moved for a
reconsideration of the decision but its motion was denied
by the RTC. Hence this petition raising the following issues:
(1) whether Sinacaban has legal personality to file a claim,
and (2) if it has, whether it is the boundary provided for in
E.O. No. 258 or in resolution No. 77 of the Provincial Board
of Misamis Occidental which should be used as the basis for
adjudicating Sinacabans territorial claim.
First. The preliminary issue concerns the legal existence
of Sinacaban. If Sinacaban legally exist, then it has standing
to bring a claim in the Provincial Board. Otherwise, it
cannot.
The principal basis for the view that Sinacaban was not
validly created as a municipal corporation is the ruling in
Pelaez v. Auditor General that the creation of municipal
corporations is essentially a legislative matter and therefore
the President was without power to create by executive
order the Municipality of Sinacaban. The ruling in this case
has been reiterated in a number of cases
[9]
later
decided. However, we have since held that where a
municipality created as such by executive order is later
impliedly recognized and its acts are accorded legal validity,
its creation can no longer be questioned. In Municipality of
San Narciso, Quezon v. Mendez, Sr.,
[10]
this Court
considered the following factors as having validated the
creation of a municipal corporation, which, like the
Municipallity of Sinacaban, was created by executive order
of the President before the ruling in Pelaez v. Auditor
general: (1) the fact that for nearly 30 years the validity of
the creation of the municipality had never been challenged;
(2) the fact that following the ruling in Pelaez no quo
warranto suit was filed to question the validity of the
executive order creating such municipality; and (3) the fact
333

that the municipality was later classified as a fifth class
municipality, organized as part of a municipal circuit court
and considered part of a legislative district in the
Constitution apportioning the seats in the House of
Representatives. Above all, it was held that whatever
doubt there might be as to the de jure character of the
municipality must be deemed to have been put to rest by
the local Government Code of 1991 (R.A. no. 7160), 442
(d) of which provides that municipal districts organized
pursuant to presidential issuances or executive orders and
which have their respective sets of elective officials holding
office at the time of the effectivity of this Code shall
henceforth be considered as regular municipalities.
Here, the same factors are present so as to confer on
Sinacaban the status of at least a de facto municipal
corporation in the sense that its legal existence has been
recognized and acquiesced publicly and
officially. Sinacaban had been in existence for sixteen years
when Pelaez v. Auditor General was decided on December
24, 1965. Yet the validity of E.O. No. 258 creating it had
never been questioned. Created in 1949, it was only 40
years later that its existence was questioned and only
because it had laid claim to an area that apparently is
desired for its revenue. This fact must be underscored
because under Rule 66, 16 of the Rules of Court, a quo
warranto suit against a corporation for forfeiture of its
charter must be commenced within five (5) years from the
time the act complained of was done or committed. On the
contrary, the State and even the municipality of Jimenez
itself have recognized Sinacabans corporate
existence. Under Administrative order no. 33 dated June
13, 1978 of this Court, as reiterated by 31 of the judiciary
Reorganization Act of 1980 (B.P. Blg. 129), Sinacaban is
constituted part of municipal circuit for purposes of the
establishment of Municipal Circuit Trial Courts in the
country. For its part, Jimenez had earlier recognized
Sinacaban in 1950 by entering into an agreement with it
regarding their common boundary. The agreement was
embodied in Resolution no. 77 of the Provincial Board of
Misamis Occidental.
Indeed Sinacaban has attained de jure status by virtue
of the Ordinance appended to the 1987 Constitution,
apportioning legislative districts throughout the country,
which considered Sinacaban part of the Second District of
Misamis Occidental. Moreover following the ruling in
Municipality of san Narciso, Quezon v. Mendez, Sr., 442(d)
of the Local Government Code of 1991 must be deemed to
have cured any defect in the creation of Sinacaban. This
provision states:
Municipalities existing as of the date of the effectivity of
this Code shall continue to exist and operate as
such. Existing municipal district organized pursuant to
presidential issuances or executive orders and which
have their respective set of elective municipal officials
holding office at the time of the effectivity of the Code
shall henceforth be considered as regular
municipalities.
334

Second. Jimenez claims, however, that R.A. No. 7160,
442(d) is invalid, since it does not conform to the
constitutional and statutory requirements for the holding of
plebiscites in the creation of new municipalities.
[11]

This contention will not bear analysis. Since, as
previously explained, Sinacaban had attained de
facto status at the time the 1987 Constitution took effect
on February 2, 1987, it is not subject to the plebiscite
requirement. This requirement applies only to new
municipalities created for the first time under the
Constitution. Actually, the requirement of plebiscite was
originally contained in Art. XI, 3 of the previous
Constitution which took effect on January 17, 1973. It
cannot, therefore, be applied to municipal corporations
created before, such as the municipality of Sinacaban in the
case at bar.
Third. Finally Jimenez argues that the RTC erred in
ordering a relocation survey of the boundary of Sinacaban
because the barangays which Sinacaban are claiming are
not enumerated in E.O. No. 258 and that in any event in
1950 the parties entered into an agreement whereby the
barangays in question were considered part of the territory
of Jimenez.
E.O. no. 258 does not say that Sinacaban comprises only
the barrios (now called Barangays) therein
mentioned. What it say is that Sinacaban contains those
barrios, without saying they are the only ones comprising
it. The reason for this is that the technical description,
containing the metes and bounds of its territory, is
controlling. The trial court correctly ordered a relocation
and consequently the question to which the municipality
the barangays in question belong.
Now, as already stated, in 1950 the two municipalities
agreed that certain barrios bellonged to Jimenez, while
certain other ones belonged to Sinacaban. This agreement
was subsequently approved by the Provincial board of
Misamis Occidental. Whether this agreement conforms to
E.O. no. 258 will be determined by the result of the
survey. Jimenez contends however, that regardless of its
conformity to E.O. No, 258, the agreement as embodied in
resolution No, 77 of the Provincial Board, is binding on
Sinacaban. This raises the question whether the provincial
board had authority to approve the agreement or, to put it
in another way, whether it had the power to declare certain
barrios part of the one or the other municipality. We hold
it did not if effect would be to amend the area as described
in E.O no. 258 creating the Municipality of Sinacaban.
At the time the Provincial Board passed Resolution No.
77 on February 18, 1950, the applicable law was 2167 of
the Revised Administrative Code of 1917 which provided:
SEC. 2167. Municipal boundary disputes. How settled.
Disputes as to jurisdiction of municipal governments over
places or barrios shall be decided by the provincial boards
of the provinces in which such municipalities are situated,
after an investigation at which the municipalities concerned
shall be duly heard. From the decision of the provincial
335

board appeal may be taken by the municipality aggrieved to
the Secretary of the Interior [now the Office of the
Executive Secretary], whose decision shall be final. Where
the places or barrios in dispute are claimed by
municipalities situated in different provinces, the provincial
boards of the provinces concerned shall come to an
agreement if possible, but, in the event of their failing to
agree, an appeal shall be had to the Secretary of Interior
[Executive Secretary], whose decision shall be final.
As held in Pelaez v. Auditor General,
[12]
the power of
provincial boards to settle boundary disputes is of an
administrative nature involving as it does, the adoption of
means and ways to carry into effect the law creating said
municipalities. It is a power to fix common boundary, in
order to avoid or settle conflicts of jurisdiction between
adjoining municipalities. It is thus limited to implementing
the law creating a municipality. It is obvious that any
alteration of boundaries that is not in accordance with the
law creating a municipality is not the carrying into effect of
that law but its amendment.
[13]
If, therefore, Resolution No.
77 of the Provincial Board of Misamis Occidental is contrary
to the technical description of the territory of Sinacaban, it
cannot be used by Jimenez as basis for opposing the claim
of Sinacaban.
Jimenez properly brought to the RTC for review the
decision of October 11, 1989 and Resolution No. 13-90 of
the Provincial Board. Its action is in accordance with the
local Government Code of 1983, 79 of which provides that
I case no settlement of boundary disputes is made the
dispute should be elevated to the RTC of the province. In
1989, when the action was brought by Jimenez, this Code
was the governing law. The governing law is now the Local
Government Code of 1991 (R.A. No. 7160), 118-119.
Jimenezs contention that the RTC failed to decide the
case within one year form the start of proceeding as
required by 79 of the Local Government Code of 1983 and
the 90-day period provided for in the Article VIII, 15 of the
Constitution does not affect the validity of the decision
rendered. For even granting that the court failed to decide
within the period prescribed by law, its failure did not
divest it of its jurisdiction to decide the case but only makes
the judge thereof liable for possible administrative
sanction.
[14]

WHEREFORE, the petition is DENIED and the decision of
the Regional Trial Court of Oroquieta City, Branch 14 is
AFFIRMED.
SO ORDERED
Narvasa C.J., Padilla, Regalado, Davide Jr., Romero,
Bellosillo, Melo, Puno, Vitug, Kapunan, Francisco,
Hermosisima Jr., Panganiban, and Torres, Jr., JJ., concur.

EN BANC
[G.R. No. 133064. September 16, 1999]
336

JOSE C. MIRANDA, ALFREDO S. DIRIGE, MANUEL H.
AFIADO, MARIANO V. BABARAN and ANDRES R.
CABUYADAO, petitioners, vs. HON. ALEXANDER
AGUIRRE, In his capacity as Executive Secretary;
HON. EPIMACO VELASCO, in his capacity as
Secretary of Local Government, HON. SALVADOR
ENRIQUEZ, in his capacity as Secretary of Budget,
THE COMMISSION ON AUDIT THE COMMISSION ON
ELECTIONS HON. BENJAMIN G. DY, in his capacity as
Governor of Isabela, THE HONORABLE
SANGGUNIANG PANLALAWIGAN OF ISABELA, ATTY.
BALTAZAR PICIO, in his capacity as Provincial
Administrator, and MR. ANTONIO CHUA, in his
capacity as Provincial Treasurer, respondents,
GIORGIDI B. AGGABAO, intervenor.
D E C I S I O N
PUNO, J.:
This is a petition for a writ of prohibition with prayer for
preliminary injunction assailing the constitutionality of
Republic Act No. 8528 converting the city of Santiago,
Isabela from an independent component city to a
component city.
On May 5, 1994, Republic Act No. 7720 which converted
the municipality of Santiago, Isabela into an independent
component city was signed into law. On July 4, 1994, the
people of Santiago ratified R.A. No. 7720 in a plebiscite.
1

On February 14, 1998, Republic Act No. 8528 was
enacted. It amended R.A. No. 7720. Among others, it
changed the status of Santiago from an independent
component city to a component city, viz:
AN ACT AMENDING CERTAIN SECTIONS OF REPUBLIC
ACT NUMBERED 7720 AN ACT CONVERTING THE
MUNICIPALITY OF SANTIAGO INTO AN INDEPENDENT
COMPONENT CITY TO BE KNOWN AS THE CITY OF
SANTIAGO.
Be it enacted by the Senate and House of
Representatives of the Philippines in Congress assembled:
SECTION 1. Section 2 of Republic Act No. 7720
is hereby amended by deleting the words an
independent thereon so that said Section will read
as follows:
SEC. 2. The City of Santiago. The Municipality
of Santiago shall be converted into a component
city to be known as the City of Santiago, hereinafter
referred to as the City, which shall comprise of the
present territory of the Municipality of Santiago,
Isabela. The territorial jurisdiction of the City shall
be within the present metes and bounds of the
Municipality of Santiago.
Sec. 2. Section 51 of Republic Act No. 7720 is hereby
amended deleting the entire section and in its stead
substitute the following:
337

SEC. 51. Election of Provincial Governor, Vice-
Governor, Sangguniang Panlalawigan Members,
and any Elective Provincial Position for the Province
of Isabela.- The voters of the City of Santiago shall
be qualified to vote in the elections of the Provincial
Governor, Vice-Governor, Sangguniang
Panlalawigan members and other elective provincial
positions of the Province of Isabela, and any such
qualified voter can be a candidate for such
provincial positions and any elective provincial
office.
Sec. 3. Repealing Clause.- All existing laws or parts
thereof inconsistent with the provisions of this Act are
hereby repealed or modified accordingly.
Sec. 4. Effectivity.- This Act shall take effect upon its
approval.
Approved.
Petitioners assail the constitutionality of R.A. No.
8528.
2
They alleged as ground the lack of provision in R.A.
No. 8528 submitting the law for ratification by the people
of Santiago City in a proper plebiscite. Petitioner Miranda
was the mayor of Santiago at the time of the filing of the
petition at bar. Petitioner Afiado is the President of the
Liga ng mga Barangay ng Santiago City. Petitioners Dirige,
Cabuyadao and Babaran are residents of Santiago City.
In their Comment, respondent provincial officials of
Isabela defended the constitutionality of R.A. No.
8528. They assailed the standing of petitioners to file the
petition at bar. They also contend that the petition raises a
political question over which this Court lacks jurisdiction.
Another Comment was filed by the Solicitor General for
the respondent public officials. The Solicitor General also
contends that petitioners are not real parties in
interest. More importantly, it is contended that R.A. No.
8528 merely reclassified Santiago City from an independent
component city to a component city. It allegedly did not
involve any creation, division, merger, abolition, or
substantial alteration of boundaries of local government
units, hence, a plebiscite of the people of Santiago is
unnecessary.
A third Comment similar in tone was submitted by
intervenor Giorgidi B. Aggabao,
3
a member of the provincial
board of Isabela.
4
He contended that both the Constitution
and the Local Government Code of 1991 do not require a
plebiscite to approve a law that merely allowed qualified
voters of a city to vote in provincial elections. The rules
implementing the Local Government Code cannot require a
plebiscite. He also urged that petitioners lacked locus
standi.
Petitioners filed a Reply to meet the arguments of the
respondents and the intervenor. They defended their
standing. They also stressed the changes that would visit
the city of Santiago as a result of its reclassification.
We find merit in the petition.
338

First. The challenge to the locus standi of petitioners
cannot succeed. It is now an ancient rule that the
constitutionality of law can be challenged by one who will
sustain a direct injury as a result of its
enforcement.
5
Petitioner Miranda was the mayor of
Santiago City when he filed the present petition in his own
right as mayor and not on behalf of the city, hence, he did
not need the consent of the city council of Santiago City. It
is also indubitable that the change of status of the city of
Santiago from independent component city to a mere
component city will affect his powers as mayor, as will be
shown hereafter. The injury that he would sustain from the
enforcement of R.A. No. 8528 is direct and immediate and
not a mere generalized grievance shared with the people of
Santiago City. Similarly, the standing of the other
petitioners rests on a firm foundation. They are residents
and voters in the city of Santiago. They have the right to be
heard in the conversion of their city thru a plebiscite to be
conducted by the COMELEC. The denial of this right in R.A.
No. 8528 gives them proper standing to strike the law as
unconstitutional.
Second. The plea that this court back off from
assuming jurisdiction over the petition at bar on the ground
that it involves a political question has to be brushed
aside. This plea has long lost its appeal especially in light of
Section 1 of Article VIII of the 1987 Constitution which
defines judicial power as including the duty of the courts
of justice to settle actual controversies involving rights
which are legally demandable and enforceable, and to
determine whether or not there has been a grave abuse of
discretion amounting to lack or excess of jurisdiction on the
part of any branch or instrumentality of the government.
To be sure, the cut between a political and justiciable issue
has been made by this Court in many cases and need no
longer mystify us. In Taada v. Cuenco,
6
we held:
x x x
The term political question connotes what it means in
ordinary parlance, namely, a question of policy. It refers to
those questions which under the Constitution are to be
decided by the people in their sovereign capacity; or in
regard to which full discretionary authority has been
delegated to the legislative or executive branch of the
government. It is concerned with issues dependent upon
the wisdom, not legality, of a particular measure.
In Casibang v. Aquino,
7
we defined a justiciable issue as
follows:
A purely justiciable issue implies a given right, legally
demandable and enforceable, an act or omission violative
of such right, and a remedy granted and sanctioned by law,
for said breach of right.
Clearly, the petition at bar presents a justiciable
issue. Petitioners claim that under Section 10, Article X of
the 1987 Constitution they have a right to approve or
disapprove R.A. No. 8528 in a plebiscite before it can be
enforced. It ought to be self-evident that whether or not
petitioners have the said right is a legal not a political
339

question. For whether or not laws passed by Congress
comply with the requirements of the Constitution pose
questions that this Court alone can decide. The proposition
that this Court is the ultimate arbiter of the meaning and
nuances of the Constitution need not be the subject of a
prolix explanation.
Third. The threshold issue is whether R.A. No. 8528 is
unconstitutional for its failure to provide that the
conversion of the city of Santiago from an independent
component city to a component city should be submitted to
its people in a proper plebiscite. We hold that the
Constitution requires a plebiscite. Section 10, Article X of
the 1987 Constitution provides:
No province, city, municipality, or barangay may be
created, or divided, merged, abolished, or its boundary
substantially altered except in accordance with the criteria
established in the local government code and subject to
approval by a majority of the votes cast in a plebiscite in the
political units directly affected.
This constitutional requirement is reiterated in Section
10, Chapter 2 of the Local Government Code (R.A. No.
7160), thus:
Sec. 10. No province, city, municipality, or barangay
may be created, divided, merged, abolished, or its
boundary substantially altered except in accordance with
the criteria established in the local government code and
subject to approval by a majority of the votes cast in a
plebiscite in the political units directly affected.
The power to create, divide, merge, abolish or
substantially alter boundaries of local government
units belongs to Congress.
8
This power is part of the larger
power to enact laws which the Constitution vested in
Congress.
9
The exercise of the power must be in accord
with the mandate of the Constitution. In the case at bar,
the issue is whether the downgrading of Santiago City from
an independent component city to a mere component city
requires the approval of the people of Santiago City in a
plebiscite. The resolution of the issue depends on whether
or not the downgrading falls within the meaning of
creation, division, merger, abolition or substantial
alteration of boundaries of municipalities per Section 10,
Article X of the Constitution. A close analysis of the said
constitutional provision will reveal that the creation,
division, merger, abolition or substantial alteration of
boundaries of local government units involve a common
denominator - - - material change in the political and
economic rights of the local government units directly
affected as well as the people therein. It is precisely for this
reason that the Constitution requires the approval of the
people in the political units directly affected. It is not
difficult to appreciate the rationale of this constitutional
requirement. The 1987 Constitution, more than any of our
previous Constitutions, gave more reality to the sovereignty
of our people for it was borne out of the people power in
the 1986 EDSA revolution. Its Section 10, Article X
addressed the undesirable practice in the past whereby
local government units were created, abolished, merged or
divided on the basis of the vagaries of politics and not of
340

the welfare of the people. Thus, the consent of the people
of the local government unit directly affected was required
to serve as a checking mechanism to any exercise of
legislative power creating, dividing, abolishing, merging or
altering the boundaries of local government units. It is one
instance where the people in their sovereign capacity
decide on a matter that affects them - - - direct democracy
of the people as opposed to democracy thru peoples
representatives. This plebiscite requirement is also in
accord with the philosophy of the Constitution granting
more autonomy to local government units.
The changes that will result from the downgrading of
the city of Santiago from an independent component city to
a component city are many and cannot be characterized as
insubstantial. For one, the independence of the city as a
political unit will be diminished. The city mayor will be
placed under the administrative supervision of the
provincial governor. The resolutions and ordinances of the
city council of Santiago will have to be reviewed by the
Provincial Board of Isabela. Taxes that will be collected by
the city will now have to be shared with the
province. Petitioners pointed out these far reaching
changes on the life of the people of the city of
Santiago, viz:
10

Although RESPONDENTS would like to make it appear
that R.A. No. 8528 had merely re-classified Santiago City
from an independent component city into a component
city, the effect when challenged (sic) the Act were
operational would be, actually, that of
conversion. Consequently, there would be substantial
changes in the political culture and administrative
responsibilities of Santiago City, and the Province of
Isabela. Santiago City from an independent component city
will revert to the Province of Isabela, geographically,
politically and administratively. Thus, the territorial land
area of Santiago City will be added to the land area
comprising the province of Isabela. This will be to the
benefit or advantage of the Provincial Government of
Isabela on account of the subsequent increase of its share
from the internal revenue allotment (IRA) from the National
Government (Section 285, R.A. No. 7160 or the Local
Government Code of 1991). The IRA is based on land area
and population of local government units, provinces
included.
The nature or kinds, and magnitude of the taxes
collected by the City Government, and which taxes shall
accrue solely to the City Government, will be redefined
(Section 151, R.A. No. 7160), and may be shared with the
province such as taxes on sand, gravel and other quarry
resources (Section 138, R.A. No. 7160), professional taxes
(Section 139, R.A. No. 7160), or amusement taxes (Section
140, R.A. No. 7160). The Provincial Government will
allocate operating funds for the City. Inarguably, there
would be a (sic) diminished funds for the local operations of
the City Government because of reduced shares of the IRA
in accordance with the schedule set forth by Section 285 of
the R.A. No. 7160. The City Governments share in the
proceeds in the development and utilization of national
341

wealth shall be diluted since certain portions shall accrue to
the Provincial Government (Section 292, R.A. No.7160).
The registered voters of Santiago City will vote for and
can be voted as provincial officials (Section 451 and 452 [c],
R.A. No. 7160).
The City Mayor will now be under the administrative
supervision of the Provincial Governor who is tasked by law
to ensure that every component city and municipality
within the territorial jurisdiction of the province acts within
the scope of its prescribed powers and functions (Section
29 and 465 (b) (2) (i), R.A. No. 7160), and to review (Section
30, R.A. No. 7160) all executive orders submitted by the
former (Section 455 (b) (1) (xii), R.A. No. 7160) and
(R)eportorial requirements with respect to the local
governance and state of affairs of the city (Section 455 (b)
(1) (xx), R.A. No. 7160). Elective city officials will also be
effectively under the control of the Provincial Governor
(Section 63, R.A. No. 7160). Such will be the great change
in the state of the political autonomy of what is now
Santiago City where by virtue of R.A. No. 7720, it is the
Office of the President which has supervisory authority over
it as an independent component city (Section 25, R.A. No.
7160; Section 4 (ARTICLE X), 1987 Constitution).
The resolutions and ordinances adopted and approved
by the Sangguniang Panlungsod will be subject to the
review of the Sangguniang Panlalawigan (Sections 56, 468
(a) (1) (i), 468 (a) (2) (vii), and 469 (c) (4), R.A. No.
7160). Likewise, the decisions in administrative cases by
the former could be appealed and acted upon by the latter
(Section 67, R.A. No. 7160).
It is markworthy that when R.A. No. 7720 upgraded the
status of Santiago City from a municipality to an
independent component city, it required the approval of its
people thru a plebiscite called for the purpose. There is
neither rhyme nor reason why this plebiscite should not be
called to determine the will of the people of Santiago City
when R.A. No. 8528 downgrades the status of their
city. Indeed, there is more reason to consult the people
when a law substantially diminishes their right. Rule II,
Article 6, paragraph (f) (1) of the Implementing Rules and
Regulations of the Local Government Code is in accord with
the Constitution when it provides that:
(f) Plebiscite - (1) no creation, conversion, division,
merger, abolition, or substantial alteration of boundaries of
LGUS shall take effect unless approved by a majority of the
votes cast in a plebiscite called for the purpose in the LGU
or LGUs affected. The plebiscite shall be conducted by the
Commission on Elections (COMELEC) within one hundred
twenty (120) days from the effectivity of the law or
ordinance prescribing such action, unless said law or
ordinance fixes another date.
x x x.
The rules cover all conversions, whether upward or
downward in character, so long as they result in a material
change in the local government unit directly affected,
342

especially a change in the political and economic rights of
its people.
A word on the dissenting opinions of our esteemed
brethren. Mr. Justice Buena justifies R.A. No. 8528 on the
ground that Congress has the power to amend the charter
of Santiago City. This power of amendment, however, is
limited by Section 10, Article X of the Constitution. Quite
clearly, when an amendment of a law involves the creation,
merger, division, abolition or substantial alteration of
boundaries of local government units, a plebiscite in the
political units directly affected is mandatory. He also
contends that the amendment merely caused
a transition in the status of Santiago as a city. Allegedly, it
is a transition because no new city was created nor was a
former city dissolved by R.A. No. 8528. As discussed above,
the spirit of Section 10, Article X of the Constitution calls for
the people of the local government unit directly affected to
vote in a plebiscite whenever there is a material change in
their rights and responsibilities. They may call the
downgrading of Santiago to a component city as a mere
transition but they cannot blink away from the fact that the
transition will radically change its physical and political
configuration as well as the rights and responsibilities of its
people.
On the other hand, our esteemed colleague, Mr. Justice
Mendoza, posits the theory that "only if the classification
involves changes in income, population, and land area of
the local government unit is there a need for such changes
to be approved by the people x x x."
With due respect, such an interpretation runs against
the letter and spirit of section 10, Article X of the 1987
Constitution which, to repeat, states: "No province, city,
municipality, or barangay may be created, divided, merged,
abolished, or its boundary substantially altered except in
accordance with the criteria established in the Local
Government Code and subject to approval by a majority of
the votes cast in a plebiscite in the political units directly
affected." It is clear that the Constitution imposes two
conditions - - - first, the creation, division, merger, abolition
or substantial alteration of boundary of a local government
unit must meet the criteria fixed by the Local Government
Code on income, population and land area and second, the
law must be approved by the people "by a majority of the
votes cast in a plebiscite in the political units directly
affected."
In accord with the Constitution, sections 7, 8, and 9 of
the Local Government Code fixed the said criteria and they
involve requirements on income, population and land
area. These requirements, however, are imposed to help
assure the economic viability of the local government unit
concerned. They were not imposed to determine the
necessity for a plebiscite of the people. Indeed, the Local
Government Code does not state that there will be no more
plebiscite after its requirements on income, population and
land area have been satisfied. On the contrary, section 10,
Chapter 2 of the Code provides: "No creation, division,
merger, abolition, or substantial alteration of boundaries of
local government units shall take effect unless approved by
343

a majority of the votes casts in a plebiscite called for the
purpose in the political unit or units directly affected. Said
plebiscite shall be conducted by the COMELEC within one
hundred twenty (120) days from the date of the effectivity
of the law or ordinance effecting such action, unless said
law or ordinance fixes another date."
11
Senator Aquilino
Pimentel, the principal author of the Local Government
Code of 1991, opines that the plebiscite is absolute and
mandatory.
12

It cannot be overstressed that the said two
requirements of the Constitution have different
purposes. The criteria fixed by the Local Government Code
on income, population and land area are designed to
achieve aneconomic purpose. They are to be based on
verified indicators, hence, section 7, Chapter 2 of the Local
Government Code requires that these "indicators shall be
attested by the Department of Finance, the National
Statistics Office, and the Lands Management Bureau of the
Department of Environment and Natural Resources." In
contrast, the people's plebiscite is required to achieve
a political purpose --- to use the people's voice as a check
against the pernicious political practice of
gerrymandering. There is no better check against this
excess committed by the political representatives of the
people themselves than the exercise of direct people
power. As well-observed by one commentator, as the
creation, division, merger, abolition, or substantial
alteration of boundaries are "xxx basic to local government,
it is also imperative that these acts be done not only by
Congress but also be approved by the inhabitants of the
locality concerned. xxx By giving the inhabitants a hand in
their approval, the provision will also eliminate the old
practice of gerrymandering and minimize legislative action
designed for the benefit of a few politicians. Hence, it
promotes the autonomy of local government units."
13

The records show that the downgrading of Santiago City
was opposed by certain segments of its people. In the
debates in Congress, it was noted that at the time R.A. No.
8528 was proposed, Santiago City has been converted to an
independent component city barely two and a half (2 1/2)
years ago and the conversion was approved by a majority of
14,000 votes. Some legislators expressed surprise for the
sudden move to downgrade the status of Santiago City as
there had been no significant change in its socio-economic-
political status. The only reason given for the downgrading
is to enable the people of the city to aspire for the
leadership of the province. To say the least, the alleged
reason is unconvincing for it is the essence of
an independent component city that its people can no
longer participate or be voted for in the election of officials
of the province. The people of Santiago City were aware
that they gave up that privilege when they voted to
be independent from the province of Isabela. There was an
attempt on the part of the Committee on Local
Government to submit the downgrading of Santiago City to
its people via a plebiscite. The amendment to this effect
was about to be voted upon when a recess was
called. After the recess, the chairman of the Committee
344

anounced the withdrawal of the amendment "after a very
enlightening conversation with the elders of the Body." We
quote the debates, viz:
14

"BILL ON SECOND READING
H.B. No. 8729 - City of Santiago
"Senator Tatad. Mr. President, I move that we consider
House Bill No. 8729 as reported out under
Committee Report No. 971.
"The President. Is there any objection? [Silence] there
being none, the motion is approved.
"Consideration of House Bill No. 8729 is now in
order. With the permission of the Body, the Secretary will
read only the title of the bill without prejudice to inserting
in the Record the whole text thereof.
"The Acting Secretary [Atty. Raval]. House Bill No.
8729, entitled
AN ACT AMENDING CERTAIN SECTIONS OF R.A.
NO. 7720 ENTITLED "AN ACT CONVERTING THE
MUNICIPALITY OF SANTIAGO INTO AN
INDEPENDENT COMPONENT CITY TO BE KNOWN AS
THE CITY OF SANTIAGO
_____________________________________________
__________
The following is the full text of H.B. No. 8729
Insert
_____________________________________________
__________
"Senator Tatad. Mr. President, for the sponsorship, I ask
that the distinguished Chairman of the Committee on
Local Government be recognized.
"The President. Senator Sotto is recognized.
SPONSORSHIP SPEECH OF SENATOR SOTTO
"Mr. President. House Bill No. 8729, which was
introduced in the House by Congressman Antonio M.
Abaya as its principal author, is a simple measure
which merely seeks to convert the City of Santiago
into a component city of the Province of Isabela.
"The City of Santiago is geographically located within,
and is physically an integral part of the Province of
Isabela. As an independent component city,
however, it is completely detached and separate
from the said province as a local political unit. To use
the language of the Explanatory Note of the
proposed bill, the City of Santiago is an island in the
provincial milieu.
"The residents of the city no longer participate in the
elections, nor are they qualified to run for any
elective positions in the Province of Isabela.
"The Province of Isabela, on the other hand, is no longer
vested with the power and authority of general
supervision over the city and its officials, which
power and authority are now exercised by the Office
345

of the President, which is very far away from
Santiago City.
Being geographically located within the Province of
Isabela, the City of Santiago is affected, one way or
the other, by the happenings in the said province,
and is benefited by its progress and
development. Hence, the proposed bill to convert
the City of Santiago into a component city of Isabela.
"Mr. President, it is my pleasure, therefore, to present
for consideration of this august Body Committee
Report No. 971 of the Committee on Local
Government , recommending approval, with our
proposed committee amendment, of House Bill No.
8729.
"Thank you, Mr. President.
"The President. The Majority Leader is recognized.
"Senator Tatad. Mr. President, I moved (sic) that we
close the period of interpellations.
"The President. Is there any objection? [Silence] There
being none, the period of interpellations is closed.
"Senator Tatad. I move that we now consider the
committee amendments.
"Senator Roco. Mr. President.
"The President. What is the pleasure of Senator Roco?
"Senator Roco. Mr. President, may I ask for a
reconsideration of the ruling on the motion to close
the period of interpellations just to be able to ask a
few questions?
"Senator Tatad. May I move for a reconsideration of my
motion, Mr. President.
"The President. Is there any objection to the
reconsideration of the closing of the period of
interpellations? [Silence] There being none, the
motion is approved.
"Senator Roco is recognized.
"Senator Roco. Will the distinguished gentleman yield
for some questions?
"Senator Sotto. Willingly, Mr. President.
"Senator Roco. Mr. President, together with the
Chairman of the Committee on Local Government,
we were with the sponsors when we approved this
bill to make Santiago a City. That was about two
and a half years ago. At that time, I remember it
was the cry of the city that it be independent. Now
we are deleting that word independent.
"Mr. President, only because I was a co-author and a co-
sponsor, for the Record, I want some explanation on
what happened between then and now that has
made us decide that the City of Santiago should
cease to be independent and should now become a
component city.
346

"Senator Sotto. Mr. President, the officials of the
province said during the public hearing that they are
no longer vested with the power and authority of
general supervision over the city. The power and
authority is now being exercised by the Office of the
President and it is quite far from the City of Santiago.
"In the public hearing, we also gathered that there is a
clamor from some sectors that they want to
participate in the provincial elections.
"Senator Roco. Mr. President, I did not mean to delay
this. I did want it on record, however. I think there
was a majority of 14,000 who approved the charter,
and maybe we owe it to those who voted for that
charter some degree of respect. But if there has
been a change of political will, there has been a
change of political will, then so be it.
"Thank you, Mr. President.
"Senator Sotto. Mr. President, to be very frank about it,
that was a very important point raised by Senator
Roco, and I will have to place it on the Record of the
Senate that the reason why we are proposing a
committee amendment is that, originally, there was
an objection on the part of the local officials and
those who oppose it by incorporating a plebiscite in
this bill. That was the solution. Because there were
some sectors in the City of Santiago who were
opposing the reclassification or reconversion of the
city into a component city.
"Senator Roco. All I wanted to say, Mr. President --
because the two of us had special pictures (sic) in the
city -- is that I thought it should be put on record that
we have supported originally the proposal to make it
an independent city. But now if it is their request,
then, on the manifestation of the Chairman, let it be
so.
"Thank you.
"Senator Drilon. Mr. President.
"Senator Drilon. Will the gentleman yield for a few
questions, Mr. President?
"Senator Sotto. Yes, Mr. President.
"Senator Drilon. Mr. President, further to the
interpellation of our good friend, the Senator from
Bicol, on the matter of the opinion of the citizens of
Santiago City, there is a resolution passed by the
Sanggunian on January 30, 1997 opposing the
conversion of Santiago from an independent city.
"This opposition was placed on records during the
committee hearings. And that is the reason why, as
mentioned by the good sponsor, one of the
amendments is that a plebiscite be conducted
before the law takes effect.
"The question I would like to raise-- and I would like to
recall the statement of our Minority Leader -- is
that, at this time we should not be passing it for a
particular politician.
347

"In this particular case, it is obvious that this bill is being
passed in order that the additional territory be
added to the election of the provincial officials of
the province of Isabela.
"Now, is this for the benefit of any particular politician,
Mr. President.
"Senator Sotto. If it is, I am not aware of it, Mr.
President.
"Senator Alvarez. Mr. President.
"The President. With the permission of the two
gentlemen on the Floor, Senator Alvarez is
recognized.
"Senator Alvarez. As a born inbred citizen of this city,
Mr. President, may I share some information.
"Mr. President, if we open up the election of the city to
the provincial leadership, it will not be to the benefit
of the provincial leadership, because the provincial
leadership will then campaign in a bigger territory.
"As a matter of fact, the ones who will benefit from this
are the citizens of Santiago who will now be
enfranchised in the provincial electoral process, and
whose children will have the opportunity to grow
into provincial leadership. This is one of the prime
reasons why this amendment is being put forward.
"While it is true that there may have been a resolution by
the city council, those who signed the resolution
were not the whole of the council. This bill was
sponsored by the congressman of that district who
represents a constituency, the voice of the district.
"I think, Mr. President, in considering which interest is
paramount, whose voice must be heard, and if we
have to fathom the interest of the people, the law
which has been crafted here in accordance with the
rules should be given account, as we do give account
to many of the legislations coming from the House on
local issues.
"Senator Drilon. Mr. President, the reason why I am
raising this question is that, as Senator Roco said,
just two-and-a-half years ago we passed a bill which
indeed disenfranchized--if we want to use that
phrase-- the citizens of the City of Santiago in the
matter of the provincial election. Two-and-a-half
years after, we are changing the rule.
"In the original charter, the citizens of the City of
Santiago participated in a plebiscite in order to
approve the conversion of the city into an
independent city. I believe that the only way to
resolve this issue raised by Senator Roco is again to
subject this issue to another plebiscite as part of the
provision of this proposed bill and as will be
proposed by the Committee Chairman as an
amendment.
"Thank you very much, Mr. President.
348

"Senator Alvarez. Mr. President, the Constitution does
not require that the change from an independent to
a component city be subjected to a plebiscite.
Sections 10, 11, 12 of Article X of the 1987 Constitution
provides as follows:
Sec. 10. No province, city, municipality, or
barangay may be created, divided, merged,
abolished, or its boundary substantially altered,
except in accordance with the criteria established in
the local government code and subject to approval
by a majority of the votes cast in a plebiscite in the
political units directly affected.
This change from an independent city into a component
city is none of those enumerated. So the proposal
coming from the House is in adherence to this
constitutional mandate which does not require a
plebiscite.
Senator Sotto. Mr. President, the key word here is
conversion. The word conversion appears in that
provision wherein we must call a plebiscite. During
the public hearing, the representative of
Congressman Abaya was insisting that this is not a
conversion; this is merely a reclassification. But it is
clear in the bill.
We are amending a bill that converts, and we are
converting it into a component city. That is how the
members of the committee felt. That is why we
have proposed an amendment to this, and this is to
incorporate a plebiscite in as much as there is no
provision on incorporating a plebiscite. Because we
would like not only to give the other people of
Santiago a chance or be enfranchised as far as the
leadership of the province is concerned, but also we
will give a chance to those who are opposing it. To
them, this is the best compromise. Let the people
decide, instead of the political leaders of Isabela
deciding for them.
"Senator Tatad. Mr. President.
"The President. The Majority Leader is recognized.
"Senator Tatad. At this point, Mr. President, I think we
can move to close the period of interpellations.
"The President. Is there any objection? [Silence] There
being none, the motion is approved.
"Senator Tatad. I move that we now consider the
committee amendments, Mr. President.
"The President. Is there any objection? Silence] There
being none, the motion is approved.
"Senator Sotto. On page 2, after line 13, insert a new
Section 3, as follows:
"SEC. 3. SECTION 49 OF REPUBLIC ACT NO. 7720 IS
HEREBY AMENDED BY DELETING THE ENTIRE SECTION AND
IN ITS STEAD SUBSTITUTE THE FOLLOWING:
349

"SEC. 49. PLEBISCITE. - THE CONVERSION OF THE CITY
OF SANTIAGO INTO A COMPONENT CITY OF THE PROVINCE
OF ISABELA SHALL TAKE EFFECT UPON THE RATIFICATION
OF THIS ACT BY A MAJORITY OF THE PEOPLE OF SAID CITY
IN A PLEBISCITE WHICH SHALL BE HELD FOR THE PURPOSE
WITHIN SIXTY (60) DAYS FROM THE APPROVAL OF THIS
ACT. THE COMMISSION ON ELECTIONS SHALL CONDUCT
AND SUPERVISE SUCH PLEBISCITE.
"The President. Is there any objection?
"Senator Enrile. Mr. President.
"The President. Senator Enrile is recognized.
"Senator Enrile. I object to this committee amendment,
Mr. President.
"SUSPENSION OF SESSION
"Senator Tatad. May I ask for a one-minute suspension
of the session.
"The President. The session is suspended for a few
minutes if there is no objection. [There was none]
"It was 7:54 p.m.
"RESUMPTION OF SESSION
"At 7:57 p.m., the session was resumed.
"The President. The session is resumed.
"Senator Sotto is recognized.
"Senator Sotto. Mr. President, after a very enlightening
conversation with the elders of the Body, I withdraw
my amendment.
"The President. The amendment is withdrawn.
"Senator Maceda. Mr. President.
"The President. Senator Maceda is recognized.
"Senator Maceda. We wish to thank the sponsor for the
withdrawal of the amendment.
"Mr. President, with due respect to the Senator from
Isabela -- I am no great fan of the Senator from
Isabela -- but it so happens that this is a local bill
affecting not only his province but his own city
where he is a resident and registered voter.
"So, unless the issue is really a matter of life and death
and of national importance, senatorial courtesy
demands that we, as much as possible, accommodate
the request of the Senator from Isabela as we have
done on matters affecting the district of other
senators. I need not remind them.
"Thank you anyway, Mr. President.
"Senator Alvarez. Mr. President.
"The President. Senator Alvarez is recognized.
"Senator Alvarez. Mr. President, may I express my
deepest appreciation for the statement of the
gentleman from Ilocos and Laguna. Whatever he
350

may have said, the feeling is not mutual. At least for
now, I have suddenly become his great fan for the
evening.
"May I put on record, Mr. President, that I campaigned
against the cityhood of Santiago not because I do not
want it to be a city but because it had
disenfranchised the young men of my city from
aspiring for the leadership of the province. The town
is the gem of the province. How could we extricate
the town from the province?
"But I would like to thank the gentleman, Mr. President,
and also the Chairman of the Committee.
"Senator Tatad. Mr. President.
"The President. The Majority Leader is recognized.
"Senator Tatad. There being no committee
amendments, I move that the period of committee
amendments be closed.
"The President. Shall we amend the title of this bill by
removing the word independent preceding
component city?
"Senator Sotto. No, Mr. President. We are merely citing
the title. The main title of this House Bill No. 8729 is
An Act Amending Certain Sections of Republic Act
7720. The title is the title of Republic Act 7720. So, I
do not think that we should amend that anymore.
"The President. What is the pending motion? Will the
gentleman kindly state the motion?
"Senator Tatad. I move that we close the period of
committee amendments.
"The President. Is there any objection? [Silence] There
being none, the motion is approved.
"Senator Tatad. Unless there are any individual
amendments, I move that we close the period of
individual amendments.
"The President. Is there any objection? [Silence] There
being none, the period of individual amendments is
closed.
"APPROVAL OF H.B. NO. 8729 ON SECOND READING
"Senator Tatad. Mr. President, I move that we vote on
Second Reading on House Bill No. 8729.
"The President. Is there any objection? [Silence] There
being none, we shall now vote on Second Reading on
House Bill No. 8729.
"As many as are in favor of the bill, say aye.
"Several Members. Aye
As many as are against the bill, say nay. [Silence]
"House Bill No. 8729 is approved on Second Reading."
The debates cannot but raise some quizzical eyebrows on
the real purpose for the downgrading of the city of
351

Santiago. There is all the reason to listen to the voice of the
people of the city via a plebiscite.
In the case of Tan, et al. vs. COMELEC,
15
BP 885 was
enacted partitioning the province of Negros Occidental
without consulting its people in a plebiscite. In his
concurring opinion striking down the law as
unconstitutional, Chief Justice Teehankee cited the illicit
political purpose behind its enactment, viz:
"The scenario, as petitioners urgently asserted, was to
have the creation of the new Province a fait accompli by
the time elections are held on February 7, 1986. The
transparent purpose is unmistakably so that the new
Governor and other officials shall by then have been
installed in office, ready to function for purposes of the
election for President and Vice-President. Thus, the
petitioners reported after the event: With indecent haste,
the plebiscite was held; Negros del Norte was set up and
proclaimed by President Marcos as in existence; a new set
of government officials headed by Governor Armando
Gustilo was appointed; and, by the time the elections were
held on February 7, 1986, the political machinery was in
place to deliver the solid North to ex-President
Marcos. The rest is history. What happened in Negros del
Norte during the elections - the unashamed use of naked
power and resources - contributed in no small way to
arousing peoples power and steel the ordinary citizen to
perform deeds of courage and patriotism that makes one
proud to be a Filipino today.
"The challenged Act is manifestly void and
unconstitutional. Consequently, all the implementing acts
complained of, viz. the plebiscite, the proclamation of a
new province of Negros del Norte and the appointment of
its officials are equally void. The limited holding of the
plebiscite only in the areas of the proposed new province
(as provided by Section 4 of the Act) to the exclusion of the
voters of the remaining areas of the integral province of
Negros Occidental (namely, the three cities of Bacolod,
Bago and La Carlota and the Municipalities of Las
Castellana, Isabela, Moises Padilla, Pontevedra, Hinigaran,
Himamaylan, Kabankalan, Murcia, Valladolid, San Enrique,
Ilog, Cauayan, Hinoba-an and Sipalay and Candoni), grossly
contravenes and disregards the mandate of Article XI,
section 3 of the then prevailing 1973 Constitution that no
province may be created or divided or its boundary
substantially altered without the approval of a majority of
the votes in a plebiscite in the unit or units affected. It is
plain that all the cities and municipalities of the province of
Negros Occidental, not merely those of the proposed new
province, comprise the units affected. It follows that the
voters of the whole and entire province of Negros
Occidental have to participate and give their approval in the
plebiscite, because the whole province is affected by its
proposed division and substantial alteration of its
boundary. To limit the plebiscite to only the voters of the
areas to be partitioned and seceded from the province is as
absurd and illogical as allowing only the secessionists to
vote for the secession that they demanded against the
352

wishes of the majority and to nullify the basic principle of
majority rule.
Mr. Justice Mendoza and Mr. Justice Buena also cite
two instances when allegedly independent component
cities were downgraded into component cities without
need of a plebiscite. They cite the City of Oroquieta,
Misamis Occidental,
16
and the City of San Carlos,
Pangasinan
17
whose charters were amended to allow their
people to vote and be voted upon in the election of officials
of the province to which their city belongs without
submitting the amendment to a plebiscite. With due
respect, the cities of Oroquieta and San Carlos are not
similarly situated as the city of Santiago. The said two
cities then were not independent component cities unlike
the city of Santiago. The two cities were chartered but
were not independent component cities for both were not
highly urbanized cities which alone were considered
independent cities at that time. Thus, when the case of
San Carlos City was under consideration by the Senate,
Senator Pimentel explained:
18

"x x x Senator Pimentel. The bill under consideration,
Mr. President, merely empowers the voters of San Carlos to
vote in the elections of provincial officials. There is no
intention whatsoever to downgrade the status of the City
of San Carlos and there is no showing whatsoever that the
enactment of this bill will, in any way, diminish the powers
and prerogatives already enjoyed by the City of San
Carlos. In fact, the City of San Carlos as of now, is a
component city. It is not a highly urbanized
city. Therefore, this bill merely, as we said earlier, grants
the voters of the city, the power to vote in provincial
elections, without in any way changing the character of its
being a component city. It is for this reason that I vote in
favor of this bill.
It was Senator Pimentel who also sponsored the
bill
19
allowing qualified voters of the city of Oroquieta to
vote in provincial elections of the province of Misamis
Occidental. In his sponsorship speech, he explained that
the right to vote being given to the people of Oroquieta City
was consistent with its status as a component
city.
20
Indeed, during the debates, former Senator Neptali
Gonzales pointed out the need to remedy the anomalous
situation then obtaining xxx where voters of one
component city can vote in the provincial election while the
voters of another component city cannot vote simply
because their charters so provide.
21
Thus, Congress
amended other charters of component cities prohibiting
their people from voting in provincial elections.
IN VIEW WHEREOF, the petition is granted. Republic
Act No. 8528 is declared unconstitutional and the writ of
prohibition is hereby issued commanding the respondents
to desist from implementing said law.
SO ORDERED.
FIRST DIVISION
[G.R. No. 135962. March 27, 2000]
353

METROPOLITAN MANILA DEVELOPMENT
AUTHORITY, petitioner, vs. BEL-AIR VILLAGE ASSOCIATION,
INC., respondent.
D E C I S I O N
PUNO, J.:
Not infrequently, the government is tempted to take legal
shortcuts to 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. h Y
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: Court
"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,
354

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. Sppedsc
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 MMDAs 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: Jurissc
"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. Jksm
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
355

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? Jlexj
V
WAS RESPONDENT DEPRIVED OF DUE PROCESS
DESPITE THE SEVERAL MEETINGS HELD
BETWEEN MMDA AND THE AFFECTED BEL-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. Edp mis
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]

356

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: Chief
"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
357

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 x x x."
[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:Lexjuris
"(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: Esm
"Sec. 5. Functions and powers of the Metro
Manila Development Authority.The MMDA
shall:
358

(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; Esmsc
(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
359

(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." Jurismis
The implementation of the MMDAs plans, programs and
projects is undertaken by the local government units,
national government agencies, accredited peoples
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 cooperative
arrangements with these bodies for the delivery of the
required services within 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 a 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 promulgates 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: LEX
"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." Jj sc
360

Clearly, the scope of the MMDAs 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 this 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. Ca-lrsc
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 and appropriate
funds for the general welfare" of the inhabitants of Metro
Manila. The MMDA is, as termed in the charter itself, a
"development authority."
[30]
It is an agency created for the
purpose of laying down policies and coordinating with the
various national government agencies, peoples
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. -- x x x.
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
361

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. Scc-alr
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
362

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 petitioners 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. Misjuris
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. Jjlex
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: Calrs-pped
"Section 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,
363

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;
364

10. To establish and operate a transport and
traffic center, which shall direct traffic
activities; Jjjuris
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." Sc jj
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.
365

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.
x x x.
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 MMCs 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. Sce-dp
Thus, Metropolitan Manila had a "central
government," i.e., the MMC which fully possessed
legislative and 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: Sj cj
"Section 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.
Section 2. The territorial and political
subdivisions shall enjoy local autonomy."
366

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:
"Section 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."
The 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 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:
"Section 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 MMAs power was limited
to the "delivery of basic urban services requiring
coordination in Metropolitan Manila."
[47]
The MMAs
governing body, the Metropolitan Manila Council,
although composed of the mayors of the component cities
and municipalities, was merely given the power of: (1)
formulation of policies on the delivery of basic services
requiring coordination and consolidation; and (2)
promulgation of 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 MMAs 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
367

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. Its a special we can
create a special metropolitan political
subdivision. Supreme
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: Thats 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. Esmmis
If you go over Section 6, where the powers
and functions of the Metro Manila
Development Authority, it is purely
368

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. justice
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. Its before our
eyes. Sewerage, flood control, water system,
peace and order, we cannot deny these. Its
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, its alright. We may call it a
council or maybe a management agency.
x x x."
[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 MMDAs 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 bills
presentation to Congress. Thus: Ed-p
"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
369

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, its very clear that those policies must
be followed. Otherwise, whats 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. Youve got the
power to set a policy, the body wants to follow
your policy, then we say lets call it an
ordinance and see if they will not follow it.
THE CHAIRMAN: Thats very nice. I like
that. However, there is a constitutional
impediment. You are making this MMDA a
political subdivision. The creation of the
MMDA would be subject to a plebiscite. That
is what Im trying to avoid. Ive 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. Im trying to make this
as administrative. Thats 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. Jksm
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. sc
370

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. 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. Newmiso
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. Esmso
We stress that this decision does not make light of the
MMDAs noble efforts to solve the chaotic traffic condition
in Metro Manila. Everyday, traffic jams and traffic
371

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 peoples
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. Sdjad
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. Sppedsc
SO ORDERED.
Davide, Jr., C.J., (Chairman), Kapunan, Pardo, and Ynares-
Santia
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 116702 December 28, 1995
THE MUNICIPALITY OF CANDIJAY, BOHOL, acting through
its Sanguniang Bayan and Mayor, petitioner,
vs.
COURT OF APPEALS and THE MUNICIPALITY OF ALICIA,
BOHOL, respondents.
R E S O L U T I O N

PANGANIBAN, J.:
This is a petition for review on certiorari of the Decision of
the Court of Appeals
1
promulgated on June 28,
1994,reversing the judgment
2
of the Regional Trial
Court (Branch I) of the City of Tagbilaran, Bohol.
The lower court's decision, among other things, declared
"barrio/barangay Pagahat as within the territorial
jurisdiction of the plaintiff municipality of Candijay, Bohol,
therefore, said barrio forms part and parcel of its territory,
therefore, belonging to said plaintiff municipality", and
further permanently enjoined defendant municipality of
Alicia "to respect plaintiff's control, possession and political
supervision of barangay Pagahat and never to molest,
disturb, harass its possession and ownership over the same
barrio" (RTC decision, p. 4; Rollo, p. 86).
On appeal, the respondent Court stated that "(S)crutiny of
the conflicting claims and the respective evidence of the
parties lead to the conclusion that the trial court committed
372

an error in declaring that Barrio Pagahat is within the
territorial jurisdiction of plaintiff-appellee (municipality of
Candijay)." Said Court rejected the boundary line being
claimed by petitioner based on certain exhibits, since it
would in effect place "practically all of Barrio Pagahat . . . ,
part of Barrio Cagongcagong and portions of Barrio
Putlongcam and La Hacienda and all of Barrio Mahayag and
Barrio del Monte within the territorial jurisdiction of
plaintiff-appellee Candijay." Added the respondent Court,
"As aptly pointed out by defendant-appellant in its appeal
brief, 'the plaintiff municipality will not only engulf the
entire barrio of Pagahat, but also of the barrios of
Putlongcam, Mahayag, Del Monte, Cagongcagong, and a
part of the Municipality of Mabini. Candijay will eat up a big
chunk of territories far exceeding her territorial jurisdiction
under the law creating her. Her claim opens the floodgate
of controversies over boundaries, including with Mabini.'"
(Decision p. 4; rollo, p. 35.) The respondent Court
concluded that "the trial court erred in relying on Exh. X-
Commissioner [exhibit for petitioner], because, in effect, it
included portions of Barrios Putlongcam and La Hacienda
within the jurisdiction of appellee Candijay when said
barrios are undisputedly part of appellant's (Alicia) territory
under Executive Order No. 265 creating the latter"
(Decision, p. 6, rollo, p. 37).
The respondent Court also found, after an examination of
the respective survey plans of petitioner and respondent
submitted as exhibits, that "both plans are inadequate
insofar as identifying the monuments of the boundary line
between [petitioner] and the Municipality of Mabini (which
is not a party to this case) as declared by the Provincial
Board of Bohol. Neither plan shows where Looc-Tabasan,
Lomislis Island, Tagtang Canlirong, mentioned in the
aforequoted boundary line declared by the Provincial Board
of Bohol, are actually located." (Decision, p. 4; rollo, p. 35.)
The respondent Court, after weighing and considering the
import of certain official acts, including Executive Order No.
265 dated September 16, 1949 (which created the
municipality of Alicia from out of certain barrios of the
municipality of Mabini), and Act No. 968 of
the Philippine Commission dated October 31, 1903 (which
set forth the respective component territories of the
municipalities of Mabini and Candijay), concluded that
"Barrio Bulawan from where barrio Pagahat originated is
not mentioned as one of the barrios constituted as part of
defendant-appellant Municipality of Alicia. Neither do they
show that Barrio Pagahat forms part of plaintiff-appellant
Municipality of Candijay."
On that basis, the respondent Court held that:
Clearly, from the foregoing, there is
equiponderance of evidence. The Supreme
Court has ruled:
Equiponderance of evidence rule
states:
373

When the scale shall stand upon
an equipoise and there is nothing
in the evidence which shall incline
it to one side or the other, the
court will find for the defendant.
Under said principle, the plaintiff
must rely on the strength of his
evidence and not on the weakness
of defendant's claim. Even if the
evidence of the plaintiff may be
stronger than that of the
defendant, there is no
preponderance of evidence on his
side if such evidence is insufficient
in itself to establish his cause of
action.
(Sapu-an, et al. v. Court
of Appeals, Oct. 19, 1992, 214
SCRA 701, 705-706.)
WHEREFORE, the appealed judgment is
reversed and set aside. Another judgment is
hereby entered dismissing the complaint in
Civil Case No. 2402. No costs. (Decision, p.
6, rollo, p. 37.)
Petitioner's motion for reconsideration having been
rejected by the respondent Court, petitioner came to this
Court, alleging (i) improper application by the respondent
Court of Appeals of the so-called principle of
"equiponderance of evidence", for having based its ruling
against petitioner on documentary evidence which,
petitioner claims, are void, (ii) the respondent
municipality's purported lack of juridical personality, as a
result of having been created under a void executive order,
and (iii) that the challenged Decision "does not solve the
problem of both towns but throws them back again to their
controversy." (Petition, p. 6, rollo, p. 21.)
After deliberating on the petition, comment and reply, this
Court is not persuaded to grant due course to the petition.
With respect to the first and third grounds, we find that the
issues of fact in this case had been adequately passed upon
by respondent Court in its Decision, which is well-supported
by the evidence on record. The determination of
equiponderance of evidence by the respondent Court
involves the appreciation of evidence by the latter tribunal,
which will not be reviewed by this Court unless shown to be
whimsical or capricious; here, there has been no such
showing.
In connection with the foregoing, that the assailed Decision,
in dismissing the complaint in Civil Case No. 2402, may
leave the parties where they are or may not resolve their
problem one way or the other, is of no moment. The fact
remains that, as correctly evaluated by the respondent
Court, neither party was able to make out a case; neither
374

side could establish its cause of action and prevail with the
evidence it had. They are thus no better off than before
they proceeded to litigate, and, as a consequence thereof,
the courts can only leave them as they are. In such cases,
courts have no choice but to dismiss the
complaints/petitions.
On the second issue, we noted that petitioner commenced
its collateral attack on the juridical personality of
respondent municipality on 19 January 1984 (or some thirty
five years after respondent municipality first cameinto
existence in 1949) during the proceedings in the court a
quo. It appears that, after presentation of its evidence,
herein petitioner asked the trial court to bar respondent
municipality from presenting its evidence on the ground
that it had no juridical personality. Petitioner contended
that Exec. Order No. 265 issued by President Quirino on
September 16, 1949 creating respondent municipality is
null and void ab initio, inasmuch as Section 68 of the
Revised Administrative Code, on which said Executive Order
was based, constituted an undue delegation of legislative
powers to the President of the Philippines, and was
therefore declared unconstitutional, per this Court's ruling
in Pelaez vs. Auditor General.
3

In this regard, we call to mind the ruling of this Court
in Municipality of San Narciso, Quezon vs. Mendez, Sr.
4
,
which will be found very instructive in the case at bench.
Therein we stated:
While petitioners would grant that the
enactment of Republic Act No. 7160 [Local
Government Code of 1991] may have
converted the Municipality of San Andres into
a de facto municipality, they, however,
contend that since the petition for quo
warranto had been filed prior to the passage of
said law, petitioner municipality had acquired a
vested right to seek the nullification of
Executive Order No. 353, and any attempt to
apply Section 442 of Republic Act 7160 to the
petition would perforce be violative of due
process and the equal protection clause of the
Constitution.
Petitioner's theory might perhaps be a point to
consider had the case been seasonably
brought. Executive Order No. 353 creating the
municipal district of San Andres was issued on
20 August 1959 but it was only after almost
thirty (30) years, or on 05 June 1989, that the
municipality of San Narciso finally decided to
challenge the legality of the executive order. In
the meantime, the Municipal district, and later
the Municipality of San Andres, began and
continued to exercise the powers and
authority of a duly created local government
unit. In the same manner that the failure of a
public officer to question his ouster or the right
of another to hold a position within a one-year
375

period can abrogate an action belatedly file, so
also, if not indeed with greatest
imperativeness, must a quo
warrantoproceeding assailing the lawful
authority of a political subdivision be timely
raised. Public interest demands it.
Granting that Executive Order No. 353 was a
complete nullity for being the result of an
unconstitutional delegation of legislative
power, the peculiar circumstances obtaining in
this case hardly could offer a choice other than
to consider the Municipality of San Andres to
have at least attained a status uniquely of its
own closely approximating, if not in fact
attaining, that of a de factomunicipal
corporation. Conventional wisdom cannot
allow it to be otherwise. Created in 1959 by
virtue of Executive Order No. 353, the
Municipality of San Andres had been in
existence for more than six years when, on 24
December 1965, Pelaez vs. Auditor
General was promulgated. The ruling could
have sounded the call for a similar declaration
of the unconstitutionality of Executive Order
No. 353 but it was not to be the case. On the
contrary, certain governmental acts all pointed
to the State's recognition of the continued
existence of the Municipality of San Andres.
Thus, after more than five years as a municipal
district, Executive Order No. 174 classified the
Municipality of San Andres as a fifth class
municipality after having surpassed the income
requirement laid out in Republic Act No. 1515.
Section 31 of Batas Pambansa Blg. 129,
otherwise known as the Judiciary
Reorganization Act of 1980, constituted as
municipal circuits, in the establishment of
Municipal Circuit Trial Courts in the country,
certain municipalities that comprised the
municipal circuits organized under
Administrative Order No. 33, dated 13 June
1978, issued by this court pursuant to
Presidential Decree No. 537. Under this
administrative order, the Municipality of San
Andres had been covered by the 10th
Municipal Circuit Court of San Francisco-San
Andres for the province of Quezon.
At the present time, all doubts on the de
jure standing of the municipality must be
dispelled. Under the Ordinance (adopted on 15
October 1986) apportioning the seats of the
House of Representatives, appended to the
1987 Constitution, the Municipality of San
Andres has been considered to be one of the
twelve (12) municipalities composing the Third
District of the province of Quezon. Equally
significant is Section 442 (d) of the Local
Government Code to the effect that municipal
376

districts "organized pursuant to presidential
issuances or executive orders and which have
their respective sets of elective municipal
officials holding office at the time of the
effectivity of (the) Code shall henceforth be
considered as regular municipalities." No
pretension of unconstitutionality per se of
Section 442 (d) of the Local Government Code
is proffered. It is doubtful whether such a
pretext, even if made, would succeed. The
power to create political subdivisions is a
function of the legislature. Congress did just
that when it has incorporated Section 442 (d)
in the Code. Curativelaws, which in essence are
retrospective, and aimed at giving "validity to
acts done that would have been invalid under
existing laws, as if existing laws have been
complied with," are validly accepted in this
jurisdiction, subject to the usual qualification
against impairment of vested rights.
All considered, the de jure status of the
Municipality of San Andres in the province of
Quezon must now be conceded.
Respondent municipality's situation in the instant case is
strikingly similar to that of the municipality of San Andres.
Respondent municipality of Alicia was created by virtue of
Executive Order No. 265 in 1949, or ten years ahead of the
municipality of San Andres, and therefore had been in
existence for all of sixteen years when Pelaez vs.Auditor
General was promulgated. And various governmental acts
throughout the years all indicate the State's recognition and
acknowledgment of the existence thereof. For instance,
under Administrative Order No. 33 above-mentioned, the
Municipality of Alicia was covered by the 7th Municipal
Circuit Court of Alicia-Mabini for the province of Bohol.
Likewise, under the Ordinance appended to the 1987
Constitution, the Municipality of Alicia is one of twenty
municipalities comprising the Third District of Bohol.
Inasmuch as respondent municipality of Alicia is similarly
situated as the municipality of San Andres, it should
likewise benefit from the effects of Section 442 (d) of the
Local Government Code, and should henceforth be
considered as a regular, de jure municipality.
WHEREFORE, the instant petition for review on certiorari is
hereby DENIED, with costs against petitioner.
SO ORDERED.
During the 11
th
Congress, 57 bills seeking the
conversion of municipalities into component cities were
filed before the House of Representatives. However,
Congress acted only on 33 bills. It did not act on bills
converting 24 other municipalities into cities. During the
12
th
Congress, R.A. No. 9009 became effective revising
Section 450 of the Local Government Code. It increased
the income requirement to qualify for conversion into a
377

city from P20 million annual income toP100 million locally-
generated income. In the 13
th
Congress, 16 of the 24
municipalities filed, through their respective sponsors,
individual cityhood bills. Each of the cityhood bills
contained a common provisionexempting the particular
municipality from the 100 million income requirement
imposed by R.A. No. 9009. Are the cityhood laws
converting 16 municipalities into cities constitutional?
SUGGESTED ANSWER:
November 18, 2008 Ruling
No. The SC (voting 6-5) ruled that the exemptions in
the City Laws is unconstitutional because sec. 10, Art. X of
the Constitution requires that such exemption must be
written into the LGC and not into any other laws. The
Cityhood Laws violate sec. 6, Art. X of the Constitution
because they prevent a fair and just distribution of the
national taxes to local government units. The criteria, as
prescribed in sec. 450 of the LGC, must be strictly followed
because such criteria prescribed by law, are material in
determining the just share of local government units
(LGUs) in national taxes. (League of Cities of the
Philippines v. Comelec GR No. 176951, November 18,
2008)
March 31, 2009 Ruling
No. The SC denied the first Motion for Reconsideration. 7-5
vote.
April 28, 2009 Ruling
No. The SC En Banc, by a split vote (6-6), denied a
second motion for reconsideration.
December 21, 2009 Ruling
Yes. The SC (voting 6-4) reversed its November 18,
2008 decision and declared as constitutional the Cityhood
Laws or Republic Acts (RAs) converting 16 municipalities
into cities. It said that based on Congress deliberations and
clear legislative intent was that the then pending cityhood
bills would be outside the pale of the minimum
income requirement of PhP100 million that Senate Bill No.
2159 proposes; and RA 9009 would not have any
retroactive effect insofar as the cityhood bills are
concerned. The conversion of a municipality into a city will
only affect its status as a political unit, but not its property
as such, it added. The Court held that the favorable
treatment accorded the sixteen municipalities by the
cityhood laws rests on substantial distinction.
The Court stressed that respondent LGUs were qualified
cityhood applicants before the enactment of RA 9009. To
impose on them the much higher income requirement after
what they have gone through would appear to
be indeedunfair. Thus, the imperatives of fairness dictate
that they should be given a legal remedy by which they
378

should be allowed to prove that they have all the necessary
qualifications for city status using the criteria set forth
under the LGC of 1991 prior to its amendment by RA
9009. (GR No. 176951, League of Cities of the Philippines v.
COMELEC; GR No. 177499, League of Cities of the
Philippines v. COMELEC; GR No. 178056, League of Cities of
the Philippines v. COMELEC, December 21, 2009)
NOTE: The November 18, 2008 ruling already became final
and executory and was recorded in the SCs Book of Entries
of Judgments on May 21, 2009.)
August 24, 2010 Ruling
No. The SC (voting 7-6) granted the motions for
reconsideration of the League of Cities of the Philippines
(LCP), et al. and reinstated its November 18, 2008 decision
declaring unconstitutional the Cityhood Laws or Republic
Acts (RAs) converting 16 municipalities into
cities. Undeniably, the 6-6 vote did not overrule the prior
majority en banc Decision of 18 November 2008, as well as
the prior majority en banc Resolution of 31 March 2009
denying reconsideration. The tie-vote on the second motion
for reconsideration is not the same as a tie-vote on the
main decision where there is no prior decision, the Court
said. In the latest resolution, the Court reiterated its
November 18, 2008 ruling that the Cityhood Laws violate
sec. 10, Art. X of the Constitution which expressly provides
that no cityshall be createdexcept in accordance with
the criteria established in the local government code. It
stressed that while all the criteria for the creation of cities
must be embodied exclusively in the Local Government
Code, the assailed Cityhood Laws provided an exemption
from the increased income requirement for the creation of
cities under sec. 450 of the LGC. The unconstitutionality of
the Cityhood Laws lies in the fact that Congress provided an
exemption contrary to the express language of the
Constitution.Congress exceeded and abused its law-
making power, rendering the challenged Cityhood Laws
void for being violative of the Constitution, the Court held.
The Court further held that limiting the exemption
only to the 16 municipalities violates the requirement that
the classification must apply to all similarly situated.
Municipalities with the same income as the 16 respondent
municipalities cannot convert into cities, while the 16
respondent municipalities can. Clearly, as worded the
exemption provision found in the Cityhood Laws, even if it
were written in Section 450 of the Local Government Code,
would still be unconstitutional for violation of the equal
protection clause. (GR No. 176951,League of Cities of the
Philippines v. Comelec; GR No. 177499, League of Cities of
the Philippines v. Comelec; GR No. 178056, League of
Cities of the Philippines v. Comelec, August 24, 2010)
February 15, 2011 Ruling
Yes, the laws are constitutional. The February 15, 2011
resolution is the fourth ruling since the High Court first
resolved the Cityhood case in 2008.
April 12, 2011Ruling
379

Yes! Its final. The 16 Cityhood Laws are constitutional. We
should not ever lose sight of the fact that the 16 cities
covered by the Cityhood Laws not only had conversion bills
pending during the 11th Congress, but have also complied
with the requirements of the [Local Government Code] LGC
prescribed prior to its amendment by RA No. 9009.
Congress undeniably gave these cities all the considerations
that justice and fair play demanded. Hence, this Court
should do no less by stamping its imprimatur to the clear
and unmistakable legislative intent and by duly recognizing
the certain collective wisdom of Congress, the SC said.
The Court stressed that Congress clearly intended that the
local government units covered by the Cityhood Laws be
exempted from the coverage of RA 9009, which imposes a
higher income requirement of PhP100 million for the
creation of cities.
The Court reiterated that while RA 9009 was being
deliberated upon, the Congress was well aware of the
pendency of conversion bills of several municipalities,
including those covered by the Cityhood Laws. It pointed
out that RA 9009 took effect on June 30, 2001, when the
12th Congress was incipient. By reason of the clear
legislative intent to exempt the municipalities covered by
the conversion bills pending during the 11th Congress, the
House of Representatives adopted Joint Resolution No. 29
entitled Joint Resolution to Exempt Certain Municipalities
Embodied in Bills Filed in Congress before June 30, 2001
from the coverage of Republic Act No. 9009. However, the
Senate failed to act on the said Joint Resolution. Even so,
the House readopted Joint Resolution No. 29 as Joint
Resolution No. 1 during the 12th Congress, and forwarded
the same for approval to the Senate, which again failed to
prove it. Eventually, the conversion bills of respondents
were individually filed in the Lower House and
fellesters.blogspot.com were all unanimously and favorably
voted upon. When forwarded to the Senate, the bills were
also unanimously approved. The acts of both Chambers of
Congress show that the exemption clauses ultimately
incorporated in the Cityhood Laws are but the express
articulations of the clear legislative intent to exempt the
respondents, without exception, from the coverage of RA
No. 9009. Thereby, RA 9009, and, by necessity, the LCG,
were amended, not by repeal but by way of the express
exemptions being embodied in the exemption
clauses.(http://sc.judiciary.gov.ph/news/courtnews%20fl
ash/2011/04/04141101.php)
The Court held that the imposition of the income
requirement of P100 million from local sources under RA
9009 was arbitrary. While the Constitution mandates that
the creation of local government units must comply with
the criteria laid down in the LGC, it cannot be justified to
insist that the Constitution must have to yield to every
amendment to the LGC despite such amendment
imminently producing effects contrary to the original
thrusts of the LGC to promote autonomy, decentralization,
countryside development, and the concomitant national
growth. (GR No. 176951, League of City of the
380

Philippines v. COMELEC; GR No. 177499, League of City of
the Philippines v. COMELEC: GR No. 178056, League of City
of the Philippines v. COMELEC, April 12, 2011)

Republic of the Philippines
Supreme Court
Baguio City

EN BANC

RODOLFO G. NAVARRO, VICTOR F.
BERNAL, and
RENE O. MEDINA,
Petitioners,

- versus -

EXECUTIVE SECRETARY EDUARDO
ERMITA, representing the
President of the Philippines; Senate
of the Philippines, represented by



G.R. No. 180050

Present:

CORONA, C.J.,
CARPIO,
CARPIO MORALES,
VELASCO, JR.,
NACHURA,
LEONARDO-DE CASTRO,
BRION,
PERALTA,
BERSAMIN,
DEL CASTILLO,
the SENATE PRESIDENT; House of
Representatives, represented by
the HOUSE SPEAKER; GOVERNOR
ROBERT ACE S. BARBERS,
representing the mother province
of Surigao del Norte; GOVERNOR
GERALDINE ECLEO VILLAROMAN,
representing the new Province of
Dinagat Islands,
Respondents,

CONGRESSMAN FRANCISCO T.
MATUGAS, HON. SOL T. MATUGAS,
HON. ARTURO CARLOS A. EGAY,
JR., HON. SIMEON VICENTE G.
CASTRENCE, HON. MAMERTO D.
GALANIDA, HON. MARGARITO M.
LONGOS, and HON. CESAR M.
BAGUNDOL,
Intervenors.

ABAD,
VILLARAMA, JR.,
PEREZ,
MENDOZA, and
SERENO, JJ.













Promulgated:
381


April 12, 2011
x------------------------------------------------------------------------------
-----------x

382

RESOLUTION

NACHURA, J.:


For consideration of the Court is the Urgent Motion
to Recall Entry of Judgment dated October 20, 2010 filed by
Movant-Intervenors
[1]
dated and filed on October 29, 2010,
praying that the Court (a) recall the entry of judgment, and
(b) resolve their motion for reconsideration of the July 20,
2010 Resolution.

To provide a clear perspective of the instant motion,
we present hereunder a brief background of the relevant
antecedents

On October 2, 2006, the President of the Republic
approved into law Republic Act (R.A.) No. 9355 (An Act
Creating the Province of Dinagat Islands).
[2]
On December
3, 2006, the Commission on Elections (COMELEC)
conducted the mandatory plebiscite for the ratification of
the creation of the province under the Local Government
Code (LGC).
[3]
The plebiscite yielded 69,943 affirmative
votes and 63,502 negative votes.
[4]
With
the approval of the people from both the mother
province of Surigao del
Norte and the Province of Dinagat Islands (Dinagat), the
President appointed the interim set of provincial officials
who took their oath of office on January 26, 2007. Later,
during the May 14, 2007 synchronized elections, the
Dinagatnons elected their new set of provincial officials
who assumed office on July 1, 2007.
[5]


On November 10, 2006, petitioners Rodolfo G.
Navarro, Victor F. Bernal and Rene O. Medina, former
political leaders of Surigao del Norte, filed before this Court
a petition for certiorari and prohibition (G.R. No. 175158)
challenging the constitutionality of R.A. No. 9355.
[6]
The
Court dismissed the petition on technical grounds. Their
motion for reconsideration was also denied.
[7]


Undaunted, petitioners, as taxpayers and residents of
the Province of Surigao del Norte, filed another petition
for certiorari
[8]
seeking to nullify R.A. No. 9355 for being
unconstitutional. They alleged that the creation of Dinagat
as a new province, if uncorrected, would perpetuate an
illegal act of Congress, and would unjustly deprive the
people of Surigao del Norte of a large chunk of the
383

provincial territory, Internal Revenue Allocation (IRA), and
rich resources from the area. They pointed out that when
the law was passed, Dinagat had
a land area of 802.12 square kilometers only and a po
pulation of only 106,951, failing to comply with Section 10,
Article X of the Constitution and of Section 461 of the LGC,
on both counts, viz.

Constitution, Article X Local Government

Section 10. No province, city,
municipality, or barangay may be created,
divided, merged, abolished, or its boundary
substantially altered, except in accordance
with the criteria established in the local
government code and subject to the approval
by a majority of the votes cast in a plebiscite in
the political units directly affected.



LGC, Title IV, Chapter I

Section 461. Requisites for Creation.
(a) A province may be created if it has an
average annual income, as certified by the
Department of Finance, of not less than
Twenty million pesos (P20,000,000.00) based
on 1991 constant prices and either of the
following requisites:

(i) a continuous territory of at
least two thousand (2,000)
square kilometers, as certified by
the Lands Management
Bureau; or

(ii) a population of not less than
two hundred fifty thousand
(250,000) inhabitants as certified
by the National Statistics Office:

Provided, That, the creation thereof shall
not reduce the land area, population, and
384

income of the original unit or units at the time
of said creation to less than the minimum
requirements prescribed herein.

(b) The territory need not be contiguous
if it comprises two (2) or more islands or is
separated by a chartered city or cities which
do not contribute to the income of the
province.

(c) The average annual income shall
include the income accruing to the general
fund, exclusive of special funds, trust funds,
transfers, and non-recurring income.
(Emphasis supplied.)


On February 10, 2010, the Court rendered its
Decision
[9]
granting the petition.
[10]
The Decision declared
R.A. No. 9355 unconstitutional for failure to comply with
the requirements on population and land area in the
creation of a province under the LGC. Consequently, it
declared the proclamation of Dinagat and the election of its
officials as null and void. The Decision likewise declared as
null and void the provision on Article 9(2) of the Rules and
Regulations Implementing the LGC (LGC-IRR), stating that,
*t+he land
area requirement shall not apply where the proposed
province is composed of one (1) or more islands for being
beyond the ambit of Article 461 of the LGC, inasmuch as
such exemption is not expressly provided in the law.
[11]

The Republic, represented by the Office of the
Solicitor General, and Dinagat filed their respective motions
for reconsideration of the Decision. In its
Resolution
[12]
datedMay 12, 2010,
[13]
the Court denied the
said motions.
[14]


Unperturbed, the Republic and Dinagat both filed
their respective motions for leave of court to admit their
second motions for reconsideration, accompanied by their
second motions for reconsideration. These motions were
eventually noted without action by this Court in its June
29, 2010 Resolution.
[15]


Meanwhile, the movants-intervenors filed on June
18, 2010 a Motion for Leave to Intervene and to File and to
Admit Intervenors Motion for Reconsideration of the
Resolution dated May 12, 2010. They alleged that the
385

COMELEC issued Resolution No. 8790, relevant to this case,
which provides

RESOLUTION NO. 8790

WHEREAS, Dinagat Islands, consisting of
seven (7) municipalities, were previously
components of the First Legislative District of
the Province of Surigao del Norte. In
December 2006 pursuant to Republic Act No.
9355, the Province of Dinagat Island[s] was
created and its creation was ratified on 02
December 2006 in the Plebiscite for this
purpose;

WHEREAS, as a province, Dinagat
Islands was, for purposes of the May 10, 2010
National and Local Elections, allocated one (1)
seat for Governor, one (1) seat for Vice
Governor, one (1) for congressional seat, and
ten (10) Sangguniang Panlalawigan seats
pursuant to Resolution No. 8670 dated 16
September 2009;



WHEREAS, the Supreme Court in G.R.
No. 180050 entitled Rodolfo Navarro, et al.,
vs. Executive Secretary Eduardo Ermita, as
representative of the President of
the Philippines, et al. rendered a Decision,
dated 10 February 2010, declaring Republic
Act No. 9355 unconstitutional for failure to
comply with the criteria for the creation of a
province prescribed in Sec. 461 of the Local
Government Code in relation to Sec. 10, Art. X,
of the 1987 Constitution;

WHEREAS, respondents intend to file
Motion[s] for Reconsideration on the above
decision of the Supreme Court;

WHEREAS, the electoral data relative to
the: (1) position for Member, House of
Representatives representing the lone
386

congressional district of Dinagat Islands, (2)
names of the candidates for the
aforementioned position, (3) position for
Governor, Dinagat Islands, (4) names of the
candidates for the said position, (5) position of
the Vice Governor, (6) the names of the
candidates for the said position, (7) positions
for the ten (10) Sangguniang Panlalawigan
Members and, [8] all the names of the
candidates for Sangguniang Panlalawigan
Members, have already been configured into
the system and can no longer be revised
within the remaining period before the
elections on May 10, 2010.

NOW, THEREFORE, with the current
system configuration, and depending on
whether the Decision of the Supreme Court in
Navarro vs. Ermita is reconsidered or not, the
Commission RESOLVED, as it hereby
RESOLVES, to declare that:

a. If the Decision is reversed, there
will be no problem since the current
system configuration is in line with
the reconsidered Decision, meaning
that the Province of Dinagat Islands
and the Provinceof Surigao del
Norte remain as two (2) separate
provinces;

b. If the Decision becomes final and
executory before the election, the
Province of Dinagat Islands will
revert to its previous status as part of
the First Legislative District, Surigao
del Norte.

But because of the current system
configuration, the ballots for the
Province of Dinagat Islands will, for
the positions of Member, House of
Representatives, Governor, Vice
Governor and Members,
Sangguniang Panlalawigan, bear only
the names of the candidates for the
said positions.
387


Conversely, the ballots for the First
Legislative District of Surigao del
Norte, will, for the position of
Governor, Vice Governor, Member,
House of Representatives, First
District of Surigao del Norte and
Members, Sangguniang
Panlalawigan, show only candidates
for the said position. Likewise, the
whole Province of Surigao del Norte,
will, for the position of Governor and
Vice Governor, bear only the names
of the candidates for the said
position[s].


Consequently, the voters of the
Province of Dinagat Islands will not
be able to vote for the candidates of
Members, Sangguniang
Panlalawigan, and Member, House
[of] Representatives, First Legislative
District, Surigao del Norte, and
candidates for Governor and Vice
Governor for Surigao del
Norte. Meanwhile, voters of the First
Legislative District of Surigao del
Norte, will not be able to vote for
Members, Sangguniang Panlalawigan
and Member, House of
Representatives, Dinagat Islands. Als
o, the voters of the
whole Province of Surigao del Norte,
will not be able to vote for the
Governor and Vice
Governor, Dinagat Islands. Given this
situation, the Commission will
postpone the elections for Governor,
Vice Governor, Member, House of
Representatives, First Legislative
District, Surigao del Norte, and
Members, Sangguniang
Panlalawigan, First Legislative
District, Surigao del Norte, because
the election will result in [a] failure to
elect, since, in actuality, there are no
candidates for Governor, Vice
Governor, Members, Sangguniang
Panlalawigan, First Legislative
388

District, and Member, House of
Representatives, First Legislative
District (with Dinagat Islands) of
Surigao del Norte.

c. If the Decision becomes final and
executory after the election, the
Province of Dinagat Islands will
revert to its previous status as part of
the First Legislative District of Surigao
del Norte. The result of the election
will have to be nullified for the same
reasons given in Item b above. A
special election for Governor, Vice
Governor, Member, House of
Representatives, First Legislative
District of Surigao del Norte, and
Members, Sangguniang
Panlalawigan, First District, Surigao
del Norte (with Dinagat Islands) will
have to be conducted.

x x x x

SO ORDERED.


They further alleged that, because they are the duly
elected officials of Surigao del Norte whose positions will be
affected by the nullification of the election results in the
event that the May 12, 2010 Resolution is not reversed,
they have a legal interest in the instant case and would be
directly affected by the declaration of nullity of R.A. No.
9355. Simply put, movants-intervenors election to their
respective offices would necessarily be annulled since
Dinagat Islands will revert to its previous status as part of
the First Legislative District of Surigao del Norte and a
special election will have to be conducted for governor, vice
governor, and House of Representatives member and
Sangguniang Panlalawigan member for the First Legislative
District of Surigao del Norte. Moreover, as residents of
Surigao del Norte and as public servants representing the
interests of their constituents, they have a clear and strong
interest in the outcome of this case inasmuch as the
reversion of Dinagat as part of the First Legislative District
of Surigao del Norte will affect the latter province such that:
(1) the whole administrative set-up of the province will
have to be restructured; (2) the services of many
employees will have to be terminated; (3) contracts will
389

have to be invalidated; and (4) projects and other
developments will have to be discontinued. In addition,
they claim that their rights cannot be adequately pursued
and protected in any other proceeding since their rights
would be foreclosed if the May 12, 2010 Resolution would
attain finality.

In their motion for reconsideration of the May 12,
2010 Resolution, movants-intervenors raised three (3) main
arguments to challenge the above Resolution, namely: (1)
that the passage of R.A. No. 9355 operates as an act of
Congress amending Section 461 of the LGC; (2) that the
exemption from territorial contiguity, when the intended
province consists of two or more islands, includes the
exemption from the application of the minimum land area
requirement; and (3) that the Operative Fact Doctrine is
applicable in the instant case.

In the Resolution dated July 20, 2010,
[16]
the Court
denied the Motion for Leave to Intervene and to File and to
Admit Intervenors Motion for Reconsideration of the
Resolution dated May 12, 2010 on the ground that the
allowance or disallowance of a motion to intervene is
addressed to the sound discretion of the Court, and that
the appropriate time to file the said motion was before and
not after the resolution of this case.

On September 7, 2010, movants-intervenors filed a
Motion for Reconsideration of the July 20, 2010 Resolution,
citing several rulings
[17]
of the Court, allowing intervention
as an exception to Section 2, Rule 19 of the Rules of Court
that it should be filed at any time before the rendition of
judgment. They alleged that, prior to the May 10, 2010
elections, their legal interest in this case was not yet
existent. They averred that prior to the May 10, 2010
elections, they were unaware of the proceedings in this
case. Even for the sake of argument that they had notice of
the pendency of the case, they pointed out that prior to the
said elections, Sol T. Matugas was a simple resident of
Surigao del Norte, Arturo Carlos A. Egay, Jr. was a member
of the Sangguniang Panlalawigan of the Second District of
Surigao del Norte, and Mamerto D. Galanida was the
Municipal Mayor of Socorro, Surigao del Norte, and that,
pursuant to COMELEC Resolution No. 8790, it was only after
they were elected as Governor of Surigao del Norte, Vice
Governor of Surigao del Norte and Sangguniang
Panlalawigan Member of the First District of Surigao del
Norte, respectively, that they became possessed with legal
interest in this controversy.

On October 5, 2010, the Court issued an order for
Entry of Judgment, stating that the decision in this case had
390

become final and executory on May 18, 2010. Hence, the
above motion.

At the outset, it must be clarified that this Resolution
delves solely on the instant Urgent Motion to Recall Entry
of Judgment of movants-intervenors, not on the second
motions for reconsideration of the original
parties, and neither on Dinagats Urgent Omnibus Moti
on, which our
391

esteemed colleague, Mr. Justice Arturo D. Brion considers
as Dinagats third motion for reconsideration. Inasmuch as
the motions for leave to admit their respective motions for
reconsideration of the May 12, 2010 Resolution and the
aforesaid motions for reconsideration were already noted
without action by the Court, there is no reason to treat
Dinagats Urgent Omnibus Motion differently. In relation to
this, the Urgent Motion to Recall Entry of Judgment of
movants-intervenors could not be considered as a second
motion for reconsideration to warrant the application of
Section 3, Rule 15 of the Internal Rules of the Supreme
Court.
[18]
It should be noted that this motion prays for the
recall of the entry of judgment and for the resolution of
their motion for reconsideration of the July 20, 2010
Resolution which remained unresolved. The denial of their
motion for leave to intervene and to admit motion for
reconsideration of the May 12, 2010 Resolution did not rule
on the merits of the motion for reconsideration of the May
12, 2010 Resolution, but only on the timeliness of the
intended intervention. Their motion for reconsideration of
this denial elaborated on movants-intervenors interest in
this case which existed only after judgment had been
rendered. As such, their motion for intervention and their
motion for reconsideration of the May 12, 2010 Resolution
merely stand as an initial reconsideration of the said
resolution.

With due deference to Mr. Justice Brion, there
appears nothing in the records to support the claim that
this was a ploy of respondents legal tactician to reopen the
case despite an entry of judgment. To be sure, it is actually
COMELEC Resolution No. 8790 that set this controversy into
motion anew. To reiterate, the pertinent portion of the
Resolution reads:

c. If the Decision becomes final and
executory after the election, the Province
of Dinagat Islands will revert to its previous
status as part of the First Legislative District
of Surigao del Norte. The result of the
election will have to be nullified for the
same reasons given in Item b above. A
special election for Governor, Vice
Governor, Member, House of
Representatives, First Legislative District of
Surigao del Norte, and Members,
Sangguniang Panlalawigan, First District,
Surigao del Norte (with Dinagat Islands) will
have to be conducted. (Emphasis supplied.)


392

Indeed, COMELEC Resolution No. 8790 spawned the
peculiar circumstance of proper party interest for movants-
intervenors only with the specter of the decision in the
main case becoming final and executory. More
importantly, if the intervention be not entertained, the
movants-intervenors would be left with no other remedy as
regards to the impending nullification of their election to
their respective positions. Thus, to the Courts mind, there
is an imperative to grant the Urgent Motion to Recall Entry
of Judgment by movants-intervenors.

It should be remembered that this case was initiated
upon the filing of the petition for certiorari way back on
October 30, 2007. At that time, movants-intervenors had
nothing at stake in the outcome of this case. While it may
be argued that their interest in this case should have
commenced upon the issuance of COMELEC Resolution No.
8790, it is obvious that their interest in this case then was
more imaginary than real. This is because COMELEC
Resolution No. 8790 provides that should the decision in
this case attain finality prior to the May 10, 2010 elections,
the election of the local government officials stated therein
would only have to be postponed. Given such a scenario,
movants-intervenors would not have suffered any injury or
adverse effect with respect to the reversion of Dinagat as
part of Surigao del Norte since they would simply have
remained candidates for the respective positions they have
vied for and to which they have been elected.
393

For a party to have locus standi, one must allege 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. Because constitutional cases are often public
actions in which the relief sought is likely to affect other
persons, a preliminary question frequently arises as to this
interest in the constitutional question raised.
[19]


It cannot be denied that movants-intervenors will
suffer direct injury in the event their Urgent Motion to
Recall Entry of Judgment dated October 29, 2010 is denied
and their Motion for Leave to Intervene and to File and to
Admit Intervenors Motion for Reconsideration of the
Resolution dated May 12, 2010 is denied with
finality. Indeed, they have sufficiently shown that they
have a personal and substantial interest in the case, such
that if the May 12, 2010 Resolution be not reconsidered,
their election to their respective positions during the May
10, 2010 polls and its concomitant effects would all be
nullified and be put to naught. Given their unique
circumstances, movants-intervenors should not be left
without any remedy before this Court simply because their
interest in this case became manifest only after the case
had already been decided. The consequences of such a
decision would definitely work to their disadvantage, nay,
to their utmost prejudice, without even them being parties
to the dispute. Such decision would also violate their right
to due process, a right that cries out for protection. Thus, it
is imperative that the movants-intervenors be heard on the
merits of their cause. We are not only a court of law, but
also of justice and equity, such that our position and the
dire repercussions of this controversy should be weighed
on the scales of justice, rather than dismissed on account of
mootness.
394

The moot and academic principle is not a magical
formula that can automatically dissuade the courts from
resolving a case. Courts will decide cases, otherwise moot
and academic, if: (1) there is a grave violation of the
Constitution; (2) there is an exceptional character of the
situation and the paramount public interest is involved; (3)
the constitutional issue raised requires formation of
controlling principles to guide the bench, the bar, and the
public; and (4) the case is capable of repetition yet evading
review.
[20]
The second exception attends this case.

This Court had taken a liberal attitude in the case
of David v. Macapagal-Arroyo,
[21]
where technicalities of
procedure on locus standi were brushed aside, because the
constitutional issues raised were of paramount public
interest or of transcendental importance deserving the
attention of the Court. Along parallel lines, the motion for
intervention should be given due course since movants-
intervenors have shown their substantial legal interest in
the outcome of this case, even much more than petitioners
themselves, and because of the novelty, gravity, and weight
of the issues involved.

Undeniably, the motion for intervention and the
motion for reconsideration of the May 12, 2010 Resolution
of movants-intervenors is akin to the right to appeal the
judgment of a case, which, though merely a statutory right
that must comply with the requirements of the rules, is an
essential part of our judicial system, such that courts should
proceed with caution not to deprive a party of the right to
question the judgment and its effects, and ensure that
every party-litigant, including those who would be directly
affected, would have the amplest opportunity for the
proper and just disposition of their cause, freed from the
constraints of technicalities.
[22]


Verily, the Court had, on several occasions, sanctioned
the recall entries of judgment in light of attendant
extraordinary circumstances.
[23]
The power to suspend or
even disregard rules of procedure can be so pervasive and
compelling as to alter even that which this Court itself had
already declared final.
[24]
In this case, the compelling
concern is not only to afford the movants-intervenors the
right to be heard since they would be adversely affected by
the judgment in this case despite not being original parties
thereto, but also to arrive at the correct interpretation of
the provisions of the LGC with respect to the creation of
local government units. In this manner, the thrust of the
Constitution with respect to local autonomy and of the LGC
with respect to decentralization and the attainment of
national goals, as hereafter elucidated, will effectively be
realized.
395


On the merits of the motion for intervention, after
taking a long and intent look, the Court finds that the first
and second arguments raised by movants-intervenors
deserve affirmative consideration.

It must be borne in mind that the central policy
considerations in the creation of local government units are
economic viability, efficient administration, and capability
to deliver basic services to their constituents. The criteria
prescribed by the LGC, i.e., income, population and land
area, are all designed to accomplish these results. In this
light, Congress, in its collective wisdom, has debated on the
relative weight of each of these three criteria, placing
emphasis on which of them should enjoy preferential
consideration.
396

Without doubt, the primordial criterion in the
creation of local government units, particularly of a
province, is economic viability. This is the clear intent of
the framers of the LGC. In this connection, the following
excerpts from congressional debates are quoted
hereunder


HON. ALFELOR. Income is mandatory. We can
even have this doubled because we thought

CHAIRMAN CUENCO. In other words, the
primordial consideration here is the economic
viability of the new local government unit, the
new province?

x x x x

HON. LAGUDA. The reason why we are willing
to increase the income, double than the House
version, because we also believe that
economic viability is really a minimum. Land
area and population are functions really of the
viability of the area, because you have an
income level which would be the trigger point
for economic development, population will
naturally increase because there will be an
immigration. However, if you disallow the
particular area from being converted into a
province because of the population problems
in the beginning, it will never be able to reach
the point where it could become a province
simply because it will never have the
economic take off for it to trigger off that
economic development.

Now, were saying that maybe Fourteen
Million Pesos is a floor area where it could pay
for overhead and provide a minimum of basic
services to the population. Over and above
that, the provincial officials should be able to
trigger off economic development which will
attract immigration, which will attract new
investments from the private sector. This is
now the concern of the local officials. But if we
are going to tie the hands of the proponents,
simply by telling them, Sorry, you are now at
397

150 thousand or 200 thousand, you will never
be able to become a province because nobody
wants to go to your place. Why? Because you
never have any reason for economic viability.

x x x x

CHAIRMAN PIMENTEL. Okay, what about land
area?

HON. LUMAUIG. 1,500 square kilometers

HON. ANGARA. Walang problema yon, in fact
thats not very critical, yong land area
because

CHAIRMAN PIMENTEL. Okay, ya, our, the
Senate version is 3.5, 3,500 square meters, ah,
square kilometers.

HON. LAGUDA. Ne, Ne. A province is
constituted for the purpose of administrative
efficiency and delivery of basic services.
CHAIRMAN PIMENTEL. Right.

HON. LAGUDA. Actually, when you come
down to it, when government was instituted,
there is only one central government and then
everybody falls under that. But it was later on
subdivided into provinces for purposes of
administrative efficiency.

CHAIRMAN PIMENTEL. Okay.

HON. LAGUDA. Now, what were seeing now
is that the administrative efficiency is no
longer there precisely because the land areas
that we are giving to our governors is so wide
that no one man can possibly administer all of
the complex machineries that are needed.

398

Secondly, when you say delivery of
basic services, as pointed out by Cong.
Alfelor, there are sections of the province
which have never been visited by public
officials, precisely because they dont have the
time nor the energy anymore to do that
because its so wide. Now, by compressing the
land area and by reducing the population
requirement, we are, in effect, trying to follow
the basic policy of why we are creating
provinces, which is to deliver basic services
and to make it more efficient in
administration.

CHAIRMAN PIMENTEL. Yeah, thats correct,
but on the assumption that the province is
able to do it without being a burden to the
national government. Thats the assumption.

HON. LAGUDA. Thats why were going into
the minimum income level. As we said, if we
go on a minimum income level, then we say,
this is the trigger point at which this
administration can take place.
[25]


Also worthy of note are the requisites in the creation
of a barangay, a municipality, a city, and a province as
provided both in the LGC and the LGC-IRR, viz.

For a Barangay:

LGC: SEC. 386. Requisites for Creation. (a) A
barangay may be created out of a contiguous
territory which has a population of at least
two thousand (2,000) inhabitants as certified
by the National Statistics Office except in cities
and municipalities within Metro Manila and
other metropolitan political subdivisions or in
highly urbanized cities where such territory
shall have a certified population of at least five
thousand (5,000) inhabitants: Provided, That
the creation thereof shall not reduce the
population of the original barangay or
barangays to less than the minimum
requirement prescribed herein.
To enhance the delivery of basic services in
the indigenous cultural communities,
399

barangays may be created in such
communities by an Act of Congress,
notwithstanding the above requirement.

(b) The territorial jurisdiction of the new
barangay shall be properly identified by metes
and bounds or by more or less permanent
natural boundaries. The territory need not be
contiguous if it comprises two (2) or more
islands.

(c) The governor or city mayor may prepare a
consolidation plan for barangays, based on the
criteria prescribed in this Section, within his
territorial jurisdiction. The plan shall be
submitted to the sangguniang panlalawigan or
sangguniang panlungsod concerned for
appropriate action. In the case of
municipalities within the Metropolitan Manila
area and other metropolitan political
subdivisions, the barangay consolidation plan
can be prepared and approved by the
sangguniang bayan concerned.

LGC-IRR: ARTICLE 14. Barangays. (a)
Creation of barangays by the sangguniang
panlalawigan shall require prior
recommendation of the sangguniang bayan.

(b) New barangays in the municipalities within
MMA shall be created only by Act of Congress,
subject to the limitations and requirements
prescribed in this Article.

(c) Notwithstanding the population
requirement, a barangay may be created in
the indigenous cultural communities by Act of
Congress upon recommendation of the LGU or
LGUs where the cultural community is located.

(d) A barangay shall not be created unless the
following requisites are present:

400

(1) Population which shall not be less than
two thousand (2,000) inhabitants, except in
municipalities and cities within MMA and
other metropolitan political subdivisions as
may be created by law, or in highly-
urbanized cities where such territory shall
have a population of at least five thousand
(5,000) inhabitants, as certified by the
NSO. The creation of a barangay shall not
reduce the population of the original
barangay or barangays to less than the
prescribed minimum/

(2) Land Area which must be contiguous,
unless comprised by two (2) or more
islands. The territorial jurisdiction of a
barangay sought to be created shall be
properly identified by metes and bounds or
by more or less permanent natural
boundaries.


Municipality:

LGC: SEC. 442. Requisites for Creation. (a) A
municipality may be created if it has an
average annual income, as certified by the
provincial treasurer, or at least Two million
five hundred thousand pesos (P2,500,000.00)
for the last two (2) consecutive years based on
the 1991 constant prices; a population of at
least twenty-five thousand (25,000)
inhabitants as certified by the National
Statistics Office; and a contiguous
territory of at least fifty (50) square
kilometers as certified by the Lands
Management Bureau: Provided, That the
creation thereof shall not reduce the land
area, population or income of the original
municipality or municipalities at the time of
said creation to less than the minimum
requirements prescribed herein.

(b) The territorial jurisdiction of a newly-
created municipality shall be properly
identified by metes and bounds. The
requirement on land area shall not apply
401

where the municipality proposed to be
created is composed of one (1) or more
islands. The territory need not be contiguous
if it comprises two (2) or more islands.

(c) The average annual income shall include
the income accruing to the general fund of the
municipality concerned, exclusive of special
funds, transfers and non-recurring income.

(d) Municipalities existing as of the date of
effectivity of this Code shall continue to exist
and operate as such. Existing municipal
districts organized pursuant to presidential
issuances or executive orders and which have
their respective set of elective municipal
officials holding office at the time of the
effectivity of this Code shall henceforth be
considered regular municipalities.

LGC-IRR: ARTICLE 13. Municipalities. (a)
Requisites for Creation A municipality shall
not be created unless the following requisites
are present:

(i) Income An average annual
income of not less than Two Million Five
Hundred Thousand Pesos
(P2,500,000.00), for the immediately
preceding two (2) consecutive years
based on 1991 constant prices, as
certified by the provincial
treasurer. The average annual income
shall include the income accruing to the
general fund, exclusive of special funds,
special accounts, transfers, and
nonrecurring income;

(ii) Population which shall not be less
than twenty five thousand (25,000)
inhabitants, as certified by NSO; and

(iii) Land area which must be
contiguous with an area of at least fifty
(50) square kilometers, as certified by
402

LMB. The territory need not be
contiguous if it comprises two (2) or
more islands. The requirement on land
area shall not apply where the
proposed municipality is composed of
one (1) or more islands. The territorial
jurisdiction of a municipality sought to
be created shall be properly identified
by metes and bounds.

The creation of a new municipality shall not
reduce the land area, population, and income
of the original LGU or LGUs at the time of said
creation to less than the prescribed minimum
requirements. All expenses incidental to the
creation shall be borne by the petitioners.




City:

LGC: SEC. 450. Requisites for Creation. (a) A
municipality or a cluster of barangays may be
converted into a component city if it has an
average annual income, as certified by the
Department of Finance, of at least Twenty
million pesos (P20,000,000.00) for the last two
(2) consecutive years based on 1991 constant
prices, and if it has either of the following
requisities:

(i) a contiguous territory of at least
one hundred (100) square kilometers, as
certified by the Lands Management
Bureau; or,

(ii) a population of not less than one
hundred fifty thousand (150,000)
inhabitants, as certified by the National
Statistics Office: Provided, That, the
creation thereof shall not reduce the
land area, population, and income of
the original unit or units at the time of
said creation to less than the minimum
requirements prescribed herein.
403


(b) The territorial jurisdiction of a newly-
created city shall be properly identified by
metes and bounds. The requirement on land
area shall not apply where the city proposed
to be created is composed of one (1) or more
islands. The territory need not be contiguous
if it comprises two (2) or more islands.

(c) The average annual income shall include
the income accruing to the general fund,
exclusive of special funds, transfers, and non-
recurring income.

LGC-IRR: ARTICLE 11. Cities. (a) Requisites
for creation A city shall not be created unless
the following requisites on income and either
population or land area are present:

(1) Income An average annual income of
not less than Twenty Million Pesos
(P20,000,000.00), for the immediately
preceding two (2) consecutive years based
on 1991 constant prices, as certified by
DOF. The average annual income shall
include the income accruing to the general
fund, exclusive of special funds, special
accounts, transfers, and nonrecurring
income; and

(2) Population or land area Population
which shall not be less than one hundred
fifty thousand (150,000) inhabitants, as
certified by the NSO; or land area which
must be contiguous with an area of at least
one hundred (100) square kilometers, as
certified by LMB. The territory need not be
contiguous if it comprises two (2) or more
islands or is separated by a chartered city
or cities which do not contribute to the
income of the province. The land area
requirement shall not apply where the
proposed city is composed of one (1) or
more islands. The territorial jurisdiction of
a city sought to be created shall be
properly identified by metes and bounds.
404

The creation of a new city shall not reduce the
land area, population, and income of the
original LGU or LGUs at the time of said
creation to less than the prescribed minimum
requirements. All expenses incidental to the
creation shall be borne by the petitioners.


Provinces:

LGC: SEC. 461. Requisites for Creation. (a) A
province may be created if it has an average
annual income, as certified by the Department
of Finance, of not less than Twenty million
pesos (P20,000,000.00) based on 1991 prices
and either of the following requisites:

(i) a contiguous territory of at least
two thousand (2,000) square
kilometers, as certified by the Lands
Management Bureau; or,

(ii) a population of not less than two
hundred fifty thousand (250,000)
inhabitants as certified by the National
Statistics Office:

Provided, That the creation thereof shall not
reduce the land area, population, and income
of the original unit or units at the time of said
creation to less than the minimum
requirements prescribed herein.

(b) The territory need not be contiguous if it
comprises two (2) or more islands or is
separated by a chartered city or cities which
do not contribute to the income of the
province.

(c) The average annual income shall include
the income accruing to the general fund,
exclusive of special funds, trust funds,
transfers, and non-recurring income.

405

LGC-IRR: ARTICLE 9. Provinces. (a)
Requisites for creation A province shall not
be created unless the following requisites on
income and either population or land area are
present:

(1) Income An average annual income of
not less than Twenty Million pesos
(P20,000,000.00) for the immediately
preceding two (2) consecutive years based
on 1991 constant prices, as certified by
DOF. The average annual income shall
include the income accruing to the general
fund, exclusive of special funds, special
accounts, transfers, and non-recurring
income; and

(2) Population or land area Population
which shall not be less than two hundred
fifty thousand (250,000) inhabitants, as
certified by NSO; or land area which must
be contiguous with an area of at least two
thousand (2,000) square kilometers, as
certified by LMB. The territory need not be
contiguous if it comprises two (2) or more
islands or is separated by a chartered city
or cities which do not contribute to the
income of the province. The land area
requirement shall not apply where the
proposed province is composed of one (1)
or more islands. The territorial jurisdiction
of a province sought to be created shall be
properly identified by metes and bounds.

The creation of a new province shall not
reduce the land area, population, and income
of the original LGU or LGUs at the time of said
creation to less than the prescribed minimum
requirements. All expenses incidental to the
creation shall be borne by the petitioners.
(Emphasis supplied.)

It bears scrupulous notice that from the above cited
provisions, with respect to the creation of barangays, land
area is not a requisite indicator of viability. However, with
respect to the creation of municipalities, component cities,
and provinces, the three (3) indicators of viability and
406

projected capacity to provide services, i.e., income,
population, and land area, are provided for.

But it must be pointed out that when the local
government unit to be created consists of one (1) or more
islands, it is exempt from the land area requirement as
expressly provided in Section 442 and Section 450 of the
LGC if the local government unit to be created is a
municipality or a component city, respectively. This
exemption is absent in the enumeration of the requisites
for the creation of a province under Section 461 of the LGC,
although it is expressly stated under Article 9(2) of the LGC-
IRR.

There appears neither rhyme nor reason why this
exemption should apply to cities and municipalities, but not
to provinces. In fact, considering the physical configuration
of the Philippine archipelago, there is a greater likelihood
that islands or group of islands would form part of the land
area of a newly-created province than in most cities or
municipalities. It is, therefore, logical to infer that the
genuine legislative policy decision was expressed in Section
442 (for municipalities) and Section 450 (for component
cities) of the LGC, but was inadvertently omitted in Section
461 (for provinces). Thus, when the exemption was
expressly provided in Article 9(2) of the LGC-IRR, the
inclusion was intended to correct the congressional
oversight in Section 461 of the LGC and to reflect the true
legislative intent. It would, then, be in order for the Court
to uphold the validity of Article 9(2) of the LGC-IRR.
This interpretation finds merit when we consider the
basic policy considerations underpinning the principle of
local autonomy.

Section 2 of the LGC, of which paragraph (a) is
pertinent to this case, provides

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,
407

authority, responsibilities, and resources. The
process of decentralization shall proceed from
the national government to the local
government units.


This declaration of policy is echoed in Article 3(a) of the
LGC-IRR
[26]
and in the Whereas clauses of Administrative
Order No. 270,
[27]
which read

WHEREAS, Section 25, Article II of the
Constitution mandates that the State shall
ensure the autonomy of local governments;

WHEREAS, pursuant to this declared policy,
Republic Act No. 7160, otherwise known as the
Local Government Code of 1991, affirms,
among others, 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;

WHEREAS, Section 533 of the Local
Government Code of 1991 requires the
President to convene an Oversight Committee
for the purpose of formulating and issuing the
appropriate rules and regulations necessary for
the efficient and effective implementation of
all the provisions of the said Code; and
408

WHEREAS, the Oversight Committee, after due
deliberations and consultations with all the
concerned sectors of society and consideration
of the operative principles of local autonomy
as provided in the Local Government Code of
1991, has completed the formulation of the
implementing rules and regulations; x x x


Consistent with the declared policy to provide local
government units genuine and meaningful local autonomy,
contiguity and minimum land area requirements for
prospective local government units should be liberally
construed in order to achieve the desired results. The strict
interpretation adopted by the February 10, 2010 Decision
could prove to be counter-productive, if not outright
absurd, awkward, and impractical. Picture an intended
province that consists of several municipalities and
component cities which, in themselves, also consist of
islands. The component cities and municipalities which
consist of islands are exempt from the minimum land area
requirement, pursuant to Sections 450 and 442,
respectively, of the LGC. Yet, the province would be made
to comply with the minimum land area criterion of 2,000
square kilometers, even if it consists of several islands. This
would mean that Congress has opted to assign a distinctive
preference to create a province with contiguous land area
over one composed of islands and negate the greater
imperative of development of self-reliant communities,
rural progress, and the delivery of basic services to the
constituency. This preferential option would prove more
difficult and burdensome if the 2,000-square-kilometer
territory of a province is scattered because the islands are
separated by bodies of water, as compared to one with a
contiguous land mass.

Moreover, such a very restrictive construction could
trench on the equal protection clause, as it actually defeats
the purpose of local autonomy and decentralization as
enshrined in the Constitution. Hence, the land area
requirement should be read together with territorial
contiguity.

409

Another look at the transcript of the deliberations of
Congress should prove enlightening:

CHAIRMAN ALFELOR. Can we give time to
Congressman Chiongbian,
[28]
with respect to
his

CHAIRMAN LINA. Okay.

HON. CHIONGBIAN. At the outset, Chairman
Lina, we would like to apprise the distinguished
Senator about the action taken by the House,
on House Bill No. 7166. This was passed about
two years ago and has been pending in the
Senate for consideration. This is a bill that I am
not the only one involved, including our
distinguished Chairman here. But then we did
want to sponsor the bill, being the Chairman
then of the Local Government.

So, I took the cudgels for the rest of the
Congressmen, who were more or less
interested in the creation of the new
provinces, because of the vastness of the areas
that were involved.

At any rate, this bill was passed by the
House unanimously without any
objection. And as I have said a while ago, that
this has been pending in the Senate for the last
two years. And Sen. Pimentel himself was just
in South Cotabato and he delivered a speech
that he will support this bill, and he says, that
he will incorporate this in the Local
Government Code, which I have in writing from
him. I showed you the letter that he wrote,
and naturally, we in the House got hold of the
Senate version. It becomes an impossibility for
the whole Philippines to create a new
province, and that is quite the concern of the
respective Congressmen.

Now, insofar as the constitutional
provision is concerned, there is nothing to stop
the mother province from voting against the
bill, if a province is going to be created.
410


So, we are talking about devolution of
powers here. Why is the province not willing
to create another province, when it can be
justified. Even Speaker Mitra says, what will
happen to Palawan? We wont have one
million people there, and if you look
at Palawan, there will be about three or four
provinces that will comprise that island. So,
the development will be hampered.

Now, I would like to read into the record
the letter of Sen. Pimentel, dated November 2,
1989. This was practically about a year after
7166 was approved by the House, House Bill
7166.






On November 2, 1989, the Senator
wrote me:

Dear Congressman Chiongbian:

We are in receipt of your letter of
17 October. Please be informed that
your House No. 7166 was incorporated
in the proposed Local Government Code,
Senate Bill No. 155, which is pending for
second reading.

Thank you and warm regards.

Very truly
yours,

411

That is the very context of the letter of the
Senator, and we are quite surprised that the
Senate has adopted another position.

So, we would like because this is a
unanimously approved bill in the House, thats
the only bill that is involving the present Local
Government Code that we are practically
considering; and this will be a slap on the
House, if we do not approve it, as approved by
the lower House. This can be [an] irritant in
the approval of the Conference Committee
Report. And I just want to manifest that
insofar as the creation of the province, not
only in my province, but the other
provinces. That the mother province will
participate in the plebiscite, they can defeat
the province, lets say, on the basis of the
result, the province cannot be created if they
lose in the plebiscite, and I dont see why, we
should put this stringent conditions to the
private people of the devolution that they are
seeking.

So, Mr. Senator, I think we should
consider the situation seriously, because, this
is an approved version of the House, and I will
not be the one to raise up and question the
Conference Committee Report, but the rest of
the House that are interested in this bill. And
they have been approaching the Speaker about
this. So, the Speaker reminded me to make
sure that it takes the cudgel of the House
approved version.

So, thats all what I can say, Mr. Senator,
and I dont believe that it is not, because its
the wish of the House, but because the mother
province will participate anyhow, you vote
them down; and that is provided for in the
Constitution. As a matter of fact, I have seen
the amendment with regards to the creation of
the city to be urbanized, subject to the
plebiscite. And why should we not allow that
to happen in the provinces! In other words,
we dont want the people who wants to create
a new province, as if they are left in the
devolution of powers, when they feel that they
are far away from civilization.
412


Now, I am not talking about other
provinces, because I am unaware, not aware of
their situation. But the province of South
Cotabato has a very unique geographical
territorial conglomerations. One side is in the
other side of the Bay, of Sarangani Bay. The
capital town is in the North; while these other
municipalities are in the East and in the
West. And if they have to travel from the last
town in the eastern part of the province, it is
about one hundred forty kilometers to the
capital town. And from the West side, it is the
same distance. And from the North side, it is
about one hundred kilometers. So that is the
problem there. And besides, they have enough
resources and I feel that, not because I am
interested in the province, I am after their
welfare in the future. Who am I to dictate on
those people? I have no interest but then I am
looking at the future development of these
areas.

As a matter of fact, if I am in politics, its
incidental; I do not need to be there, but I can
foresee what the creation of a new province
will bring to these people. It will bring them
prosperity; it will bring them more income, and
it will encourage even foreign investors. Like
the PAP now,
they are concentrating in South Cotabato,
especially in the City of
General Santos and the neighboring
municipalities, and they are quite interested
and even the AID people are asking me, What
is holding the creation of a new province when
practically you need it? Its not 20 or 30
kilometers from the capital town; its about
140 kilometers. And imagine those people
have to travel that far and our road is not like
Metropolitan Manila. That is as far as from
here to Tarlac. And there are municipalities
there that are just one municipality is bigger
than the province of La Union. They have the
income. Of course, they dont have the
population because thats a part of the land of
promise and people from Luzon are migrating
413

everyday because they feel that there are
more opportunities here.

So, by creating the new provinces, not
only in my case, in the other cases, it will
enhance the development of the Philippines,
not because I am interested in my
province. Well, as far as I am concerned, you
know, I am in the twilight years of my life to
serve and I would like to serve my people
well. No personal or political interest here. I
hope the distinguished Chairman of the
Committee will appreciate the House Bill 7166,
which the House has already approved
because we dont want them to throw the
Conference Committee Report after we have
worked that the house Bill has been, you know,
drawn over board and not even considered by
the Senate. And on top of that, we are
considering a bill that has not yet been
passed. So I hope the Senator will take that
into account.

Thank you for giving me this time to
explain.

CHAIRMAN LINA. Thank you very much,
Congressman James. We will look into the
legislative history of the Senate version on this
matter of creation of provinces. I am sure
there was an amendment. As I said, Ill look
into it. Maybe the House version was
incorporated in toto, but maybe during the
discussion, their amendments were introduced
and, therefore, Senator Pimentel could not
hold on to the original version and as a result
new criteria were introduced.

But because of the manifestation that
you just made, we will definitely, when we
reach a book, Title IV, on the matter of
provinces, we will look at it sympathetically
from your end so that the objective that you
want [to] achieve can be realized. So we will
look at it with sympathy. We will review our
position on the matter, how we arrived at the
414

Senate version and we will adopt an open mind
definitely when we come into it.




CHAIRMAN ALFELOR. Kanino yan?

CHAIRMAN LINA. Book III.

CHAIRMAN ALFELOR. Title?

CHAIRMAN LINA. Title IV.

CHAIRMAN ALFELOR. I have been pondering
on the case of James, especially on economic
stimulation of a certain area. Like our case,
because I put myself on our province, our
province is quite very big. Its composed of
four (4) congressional districts and I feel it
should be five now. But during the Batasan
time, four of us talked and conversed
proposing to divide the province into two.

There are areas then, when since time
immemorial, very few governors ever tread on
those areas. That is, maybe youre acquainted
with the Bondoc Peninsula of Quezon, fronting
that is RagayGulf. From Ragay there is a long
stretch of coastal area. From Albay going to
Ragay, very few governors ever tread [there]
before, even today. That area now is infested
with NPA. That is the area of Congressman
Andaya.

Now, we thought that in order to
stimulate growth, maybe provincial aid can be
extended to these areas. With a big or a large
area of a province, a certain administrator or
provincial governor definitely will have no
sufficient time. For me, if we really would like
to stimulate growth, I believe that an area
where there is physical or geographical
415

impossibilities, where administrators can
penetrate, I think we have to create certain
provisions in the law where maybe we can
treat it with special considerations.

Now, we went over the graduate scale
of the Philipppine Local Government Data as
far as provinces are concerned. It is very
surprising that there are provinces here which
only composed of six municipalities, eight
municipalities, seven municipalities. Like in
Cagayan, Tuguegarao, there are six
municipalities. Ah, excuse me, Batanes.

CHAIRMAN LINA. Will you look at the case of --
- how many municipalities are there in Batanes
province?

CHAIRMAN ALFELOR. Batanes is only six.

CHAIRMAN LINA. Six town. Siquijor?

CHAIRMAN ALFELOR. Siquijor. It is region?

CHAIRMAN LINA. Seven.

CHAIRMAN ALFELOR.L Seven. Anim.

CHAIRMAN LINA. Six also.

CHAIRMAN ALFELOR. Six also.

CHAIRMAN LINA. It seems with a minimum
number of towns?
CHAIRMAN ALFELOR. The population of
Siquijor is only 70 thousand, not even one
congressional district. But tumaas in
1982. Camiguin, that is Region 9. Wala
dito. Nagtataka nga ako ngayon.

416

CHAIRMAN LINA. Camiguin, Camiguin.

CHAIRMAN ALFELOR. That is
region? Camiguin has five municipalities, with
a population of 63 thousand. But we do not
hold it against the province because maybe
thats one stimulant where growth can grow,
can start. The land area for Camiguin is only
229 square kilometers. So if we hard fast on
requirements of, we set a minimum for every
province, palagay ko we just leave it to
legislation, eh. Anyway, the Constitution is very
clear that in case we would like to divide, we
submit it to a plebiscite. Pabayaan natin ang
tao. Kung maglalagay tayo ng set ng minimum,
tila yata mahihirapan tayo, eh. Because what is
really the thrust of the Local Government
Code? Growth. To devolve powers in order
for the community to have its own idea how
they will stimulate growth in their respective
areas.

So, in every geographical condition,
mayroon sariling id[i]osyncracies eh, we cannot
make a generalization.

CHAIRMAN LINA. Will the creation of a
province, carved out of the existing province
because of some geographical id[i]osyncracies,
as you called it, stimulate the economic growth
in the area or will substantial aid coming from
the national government to a particular area,
say, to a municipality, achieve the same
purpose?

CHAIRMAN ALFELOR. Ano tayo dito sa
budget. All right, here is a province. Usually,
tinitingnan lang yun, provision eh, hindi na
yung composition eh. You are entitled to, say,
20% of the area.

Theres a province of Camarines
Sur which have the same share with that of
Camiguin and Siquijor, but Camiguin is
composed only of five municipalities; in
417

Siquijor, its composed of six, but the share of
Siquijor is the same share with that of
the province of Camarines Sur, having a bigger
area, very much bigger.

That is the budget in process.

CHAIRMAN LINA. Well, as I said, we are going
to consider this very seriously and even with
sympathy because of the explanation given
and we will study this very carefully.
[29]


The matters raised during the said Bicameral
Conference Committee meeting clearly show the manifest
intention of Congress to promote development in the
previously underdeveloped and uninhabited land areas
by allowing them to directly share in
the allocation of funds under the
418

national budget. It should be remembered that, under
Sections 284 and 285
of the LGC, the IRA is given back to local governments, and
the sharing is based on land area, population, and local
revenue.
[30]


Elementary is the principle that, if the literal
application of the law results in absurdity, impossibility, or
injustice, then courts may resort to extrinsic aids of
statutory construction, such as the legislative history of the
law,
[31]
or may consider the implementing rules and
regulations and pertinent executive issuances in the nature
of executive and/or legislative construction. Pursuant to
this principle, Article 9(2) of the LGC-IRR should be deemed
incorporated in the basic law, the LGC.

It is well to remember that the LGC-IRR was
formulated by the Oversight Committee consisting of
members of both the Executive and Legislative
departments, pursuant to Section 533
[32]
of the LGC. As
Section 533 provides, the Oversight Committee shall
formulate and issue the appropriate rules and regulations
necessary for the efficient and effective implementation
of any and all provisions of this Code, thereby ensuring
compliance with the principles of local autonomy as
defined under the Constitution. It was also mandated by
the Constitution that a local government code shall be
enacted by Congress, to wit


Section 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. (Emphasis
supplied.)


419

These State policies are the very reason for the
enactment of the LGC, with the view to attain
decentralization and countryside development. Congress
saw that the old LGC, Batas Pambansa Bilang 337, had to be
replaced with a new law, now the LGC of 1991, which is
more dynamic and cognizant of the needs of
the Philippines as an archipelagic country. This accounts for
the exemption from the land area requirement of local
government units composed of one or more islands, as
expressly stated under Sections 442 and 450 of the LGC,
with respect to the creation of municipalities and cities, but
inadvertently omitted from Section 461 with respect to the
creation of provinces. Hence, the void or missing detail was
filled in by the Oversight Committee in the LGC-IRR.

With three (3) members each from both the Senate
and the House of Representatives, particularly the
chairpersons of their respective Committees on Local
Government, it cannot be gainsaid that the inclusion by the
Oversight Committee of the exemption from the land area
requirement with respect to the creation of provinces
consisting of one (1) or more islands was intended by
Congress, but unfortunately not expressly stated in Section
461 of the LGC, and this intent was echoed through an
express provision in the LGC-IRR. To be sure, the Oversight
Committee did not just arbitrarily and whimsically insert
such an exemption in Article 9(2) of the LGC-IRR. The
Oversight Committee evidently conducted due deliberation
and consultations with all the concerned sectors of society
and considered the operative principles of local autonomy
as provided in the LGC when the IRR was
formulated.
[33]
Undoubtedly, this amounts not only to an
executive construction, entitled to great weight and respect
from this Court,
[34]
but to legislative construction as well,
especially with the inclusion of representatives from the
four leagues of local government units as members of the
Oversight Committee.

With the formulation of the LGC-IRR, which
amounted to both executive and legislative construction of
the LGC, the many details to implement the LGC had
already been put in place, which Congress understood to be
impractical and not too urgent to immediately translate
into direct amendments to the LGC. But Congress,
recognizing the capacity and viability of Dinagat to become
a full-fledged province, enacted R.A. No. 9355, following
the exemption from the land area requirement, which, with
respect to the creation of provinces, can only be found as
an express provision in the LGC-IRR. In effect, pursuant to
its plenary legislative powers, Congress breathed flesh and
blood into that exemption in Article 9(2) of the LGC-IRR and
transformed it into law when it enacted R.A. No. 9355
creating the Island Province of Dinagat.
420


Further, the bill that eventually became R.A. No.
9355 was filed and favorably voted upon in both Chambers
of Congress. Such acts of both Chambers of Congress
definitively show the clear legislative intent to incorporate
into the LGC that exemption from the land area
requirement, with respect to the creation of a province
when it consists of one or more islands, as expressly
provided only in the LGC-IRR. Thereby, and by necessity,
the LGC was amended by way of the enactment of R.A. No.
9355.

What is more, the land area, while considered as an
indicator of viability of a local government unit, is not
conclusive in showing that Dinagat cannot become a
province, taking into account its average annual income
of P82,696,433.23 at the time of its creation, as certified by
the Bureau of Local Government Finance, which is four
times more than the minimum requirement
of P20,000,000.00 for the creation of a province. The
delivery of basic services to its constituents has been
proven possible and sustainable. Rather than looking at the
results of the plebiscite and the May 10, 2010 elections as
mere fait accompli circumstances which cannot operate in
favor of Dinagats existence as a province, they must be
seen from the perspective that Dinagat is ready and capable
of becoming a province. This Court should not be
instrumental in stunting such capacity. As we have held
in League of Cities of the Philippines v. Commission on
Elections
[35]


Ratio legis est anima. The spirit rather
than the letter of the law. A statute must be
read according to its spirit or intent, for what is
within the spirit is within the statute although
it is not within its letter, and that which is
within the letter but not within the spirit is not
within the statute. Put a bit differently, that
which is within the intent of the lawmaker is as
much within the statute as if within the letter,
and that which is within the letter of the
statute is not within the statute unless within
the intent of the lawmakers. Withal, courts
ought not to interpret and should not accept
an interpretation that would defeat the intent
of the law and its legislators.

So as it is exhorted to pass on a
challenge against the validity of an act of
Congress, a co-equal branch of government, it
421

behooves the Court to have at once one
principle in mind: the presumption of
constitutionality of statutes. This presumption
finds its roots in the tri-partite system of
government and the corollary separation of
powers, which enjoins the three great
departments of the government to accord a
becoming courtesy for each others acts, and
not to interfere inordinately with the exercise
by one of its official functions. Towards this
end, courts ought to reject assaults against the
validity of statutes, barring of course their clear
unconstitutionality. To doubt is to sustain, the
theory in context being that the law is the
product of earnest studies by Congress to
ensure that no constitutional prescription or
concept is infringed. Consequently, before a
law duly challenged is nullified, an unequivocal
breach of, or a clear conflict with, the
Constitution, not merely a doubtful or
argumentative one, must be demonstrated in
such a manner as to leave no doubt in the
mind of the Court.



WHEREFORE, the Court resolved to:

1. GRANT the Urgent Motion to Recall Entry of
Judgment by movants-intervenors, dated and filed on
October 29, 2010;

2. RECONSIDER and SET ASIDE the July 20, 2010
Resolution, and GRANT the Motion for Leave to Intervene
and to File and to Admit Intervenors Motion for
Reconsideration of the Resolution dated July 20, 2010;

3. GRANT the Intervenors Motion for
Reconsideration of the Resolution dated May 12, 2010. The
May 12, 2010 Resolution is RECONSIDERED and SET
ASIDE. The provision in Article 9(2) of the Rules and
Regulations Implementing the Local Government Code of
1991 stating, The land area requirement shall not apply
where the proposed province is composed of one (1) or
more islands, is declared VALID. Accordingly, Republic Act
No. 9355 (An Act Creating the Province of Dinagat Islands)
is declared as VALID and CONSTITUTIONAL, and the
proclamation of the Province of Dinagat Islands and the
election of the officials thereof are declared VALID; and
422


4. The petition is DISMISSED.

EN BANC
G.R. No. L-22766 August 30, 1968
SURIGAO ELECTRIC, CO., INC. and ARTURO LUMANLAN,
SR., petitioners,
vs.
MUNICIPALITY OF SURIGAO and HON. PUBLIC SERVICE
COMMISSION, respondents.
David G. Nitafan for petitioners.
Provincial Fiscal Bernardo Ll. Salas for respondent
Municipality of Surigao.
Office of the Solicitor General for respondent Public Service
Commission.
FERNANDO, J.:
On June 18, 1960, Congress further amended the Public
Service Act, one of the changes introduced doing away with
the requirement of a certificate of public convenience and
necessity from the Public Service Commission for "public
services owned or operated by government entities or
government-owned or controlled corporations," but at the
same time affirming its power of
regulation,
1
more specifically as set forth in the next section
of the law, which while exempting public services owned or
operated by any instrumentality of the government or any
government-owned or controlled corporations from its
supervision, jurisdiction and control stops short of including
"the fixing of rates."
2

In this petition for review, a case of first impression,
petitioner Surigao Electric Co., Inc., a legislative franchise
holder, and petitioner Arturo Lumanlan to whom, on
February 16, 1962, the rights and privileges of the former as
well as its plant and facilities were transferred, challenge
the validity of the order of respondent Public Service
Commission, dated July 11, 1963, wherein it held that it had
"no other alternative but to approve as [it did approve] the
tentative schedule of rates submitted by the applicant," the
other respondent herein, the Municipality of Surigao.
3

In the above order, the issue, according to respondent
Commission, "boils down to whether or not a municipal
government can directly maintain and operate an electric
plant without obtaining a specific franchise for the purpose
and without a certificate of public convenience and
necessity duly issued by the Public Service
Commission."
4
Citing the above amendments introduced by
Republic Act No. 2677, respondent Commission answered
the question thus: "A municipal government or a municipal
corporation such as the Municipality of Surigao is a
government entity recognized, supported and utilized by
the National Government as a part of its government
423

machinery and functions; a municipal government actually
functions as an extension of the national government and,
therefore, it is an instrumentality of the latter; and by
express provisions of Section 14(e) of Act 2677, an
instrumentality of the national government is exempted
from the jurisdiction of the PSC except with respect to the
fixing of rates. This exemption is even clearer in Section
13(a)."
5

The above formulation of respondent Commission could be
worded differently. There is need for greater precision as
well as further elaboration. Its conclusion, however, can
stand the test of scrutiny. We sustain the Public Service
Commission.
The question involved is one of statutory interpretation.
We have to ascertain the intent of Congress in introducing
the above amendments, more specifically, in eliminating
the requirement of the certificate of public convenience
and necessity being obtained by government entities, or by
government-owned or controlled corporations operating
public services. Here, the Municipality of Surigao is not a
government-owned or controlled corporation. It cannot be
said, however, that it is not a government entity.
As early as 1916, in Mendoza v. de Leon,
6
there has been a
recognition by this Court of the dual character of a
municipal corporation, one as governmental, being a
branch of the general administration of the state, and the
other as quasi-private and corporate. A well-known
authority, Dillon, was referred to by us to stress the
undeniable fact that "legislative and governmental powers"
are "conferred upon a municipality, the better to enable it
to aid a state in properly governing that portion of its
people residing within its municipality, such powers [being]
in their nature public, ..."
7
As was emphasized by us in the
Mendoza decision: "Governmental affairs do not lose their
governmental character by being delegated to the
municipal governments. Nor does the fact that such duties
are performed by officers of the municipality which, for
convenience, the state allows the municipality to select,
change their character. To preserve the peace, protect the
morals and health of the community and so on is to
administer government, whether it be done by the central
government itself or is shifted to a local organization."
8

It would, therefore, be to erode the term "government
entities" of its meaning if we are to reverse the Public
Service Commission and to hold that a municipality is to be
considered outside its scope. It may be admitted that there
would be no ambiguity at all had the term "municipal
corporations" been employed. Our function, however, is to
put meaning to legislative words, not to denude them of
their contents. They may be at times, as Cohen pointed out,
frail vessels in which to embark legislative hopes, but we do
not, just because of that, allow them to disappear
perpetually from sight to find eternal slumber in the deep.
It would be far from manifesting fidelity to the judicial task
of construing statutes if we were to consider the order
424

under review as a failure to abide by what the law
commands.
The above construction gives significance to every word of
the statute. It makes the entire scheme harmonious.
Moreover, the conclusion to which we are thus led is
reinforced by a manifestation of public policy as expressed
in a legislative act of well-nigh contemporaneous vintage.
We refer to the Local Autonomy Act,
9
approved a year
earlier. It would be to impute to Congress a desire not to
extend further but to cut short what the year before it
considered a laudatory scheme to enlarge the scope of
municipal power, if the amendatory act now under scrutiny
were to be so restrictively construed. Municipal
corporations should not be excluded from the operation
thereof.
There would be no warrant for such a view. Logic and
common sense would be affronted by such a conclusion, let
alone the sense of esteem which under the theory
of separation of powers is owed a coordinate branch.
Again, this is one instance where assuming the ambiguity of
the words employed in a statute, its overriding principle, to
paraphrase Holmes, fixes the reach of statutory language.
With the view we thus take of the amendatory statute, the
errors assigned by petitioner, which would seek to fasten,
mistakenly to our mind, an unwarranted restriction to the
amendatory language of Republic Act No. 2677, need not
be passed upon.
An alleged error imputed to respondent Commission,
however, needs further discussion. Petitioners seek refuge
in the legislative franchise granted them.
10
Whatever
privilege may be claimed by petitioners cannot override the
specific constitutional restriction that no franchise or right
shall be granted to any individual or corporation except
under a condition that it shall be subject to amendment,
alteration or repeal by Congress.
11
Such amendment or
alteration need not be express; it may be implied from a
latter act of general applicability, such as the one now
under consideration.
Moreover, under a well-settled principle of American origin,
one which upon the establishment of the Philippine
Government under American tutelage was adopted here
and continued under our Constitution, no such franchise or
right can be availed of to defeat the proper exercise of the
police power. An early expression of this view is found in
the leading American case of Charles River Bridge v. Warren
Bridge,
12
an 1837 decision, the opinion being penned by
Chief Justice Taney: "The continued existence of a
government would be of no great value, if by implications
and presumptions it was disarmed of the powers necessary
to accomplish the ends of its creation; and the functions it
was designed to perform, transferred to the hands of
privileged Corporations. .. While the rights of private
property are sacredly guarded, we must not forget that the
community also have rights, and that the happiness and
well-being of every citizen depend on their faithful
preservation."
13

425

Reference by petitioners to the statute providing the
procedure for the taking over and operation by the
government of public utilities,
14
in their view "to further
strengthen [their] contention", as to the commission of this
alleged error is unavailing, even if such statute were
applicable, which it is not. In the language of their own
brief: "This Act provides for the procedure to be followed
whenever the Government or any political subdivision
thereof decides to acquire and operate a public utility
owned and operated by any individual or private
corporation."
15
What is to be regulated, therefore, by this
enactment is the exercise of eminent domain, which is a
taking of private property for public use upon the payment
of just compensation. There is here no taking. There is here
no appropriation. What was owned before by petitioners
continue to remain theirs. There is to be no transfer of
ownership.
Rather, a municipal corporation, by virtue of
Commonwealth Act No. 2677, may further promote
community welfare by itself engaging in supplying public
services, without the need of a certificate of public
convenience. If at all then, the exercise of this
governmental prerogative comes within the broad, well-
nigh, undefined scope of the police power. It is not here, of
course, the ordinary case of restraint on property or liberty,
by the imposition of a regulation. What the amendatory act
in effect accomplishes is to lend encouragement and
support for the municipal corporation itself undertaking an
activity as a result of which, profits of a competing private
firm would be adversely affected.
Clearly, then, the relevancy of the statute providing for the
taking or operation of the government of public utilities,
appears, to put it at its mildest, far from clear. Petitioners'
contention as to this alleged error being committed,
therefore, far from being strengthened by such a reference,
suffers from a fate less auspicious.
No other alleged error committed need be considered.
WHEREFORE, the order of respondent Public Service
Commission of July 11, 1963, as well as the order of
February 7, 1964, denying the motion for reconsideration,
are affirmed. Costs against petitioners.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar,
Sanchez, Castro and Angeles, JJ., concur. 1wph1.t
Footnotes
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-28089 October 25, 1967
426

BARA LIDASAN, petitioner,
vs.
COMMISSION ON ELECTIONS, respondent.
Suntay for petitioner.
Barrios and Fule for respondent.
SANCHEZ, J.:
The question initially presented to the Commission
on Elections,
1
is this: Is Republic Act 4790, which is entitled
"An Act Creating the Municipality of Dianaton in the
Province of Lanao del Sur", but which includes barrios
located in another province Cotabato to be spared
from attack planted upon the constitutional mandate that
"No bill which may be enacted into law shall
embrace more than one subject which shall be expressed in
the title of the bill"? Comelec's answer is in the affirmative.
Offshoot is the present original petition for certiorari and
prohibition.
On June 18, 1966, the Chief Executive signed into law
House Bill 1247, known as Republic Act 4790, now in
dispute. The body of the statute, reproduced in haec verba,
reads:
Sec. 1. Barrios Togaig, Madalum, Bayanga, Langkong,
Sarakan, Kat-bo, Digakapan, Magabo, Tabangao,
Tiongko, Colodan, Kabamakawan, Kapatagan,
Bongabong, Aipang, Dagowan, Bakikis, Bungabung,
Losain, Matimos and Magolatung, in the
Municipalities of Butig and Balabagan, Province of
Lanao del Sur, are separated from said municipalities
and constituted into a distinct and independent
municipality of the same province to be known as the
Municipality of Dianaton, Province of Lanao del Sur.
The seat of government of the municipality shall be
in Togaig.
Sec. 2. The first mayor, vice-mayor and councilors of
the new municipality shall be elected in the nineteen
hundred sixty-seven general elections for local
officials.
Sec. 3. This Act shall take effect upon its approval.
It came to light later that barrios Togaig and Madalum just
mentioned are within the municipality of Buldon,Province
of Cotabato, and that Bayanga, Langkong, Sarakan, Kat-bo,
Digakapan, Magabo, Tabangao, Tiongko, Colodan and
Kabamakawan are parts and parcel of another municipality,
the municipality of Parang, also in theProvince of
Cotabato and not of Lanao del Sur.
Prompted by the coming elections, Comelec adopted its
resolution of August 15, 1967, the pertinent portions of
which are:
For purposes of establishment of precincts,
registration of voters and for other election
427

purposes, the Commission RESOLVED that pursuant
to RA 4790, the new municipality of Dianaton, Lanao
del Sur shall comprise the barrios of Kapatagan,
Bongabong, Aipang, Dagowan, Bakikis, Bungabung,
Losain, Matimos, and Magolatung situated in the
municipality of Balabagan, Lanao del Sur, the barrios
of Togaig and Madalum situated in the municipality
of Buldon, Cotabato, the barrios of Bayanga,
Langkong, Sarakan, Kat-bo, Digakapan, Magabo,
Tabangao, Tiongko, Colodan and Kabamakawan
situated in the municipality of Parang, also of
Cotabato.
Doubtless, as the statute stands, twelve barrios in two
municipalities in the province of Cotabato are
transferred to the province of Lanao del Sur. This brought
about a change in the boundaries of the two provinces.
Apprised of this development, on September 7, 1967,
the Office of the President, through the Assistant Executive
Secretary, recommended to Comelec that the operation of
the statute be suspended until "clarified by correcting
legislation."
Comelec, by resolution of September 20, 1967, stood by its
own interpretation, declared that the statute "should be
implemented unless declared unconstitutional by
the Supreme Court."
This triggered the present original action for certiorari and
prohibition by Bara Lidasan, a resident and taxpayer of the
detached portion of Parang, Cotabato, and a qualified voter
for the 1967 elections. He prays that Republic Act 4790 be
declared unconstitutional; and that Comelec's resolutions
of August 15, 1967 and September 20, 1967 implementing
the same for electoral purposes, be nullified.
1. Petitioner relies upon the constitutional requirement
aforestated, that "[n]o bill which may be enacted into law
shall embrace more than one subject which shall be
expressed in the title of the bill."
2

It may be well to state, right at the outset, that the
constitutional provision contains dual limitations upon
legislative power. First. Congress is to refrain from
conglomeration, under one statute, of heterogeneous
subjects. Second. The title of the bill is to be couched in a
language sufficient to notify the legislators and the public
and those concerned of the import of the single
subject thereof.
Of relevance here is the second directive. The subject of the
statute must be "expressed in the title" of the bill. This
constitutional requirement "breathes the spirit of
command."
3
Compliance is imperative, given the fact that
the Constitution does not exact of Congress the obligation
to read during its deliberations the entire text of the bill. In
fact, in the case of House Bill 1247, which became Republic
Act 4790, only its title was read from its introduction to its
428

final approval in the House of Representatives
4
where the
bill, being of local application, originated.
5

Of course, the Constitution does not require Congress to
employ in the title of an enactment, language of such
precision as to mirror, fully index or catalogue all the
contents and the minute details therein. It suffices if the
title should serve the purpose of the constitutional demand
that it inform the legislators, the persons interested in the
subject of the bill, and the public, of the nature, scope and
consequences of the proposed law and its operation. And
this, to lead them to inquire into the body of the bill, study
and discuss the same, take appropriate action thereon, and,
thus, prevent surprise or fraud upon the legislators.
6

In our task of ascertaining whether or not the title of a
statute conforms with the constitutional requirement, the
following, we believe, may be taken as guidelines:
The test of the sufficiency of a title is whether or not
it is misleading; and, which technical accuracy is not
essential, and the subject need not be stated in
express terms where it is clearly inferable from the
details set forth, a title which is so uncertain that the
average person reading it would not be informed of
the purpose of the enactment or put on inquiry as to
its contents, or which is misleading, either in referring
to or indicating one subject where another or
different one is really embraced in the act, or in
omitting any expression or indication of the real
subject or scope of the act, is bad.
xxx xxx xxx
In determining sufficiency of particular title its
substance rather than its form should be considered,
and the purpose of the constitutional requirement,
of giving notice to all persons interested, should be
kept in mind by the court.
7

With the foregoing principles at hand, we take a hard look
at the disputed statute. The title "An Act Creating the
Municipality of Dianaton, in the Province of Lanao del
Sur"
8
projects the impression that solely the province of
Lanao del Sur is affected by the creation of Dianaton. Not
the slightest intimation is there that communities in the
adjacent province of Cotabato are incorporated in this new
Lanao del Sur town. The phrase "in the Province of Lanao
del Sur," read without subtlety or contortion, makes the
title misleading, deceptive. For, the known fact is that the
legislation has a two-pronged purpose combined in one
statute: (1) it creates the municipality of Dianaton
purportedly from twenty-one barrios in the towns of Butig
and Balabagan, both in the province of Lanao del Sur; and
(2) it also dismembers two municipalities in Cotabato, a
province different from Lanao del Sur.
The baneful effect of the defective title here presented is
not so difficult to perceive. Such title did not inform the
429

members of Congress as to the full impact of the law; it did
not apprise the people in the towns of Buldon and Parang
in Cotabato and in the province of Cotabato itself that part
of their territory is being taken away from their towns and
province and added to the adjacent Province of Lanao del
Sur; it kept the public in the dark as to what towns and
provinces were actually affected by the bill. These are the
pressures which heavily weigh against the constitutionality
of Republic Act 4790.
Respondent's stance is that the change in boundaries of the
two provinces resulting in "the substantial diminution of
territorial limits" of Cotabato province is "merely the
incidental legal results of the definition of the boundary" of
the municipality of Dianaton and that, therefore, reference
to the fact that portions in Cotabato are taken away "need
not be expressed in the title of the law." This posture we
must say but emphasizes the error of constitutional
dimensions in writing down the title of the bill. Transfer of a
sizeable portion of territory from one province to another
of necessity involves reduction of area, population and
income of the first and the corresponding increase of those
of the other. This is as important as the creation of a
municipality. And yet, the title did not reflect this fact.
Respondent asks us to read Felwa vs. Salas, L-16511,
October 29, 1966, as controlling here. The Felwa case is not
in focus. For there, the title of the Act (Republic Act 4695)
reads: "An Act Creating the Provinces of Benguet, Mountain
Province, Ifugao, and Kalinga-Apayao." That title was
assailed as unconstitutional upon the averment that the
provisions of the law (Section, 8 thereof) in reference to the
elective officials of the provinces thus created, were not set
forth in the title of the bill. We there ruled that this
pretense is devoid of merit "for, surely, an Act creating said
provinces must be expected to provide for the officers who
shall run the affairs thereof" which is "manifestly
germane to the subject" of the legislation, as set forth in its
title. The statute now before us stands altogether on a
different footing. The lumping together of barrios in
adjacent but separate provinces under one statute is
neither a natural nor logical consequence of the creation of
the new municipality of Dianaton. A change of boundaries
of the two provinces may be made without necessarily
creating a new municipality and vice versa.
As we canvass the authorities on this point, our attention is
drawn to Hume vs. Village of Fruitport, 219 NW 648, 649.
There, the statute in controversy bears the title "An Act to
Incorporate the Village of Fruitport, in the County of
Muskegon." The statute, however, in its section 1 reads:
"The people of the state of Michigan enact, that the
following described territory in the counties of Muskegon
and Ottawa Michigan, to wit: . . . be, and the same is hereby
constituted a village corporate, by the name of the Village
of Fruitport." This statute was challenged as void by
plaintiff, a resident of Ottawa county, in an action to
restraint the Village from exercising jurisdiction and control,
including taxing his lands. Plaintiff based his claim on
Section 20, Article IV of the Michigan State Constitution,
430

which reads: "No law shall embrace more than one object,
which shall be expressed in its title." The Circuit Court
decree voided the statute and defendant appealed. The
Supreme Court of Michigan voted to uphold the decree of
nullity. The following, said in Hume, may well apply to this
case:
It may be that words, "An act to incorporate the
village of Fruitport," would have been a sufficient
title, and that the words, "in the county of
Muskegon" were unnecessary; but we do not agree
with appellant that the words last quoted may, for
that reason, be disregarded as surplusage.
. . . Under the guise of discarding surplusage, a court
cannot reject a part of the title of an act for the
purpose of saving the act. Schmalz vs. Woody, 56 N.J.
Eq. 649, 39 A. 539.
A purpose of the provision of the Constitution is to
"challenge the attention of those affected by the act
to its provisions." Savings Bank vs. State of Michigan,
228 Mich. 316, 200 NW 262.
The title here is restrictive. It restricts the operation of
the act of Muskegon county. The act goes beyond the
restriction. As was said in Schmalz vs. Wooly, supra:
"The title is erroneous in the worst degree, for it is
misleading."
9

Similar statutes aimed at changing boundaries of political
subdivisions, which legislative purpose is not expressed in
the title, were likewise declared unconstitutional."
10

We rule that Republic Act 4790 is null and void.
2. Suggestion was made that Republic Act 4790 may still be
salvaged with reference to the nine barrios in the
municipalities of Butig and Balabagan in Lanao del Sur, with
the mere nullification of the portion thereof which took
away the twelve barrios in the municipalities of Buldon and
Parang in the other province of Cotabato. The reasoning
advocated is that the limited title of the Act still covers
those barrios actually in the province of Lanao del Sur.
We are not unmindful of the rule, buttressed on reason and
of long standing, that where a portion of a statute is
rendered unconstitutional and the remainder valid, the
parts will be separated, and the constitutional portion
upheld. Black, however, gives the exception to this rule,
thus:
. . . But when the parts of the statute are so mutually
dependent and connected, as conditions,
considerations, inducements, or compensations for
each other, as to warrant a belief that the legislature
intended them as a whole, and that if all could not be
carried into effect, the legislature would not pass the
residue independently, then, if some parts are
unconstitutional, all the provisions which are thus
431

dependent, conditional, or connected, must fall with
them,
11

In substantially similar language, the same exception is
recognized in the jurisprudence of this Court, thus:
The general rule is that where part of a statute is
void, as repugnant to the Organic Law, while another
part is valid, the valid portion if separable from the
invalid, may stand and be enforced. But in order to
do this, the valid portion must be so far independent
of the invalid portion that it is fair to presume that
the Legislature would have enacted it by itself if they
had supposed that they could not constitutionally
enact the other. . . Enough must remain to make a
complete, intelligible, and valid statute, which carries
out the legislative intent. . . . The language used in
the invalid part of the statute can have no legal force
or efficacy for any purpose whatever, and what
remains must express the legislative will
independently of the void part, since the court has no
power to legislate, . . . .
12

Could we indulge in the assumption that Congress still
intended, by the Act, to create the restricted area of nine
barrios in the towns of Butig and Balabagan in Lanao del Sur
into the town of Dianaton, if the twelve barrios in the towns
of Buldon and Parang, Cotabato were to be excluded
therefrom? The answer must be in the negative.
Municipal corporations perform twin functions. Firstly. They
serve as an instrumentality of the State in carrying out the
functions of government. Secondly. They act as an agency
of the community in the administration of local affairs. It is
in the latter character that they are a separate entity acting
for their own purposes and not a subdivision of the State.
13

Consequently, several factors come to the fore in the
consideration of whether a group of barrios is capable of
maintaining itself as an independent municipality. Amongst
these are population, territory, and income. It was
apparently these same factors which induced the writing
out of House Bill 1247 creating the town of Dianaton.
Speaking of the original twenty-one barrios which comprise
the new municipality, the explanatory note to House Bill
1247, now Republic Act 4790, reads:
The territory is now a progressive community; the
aggregate population is large; and the collective
income is sufficient to maintain an independent
municipality.
This bill, if enacted into law, will enable the
inhabitants concerned to govern themselves and
enjoy the blessings of municipal autonomy.
When the foregoing bill was presented in Congress,
unquestionably, the totality of the twenty-one barrios
not nine barrios was in the mind of the proponent
thereof. That this is so, is plainly evident by the fact that the
432

bill itself, thereafter enacted into law, states that the seat
of the government is in Togaig, which is a barrio in the
municipality of Buldon in Cotabato. And then the reduced
area poses a number of questions, thus: Could the
observations as to progressive community, large aggregate
population, collective income sufficient to maintain an
independent municipality, still apply to a motley group of
only nine barrios out of the twenty-one? Is it fair to assume
that the inhabitants of the said remaining barrios would
have agreed that they be formed into a municipality, what
with the consequent duties and liabilities of an
independent municipal corporation? Could they stand on
their own feet with the income to be derived in their
community? How about the peace and order, sanitation,
and other corporate obligations? This Court may not supply
the answer to any of these disturbing questions. And yet, to
remain deaf to these problems, or to answer them in the
negative and still cling to the rule on separability, we are
afraid, is to impute to Congress an undeclared will. With the
known premise that Dianaton was created upon the basic
considerations of progressive community, large aggregate
population and sufficient income, we may not now say that
Congress intended to create Dianaton with only nine of
the original twenty-one barrios, with a seat of
government still left to be conjectured. For, this unduly
stretches judicial interpretation of congressional intent
beyond credibility point. To do so, indeed, is to pass the line
which circumscribes the judiciary and tread on legislative
premises. Paying due respect to the traditional separation
of powers, we may not now melt and recast Republic Act
4790 to read a Dianaton town of nine instead of the
originally intended twenty-one barrios. Really, if these nine
barrios are to constitute a town at all, it is the function of
Congress, not of this Court, to spell out that congressional
will.
Republic Act 4790 is thus indivisible, and it is accordingly
null and void in its totality.
14

3. There remains for consideration the issue raised by
respondent, namely, that petitioner has no substantial legal
interest adversely affected by the implementation of
Republic Act 4790. Stated differently, respondent's pose is
that petitioner is not the real party in interest.
Here the validity of a statute is challenged on the ground
that it violates the constitutional requirement that the
subject of the bill be expressed in its title. Capacity to sue,
therefore, hinges on whether petitioner's substantial rights
or interests are impaired by lack of notification in the title
that the barrio in Parang, Cotabato, where he is residing has
been transferred to a different provincial hegemony.
The right of every citizen, taxpayer and voter of a
community affected by legislation creating a town to
ascertain that the law so created is not dismembering his
place of residence "in accordance with the Constitution" is
recognized in this jurisdiction.
15

433

Petitioner is a qualified voter. He expects to vote in the
1967 elections. His right to vote in his own barrio before it
was annexed to a new town is affected. He may not want,
as is the case here, to vote in a town different from his
actual residence. He may not desire to be considered a part
of hitherto different communities which are fanned into the
new town; he may prefer to remain in the place where he is
and as it was constituted, and continue to enjoy the rights
and benefits he acquired therein. He may not even know
the candidates of the new town; he may express a lack of
desire to vote for anyone of them; he may feel that his vote
should be cast for the officials in the town before
dismemberment. Since by constitutional direction the
purpose of a bill must be shown in its title for the benefit,
amongst others, of the community affected thereby,
16
it
stands to reason to say that when the constitutional right to
vote on the part of any citizen of that community is
affected, he may become a suitor to challenge the
constitutionality of the Act as passed by Congress.
For the reasons given, we vote to declare Republic Act 4790
null and void, and to prohibit respondent Commission from
implementing the same for electoral purposes.
No costs allowed. So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Bengzon,
J.P., Zaldivar, Castro and Angeles, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

G.R. No. L-52179 April 8, 1991
MUNICIPALITY OF SAN FERNANDO, LA UNION, petitioner
vs.
HON. JUDGE ROMEO N. FIRME, JUANA RIMANDO-
BANIA, IAUREANO BANIA, JR., SOR MARIETA BANIA,
MONTANO BANIA, ORJA BANIA, AND LYDIA R.
BANIA, respondents.
Mauro C. Cabading, Jr. for petitioner.
Simeon G. Hipol for private respondent.

MEDIALDEA, J.:p
This is a petition for certiorari with prayer for the issuance
of a writ of preliminary mandatory injunction seeking the
nullification or modification of the proceedings and the
orders issued by the respondent Judge Romeo N. Firme, in
his capacity as the presiding judge of the Court of First
Instance of La Union, Second Judicial District, Branch IV,
434

Bauang, La Union in Civil Case No. 107-BG, entitled "Juana
Rimando Bania, et al. vs. Macario Nieveras, et al." dated
November 4, 1975; July 13, 1976; August 23,1976; February
23, 1977; March 16, 1977; July 26, 1979; September 7,
1979; November 7, 1979 and December 3, 1979 and the
decision dated October 10, 1979 ordering defendants
Municipality of San Fernando, La Union and Alfredo Bislig
to pay, jointly and severally, the plaintiffs for funeral
expenses, actual damages consisting of the loss of earning
capacity of the deceased, attorney's fees and costs of suit
and dismissing the complaint against the Estate of Macario
Nieveras and Bernardo Balagot.
The antecedent facts are as follows:
Petitioner Municipality of San Fernando, La Union is a
municipal corporation existing under and in accordance
with the laws of the Republic of the Philippines.
Respondent Honorable Judge Romeo N. Firme is impleaded
in his official capacity as the presiding judge of the Court of
First Instance of La Union, Branch IV, Bauang, La Union.
While private respondents Juana Rimando-Bania,
Laureano Bania, Jr., Sor Marietta Bania, Montano Bania,
Orja Bania and Lydia R. Bania are heirs of the deceased
Laureano Bania Sr. and plaintiffs in Civil Case No. 107-Bg
before the aforesaid court.
At about 7 o'clock in the morning of December 16, 1965, a
collision occurred involving a passenger jeepney driven by
Bernardo Balagot and owned by the Estate of Macario
Nieveras, a gravel and sand truck driven by Jose Manandeg
and owned by Tanquilino Velasquez and a dump truck of
the Municipality of San Fernando, La Union and driven by
Alfredo Bislig. Due to the impact, several passengers of the
jeepney including Laureano Bania Sr. died as a result of
the injuries they sustained and four (4) others suffered
varying degrees of physical injuries.
On December 11, 1966, the private respondents instituted
a compliant for damages against the Estate of Macario
Nieveras and Bernardo Balagot, owner and driver,
respectively, of the passenger jeepney, which was docketed
Civil Case No. 2183 in the Court of First Instance of La
Union, Branch I, San Fernando, La Union. However, the
aforesaid defendants filed a Third Party Complaint against
the petitioner and the driver of a dump truck of petitioner.
Thereafter, the case was subsequently transferred to
Branch IV, presided over by respondent judge and was
subsequently docketed as Civil Case No. 107-Bg. By virtue of
a court order dated May 7, 1975, the private respondents
amended the complaint wherein the petitioner and its
regular employee, Alfredo Bislig were impleaded for the
first time as defendants. Petitioner filed its answer and
raised affirmative defenses such as lack of cause of action,
non-suability of the State, prescription of cause of action
and the negligence of the owner and driver of the
passenger jeepney as the proximate cause of the collision.
435

In the course of the proceedings, the respondent judge
issued the following questioned orders, to wit:
(1) Order dated November 4, 1975 dismissing
the cross-claim against Bernardo Balagot;
(2) Order dated July 13, 1976 admitting the
Amended Answer of the Municipality of San
Fernando, La Union and Bislig and setting the
hearing on the affirmative defenses only with
respect to the supposed lack of jurisdiction;
(3) Order dated August 23, 1976 deferring
there resolution of the grounds for the Motion
to Dismiss until the trial;
(4) Order dated February 23, 1977 denying the
motion for reconsideration of the order of July
13, 1976 filed by the Municipality and Bislig for
having been filed out of time;
(5) Order dated March 16, 1977 reiterating the
denial of the motion for reconsideration of the
order of July 13, 1976;
(6) Order dated July 26, 1979 declaring the
case deemed submitted for decision it
appearing that parties have not yet submitted
their respective memoranda despite the
court's direction; and
(7) Order dated September 7, 1979 denying
the petitioner's motion for reconsideration
and/or order to recall prosecution witnesses
for cross examination.
On October 10, 1979 the trial court rendered a decision, the
dispositive portion is hereunder quoted as follows:
IN VIEW OF ALL OF (sic) THE FOREGOING,
judgment is hereby rendered for the plaintiffs,
and defendants Municipality of San Fernando,
La Union and Alfredo Bislig are ordered to pay
jointly and severally, plaintiffs Juana Rimando-
Bania, Mrs. Priscilla B. Surell, Laureano Bania
Jr., Sor Marietta Bania, Mrs. Fe B. Soriano,
Montano Bania, Orja Bania and Lydia B.
Bania the sums of P1,500.00 as funeral
expenses and P24,744.24 as the lost expected
earnings of the late Laureano Bania Sr.,
P30,000.00 as moral damages, and P2,500.00
as attorney's fees. Costs against said
defendants.
The Complaint is dismissed as to defendants
Estate of Macario Nieveras and Bernardo
Balagot.
SO ORDERED. (Rollo, p. 30)
436

Petitioner filed a motion for reconsideration and for a new
trial without prejudice to another motion which was then
pending. However, respondent judge issued another order
dated November 7, 1979 denying the motion for
reconsideration of the order of September 7, 1979 for
having been filed out of time.
Finally, the respondent judge issued an order dated
December 3, 1979 providing that if defendants municipality
and Bislig further wish to pursue the matter disposed of in
the order of July 26, 1979, such should be elevated to a
higher court in accordance with the Rules of Court. Hence,
this petition.
Petitioner maintains that the respondent judge committed
grave abuse of discretion amounting to excess of
jurisdiction in issuing the aforesaid orders and in rendering
a decision. Furthermore, petitioner asserts that while
appeal of the decision maybe available, the same is not the
speedy and adequate remedy in the ordinary course of law.
On the other hand, private respondents controvert the
position of the petitioner and allege that the petition is
devoid of merit, utterly lacking the good faith which is
indispensable in a petition for certiorari and prohibition.
(Rollo,
p. 42.) In addition, the private respondents stress that
petitioner has not considered that every court, including
respondent court, has the inherent power to amend and
control its process and orders so as to make them
conformable to law and justice. (Rollo, p. 43.)
The controversy boils down to the main issue of whether or
not the respondent court committed grave abuse of
discretion when it deferred and failed to resolve the
defense of non-suability of the State amounting to lack of
jurisdiction in a motion to dismiss.
In the case at bar, the respondent judge deferred the
resolution of the defense of non-suability of the State
amounting to lack of jurisdiction until trial. However, said
respondent judge failed to resolve such defense, proceeded
with the trial and thereafter rendered a decision against the
municipality and its driver.
The respondent judge did not commit grave abuse of
discretion when in the exercise of its judgment it arbitrarily
failed to resolve the vital issue of non-suability of the State
in the guise of the municipality. However, said judge acted
in excess of his jurisdiction when in his decision dated
October 10, 1979 he held the municipality liable for the
quasi-delict committed by its regular employee.
The doctrine of non-suability of the State is expressly
provided for in Article XVI, Section 3 of the Constitution, to
wit: "the State may not be sued without its consent."
437

Stated in simple parlance, the general rule is that the State
may not be sued except when it gives consent to be sued.
Consent takes the form of express or implied consent.
Express consent may be embodied in a general law or a
special law. The standing consent of the State to be sued in
case of money claims involving liability arising from
contracts is found in Act No. 3083. A special law may be
passed to enable a person to sue the government for an
alleged quasi-delict, as in Merritt v. Government of the
Philippine Islands (34 Phil 311). (see United States of
America v. Guinto, G.R. No. 76607, February 26, 1990, 182
SCRA 644, 654.)
Consent is implied when the government enters into
business contracts, thereby descending to the level of the
other contracting party, and also when the State files a
complaint, thus opening itself to a counterclaim. (Ibid)
Municipal corporations, for example, like provinces and
cities, are agencies of the State when they are engaged in
governmental functions and therefore should enjoy the
sovereign immunity from suit. Nevertheless, they are
subject to suit even in the performance of such functions
because their charter provided that they can sue and be
sued. (Cruz, Philippine Political Law, 1987 Edition, p. 39)
A distinction should first be made between suability and
liability. "Suability depends on the consent of the state to
be sued, liability on the applicable law and the established
facts. The circumstance that a state is suable does not
necessarily mean that it is liable; on the other hand, it can
never be held liable if it does not first consent to be sued.
Liability is not conceded by the mere fact that the state has
allowed itself to be sued. When the state does waive its
sovereign immunity, it is only giving the plaintiff the chance
to prove, if it can, that the defendant is liable." (United
States of America vs. Guinto, supra, p. 659-660)
Anent the issue of whether or not the municipality is liable
for the torts committed by its employee, the test of liability
of the municipality depends on whether or not the driver,
acting in behalf of the municipality, is performing
governmental or proprietary functions. As emphasized in
the case of Torio vs. Fontanilla (G. R. No. L-29993, October
23, 1978. 85 SCRA 599, 606), the distinction of powers
becomes important for purposes of determining the liability
of the municipality for the acts of its agents which result in
an injury to third persons.
Another statement of the test is given in City of Kokomo vs.
Loy, decided by the Supreme Court of Indiana in 1916, thus:
Municipal corporations exist in a dual capacity,
and their functions are twofold. In one they
exercise the right springing from sovereignty,
and while in the performance of the duties
pertaining thereto, their acts are political and
governmental. Their officers and agents in such
capacity, though elected or appointed by
438

them, are nevertheless public functionaries
performing a public service, and as such they
are officers, agents, and servants of the state.
In the other capacity the municipalities
exercise a private, proprietary or corporate
right, arising from their existence as legal
persons and not as public agencies. Their
officers and agents in the performance of such
functions act in behalf of the municipalities in
their corporate or individual capacity, and not
for the state or sovereign power." (112 N.E.,
994-995) (Ibid, pp. 605-606.)
It has already been remarked that municipal corporations
are suable because their charters grant them the
competence to sue and be sued. Nevertheless, they are
generally not liable for torts committed by them in the
discharge of governmental functions and can be held
answerable only if it can be shown that they were acting in
a proprietary capacity. In permitting such entities to be
sued, the State merely gives the claimant the right to show
that the defendant was not acting in its governmental
capacity when the injury was committed or that the case
comes under the exceptions recognized by law. Failing this,
the claimant cannot recover. (Cruz, supra, p. 44.)
In the case at bar, the driver of the dump truck of the
municipality insists that "he was on his way to the Naguilian
river to get a load of sand and gravel for the repair of San
Fernando's municipal streets." (Rollo, p. 29.)
In the absence of any evidence to the contrary, the
regularity of the performance of official duty is presumed
pursuant to Section 3(m) of Rule 131 of the Revised Rules of
Court. Hence, We rule that the driver of the dump truck
was performing duties or tasks pertaining to his office.
We already stressed in the case of Palafox,
et. al. vs. Province of Ilocos Norte, the District Engineer, and
the Provincial Treasurer (102 Phil 1186) that "the
construction or maintenance of roads in which the truck
and the driver worked at the time of the accident are
admittedly governmental activities."
After a careful examination of existing laws and
jurisprudence, We arrive at the conclusion that the
municipality cannot be held liable for the torts committed
by its regular employee, who was then engaged in the
discharge of governmental functions. Hence, the death of
the passenger tragic and deplorable though it may be
imposed on the municipality no duty to pay monetary
compensation.
All premises considered, the Court is convinced that the
respondent judge's dereliction in failing to resolve the issue
of non-suability did not amount to grave abuse of
discretion. But said judge exceeded his jurisdiction when it
ruled on the issue of liability.
ACCORDINGLY, the petition is GRANTED and the decision of
the respondent court is hereby modified, absolving the
439

petitioner municipality of any liability in favor of private
respondents.
SO ORDERED.
Republic of the Philippines
Supreme Court
Manila

THIRD DIVISION


THE MUNICIPALITY OF HAGONOY,
BULACAN, represented by the HON.
FELIX V. OPLE, Municipal Mayor, and
FELIX V. OPLE, in his personal capacity,
Petitioners,

- versus -

HON. SIMEON P. DUMDUM, JR., in his
capacity as the Presiding Judge of the
G.R. No. 168289


Present:


CORONA, J., Chairperson,
VELASCO, JR.,
REGIONAL TRIAL COURT, BRANCH 7,
CEBU CITY; HON. CLERK OF COURT &
EX-OFFICIO SHERIFF of the REGIONAL
TRIAL COURT of CEBU CITY; HON.
CLERK OF COURT & EX-OFFICIO SHERIFF
of the REGIONAL TRIAL COURT of
BULACAN and his DEPUTIES; and EMILY
ROSE GO KO LIM CHAO, doing business
under the name and style KD SURPLUS,
Respondents.
NACHURA,
PERALTA, and
MENDOZA, JJ.










Promulgated:

March 22, 2010
x------------------------------------------------------------------------------
-----------x
440



D E C I S I O N

PERALTA, J.:


This is a Joint Petition
[1]
under Rule 45 of the Rules of
Court brought by the Municipality of Hagonoy, Bulacan and
its former chief executive, Mayor Felix V. Ople in his official
and personal capacity, from the January 31, 2005
Decision
[2]
and the May 23, 2005 Resolution
[3]
of the Court
of Appeals in CA-G.R. SP No. 81888. The assailed decision
affirmed the October 20, 2003 Order
[4]
issued by
the Regional Trial Court of Cebu City, Branch 7 in Civil Case
No. CEB-28587 denying petitioners motion to dismiss and
motion to discharge/dissolve the writ of preliminary
attachment previously issued in the case. The assailed
resolution denied reconsideration.

The case stems from a Complaint
[5]
filed by herein
private respondent Emily Rose Go Ko Lim Chao against
herein petitioners, the Municipality of Hagonoy, Bulacan
and its chief executive, Felix V. Ople (Ople) for collection of
a sum of money and damages. It was alleged that
sometime in the middle of the year 2000, respondent,
doing business as KD Surplus and as such engaged in buying
and selling surplus trucks, heavy equipment, machinery,
spare parts and related supplies, was contacted by
petitioner Ople. Respondent had entered into an
agreement with petitioner municipality through Ople for
the delivery of motor vehicles, which supposedly were
needed to carry out certain developmental undertakings in
the municipality. Respondent claimed that because of
Oples earnest representation that funds had already been
allocated for the project, she agreed to deliver from her
principal place of business in Cebu City twenty-one motor
vehicles whose value totaled P5,820,000.00. To prove this,
she attached to the complaint copies of the bills of lading
showing that the items were consigned, delivered to and
received by petitioner municipality on different
dates.
[6]
However, despite having made several deliveries,
Ople allegedly did not heed respondents claim for
payment. As of the filing of the complaint, the total
obligation of petitioner had already
totaled P10,026,060.13exclusive of penalties and
damages. Thus, respondent prayed for full payment of the
said amount, with interest at not less than 2% per month,
plus P500,000.00 as damages for business
losses, P500,000.00 as exemplary damages, attorneys fees
of P100,000.00 and the costs of the suit.
441


On February 13, 2003, the trial court issued an
Order
[7]
granting respondents prayer for a writ of
preliminary attachment conditioned upon the posting of a
bond equivalent to the amount of the claim. On March 20,
2003, the trial court issued the Writ of Preliminary
Attachment
[8]
directing the sheriff to attach the estate,
real and personal properties of petitioners.

Instead of addressing private respondents
allegations, petitioners filed a Motion to Dismiss
[9]
on the
ground that the claim on which the action had been
brought was unenforceable under the statute of frauds,
pointing out that there was no written contract or
document that would evince the supposed agreement they
entered into with respondent. They averred that contracts
of this nature, before being undertaken by the municipality,
would ordinarily be subject to several preconditions such as
a public bidding and prior approval of the municipal council
which, in this case, did not obtain. From this, petitioners
impress upon us the notion that no contract was ever
entered into by the local government with
respondent.
[10]
To address the claim that respondent had
made the deliveries under the agreement, they advanced
that the bills of lading attached to the complaint were
hardly probative, inasmuch as these documents had been
accomplished and handled exclusively by respondent
herself as well as by her employees and agents.
[11]


Petitioners also filed a Motion to Dissolve and/or
Discharge the Writ of Preliminary Attachment Already
Issued,
[12]
invoking immunity of the state from suit,
unenforceability of the contract, and failure to substantiate
the allegation of fraud.
[13]


On October 20, 2003, the trial court issued an
Order
[14]
denying the two motions. Petitioners moved for
reconsideration, but they were denied in an
Order
[15]
datedDecember 29, 2003.

Believing that the trial court had committed grave
abuse of discretion in issuing the two orders, petitioners
elevated the matter to the Court of Appeals via a petition
forcertiorari under Rule 65. In it, they faulted the trial court
for not dismissing the complaint despite the fact that the
alleged contract was unenforceable under the statute of
frauds, as well as for ordering the filing of an answer and in
effect allowing private respondent to prove that she did
make several deliveries of the subject motor vehicles.
Additionally, it was likewise asserted that the trial court
committed grave abuse of discretion in not
442

discharging/dissolving the writ of preliminary attachment,
as prayed for in the motion, and in effect disregarding the
rule that the local government is immune from suit.

On January 31, 2005, following assessment of the
parties arguments, the Court of Appeals, finding no merit
in the petition, upheld private respondents claim and
affirmed the trial courts order.
[16]
Petitioners moved for
reconsideration, but the same was likewise denied for lack
of merit and for being a mere scrap of paper for having
been filed by an unauthorized counsel.
[17]
Hence, this
petition.

In their present recourse, which raises no matter
different from those passed upon by the Court of Appeals,
petitioners ascribe error to the Court of Appeals for
dismissing their challenge against the trial courts October
20 and December 29, 2003 Orders. Again, they reason that
the complaint should have been dismissed at the first
instance based on unenforceability and that the motion to
dissolve/discharge the preliminary attachment should have
been granted.
[18]


Commenting on the petition, private respondent
notes that with respect to the Court of Appeals denial of
the certiorari petition, the same was rightly done, as the
fact of delivery may be properly and adequately addressed
at the trial of the case on the merits; and that the
dissolution of the writ of preliminary attachment was not
proper under the premises inasmuch as the application for
the writ sufficiently alleged fraud on the part of
petitioners. In the same breath, respondent laments that
the denial of petitioners motion for reconsideration was
rightly done by the Court of Appeals, because it raised no
new matter that had not yet been addressed.
[19]


After the filing of the parties respective memoranda,
the case was deemed submitted for decision.

We now rule on the petition.

To begin with, the Statute of Frauds found in
paragraph (2), Article 1403 of the Civil Code,
[20]
requires for
enforceability certain contracts enumerated therein to be
evidenced by some note or memorandum. The term
Statute of Frauds is descriptive of statutes that require
certain classes of contracts to be in writing; and that do not
deprive the parties of the right to contract with respect to
the matters therein involved, but merely regulate the
443

formalities of the contract necessary to render it
enforceable.
[21]


In other words, the Statute of Frauds only lays
down the method by which the enumerated contracts may
be proved. But it does not declare them invalid because
they are not reduced to writing inasmuch as, by law,
contracts are obligatory in whatever form they may have
been entered into, provided all the essential requisites for
their validity are present.
[22]
The object is to prevent fraud
and perjury in the enforcement of obligations depending,
for evidence thereof, on the unassisted memory of
witnesses by requiring certain enumerated contracts and
transactions to be evidenced by a writing signed by the
party to be charged.
[23]
The effect of noncompliance with
this requirement is simply that no action can be enforced
under the given contracts.
[24]
If an action is nevertheless
filed in court, it shall warrant a dismissal under Section
1(i),
[25]
Rule 16 of the Rules of Court,unless there has been,
among others, total or partial performance of the
obligation on the part of either party.
[26]


It has been private respondents consistent stand,
since the inception of the instant case that she has entered
into a contract with petitioners. As far as she is concerned,
she has already performed her part of the obligation under
the agreement by undertaking the delivery of the 21 motor
vehicles contracted for by Ople in the name of petitioner
municipality. This claim is well substantiated at least for
the initial purpose of setting out a valid cause of action
against petitioners by copies of the bills of lading
attached to the complaint, naming petitioner municipality
as consignee of the shipment. Petitioners have not at any
time expressly denied this allegation and, hence, the same
is binding on the trial court for the purpose of ruling on the
motion to dismiss. In other words, since there exists an
indication by way of allegation that there has been
performance of the obligation on the part of respondent,
the case is excluded from the coverage of the rule on
dismissals based on unenforceability under the statute of
frauds, and either party may then enforce its claims against
the other.

No other principle in remedial law is more settled
than that when a motion to dismiss is filed, the material
allegations of the complaint are deemed to be
hypothetically admitted.
[27]
This hypothetical admission,
according to Viewmaster Construction Corporation v.
Roxas
[28]
and Navoa v. Court of Appeals,
[29]
extends not only
to the relevant and material facts well pleaded in the
complaint, but also to inferences that may be fairly
deduced from them. Thus, where it appears that the
allegations in the complaint furnish sufficient basis on
444

which the complaint can be maintained, the same should
not be dismissed regardless of the defenses that may be
raised by the defendants.
[30]
Stated differently, where the
motion to dismiss is predicated on grounds that are not
indubitable, the better policy is to deny the motion without
prejudice to taking such measures as may be proper to
assure that the ends of justice may be served.
[31]


It is interesting to note at this point that in their bid
to have the case dismissed, petitioners theorize that there
could not have been a contract by which the municipality
agreed to be bound, because it was not shown that there
had been compliance with the required bidding or that the
municipal council had approved the contract. The argument
is flawed. By invoking unenforceability under the Statute of
Frauds, petitioners are in effect acknowledging the
existence of a contract between them and private
respondent only, the said contract cannot be enforced
by action for being non-compliant with the legal requisite
that it be reduced into writing. Suffice it to say that while
this assertion might be a viable defense against
respondents claim, it is principally a matter of evidence
that may be properly ventilated at the trial of the case on
the merits.

Verily, no grave abuse of discretion has been
committed by the trial court in denying petitioners motion
to dismiss this case. The Court of Appeals is thus correct in
affirming the same.

We now address the question of whether there is a
valid reason to deny petitioners motion to discharge the
writ of preliminary attachment.

Petitioners, advocating a negative stance on this
issue, posit that as a municipal corporation,
the Municipality of Hagonoy is immune from suit, and that
its properties are by law exempt from execution and
garnishment. Hence, they submit that not only was there
an error committed by the trial court in denying their
motion to dissolve the writ of preliminary attachment; they
also advance that it should not have been issued in the first
place. Nevertheless, they believe that respondent has not
been able to substantiate her allegations of fraud necessary
for the issuance of the writ.
[32]


Private respondent, for her part, counters that,
contrary to petitioners claim, she has amply discussed the
basis for the issuance of the writ of preliminary attachment
in her affidavit; and that petitioners claim of immunity
445

from suit is negated by Section 22 of the Local Government
Code, which vests municipal corporations with the power to
sue and be sued. Further, she contends that the arguments
offered by petitioners against the writ of preliminary
attachment clearly touch on matters that when ruled upon
in the hearing for the motion to discharge, would amount
to a trial of the case on the merits.
[33]


The general rule spelled out in Section 3, Article XVI
of the Constitution is that the state and its political
subdivisions may not be sued without their
consent. Otherwise put, they are open to suit but only
when they consent to it. Consent is implied when the
government enters into a business contract, as it then
descends to the level of the other contracting party; or it
may be embodied in a general or special law
[34]
such as that
found in Book I, Title I, Chapter 2, Section 22 of the Local
Government Code of 1991, which vests local government
units with certain corporate powers one of them is the
power to sue and be sued.

Be that as it may, a difference lies between suability
and liability. As held in City of Caloocan v. Allarde,
[35]
where
the suability of the state is conceded and by which liability
is ascertained judicially, the state is at liberty to determine
for itself whether to satisfy the judgment or not. Execution
may not issue upon such judgment, because statutes
waiving non-suability do not authorize the seizure of
property to satisfy judgments recovered from the
action. These statutes only convey an implication that the
legislature will recognize such judgment as final and make
provisions for its full satisfaction. Thus, where consent to
be sued is given by general or special law, the implication
thereof is limited only to the resultant verdict on the action
before execution of the judgment.
[36]


Traders Royal Bank v. Intermediate Appellate
Court,
[37]
citing Commissioner of Public Highways v. San
Diego,
[38]
is instructive on this point. In that case which
involved a suit on a contract entered into by an entity
supervised by the Office of the President, the Court held
that while the said entity opened itself to suit by entering
into the subject contract with a private entity; still, the trial
court was in error in ordering the garnishment of its funds,
which were public in nature and, hence, beyond the reach
of garnishment and attachment proceedings. Accordingly,
the Court ordered that the writ of preliminary attachment
issued in that case be lifted, and that the parties be allowed
to prove their respective claims at the trial on the
merits. There, the Court highlighted the reason for the rule,
to wit:

446

The universal rule that where the State
gives its consent to be sued by private parties
either by general or special law, it may limit
claimants action only up to the completion of
proceedings anterior to the stage of execution
and that the power of the Courts ends when
the judgment is rendered, since government
funds and properties may not be seized under
writs of execution or garnishment to satisfy
such judgments, is based on obvious
considerations of public policy. Disbursements
of public funds must be covered by the
corresponding appropriations as required by
law. The functions and public services
rendered by the State cannot be allowed to be
paralyzed or disrupted by the diversion of
public funds from their legitimate and specific
objects. x x x
[39]



With this in mind, the Court holds that the writ of
preliminary attachment must be dissolved and, indeed, it
must not have been issued in the very first place. While
there is merit in private respondents position that she, by
affidavit, was able to substantiate the allegation of fraud in
the same way that the fraud attributable to petitioners was
sufficiently alleged in the complaint and, hence, the
issuance of the writ would have been justified. Still, the writ
of attachment in this case would only prove to be useless
and unnecessary under the premises, since the property of
the municipality may not, in the event that respondents
claim is validated, be subjected to writs of execution and
garnishment unless, of course, there has been a
corresponding appropriation provided by law.
[40]


Anent the other issues raised by petitioners relative
to the denial of their motion to dissolve the writ of
attachment, i.e., unenforceability of the contract and the
veracity of private respondents allegation of fraud, suffice
it to say that these pertain to the merits of the main
action. Hence, these issues are not to be taken up in
resolving the motion to discharge, lest we run the risk of
deciding or prejudging the main case and force a trial on
the merits at this stage of the proceedings.
[41]


There is one final concern raised by petitioners
relative to the denial of their motion for reconsideration.
They complain that it was an error for the Court of Appeals
to have denied the motion on the ground that the same
was filed by an unauthorized counsel and, hence, must be
treated as a mere scrap of paper.
[42]

447


It can be derived from the records that petitioner
Ople, in his personal capacity, filed his Rule 65 petition with
the Court of Appeals through the representation of the law
firm Chan Robles & Associates. Later on, municipal legal
officer Joselito Reyes, counsel for petitioner Ople, in his
official capacity and for petitioner municipality, filed with
the Court of Appeals a Manifestation with Entry of
Appearance
[43]
to the effect that he, as counsel, was
adopting all the pleadings filed for and in behalf of *Oples
personal representation] relative to this case.
[44]


It appears, however, that after the issuance of the
Court of Appeals decision, only Oples personal
representation signed the motion for
reconsideration. There is no showing that the municipal
legal officer made the same manifestation, as he previously
did upon the filing of the petition.
[45]
From this, the Court
of Appeals concluded that it was as if petitioner
municipality and petitioner Ople, in his official capacity, had
never moved for reconsideration of the assailed decision,
and adverts to the ruling in Ramos v. Court of
Appeals
[46]
and Municipality of Pililla, Rizal v. Court of
Appeals
[47]
that only under well-defined exceptions may a
private counsel be engaged in lawsuits involving a
municipality, none of which exceptions obtains in this
case.
[48]


The Court of Appeals is mistaken. As can be seen
from the manner in which the Manifestation with Entry of
Appearance is worded, it is clear that petitioner
municipalitys legal officer was intent on adopting, for both
the municipality and Mayor Ople, not only
the certiorari petition filed with the Court of Appeals, but
also all other pleadings that may be filed thereafter by
Oples personal representation, including the motion for
reconsideration subject of this case. In any event,
however, the said motion for reconsideration would
warrant a denial, because there seems to be no matter
raised therein that has not yet been previously addressed in
the assailed decision of the Court of Appeals as well as in
the proceedings below, and that would have otherwise
warranted a different treatment of the issues involved.

WHEREFORE, the Petition is GRANTED IN
PART. The January 31, 2005 Decision of the Court of
Appeals in CA-G.R. SP No. 81888 is AFFIRMED insofar as it
affirmed the October 20, 2003 Decision of the Regional Trial
Court of Cebu City, Branch 7 denying petitioners motion to
dismiss in Civil Case No. CEB-28587. The assailed decision
is REVERSED insofar as it affirmed the said trial courts
448

denial of petitioners motion to discharge the writ of
preliminary attachment issued in that case. Accordingly,
the August 4, 2003 Writ of Preliminary Attachment issued
in Civil Case No. CEB-28587 is ordered lifted.

Republic of the Philippines
Supreme Court
Manila

THIRD DIVISION


THE MUNICIPALITY OF HAGONOY,
BULACAN, represented by the HON.
FELIX V. OPLE, Municipal Mayor, and
FELIX V. OPLE, in his personal capacity,
Petitioners,

- versus -

G.R. No. 168289


Present:


CORONA, J., Chairperson,
HON. SIMEON P. DUMDUM, JR., in his
capacity as the Presiding Judge of the
REGIONAL TRIAL COURT, BRANCH 7,
CEBU CITY; HON. CLERK OF COURT &
EX-OFFICIO SHERIFF of the REGIONAL
TRIAL COURT of CEBU CITY; HON.
CLERK OF COURT & EX-OFFICIO SHERIFF
of the REGIONAL TRIAL COURT of
BULACAN and his DEPUTIES; and EMILY
ROSE GO KO LIM CHAO, doing business
under the name and style KD SURPLUS,
Respondents.
VELASCO, JR.,
NACHURA,
PERALTA, and
MENDOZA, JJ.










Promulgated:

March 22, 2010
449

x------------------------------------------------------------------------------
-----------x


D E C I S I O N

PERALTA, J.:


This is a Joint Petition
[1]
under Rule 45 of the Rules of
Court brought by the Municipality of Hagonoy, Bulacan and
its former chief executive, Mayor Felix V. Ople in his official
and personal capacity, from the January 31, 2005
Decision
[2]
and the May 23, 2005 Resolution
[3]
of the Court
of Appeals in CA-G.R. SP No. 81888. The assailed decision
affirmed the October 20, 2003 Order
[4]
issued by
the Regional Trial Court of Cebu City, Branch 7 in Civil Case
No. CEB-28587 denying petitioners motion to dismiss and
motion to discharge/dissolve the writ of preliminary
attachment previously issued in the case. The assailed
resolution denied reconsideration.

The case stems from a Complaint
[5]
filed by herein
private respondent Emily Rose Go Ko Lim Chao against
herein petitioners, the Municipality of Hagonoy, Bulacan
and its chief executive, Felix V. Ople (Ople) for collection of
a sum of money and damages. It was alleged that
sometime in the middle of the year 2000, respondent,
doing business as KD Surplus and as such engaged in buying
and selling surplus trucks, heavy equipment, machinery,
spare parts and related supplies, was contacted by
petitioner Ople. Respondent had entered into an
agreement with petitioner municipality through Ople for
the delivery of motor vehicles, which supposedly were
needed to carry out certain developmental undertakings in
the municipality. Respondent claimed that because of
Oples earnest representation that funds had already been
allocated for the project, she agreed to deliver from her
principal place of business in Cebu City twenty-one motor
vehicles whose value totaled P5,820,000.00. To prove this,
she attached to the complaint copies of the bills of lading
showing that the items were consigned, delivered to and
received by petitioner municipality on different
dates.
[6]
However, despite having made several deliveries,
Ople allegedly did not heed respondents claim for
payment. As of the filing of the complaint, the total
obligation of petitioner had already
totaled P10,026,060.13exclusive of penalties and
damages. Thus, respondent prayed for full payment of the
said amount, with interest at not less than 2% per month,
plus P500,000.00 as damages for business
450

losses, P500,000.00 as exemplary damages, attorneys fees
of P100,000.00 and the costs of the suit.

On February 13, 2003, the trial court issued an
Order
[7]
granting respondents prayer for a writ of
preliminary attachment conditioned upon the posting of a
bond equivalent to the amount of the claim. On March 20,
2003, the trial court issued the Writ of Preliminary
Attachment
[8]
directing the sheriff to attach the estate,
real and personal properties of petitioners.

Instead of addressing private respondents
allegations, petitioners filed a Motion to Dismiss
[9]
on the
ground that the claim on which the action had been
brought was unenforceable under the statute of frauds,
pointing out that there was no written contract or
document that would evince the supposed agreement they
entered into with respondent. They averred that contracts
of this nature, before being undertaken by the municipality,
would ordinarily be subject to several preconditions such as
a public bidding and prior approval of the municipal council
which, in this case, did not obtain. From this, petitioners
impress upon us the notion that no contract was ever
entered into by the local government with
respondent.
[10]
To address the claim that respondent had
made the deliveries under the agreement, they advanced
that the bills of lading attached to the complaint were
hardly probative, inasmuch as these documents had been
accomplished and handled exclusively by respondent
herself as well as by her employees and agents.
[11]


Petitioners also filed a Motion to Dissolve and/or
Discharge the Writ of Preliminary Attachment Already
Issued,
[12]
invoking immunity of the state from suit,
unenforceability of the contract, and failure to substantiate
the allegation of fraud.
[13]


On October 20, 2003, the trial court issued an
Order
[14]
denying the two motions. Petitioners moved for
reconsideration, but they were denied in an
Order
[15]
datedDecember 29, 2003.

Believing that the trial court had committed grave
abuse of discretion in issuing the two orders, petitioners
elevated the matter to the Court of Appeals via a petition
forcertiorari under Rule 65. In it, they faulted the trial court
for not dismissing the complaint despite the fact that the
alleged contract was unenforceable under the statute of
frauds, as well as for ordering the filing of an answer and in
effect allowing private respondent to prove that she did
make several deliveries of the subject motor vehicles.
451

Additionally, it was likewise asserted that the trial court
committed grave abuse of discretion in not
discharging/dissolving the writ of preliminary attachment,
as prayed for in the motion, and in effect disregarding the
rule that the local government is immune from suit.

On January 31, 2005, following assessment of the
parties arguments, the Court of Appeals, finding no merit
in the petition, upheld private respondents claim and
affirmed the trial courts order.
[16]
Petitioners moved for
reconsideration, but the same was likewise denied for lack
of merit and for being a mere scrap of paper for having
been filed by an unauthorized counsel.
[17]
Hence, this
petition.

In their present recourse, which raises no matter
different from those passed upon by the Court of Appeals,
petitioners ascribe error to the Court of Appeals for
dismissing their challenge against the trial courts October
20 and December 29, 2003 Orders. Again, they reason that
the complaint should have been dismissed at the first
instance based on unenforceability and that the motion to
dissolve/discharge the preliminary attachment should have
been granted.
[18]


Commenting on the petition, private respondent
notes that with respect to the Court of Appeals denial of
the certiorari petition, the same was rightly done, as the
fact of delivery may be properly and adequately addressed
at the trial of the case on the merits; and that the
dissolution of the writ of preliminary attachment was not
proper under the premises inasmuch as the application for
the writ sufficiently alleged fraud on the part of
petitioners. In the same breath, respondent laments that
the denial of petitioners motion for reconsideration was
rightly done by the Court of Appeals, because it raised no
new matter that had not yet been addressed.
[19]


After the filing of the parties respective memoranda,
the case was deemed submitted for decision.

We now rule on the petition.

To begin with, the Statute of Frauds found in
paragraph (2), Article 1403 of the Civil Code,
[20]
requires for
enforceability certain contracts enumerated therein to be
evidenced by some note or memorandum. The term
Statute of Frauds is descriptive of statutes that require
certain classes of contracts to be in writing; and that do not
deprive the parties of the right to contract with respect to
452

the matters therein involved, but merely regulate the
formalities of the contract necessary to render it
enforceable.
[21]


In other words, the Statute of Frauds only lays
down the method by which the enumerated contracts may
be proved. But it does not declare them invalid because
they are not reduced to writing inasmuch as, by law,
contracts are obligatory in whatever form they may have
been entered into, provided all the essential requisites for
their validity are present.
[22]
The object is to prevent fraud
and perjury in the enforcement of obligations depending,
for evidence thereof, on the unassisted memory of
witnesses by requiring certain enumerated contracts and
transactions to be evidenced by a writing signed by the
party to be charged.
[23]
The effect of noncompliance with
this requirement is simply that no action can be enforced
under the given contracts.
[24]
If an action is nevertheless
filed in court, it shall warrant a dismissal under Section
1(i),
[25]
Rule 16 of the Rules of Court,unless there has been,
among others, total or partial performance of the
obligation on the part of either party.
[26]


It has been private respondents consistent stand,
since the inception of the instant case that she has entered
into a contract with petitioners. As far as she is concerned,
she has already performed her part of the obligation under
the agreement by undertaking the delivery of the 21 motor
vehicles contracted for by Ople in the name of petitioner
municipality. This claim is well substantiated at least for
the initial purpose of setting out a valid cause of action
against petitioners by copies of the bills of lading
attached to the complaint, naming petitioner municipality
as consignee of the shipment. Petitioners have not at any
time expressly denied this allegation and, hence, the same
is binding on the trial court for the purpose of ruling on the
motion to dismiss. In other words, since there exists an
indication by way of allegation that there has been
performance of the obligation on the part of respondent,
the case is excluded from the coverage of the rule on
dismissals based on unenforceability under the statute of
frauds, and either party may then enforce its claims against
the other.

No other principle in remedial law is more settled
than that when a motion to dismiss is filed, the material
allegations of the complaint are deemed to be
hypothetically admitted.
[27]
This hypothetical admission,
according to Viewmaster Construction Corporation v.
Roxas
[28]
and Navoa v. Court of Appeals,
[29]
extends not only
to the relevant and material facts well pleaded in the
complaint, but also to inferences that may be fairly
deduced from them. Thus, where it appears that the
453

allegations in the complaint furnish sufficient basis on
which the complaint can be maintained, the same should
not be dismissed regardless of the defenses that may be
raised by the defendants.
[30]
Stated differently, where the
motion to dismiss is predicated on grounds that are not
indubitable, the better policy is to deny the motion without
prejudice to taking such measures as may be proper to
assure that the ends of justice may be served.
[31]


It is interesting to note at this point that in their bid
to have the case dismissed, petitioners theorize that there
could not have been a contract by which the municipality
agreed to be bound, because it was not shown that there
had been compliance with the required bidding or that the
municipal council had approved the contract. The argument
is flawed. By invoking unenforceability under the Statute of
Frauds, petitioners are in effect acknowledging the
existence of a contract between them and private
respondent only, the said contract cannot be enforced
by action for being non-compliant with the legal requisite
that it be reduced into writing. Suffice it to say that while
this assertion might be a viable defense against
respondents claim, it is principally a matter of evidence
that may be properly ventilated at the trial of the case on
the merits.

Verily, no grave abuse of discretion has been
committed by the trial court in denying petitioners motion
to dismiss this case. The Court of Appeals is thus correct in
affirming the same.

We now address the question of whether there is a
valid reason to deny petitioners motion to discharge the
writ of preliminary attachment.

Petitioners, advocating a negative stance on this
issue, posit that as a municipal corporation,
the Municipality of Hagonoy is immune from suit, and that
its properties are by law exempt from execution and
garnishment. Hence, they submit that not only was there
an error committed by the trial court in denying their
motion to dissolve the writ of preliminary attachment; they
also advance that it should not have been issued in the first
place. Nevertheless, they believe that respondent has not
been able to substantiate her allegations of fraud necessary
for the issuance of the writ.
[32]


Private respondent, for her part, counters that,
contrary to petitioners claim, she has amply discussed the
basis for the issuance of the writ of preliminary attachment
in her affidavit; and that petitioners claim of immunity
454

from suit is negated by Section 22 of the Local Government
Code, which vests municipal corporations with the power to
sue and be sued. Further, she contends that the arguments
offered by petitioners against the writ of preliminary
attachment clearly touch on matters that when ruled upon
in the hearing for the motion to discharge, would amount
to a trial of the case on the merits.
[33]


The general rule spelled out in Section 3, Article XVI
of the Constitution is that the state and its political
subdivisions may not be sued without their
consent. Otherwise put, they are open to suit but only
when they consent to it. Consent is implied when the
government enters into a business contract, as it then
descends to the level of the other contracting party; or it
may be embodied in a general or special law
[34]
such as that
found in Book I, Title I, Chapter 2, Section 22 of the Local
Government Code of 1991, which vests local government
units with certain corporate powers one of them is the
power to sue and be sued.

Be that as it may, a difference lies between suability
and liability. As held in City of Caloocan v. Allarde,
[35]
where
the suability of the state is conceded and by which liability
is ascertained judicially, the state is at liberty to determine
for itself whether to satisfy the judgment or not. Execution
may not issue upon such judgment, because statutes
waiving non-suability do not authorize the seizure of
property to satisfy judgments recovered from the
action. These statutes only convey an implication that the
legislature will recognize such judgment as final and make
provisions for its full satisfaction. Thus, where consent to
be sued is given by general or special law, the implication
thereof is limited only to the resultant verdict on the action
before execution of the judgment.
[36]


Traders Royal Bank v. Intermediate Appellate
Court,
[37]
citing Commissioner of Public Highways v. San
Diego,
[38]
is instructive on this point. In that case which
involved a suit on a contract entered into by an entity
supervised by the Office of the President, the Court held
that while the said entity opened itself to suit by entering
into the subject contract with a private entity; still, the trial
court was in error in ordering the garnishment of its funds,
which were public in nature and, hence, beyond the reach
of garnishment and attachment proceedings. Accordingly,
the Court ordered that the writ of preliminary attachment
issued in that case be lifted, and that the parties be allowed
to prove their respective claims at the trial on the
merits. There, the Court highlighted the reason for the rule,
to wit:

455

The universal rule that where the State
gives its consent to be sued by private parties
either by general or special law, it may limit
claimants action only up to the completion of
proceedings anterior to the stage of execution
and that the power of the Courts ends when
the judgment is rendered, since government
funds and properties may not be seized under
writs of execution or garnishment to satisfy
such judgments, is based on obvious
considerations of public policy. Disbursements
of public funds must be covered by the
corresponding appropriations as required by
law. The functions and public services
rendered by the State cannot be allowed to be
paralyzed or disrupted by the diversion of
public funds from their legitimate and specific
objects. x x x
[39]



With this in mind, the Court holds that the writ of
preliminary attachment must be dissolved and, indeed, it
must not have been issued in the very first place. While
there is merit in private respondents position that she, by
affidavit, was able to substantiate the allegation of fraud in
the same way that the fraud attributable to petitioners was
sufficiently alleged in the complaint and, hence, the
issuance of the writ would have been justified. Still, the writ
of attachment in this case would only prove to be useless
and unnecessary under the premises, since the property of
the municipality may not, in the event that respondents
claim is validated, be subjected to writs of execution and
garnishment unless, of course, there has been a
corresponding appropriation provided by law.
[40]


Anent the other issues raised by petitioners relative
to the denial of their motion to dissolve the writ of
attachment, i.e., unenforceability of the contract and the
veracity of private respondents allegation of fraud, suffice
it to say that these pertain to the merits of the main
action. Hence, these issues are not to be taken up in
resolving the motion to discharge, lest we run the risk of
deciding or prejudging the main case and force a trial on
the merits at this stage of the proceedings.
[41]


There is one final concern raised by petitioners
relative to the denial of their motion for reconsideration.
They complain that it was an error for the Court of Appeals
to have denied the motion on the ground that the same
was filed by an unauthorized counsel and, hence, must be
treated as a mere scrap of paper.
[42]

456


It can be derived from the records that petitioner
Ople, in his personal capacity, filed his Rule 65 petition with
the Court of Appeals through the representation of the law
firm Chan Robles & Associates. Later on, municipal legal
officer Joselito Reyes, counsel for petitioner Ople, in his
official capacity and for petitioner municipality, filed with
the Court of Appeals a Manifestation with Entry of
Appearance
[43]
to the effect that he, as counsel, was
adopting all the pleadings filed for and in behalf of *Oples
personal representation+ relative to this case.
[44]


It appears, however, that after the issuance of the
Court of Appeals decision, only Oples personal
representation signed the motion for
reconsideration. There is no showing that the municipal
legal officer made the same manifestation, as he previously
did upon the filing of the petition.
[45]
From this, the Court
of Appeals concluded that it was as if petitioner
municipality and petitioner Ople, in his official capacity, had
never moved for reconsideration of the assailed decision,
and adverts to the ruling in Ramos v. Court of
Appeals
[46]
and Municipality of Pililla, Rizal v. Court of
Appeals
[47]
that only under well-defined exceptions may a
private counsel be engaged in lawsuits involving a
municipality, none of which exceptions obtains in this
case.
[48]


The Court of Appeals is mistaken. As can be seen
from the manner in which the Manifestation with Entry of
Appearance is worded, it is clear that petitioner
municipalitys legal officer was intent on adopting, for both
the municipality and Mayor Ople, not only
the certiorari petition filed with the Court of Appeals, but
also all other pleadings that may be filed thereafter by
Oples personal representation, including the motion for
reconsideration subject of this case. In any event,
however, the said motion for reconsideration would
warrant a denial, because there seems to be no matter
raised therein that has not yet been previously addressed in
the assailed decision of the Court of Appeals as well as in
the proceedings below, and that would have otherwise
warranted a different treatment of the issues involved.

WHEREFORE, the Petition is GRANTED IN
PART. The January 31, 2005 Decision of the Court of
Appeals in CA-G.R. SP No. 81888 is AFFIRMED insofar as it
affirmed the October 20, 2003 Decision of the Regional Trial
Court of Cebu City, Branch 7 denying petitioners motion to
dismiss in Civil Case No. CEB-28587. The assailed decision
is REVERSED insofar as it affirmed the said trial courts
457

denial of petitioners motion to discharge the writ of
preliminary attachment issued in that case. Accordingly,
the August 4, 2003 Writ of Preliminary Attachment issued
in Civil Case No. CEB-28587 is ordered lifted.

THIRD DIVISION
[G.R. No. 107271. September 10, 2003]
CITY OF CALOOCAN and NORMA M. ABRACIA, petitioners,
vs. HON. MAURO T. ALLARDE, Presiding Judge of
Branch 123, RTC of Caloocan City, ALBERTO A.
CASTILLO, Deputy Sheriff of Branch 123, RTC of
Caloocan City, and DELFINA HERNANDEZ SANTIAGO
and PHILIPPINE NATIONAL BANK
(PNB), respondents.
D E C I S I O N
CORONA, J.:
Assailed in this petition for certiorari is the
decision
[1]
dated August 31, 1992, of the Court of Appeals in
CA G.R. SP No. 27423, ordering the Regional Trial Court of
Caloocan City, Branch 123, to implement an alias writ of
execution dated January 16, 1992. The dispositive portion
read as follows:
WHEREFORE the petition is hereby granted ordering the
Regional Trial Court of Kaloocan City, Branch 123, to
immediately effect the alias writ of execution dated January
16, 1992 without further delay.
Counsel for the respondents are warned that a repetition of
their contemptuous act to delay the execution of a final and
executory judgment will be dealt with more severely.
SO ORDERED.
[2]

It is important to state at the outset that the dispute
between petitioner and private respondent has been
litigated thrice before this Court: first, in G.R. No. L-39288-
89, entitled Heirs of Abelardo Palomique, et al. vs. Marcial
Samson, et al., decided on January 31, 1985; second, in G.R.
No. 98366, entitled City Government of Caloocan vs. Court
of Appeals, et al., resolved on May 16, 1991, and third, in
G.R. No. 102625, entitled Santiago vs. Sto. Tomas, et al.,
decided on August 1, 1995. This is not to mention the
numerous concurrent efforts by the City Government of
Caloocan to seek relief from other judicial and quasi-judicial
bodies. The present petition for certiorari is the fourth time
we are called upon to resolve the dispute.
The factual and procedural antecedents follow.
Sometime in 1972, Marcial Samson, City Mayor of
Caloocan City, through Ordinance No. 1749, abolished the
position of Assistant City Administrator and 17 other
positions from the plantilla of the local government of
458

Caloocan. Then Assistant City Administrator Delfina
Hernandez Santiago and the 17 affected employees of the
City Government assailed the legality of the abolition
before the then Court of First Instance (CFI) of Caloocan
City, Branch 33.
In 1973, the CFI declared the abolition illegal and
ordered the reinstatement of all the dismissed employees
and the payment of their back salaries and other
emoluments. The City Government of Caloocan appealed to
the Court of Appeals. Respondent Santiago and her co-
parties moved for the dismissal of the appeal for being
dilatory and frivolous but the appellate court denied their
motion. Thus, they elevated the case on certiorari before
this Court, docketed as G.R. No. L-39288-89, Heirs of
Abelardo Palomique, et al. vs. Marcial Samson, et al. In our
Resolution dated January 31, 1985, we held that the
appellate court erred in not dismissing the appeal, and
that the appeal of the City Government of Caloocan was
frivolous and dilatory. In due time, the resolution lapsed
into finality and entry of judgment was made on February
27, 1985.
In 1986, the City Government of Caloocan paid
respondent Santiago P75,083.37 in partial payment of her
backwages, thereby leaving a balance of P530,761.91. Her
co-parties were paid in full.
[3]
In 1987, the City of Caloocan
appropriated funds for her unpaid back salaries. This was
included in Supplemental Budget No. 3 for the fiscal year
1987. Surprisingly, however, the City later refused to
release the money to respondent Santiago.
Respondent Santiago exerted effort for the execution of
the remainder of the money judgment but she met stiff
opposition from the City Government of Caloocan. On
February 12, 1991, Judge Mauro T. Allarde, RTC of Caloocan
City, Branch 123, issued a writ of execution for the payment
of the remainder of respondent Santiagos back salaries and
other emoluments.
[4]

For the second time, the City Government of Caloocan
went up to the Court of Appeals and filed a petition for
certiorari, prohibition and injunction to stop the trial court
from enforcing the writ of execution. The CA dismissed the
petition and affirmed the order of issuance of the writ of
execution.
[5]
One of the issues raised and resolved therein
was the extent to which back salaries and emoluments
were due to respondent Santiago. The appellate court held
that she was entitled to her salaries from October, 1983 to
December, 1986.
And for the second time, the City Government of
Caloocan appealed to this Court in G.R. No. 98366, City
Government of Caloocan vs. Court of Appeals, et al. The
petition was dismissed, through our Resolution of May 16,
1991, for having been filed late and for failure to show any
reversible error on the part of the Court of Appeals. The
resolution subsequently attained finality and the
corresponding entry of judgment was made on July 29,
1991.
On motion of private respondent Santiago, Judge
Mauro T. Allarde ordered the issuance of an alias writ of
459

execution on March 3, 1992. The City Government of
Caloocan moved to reconsider the order, insisting in the
main that respondent Santiago was not entitled to
backwages from 1983 to 1986. The court a quo denied the
motion and forthwith issued the alias writ of execution.
Unfazed, the City Government of Caloocan filed a motion to
quash the writ, maintaining that the money judgment
sought to be enforced should not have included salaries
and allowances for the years 1983-1986. The trial court
likewise denied the motion.
On July 27, 1992, Sheriff Alberto A. Castillo levied and
sold at public auction one of the motor vehicles of the City
Government of Caloocan, with plate no. SBH-165,
for P100,000. The proceeds of the sale were turned over to
respondent Santiago in partial satisfaction of her claim,
thereby leaving a balance of P439,377.14, inclusive of
interest. Petitioners filed a motion questioning the validity
of the auction sale of the vehicle with plate no. SBH-165,
and a supplemental motion maintaining that the properties
of the municipality were exempt from execution. In his
Order dated October 1, 1992, Judge Allarde denied both
motions and directed the sheriff to levy and schedule at
public auction three more vehicles of the City of Caloocan -

[6]

ONE (1) Unit Motor Vehicle (Hunter Station Wagon); Motor
No. C-240-199629; Chassis No. MBB-910369C;
ONE (1) Unit Motor Vehicle (Hunter Series 11-Diesel);
Engine No. 4FB1-174328, Chassis No. MBB-910345C; Plate
No. SDL-653;
ONE (1) Unit Motor Vehicle (Hunter Series 11-Diesel);
Engine No. 4FB-165196; Chassis No. MBB 910349C.
All the vehicles, including that previously sold in the
auction sale, were owned by the City and assigned for the
use of herein petitioner Norma Abracia, Division
Superintendent of Caloocan City, and other officials of the
Division of City Schools.
Meanwhile, the City Government of Caloocan sought
clarification from the Civil Service Commission (CSC) on
whether respondent Santiago was considered to have
rendered services from 1983-1986 as to be entitled to
backwages for that period. In its Resolution No. 91-1124,
the CSC ruled in the negative.
On November 22, 1991, private respondent Santiago
challenged the CSC resolution before this Court in G.R. No.
102625, Santiago vs. Sto. Tomas, et al. On July 8, 1993, we
initially dismissed the petition for lack of merit; however,
we reconsidered the dismissal of the petition in our
Resolution dated August 1, 1995, this time ruling in favor of
respondent Santiago:
The issue of petitioner Santiagos right to back salaries for
the period from October 1983 to December 1986 having
been resolved in G.R. No. 98366 on 16 May 1991, CSC
460

Resolution No. 91-1124 promulgated later on 24 September
1991 in particular, its ruling on the extent of backwages
due petitioner Santiago was in fact moot and academic at
the time of its promulgation. CSC Resolution No. 91-1124
could not, of course, set aside what had been judicially
decided with finality x x x x the court considers that resort
by the City Government of Caloocan to respondent CSC was
but another attempt to deprive petitioner Santiago of her
claim to back salaries x x x and a continuation of the Citys
abuse and misuse of the rules of judicial procedure. The
Citys acts have resulted in wasting the precious time and
resources of the courts and respondent CSC. (Underscoring
supplied).
On October 5, 1992, the City Council of Caloocan passed
Ordinance No. 0134, Series of 1992, which included the
amount of P439,377.14 claimed by respondent Santiago as
back salaries, plus interest.
[7]
Pursuant to the subject
ordinance, Judge Allarde issued an order dated November
10, 1992, decreeing that:
WHEREFORE, the City Treasurer (of Caloocan), Norberto
Azarcon is hereby ordered to deliver to this Court within
five (5) days from receipt hereof, (a) managers check
covering the amount of P439,378.00 representing the back
salaries of petitioner Delfina H. Santiago in accordance with
Ordinance No. 0134 S. 1992 and pursuant to the final and
executory decision in these cases.
Then Caloocan Mayor Macario A. Asistio, Jr., however,
refused to sign the check intended as payment for
respondent Santiagos claims. This, despite the fact that he
was one of the signatories of the ordinance authorizing
such payment. On April 29, 1993, Judge Allarde issued
another order directing the Acting City Mayor of Caloocan,
Reynaldo O. Malonzo, to sign the check which had been
pending before the Office of the Mayor since December 11,
1992. Acting City Mayor Malonzo informed the trial court
that he could not comply with the order since the subject
check was not formally turned over to him by the City
Mayor who went on official leave of absence on April 15,
1993, and that he doubted whether he had authority to
sign the same.
[8]

Thus, in an order dated May 7, 1993, Judge Allarde
ordered Sheriff Alberto A. Castillo to immediately garnish
the funds of the City Government of Caloocan
corresponding to the claim of respondent Santiago.
[9]
On
the same day, Sheriff Alberto A. Castillo served a copy of
the Notice of Garnishment on the Philippine National Bank
(PNB), Sangandaan Branch, Caloocan City. When PNB
immediately notified the City of Caloocan of the Notice of
Garnishment, the City Treasurer sent a letter-advice
informing PNB that the order of garnishment was illegal,
with a warning that it would hold PNB liable for any
damages which may be caused by the withholding of the
funds of the city. PNB opted to comply with the order of
Judge Allarde and released to the Sheriff a managers check
461

amounting to P439,378. After 21 long years, the claim of
private respondent Santiago was finally settled in full.
On June 4, 1993, however, while the instant petition
was pending, the City Government of Caloocan filed yet
another motion with this Court, a Motion to Declare in
Contempt of Court; to Set Aside the Garnishment and
Administrative Complaint against Judge Allarde, respondent
Santiago and PNB. Subsequently, the City Government of
Caloocan filed a Supplemental Petition formally impleading
PNB as a party-respondent in this case.
The instant petition for certiorari is directed this time
against the validity of the garnishment of the funds of the
City of Caloocan, as well as the validity of the levy and sale
of the motor vehicles belonging to the City of Caloocan.
More specifically, petitioners insist that Judge Allarde
gravely abused his discretion in:
(a) ordering the garnishment of the funds of the City of
Caloocan deposited with the PNB, since it is settled that
public funds are beyond the reach of garnishment and even
with the appropriation passed by the City Council, the
authority of the Mayor is still needed for the release of the
appropriation;
(b) ordering the levy and sale at public auction of three (3)
motor vehicles owned by the City of Caloocan, which
vehicles are necessary for public use and cannot be
attached nor sold in an execution sale to satisfy a money
judgment against the City of Caloocan;
(c) peremptorily denying petitioner City of
Caloocans urgent motions to vacate and set aside the
auction sale of the motor vehicle with PLATE NO. SBH-165,
notwithstanding that the auction sale by the Sheriff was
tainted with serious irregularities, more particularly:
i. non-compliance with the mandatory posting of the notice
of sale;
ii. non-observance of the procedure that a sale through
public auction has to be made and consummated at the
time of the auction, at the designated place and upon
actual payment of the purchase price by the winning
bidder;
iii. violation of Sec. 21, Rule 39 of the Rules of Court to the
effect that sale of personal property capable of manual
delivery must be sold within the view of those attending
the sale; and,
iv. the Sheriffs Certificate of Sale contained false narration
of facts respecting the actual time of the public auction;
(d) the enforcement of the levy made by the Sheriff
covering the three (3) motor vehicles based on an alias writ
that has long expired.
The petition has absolutely no merit. The trial court
committed no grave abuse of discretion in implementing
the alias writ of execution to settle the claim of respondent
462

Santiago, the satisfaction of which petitioner had been
maliciously evading for 21 years.
Petitioner argues that the garnishment of its funds in
PNB was invalid inasmuch as these were public funds and
thus exempt from execution. Garnishment is considered a
specie of attachment by means of which the plaintiff seeks
to subject to his claim property of the defendant in the
hands of a third person, or money owed by such third
person or garnishee to the defendant.
[10]

The rule is and has always been that all government
funds deposited in the PNB or any other official depositary
of the Philippine Government by any of its agencies or
instrumentalities, whether by general or special deposit,
remain government funds and may not be subject to
garnishment or levy, in the absence of a corresponding
appropriation as required by law:
[11]

Even though the rule as to immunity of a state from suit is
relaxed, the power of the courts ends when the judgment is
rendered. Although the liability of the state has been
judicially ascertained, the state is at liberty to determine for
itself whether to pay the judgment or not, and execution
cannot issue on a judgment against the state. Such statutes
do not authorize a seizure of state property to satisfy
judgments recovered, and only convey an implication that
the legislature will recognize such judgment as final and
make provision for the satisfaction thereof.
[12]

The rule is based on obvious considerations of public
policy. The functions and public services rendered by the
State cannot be allowed to be paralyzed or disrupted by the
diversion of public funds from their legitimate and specific
objects, as appropriated by law.
[13]

However, the rule is not absolute and admits of a well-
defined exception, that is, when there is a corresponding
appropriation as required by law. Otherwise stated, the rule
on the immunity of public funds from seizure or
garnishment does not apply where the funds sought to be
levied under execution are already allocated by law
specifically for the satisfaction of the money judgment
against the government. In such a case, the monetary
judgment may be legally enforced by judicial processes.
Thus, in the similar case of Pasay City Government, et
al. vs. CFI of Manila, Br. X, et al.,
[14]
where petitioners
challenged the trial courts order garnishing its funds in
payment of the contract price for the construction of the
City Hall, we ruled that, while government funds deposited
in the PNB are exempt from execution or garnishment, this
rule does not apply if an ordinance has already been
enacted for the payment of the Citys obligations
Upon the issuance of the writ of execution, the petitioner-
appellants moved for its quashal alleging among other
things the exemption of the government from execution.
This move on the part of petitioner-appellants is at first
glance laudable for all government funds deposited with
the Philippine National Bank by any agency or
463

instrumentality of the government, whether by way of
general or special deposit, remain government funds and
may not be subject to garnishment or levy. But inasmuch
as an ordinance has already been enacted expressly
appropriating the amount of P613,096.00 as payment to
the respondent-appellee, then the herein case is covered by
the exception to the general rule x x x x
In the instant case, the City Council of Caloocan already
approved and passed Ordinance No. 0134, Series of 1992,
allocating the amount of P439,377.14 for respondent
Santiagos back salaries plus interest. Thus this case fell
squarely within the exception. For all intents and purposes,
Ordinance No. 0134, Series of 1992, was the
corresponding appropriation as required by law. The sum
indicated in the ordinance for Santiago were deemed
automatically segregated from the other budgetary
allocations of the City of Caloocan and earmarked solely for
the Citys monetary obligation to her. The judgment of the
trial court could then be validly enforced against such
funds.
Indeed, this conclusion is further buttressed by the
Certification issued on December 23, 1992 by Norberto C.
Azarcon, City Treasurer of Caloocan:
CERTIFICATION
This is to certify that according to the records available in
this Office the claim for backwages of the HON. JUDGE
DELFINA H. SANTIAGO has been properly obligated and can
be collected in accordance with existing accounting and
auditing rules and regulations.
This is to certify further that in case the claim is not
collected within the present fiscal year, such claim shall be
entered in the books of Accounts Payable and can still be
collected in the next fiscal year x x x x (Underscoring
supplied)
Petitioners reliance on Municipality of Makati vs. Court
of Appeals, et al.,
[15]
and Commissioner of Public Highways
vs. San Diego,
[16]
does not help their cause.
[17]
Both cases
implicitly affirmed that public funds may be garnished if
there is a statute which appropriated the amount so
garnished. Thus, in Municipality of Makati, citing San Diego,
we unequivocally held that:
In this jurisdiction, well-settled is the rule that public funds
are not subject to levy and execution, unless otherwise
provided by statute x x x x
Similarly, we cannot agree with petitioners argument
that the appropriation ordinance of the City Council did not
authorize PNB to release the funds because only the City
Mayor could authorize the release thereof. A valid
appropriation of public funds lifts its exemption from
execution. Here, the appropriation passed by the City
Council of Caloocan providing for the payment of
backwages to respondent was duly approved and signed by
both the council and then Mayor Macario Asistio, Jr. The
464

mayors signature approving the budget ordinance was his
assent to the appropriation of funds for respondent
Santiagos backwages. If he did not agree with such
allocation, he could have vetoed the item pursuant to
Section 55 of the Local Government Code.
[18]
There was no
such veto.
In view of the foregoing discourse, we dismiss
petitioners unfounded assertion, probably made more out
of sheer ignorance of prevailing jurisprudence than a
deliberate attempt to mislead us, that the rule that public
funds (are) beyond the reach of levy and garnishment is not
qualified by any condition.
[19]

We now come to the issue of the legality of the levy on
the three motor vehicles belonging to the City of Caloocan
which petitioners claimed to be exempt from execution,
and which levy was based on an alias writ that had
purportedly expired. Suffice it to say that Judge Allarde, in
his Order dated November 10, 1992,
[20]
already lifted the
levy on the three vehicles, thereby formally discharging
them from the jurisdiction of the court and turning them
over to the City Government of Caloocan:
x x x x the levy of the three (3) vehicles made by Sheriff
Alberto Castillo pursuant to the Orders of this Court dated
October 1 and 8, 1992 is hereby lifted and the said Sheriff is
hereby ordered to return the same to the City Government
in view of the satisfaction of the decision in these cases x x
x x
It is thus unnecessary for us to discuss a moot issue.
We turn to the third issue raised by petitioners that the
auction sale by Sheriff Alberto A. Castillo of the motor
vehicle with plate no. SBH-165 was tainted with serious
irregularities. We need not emphasize that the sheriff
enjoys the presumption of regularity in the performance of
the functions of his office. This presumption prevails in the
absence of substantial evidence to the contrary and cannot
be overcome by bare and self-serving allegations. The
petitioners failed to convince us that the auction sale
conducted by the sheriff indeed suffered from fatal flaws.
No evidence was adduced to prove that the sheriff had
been remiss in the performance of his duties during the
public auction sale. Indeed it would be injudicious for us to
assume, as petitioners want us to do, that the sheriff failed
to follow the established procedures governing public
auctions.
On the contrary, a review of the records shows that the
sheriff complied with the rules on public auction. The sale
of the Citys vehicle was made publicly in front of the
Caloocan City Hall on the date fixed in the notice July 27,
1992. In fact, petitioners in their Motion to Declare in
Contempt of Court; to Set Aside the Garnishment and
Administrative Complaint admitted as much:
On July 27, 1992, by virtue of an alias writ of execution
issued by the respondent court, a vehicle owned by the
petitioner xxx was levied and sold at public auction for the
465

amount of P100,000.00 and which amount was
immediately delivered to the private respondent x x x x
[21]

Hence, petitioners cannot now be heard to impugn the
validity of the auction sale.
Petitioners, in desperation, likewise make much of the
proceedings before the trial court on October 8, 1992,
wherein petitioner Norma Abracia, Superintendent of the
Division of City Schools of Caloocan, was commanded to
appear and show cause why she should not be cited in
contempt for delaying the execution of judgment. This was
in connection with her failure (or refusal) to surrender the
three motor vehicles assigned to the Division of City Schools
to the custody of the sheriff. Petitioner Abracia, assisted by
Mr. Ricardo Nagpacan of the Division of City Schools,
appeared during the hearing but requested a ten-day
period within which to refer the matter of contempt to a
counsel of her choice. The request was denied by Judge
Allarde in his assailed order dated October 8, 1992. Thus
petitioner Abracia claimed, inter alia, that: (a) she was
denied due process; (b) the silence of the order of Judge
Allarde on her request for time violated an orderly and
faithful recording of the proceedings, and (c) she was
coerced into agreeing to surrender the vehicles.
We do not think so. What violates due process is the
absolute lack of opportunity to be heard. That opportunity,
the Court is convinced, was sufficiently accorded to
petitioner Abracia. She was notified of the contempt charge
against her; she was effectively assisted by counsel when
she appeared during the hearing on October 8, 1992; and
she was afforded ample opportunity to answer and refute
the charge against her. The circumstance that she opted
not to avail of her chance to be heard on that occasion by
asking for an extension of time within which to hire a
counsel of her choice, a request denied by the trial court,
did not transgress nor deprive her of her right to due
process.
Significantly, during the hearing on October 8, 1992, Mr.
Nagpacan manifested in open court that, after conferring
with petitioner Abracia, the latter was willing to surrender
these vehicles into the custody of the sheriff on the
condition that the standing motion (for contempt) be
withdrawn.
[22]
Her decision was made freely and
voluntarily, and after conferring with her counsel.
Moreover, it was petitioner Abracia herself who imposed
the condition that respondent Santiago should withdraw
her motion for contempt in exchange for her promise to
surrender the subject vehicles. Thus, petitioner Abracias
claim that she was coerced into surrendering the vehicles
had no basis.
Even assuming ex gratia argumenti that there indeed
existed certain legal infirmities in connection with the
assailed orders of Judge Allarde, still, considering the
totality of circumstances of this case, the nullification of the
contested orders would be way out of line. For 21 long
years, starting 1972 when this controversy started up to
1993 when her claim was fully paid out of the garnished
funds of the City of Caloocan, respondent Santiago was
466

cruelly and unjustly deprived of what was due her. It would
be, at the very least, merciless and unchristian to make
private respondent refund the City of Caloocan the amount
already paid to her, only to force her to go through the
same nightmare all over again.
At any rate, of paramount importance to us is that
justice has been served. No right of the public was violated
and public interest was preserved.
Finally, we cannot simply pass over in silence the
deplorable act of the former Mayor of Caloocan City in
refusing to sign the check in payment of the Citys
obligation to private respondent. It was an open defiance of
judicial processes, smacking of political arrogance, and a
direct violation of the very ordinance he himself approved.
Our Resolution in G.R. No. 98366, City Government of
Caloocan vs. Court of Appeals, et al., dated May 16, 1991,
dismissing the petition of the City of Caloocan assailing the
issuance of a writ of execution by the trial court, already
resolved with finality all impediments to the execution of
judgment in this case. Yet, the City Government of
Caloocan, in a blatant display of malice and bad faith,
refused to comply with the decision. Now, it has the
temerity to come to this Court once more and continue
inflicting injustice on a hapless citizen, as if all the harm and
prejudice it has already heaped upon respondent Santiago
are still not enough.
This Court will not condone the repudiation of just
obligations contracted by municipal corporations. On the
contrary, we will extend our aid and every judicial facility to
any citizen in the enforcement of just and valid claims
against abusive local government units.
WHEREFORE, the petition is hereby DISMISSED for utter
lack of merit. The assailed orders of the trial court dated
October 1, 1992, October 8, 1992 and May 7, 1993,
respectively, are AFFIRMED.
Petitioners and their counsels are hereby warned
against filing any more pleadings in connection with the
issues already resolved with finality herein and in related
cases.
Costs against petitioners.
SO ORDERED.
Panganiban, (Acting Chairman), Sandoval-
Gutierrez, and Carpio-Morales, JJ., concur.
Puno, (Chairman), J., on official leave.

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-61744 June 25, 1984
MUNICIPALITY OF SAN MIGUEL, BULACAN, petitioner,
vs.
467

HONORABLE OSCAR C. FERNANDEZ, in his capacity as the
Presiding Judge, Branch IV, Baliuag, Bulacan, The
PROVINCIAL SHERIFF of Bulacan, MARGARITA D. VDA. DE
IMPERIO, ADORACION IMPERIO, RODOLFO IMPERIO,
CONRADO IMPERIO, ERNESTO IMPERIO, ALFREDO
IMPERIO, CARLOS IMPERIO, JR., JUAN IMPERIO and
SPOUSES MARCELO PINEDA and LUCILA
PONGCO, respondents.
Pascual C. Liatchko for petitioner.
The Solicitor General and Marcelo Pineda for respondents.

RELOVA, J.:
In Civil Case No. 604-B, entitled "Margarita D. Vda. de
Imperio, et al. vs. Municipal Government of San Miguel,
Bulacan, et al.", the then Court of First Instance of Bulacan,
on April 28, 1978, rendered judgment holding herein
petitioner municipality liable to private respondents, as
follows:
WHEREFORE, premises considered, judgment
is hereby rendered in favor of the plaintiffs and
against the defendant Municipal Government
of San Miguel Bulacan, represented by Mayor
MarMarcelo G. Aure and its Municipal
Treasurer:
1. ordering the partial revocation of the Deed
of Donation signed by the deceased Carlos
Imperio in favor of the Municipality of San
Miguel Bulacan, dated October 27, 1947
insofar as Lots Nos. 1, 2, 3, 4 and 5, Block 11 of
Subdivision Plan Psd-20831 are concerned,
with an aggregate total area of 4,646 square
meters, which lots are among those covered
and described under TCT No. T-1831 of the
Register of Deeds of Bulacan in the name of
the Municipal Government of San Miguel
Bulacan,
2. ordering the defendant to execute the
corresponding Deed of Reconveyance over the
aforementioned five lots in favor of the
plaintiffs in the proportion of the undivided
one-half () share in the name of plaintiffs
Margarita D. Vda. de Imperio, Adoracion,
Rodolfo, Conrado, Ernesto, Alfredo, Carlos, Jr.
and Juan, all surnamed Imperio, and the
remaining undivided one-half () share in favor
of plaintiffs uses Marcelo E. Pineda and Lucila
Pongco;
3. ordering the defendant municipality to pay
to the plaintiffs in the proportion mentioned in
the immediately preceding paragraph the sum
of P64,440.00 corresponding to the rentals it
has collected from the occupants for their use
468

and occupation of the premises from 1970 up
to and including 1975, plus interest thereon at
the legal rate from January 1970 until fully
paid;
4. ordering the restoration of ownership and
possession over the five lots in question in
favor of the plaintiffs in the same proportion
aforementioned;
5. ordering the defendant to pay the plaintiffs
the sum of P3,000.00 for attomey's fees; and
to pay the cost of suit.
The counterclaim of the defendant is hereby
ordered dismissed for lack of evidence
presented to substantiate the same.
SO ORDERED. (pp. 11-12, Rollo)
The foregoing judgment became final when herein
petitioner's appeal was dismissed due to its failure to file
the record on appeal on time. The dismissal was affirmed
by the then Court of Appeals in CA-G.R. No. SP-12118 and
by this Court in G.R. No. 59938. Thereafter, herein private
respondents moved for issuance of a writ of execution for
the satisfaction of the judgment. Respondent judge, on July
27, 1982, issued an order, to wit:
Considering that an entry of judgment had
already been made on June 14, 1982 in G. R.
No. L-59938 and;
Considering further that there is no opposition
to plaintiffs' motion for execution dated July
23, 1983;
Let a writ of execution be so issued, as prayed
for in the aforestated motion. (p. 10, Rollo)
Petitioner, on July 30, 1982, filed a Motion to Quash the
writ of execution on the ground that the municipality's
property or funds are all public funds exempt from
execution. The said motion to quash was, however, denied
by the respondent judge in an order dated August 23, 1982
and the alias writ of execution stands in full force and
effect.
On September 13, 1982, respondent judge issued an order
which in part, states:
It is clear and evident from the foregoing that
defendant has more than enough funds to
meet its judgment obligation. Municipal
Treasurer Miguel C, Roura of San Miguel,
Bulacan and Provincial Treasurer of Bulacan
Agustin O. Talavera are therefor hereby
ordered to comply with the money judgment
rendered by Judge Agustin C. Bagasao against
469

said municipality. In like manner, the municipal
authorities of San Miguel, Bulacan are likewise
ordered to desist from plaintiffs' legal
possession of the property already returned to
plaintiffs by virtue of the alias writ of
execution.
Finally, defendants are hereby given an
inextendible period of ten (10) days from
receipt of a copy of this order by the Office of
the Provincial Fiscal of Bulacan within which to
submit their written compliance, (p. 24, Rollo)
When the treasurers (provincial and municipal) failed to
comply with the order of September 13, 1982, respondent
judge issued an order for their arrest and that they will be
release only upon compliance thereof.
Hence, the present petition on the issue whether the funds
of the Municipality of San Miguel, Bulacan, in the hands of
the provincial and municipal treasurers of Bulacan and San
Miguel, respectively, are public funds which are exempt
from execution for the satisfaction of the money judgment
in Civil Case No. 604-B.
Well settled is the rule that public funds are not subject to
levy and execution. The reason for this was explained in the
case of Municipality of Paoay vs. Manaois, 86 Phil. 629
"that they are held in trust for the people, intended and
used for the accomplishment of the purposes for which
municipal corporations are created, and that to subject said
properties and public funds to execution would materially
impede, even defeat and in some instances destroy said
purpose." And, in Tantoco vs. Municipal Council of Iloilo, 49
Phil. 52, it was held that "it is the settled doctrine of the law
that not only the public property but also the taxes and
public revenues of such corporations Cannot be seized
under execution against them, either in the treasury or
when in transit to it. Judgments rendered for taxes, and the
proceeds of such judgments in the hands of officers of the
law, are not subject to execution unless so declared by
statute." Thus, it is clear that all the funds of petitioner
municipality in the possession of the Municipal Treasurer of
San Miguel, as well as those in the possession of the
Provincial Treasurer of Bulacan, are also public funds and as
such they are exempt from execution.
Besides, Presidential Decree No. 477, known as "The Decree
on Local Fiscal Administration", Section 2 (a), provides:
SEC. 2. Fundamental Principles.
Local government financial affairs,
transactions, and operations shall be governed
by the fundamental principles set forth
hereunder:
(a) No money shall be paid out of the treasury
except in pursuance of a lawful appropriation
or other specific statutory authority.
470

xxx xxx xxx
Otherwise stated, there must be a corresponding
appropriation in the form of an ordinance duly passed by
the Sangguniang Bayan before any money of the
municipality may be paid out. In the case at bar, it has not
been shown that the Sangguniang Bayan has passed an
ordinance to this effect.
Furthermore, Section 15, Rule 39 of the New Rules of
Court, outlines the procedure for the enforcement of
money judgment:
(a) By levying on all the property of the debtor,
whether real or personal, not otherwise
exempt from execution, or only on such part of
the property as is sufficient to satisfy the
judgment and accruing cost, if he has more
than sufficient property for the purpose;
(b) By selling the property levied upon;
(c) By paying the judgment-creditor so much of
the proceeds as will satisfy the judgment and
accruing costs; and
(d) By delivering to the judgment-debtor the
excess, if any, unless otherwise, directed by
judgment or order of the court.
The foregoing has not been followed in the case at bar.
ACCORDINGLY, the petition is granted and the order of
respondent judge, dated July 27, 1982, granting issuance of
a writ of execution; the alias writ of execution, dated July
27, 1982; and the order of respondent judge, dated
September 13, 1982, directing the Provincial Treasurer of
Bulacan and the Municipal Treasurer of San Miguel, Bulacan
to comply with the money judgments, are SET ASIDE; and
respondents are hereby enjoined from implementing the
writ of execution.
SO ORDERED.
Teehankee (Chairman), Melencio-Herrera, Plana, Gutierrez,
Jr., and De la Fuente, JJ,. concur.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. Nos. 89898-99 October 1, 1990
MUNICIPALITY OF MAKATI, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, HON. SALVADOR P.
DE GUZMAN, JR., as Judge RTC of Makati, Branch CXLII
ADMIRAL FINANCE CREDITORS CONSORTIUM, INC., and
SHERIFF SILVINO R. PASTRANA,respondents.
471

Defante & Elegado for petitioner.
Roberto B. Lugue for private respondent Admiral Finance
Creditors' Consortium, Inc.
R E S O L U T I O N

CORTS, J.:
The present petition for review is an off-shoot of
expropriation proceedings initiated by petitioner
Municipality of Makati against private respondent Admiral
Finance Creditors Consortium, Inc., Home Building System
& Realty Corporation and one Arceli P. Jo, involving a parcel
of land and improvements thereon located at Mayapis St.,
San Antonio Village, Makati and registered in the name of
Arceli P. Jo under TCT No. S-5499.
It appears that the action for eminent domain was filed on
May 20, 1986, docketed as Civil Case No. 13699. Attached
to petitioner's complaint was a certification that a bank
account (Account No. S/A 265-537154-3) had been opened
with the PNB Buendia Branch under petitioner's name
containing the sum of P417,510.00, made pursuant to the
provisions of Pres. Decree No. 42. After due hearing where
the parties presented their respective appraisal reports
regarding the value of the property, respondent RTC judge
rendered a decision on June 4, 1987, fixing the appraised
value of the property at P5,291,666.00, and ordering
petitioner to pay this amount minus the advanced payment
of P338,160.00 which was earlier released to private
respondent.
After this decision became final and executory, private
respondent moved for the issuance of a writ of execution.
This motion was granted by respondent RTC judge. After
issuance of the writ of execution, a Notice of Garnishment
dated January 14, 1988 was served by respondent sheriff
Silvino R. Pastrana upon the manager of the PNB Buendia
Branch. However, respondent sheriff was informed that a
"hold code" was placed on the account of petitioner. As a
result of this, private respondent filed a motion dated
January 27, 1988 praying that an order be issued directing
the bank to deliver to respondent sheriff the amount
equivalent to the unpaid balance due under the RTC
decision dated June 4, 1987.
Petitioner filed a motion to lift the garnishment, on the
ground that the manner of payment of the expropriation
amount should be done in installments which the
respondent RTC judge failed to state in his decision. Private
respondent filed its opposition to the motion.
Pending resolution of the above motions, petitioner filed on
July 20, 1988 a "Manifestation" informing the court that
private respondent was no longer the true and lawful
owner of the subject property because a new title over the
property had been registered in the name of Philippine
Savings Bank, Inc. (PSB) Respondent RTC judge issued an
472

order requiring PSB to make available the documents
pertaining to its transactions over the subject property, and
the PNB Buendia Branch to reveal the amount in
petitioner's account which was garnished by respondent
sheriff. In compliance with this order, PSB filed a
manifestation informing the court that it had consolidated
its ownership over the property as mortgagee/purchaser at
an extrajudicial foreclosure sale held on April 20, 1987.
After several conferences, PSB and private respondent
entered into a compromise agreement whereby they
agreed to divide between themselves the compensation
due from the expropriation proceedings.
Respondent trial judge subsequently issued an order dated
September 8, 1988 which: (1) approved the compromise
agreement; (2) ordered PNB Buendia Branch to
immediately release to PSB the sum of P4,953,506.45 which
corresponds to the balance of the appraised value of the
subject property under the RTC decision dated June 4,
1987, from the garnished account of petitioner; and, (3)
ordered PSB and private respondent to execute the
necessary deed of conveyance over the subject property in
favor of petitioner. Petitioner's motion to lift the
garnishment was denied.
Petitioner filed a motion for reconsideration, which was
duly opposed by private respondent. On the other hand, for
failure of the manager of the PNB Buendia Branch to
comply with the order dated September 8, 1988, private
respondent filed two succeeding motions to require the
bank manager to show cause why he should not be held in
contempt of court. During the hearings conducted for the
above motions, the general manager of the PNB Buendia
Branch, a Mr. Antonio Bautista, informed the court that he
was still waiting for proper authorization from the PNB
head office enabling him to make a disbursement for the
amount so ordered. For its part, petitioner contended that
its funds at the PNB Buendia Branch could neither be
garnished nor levied upon execution, for to do so would
result in the disbursement of public funds without the
proper appropriation required under the law, citing the
case of Republic of the Philippines v. Palacio [G.R. No. L-
20322, May 29, 1968, 23 SCRA 899].
Respondent trial judge issued an order dated December 21,
1988 denying petitioner's motion for reconsideration on
the ground that the doctrine enunciated in Republic v.
Palacio did not apply to the case because petitioner's PNB
Account No. S/A 265-537154-3 was an account specifically
opened for the expropriation proceedings of the subject
property pursuant to Pres. Decree No. 42. Respondent RTC
judge likewise declared Mr. Antonio Bautista guilty of
contempt of court for his inexcusable refusal to obey the
order dated September 8, 1988, and thus ordered his arrest
and detention until his compliance with the said order.
Petitioner and the bank manager of PNB Buendia Branch
then filed separate petitions for certiorari with the Court of
Appeals, which were eventually consolidated. In a decision
promulgated on June 28, 1989, the Court of Appeals
473

dismissed both petitions for lack of merit, sustained the
jurisdiction of respondent RTC judge over the funds
contained in petitioner's PNB Account No. 265-537154-3,
and affirmed his authority to levy on such funds.
Its motion for reconsideration having been denied by the
Court of Appeals, petitioner now files the present petition
for review with prayer for preliminary injunction.
On November 20, 1989, the Court resolved to issue a
temporary restraining order enjoining respondent RTC
judge, respondent sheriff, and their representatives, from
enforcing and/or carrying out the RTC order dated
December 21, 1988 and the writ of garnishment issued
pursuant thereto. Private respondent then filed its
comment to the petition, while petitioner filed its reply.
Petitioner not only reiterates the arguments adduced in its
petition before the Court of Appeals, but also alleges for
the first time that it has actually two accounts with the PNB
Buendia Branch, to wit:
xxx xxx xxx
(1) Account No. S/A 265-537154-3
exclusively for the expropriation of the subject
property, with an outstanding balance of
P99,743.94.
(2) Account No. S/A 263-530850-7 for
statutory obligations and other purposes of the
municipal government, with a balance of
P170,098,421.72, as of July 12, 1989.
xxx xxx xxx
[Petition, pp. 6-7; Rollo, pp. 11-12.]
Because the petitioner has belatedly alleged only in this
Court the existence of two bank accounts, it may fairly be
asked whether the second account was opened only for the
purpose of undermining the legal basis of the assailed
orders of respondent RTC judge and the decision of the
Court of Appeals, and strengthening its reliance on the
doctrine that public funds are exempted from garnishment
or execution as enunciated in Republic v. Palacio[supra.] At
any rate, the Court will give petitioner the benefit of the
doubt, and proceed to resolve the principal issues
presented based on the factual circumstances thus alleged
by petitioner.
Admitting that its PNB Account No. S/A 265-537154-3 was
specifically opened for expropriation proceedings it had
initiated over the subject property, petitioner poses no
objection to the garnishment or the levy under execution of
the funds deposited therein amounting to P99,743.94.
However, it is petitioner's main contention that inasmuch
as the assailed orders of respondent RTC judge involved the
net amount of P4,965,506.45, the funds garnished by
respondent sheriff in excess of P99,743.94, which are public
funds earmarked for the municipal government's other
474

statutory obligations, are exempted from execution without
the proper appropriation required under the law.
There is merit in this contention. The funds deposited in the
second PNB Account No. S/A 263-530850-7 are public funds
of the municipal government. In this jurisdiction, well-
settled is the rule that public funds are not subject to levy
and execution, unless otherwise provided for by statute
[Republic v. Palacio, supra.; The Commissioner of Public
Highways v. San Diego, G.R. No. L-30098, February 18,
1970, 31 SCRA 616]. More particularly, the properties of a
municipality, whether real or personal, which are necessary
for public use cannot be attached and sold at execution sale
to satisfy a money judgment against the municipality.
Municipal revenues derived from taxes, licenses and market
fees, and which are intended primarily and exclusively for
the purpose of financing the governmental activities and
functions of the municipality, are exempt from execution
[See Viuda De Tan Toco v. The Municipal Council of Iloilo, 49
Phil. 52 (1926): The Municipality of Paoay, Ilocos Norte v.
Manaois, 86 Phil. 629 (1950); Municipality of San Miguel,
Bulacan v. Fernandez, G.R. No. 61744, June 25, 1984, 130
SCRA 56]. The foregoing rule finds application in the case at
bar. Absent a showing that the municipal council of Makati
has passed an ordinance appropriating from its public funds
an amount corresponding to the balance due under the RTC
decision dated June 4, 1987, less the sum of P99,743.94
deposited in Account No. S/A 265-537154-3, no levy under
execution may be validly effected on the public funds of
petitioner deposited in Account No. S/A 263-530850-7.
Nevertheless, this is not to say that private respondent and
PSB are left with no legal recourse. Where a municipality
fails or refuses, without justifiable reason, to effect
payment of a final money judgment rendered against it, the
claimant may avail of the remedy of mandamus in order to
compel the enactment and approval of the necessary
appropriation ordinance, and the corresponding
disbursement of municipal funds therefor [SeeViuda De Tan
Toco v. The Municipal Council of Iloilo, supra; Baldivia v.
Lota, 107 Phil. 1099 (1960); Yuviengco v. Gonzales, 108 Phil.
247 (1960)].
In the case at bar, the validity of the RTC decision dated
June 4, 1987 is not disputed by petitioner. No appeal was
taken therefrom. For three years now, petitioner has
enjoyed possession and use of the subject property
notwithstanding its inexcusable failure to comply with its
legal obligation to pay just compensation. Petitioner has
benefited from its possession of the property since the
same has been the site of Makati West High School since
the school year 1986-1987. This Court will not condone
petitioner's blatant refusal to settle its legal obligation
arising from expropriation proceedings it had in fact
initiated. It cannot be over-emphasized that, within the
context of the State's inherent power of eminent domain,
. . . [j]ust compensation means not only the
correct determination of the amount to be
paid to the owner of the land but also the
payment of the land within a reasonable time
475

from its taking. Without prompt payment,
compensation cannot be considered "just" for
the property owner is made to suffer the
consequence of being immediately deprived of
his land while being made to wait for a decade
or more before actually receiving the amount
necessary to cope with his loss [Cosculluela v.
The Honorable Court of Appeals, G.R. No.
77765, August 15, 1988, 164 SCRA 393,
400. See also Provincial Government of
Sorsogon v. Vda. de Villaroya, G.R. No. 64037,
August 27, 1987, 153 SCRA 291].
The State's power of eminent domain should be exercised
within the bounds of fair play and justice. In the case at bar,
considering that valuable property has been taken, the
compensation to be paid fixed and the municipality is in full
possession and utilizing the property for public purpose, for
three (3) years, the Court finds that the municipality has
had more than reasonable time to pay full compensation.
WHEREFORE, the Court Resolved to ORDER petitioner
Municipality of Makati to immediately pay Philippine
Savings Bank, Inc. and private respondent the amount of
P4,953,506.45. Petitioner is hereby required to submit to
this Court a report of its compliance with the foregoing
order within a non-extendible period of SIXTY (60) DAYS
from the date of receipt of this resolution.
The order of respondent RTC judge dated December 21,
1988, which was rendered in Civil Case No. 13699, is SET
ASIDE and the temporary restraining order issued by the
Court on November 20, 1989 is MADE PERMANENT.
SO ORDERED.
Fernan, C.J., Gutierrez, Jr., Feliciano and Bidin, JJ., concur.
THIRD DIVISION
[G.R. No. 107271. September 10, 2003]
CITY OF CALOOCAN and NORMA M. ABRACIA, petitioners,
vs. HON. MAURO T. ALLARDE, Presiding Judge of
Branch 123, RTC of Caloocan City, ALBERTO A.
CASTILLO, Deputy Sheriff of Branch 123, RTC of
Caloocan City, and DELFINA HERNANDEZ SANTIAGO
and PHILIPPINE NATIONAL BANK
(PNB), respondents.
D E C I S I O N
CORONA, J.:
Assailed in this petition for certiorari is the
decision
[1]
dated August 31, 1992, of the Court of Appeals in
CA G.R. SP No. 27423, ordering the Regional Trial Court of
Caloocan City, Branch 123, to implement an alias writ of
476

execution dated January 16, 1992. The dispositive portion
read as follows:
WHEREFORE the petition is hereby granted ordering the
Regional Trial Court of Kaloocan City, Branch 123, to
immediately effect the alias writ of execution dated January
16, 1992 without further delay.
Counsel for the respondents are warned that a repetition of
their contemptuous act to delay the execution of a final and
executory judgment will be dealt with more severely.
SO ORDERED.
[2]

It is important to state at the outset that the dispute
between petitioner and private respondent has been
litigated thrice before this Court: first, in G.R. No. L-39288-
89, entitled Heirs of Abelardo Palomique, et al. vs. Marcial
Samson, et al., decided on January 31, 1985; second, in G.R.
No. 98366, entitled City Government of Caloocan vs. Court
of Appeals, et al., resolved on May 16, 1991, and third, in
G.R. No. 102625, entitled Santiago vs. Sto. Tomas, et al.,
decided on August 1, 1995. This is not to mention the
numerous concurrent efforts by the City Government of
Caloocan to seek relief from other judicial and quasi-judicial
bodies. The present petition for certiorari is the fourth time
we are called upon to resolve the dispute.
The factual and procedural antecedents follow.
Sometime in 1972, Marcial Samson, City Mayor of
Caloocan City, through Ordinance No. 1749, abolished the
position of Assistant City Administrator and 17 other
positions from the plantilla of the local government of
Caloocan. Then Assistant City Administrator Delfina
Hernandez Santiago and the 17 affected employees of the
City Government assailed the legality of the abolition
before the then Court of First Instance (CFI) of Caloocan
City, Branch 33.
In 1973, the CFI declared the abolition illegal and
ordered the reinstatement of all the dismissed employees
and the payment of their back salaries and other
emoluments. The City Government of Caloocan appealed to
the Court of Appeals. Respondent Santiago and her co-
parties moved for the dismissal of the appeal for being
dilatory and frivolous but the appellate court denied their
motion. Thus, they elevated the case on certiorari before
this Court, docketed as G.R. No. L-39288-89, Heirs of
Abelardo Palomique, et al. vs. Marcial Samson, et al. In our
Resolution dated January 31, 1985, we held that the
appellate court erred in not dismissing the appeal, and
that the appeal of the City Government of Caloocan was
frivolous and dilatory. In due time, the resolution lapsed
into finality and entry of judgment was made on February
27, 1985.
In 1986, the City Government of Caloocan paid
respondent Santiago P75,083.37 in partial payment of her
backwages, thereby leaving a balance of P530,761.91. Her
co-parties were paid in full.
[3]
In 1987, the City of Caloocan
477

appropriated funds for her unpaid back salaries. This was
included in Supplemental Budget No. 3 for the fiscal year
1987. Surprisingly, however, the City later refused to
release the money to respondent Santiago.
Respondent Santiago exerted effort for the execution of
the remainder of the money judgment but she met stiff
opposition from the City Government of Caloocan. On
February 12, 1991, Judge Mauro T. Allarde, RTC of Caloocan
City, Branch 123, issued a writ of execution for the payment
of the remainder of respondent Santiagos back salaries and
other emoluments.
[4]

For the second time, the City Government of Caloocan
went up to the Court of Appeals and filed a petition for
certiorari, prohibition and injunction to stop the trial court
from enforcing the writ of execution. The CA dismissed the
petition and affirmed the order of issuance of the writ of
execution.
[5]
One of the issues raised and resolved therein
was the extent to which back salaries and emoluments
were due to respondent Santiago. The appellate court held
that she was entitled to her salaries from October, 1983 to
December, 1986.
And for the second time, the City Government of
Caloocan appealed to this Court in G.R. No. 98366, City
Government of Caloocan vs. Court of Appeals, et al. The
petition was dismissed, through our Resolution of May 16,
1991, for having been filed late and for failure to show any
reversible error on the part of the Court of Appeals. The
resolution subsequently attained finality and the
corresponding entry of judgment was made on July 29,
1991.
On motion of private respondent Santiago, Judge
Mauro T. Allarde ordered the issuance of an alias writ of
execution on March 3, 1992. The City Government of
Caloocan moved to reconsider the order, insisting in the
main that respondent Santiago was not entitled to
backwages from 1983 to 1986. The court a quo denied the
motion and forthwith issued the alias writ of execution.
Unfazed, the City Government of Caloocan filed a motion to
quash the writ, maintaining that the money judgment
sought to be enforced should not have included salaries
and allowances for the years 1983-1986. The trial court
likewise denied the motion.
On July 27, 1992, Sheriff Alberto A. Castillo levied and
sold at public auction one of the motor vehicles of the City
Government of Caloocan, with plate no. SBH-165,
for P100,000. The proceeds of the sale were turned over to
respondent Santiago in partial satisfaction of her claim,
thereby leaving a balance of P439,377.14, inclusive of
interest. Petitioners filed a motion questioning the validity
of the auction sale of the vehicle with plate no. SBH-165,
and a supplemental motion maintaining that the properties
of the municipality were exempt from execution. In his
Order dated October 1, 1992, Judge Allarde denied both
motions and directed the sheriff to levy and schedule at
public auction three more vehicles of the City of Caloocan -

[6]

478

ONE (1) Unit Motor Vehicle (Hunter Station Wagon); Motor
No. C-240-199629; Chassis No. MBB-910369C;
ONE (1) Unit Motor Vehicle (Hunter Series 11-Diesel);
Engine No. 4FB1-174328, Chassis No. MBB-910345C; Plate
No. SDL-653;
ONE (1) Unit Motor Vehicle (Hunter Series 11-Diesel);
Engine No. 4FB-165196; Chassis No. MBB 910349C.
All the vehicles, including that previously sold in the
auction sale, were owned by the City and assigned for the
use of herein petitioner Norma Abracia, Division
Superintendent of Caloocan City, and other officials of the
Division of City Schools.
Meanwhile, the City Government of Caloocan sought
clarification from the Civil Service Commission (CSC) on
whether respondent Santiago was considered to have
rendered services from 1983-1986 as to be entitled to
backwages for that period. In its Resolution No. 91-1124,
the CSC ruled in the negative.
On November 22, 1991, private respondent Santiago
challenged the CSC resolution before this Court in G.R. No.
102625, Santiago vs. Sto. Tomas, et al. On July 8, 1993, we
initially dismissed the petition for lack of merit; however,
we reconsidered the dismissal of the petition in our
Resolution dated August 1, 1995, this time ruling in favor of
respondent Santiago:
The issue of petitioner Santiagos right to back salaries for
the period from October 1983 to December 1986 having
been resolved in G.R. No. 98366 on 16 May 1991, CSC
Resolution No. 91-1124 promulgated later on 24 September
1991 in particular, its ruling on the extent of backwages
due petitioner Santiago was in fact moot and academic at
the time of its promulgation. CSC Resolution No. 91-1124
could not, of course, set aside what had been judicially
decided with finality x x x x the court considers that resort
by the City Government of Caloocan to respondent CSC was
but another attempt to deprive petitioner Santiago of her
claim to back salaries x x x and a continuation of the Citys
abuse and misuse of the rules of judicial procedure. The
Citys acts have resulted in wasting the precious time and
resources of the courts and respondent CSC. (Underscoring
supplied).
On October 5, 1992, the City Council of Caloocan passed
Ordinance No. 0134, Series of 1992, which included the
amount of P439,377.14 claimed by respondent Santiago as
back salaries, plus interest.
[7]
Pursuant to the subject
ordinance, Judge Allarde issued an order dated November
10, 1992, decreeing that:
WHEREFORE, the City Treasurer (of Caloocan), Norberto
Azarcon is hereby ordered to deliver to this Court within
five (5) days from receipt hereof, (a) managers check
covering the amount of P439,378.00 representing the back
salaries of petitioner Delfina H. Santiago in accordance with
479

Ordinance No. 0134 S. 1992 and pursuant to the final and
executory decision in these cases.
Then Caloocan Mayor Macario A. Asistio, Jr., however,
refused to sign the check intended as payment for
respondent Santiagos claims. This, despite the fact that he
was one of the signatories of the ordinance authorizing
such payment. On April 29, 1993, Judge Allarde issued
another order directing the Acting City Mayor of Caloocan,
Reynaldo O. Malonzo, to sign the check which had been
pending before the Office of the Mayor since December 11,
1992. Acting City Mayor Malonzo informed the trial court
that he could not comply with the order since the subject
check was not formally turned over to him by the City
Mayor who went on official leave of absence on April 15,
1993, and that he doubted whether he had authority to
sign the same.
[8]

Thus, in an order dated May 7, 1993, Judge Allarde
ordered Sheriff Alberto A. Castillo to immediately garnish
the funds of the City Government of Caloocan
corresponding to the claim of respondent Santiago.
[9]
On
the same day, Sheriff Alberto A. Castillo served a copy of
the Notice of Garnishment on the Philippine National Bank
(PNB), Sangandaan Branch, Caloocan City. When PNB
immediately notified the City of Caloocan of the Notice of
Garnishment, the City Treasurer sent a letter-advice
informing PNB that the order of garnishment was illegal,
with a warning that it would hold PNB liable for any
damages which may be caused by the withholding of the
funds of the city. PNB opted to comply with the order of
Judge Allarde and released to the Sheriff a managers check
amounting to P439,378. After 21 long years, the claim of
private respondent Santiago was finally settled in full.
On June 4, 1993, however, while the instant petition
was pending, the City Government of Caloocan filed yet
another motion with this Court, a Motion to Declare in
Contempt of Court; to Set Aside the Garnishment and
Administrative Complaint against Judge Allarde, respondent
Santiago and PNB. Subsequently, the City Government of
Caloocan filed a Supplemental Petition formally impleading
PNB as a party-respondent in this case.
The instant petition for certiorari is directed this time
against the validity of the garnishment of the funds of the
City of Caloocan, as well as the validity of the levy and sale
of the motor vehicles belonging to the City of Caloocan.
More specifically, petitioners insist that Judge Allarde
gravely abused his discretion in:
(a) ordering the garnishment of the funds of the City of
Caloocan deposited with the PNB, since it is settled that
public funds are beyond the reach of garnishment and even
with the appropriation passed by the City Council, the
authority of the Mayor is still needed for the release of the
appropriation;
(b) ordering the levy and sale at public auction of three (3)
motor vehicles owned by the City of Caloocan, which
vehicles are necessary for public use and cannot be
480

attached nor sold in an execution sale to satisfy a money
judgment against the City of Caloocan;
(c) peremptorily denying petitioner City of
Caloocans urgent motions to vacate and set aside the
auction sale of the motor vehicle with PLATE NO. SBH-165,
notwithstanding that the auction sale by the Sheriff was
tainted with serious irregularities, more particularly:
i. non-compliance with the mandatory posting of the notice
of sale;
ii. non-observance of the procedure that a sale through
public auction has to be made and consummated at the
time of the auction, at the designated place and upon
actual payment of the purchase price by the winning
bidder;
iii. violation of Sec. 21, Rule 39 of the Rules of Court to the
effect that sale of personal property capable of manual
delivery must be sold within the view of those attending
the sale; and,
iv. the Sheriffs Certificate of Sale contained false narration
of facts respecting the actual time of the public auction;
(d) the enforcement of the levy made by the Sheriff
covering the three (3) motor vehicles based on an alias writ
that has long expired.
The petition has absolutely no merit. The trial court
committed no grave abuse of discretion in implementing
the alias writ of execution to settle the claim of respondent
Santiago, the satisfaction of which petitioner had been
maliciously evading for 21 years.
Petitioner argues that the garnishment of its funds in
PNB was invalid inasmuch as these were public funds and
thus exempt from execution. Garnishment is considered a
specie of attachment by means of which the plaintiff seeks
to subject to his claim property of the defendant in the
hands of a third person, or money owed by such third
person or garnishee to the defendant.
[10]

The rule is and has always been that all government
funds deposited in the PNB or any other official depositary
of the Philippine Government by any of its agencies or
instrumentalities, whether by general or special deposit,
remain government funds and may not be subject to
garnishment or levy, in the absence of a corresponding
appropriation as required by law:
[11]

Even though the rule as to immunity of a state from suit is
relaxed, the power of the courts ends when the judgment is
rendered. Although the liability of the state has been
judicially ascertained, the state is at liberty to determine for
itself whether to pay the judgment or not, and execution
cannot issue on a judgment against the state. Such statutes
do not authorize a seizure of state property to satisfy
judgments recovered, and only convey an implication that
481

the legislature will recognize such judgment as final and
make provision for the satisfaction thereof.
[12]

The rule is based on obvious considerations of public
policy. The functions and public services rendered by the
State cannot be allowed to be paralyzed or disrupted by the
diversion of public funds from their legitimate and specific
objects, as appropriated by law.
[13]

However, the rule is not absolute and admits of a well-
defined exception, that is, when there is a corresponding
appropriation as required by law. Otherwise stated, the rule
on the immunity of public funds from seizure or
garnishment does not apply where the funds sought to be
levied under execution are already allocated by law
specifically for the satisfaction of the money judgment
against the government. In such a case, the monetary
judgment may be legally enforced by judicial processes.
Thus, in the similar case of Pasay City Government, et
al. vs. CFI of Manila, Br. X, et al.,
[14]
where petitioners
challenged the trial courts order garnishing its funds in
payment of the contract price for the construction of the
City Hall, we ruled that, while government funds deposited
in the PNB are exempt from execution or garnishment, this
rule does not apply if an ordinance has already been
enacted for the payment of the Citys obligations
Upon the issuance of the writ of execution, the petitioner-
appellants moved for its quashal alleging among other
things the exemption of the government from execution.
This move on the part of petitioner-appellants is at first
glance laudable for all government funds deposited with
the Philippine National Bank by any agency or
instrumentality of the government, whether by way of
general or special deposit, remain government funds and
may not be subject to garnishment or levy. But inasmuch
as an ordinance has already been enacted expressly
appropriating the amount of P613,096.00 as payment to
the respondent-appellee, then the herein case is covered by
the exception to the general rule x x x x
In the instant case, the City Council of Caloocan already
approved and passed Ordinance No. 0134, Series of 1992,
allocating the amount of P439,377.14 for respondent
Santiagos back salaries plus interest. Thus this case fell
squarely within the exception. For all intents and purposes,
Ordinance No. 0134, Series of 1992, was the
corresponding appropriation as required by law. The sum
indicated in the ordinance for Santiago were deemed
automatically segregated from the other budgetary
allocations of the City of Caloocan and earmarked solely for
the Citys monetary obligation to her. The judgment of the
trial court could then be validly enforced against such
funds.
Indeed, this conclusion is further buttressed by the
Certification issued on December 23, 1992 by Norberto C.
Azarcon, City Treasurer of Caloocan:
CERTIFICATION
482

This is to certify that according to the records available in
this Office the claim for backwages of the HON. JUDGE
DELFINA H. SANTIAGO has been properly obligated and can
be collected in accordance with existing accounting and
auditing rules and regulations.
This is to certify further that in case the claim is not
collected within the present fiscal year, such claim shall be
entered in the books of Accounts Payable and can still be
collected in the next fiscal year x x x x (Underscoring
supplied)
Petitioners reliance on Municipality of Makati vs. Court
of Appeals, et al.,
[15]
and Commissioner of Public Highways
vs. San Diego,
[16]
does not help their cause.
[17]
Both cases
implicitly affirmed that public funds may be garnished if
there is a statute which appropriated the amount so
garnished. Thus, in Municipality of Makati, citing San Diego,
we unequivocally held that:
In this jurisdiction, well-settled is the rule that public funds
are not subject to levy and execution, unless otherwise
provided by statute x x x x
Similarly, we cannot agree with petitioners argument
that the appropriation ordinance of the City Council did not
authorize PNB to release the funds because only the City
Mayor could authorize the release thereof. A valid
appropriation of public funds lifts its exemption from
execution. Here, the appropriation passed by the City
Council of Caloocan providing for the payment of
backwages to respondent was duly approved and signed by
both the council and then Mayor Macario Asistio, Jr. The
mayors signature approving the budget ordinance was his
assent to the appropriation of funds for respondent
Santiagos backwages. If he did not agree with such
allocation, he could have vetoed the item pursuant to
Section 55 of the Local Government Code.
[18]
There was no
such veto.
In view of the foregoing discourse, we dismiss
petitioners unfounded assertion, probably made more out
of sheer ignorance of prevailing jurisprudence than a
deliberate attempt to mislead us, that the rule that public
funds (are) beyond the reach of levy and garnishment is not
qualified by any condition.
[19]

We now come to the issue of the legality of the levy on
the three motor vehicles belonging to the City of Caloocan
which petitioners claimed to be exempt from execution,
and which levy was based on an alias writ that had
purportedly expired. Suffice it to say that Judge Allarde, in
his Order dated November 10, 1992,
[20]
already lifted the
levy on the three vehicles, thereby formally discharging
them from the jurisdiction of the court and turning them
over to the City Government of Caloocan:
x x x x the levy of the three (3) vehicles made by Sheriff
Alberto Castillo pursuant to the Orders of this Court dated
October 1 and 8, 1992 is hereby lifted and the said Sheriff is
hereby ordered to return the same to the City Government
483

in view of the satisfaction of the decision in these cases x x
x x
It is thus unnecessary for us to discuss a moot issue.
We turn to the third issue raised by petitioners that the
auction sale by Sheriff Alberto A. Castillo of the motor
vehicle with plate no. SBH-165 was tainted with serious
irregularities. We need not emphasize that the sheriff
enjoys the presumption of regularity in the performance of
the functions of his office. This presumption prevails in the
absence of substantial evidence to the contrary and cannot
be overcome by bare and self-serving allegations. The
petitioners failed to convince us that the auction sale
conducted by the sheriff indeed suffered from fatal flaws.
No evidence was adduced to prove that the sheriff had
been remiss in the performance of his duties during the
public auction sale. Indeed it would be injudicious for us to
assume, as petitioners want us to do, that the sheriff failed
to follow the established procedures governing public
auctions.
On the contrary, a review of the records shows that the
sheriff complied with the rules on public auction. The sale
of the Citys vehicle was made publicly in front of the
Caloocan City Hall on the date fixed in the notice July 27,
1992. In fact, petitioners in their Motion to Declare in
Contempt of Court; to Set Aside the Garnishment and
Administrative Complaint admitted as much:
On July 27, 1992, by virtue of an alias writ of execution
issued by the respondent court, a vehicle owned by the
petitioner xxx was levied and sold at public auction for the
amount of P100,000.00 and which amount was
immediately delivered to the private respondent x x x x
[21]

Hence, petitioners cannot now be heard to impugn the
validity of the auction sale.
Petitioners, in desperation, likewise make much of the
proceedings before the trial court on October 8, 1992,
wherein petitioner Norma Abracia, Superintendent of the
Division of City Schools of Caloocan, was commanded to
appear and show cause why she should not be cited in
contempt for delaying the execution of judgment. This was
in connection with her failure (or refusal) to surrender the
three motor vehicles assigned to the Division of City Schools
to the custody of the sheriff. Petitioner Abracia, assisted by
Mr. Ricardo Nagpacan of the Division of City Schools,
appeared during the hearing but requested a ten-day
period within which to refer the matter of contempt to a
counsel of her choice. The request was denied by Judge
Allarde in his assailed order dated October 8, 1992. Thus
petitioner Abracia claimed, inter alia, that: (a) she was
denied due process; (b) the silence of the order of Judge
Allarde on her request for time violated an orderly and
faithful recording of the proceedings, and (c) she was
coerced into agreeing to surrender the vehicles.
We do not think so. What violates due process is the
absolute lack of opportunity to be heard. That opportunity,
484

the Court is convinced, was sufficiently accorded to
petitioner Abracia. She was notified of the contempt charge
against her; she was effectively assisted by counsel when
she appeared during the hearing on October 8, 1992; and
she was afforded ample opportunity to answer and refute
the charge against her. The circumstance that she opted
not to avail of her chance to be heard on that occasion by
asking for an extension of time within which to hire a
counsel of her choice, a request denied by the trial court,
did not transgress nor deprive her of her right to due
process.
Significantly, during the hearing on October 8, 1992, Mr.
Nagpacan manifested in open court that, after conferring
with petitioner Abracia, the latter was willing to surrender
these vehicles into the custody of the sheriff on the
condition that the standing motion (for contempt) be
withdrawn.
[22]
Her decision was made freely and
voluntarily, and after conferring with her counsel.
Moreover, it was petitioner Abracia herself who imposed
the condition that respondent Santiago should withdraw
her motion for contempt in exchange for her promise to
surrender the subject vehicles. Thus, petitioner Abracias
claim that she was coerced into surrendering the vehicles
had no basis.
Even assuming ex gratia argumenti that there indeed
existed certain legal infirmities in connection with the
assailed orders of Judge Allarde, still, considering the
totality of circumstances of this case, the nullification of the
contested orders would be way out of line. For 21 long
years, starting 1972 when this controversy started up to
1993 when her claim was fully paid out of the garnished
funds of the City of Caloocan, respondent Santiago was
cruelly and unjustly deprived of what was due her. It would
be, at the very least, merciless and unchristian to make
private respondent refund the City of Caloocan the amount
already paid to her, only to force her to go through the
same nightmare all over again.
At any rate, of paramount importance to us is that
justice has been served. No right of the public was violated
and public interest was preserved.
Finally, we cannot simply pass over in silence the
deplorable act of the former Mayor of Caloocan City in
refusing to sign the check in payment of the Citys
obligation to private respondent. It was an open defiance of
judicial processes, smacking of political arrogance, and a
direct violation of the very ordinance he himself approved.
Our Resolution in G.R. No. 98366, City Government of
Caloocan vs. Court of Appeals, et al., dated May 16, 1991,
dismissing the petition of the City of Caloocan assailing the
issuance of a writ of execution by the trial court, already
resolved with finality all impediments to the execution of
judgment in this case. Yet, the City Government of
Caloocan, in a blatant display of malice and bad faith,
refused to comply with the decision. Now, it has the
temerity to come to this Court once more and continue
inflicting injustice on a hapless citizen, as if all the harm and
prejudice it has already heaped upon respondent Santiago
are still not enough.
485

This Court will not condone the repudiation of just
obligations contracted by municipal corporations. On the
contrary, we will extend our aid and every judicial facility to
any citizen in the enforcement of just and valid claims
against abusive local government units.
WHEREFORE, the petition is hereby DISMISSED for utter
lack of merit. The assailed orders of the trial court dated
October 1, 1992, October 8, 1992 and May 7, 1993,
respectively, are AFFIRMED.
Petitioners and their counsels are hereby warned
against filing any more pleadings in connection with the
issues already resolved with finality herein and in related
cases.
Costs against petitioners.
SO ORDERED.
Panganiban, (Acting Chairman), Sandoval-
Gutierrez, and Carpio-Morales, JJ., concur.
Puno, (Chairman), J., on official leave.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-29993 October 23, 1978
LAUDENCIO TORIO, GUILLERMO EVANGELISTA, MANUEL
DE GUZMAN, ALFONSO R. MAGSANOC, JESUS
MACARANAS, MAXIMO MANANGAN, FIDEL
MONTEMAYOR, MELCHOR VIRAY, RAMON TULAGAN, all
Members of the Municipal Council of Malasiqui in 1959,
Malasiqui, Pangasinan, petitioners,
vs.
ROSALINA, ANGELINA, LEONARDO, EDUARDO, ARTEMIO,
ANGELITA, ANITA, ERNESTO, NORMA, VIRGINIA,
REMEDIOS and ROBERTO, all surnamed FONTANILLA, and
THE HONORABLE COURT OF APPEALS,respondents.
G.R. No. L-30183 October 23, 1978
MUNICIPALITY OF MALASIQUI, petitioner,
vs.
ROSALINA, ANGELINA, LEONARDO, EDUARDO, ARTEMIO,
ANGELITA, ANITA, ERNESTO, NORMA, VIRGINIA,
REMEDIOS and ROBERTO, all surnamed FONTANILLA, and
the Honorable COURT OF APPEALS,respondents.
Julian M. Armas, Assistant Provincial Fiscal for petitioners.
Isidro L. Padilla for respondents.

MUOZ PALMA, J.:
These Petitions for review present the issue of whether or
not the celebration of a town fiesta authorized by a
486

municipal council under Sec. 2282 of the Municipal Law as
embodied in the Revised Administrative Code is a
governmental or a corporate or proprietary function of the
municipality.
A resolution of that issue will lead to another, viz the civil
liability for damages of the Municipality of Malasiqui, and
the members of the Municipal Council of Malasiqui,
province of Pangasinan, for a death which occurred during
the celebration of the town fiesta on January 22, 1959, and
which was attributed to the negligence of the municipality
and its council members.
The following facts are not in dispute:
On October 21, 1958, the Municipal Council of Malasiqui,
Pangasinan, passed Resolution No. 159 whereby "it
resolved to manage the 1959 Malasiqui town fiesta
celebration on January 21, 22, and 23, 1959." Resolution
No. 182 was also passed creating the "1959 Malasiqui
'Town Fiesta Executive Committee" which in turn organized
a sub-committee on entertainment and stage, with Jose
Macaraeg as Chairman. the council appropriated the
amount of P100.00 for the construction of 2 stages, one for
the "zarzuela" and another for the cancionan Jose
Macaraeg supervised the construction of the stage and as
constructed the stage for the "zarzuela" was "5- meters
by 8 meters in size, had a wooden floor high at the rear and
was supported by 24 bamboo posts 4 in a row in front, 4
in the rear and 5 on each side with bamboo braces."
1

The "zarzuela" entitled "Midas Extravaganza" was donated
by an association of Malasiqui employees of the Manila
Railroad Company in Caloocan, Rizal. The troupe arrived in
the evening of January 22 for the performance and one of
the members of the group was Vicente Fontanilla. The
program started at about 10:15 o'clock that evening with
some speeches, and many persons went up the stage. The
"zarzuela" then began but before the dramatic part of the
play was reached, the stage collapsed and Vicente
Fontanilla who was at the rear of the stage was pinned
underneath. Fontanilia was taken to tile San Carlos General
Hospital where he died in the afternoon of the following
day.
The heirs of Vicente Fontanilia filed a complaint with the
Court of First Instance of Manila on September 11, 1959 to
recover damages. Named party-defendants were the
Municipality of Malasiqui, the Municipal Council of
Malasiqui and all the individual members of the Municipal
Council in 1959.
Answering the complaint defendant municipality invoked
inter alia the principal defense that as a legally and duly
organized public corporation it performs sovereign
functions and the holding of a town fiesta was an exercise
of its governmental functions from which no liability can
arise to answer for the negligence of any of its agents.
The defendant councilors inturn maintained that they
merely acted as agents of the municipality in carrying out
487

the municipal ordinance providing for the management of
the town fiesta celebration and as such they are likewise
not liable for damages as the undertaking was not one for
profit; furthermore, they had exercised due care and
diligence in implementing the municipal ordinance.
2

After trial, the Presiding Judge, Hon. Gregorio T. Lantin
narrowed the issue to whether or not the defendants
exercised due diligence 'm the construction of the stage.
From his findings he arrived at the conclusion that the
Executive Committee appointed by the municipal council
had exercised due diligence and care like a good father of
the family in selecting a competent man to construct a
stage strong enough for the occasion and that if it collapsed
that was due to forces beyond the control of the committee
on entertainment, consequently, the defendants were not
liable for damages for the death of Vicente Fontanilla. The
complaint was accordingly dismissed in a decision dated
July 10, 1962.
3

The Fontanillas appealed to the Court of Appeals. In a
decision Promulgated on October 31, 1968, the Court of
Appeals through its Fourth Division composed at the time
of Justices Salvador V. Esguerra, Nicasio A. Yatco and
Eulogio S. Serrano reversed the trial court's decision and
ordered all the defendants-appellees to pay jointly and
severally the heirs of Vicente Fontanilla the sums of
P12,000.00 by way of moral and actual damages: P1200.00
its attorney's fees; and the costs.
4

The case is now before Us on various assignments of errors
all of which center on the proposition stated at the
sentence of this Opinion and which We repeat:
Is the celebration of a town fiesta an undertaking in the
excercise of a municipality's governmental or public
function or is it or a private or proprietary character?
1. Under Philippine laws municipalities are political bodies
corporate and as such ag endowed with the faculties of
municipal corporations to be exercised by and through their
respective municipal governments in conformity with law,
and in their proper corporate name, they may inter alia sue
and be sued, and contract and be contracted with.
5

The powers of a municipality are twofold in character
public, governmental or political on the one hand, and
corporate, private, or proprietary on the other.
Governmental powers are those exercised by the
corporation in administering the powers of the state and
promoting the public welfare and they include the
legislative, judicial public, and political Municipal powers on
the other hand are exercised for the special benefit and
advantage of the community and include those which are
ministerial private and corporate.
6

As to when a certain activity is governmental and when
proprietary or private, that is generally a difficult matter to
determine. The evolution of the municipal law in American
Jurisprudence, for instance, has shown that; none of the
488

tests which have evolved and are stated in textbooks have
set down a conclusive principle or rule, so that each case
will have to be determined on the basis of attending
circumstances.
In McQuillin on Municipal Corporations, the rule is stated
thus: "A municipal corporation proper has ... a public
character as regards the state at large insofar as it is its
agent in government, and private (so-called) insofar as it is
to promote local necessities and conveniences for its own
community.
7

Another statement of the test is given in City of Kokomo v.
Loy, decided by the Supreme Court of Indiana in 1916, thus:
Municipal corporations exist in a dual capacity,
and their functions are two fold. In one they
exercise the right springing from sovereignty,
and while in the performance of the duties
pertaining thereto, their acts are political and
governmental Their officers and agents in such
capacity, though elected or appointed by the
are nevertheless public functionaries
performing a public service, and as such they
are officers, agents, and servants of the state.
In the other capacity the municipalities
exercise a private. proprietary or corporate
right, arising from their existence as legal
persons and not as public agencies. Their
officers and agents in the performance of such
functions act in behalf of the municipalities in
their corporate or in. individual capacity, and
not for the state or sovereign power. (112 N. E
994-995)
In the early Philippine case of Mendoza v. de Leon 1916, the
Supreme Court, through Justice Grant T. Trent, relying
mainly on American Jurisprudence classified certain
activities of the municipality as governmental, e.g.:
regulations against fire, disease, preservation of public
peace, maintenance of municipal prisons, establishment of
schools, post-offices, etc. while the following are corporate
or proprietary in character, viz: municipal waterwork,
slaughter houses, markets, stables, bathing establishments,
wharves, ferries, and fisheries.
8
Maintenance of parks, golf
courses, cemeteries and airports among others, are also
recognized as municipal or city activities of a proprietary
character.
9

2. This distinction of powers becomes important for
purposes of determining the liability of the municipality for
the acts of its agents which result in an injury to third
persons.
If the injury is caused in the course of the performance of a
governmental function or duty no recovery, as a rule, can
be. had from the municipality unless there is an existing
statute on the matter,
10
nor from its officers, so long as
they performed their duties honestly and in good faith or
that they did not act wantonly and
489

maliciously.
11
In Palafox, et al., v. Province of Ilocos Norte,
et al., 1958, a truck driver employed by the provincial
government of Ilocos Norte ran over Proceto Palafox in the
course of his work at the construction of a road. The
Supreme Court in affirming the trial court's dismissal of the
complaint for damages held that the province could not be
made liable because its employee was in the performance
of a governmental function the construction and
maintenance of roads and however tragic and deplorable
it may be, the death of Palafox imposed on the province no
duty to pay monetary consideration.
12

With respect to proprietary functions, the settled rule is
that a municipal corporation can be held liable to third
persons ex contract
13
or ex delicto.
14

Municipal corporations are subject to be sued
upon contracts and in tort. ...
xxx xxx xxx
The rule of law is a general one, that the
superior or employer must answer civilly for
the negligence or want of skill of its agent or
servant in the course or fine of his
employment, by which another, who is free
from contributory fault, is injured. Municipal
corporations under the conditions herein
stated, fall within the operation of this rule of
law, and are liable, accordingly, to civil actions
for damages when the requisite elements of
liability co-exist. ... (Dillon on Municipal
Corporations, 5th ed. Sec. 1610,1647, cited in
Mendoza v. de Leon, supra. 514)
3. Coming to the cam before Us, and applying the general
tests given above, We hold that the ho of the town fiesta in
1959 by the municipality of Malsiqui Pangasinan was an
exercise of a private or proprietary function of the
municipality.
Section 2282 of the Chatter on Municipal Law of the
Revised Administrative Code provides:
Section 2282. Celebration of fiesta. fiesta
may be held in each municipality not oftener
than once a year upon a date fixed by the
municipal council A fiesta s not be held upon
any other date than that lawfully fixed
therefor, except when, for weighty reasons,
such as typhoons, foundations, earthquakes,
epidemics, or other public ties, the fiesta
cannot be hold in the date fixed in which case
it may be held at a later date in the same year,
by resolution of the council.
This provision simply gives authority to the municipality to
accelebrate a yearly fiesta but it does not impose upon it a
duty to observe one. Holding a fiesta even if the purpose is
to commemorate a religious or historical event of the town
490

is in essence an act for the special benefit of the community
and not for the general welfare of the public performed in
pursuance of a policy of the state. The mere fact that the
celebration, as claimed was not to secure profit or gain but
merely to provide entertainment to the town inhabitants is
not a conclusive test. For instance, the maintenance of
parks is not a source of income for the nonetheless it is
private undertaking as distinguished from the maintenance
of public schools, jails, and the like which are for public
service.
As stated earlier, there can be no hard and fast rule for
purposes of determining the true nature of an undertaking
or function of a municipality; the surrounding
circumstances of a particular case are to be considered and
will be decisive. The basic element, however beneficial to
the public the undertaking may be, is that it is
governmental in essence, otherwise. the function becomes
private or proprietary in character. Easily, no overnmental
or public policy of the state is involved in the celebration of
a town fiesta.
15

4. It follows that under the doctrine of respondent superior,
petitioner-municipality is to be held liable for damages for
the death of Vicente Fontanilia if that was at- tributable to
the negligence of the municipality's officers, employees, or
agents.
Art. 2176, Civil Code: Whoever by act or
omission causes damage to another, there
being fault or negligence, is obliged to pay for
the damage done. . .
Art. 2180, Civil Code: The obligation imposed
by article 2176 is demandable not only for
one's own acts or omission, but also for those
of persons for whom one is responsible. . .
On this point, the Court of Appeals found and held that
there was negligence.
The trial court gave credence to the testimony of Angel
Novado, a witness of the defendants (now petitioners), that
a member of the "extravaganza troupe removed two
principal braces located on the front portion of the stage
and u them to hang the screen or "telon", and that when
many people went up the stage the latter collapsed. This
testimony was not believed however by respondent
appellate court, and rightly so. According to said
defendants, those two braces were "mother" or "principal"
braces located semi-diagonally from the front ends of the
stage to the front posts of the ticket booth located at the
rear of the stage and were fastened with a bamboo
twine.
16
That being the case, it becomes incredible that any
person in his right mind would remove those principal
braces and leave the front portion of the stage practically
unsuported Moreover, if that did happen, there was indeed
negligence as there was lack of suspension over the use of
the stage to prevent such an occurrence.
491

At any rate, the guitarist who was pointed to by Novado as
the person who removed the two bamboo braces denied
having done go. The Court of Appeals said "Amor by himself
alone could not have removed the two braces which must
be about ten meters long and fastened them on top of the
stags for the curtain. The stage was only five and a half
meters wide. Surely, it, would be impractical and unwieldy
to use a ten meter bamboo pole, much more two poles for
the stage curtain.
17

The appellate court also found that the stage was not
strong enough considering that only P100.00 was
appropriate for the construction of two stages and while
the floor of the "zarzuela" stage was of wooden planks, the
Post and braces used were of bamboo material We likewise
observe that although the stage was described by the
Petitioners as being supported by "24" posts, nevertheless
there were only 4 in front, 4 at the rear, and 5 on each side.
Where were the rest?
The Court of Appeals thus concluded
The court a quo itself attributed the collapse of
the stage to the great number of onlookers
who mounted the stage. The municipality
and/or its agents had the necessary means
within its command to prevent such an
occurrence. Having filed to take the necessary
steps to maintain the safety of the stage for
the use of the participants in the stage
presentation prepared in connection with the
celebration of the town fiesta, particularly, in
preventing non participants or spectators from
mounting and accumulating on the stage which
was not constructed to meet the additional
weight- the defendant-appellees were
negligent and are liable for the death of
Vicente Fontanilla . (pp. 30-31, rollo, L-29993)
The findings of the respondent appellate court that the
facts as presented to it establish negligence as a matter of
law and that the Municipality failed to exercise the due
diligence of a good father of the family, will not disturbed
by Us in the absence of a clear showing of an abuse of
discretion or a gross misapprehension of facts."
18

Liability rests on negligence which is "the want of such care
as a person of ordinary prudence would exercise under the
circumstances of the case."
19

Thus, private respondents argue that the "Midas
Extravaganza" which was to be performed during the town
fiesta was a "donation" offered by an association of
Malasiqui employees of the Manila Railroad Co. in
Caloocan, and that when the Municipality of Malasiqui
accepted the donation of services and constructed precisely
a "zarzuela stage" for the purpose, the participants in the
stage show had the right to expect that the Municipality
through its "Committee on entertainment and stage" would
build or put up a stage or platform strong enough to sustain
492

the weight or burden of the performance and take the
necessary measures to insure the personal safety of the
participants.
20
We agree.
Quite relevant to that argument is the American case
of Sanders v. City of Long Beach, 1942, which was an action
against the city for injuries sustained from a fall when
plaintiff was descending the steps of the city auditorium.
The city was conducting a "Know your City Week" and one
of the features was the showing of a motion picture in the
city auditorium to which the general public was invited and
plaintiff Sanders was one of those who attended. In
sustaining the award for Damages in favor of plaintiff, the
District Court of Appeal, Second district, California,
heldinter alia that the "Know your City Week" was a
"proprietary activity" and not a "governmental one" of the
city, that defendant owed to plaintiff, an invitee the duty of
exercising ordinary care for her safety, and plaintiff was
entitled to assume that she would not be exposed to a
danger (which in this case consisted of lack of sufficient
illumination of the premises) that would come to her
through a violation of defendant duty.
21

We can say that the deceased Vicente Fontanilla was
similarly situated as Sander The Municipality of Malasiqui
resolved to celebrate the town fiesta in January of 1959; it
created a committee in charge of the entertainment and
stage; an association of Malasiqui residents responded to
the call for the festivities and volunteered to present a
stage show; Vicente Fontanilla was one of the participants
who like Sanders had the right to expect that he would be
exposed to danger on that occasion.
Lastly, petitioner or appellant Municipality cannot evade
ability and/or liability under the c that it was Jose Macaraeg
who constructed the stage. The municipality acting through
its municipal council appointed Macaraeg as chairman of
the sub-committee on entertainment and in charge of the
construction of the "zarzuela" stage. Macaraeg acted
merely as an agent of the Municipality. Under the doctrine
of respondent superior mentioned earlier, petitioner is
responsible or liable for the negligence of its agent acting
within his assigned tasks.
22

... when it is sought to render a municipal corporation liable
for the act of servants or agents, a cardinal inquiry is,
whether they are the servants or agents of the corporation.
If the corporation appoints or elects them, can control
them in the discharge of their duties, can continue or
remove the can hold them responsible for the manner in
which they discharge their trust, and if those duties relate
to the exercise of corporate powers, and are for the benefit
of the corporation in its local or special interest, they may
justly be regarded as its agents or servants, and the maxim
of respondent superior applies." ... (Dillon on Municipal
Corporations, 5th Ed., Vol IV, p. 2879)
5. The remaining question to be resolved centers on the
liability of the municipal councilors who enacted the
ordinance and created the fiesta committee.
493

The Court of Appeals held the councilors jointly and
solidarity liable with the municipality for damages under
Article 27 of the Civil Code which provides that d any
person suffering ing material or moral loss because a public
servant or employee refuses or neglects, without just cause
to perform his official duty may file an action for damages
and other relief at the latter.
23

In their Petition for review the municipal councilors allege
that the Court of Appeals erred in ruling that the holding of
a town fiesta is not a governmental function and that there
was negligence on their part for not maintaining and
supervising the safe use of the stage, in applying Article 27
of the Civil Code against them and in not holding Jose
Macaraeg liable for the collapse of the stage and the
consequent death of Vicente Fontanilla.
24

We agree with petitioners that the Court of Appeals erred
in applying Article 27 of the Civil Code against the for this
particular article covers a case of nonfeasance or non-
performance by a public officer of his official duty; it does
not apply to a case of negligence or misfeasance in carrying
out an official duty.
If We are led to set aside the decision of the Court of
Appeals insofar as these petitioners are concerned, it is
because of a plain error committed by respondent court
which however is not invoked in petitioners' brief.
In Miguel v. The Court of appeal. et al., the Court, through
Justice, now Chief Justice, Fred Ruiz Castro, held that the
Supreme Court is vested with ample authority to review
matters not assigned as errors in an appeal if it finds that
their consideration and resolution are indispensable or
necessary in arriving at a just decision in a given case, and
that tills is author under Sec. 7, Rule 51 of the Rules of
Court.
25
We believe that this pronouncement can well be
applied in the instant case.
The Court of Appeals in its decision now under review held
that the celebration of a town fiesta by the Municipality of
Malasiqui was not a governmental function. We upheld
that ruling. The legal consequence thereof is that the
Municipality stands on the same footing as an ordinary
private corporation with the municipal council acting as its
board of directors. It is an elementary principle that a
corporation has a personality, separate and distinct from its
officers, directors, or persons composing it
26
and the latter
are not as a rule co-responsible in an action for damages for
tort or negligence culpa aquilla committed by the
corporation's employees or agents unless there is a
showing of bad faith or gross or wanton negligence on their
part.
27

xxx xxx xxx
The ordinary doctrine is that a director, merely
by reason of his office, is not personally Stable
for the torts of his corporation; he Must be
494

shown to have personally voted for or
otherwise participated in them ... Fletcher
Encyclopedia Corporations, Vol 3A Chapt 11, p.
207)
Officers of a corporation 'are not held liable for
the negligence of the corporation merely
because of their official relation to it, but
because of some wrongful or negligent act by
such officer amounting to a breach of duty
which resulted in an injury ... To make an
officer of a corporation liable for the
negligence of the corporation there must have
been upon his part such a breach of duty as
contributed to, or helped to bring about, the
injury; that is to say, he must be a participant
in the wrongful act. ... (pp. 207-208, Ibid.)
xxx xxx xxx
Directors who merely employ one to give a
fireworks Ambition on the corporate are not
personally liable for the negligent acts of the
exhibitor. (p. 211, Ibid.)
On these people We absolve Use municipal councilors from
any liability for the death of Vicente Fontanilla. The records
do not show that said petitioners directly participated in
the defective construction of the "zarzuela" stage or that
they personally permitted spectators to go up the platform.
6. One last point We have to resolve is on the award of
attorney's fees by respondent court. Petitioner-municipality
assails the award.
Under paragraph 11, Art. 2208 of the Civil Code attorney's
fees and expenses of litigation may be granted when the
court deems it just and equitable. In this case of Vicente
Fontanilla, although respondent appellate court failed to
state the grounds for awarding attorney's fees, the records
show however that attempts were made by plaintiffs, now
private respondents, to secure an extrajudicial
compensation from the municipality: that the latter gave
prorases and assurances of assistance but failed to comply;
and it was only eight month after the incident that the
bereaved family of Vicente Fontanilla was compelled to
seek relief from the courts to ventilate what was believed
to be a just cause.
28

We hold, therefore, that there is no error committed in the
grant of attorney's fees which after all is a matter of judicial
discretion. The amount of P1,200.00 is fair and reasonable.
PREMISES CONSIDERED, We AFFIRM in toto the decision of
the Court of Appeals insofar as the Municipality of
Malasiqui is concerned (L-30183), and We absolve the
municipal councilors from liability and SET ASIDE the
judgment against them (L-9993).
Without pronouncement as to costs.
495

SO ORDERED,
Teehankee (Chairman), Makasiar, Fernandez, and Guerrero,
JJ., concur.

Footnotes
1 pp- 3-4 of Petitioner's brief
HIRD DIVISION

SPOUSES CIRIACO and
ARMINDA ORTEGA,
Petitioners,

- versus -

CITY OF CEBU,
Respondent.
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
G.R. No. 181562-63








CITY OF CEBU,
Petitioner,




- versus -




SPOUSES CIRIACO and
ARMINDA ORTEGA,
Respondents.
G.R. No. 181583-84

Present:

YNARES-SANTIAGO, J.,
Chairperson,
CHICO-NAZARIO,
VELASCO, JR.,
NACHURA, and
PERALTA, JJ.

Promulgated:

October 2, 2009

x---------------------------------------------------------------------------------
---x

496


DECISION

NACHURA, J.:


These are consolidated petitions for review
on certiorari filed by petitioners Ciriaco and Arminda Ortega
(Spouses Ortega) in G.R. Nos. 181562-63
and petitioner City of Cebu (Cebu City) in G.R. Nos. 181583-
84 assailing the Decision of the Court of Appeals (CA) in the
similarly consolidated petitions docketed as CA-G.R. SP No.
80187 and CA-G.R. SP No. 00147, respectively.
[1]


The facts, summarized by the CA, follow.

Spouses Ciriaco and Arminda Ortega x x
x are the registered owners of a parcel of land
known as Lot No. 310-B, situated in
Hipodromo, Cebu City, with an area of 5,712
square meters and covered by Transfer
Certificate of Title No. 113311, issued by the
Register of Deeds of the City of Cebu.

One-half of the above described land is
occupied by squatters. On September 24,
1990, [the Spouses Ortega] filed an ejectment
case against the squatters before the
Municipal Trial Court in Cities (MTCC) of Cebu
City, which rendered decision in favor of [the
spouses Ortega]. The case eventually reached
the Supreme Court, which affirmed the
decision of the MTCC. The decision of the
MTCC became final and executory, and a writ
of execution was issued on February 1, 1994.

On May 23, 1994, the Sangguniang
Panglungsod of [Cebu City] enacted City
Ordinance No. 1519, giving authority to the
City Mayor to expropriate one-half (1/2)
portion (2,856 square meters) of [the spouses
Ortegas+ land (which is occupied by the
squatters), and appropriating for that purpose
the amount of P3,284,400.00 or at the price of
ONE THOUSAND ONE HUNDRED FIFTY PESOS
497

(P1,150.00) per square meter. The amount will
be charged against Account No. 8-93-310,
Continuing Appropriation, Account No. 101-
8918-334, repurchase of lots for various
projects. The value of the land was determined
by the Cebu City Appraisal Committee in
Resolution No. 19, series of 1994, dated April
15, 1994.

Pursuant to said ordinance, [Cebu City]
filed a Complaint for Eminent Domain [before
the Regional Trial Court (RTC), Branch 23, Cebu
City] against [the spouses Ortega], docketed as
Civil Case No. CEB-16577.

On March 13, 1998, the [RTC] issued an
order declaring that [Cebu City+ has the lawful
right to take the property subject of the instant
case, for public use or purpose described in the
complaint upon payment of just
compensation.

Based on the recommendation of the
appointed Commissioners (one of whom was
the City Assessor of [Cebu City], the [RTC]
issued another Order dated May 21, 1999,
fixing the value of the land subject to
expropriation at ELEVEN THOUSAND PESOS
(P11,000.00) per square meter and ordering
[Cebu City] to pay [Spouses Ortega] the sum of
THIRTY ONE MILLION AND FOUR HUNDRED
SIXTEEN THOUSAND PESOS (P31,416,000.00)
as just compensation for the expropriated
portion of Lot No. 310-B.

The Decision of the [RTC] became final
and executory because of [Cebu Citys+ failure
to perfect an appeal on time, and a Writ of
Execution was issued on September 17, 1999
to enforce the courts judgment. Upon motion
of [the Spouses Ortega], the [RTC] issued an
Order dated March 11, 2002, quoted as
follows:

Reading of the aforestated
resolution shows that the City
498

Council of Cebu approved
Ordinance No. 1519 appropriating
the sum of P3,284,400.00 for
payment of the subject lot
chargeable to Account No. 101-
8918-334.

In view thereof, the above-
mentioned sum is now subject for
execution or garnishment for the
same is no longer exempt from
execution.

[Cebu City] filed an Omnibus Motion to
Stay Execution, Modification of Judgment and
Withdrawal of the Case, contending that the
price set by the [RTC] as just compensation to
be paid to [the Spouses Ortega] is way beyond
the reach of its intended beneficiaries for its
socialized housing program. The motion was
denied by the [RTC]. [Cebu Citys+ Motion for
Reconsideration was likewise denied.

By virtue of the Order of the [RTC],
dated July 2, 2003, x x x Sheriff Benigno B.
Reas[,] Jr. served a Notice of Garnishment to
Philippine Postal Bank, P. del Rosario
and Junquera Branch CebuCity, garnishing
[Cebu Citys+ bank deposit therein.

Hence, [Cebu City] filed the instant
Petition for Certiorari before [the CA] (CA-G.R.
SP NO. 80187).

During the pendency of x x x CA-G.R. SP
NO. 80187, [Cebu City] filed before the [RTC] a
Motion to Dissolve, Quash or Recall the Writ of
Garnishment, contending that Account No.
101-8918-334 mentioned in Ordinance No.
1519 is not actually an existing bank account
and that the garnishment of *Cebu Citys+ bank
account with Philippine Postal Bank was illegal,
because government funds and properties may
not be seized under writ of execution or
garnishment to satisfy such judgment, on
obvious reason of public policy. The [RTC]
issued an Order dated March 8, 2004, denying
499

said motion. [Cebu Citys+ Motion for
Reconsideration was also denied.

[The Spouses Ortega] filed an Ex-Parte
Motion to Direct the New Manager of
Philippine Postal Bank to Release to the Sheriff
the Garnished Amount, which was granted by
the [RTC]. [Cebu City] filed a Motion for
Reconsideration, but the same was denied.

Hence, [Cebu City] filed another Petition
for Certiorari (CA-G.R. SP NO. 00147) [with the
Court of Appeals].
[2]


Ruling on the petitions for certiorari, the CA disposed
of the cases, to wit:

WHEREFORE, all the foregoing premises
considered, the instant Petitions
for Certiorari are hereby PARTIALLY GRANTED.
The assailed Orders of the [RTC] [Assailed
Orders dated March 11, 2002 and July 2, 2003,
respectively, in CA-G.R SP NO. 80187] are
hereby ANNULLED AND SET ASIDE insofar as
they denied [Cebu Citys+ Motion to Stay
Execution, but they are hereby AFFIRMED
insofar as they denied [Cebu Citys+ Motion to
Modify Judgment and Withdraw from the
Expropriation Proceedings. Furthermore, the
assailed Orders of the [RTC dated March 8,
2004 in CA-G.R. SP NO. 00147] are hereby
ANNULLED AND SET ASIDE. Let the Decision of
the [RTC] be executed in a manner prescribed
by applicable law and jurisprudence.

SO ORDERED.
[3]


Hence, these consolidated appeals by
petitioners Cebu City and the Spouses Ortega positing the
following issues:

1. Whether the CA erred in affirming the RTCs
denial of Cebu Citys Omnibus Motion to Modify Judgment
and to be Allowed to Withdraw from the Expropriation
Proceedings.
500


2. Whether the deposit of Cebu City with the
Philippine Postal Bank, appropriated for a different purpose
by its Sangguniang Panglungsod, can be subject to
garnishment as payment for the expropriated lot covered
by City Ordinance No. 1519.

We deny both petitions.

On the first issue, the CA did not err in affirming the
RTCs Order that the expropriation case had long been final
and executory. Consequently, both the Order of
expropriation and the Order fixing just compensation by the
RTC can no longer be modified. In short, Cebu City cannot
withdraw from the expropriation proceedings.

Section 4, Rule 67 of the Rules of Court on
Expropriation provides:

SEC. 4. Order of expropriation. If the
objections to and the defenses against the
right of the plaintiff to expropriate the
property are overruled, or when no party
appears to defend as required by this Rule, the
court may issue an order of expropriation
declaring that the plaintiff has a lawful right to
take the property sought to be expropriated,
for the public use or purpose described in the
complaint, upon the payment of just
compensation to be determined as of the date
of the taking of the property or the filing of the
complaint, whichever came first.

A final order sustaining the right to
expropriate the property may be appealed by
any party aggrieved thereby. Such appeal,
however, shall not prevent the court from
determining the just compensation to be paid.

After the rendition of such an order, the
plaintiff shall not be permitted to dismiss or
discontinue the proceeding except on such
terms as the court deems just and equitable.


501

Plainly, from the aforequoted provision, expropriation
proceedings speak of two (2) stages, i.e.:

1. Determination of the authority of
the plaintiff to exercise the power of eminent
domain and the propriety of its exercise in the
context of the facts involved in the suit. This
ends with an order, if not of dismissal of the
action, of condemnation [or order of
expropriation] declaring that the plaintiff has
the lawful right to take the property sought to
be condemned, for the public use or purpose
described in the complaint, upon the payment
of just compensation to be determined as of
the date of the filing of the complaint; and

2. Determination by the court of the
just compensation for the property sought to
be taken.
[4]


We held in the recent case of Republic v. Phil-Ville
Development and Housing Corporation
[5]
that:

[A]n order of expropriation denotes the end of
the first stage of expropriation. Its end then
paves the way for the second stagethe
determination of just compensation, and,
ultimately, payment. An order of
expropriation puts an end to any ambiguity
regarding the right of the petitioner to
condemn the respondents
properties. Because an order of expropriation
merely determines the authority to exercise
the power of eminent domain and the
propriety of such exercise, its issuance does
not hinge on the payment of just
compensation. After all, there would be no
point in determining just compensation if, in
the first place, the plaintiffs right to
expropriate the property was not first clearly
established.
[6]



Conversely, as is evident from the foregoing, an order
by the trial court fixing just compensation does not affect a
prior order of expropriation. As applied to the case at
502

bar,Cebu City can no longer ask for modification of the
judgment, much less, withdraw its complaint, after it failed
to appeal even the first stage of the expropriation
proceedings.

Cebu City is adamant, however, that it should be
allowed to withdraw its complaint as the just compensation
fixed by the RTC is too high, and the intended expropriation
of the Spouses Ortegas property is dependent on whether
Cebu City would have sufficient funds to pay for the same.

We cannot subscribe to Cebu Citys ridiculous
contention.

It is well-settled in jurisprudence that the
determination of just compensation is a judicial
prerogative.
[7]
In Export Processing Zone Authority v.
Dulay,
[8]
we declared:

The determination of just
compensation in eminent domain cases is a
judicial function. The executive department or
the legislature may make the initial
determinations but when a party claims a
violation of the guarantee in the Bill of Rights
that private property may not be taken for
public use without just compensation, no
statute, decree, or executive order can
mandate that its own determination shall
prevail over the courts findings. Much less can
the courts be precluded from looking into the
just-ness of the decreed compensation.


We, therefore, hold that P.D. No. 1533,
which eliminates the courts discretion to
appoint commissioners pursuant to Rule 67 of
the Rules of Court, is unconstitutional and void.
To hold otherwise would be to undermine the
very purpose why this Court exists in the first
place.

Likewise, in the recent cases of National Power
Corporation v. dela Cruz
[9]
and Forfom Development
Corporation v. Philippine National Railways,
[10]
we
emphasized the primacy of judicial prerogative in the
503

ascertainment of just compensation as aided by the
appointed commissioners, to wit:

Though the ascertainment of just
compensation is a judicial prerogative,
the appointment of commissioners to ascertain
just compensation for the property sought to
be taken is a mandatory requirement
in expropriation cases. While it is true that the
findings of commissioners may be disregarded
and the trial court may substitute its own
estimate of the value, it may only do so for
valid reasons; that is, where the commissioners
have applied illegal principles to the evidence
submitted to them, where they have
disregarded a clear preponderance of
evidence, or where the amount allowed is
either grossly inadequate or excessive. Thus,
trial with the aid of the commissioners is a
substantial right that may not be done away
with capriciously or for no reason at all.


As regards the second issue raised by the Spouses
Ortega, we quote with favor the CAs disquisition thereon,
to wit:

While the claim of [the Spouses Ortega]
against [Cebu City] is valid, the [RTC] cannot,
by itself, order the City Council of [Cebu City]
to enact an appropriation ordinance in order to
satisfy its judgment.

The proper remedy of [the Spouses
Ortega] is to file a mandamus case against
[Cebu City] in order to compel its Sangguniang
Panglungsod to enact an appropriation
ordinance for the satisfaction of [the Spouses
Ortegas+ claim. This remedy is provided in the
case of Municipality of Makati v. Court of
Appeals, which provides:

Nevertheless, this is not to
say that private respondent and
PSB are left with no legal
recourse. Where a municipality
504

fails or refuses, without justifiable
reason[s], to effect payment of a
final money judgment rendered
against it, the claimant may avail
of the remedy of mandamus in
order to compel the enactment
and approval of the necessary
appropriation ordinance, and the
corresponding disbursement of
municipal funds therefor. x x x.

x x x x

The Sangguniang Panglungsod of [Cebu
City] enacted Ordinance No. 1519,
appropriating the sum of P3,284,400.00 for
payment of just compensation for the
expropriated land, chargeable to Account No.
101-8918-334.

Pursuant to such ordinance, the [RTC]
issued an order dated March 11, 2002, which
was the basis for the issuance of the Writ of
Garnishment, garnishing [Cebu Citys+ bank
account with Philippine Postal Bank.

However, Philippine Postal Bank issued
a Certification dated February 7, 2005,
certifying that Account No. 8-93-310
(Continuing Account) and Account No. 101-
8918-334 intended for purchase of lot for
various projects are not bank account numbers
with Philippine Postal Bank.

It is a settled rule that government
funds and properties may not be seized under
writs of execution or garnishment to satisfy
judgments, based on obvious consideration of
public policy. Disbursements of public funds
must be covered by the corresponding
appropriation as required by law. The functions
and public services rendered by the State
cannot be allowed to be paralyzed or disrupted
by the diversion of public funds from their
legitimate and specific objects, as appropriated
by law.
505


In Municipality of Makati v. Court of
Appeals, x x x where the Municipality of Makati
enacted an ordinance appropriating certain
sum of money as payment for the land the
municipality expropriated, chargeable to
Account No. S/A 265-537154-3 deposited in
PNB Buendia Branch, the Supreme Court held
that the trial court has no authority to garnish
the Municipalitys other bank
account (Account No. S/A 263-530850-7) in
order to cover the deficiency in Account No.
S/A 265-537154-3, even if both accounts are in
the same branch of the PNB. In said case, the
Supreme Court held:

Absent any showing that
the municipal council
of Makati has passed an ordinance
appropriating from its public funds
an amount corresponding to the
balance due under the RTC
decision dated June 4, 1987, less
the sum of P99,743.94 deposited
in Account No. S/A 265-537154-3,
no levy under execution may be
validly effected on the public
funds of petitioner deposited in
Account No. S/A 263-530850-7.

The foregoing rules find application in
the case at bar. While the Sangguniang
Panglungsod of petitioner enacted Ordinance
No. 1519 appropriating the sum
of P3,284,400.00 for payment of just
compensation for the expropriated land, such
ordinance cannot be considered as a source of
authority for the *RTC+ to garnish *Cebu Citys+
bank account with Philippine Postal Bank,
which was already appropriated for another
purpose. [Cebu Citys+ account with Philippine
Postal Bank was not specifically opened for the
payment of just compensation nor was it
specifically appropriated by Ordinance No.
1519 for such purpose. Said account,
therefore, is exempt from garnishment.

506

Since the [RTC] has no authority to
garnish [Cebu Citys+ other bank accounts in
order to satisfy its judgment, consequently, it
has no authority to order the release of
[Cebu Citys+ other deposits with Philippine
Postal Bank x x x.
[11]



Even assuming that Cebu City Ordinance No. 1519
actually appropriated the amount of P3,284,400.00 for
payment of just compensation thus, within the reach of a
writ of garnishment issued by the trial court
[12]
there
remains the inescapable fact that the Philippine Postal Bank
account referred to in the ordinance does not actually exist,
as certified to by the Bank. Accordingly, no writ of
garnishment may be validly issued against such non-
existent account with Philippine Postal Bank. This
circumstance translates to a situation where there is no
valid appropriation ordinance.

WHEREFORE, the petitions in G.R. Nos. 181562-63
and 181583-84 are hereby DENIED. The Decision of the
Court of Appeals in CA-G.R. SP Nos. 80187 and 00147
is AFFIRMED. No pronouncement as to costs.

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 157860 December 1, 2003
GOVERNMENT SERVICE INSURANCE SYSTEM
(GSIS), petitioner,
vs.
THE PROVINCE OF TARLAC, respondent.
YNARES-SANTIAGO, J.:
This is a petition for review under Rule 45 of the Rules of
Court, seeking the reversal of the Decision of theCourt of
Appeals dated November 28, 2002
1
and Resolution dated
April 8, 2003.
2

The facts are undisputed.
On March 26, 1996, the Sangguniang Panlalawigan of Tarlac
passed Resolution No. 068-96, which authorized and
approved the conversion of Urquico Memorial Athletic Field
into a Government Center, as well as the segregation and
donation of portions of said land to different government
507

agencies for the purpose of constructing or relocating their
office buildings. After receiving two letters of invitation
regarding the project, the Government
Service Insurance System (GSIS) decided to put up an office
at the site.
3

Thus, Tarlac Governor Margarita Cojuangco issued a Notice
of Construction on December 13, 1996, for the building of
the GSIS office on the designated lot.
4

The Province of Tarlac and the GSIS then executed a
Memorandum of Agreement (MOA) on December 13, 1997,
whereby the Province of Tarlac donated the said lot to the
GSIS subject to the conditions stipulated therein. On the
same date, the Province executed a Deed of Donation over
the subject lot in favor of the GSIS, which was duly accepted
by the latter. As stipulated in the MOA, the GSIS donated
P2,000,000.00 to the Province of Tarlac asfinancial
assistance.
5

On September 17, 1997, the City of Tarlac issued a
building permit to the GSIS for the construction of its office.
The Sangguniang Panlalawigan then passed Resolution No.
013-97, which reiterated the authority granted to Gov.
Cojuangco by Resolution No. 068-96.
6

Subsequently, Gov. Jose Yap was elected as the new chief
executive of Tarlac, and he officially entered upon his duties
on July 1, 1998. He wrote a letter to the GSIS, inviting the
latter to reevaluate their respective positions with respect
to the MOA of December 13, 1997. Evidently, Gov. Yap was
of the opinion that the provisions of the Deed of Donation
were unfair to the Province. Later, the Provincial
Administrator wrote the GSIS, demanding thepayment of
P33,590,000.00 representing the balance of the value of the
lot donated, which the GSIS refused to pay.
7

On March 11, 1999, the Province of Tarlac then filed a
Complaint against the GSIS for declaration of nullity of
donation and memorandum of agreement, recovery of
possession and enforcement of Article 449 in relation to
Articles 450 and 451 of the Civil Code, and damages, before
the Regional Trial Court of Tarlac City, Branch 63.
8
During
the pre-trial, the parties agreed to submit the case for
decision on the basis of the pleadings and annexes
submitted by the parties, since only legal issues were
involved.
On August 25, 1999, the trial court rendered its decision in
favor of the validity of the donation to the GSIS and
dismissed the complaint for declaration of nullity of
donation and memorandum of agreement, recovery of
possession and enforcement of Article 449 in relation to
Articles 450 and 451 of the Civil Code, and damages filed by
the Province of Tarlac.
Respondent Province of Tarlac appealed to the Court of
Appeals,
9
which rendered a decision on November 28,
2002, the dispositive portion of which states:
508

WHEREFORE, the assailed decision is hereby
REVERSED and SET ASIDE. The deed of donation and
Memorandum of Agreement both dated April 30,
1997 between the parties is hereby declared NULL
and VOID. Petitioner is ORDERED to reimburse
respondent all the necessary and useful expenses
respondent incurred on the property.
SO ORDERED.
10

Petitioner GSIS filed the instant petition raising a sole
assignment of error:
WHETHER THE COURT OF APPEALS ERRED IN
HOLDING THAT THE DEED OF DONATION AND
MEMORANDUM OF AGREEMENT ARE NULL AND
VOID.
11

In deciding the instant case, the Court of Appeals relied on
Section 381 of Republic Act No. 7160, better known as
the Local Government Code of 1991, which provides:
SECTION 381. Transfer Without Cost. Property
which has become unserviceable or is no longer
needed may be transferred without cost to another
office, agency, subdivision or instrumentality of the
national government or another local government
unit at an appraised valuation determined by the
local committee on awards. Such transfer shall be
subject to the approval of the sanggunian concerned
making the transfer and by the head of the office,
agency, subdivision, instrumentality or local
government unit receiving the property.
In effect, the appellate court ruled that the donation
of the subject property by the Province of Tarlac to
the GSIS was void, because it was executed without
first securing an appraised valuation of the property
from the local committee on awards.
12

On the other hand, petitioner insists that the
donation is perfectly valid, stating that there is
nothing in the Local Government Code which
expressly states that the lack of an appraised
valuation renders the subject transfer void. Further,
it contends that at best, an appraised valuation is
merely a formal and procedural requisite, the lack of
which cannot overturn substantive and vested
rights.
13

Considering that the assailed donation is clearly
onerous, the rules on contracts will
apply.
14
Pertinently, the Civil Code expressly defines
the different kinds of void and inexistent contracts, to
wit:
ART. 1409. The following contracts are inexistent and
void from the beginning:
509

(1) Those whose cause, object or purpose is contrary
to law, morals, good customs, public order or public
policy;
(2) Those which are absolutely simulated or fictitious;
(3) Those whose cause or object did not exist at the
time of the transaction;
(4) Those whose object is outside the commerce of
men;
(5) Those which contemplate an impossible service;
(6) Those where the intention of the parties relative
to the principal object of the contract cannot be
ascertained;
(7) Those expressly prohibited or declared void by
law.
These contracts cannot be ratified. Neither can the
right to set up the defense of illegality be waived.
A transfer of real property by a local government unit to an
instrumentality of government without first securing an
appraised valuation from the local committee on awards
does not appear to be one of the void contracts
enumerated in the afore-quoted Article 1409 of the Civil
Code. Neither does Section 381 of the Local Government
Code expressly prohibit or declare void such transfers if an
appraised valuation from the local committee on awards is
not first obtained.
The freedom of contract is both a constitutional and
statutory right and to uphold this right, courts should move
with all the necessary caution and prudence in holding
contracts void.
15
Furthermore, a duly executed contract
carries with it the presumption of validity.
16
In the assailed
decision, the Court of Appeals simply ruled that the
absence of a prior appraised valuation by the local
committee on awards rendered the donation null and void.
This, to our mind, did not sufficiently overcome the
presumption of validity of the contract, considering that
there is no express provision in the law which requires that
the said valuation is a condition sine qua non for the validity
of a donation.
There being a perfected contract, the Province of Tarlac,
through Gov. Yap, cannot revoke or renounce the same
without the consent of the other party. From the moment
of perfection, the parties are bound not only to the
fulfillment of what has been expressly stipulated but also to
all the consequences which, according to their nature, may
be in keeping with good faith, usage, and law.
17
The
contract has the force of law between the parties and they
are expected to abide in good faith by their respective
contractual commitments. Just as nobody can be forced to
enter into a contract, in the same manner, once a contract
is entered into, no party can renounce it unilaterally or
without the consent of the other. It is a general principle of
510

law that no one may be permitted to change his mind or
disavow and go back upon his own acts, or to proceed
contrary thereto, to the prejudice of the other party.
18

WHEREFORE, in view of the foregoing, the petition
is GRANTED. The Decision of the Court of Appeals dated
November 28, 2002 and its Resolution dated April 8, 2003
are REVERSED and SET ASIDE. The Decision of the Regional
Trial Court of Tarlac City, Branch 63, dated August 25, 1999
is REINSTATED. No costs.
SO ORDERED.
SECOND DIVISION
[G.R. No. 129093. August 30, 2001]
HON. JOSE D. LINA, JR., SANGGUNIANG PANLALAWIGAN
OF LAGUNA, and HON. CALIXTO
CATAQUIZ, petitioners, vs. HON. FRANCISCO DIZON
PAO and TONY CALVENTO, respondents.
D E C I S I O N
QUISUMBING, J.:
For our resolution is a petition for review
on certiorari seeking the reversal of the decision
[1]
dated
February 10, 1997 of the Regional Trial Court of San Pedro,
Laguna, Branch 93, enjoining petitioners from
implementing or enforcing Kapasiyahan Bilang 508, Taon
1995, of the Sangguniang Panlalawigan of Laguna and its
subsequent Order
[2]
dated April 21, 1997 denying
petitioners motion for reconsideration.
On December 29, 1995, respondent Tony Calvento was
appointed agent by the Philippine Charity Sweepstakes
Office (PCSO) to install Terminal OM 20 for the operation of
lotto. He asked Mayor Calixto Cataquiz, Mayor of San
Pedro, Laguna, for a mayors permit to open the lotto
outlet. This was denied by Mayor Cataquiz in a letter dated
February 19, 1996. The ground for said denial was an
ordinance passed by theSangguniang Panlalawigan of
Laguna entitled Kapasiyahan Blg. 508, T. 1995 which was
issued on September 18, 1995. The ordinance reads:
ISANG KAPASIYAHAN TINUTUTULAN ANG MGA ILLEGAL
GAMBLING LALO NA ANG LOTTO SA LALAWIGAN NG
LAGUNA
SAPAGKAT, ang sugal dito sa lalawigan ng Laguna ay
talamak na;
SAPAGKAT, ang sugal ay nagdudulot ng masasamang
impluwensiya lalot higit sa mga kabataan;
KUNG KAYAT DAHIL DITO, at sa mungkahi nina Kgg. Kgd.
Juan M. Unico at Kgg. Kgd. Gat-Ala A. Alatiit,
pinangalawahan ni Kgg. Kgd. Meliton C. Larano at buong
pagkakaisang sinangayunan ng lahat ng dumalo sa pulong;
511

IPINASIYA, na tutulan gaya ng dito ay mahigpit na
TINUTUTULAN ang ano mang uri ng sugal dito sa lalawigan
ng Laguna lalot higit ang Lotto;
IPINASIYA PA RIN na hilingin tulad ng dito ay hinihiling sa
Panlalawigang pinuno ng Philippine National Police (PNP)
Col. [illegible] na mahigpit na pag-ibayuhin ang pagsugpo
sa lahat ng uri ng illegal na sugal sa buong lalawigan ng
Laguna lalo na ang Jueteng.
[3]

As a result of this resolution of denial, respondent
Calvento filed a complaint for declaratory relief with prayer
for preliminary injunction and temporary restraining
order. In the said complaint, respondent Calvento asked
the Regional Trial Court of San Pedro Laguna, Branch 93, for
the following reliefs: (1) a preliminary injunction or
temporary restraining order, ordering the defendants to
refrain from implementing or enforcingKapasiyahan Blg.
508, T. 1995; (2) an order requiring Hon. Municipal Mayor
Calixto R. Cataquiz to issue a business permit for the
operation of a lotto outlet; and (3) an order annulling or
declaring as invalidKapasiyahan Blg. 508, T. 1995.
On February 10, 1997, the respondent judge, Francisco
Dizon Pao, promulgated his decision enjoining the
petitioners from implementing or enforcing resolution
or Kapasiyahan Blg. 508, T. 1995. The dispositive portion of
said decision reads:
WHEREFORE, premises considered, defendants, their
agents and representatives are hereby enjoined from
implementing or enforcing resolution or kapasiyahan blg.
508, T. 1995 of the Sangguniang Panlalawigan ng Laguna
prohibiting the operation of the lotto in the province of
Laguna.
SO ORDERED.
[4]

Petitioners filed a motion for reconsideration which was
subsequently denied in an Order dated April 21, 1997,
which reads:
Acting on the Motion for Reconsideration filed by
defendants Jose D. Lina, Jr. and the Sangguniang
Panlalawigan of Laguna, thru counsel, with the opposition
filed by plaintiffs counsel and the comment thereto filed by
counsel for the defendants which were duly noted, the
Court hereby denies the motion for lack of merit.
SO ORDERED.
[5]

On May 23, 1997, petitioners filed this petition alleging
that the following errors were committed by the
respondent trial court:
I
THE TRIAL COURT ERRED IN ENJOINING THE PETITIONERS
FROM IMPLEMENTING KAPASIYAHAN BLG. 508, T. 1995 OF
THE SANGGUNIANG PANLALAWIGAN OF LAGUNA
PROHIBITING THE OPERATION OF THE LOTTO IN THE
PROVINCE OF LAGUNA.
512

II
THE TRIAL COURT FAILED TO APPRECIATE THE ARGUMENT
POSITED BY THE PETITIONERS THAT BEFORE ANY
GOVERNMENT PROJECT OR PROGRAM MAY BE
IMPLEMENTED BY THE NATIONAL AGENCIES OR OFFICES,
PRIOR CONSULTATION AND APPROVAL BY THE LOCAL
GOVERNMENT UNITS CONCERNED AND OTHER
CONCERNED SECTORS IS REQUIRED.
Petitioners contend that the assailed resolution is a
valid policy declaration of the Provincial Government of
Laguna of its vehement objection to the operation of lotto
and all forms of gambling. It is likewise a valid exercise of
the provincial governments police power under the
General Welfare Clause of Republic Act 7160, otherwise
known as the Local Government Code of 1991.
[6]
They also
maintain that respondents lotto operation is illegal
because no prior consultations and approval by the local
government were sought before it was implemented
contrary to the express provisions of Sections 2 (c) and 27
of R.A. 7160.
[7]

For his part, respondent Calvento argues that the
questioned resolution is, in effect, a curtailment of the
power of the state since in this case the national legislature
itself had already declared lotto as legal and permitted its
operations around the country.
[8]
As for the allegation that
no prior consultations and approval were sought from
the sangguniang panlalawigan of Laguna, respondent
Calvento contends this is not mandatory since such a
requirement is merely stated as a declaration of policy and
not a self-executing provision of the Local Government
Code of 1991.
[9]
He also states that his operation of the
lotto system is legal because of the authority given to him
by the PCSO, which in turn had been granted a franchise to
operate the lotto by Congress.
[10]

The Office of the Solicitor General (OSG), for the State,
contends that the Provincial Government of Laguna has no
power to prohibit a form of gambling which has been
authorized by the national government.
[11]
He argues that
this is based on the principle that ordinances should not
contravene statutes as municipal governments are merely
agents of the national government. The local councils
exercise only delegated legislative powers which have been
conferred on them by Congress. This being the case, these
councils, as delegates, cannot be superior to the principal
or exercise powers higher than those of the latter. The OSG
also adds that the question of whether gambling should be
permitted is for Congress to determine, taking into account
national and local interests. Since Congress has allowed the
PCSO to operate lotteries which PCSO seeks to conduct in
Laguna, pursuant to its legislative grant of authority, the
provinces Sangguniang Panlalawigan cannot nullify the
exercise of said authority by preventing something already
allowed by Congress.
The issues to be resolved now are the following: (1)
whether Kapasiyahan Blg. 508, T. 1995 of the Sangguniang
Panlalawigan of Laguna and the denial of a mayors permit
513

based thereon are valid; and (2) whether prior
consultations and approval by the
concerned Sanggunian are needed before a lotto system
can be operated in a given local government unit.
The entire controversy stemmed from the refusal of
Mayor Cataquiz to issue a mayors permit for the operation
of a lotto outlet in favor of private respondent. According
to the mayor, he based his decision on an existing
ordinance prohibiting the operation of lotto in the province
of Laguna. The ordinance, however, merely states the
objection of the council to the said game. It is but a mere
policy statement on the part of the local council, which is
not self-executing. Nor could it serve as a valid ground to
prohibit the operation of the lotto system in the province of
Laguna. Even petitioners admit as much when they stated
in their petition that:
5.7. The terms of the Resolution and the validity thereof
are express and clear. The Resolution is a policy declaration
of the Provincial Government of Laguna of its vehement
opposition and/or objection to the operation of and/or all
forms of gambling including the Lotto operation in the
Province of Laguna.
[12]

As a policy statement expressing the local governments
objection to the lotto, such resolution is valid. This is part
of the local governments autonomy to air its views which
may be contrary to that of the national
governments. However, this freedom to exercise contrary
views does not mean that local governments may actually
enact ordinances that go against laws duly enacted by
Congress. Given this premise, the assailed resolution in this
case could not and should not be interpreted as a measure
or ordinance prohibiting the operation of lotto.
The game of lotto is a game of chance duly authorized
by the national government through an Act of
Congress. Republic Act 1169, as amended by Batas
Pambansa Blg. 42, is the law which grants a franchise to the
PCSO and allows it to operate the lotteries. The pertinent
provision reads:
Section 1. The Philippine Charity Sweepstakes Office.- The
Philippine Charity Sweepstakes Office, hereinafter
designated the Office, shall be the principal government
agency for raising and providing for funds for health
programs, medical assistance and services and charities of
national character, and as such shall have the general
powers conferred in section thirteen of Act Numbered One
thousand four hundred fifty-nine, as amended, and shall
have the authority:
A. To hold and conduct charity sweepstakes races, lotteries,
and other similar activities, in such frequency and manner,
as shall be determined, and subject to such rules and
regulations as shall be promulgated by the Board of
Directors.
This statute remains valid today. While lotto is clearly a
game of chance, the national government deems it wise
514

and proper to permit it. Hence, the Sangguniang
Panlalawigan of Laguna, a local government unit, cannot
issue a resolution or an ordinance that would seek to
prohibit permits. Stated otherwise, what the national
legislature expressly allows by law, such as lotto, a
provincial board may not disallow by ordinance or
resolution.
In our system of government, the power of local
government units to legislate and enact ordinances and
resolutions is merely a delegated power coming from
Congress. As held in Tatel vs. Virac,
[13]
ordinances should
not contravene an existing statute enacted by
Congress. The reasons for this is obvious, as elucidated
in Magtajas v. Pryce Properties Corp.
[14]

Municipal governments are only agents of the national
government. Local councils exercise only delegated
legislative powers conferred upon 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 the corporation themselves are concerned. They
are, so to phrase it, the mere tenants at will of the
legislature (citing Clinton vs. Ceder Rapids, etc. Railroad Co.,
24 Iowa 455).
Nothing in the present constitutional provision
enhancing local autonomy dictates a different conclusion.
The 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 (citing Art. X, Sec. 5,
Constitution), 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.
[15]

515

Ours is still a unitary form of government, not a federal
state. Being so, any form of autonomy granted to local
governments will necessarily be limited and confined within
the extent allowed by the central authority. Besides, the
principle of local autonomy under the 1987 Constitution
simply means decentralization. It does not make local
governments sovereign within the state or an imperium in
imperio.
[16]

To conclude our resolution of the first issue, respondent
mayor of San Pedro, cannot avail of Kapasiyahan Bilang
508, Taon 1995, of the Provincial Board of Laguna as
justification to prohibit lotto in his municipality. For said
resolution is nothing but an expression of the local
legislative unit concerned. The Boards enactment, like
spring water, could not rise above its source of power, the
national legislature.
As for the second issue, we hold that petitioners erred
in declaring that Sections 2 (c) and 27 of Republic Act 7160,
otherwise known as the Local Government Code of 1991,
apply mandatorily in the setting up of lotto outlets around
the country. These provisions state:
Section 2. Declaration of Policy. x x x
(c) It is likewise the policy of the State to require all national
agencies and offices to conduct periodic consultations with
appropriate local government units, non-governmental and
peoples organizations, and other concerned sectors of the
community before any project or program is implemented
in their respective jurisdictions.
Section 27. Prior Consultations Required. No project or
program shall be implemented by government authorities
unless the consultations mentioned in Section 2 (c) and 26
hereof are complied with, and prior approval of the
sanggunian concerned is obtained; Provided, that
occupants in areas where such projects are to be
implemented shall not be evicted unless appropriate
relocation sites have been provided, in accordance with the
provisions of the Constitution.
From a careful reading of said provisions, we find that
these apply only to national programs and/or projects
which are to be implemented in a particular local
community. Lotto is neither a program nor a project of the
national government, but of a charitable institution, the
PCSO. Though sanctioned by the national government, it is
far fetched to say that lotto falls within the contemplation
of Sections 2 (c) and 27 of the Local Government Code.
Section 27 of the Code should be read in conjunction
with Section 26 thereof.
[17]
Section 26 reads:
Section 26. Duty of National Government Agencies in the
Maintenance of Ecological Balance. It shall be the duty of
every national agency or government-owned or controlled
corporation authorizing or involved in the planning and
implementation of any project or program that may cause
pollution, climatic change, depletion of non-renewable
516

resources, loss of crop land, range-land, or forest cover, and
extinction of animal or plant species, to consult with the
local government units, nongovernmental organizations,
and other sectors concerned and explain the goals and
objectives of the project or program, its impact upon the
people and the community in terms of environmental or
ecological balance, and the measures that will be
undertaken to prevent or minimize the adverse effects
thereof.
Thus, the projects and programs mentioned in Section
27 should be interpreted to mean projects and programs
whose effects are among those enumerated in Section 26
and 27, to wit, those that: (1) may cause pollution; (2) may
bring about climatic change; (3) may cause the depletion of
non-renewable resources; (4) may result in loss of crop
land, range-land, or forest cover; (5) may eradicate certain
animal or plant species from the face of the planet; and (6)
other projects or programs that may call for the eviction of
a particular group of people residing in the locality where
these will be implemented. Obviously, none of these
effects will be produced by the introduction of lotto in the
province of Laguna.
Moreover, the argument regarding lack of consultation
raised by petitioners is clearly an afterthought on their
part. There is no indication in the letter of Mayor Cataquiz
that this was one of the reasons for his refusal to issue a
permit. That refusal was predicated solely but erroneously
on the provisions of Kapasiyahan Blg. 508, Taon 1995, of
the Sangguniang Panlalawigan of Laguna.
In sum, we find no reversible error in the RTC decision
enjoining Mayor Cataquiz from enforcing or implementing
the Kapasiyahan Blg. 508, T. 1995, of the Sangguniang
Panlalawigan of Laguna. That resolution expresses merely
a policy statement of the Laguna provincial board. It
possesses no binding legal force nor requires any act of
implementation. It provides no sufficient legal basis for
respondent mayors refusal to issue the permit sought by
private respondent in connection with a legitimate business
activity authorized by a law passed by Congress.
WHEREFORE, the petition is DENIED for lack of
merit. The Order of the Regional Trial Court of San Pedro,
Laguna enjoining the petitioners from implementing or
enforcing Resolution or Kapasiyahan Blg. 508, T. 1995, of
the Provincial Board of Laguna is hereby AFFIRMED. No
costs.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Buena, and De Leon,
Jr., JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
517


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.
Aquilino G. Pimentel, Jr. and Associates for petitioners.
R.R. Torralba & Associates for private respondent.

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
518

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
519

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
andsupplemental 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.
520

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
521

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

522

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 allforms 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
523

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
524

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
525

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 "modifiedpro
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
526

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.
527

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
528

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
529

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.
EN BANC
[G.R. No. 118127. April 12, 2005]
CITY OF MANILA, HON. ALFREDO S. LIM as the Mayor of
the City of Manila, HON. JOSELITO L. ATIENZA, in his
capacity as Vice-Mayor of the City of Manila and
Presiding Officer of the City Council of Manila, HON.
ERNESTO A. NIEVA, HON. GONZALO P. GONZALES,
HON. AVELINO S. CAILIAN, HON. ROBERTO C.
OCAMPO, HON. ALBERTO DOMINGO, HON.
HONORIO U. LOPEZ, HON. FRANCISCO G. VARONA,
JR., HON. ROMUALDO S. MARANAN, HON. NESTOR
C. PONCE, JR., HON. HUMBERTO B. BASCO, HON.
FLAVIANO F. CONCEPCION, JR., HON. ROMEO G.
RIVERA, HON. MANUEL M. ZARCAL, HON. PEDRO S.
DE JESUS, HON. BERNARDITO C. ANG, HON.
MANUEL L. QUIN, HON. JHOSEP Y. LOPEZ, HON.
CHIKA G. GO, HON. VICTORIANO A. MELENDEZ,
HON. ERNESTO V.P. MACEDA, JR., HON. ROLANDO
P. NIETO, HON. DANILO V. ROLEDA, HON. GERINO A.
TOLENTINO, JR., HON. MA. PAZ E. HERRERA, HON.
JOEY D. HIZON, HON. FELIXBERTO D. ESPIRITU, HON.
KARLO Q. BUTIONG, HON. ROGELIO P. DELA PAZ,
HON. BERNARDO D. RAGAZA, HON. MA. CORAZON
R. CABALLES, HON. CASIMIRO C. SISON, HON.
BIENVINIDO M. ABANTE, JR., HON. MA. LOURDES
M. ISIP, HON. ALEXANDER S. RICAFORT, HON.
ERNESTO F. RIVERA, HON. LEONARDO L. ANGAT,
and HON. JOCELYN B. DAWIS, in their capacity as
councilors of the City of Manila, petitioners,
vs. HON. PERFECTO A.S. LAGUIO, JR., as Presiding
Judge, RTC, Manila and MALATE TOURIST
DEVELOPMENT CORPORATION, respondents.
D E C I S I O N
TINGA, J.:
I know only that what is moral is what you feel good after
and what is immoral is what you feel bad after.
Ernest Hermingway
530

Death in the Afternoon, Ch.
1
It is a moral and political axiom that any dishonorable act, if
performed by oneself, is less immoral than if performed by
someone else, who would be well-intentioned in his
dishonesty.
J. Christopher Gerald
Bonaparte in Egypt, Ch.
I
The Courts commitment to the protection of morals is
secondary to its fealty to the fundamental law of the land.
It is foremost a guardian of the Constitution but not the
conscience of individuals. And if it need be, the Court will
not hesitate to make the hammer fall, and heavily in the
words of Justice Laurel, and uphold the constitutional
guarantees when faced with laws that, though not lacking
in zeal to promote morality, nevertheless fail to pass the
test of constitutionality.
The pivotal issue in this Petition
[1]
under Rule 45 (then
Rule 42) of the Revised Rules on Civil Procedure seeking the
reversal of the Decision
[2]
in Civil Case No. 93-66511 of the
Regional Trial Court (RTC) of Manila, Branch 18 (lower
court),
[3]
is the validity of Ordinance No. 7783
(the Ordinance) of the City of Manila.
[4]

The antecedents are as follows:
Private respondent Malate Tourist Development
Corporation (MTDC) is a corporation engaged in the
business of operating hotels, motels, hostels and lodging
houses.
[5]
It built and opened Victoria Court in Malate which
was licensed as a motel although duly accredited with the
Department of Tourism as a hotel.
[6]
On 28 June 1993,
MTDC filed a Petition for Declaratory Relief with Prayer for
a Writ of Preliminary Injunction and/or Temporary
Restraining Order
[7]
(RTC Petition) with the lower court
impleading as defendants, herein petitioners City of Manila,
Hon. Alfredo S. Lim (Lim), Hon. Joselito L. Atienza, and the
members of the City Council of Manila (City Council). MTDC
prayed that the Ordinance, insofar as it includes motels and
inns as among its prohibited establishments, be declared
invalid and unconstitutional.
[8]

Enacted by the City Council
[9]
on 9 March 1993 and
approved by petitioner City Mayor on 30 March 1993, the
said Ordinance is entitled
AN ORDINANCE PROHIBITING THE ESTABLISHMENT OR
OPERATION OF BUSINESSES PROVIDING CERTAIN FORMS
OF AMUSEMENT, ENTERTAINMENT, SERVICES AND
FACILITIES IN THE ERMITA-MALATE AREA, PRESCRIBING
PENALTIES FOR VIOLATION THEREOF, AND FOR OTHER
PURPOSES.
[10]

The Ordinance is reproduced in full, hereunder:
SECTION 1. Any provision of existing laws and ordinances to
the contrary notwithstanding, no person, partnership,
531

corporation or entity shall, in the Ermita-Malate
area bounded by Teodoro M. Kalaw Sr. Street in the North,
Taft Avenue in the East, Vito Cruz Street in the South and
Roxas Boulevard in the West, pursuant to P.D. 499 be
allowed or authorized to contract and engage in, any
business providing certain forms of amusement,
entertainment, services and facilities where women are
used as tools in entertainment and which tend to disturb
the community, annoy the inhabitants, and adversely
affect the social and moral welfare of the community, such
as but not limited to:
1. Sauna Parlors
2. Massage Parlors
3. Karaoke Bars
4. Beerhouses
5. Night Clubs
6. Day Clubs
7. Super Clubs
8. Discotheques
9. Cabarets
10. Dance Halls
11. Motels
12. Inns
SEC. 2 The City Mayor, the City Treasurer or any person
acting in behalf of the said officials are prohibited from
issuing permits, temporary or otherwise, or from granting
licenses and accepting payments for the operation of
business enumerated in the preceding section.
SEC. 3. Owners and/or operator of
establishments engaged in, or devoted to, the businesses
enumerated in Section 1 hereof are hereby given three (3)
months from the date of approval of this ordinance within
which to wind up business operations or to transfer to any
place outside of the Ermita-Malate area or convert said
businesses to other kinds of business allowable within the
area, such as but not limited to:
1. Curio or antique shop
2. Souvenir Shops
3. Handicrafts display centers
4. Art galleries
5. Records and music shops
6. Restaurants
7. Coffee shops
8. Flower shops
9. Music lounge and sing-along
restaurants, with well-defined activities for
wholesome family entertainment that cater to
both local and foreign clientele.
10. Theaters engaged in the exhibition,
not only of motion pictures but also of cultural
shows, stage and theatrical plays, art exhibitions,
concerts and the like.
11. Businesses allowable within the law
and medium intensity districts as provided for in
the zoning ordinances for Metropolitan Manila,
except new warehouse or open-storage depot,
dock or yard, motor repair shop, gasoline service
532

station, light industry with any machinery, or
funeral establishments.
SEC. 4. Any person violating any provisions of this
ordinance, shall upon conviction, be punished by
imprisonment of one (1) year or fine of FIVE THOUSAND
(P5,000.00) PESOS, or both, at the discretion of the Court,
PROVIDED, that in case of juridical person, the President,
the General Manager, or person-in-charge of operation
shall be liable thereof; PROVIDED FURTHER, that in case of
subsequent violation and conviction, the premises of the
erring establishment shall be closed and padlocked
permanently.
SEC. 5. This ordinance shall take effect upon approval.
Enacted by the City Council of Manila at its regular session
today, March 9, 1993.
Approved by His Honor, the Mayor on March 30, 1993.
(Emphasis supplied)
In the RTC Petition, MTDC argued that
the Ordinance erroneously and improperly included in its
enumeration of prohibited establishments, motels and inns
such as MTDCs Victoria Court considering that these were
not establishments for amusement or entertainment
and they were not services or facilities for entertainment,
nor did they use women as tools for entertainment, and
neither did they disturb the community, annoy the
inhabitants or adversely affect the social and moral
welfare of the community.
[11]

MTDC further advanced that the Ordinance was invalid
and unconstitutional for the following reasons: (1) The City
Council has no power to prohibit the operation of motels as
Section 458 (a) 4 (iv)
[12]
of the Local Government Code of
1991 (the Code) grants to the City Council only the power
to regulate the establishment, operation and maintenance
of hotels, motels, inns, pension houses, lodging houses and
other similar establishments; (2) The Ordinance is void as it
is violative of Presidential Decree (P.D.) No. 499
[13]
which
specifically declared portions of the Ermita-Malate area as a
commercial zone with certain restrictions; (3)
The Ordinance does not constitute a proper exercise of
police power as the compulsory closure of the motel
business has no reasonable relation to the legitimate
municipal interests sought to be protected; (4)
The Ordinance constitutes an ex post facto law by punishing
the operation of Victoria Court which was a legitimate
business prior to its enactment; (5) The Ordinance violates
MTDCs constitutional rights in that: (a) it is confiscatory
and constitutes an invasion of plaintiffs property rights; (b)
the City Council has no power to find as a fact that a
particular thing is a nuisance per se nor does it have the
power to extrajudicially destroy it; and (6)
The Ordinance constitutes a denial of equal protection
under the law as no reasonable basis exists for prohibiting
the operation of motels and inns, but not pension houses,
hotels, lodging houses or other similar establishments, and
533

for prohibiting said business in the Ermita-Malate area but
not outside of this area.
[14]

In their Answer
[15]
dated 23 July 1993, petitioners City of
Manila and Lim maintained that the City Council had the
power to prohibit certain forms of entertainment in order
to protect the social and moral welfare of the community
as provided for in Section 458 (a) 4 (vii) of the Local
Government Code,
[16]
which reads, thus:
Section 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:
. . . .
(4) Regulate activities relative to the use of land, buildings
and structures within the city in order to promote the
general welfare and for said purpose shall:
. . . .
(vii) Regulate the establishment, operation, and
maintenance of any entertainment or amusement
facilities, including theatrical performances,
circuses, billiard pools, public dancing schools,
public dance halls, sauna baths, massage parlors,
and other places for entertainment or amusement;
regulate such other events or activities for
amusement or entertainment, particularly those
which tend to disturb the community or annoy the
inhabitants, or require the suspension or
suppression of the same; or, prohibit certain forms
of amusement or entertainment in order to protect
the social and moral welfare of the community.
Citing Kwong Sing v. City of Manila,
[17]
petitioners
insisted that the power of regulation spoken of in the
above-quoted provision included the power to control, to
govern and to restrain places of exhibition and
amusement.
[18]

Petitioners likewise asserted that the Ordinance was
enacted by the City Council of Manila to protect the social
and moral welfare of the community in conjunction with its
police power as found in Article III, Section 18(kk) of
Republic Act No. 409,
[19]
otherwise known as the Revised
Charter of the City of Manila (Revised Charter of
Manila)
[20]
which reads, thus:
ARTICLE III
THE MUNICIPAL BOARD
. . .
Section 18. Legislative powers. The Municipal
Board shall have the following legislative powers:
534

. . .
(kk) To enact all ordinances it may deem necessary
and proper for the sanitation and safety, the
furtherance of the prosperity, and the promotion of
the morality, peace, good order, comfort,
convenience, and general welfare of the city and its
inhabitants, and such others as may be necessary to
carry into effect and discharge the powers and
duties conferred by this chapter; and to fix penalties
for the violation of ordinances which shall not
exceed two hundred pesos fine or six months
imprisonment, or both such fine and imprisonment,
for a single offense.
Further, the petitioners noted, the Ordinance had the
presumption of validity; hence, private respondent had the
burden to prove its illegality or unconstitutionality.
[21]

Petitioners also maintained that there was no
inconsistency between P.D. 499 and the Ordinance as the
latter simply disauthorized certain forms of businesses and
allowed the Ermita-Malate area to remain a commercial
zone.
[22]
The Ordinance, the petitioners likewise claimed,
cannot be assailed as ex post facto as it was prospective in
operation.
[23]
The Ordinance also did not infringe the equal
protection clause and cannot be denounced as class
legislation as there existed substantial and real differences
between the Ermita-Malate area and other places in the
City of Manila.
[24]

On 28 June 1993, respondent Judge Perfecto A.S.
Laguio, Jr. (Judge Laguio) issued an ex-parte temporary
restraining order against the enforcement of
the Ordinance.
[25]
And on 16 July 1993, again in an intrepid
gesture, he granted the writ of preliminary injunction
prayed for by MTDC.
[26]

After trial, on 25 November 1994, Judge Laguio
rendered the assailed Decision, enjoining the petitioners
from implementing the Ordinance. The dispositive portion
of said Decision reads:
[27]

WHEREFORE, judgment is hereby rendered declaring
Ordinance No. 778[3], Series of 1993, of the City of Manila
null and void, and making permanent the writ of
preliminary injunction that had been issued by this Court
against the defendant. No costs.
SO ORDERED.
[28]

Petitioners filed with the lower court a Notice of
Appeal
[29]
on 12 December 1994, manifesting that they are
elevating the case to this Court under then Rule 42 on pure
questions of law.
[30]

On 11 January 1995, petitioners filed the
present Petition, alleging that the following errors were
committed by the lower court in its ruling: (1) It erred in
concluding that the subject ordinance isultra vires, or
otherwise, unfair, unreasonable and oppressive exercise of
police power; (2) It erred in holding that the
535

questioned Ordinance contravenes P.D. 499
[31]
which allows
operators of all kinds of commercial establishments, except
those specified therein; and (3) It erred in declaring
the Ordinance void and unconstitutional.
[32]

In the Petition and in its Memorandum,
[33]
petitioners in
essence repeat the assertions they made before the lower
court. They contend that the assailed Ordinance was
enacted in the exercise of the inherent and plenary power
of the State and the general welfare clause exercised by
local government units provided for in Art. 3, Sec. 18 (kk) of
the Revised Charter of Manila and conjunctively, Section
458 (a) 4 (vii) of the Code.
[34]
They allege that
the Ordinance is a valid exercise of police power; it does not
contravene P.D. 499; and that it enjoys the presumption of
validity.
[35]

In its Memorandum
[36]
dated 27 May 1996, private
respondent maintains that the Ordinance is ultra vires and
that it is void for being repugnant to the general law. It
reiterates that the questioned Ordinance is not a valid
exercise of police power; that it is violative of due process,
confiscatory and amounts to an arbitrary interference with
its lawful business; that it is violative of the equal
protection clause; and that it confers on petitioner City
Mayor or any officer unregulated discretion in the
execution of the Ordinance absent rules to guide and
control his actions.
This is an opportune time to express the Courts deep
sentiment and tenderness for the Ermita-Malate area being
its home for several decades. A long-time resident, the
Court witnessed the areas many turn of events. It relished
its glory days and endured its days of infamy. Much as the
Court harks back to the resplendent era of the Old Manila
and yearns to restore its lost grandeur, it believes that
the Ordinance is not the fitting means to that end. The
Court is of the opinion, and so holds, that the lower court
did not err in declaring the Ordinance, as it did, ultra
vires and therefore null and void.
The Ordinance is so replete with constitutional
infirmities that almost every sentence thereof violates a
constitutional provision. The prohibitions and sanctions
therein transgress the cardinal rights of persons enshrined
by the Constitution. The Court is called upon to shelter
these rights from attempts at rendering them worthless.
The tests of a valid ordinance are well established. A
long line of decisions has held that for an ordinance to be
valid, it must not only be within the corporate powers of
the local government unit to enact and must be passed
according to the procedure prescribed by law, it must also
conform to the following substantive requirements: (1)
must not contravene the Constitution or any statute; (2)
must not be unfair or oppressive; (3) must not be partial or
discriminatory; (4) must not prohibit but may regulate
trade; (5) must be general and consistent with public policy;
and (6) must not be unreasonable.
[37]

Anent the first criterion, ordinances shall only be valid
when they are not contrary to the Constitution and to the
536

laws.
[38]
The Ordinance must satisfy two requirements: it
must pass muster under the test of constitutionality and
the test of consistency with the prevailing laws. That
ordinances should be constitutional uphold the principle of
the supremacy of the Constitution. The requirement that
the enactment must not violate existing law gives stress to
the precept that local government units are able to legislate
only by virtue of their derivative legislative power, a
delegation of legislative power from the national
legislature. The delegate cannot be superior to the
principal or exercise powers higher than those of the
latter.
[39]

This 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. The national legislature is still the
principal of the local government units, which cannot defy
its will or modify or violate it.
[40]

The Ordinance was passed by the City Council in the
exercise of its police power, an enactment of the City
Council acting as agent of Congress. Local government
units, as agencies of the State, are endowed with police
power in order to effectively accomplish and carry out the
declared objects of their creation.
[41]
This delegated police
power is found in Section 16 of the Code, known as the
general welfare clause, viz:
SECTION 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.
Local government units exercise police power through
their respective legislative bodies; in this case,
the sangguniang panlungsod or the city council. The Code
empowers the legislative bodies to enact ordinances,
approve resolutions and appropriate funds for the general
welfare of the province/city/municipality 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.
[42]
The inquiry in this
Petition is concerned with the validity of the exercise of
such delegated power.
The Ordinance contravenes
the Constitution
537

The police power of the City Council, however broad
and far-reaching, is subordinate to the constitutional
limitations thereon; and is subject to the limitation that its
exercise must be reasonable and for the public good.
[43]
In
the case at bar, the enactment of the Ordinance was an
invalid exercise of delegated power as it is unconstitutional
and repugnant to general laws.
The relevant constitutional provisions are the following:
SEC. 5. The maintenance of peace and order, the protection
of life, liberty, and property, and the promotion of the
general welfare are essential for the enjoyment by all the
people of the blessings of democracy.
[44]

SEC. 14. The State recognizes the role of women in nation-
building, and shall ensure the fundamental equality before
the law of women and men.
[45]

SEC. 1. No person shall be deprived of life, liberty or
property without due process of law, nor shall any person
be denied the equal protection of laws.
[46]

Sec. 9. Private property shall not be taken for public use
without just compensation.
[47]

A. The Ordinance infringes
the Due Process Clause
The constitutional safeguard of due process is
embodied in the fiat (N)o person shall be deprived of life,
liberty or property without due process of law. . . .
[48]

There is no controlling and precise definition of due
process. It furnishes though a standard to which
governmental action should conform in order that
deprivation of life, liberty or property, in each appropriate
case, be valid. This standard is aptly described as a
responsiveness to the supremacy of reason, obedience to
the dictates of justice,
[49]
and as such it is a limitation upon
the exercise of the police power.
[50]

The purpose of the guaranty is to prevent governmental
encroachment against the life, liberty and property of
individuals; to secure the individual from the arbitrary
exercise of the powers of the government, unrestrained by
the established principles of private rights and distributive
justice; to protect property from confiscation by legislative
enactments, from seizure, forfeiture, and destruction
without a trial and conviction by the ordinary mode of
judicial procedure; and to secure to all persons equal and
impartial justice and the benefit of the general law.
[51]

The guaranty serves as a protection against arbitrary
regulation, and private corporations and partnerships are
persons within the scope of the guaranty insofar as their
property is concerned.
[52]

This clause has been interpreted as imposing two
separate limits on government, usually called procedural
due process and substantive due process.
538

Procedural due process, as the phrase implies, refers to
the procedures that the government must follow before it
deprives a person of life, liberty, or property. Classic
procedural due process issues are concerned with what
kind of notice and what form of hearing the government
must provide when it takes a particular action.
[53]

Substantive due process, as that phrase connotes, asks
whether the government has an adequate reason for taking
away a persons life, liberty, or property. In other words,
substantive due process looks to whether there is a
sufficient justification for the governments action.
[54]
Case
law in the United States (U.S.) tells us that whether there is
such a justification depends very much on the level of
scrutiny used.
[55]
For example, if a law is in an area where
only rational basis review is applied, substantive due
process is met so long as the law is rationally related to a
legitimate government purpose. But if it is an area where
strict scrutiny is used, such as for protecting fundamental
rights, then the government will meet substantive due
process only if it can prove that the law is necessary to
achieve a compelling government purpose.
[56]

The police power granted to local government units
must always be exercised with utmost observance of the
rights of the people to due process and equal protection of
the law. Such power cannot be exercised whimsically,
arbitrarily or despotically
[57]
as its exercise is subject to a
qualification, limitation or restriction demanded by the
respect and regard due to the prescription of the
fundamental law, particularly those forming part of the Bill
of Rights. Individual rights, it bears emphasis, may be
adversely affected only to the extent that may fairly be
required by the legitimate demands of public interest or
public welfare.
[58]
Due process requires the intrinsic validity
of the law in interfering with the rights of the person to his
life, liberty and property.
[59]

Requisites for the valid exercise
of Police Power are not met
To successfully invoke the exercise of police power as
the rationale for the enactment of the Ordinance, and to
free it from the imputation of constitutional infirmity, not
only must it appear that the interests of the public
generally, as distinguished from those of a particular class,
require an interference with private rights, but the means
adopted must be reasonably necessary for the
accomplishment of the purpose and not unduly oppressive
upon individuals.
[60]
It must be evident that no other
alternative for the accomplishment of the purpose less
intrusive of private rights can work. A reasonable relation
must exist between the purposes of the police measure and
the means employed for its accomplishment, for even
under the guise of protecting the public interest, personal
rights and those pertaining to private property will not be
permitted to be arbitrarily invaded.
[61]

Lacking a concurrence of these two requisites, the
police measure shall be struck down as an arbitrary
539

intrusion into private rights
[62]
a violation of the due
process clause.
The Ordinance was enacted to address and arrest the
social ills purportedly spawned by the establishments in the
Ermita-Malate area which are allegedly operated under the
deceptive veneer of legitimate, licensed and tax-paying
nightclubs, bars, karaoke bars, girlie houses, cocktail
lounges, hotels and motels. Petitioners insist that even the
Court in the case of Ermita-Malate Hotel and Motel
Operators Association, Inc. v. City Mayor of Manila
[63]
had
already taken judicial notice of the alarming increase in
the rate of prostitution, adultery and fornication in Manila
traceable in great part to existence of motels, which
provide a necessary atmosphere for clandestine entry,
presence and exit and thus become the ideal haven for
prostitutes and thrill-seekers.
[64]

The object of the Ordinance was, accordingly, the
promotion and protection of the social and moral values of
the community. Granting for the sake of argument that the
objectives of theOrdinance are within the scope of the City
Councils police powers, the means employed for the
accomplishment thereof were unreasonable and unduly
oppressive.
It is undoubtedly one of the fundamental duties of the
City of Manila to make all reasonable regulations looking to
the promotion of the moral and social values of the
community. However, the worthy aim of fostering public
morals and the eradication of the communitys social ills
can be achieved through means less restrictive of private
rights; it can be attained by reasonable restrictions rather
than by an absolute prohibition. The closing down and
transfer of businesses or their conversion into businesses
allowed under the Ordinance have no reasonable relation
to the accomplishment of its purposes. Otherwise stated,
the prohibition of the enumerated establishments will
not per se protect and promote the social and moral
welfare of the community; it will not in itself eradicate the
alluded social ills of prostitution, adultery, fornication nor
will it arrest the spread of sexual disease in Manila.
Conceding for the nonce that the Ermita-Malate area
teems with houses of ill-repute and establishments of the
like which the City Council may lawfully prohibit,
[65]
it is
baseless and insupportable to bring within that
classification sauna parlors, massage parlors, karaoke bars,
night clubs, day clubs, super clubs, discotheques, cabarets,
dance halls, motels and inns. This is not warranted under
the accepted definitions of these terms. The enumerated
establishments are lawful pursuits which are not per
se offensive to the moral welfare of the community.
That these are used as arenas to consummate illicit
sexual affairs and as venues to further the illegal
prostitution is of no moment. We lay stress on the acrid
truth that sexual immorality, being a human frailty, may
take place in the most innocent of places that it may even
take place in the substitute establishments enumerated
under Section 3 of the Ordinance. If the flawed logic of
theOrdinance were to be followed, in the remote instance
540

that an immoral sexual act transpires in a church cloister or
a court chamber, we would behold the spectacle of the City
of Manila ordering the closure of the church or court
concerned. Every house, building, park, curb, street or even
vehicles for that matter will not be exempt from the
prohibition. Simply because there are no pure places
where there are impure men. Indeed, even the Scripture
and the Tradition of Christians churches continually recall
the presence and universality of sin in mans history.
[66]

The problem, it needs to be pointed out, is not the
establishment, which by its nature cannot be said to be
injurious to the health or comfort of the community and
which in itself is amoral, but the deplorable human activity
that may occur within its premises. While a motel may be
used as a venue for immoral sexual activity, it cannot for
that reason alone be punished. It cannot be classified as a
house of ill-repute or as a nuisance per se on a mere
likelihood or a naked assumption. If that were so and if that
were allowed, then the Ermita-Malate area would not only
be purged of its supposed social ills, it would be
extinguished of its soul as well as every human activity,
reprehensible or not, in its every nook and cranny would be
laid bare to the estimation of the authorities.
The Ordinance seeks to legislate morality but fails to
address the core issues of morality. Try as
the Ordinance may to shape morality, it should not foster
the illusion that it can make a moral man out of it because
immorality is not a thing, a building or establishment; it is in
the hearts of men. The City Council instead should regulate
human conduct that occurs inside the establishments, but
not to the detriment of liberty and privacy which are
covenants, premiums and blessings of democracy.
While petitioners earnestness at curbing clearly
objectionable social ills is commendable, they unwittingly
punish even the proprietors and operators of wholesome,
innocent establishments. In the instant case, there is a
clear invasion of personal or property rights, personal in the
case of those individuals desirous of owning, operating and
patronizing those motels and property in terms of the
investments made and the salaries to be paid to those
therein employed. If the City of Manila so desires to put an
end to prostitution, fornication and other social ills, it can
instead impose reasonable regulations such as daily
inspections of the establishments for any violation of the
conditions of their licenses or permits; it may exercise its
authority to suspend or revoke their licenses for these
violations;
[67]
and it may even impose increased license
fees. In other words, there are other means to reasonably
accomplish the desired end.
Means employed are
constitutionally infirm
The Ordinance disallows the operation of sauna parlors,
massage parlors, karaoke bars, beerhouses, night clubs, day
clubs, super clubs, discotheques, cabarets, dance halls,
motels and inns in the Ermita-Malate area. In Section 3
thereof, owners and/or operators of the enumerated
541

establishments are given three (3) months from the date of
approval of the Ordinance within which to wind up
business operations or to transfer to any place outside the
Ermita-Malate area or convert said businesses to other
kinds of business allowable within the area. Further, it
states in Section 4 that in cases of subsequent violations of
the provisions of the Ordinance, the premises of the erring
establishment shall be closed and padlocked permanently.
It is readily apparent that the means employed by
the Ordinance for the achievement of its purposes, the
governmental interference itself, infringes on the
constitutional guarantees of a persons fundamental right
to liberty and property.
Liberty as guaranteed by the Constitution was defined
by Justice Malcolm to include the right to exist and the
right to be free from arbitrary restraint or servitude. The
term cannot be dwarfed into mere freedom from physical
restraint of the person of the citizen, but is deemed to
embrace the right of man to enjoy the facilities with which
he has been endowed by his Creator, subject only to such
restraint as are necessary for the common welfare.
[68]
In
accordance with this case, the rights of the citizen to be
free to use his faculties in all lawful ways; to live and work
where he will; to earn his livelihood by any lawful calling;
and to pursue any avocation are all deemed embraced in
the concept of liberty.
[69]

The U.S. Supreme Court in the case of Roth v. Board of
Regents,
[70]
sought to clarify the meaning of liberty. It
said:
While the Court has not attempted to define with exactness
the liberty. . . guaranteed [by the Fifth and Fourteenth
Amendments], the term denotes not merely freedom from
bodily restraint but also the right of the individual to
contract, to engage in any of the common occupations of
life, to acquire useful knowledge, to marry, establish a
home and bring up children, to worship God according to
the dictates of his own conscience, and generally to enjoy
those privileges long recognizedas essential to the orderly
pursuit of happiness by free men. In a Constitution for a
free people, there can be no doubt that the meaning of
liberty must be broad indeed.
In another case, it also confirmed that liberty protected
by the due process clause includes personal decisions
relating to marriage, procreation, contraception, family
relationships, child rearing, and education. In explaining the
respect the Constitution demands for the autonomy of the
person in making these choices, the U.S. Supreme Court
explained:
These matters, involving the most intimate and personal
choices a person may make in a lifetime, choices central to
personal dignity and autonomy, are central to the liberty
protected by the Fourteenth Amendment. At the heart of
liberty is the right to define ones own concept of existence,
542

of meaning, of universe, and of the mystery of human life.
Beliefs about these matters could not define the attributes
of personhood where they formed under compulsion of the
State.
[71]

Persons desirous to own, operate and patronize the
enumerated establishments under Section 1 of
the Ordinance may seek autonomy for these purposes.
Motel patrons who are single and unmarried may
invoke this right to autonomy to consummate their bonds
in intimate sexual conduct within the motels premisesbe
it stressed that their consensual sexual behavior does not
contravene any fundamental state policy as contained in
the Constitution.
[72]
Adults have a right to choose to forge
such relationships with others in the confines of their own
private lives and still retain their dignity as free persons.
The liberty protected by the Constitution allows persons
the right to make this choice.
[73]
Their right to liberty under
the due process clause gives them the full right to engage in
their conduct without intervention of the government, as
long as they do not run afoul of the law. Liberty should be
the rule and restraint the exception.
Liberty in the constitutional sense not only means
freedom from unlawful government restraint; it must
include privacy as well, if it is to be a repository of freedom.
The right to be let alone is the beginning of all freedomit
is the most comprehensive of rights and the right most
valued by civilized men.
[74]

The concept of liberty compels respect for the
individual whose claim to privacy and interference demands
respect. As the case of Morfe v. Mutuc,
[75]
borrowing the
words of Laski, so very aptly stated:
Man is one among many, obstinately refusing reduction to
unity. His separateness, his isolation, are indefeasible;
indeed, they are so fundamental that they are the basis on
which his civic obligations are built. He cannot abandon the
consequences of his isolation, which are, broadly speaking,
that his experience is private, and the will built out of that
experience personal to himself. If he surrenders his will to
others, he surrenders himself. If his will is set by the will of
others, he ceases to be a master of himself. I cannot believe
that a man no longer a master of himself is in any real sense
free.
Indeed, the right to privacy as a constitutional right was
recognized in Morfe, the invasion of which should be
justified by a compelling state interest. Morfe accorded
recognition to the right to privacy independently of its
identification with liberty; in itself it is fully deserving of
constitutional protection. Governmental powers should
stop short of certain intrusions into the personal life of the
citizen.
[76]

There is a great temptation to have an extended
discussion on these civil liberties but the Court chooses to
exercise restraint and restrict itself to the issues presented
when it should. The previous pronouncements of the Court
543

are not to be interpreted as a license for adults to engage in
criminal conduct. The reprehensibility of such conduct is
not diminished. The Court only reaffirms and guarantees
their right to make this choice. Should they be prosecuted
for their illegal conduct, they should suffer the
consequences of the choice they have made. That,
ultimately, is their choice.
Modality employed is
unlawful taking
In addition, the Ordinance is unreasonable and
oppressive as it substantially divests the respondent of the
beneficial use of its property.
[77]
The Ordinance in Section 1
thereof forbids the running of the enumerated businesses
in the Ermita-Malate area and in Section 3 instructs its
owners/operators to wind up business operations or to
transfer outside the area or convert said businesses into
allowed businesses. An ordinance which permanently
restricts the use of property that it can not be used for any
reasonable purpose goes beyond regulation and must be
recognized as a taking of the property without just
compensation.
[78]
It is intrusive and violative of the private
property rights of individuals.
The Constitution expressly provides in Article III, Section
9, that private property shall not be taken for public use
without just compensation. The provision is the most
important protection of property rights in the Constitution.
This is a restriction on the general power of the government
to take property. The constitutional provision is about
ensuring that the government does not confiscate the
property of some to give it to others. In part too, it is about
loss spreading. If the government takes away a persons
property to benefit society, then society should pay. The
principal purpose of the guarantee is to bar the
Government from forcing some people alone to bear public
burdens which, in all fairness and justice, should be borne
by the public as a whole.
[79]

There are two different types of taking that can be
identified. A possessory taking occurs when the
government confiscates or physically occupies property. A
regulatory taking occurs when the governments
regulation leaves no reasonable economically viable use of
the property.
[80]

In the landmark case of Pennsylvania Coal v.
Mahon,
[81]
it was held that a taking also could be found if
government regulation of the use of property went too
far. When regulation reaches a certain magnitude, in most
if not in all cases there must be an exercise of eminent
domain and compensation to support the act. While
property may be regulated to a certain extent, if regulation
goes too far it will be recognized as a taking.
[82]

No formula or rule can be devised to answer the
questions of what is too far and when regulation becomes a
taking. In Mahon, Justice Holmes recognized that it was a
question of degree and therefore cannot be disposed of by
general propositions. On many other occasions as well, the
544

U.S. Supreme Court has said that the issue of when
regulation constitutes a taking is a matter of considering
the facts in each case. The Court asks whether justice and
fairness require that the economic loss caused by public
action must be compensated by the government and thus
borne by the public as a whole, or whether the loss should
remain concentrated on those few persons subject to the
public action.
[83]

What is crucial in judicial consideration of regulatory
takings is that government regulation is a taking if it leaves
no reasonable economically viable use of property in a
manner that interferes with reasonable expectations for
use.
[84]
A regulation that permanently denies all
economically beneficial or productive use of land is, from
the owners point of view, equivalent to a taking unless
principles of nuisance or property law that existed when
the owner acquired the land make the use
prohibitable.
[85]
When the owner of real property has been
called upon to sacrifice all economically beneficial uses in
the name of the common good, that is, to leave his
property economically idle, he has suffered a taking.
[86]

A regulation which denies all economically beneficial or
productive use of land will require compensation under the
takings clause. Where a regulation places limitations on
land that fall short of eliminating all economically beneficial
use, a taking nonetheless may have occurred, depending on
a complex of factors including the regulations economic
effect on the landowner, the extent to which the regulation
interferes with reasonable investment-backed expectations
and the character of government action. These inquiries are
informed by the purpose of the takings clause which is to
prevent the government from forcing some people alone to
bear public burdens which, in all fairness and justice, should
be borne by the public as a whole.
[87]

A restriction on use of property may also constitute a
taking if not reasonably necessary to the effectuation of a
substantial public purpose or if it has an unduly harsh
impact on the distinct investment-backed expectations of
the owner.
[88]

The Ordinance gives the owners and operators of the
prohibited establishments three (3) months from its
approval within which to wind up business operations or
to transfer to any place outside of the Ermita-Malate area
or convert said businesses to other kinds of business
allowable within the area. The directive to wind up
business operations amounts to a closure of the
establishment, a permanent deprivation of property, and is
practically confiscatory. Unless the owner converts his
establishment to accommodate an allowed business, the
structure which housed the previous business will be left
empty and gathering dust. Suppose he transfers it to
another area, he will likewise leave the entire
establishment idle. Consideration must be given to the
substantial amount of money invested to build the edifices
which the owner reasonably expects to be returned within
a period of time. It is apparent that the Ordinance leaves no
reasonable economically viable use of property in a manner
that interferes with reasonable expectations for use.
545

The second and third options to transfer to any place
outside of the Ermita-Malate area or to convert into
allowed businessesare confiscatory as well. The penalty of
permanent closure in cases of subsequent violations found
in Section 4 of the Ordinance is also equivalent to a taking
of private property.
The second option instructs the owners to abandon
their property and build another one outside the Ermita-
Malate area. In every sense, it qualifies as a taking without
just compensation with an additional burden imposed on
the owner to build another establishment solely from his
coffers. The proffered solution does not put an end to the
problem, it merely relocates it. Not only is this
impractical, it is unreasonable, onerous and oppressive. The
conversion into allowed enterprises is just as ridiculous.
How may the respondent convert a motel into a restaurant
or a coffee shop, art gallery or music lounge without
essentially destroying its property? This is a taking of
private property without due process of law, nay, even
without compensation.
The penalty of closure likewise constitutes unlawful
taking that should be compensated by the government. The
burden on the owner to convert or transfer his business,
otherwise it will be closed permanently after a subsequent
violation should be borne by the public as this end benefits
them as a whole.
Petitioners cannot take refuge in classifying the
measure as a zoning ordinance. A zoning ordinance,
although a valid exercise of police power, which limits a
wholesome property to a use which can not reasonably
be made of it constitutes the taking of such property
without just compensation. Private property which is not
noxious nor intended for noxious purposes may not, by
zoning, be destroyed without compensation. Such principle
finds no support in the principles of justice as we know
them. The police powers of local government units which
have always received broad and liberal interpretation
cannot be stretched to cover this particular taking.
Distinction should be made between destruction from
necessity and eminent domain. It needs restating that the
property taken in the exercise of police power is destroyed
because it is noxious or intended for a noxious purpose
while the property taken under the power of eminent
domain is intended for a public use or purpose and is
therefore wholesome.
[89]
If it be of public benefit that a
wholesome property remain unused or relegated to a
particular purpose, then certainly the public should bear
the cost of reasonable compensation for the condemnation
of private property for public use.
[90]

Further, the Ordinance fails to set up any standard to
guide or limit the petitioners actions. It in no way controls
or guides the discretion vested in them. It provides no
definition of the establishments covered by it and it fails to
set forth the conditions when the establishments come
within its ambit of prohibition. The Ordinance confers upon
the mayor arbitrary and unrestricted power to close down
establishments. Ordinances such as this, which make
546

possible abuses in its execution, depending upon no
conditions or qualifications whatsoever other than the
unregulated arbitrary will of the city authorities as the
touchstone by which its validity is to be tested, are
unreasonable and invalid. The Ordinance should have
established a rule by which its impartial enforcement could
be secured.
[91]

Ordinances placing restrictions upon the lawful use of
property must, in order to be valid and constitutional,
specify the rules and conditions to be observed and
conduct to avoid; and must not admit of the exercise, or of
an opportunity for the exercise, of unbridled discretion by
the law enforcers in carrying out its provisions.
[92]

Thus, in Coates v. City of Cincinnati,
[93]
as cited in People
v. Nazario,
[94]
the U.S. Supreme Court struck down an
ordinance that had made it illegal for three or more
persons to assemble on any sidewalk and there conduct
themselves in a manner annoying to persons passing by.
The ordinance was nullified as it imposed no standard at all
because one may never know in advance what annoys
some people but does not annoy others.
Similarly, the Ordinance does not specify the standards
to ascertain which establishments tend to disturb the
community, annoy the inhabitants, and adversely affect
the social and moral welfare of the community. The cited
case supports the nullification of the Ordinance for lack of
comprehensible standards to guide the law enforcers in
carrying out its provisions.
Petitioners cannot therefore order the closure of the
enumerated establishments without infringing the due
process clause. These lawful establishments may be
regulated, but not prevented from carrying on their
business. This is a sweeping exercise of police power that is
a result of a lack of imagination on the part of the City
Council and which amounts to an interference into personal
and private rights which the Court will not countenance. In
this regard, we take a resolute stand to uphold the
constitutional guarantee of the right to liberty and
property.
Worthy of note is an example derived from the U.S. of a
reasonable regulation which is a far cry from the ill-
considered Ordinance enacted by the City Council.
In FW/PBS, INC. v. Dallas,
[95]
the city of Dallas adopted a
comprehensive ordinance regulating sexually oriented
businesses, which are defined to include adult arcades,
bookstores, video stores, cabarets, motels, and theaters as
well as escort agencies, nude model studio and sexual
encounter centers. Among other things, the ordinance
required that such businesses be licensed. A group of motel
owners were among the three groups of businesses that
filed separate suits challenging the ordinance. The motel
owners asserted that the city violated the due process
clause by failing to produce adequate support for its
supposition that renting room for fewer than ten (10) hours
resulted in increased crime and other secondary effects.
They likewise argued than the ten (10)-hour limitation on
the rental of motel rooms placed an unconstitutional
547

burden on the right to freedom of association. Anent the
first contention, the U.S. Supreme Court held that the
reasonableness of the legislative judgment combined with a
study which the city considered, was adequate to support
the citys determination that motels permitting room
rentals for fewer than ten (10 ) hours should be included
within the licensing scheme. As regards the second point,
the Court held that limiting motel room rentals to ten (10)
hours will have no discernible effect on personal bonds as
those bonds that are formed from the use of a motel room
for fewer than ten (10) hours are not those that have
played a critical role in the culture and traditions of the
nation by cultivating and transmitting shared ideals and
beliefs.
The ordinance challenged in the above-cited case
merely regulated the targeted businesses. It imposed
reasonable restrictions; hence, its validity was upheld.
The case of Ermita Malate Hotel and Motel Operators
Association, Inc. v. City Mayor of Manila,
[96]
it needs
pointing out, is also different from this case in that what
was involved therein was a measure which regulated the
mode in which motels may conduct business in order to put
an end to practices which could encourage vice and
immorality. Necessarily, there was no valid objection on
due process or equal protection grounds as the ordinance
did not prohibit motels. The Ordinance in this case however
is not a regulatory measure but is an exercise of an
assumed power to prohibit.
[97]

The foregoing premises show that the Ordinance is an
unwarranted and unlawful curtailment of property and
personal rights of citizens. For being unreasonable and an
undue restraint of trade, it cannot, even under the guise of
exercising police power, be upheld as valid.
B. The Ordinance violates Equal
Protection Clause
Equal protection requires that all persons or things
similarly situated should be treated alike, both as to rights
conferred and responsibilities imposed. Similar subjects, in
other words, should not be treated differently, so as to give
undue favor to some and unjustly discriminate against
others.
[98]
The guarantee means that no person or class of
persons shall be denied the same protection of laws which
is enjoyed by other persons or other classes in like
circumstances.
[99]
The equal protection of the laws is a
pledge of the protection of equal laws.
[100]
It limits
governmental discrimination. The equal protection clause
extends to artificial persons but only insofar as their
property is concerned.
[101]

The Court has explained the scope of the equal
protection clause in this wise:
What does it signify? To quote from J.M. Tuason & Co. v.
Land Tenure Administration: The ideal situation is for the
laws benefits to be available to all, that none be placed
outside the sphere of its coverage. Only thus could chance
and favor be excluded and the affairs of men governed by
548

that serene and impartial uniformity, which is of the very
essence of the idea of law. There is recognition, however,
in the opinion that what in fact exists cannot approximate
the ideal. Nor is the law susceptible to the reproach that it
does not take into account the realities of the situation. The
constitutional guarantee then is not to be given a meaning
that disregards what is, what does in fact exist. To assure
that the general welfare be promoted, which is the end of
law, a regulatory measure may cut into the rights to liberty
and property. Those adversely affected may under such
circumstances invoke the equal protection clause only if
they can show that the governmental act assailed, far from
being inspired by the attainment of the common weal was
prompted by the spirit of hostility, or at the very least,
discrimination that finds no support in reason.
Classification is thus not ruled out, it being sufficient to
quote from the Tuason decision anew that the laws
operate equally and uniformly on all persons under similar
circumstances or that all persons must be treated in the
same manner, the conditions not being different, both in
the privileges conferred and the liabilities imposed.
Favoritism and undue preference cannot be allowed. For
the principle is that equal protection and security shall be
given to every person under circumstances which, if not
identical, are analogous. If law be looked upon in terms of
burden or charges, those that fall within a class should be
treated in the same fashion, whatever restrictions cast on
some in the group equally binding on the rest.
[102]

Legislative bodies are allowed to classify the subjects of
legislation. If the classification is reasonable, the law may
operate only on some and not all of the people without
violating the equal protection clause.
[103]
The classification
must, as an indispensable requisite, not be arbitrary. To be
valid, it must conform to the following requirements:
1) It must be based on substantial distinctions.
2) It must be germane to the purposes of the law.
3) It must not be limited to existing conditions only.
4) It must apply equally to all members of the
class.
[104]

In the Courts view, there are no substantial distinctions
between motels, inns, pension houses, hotels, lodging
houses or other similar establishments. By definition, all are
commercial establishments providing lodging and usually
meals and other services for the public. No reason exists for
prohibiting motels and inns but not pension houses, hotels,
lodging houses or other similar establishments. The
classification in the instant case is invalid as similar subjects
are not similarly treated, both as to rights conferred and
obligations imposed. It is arbitrary as it does not rest on
substantial distinctions bearing a just and fair relation to
the purpose of the Ordinance.
The Court likewise cannot see the logic for prohibiting
the business and operation of motels in the Ermita-Malate
area but not outside of this area. A noxious establishment
549

does not become any less noxious if located outside the
area.
The standard where women are used as tools for
entertainment is also discriminatory as prostitutionone
of the hinted ills the Ordinance aims to banishis not a
profession exclusive to women. Both men and women have
an equal propensity to engage in prostitution. It is not any
less grave a sin when men engage in it. And why would the
assumption that there is an ongoing immoral activity apply
only when women are employed and be inapposite when
men are in harness? This discrimination based on gender
violates equal protection as it is not substantially related to
important government objectives.
[105]
Thus, the
discrimination is invalid.
Failing the test of constitutionality, the Ordinance
likewise failed to pass the test of consistency with
prevailing laws.
C. The Ordinance is repugnant
to general laws; it is ultra vires
The Ordinance is in contravention of the Code as the
latter merely empowers local government units to regulate,
and not prohibit, the establishments enumerated in Section
1 thereof.
The power of the City Council to regulate by ordinances
the establishment, operation, and maintenance of motels,
hotels and other similar establishments is found in Section
458 (a) 4 (iv), which provides that:
Section 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:
. . .
(4) Regulate activities relative to the use of land, buildings
and structures within the city in order to promote the
general welfare and for said purpose shall:
. . .
(iv) Regulate the establishment, operation and
maintenance of cafes, restaurants, beerhouses, hotels,
motels, inns, pension houses, lodging houses, and other
similar establishments, including tourist guides and
transports . . . .
While its power to regulate the establishment,
operation and maintenance of any entertainment or
amusement facilities, and to prohibit certain forms of
amusement or entertainment is provided under Section 458
(a) 4 (vii) of the Code, which reads as follows:
Section 458. Powers, Duties, Functions and Compensation.
(a) The sangguniang panlungsod, as the legislative body of
the city, shall enact ordinances, approve resolutions and
550

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:
. . .
(4) Regulate activities relative to the use of land, buildings
and structures within the city in order to promote the
general welfare and for said purpose shall:
. . .
(vii) Regulate the establishment, operation, and
maintenance of any entertainment or amusement facilities,
including theatrical performances, circuses, billiard pools,
public dancing schools, public dance halls, sauna baths,
massage parlors, and other places for entertainment or
amusement; regulate such other events or activities for
amusement or entertainment, particularly those which
tend to disturb the community or annoy the inhabitants, or
require the suspension or suppression of the same; or,
prohibit certain forms of amusement or entertainment in
order to protect the social and moral welfare of the
community.
Clearly, with respect to cafes, restaurants, beerhouses,
hotels, motels, inns, pension houses, lodging houses, and
other similar establishments, the only power of the City
Council to legislate relative thereto is to regulate them to
promote the general welfare. The Code still withholds from
cities the power to suppress and prohibit altogether the
establishment, operation and maintenance of such
establishments. It is well to recall the rulings of the Court
in Kwong Sing v. City of Manila
[106]
that:
The word regulate, as used in subsection (l), section 2444
of the Administrative Code, means and includes the power
to control, to govern, and to restrain; but regulate should
not be construed as synonymous with suppress or
prohibit. Consequently, under the power to regulate
laundries, the municipal authorities could make proper
police regulations as to the mode in which the employment
or business shall be exercised.
[107]

And in People v. Esguerra,
[108]
wherein the Court
nullified an ordinance of the Municipality of Tacloban which
prohibited the selling, giving and dispensing of liquor
ratiocinating that the municipality is empowered only to
regulate the same and not prohibit. The Court therein
declared that:
(A)s a general rule when a municipal corporation is
specifically given authority or power to regulate or to
license and regulate the liquor traffic, power to prohibit is
impliedly withheld.
[109]

These doctrines still hold contrary to petitioners
assertion
[110]
that they were modified by the Code vesting
upon City Councils prohibitory powers.
551

Similarly, the City Council exercises regulatory powers
over public dancing schools, public dance halls, sauna
baths, massage parlors, and other places for entertainment
or amusement as found in the first clause of Section 458 (a)
4 (vii). Its powers to regulate, suppress and suspend such
other events or activities for amusement or entertainment,
particularly those which tend to disturb the community or
annoy the inhabitants and to prohibit certain forms of
amusement or entertainment in order to protect the social
and moral welfare of the community are stated in the
second and third clauses, respectively of the same Section.
The several powers of the City Council as provided in
Section 458 (a) 4 (vii) of the Code, it is pertinent to
emphasize, are separated by semi-colons (;), the use of
which indicates that the clauses in which these powers are
set forth are independent of each other albeit closely
related to justify being put together in a single enumeration
or paragraph.
[111]
These powers, therefore, should not be
confused, commingled or consolidated as to create a
conglomerated and unified power of regulation,
suppression and prohibition.
[112]

The Congress unequivocably specified the
establishments and forms of amusement or entertainment
subject to regulation among which are beerhouses, hotels,
motels, inns, pension houses, lodging houses, and other
similar establishments (Section 458 (a) 4 (iv)), public
dancing schools, public dance halls, sauna baths, massage
parlors, and other places for entertainment or amusement
(Section 458 (a) 4 (vii)). This enumeration therefore cannot
be included as among other events or activities for
amusement or entertainment, particularly those which
tend to disturb the community or annoy the inhabitants or
certain forms of amusement or entertainment which the
City Council may suspend, suppress or prohibit.
The rule is that the City Council has only such powers as
are expressly granted to it and those which are necessarily
implied or incidental to the exercise thereof. By reason of
its limited powers and the nature thereof, said powers are
to be construed strictissimi juris and any doubt or ambiguity
arising out of the terms used in granting said powers must
be construed against the City Council.
[113]
Moreover, it is a
general rule in statutory construction that the express
mention of one person, thing, or consequence is
tantamount to an express exclusion of all others. Expressio
unius est exclusio alterium. This maxim is based upon the
rules of logic and the natural workings of human mind. It is
particularly applicable in the construction of such statutes
as create new rights or remedies, impose penalties or
punishments, or otherwise come under the rule of strict
construction.
[114]

The argument that the City Council is empowered to
enact the Ordinance by virtue of the general welfare clause
of the Code and of Art. 3, Sec. 18 (kk) of the Revised Charter
of Manila is likewise without merit. On the first point, the
ruling of the Court in People v. Esguerra,
[115]
is instructive. It
held that:
552

The powers conferred upon a municipal council in the
general welfare clause, or section 2238 of the Revised
Administrative Code, refers to matters not covered by the
other provisions of the same Code, and therefore it can not
be applied to intoxicating liquors, for the power to regulate
the selling, giving away and dispensing thereof is granted
specifically by section 2242 (g) to municipal councils. To
hold that, under the general power granted by section
2238, a municipal council may enact the ordinance in
question, notwithstanding the provision of section 2242 (g),
would be to make the latter superfluous and nugatory,
because the power to prohibit, includes the power to
regulate, the selling, giving away and dispensing of
intoxicating liquors.
On the second point, it suffices to say that the Code
being a later expression of the legislative will must
necessarily prevail and override the earlier law, the Revised
Charter of Manila. Legis posteriores priores contrarias
abrogant, or later statute repeals prior ones which are
repugnant thereto. As between two laws on the same
subject matter, which are irreconcilably inconsistent, that
which is passed later prevails, since it is the latest
expression of legislative will.
[116]
If there is an inconsistency
or repugnance between two statutes, both relating to the
same subject matter, which cannot be removed by any fair
and reasonable method of interpretation, it is the latest
expression of the legislative will which must prevail and
override the earlier.
[117]

Implied repeals are those which take place when a
subsequently enacted law contains provisions contrary to
those of an existing law but no provisions expressly
repealing them. Such repeals have been divided into two
general classes: those which occur where an act is so
inconsistent or irreconcilable with an existing prior act that
only one of the two can remain in force and those which
occur when an act covers the whole subject of an earlier act
and is intended to be a substitute therefor. The validity of
such a repeal is sustained on the ground that the latest
expression of the legislative will should prevail.
[118]

In addition, Section 534(f) of the Code states that 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. Thus, submitting to petitioners
interpretation that the Revised Charter of Manila
empowers the City Council to prohibit motels, that portion
of the Charter stating such must be considered repealed by
the Code as it is at variance with the latters provisions
granting the City Council mere regulatory powers.
It is well to point out that petitioners also cannot seek
cover under the general welfare clause authorizing the
abatement of nuisances without judicial proceedings. That
tenet applies to a nuisance per se, or one which affects the
immediate safety of persons and property and may be
summarily abated under the undefined law of necessity. It
can not be said that motels are injurious to the rights of
553

property, health or comfort of the community. It is a
legitimate business. If it be a nuisance per accidens it may
be so proven in a hearing conducted for that purpose. A
motel is notper se a nuisance warranting its summary
abatement without judicial intervention.
[119]

Notably, the City Council was conferred powers to
prevent and prohibit certain activities and establishments in
another section of the Code which is reproduced as follows:
Section 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:
. . .
(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;
. . .
If it were the intention of Congress to confer upon the
City Council the power to prohibit the establishments
enumerated in Section 1 of the Ordinance, it would have so
declared in uncertain terms by adding them to the list of
the matters it may prohibit under the above-quoted
Section. The Ordinance now vainly attempts to lump these
establishments with houses of ill-repute and expand the
City Councils powers in the second and third clauses of
Section 458 (a) 4 (vii) of the Code in an effort to overreach
its prohibitory powers. It is evident that these
establishments may only be regulated in their
establishment, operation and maintenance.
It is important to distinguish the punishable activities
from the establishments themselves. That these
establishments are recognized legitimate enterprises can be
gleaned from another Section of the Code. Section 131
under the Title on Local Government Taxation expressly
mentioned proprietors or operators of massage clinics,
sauna, Turkish and Swedish baths, hotels, motels and
lodging houses as among the contractors defined in
paragraph (h) thereof. The same Section also defined
amusement as a pleasurable diversion and
554

entertainment, synonymous to relaxation, avocation,
pastime or fun; and amusement places to include
theaters, cinemas, concert halls, circuses and other places
of amusement where one seeks admission to entertain
oneself by seeing or viewing the show or performances.
Thus, it can be inferred that the Code considers these
establishments as legitimate enterprises and activities. It is
well to recall the maxim reddendo singula singulis which
means that words in different parts of a statute must be
referred to their appropriate connection, giving to each in
its place, its proper force and effect, and, if possible,
rendering none of them useless or superfluous, even if
strict grammatical construction demands otherwise.
Likewise, where words under consideration appear in
different sections or are widely dispersed throughout an act
the same principle applies.
[120]

Not only does the Ordinance contravene the Code, it
likewise runs counter to the provisions of P.D. 499. As
correctly argued by MTDC, the statute had already
converted the residential Ermita-Malate area into a
commercial area. The decree allowed the establishment
and operation of all kinds of commercial establishments
except warehouse or open storage depot, dump or yard,
motor repair shop, gasoline service station, light industry
with any machinery or funeral establishment. The rule is
that for an ordinance to be valid and to have force and
effect, it must not only be within the powers of the council
to enact but the same must not be in conflict with or
repugnant to the general law.
[121]
As succinctly illustrated
in Solicitor General v. Metropolitan Manila Authority:
[122]

The requirement that the enactment must not violate
existing law explains itself. Local political subdivisions are
able to legislate only by virtue of a valid delegation of
legislative power from the national legislature (except only
that the power to create their own sources of revenue and
to levy taxes is conferred by the Constitution itself). They
are mere agents vested with what is called the power of
subordinate legislation. As delegates of the Congress, the
local government units cannot contravene but must obey at
all times the will of their principal. In the case before us, the
enactment in question, which are merely local in origin
cannot prevail against the decree, which has the force and
effect of a statute.
[123]

Petitioners contend that the Ordinance enjoys the
presumption of validity. While this may be the rule, it has
already been held that although the presumption is always
in favor of the validity or reasonableness of the ordinance,
such presumption must nevertheless be set aside when the
invalidity or unreasonableness appears on the face of the
ordinance itself or is established by proper evidence. The
exercise of police power by the local government is valid
unless it contravenes the fundamental law of the land, or
an act of the legislature, or unless it is against public policy
or is unreasonable, oppressive, partial, discriminating or in
derogation of a common right.
[124]

555

Conclusion
All considered, the Ordinance invades fundamental
personal and property rights and impairs personal
privileges. It is constitutionally infirm.
The Ordinance contravenes statutes; it is discriminatory and
unreasonable in its operation; it is not sufficiently detailed
and explicit that abuses may attend the enforcement of its
sanctions. And not to be forgotten, the City Council under
the Code had no power to enact the Ordinance and is
therefore ultra vires, null and void.
Concededly, the challenged Ordinance was enacted
with the best of motives and shares the concern of the
public for the cleansing of the Ermita-Malate area of its
social sins. Police power legislation of such character
deserves the full endorsement of the judiciary we
reiterate our support for it. But inspite of its virtuous aims,
the enactment of the Ordinance has no statutory or
constitutional authority to stand on. Local legislative
bodies, in this case, the City Council, cannot prohibit the
operation of the enumerated establishments under Section
1 thereof or order their transfer or conversion without
infringing the constitutional guarantees of due process and
equal protection of laws not even under the guise of
police power.
WHEREFORE, the Petition is hereby DENIED and the
decision of the Regional Trial Court declaring
the Ordinance void is AFFIRMED. Costs against petitioners.
SO ORDERED.
Davide, Jr., C.J., Puno, Quisumbing, Sandoval-Gutierrez,
Carpio, Austria-Martinez, Corona, Carpio-Morales, Callejo,
Sr., Azcuna, Chico-Nazario and Garcia, JJ., concur
Panganiban, J., in the result.
Ynares- Santiago, J., concur in the result only.



[1]
Dated 11 January 1995; Rollo, pp. 6-73 with annexes.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 40243 March 11, 1992
CELESTINO TATEL, petitioner,
vs.
MUNICIPALITY OF VIRAC, SALVADOR A. SURTIDA, in his
capacity as Mayor of Virac, Catanduanes; GAVINO V.
GUERRERO, in his capacity as Vice-Mayor of Virac,
Catanduanes; JOSE T. BUEBOS, in his capacity as Councilor
of Virac, Catanduanes; ANGELES TABLIZO, in his capacity
as Councilor of Virac, Catanduanes; ELPIDIO T. ZAFE, in his
capacity as Councilor of Virac, Catanduanes; MARIANO
ALBERTO, in his capacity as Councilor of Virac,
556

Catanduanes; JULIA A. GARCIA, in her capacity as
Councilor of Virac, Catanduanes; and PEDRO A.
GUERRERO, in his capacity as Councilor of Virac,
Catanduanes,respondents.

NOCON, J.:
This is a Petition for Prohibition with Preliminary Injunction
with the Court of First Instance of Catanduanes filed by
appellant, Celestino Tatel, a businessman engaged in
the import and export of abaca and other products against
the Municipal Council of Virac, Catanduanes and its
municipal officials enjoining them from enforcing
Resolution No 29
1
of the Council, declaring the warehouse
of petitioner in barrio Sta. Elena of the said municipality a
public nuisance within the purview of Article 694 of the Civil
Code of the Philippines and directing the petitioner to
remove and transfer said warehouse to a more suitable
place within two (2) months from receipt of the said
resolution.
It appears from the records that on the basis of complaints
received from the residents of barrio Sta. Elena on March
18, 1966 against the disturbance caused by the operation of
the abaca bailing machine inside the warehouse of
petitioner which affected the peace and tranquility of the
neighborhood due to the smoke, obnoxious odor and dust
emitted by the machine, a committee was appointed by the
municipal council of Virac to investigate the matter. The
committee noted the crowded nature of the neighborhood
with narrow roads and the surroundingresidential houses,
so much so that an accidental fire within the warehouse of
the petitioner occasioned by the continuance of the activity
inside the warehouse and the storing of inflammable
materials created a danger to the lives and properties of
the people within the neighborhood.
Resultantly, Resolution No. 29 was passed by the Municipal
Council of Virac on April 22, 1966 declaring the warehouse
owned and operated by petitioner a public nuisance within
the purview of Article 694 of the New Civil Code.
2

His motion for reconsideration having been denied by the
Municipal Council of Virac, petitioner instituted the present
petition for prohibition with preliminary injunction.
Respondent municipal officials contend that petitioner's
warehouse was constructed in violation of Ordinance No.
13, series of 1952, prohibiting the construction of
warehouses near a block of houses either in the poblacion
or barrios without maintaining the necessary distance of
200 meters from said block of houses to avoid loss of lives
and properties by accidental fire.
On the other hand, petitioner contends that said ordinance
is unconstitutional, contrary to the due process andequal
protection clause of the Constitution and null and void for
not having been passed in accordance with law.
557

The issue then boils down on whether petitioner's
warehouse is a nuisance within the meaning of Article 694
of the Civil Code and whether Ordinance No. 13, S. 1952 of
the Municipality of Virac is unconstitutional and void.
In a decision dated September 18, 1969, the court a
quo ruled as follows:
1. The warehouse in question was legally
constructed under a valid permit issued by the
municipality of Virac in accordance with
existing regulations and may not be destroyed
or removed from its present location;
2. Ordinance No. 13, series of 1952, is a
legitimate and valid exercise of police power
by the Municipal Council of Virac is not (sic)
unconstitutional and void as claimed by the
petitioner;
3. The storage by the petitioner of abaca and
copra in the warehouse is not only in violation
of the provisions of the ordinance but poses a
grave danger to the safety of the lives and
properties of the residents of the
neighborhood due to accidental fire and
constitutes a public nuisance under the
provisions of Article 694 of the New Civil code
of the Philippines and may be abated;
4. Accordingly, the petitioner is hereby
directed to remove from the said warehouse
all abaca and copra and other inflammable
articles stored therein which are prohibited
under the provisions of Ordinance No. 13,
within a period of two (2) months from the
time this decision becomes final and that
henceforth, the petitioner is enjoined from
storing such prohibited articles in the
warehouse. With costs against petitioner.
Seeking appellate review, petitioner raised as errors of the
court a quo:
1. In holding that Ordinance No. 13, series of
1952, of the Municipality of Virac,
Catanduanes, is a legitimate and valid exercise
of police power of the Municipal Council, and
therefore, constitutional;
2. In giving the ordinance a meaning other than
and different from what it provided by
declaring that petitioner violated the same by
using the warehouse for storage of abaca and
copra when what is prohibited and penalized
by the ordinance is the construction of
warehouses.
3. In refusing to take judicial notice of the fact
that in the municipality, there are numerous
558

establishments similarly situated as appellants'
warehouses but which are not prosecuted.
We find no merit in the Petition.
Ordinance No. 13, series of 1952, was passed by the
Municipal Council of Virac in the exercise of its police
power. It is a settled principle of law that municipal
corporations are agencies of the State for the promotion
and maintenance of local self-government and as such are
endowed with the police powers in order to effectively
accomplish and carry out the declared objects of their
creation.
3
Its authority emanates from the general
welfareclause under the Administrative Code, which reads:
The municipal council shall enact such
ordinances and make such regulations, not
repugnant to law, as may be necessary to carry
into effect and discharge the powers and
duties conferred upon it by law and such as
shall seem necessary and proper to provide for
the health and safety, promote the prosperity,
improve the morals, peace, good order,
comfort and convenience of the municipality
and the inhabitants thereof, and for the
protection of property therein.
4

For an ordinance to be valid, it must not only be within the
corporate powers of the municipality to enact but must also
be passed according to the procedure prescribed by law,
and must be in consonance with certain well established
and basic principles of a substantive nature. These
principles require that a municipal ordinance (1) must not
contravene the Constitution or any statute (2) must not be
unfair or oppressive (3) must not be partial or
discriminatory (4) must not prohibit but may regulate trade
(5) must be general and consistent with public policy, and
(6) must not be unreasonable.
5
Ordinance No. 13, Series of
1952, meets these criteria.
As to the petitioner's second assignment of error, the trial
court did not give the ordinance in question a meaning
other than what it says. Ordinance No. 13 passed by the
Municipal Council of Virac on December 29, 1952,
6
reads:
AN ORDINANCE STRICTLY PROHIBITING THE
CONSTRUCTION OF WAREHOUSE IN ANY
FORM NEAR A BLOCK OF HOUSES EITHER IN
POBLACION OR BARRIO WITH NECESSARY
DISTANCE TO AVOID GREAT LOSSES OF
PROPERTY AND LIVES BY FIRE ACCIDENT.
Section 1 provides:
It is strictly prohibited to construct warehouses
in any form to any person, persons, entity,
corporation or merchants, wherein to keep or
store copra, hemp, gasoline, petroleum,
alcohol, crude oil, oil of turpentine and the like
products or materials if not within the distance
559

of 200 meters from a block of houses either in
the poblacion or barrios to avoid great losses
of properties inclusive lives by fire accident.
Section 2 provides:
7

Owners of warehouses in any form, are hereby
given advice to remove their said warehouses
this ordinance by the Municipal
Council, provided however, that if those
warehouses now in existence should no longer
be utilized as such warehouse for the above-
described products in Section 1 of this
ordinance after a lapse of the time given for
the removal of the said warehouses now in
existence, same warehouses shall be exempted
from the spirit of the provision of section 1 of
this ordinance,provided further, that these
warehouses now in existence, shall in the
future be converted into non-inflammable
products and materials warehouses.
In spite of its fractured syntax, basically, what is regulated
by the ordinance is the construction of warehouses wherein
inflammable materials are stored where such warehouses
are located at a distance of 200 meters from a block of
houses and not the construction per se of a warehouse. The
purpose is to avoid the loss of life and property in case of
fire which is one of the primordial obligation of the
government.
This was also the observation of the trial court:
A casual glance of the ordinance at once
reveals a manifest disregard of the elemental
rules of syntax. Experience, however, will show
that this is not uncommon in law making
bodies in small towns where local authorities
and in particular the persons charged with the
drafting and preparation of municipal
resolutions and ordinances lack sufficient
education and training and are not well
grounded even on the basic and fundamental
elements of the English language commonly
used throughout the country in such matters.
Nevertheless, if one scrutinizes the terms of
the ordinance, it is clear that what is prohibited
is the construction of warehouses by any
person, entity or corporation wherein copra,
hemp, gasoline and other inflammable
products mentioned in Section 1 may be stored
unless at a distance of not less than 200 meters
from a block of houses either in the poblacion
or barrios in order to avoid loss of property
and life due to fire. Under Section 2, existing
warehouses for the storage of the prohibited
articles were given one year after the approval
of the ordinance within which to remove them
but were allowed to remain in operation if
they had ceased to store such prohibited
articles.
560

The ambiguity therefore is more apparent than
real and springs from simple error in
grammatical construction but otherwise, the
meaning and intent is clear that what is
prohibited is the construction or maintenance
of warehouses for the storage of inflammable
articles at a distance within 200 meters from a
block of houses either in the poblacion or in
the barrios. And the purpose of the ordinance
is to avoid loss of life and property in case of
accidental fire which is one of the primordial
and basic obligation of any government. 8
Clearly, the lower court did NOT add meaning other than or
differrent from what was provided in the ordinance in
question. It merely stated the purpose of the ordinance and
what it intends to prohibit to accomplish its purpose.
As to the third assignment of error, that warehouses
similarly situated as that of the petitioner were not
prosecuted, suffice it to say that the mere fact that the
municipal authorities of Virac have not proceeded against
other warehouses in the municipality allegedly violating
Ordinance No. 13 is no reason to claim that the ordinance is
discriminatory. A distinction must be made between the
law itself and the manner in which said law is implemented
by the agencies in charge with its administration and
enforcement. There is no valid reason for the petitioner to
complain, in the absence of proof that the other bodegas
mentioned by him are operating in violation of the
ordinance and that the complaints have been lodged
against the bodegas concerned without the municipal
authorities doing anything about it.
The objections interposed by the petitioner to the validity
of the ordinance have not been substantiated. Its purpose
is well within the objectives of sound government. No
undue restraint is placed upon the petitioner or for
anybody to engage in trade but merely a prohibition from
storing inflammable products in the warehouse because of
the danger of fire to the lives and properties of the people
residing in the vicinity. As far as public policy is concerned,
there can be no better policy than what has been conceived
by the municipal government.
As to petitioner's contention of want of jurisdiction by the
lower court we find no merit in the same. The case is a
simple civil suit for abatement of a nuisance, the original
jurisdiction of which falls under the then Court of First
Instance.
WHEREFORE, for lack of merit, the petition is hereby
DISMISSED. Costs against petitioner.
SO ORDERED.
Melencio-Herrera, Paras, Padilla and Regalado, JJ., concur.

Footnotes
561

SECOND DIVISION
[G.R. No. 130230. April 15, 2005]
METROPOLITAN MANILA DEVELOPMENT
AUTHORITY, petitioner, vs. DANTE O.
GARIN, respondent.
D E C I S I O N
CHICO-NAZARIO, J.:
At issue in this case is the validity of Section 5(f) of
Republic Act No. 7924 creating the Metropolitan Manila
Development Authority (MMDA), which authorizes it to
confiscate and suspend or revoke drivers licenses in the
enforcement of traffic laws and regulations.
The issue arose from an incident involving the
respondent Dante O. Garin, a lawyer, who was issued a
traffic violation receipt (TVR) and his drivers license
confiscated for parking illegally along Gandara Street,
Binondo, Manila, on 05 August 1995. The following
statements were printed on the TVR:
YOU ARE HEREBY DIRECTED TO REPORT TO THE MMDA
TRAFFIC OPERATIONS CENTER PORT AREA MANILA AFTER
48 HOURS FROM DATE OF APPREHENSION FOR
DISPOSITION/APPROPRIATE ACTION THEREON. CRIMINAL
CASE SHALL BE FILED FOR FAILURE TO REDEEM LICENSE
AFTER 30 DAYS.
VALID AS TEMPORARY DRIVERS LICENSE FOR SEVEN DAYS
FROM DATE OF APPREHENSION.
[1]

Shortly before the expiration of the TVRs validity, the
respondent addressed a letter
[2]
to then MMDA Chairman
Prospero Oreta requesting the return of his drivers license,
and expressing his preference for his case to be filed in
court.
Receiving no immediate reply, Garin filed the original
complaint
[3]
with application for preliminary injunction in
Branch 260 of the Regional Trial Court (RTC) of Paraaque,
on 12 September 1995, contending that, in the absence of
any implementing rules and regulations, Sec. 5(f) of Rep.
Act No. 7924 grants the MMDA unbridled discretion to
deprive erring motorists of their licenses, pre-empting a
judicial determination of the validity of the deprivation,
thereby violating the due process clause of the
Constitution. The respondent further contended that the
provision violates the constitutional prohibition against
undue delegation of legislative authority, allowing as it does
the MMDA to fix and impose unspecified and therefore
unlimited - fines and other penalties on erring motorists.
In support of his application for a writ of preliminary
injunction, Garin alleged that he suffered and continues to
suffer great and irreparable damage because of the
deprivation of his license and that, absent any
562

implementing rules from the Metro Manila Council, the TVR
and the confiscation of his license have no legal basis.
For its part, the MMDA, represented by the Office of
the Solicitor General, pointed out that the powers granted
to it by Sec. 5(f) of Rep. Act No. 7924 are limited to the
fixing, collection and imposition of fines and penalties for
traffic violations, which powers are legislative and executive
in nature; the judiciary retains the right to determine the
validity of the penalty imposed. It further argued that the
doctrine of separation of powers does not preclude
admixture of the three powers of government in
administrative agencies.
[4]

The MMDA also refuted Garins allegation that the
Metro Manila Council, the governing board and policy
making body of the petitioner, has as yet to formulate the
implementing rules for Sec. 5(f) of Rep. Act No. 7924 and
directed the courts attention to MMDA Memorandum
Circular No. TT-95-001 dated 15 April 1995. Respondent
Garin, however, questioned the validity of MMDA
Memorandum Circular No. TT-95-001, as he claims that it
was passed by the Metro Manila Council in the absence of a
quorum.
Judge Helen Bautista-Ricafort issued a temporary
restraining order on 26 September 1995, extending the
validity of the TVR as a temporary drivers license for
twenty more days. A preliminary mandatory injunction was
granted on 23 October 1995, and the MMDA was directed
to return the respondents drivers license.
On 14 August 1997, the trial court rendered the assailed
decision
[5]
in favor of the herein respondent and held that:
a. There was indeed no quorum in that First Regular
Meeting of the MMDA Council held on March 23, 1995,
hence MMDA Memorandum Circular No. TT-95-001,
authorizing confiscation of drivers licenses upon issuance
of a TVR, is void ab initio.
b. The summary confiscation of a drivers license
without first giving the driver an opportunity to be heard;
depriving him of a property right (drivers license) without
DUE PROCESS; not filling (sic) in Court the complaint of
supposed traffic infraction, cannot be justified by any
legislation (and is) hence unconstitutional.
WHEREFORE, the temporary writ of preliminary injunction
is hereby made permanent; th(e) MMDA is directed to
return to plaintiff his drivers license; th(e) MMDA is
likewise ordered to desist from confiscating drivers license
without first giving the driver the opportunity to be heard
in an appropriate proceeding.
In filing this petition,
[6]
the MMDA reiterates and
reinforces its argument in the court below and contends
that a license to operate a motor vehicle is neither a
contract nor a property right, but is a privilege subject to
reasonable regulation under the police power in the
interest of the public safety and welfare. The petitioner
further argues that revocation or suspension of this
563

privilege does not constitute a taking without due process
as long as the licensee is given the right to appeal the
revocation.
To buttress its argument that a licensee may indeed
appeal the taking and the judiciary retains the power to
determine the validity of the confiscation, suspension or
revocation of the license, the petitioner points out that
under the terms of the confiscation, the licensee has three
options:
1. To voluntarily pay the imposable fine,
2. To protest the apprehension by filing a protest
with the MMDA Adjudication Committee, or
3. To request the referral of the TVR to the Public
Prosecutors Office.
The MMDA likewise argues that Memorandum Circular
No. TT-95-001 was validly passed in the presence of a
quorum, and that the lower courts finding that it had not
was based on a misapprehension of facts, which the
petitioner would have us review. Moreover, it asserts that
though the circular is the basis for the issuance of TVRs, the
basis for the summary confiscation of licenses is Sec. 5(f) of
Rep. Act No. 7924 itself, and that such power is self-
executory and does not require the issuance of any
implementing regulation or circular.
Meanwhile, on 12 August 2004, the MMDA, through its
Chairman Bayani Fernando, implemented Memorandum
Circular No. 04, Series of 2004, outlining the procedures for
the use of the Metropolitan Traffic Ticket (MTT) scheme.
Under the circular, erring motorists are issued an MTT,
which can be paid at any Metrobank branch. Traffic
enforcers may no longer confiscate drivers licenses as a
matter of course in cases of traffic violations. All motorists
with unredeemed TVRs were given seven days from the
date of implementation of the new system to pay their
fines and redeem their license or vehicle plates.
[7]

It would seem, therefore, that insofar as the absence of
a prima facie case to enjoin the petitioner from confiscating
drivers licenses is concerned, recent events have overtaken
the Courts need to decide this case, which has been
rendered moot and academic by the implementation of
Memorandum Circular No. 04, Series of 2004.
The petitioner, however, is not precluded from re-
implementing Memorandum Circular No. TT-95-001, or any
other scheme, for that matter, that would entail
confiscating drivers licenses. For the proper
implementation, therefore, of the petitioners future
programs, this Court deems it appropriate to make the
following observations:
1. A license to operate a motor vehicle is a privilege that
the state may withhold in the exercise of its police
power.
The petitioner correctly points out that a license to
operate a motor vehicle is not a property right, but a
privilege granted by the state, which may be suspended or
revoked by the state in the exercise of its police power, in
564

the interest of the public safety and welfare, subject to the
procedural due process requirements. This is consistent
with our rulings in Pedro v. Provincial Board of Rizal
[8]
on
the license to operate a cockpit, Tan v. Director of
Forestry
[9]
and Oposa v. Factoran
[10]
on timber licensing
agreements, and Surigao Electric Co., Inc. v. Municipality of
Surigao
[11]
on a legislative franchise to operate an electric
plant.
Petitioner cites a long list of American cases to prove
this point, such as State ex. Rel. Sullivan,
[12]
which states in
part that, the legislative power to regulate travel over the
highways and thoroughfares of the state for the general
welfare is extensive. It may be exercised in any reasonable
manner to conserve the safety of travelers and
pedestrians. Since motor vehicles are instruments of
potential danger, their registration and the licensing of their
operators have been required almost from their first
appearance. The right to operate them in public places is
not a natural and unrestrained right, but a privilege subject
to reasonable regulation, under the police power, in the
interest of the public safety and welfare. The power to
license imports further power to withhold or to revoke such
license upon noncompliance with prescribed conditions.
Likewise, the petitioner quotes the Pennsylvania
Supreme Court in Commonwealth v. Funk,
[13]
to the effect
that: Automobiles are vehicles of great speed and power.
The use of them constitutes an element of danger to
persons and property upon the highways. Carefully
operated, an automobile is still a dangerous
instrumentality, but, when operated by careless or
incompetent persons, it becomes an engine of destruction.
The Legislature, in the exercise of the police power of the
commonwealth, not only may, but must, prescribe how and
by whom motor vehicles shall be operated on the
highways. One of the primary purposes of a system of
general regulation of the subject matter, as here by the
Vehicle Code, is to insure the competency of the operator
of motor vehicles. Such a general law is manifestly directed
to the promotion of public safety and is well within the
police power.
The common thread running through the cited cases is
that it is the legislature, in the exercise of police power,
which has the power and responsibility to regulate how and
by whom motor vehicles may be operated on the state
highways.
2. The MMDA is not vested with police power.
In Metro Manila Development Authority v. Bel-Air
Village Association, Inc.,
[14]
we categorically stated that Rep.
Act No. 7924 does not grant the MMDA with police power,
let alone legislative power, and that all its functions are
administrative in nature.
The said case also involved the herein petitioner MMDA
which claimed that it had the authority to open a
subdivision street owned by the Bel-Air Village Association,
Inc. to public traffic because it is an agent of the state
endowed with police power in the delivery of basic services
in Metro Manila. From this premise, the MMDA argued
565

that there was no need for the City of Makati to enact an
ordinance opening Neptune Street to the public.
Tracing the legislative history of Rep. Act No. 7924
creating the MMDA, we concluded that the MMDA is not a
local government unit or a public corporation endowed
with legislative power, and, unlike its predecessor, the
Metro Manila Commission, it has no power to enact
ordinances for the welfare of the community. Thus, in the
absence of an ordinance from the City of Makati, its own
order to open the street was invalid.
We restate here the doctrine in the said decision as it
applies to the case at bar: police power, as an inherent
attribute of sovereignty, is 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.
Having been lodged primarily in the National
Legislature, it cannot be exercised by any group or body of
individuals not possessing legislative power. 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 (LGUs). Once delegated, the agents can
exercise only such legislative powers as are conferred on
them by the national lawmaking body.
Our Congress delegated police power to the LGUs in the
Local Government Code of 1991.
[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]
Local government units are the provinces, cities,
municipalities and barangays, which exercise police power
through their respective legislative bodies.
Metropolitan or Metro Manila is a body composed of
several local government units. With the passage of Rep.
Act No. 7924 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. Thus:
. . . [T]he 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 and appropriate
funds for the general welfare" of the inhabitants of Metro
Manila. The MMDA is, as termed in the charter itself, a
"development authority." It is an agency created for the
566

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. -- -x x x.
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.
.
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 MMDAs
functions. There is no grant of authority to enact
ordinances and regulations for the general welfare of the
inhabitants of the metropolis.
[17]
(footnotes omitted,
emphasis supplied)
Therefore, insofar as Sec. 5(f) of Rep. Act No. 7924 is
understood by the lower court and by the petitioner to
grant the MMDA the power to confiscate and suspend or
revoke drivers licenseswithout need of any other legislative
enactment, such is an unauthorized exercise of police
power.
3. Sec. 5(f) grants the MMDA with
the duty to enforce existing traffic rules and
regulations.
Section 5 of Rep. Act No. 7924 enumerates the
Functions and Powers of the Metro Manila Development
Authority. The contested clause in Sec. 5(f) states that the
petitioner shall 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 nonmoving in nature, and confiscate and
suspend or revoke drivers licenses in the enforcement of
such traffic laws and regulations, the provisions of Rep. Act
No. 4136
[18]
and P.D. No. 1605
[19]
to the contrary
notwithstanding, and that (f)or this purpose, the
Authority shall enforce 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.
567

Thus, where there is a traffic law or regulation validly
enacted by the legislature or those agencies to whom
legislative powers have been delegated (the City of Manila
in this case), the petitioner is not precluded and in fact is
duty-bound to confiscate and suspend or revoke drivers
licenses in the exercise of its mandate of transport and
traffic management, as well as the administration and
implementation of all traffic enforcement operations, traffic
engineering services and traffic education programs.
[20]

This is consistent with our ruling in Bel-Air that the
MMDA is a development authority created for the purpose
of laying down policies and coordinating with the various
national government agencies, peoples organizations, non-
governmental organizations and the private sector, which
may enforce, but not enact, ordinances.
This is also consistent with the fundamental rule of
statutory construction that a statute is to be read in a
manner that would breathe life into it, rather than defeat
it,
[21]
and is supported by the criteria in cases of this nature
that all reasonable doubts should be resolved in favor of
the constitutionality of a statute.
[22]

A last word. The MMDA was intended to coordinate
services with metro-wide impact that transcend local
political boundaries or would entail huge expenditures if
provided by the individual LGUs, especially with regard to
transport and traffic management,
[23]
and we are aware of
the valiant efforts of the petitioner to untangle the
increasingly traffic-snarled roads of Metro Manila. But
these laudable intentions are limited by the MMDAs
enabling law, which we can but interpret, and petitioner
must be reminded that its efforts in this respect must be
authorized by a valid law, or ordinance, or regulation arising
from a legitimate source.
WHEREFORE, the petition is DISMISSED.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Callejo,
Sr., and Tinga, JJ., concur.



[1]
Records, p. 10.
EN BANC
[G.R. No. 110249. August 21, 1997]
ALFREDO TANO, BALDOMERO TANO, DANILO TANO,
ROMUALDO TANO, TEOCENES MIDELLO, ANGEL DE
MESA, EULOGIO TREMOCHA, FELIPE ONGONION,
JR., ANDRES LINIJAN, ROBERT LIM, VIRGINIA LIM,
FELIMON DE MESA, GENEROSO ARAGON,
TEODORICO ANDRE, ROMULO DEL ROSARIO,
CHOLITO ANDRE, ERICK MONTANO, ANDRES OLIVA,
VITTORIO SALVADOR, LEOPOLDO ARAGON, RAFAEL
568

RIBA, ALEJANDRO LEONILA, JOSE DAMACINTO,
RAMIRO MANAEG, RUBEN MARGATE, ROBERTO
REYES, DANILO PANGARUTAN, NOE
GOLPAN,ESTANISLAO ROMERO, NICANOR
DOMINGO, ROLDAN TABANG, PANGANIBAN,
ADRIANO TABANG, FREDDIE SACAMAY, MIGUEL
TRIMOCHA, PACENCIO LABABIT, PABLO H. OMPAD,
CELESTINO A. ABANO, ALLAN ALMODAL, BILLY D.
BARTOLAY, ALBINO D. LIQUE, MELCHOR J. LAYSON,
MELANI AMANTE, CLARO E. YATOC, MERGELDO B.
BALDEO, EDGAR M. ALMASET A., JOSELITO
MANAEG, LIBERATO ANDRADA, JR., ROBERTO
BERRY, RONALD VILLANUEVA, EDUARDO
VALMORIA, WILDREDO MENDOZA, NAPOLEON
BABANGA, ROBERTO TADEPA, RUBEN ASINGUA,
SILVERIO GABO, JERRY ROMERO, DAVID
PANGAGARUTAN, DANIEL PANGGARUTAN, ROMEO
AGAWIN, FERNANDO EQUIZ, DITO LEQUIZ, RONILO
ODERABLE, BENEDICTO TORRES, ROSITO A. VALDEZ,
CRESENCIO A. SAYANG, NICOMEDES S. ACOSTA,
ERENEO A. SEGARINO, JR., WILDREDO A. RAUTO,
DIOSDADO A. ACOSTA, BONIFACIO G. SISMO, TACIO
ALUBA, DANIEL B. BATERZAL, ELISEO YBAEZ,
DIOSDADO E. HANCHIC, EDDIE ESCALICAS, ELEAZAR
B. BATERZAL, DOMINADOR HALICHIC, ROOSEVELT
RISMO-AN, ROBERT C. MERCADER, TIRSO
ARESGADO, DANIEL CHAVEZ, DANILO CHAVEZ,
VICTOR VILLAROEL, ERNESTO C. YABANEZ,
ARMANDO T. SANTILLAN, RUDY S. SANTILLAN,
JODJEN ILUSTRISIMO, NESTOR SALANGRON,
ALBERTO SALANGRON, ROGER L. ROXAS,
FRANCISCO T. ANTICANO, PASTOR SALANGRON,
BIENVENIDO SANTILLAN, GILBUENA LADDY, FIDEL
BENJAMIN JOVELITO BELGANO, HONEY PARIOL,
ANTONIO SALANGRON, NICASIO SALANGRON, &
AIRLINE SHIPPERS ASSOCIATION OF
PALAWAN, petitioners, vs. GOV. SALVADOR P.
SOCRATES, MEMBERS OF SANGGUNIAN
PANLALAWIGAN OF PALAWAN, namely, VICE-
GOVERNOR JOEL T. REYES, JOSE D. ZABALA,
ROSALINO R. ACOSTA, JOSELITO A. CADLAON,
ANDRES R. BAACO, NELSON P. PENEYRA, CIPRIANO
C. BARROMA, CLARO E. ORDINARIO, ERNESTO A.
LLACUN, RODOLFO C. FLORDELIZA, GILBERT S.
BAACO, WINSTON G. ARZAGA, NAPOLEON F.
ORDONEZ and GIL P. ACOSTA, CITY MAYOR
EDWARD HAGEDORN, MEMBERS OF SANGGUNIANG
PANLUNGSOD NG PUERTO PRINCESA, ALL
MEMBERS OF BANTAY DAGAT, MEMBERS OF
PHILIPPINE NATIONAL POLICE OF PALAWAN,
PROVINCIAL AND CITY PROSECUTORS OF PALAWAN
and PUERTO PRINCESA CITY, and ALL JUDGES OF
PALAWAN, REGIONAL, MUNICIPAL AND
METROPOLITAN, respondents.
D E C I S I O N
DAVIDE, JR., J.:
569

Petitioners caption their petition as one for
Certiorari, Injunction With Preliminary Mandatory
Injunction,with Prayer for Temporary Restraining Order
and pray that this Court: (1) declare as unconstitutional: (a)
Ordinance No. 15-92, dated 15 December 1992, of
the Sangguniang Panlungsod of Puerto Princesa; (b) Office
Order No. 23, Series of 1993, dated 22 January 1993, issued
by Acting City Mayor Amado L. Lucero of Puerto Princesa
City; and (c) Resolution No. 33, Ordinance No. 2, Series of
1993, dated 19 February 1993, of the Sangguniang
Panlalawigan of Palawan; (2) enjoin the enforcement
thereof; and (3) restrain respondents Provincial and City
Prosecutors of Palawan and Puerto Princesa City and Judges
of Regional Trial Courts, Metropolitan Trial Courts
[1]
and
Municipal Circuit Trial Courts in Palawan from assuming
jurisdiction over and hearing cases concerning the violation
of the Ordinances and of the Office Order.
More appropriately, the petition is, and shall be treated
as, a special civil action for certiorari and prohibition.
The following is petitioners summary of the factual
antecedents giving rise to the petition:
1. On December 15, 1992, the Sangguniang Panlungsod
ng Puerto Princesa City enacted Ordinance No. 15-92 which
took effect on January 1, 1993 entitled: AN ORDINANCE
BANNING THE SHIPMENT OF ALL LIVE FISH AND LOBSTER
OUTSIDE PUERTO PRINCESA CITY FROM JANUARY 1, 1993
TO JANUARY 1, 1998 AND PROVIDING EXEMPTIONS,
PENALTIES AND FOR OTHER PURPOSES THEREOF, the full
text of which reads as follows:
Section 1. Title of the Ordinance. - This Ordinance is
entitled: AN ORDINANCE BANNING THE SHIPMENT OF ALL
LIVE FISH AND LOBSTER OUTSIDE PUERTO PRINCESA CITY
FROM JANUARY 1, 1993 TO JANUARY 1, 1998 AND
PROVIDING EXEMPTIONS, PENALTIES AND FOR OTHER
PURPOSES THEREOF.
Section 2. Purpose, Scope and Coverage. - To effectively
free our City Sea Waters from Cyanide and other Obnoxious
substance, and shall cover all persons and/or entities
operating within and outside the City of Puerto Princesa
who is are [sic] directly or indirectly in the business or
shipment of live fish and lobster outside the City.
Section 3. Definition of terms. - For purpose of this
Ordinance the following are hereby defined:
A. SEA BASS - A kind of fish under the family of
Centropomidae, better known as APAHAP;
B. CATFISH - A kind of fish under the family of Plotosidae,
better known as HITO-HITO;
C. MUDFISH - A kind of fish under the family of
Orphicaphalisae better known as DALAG
570

D. ALL LIVE FISH - All alive, breathing not necessarily
moving of all specie[s] use for food and for aquarium
purposes.
E. LIVE LOBSTER - Several relatively, large marine
crustaceans of the genus Homarus that are alive and
breathing not necessarily moving.
Section 4. It shall be unlawful [for] any person or any
business enterprise or company to ship out from Puerto
Princesa City to any point of destination either via aircraft
or seacraft of any live fish and lobster except SEA BASS,
CATFISH, MUDFISH, AND MILKFISH FRIES.
Section 5. Penalty Clause. - Any person/s and or business
entity violating this Ordinance shall be penalized with a fine
of not more than P5,000.00 or imprisonment of not more
than twelve (12) months, cancellation of their permit to do
business in the City of Puerto Princesa or all of the herein
stated penalties, upon the discretion of the court.
Section 6. If the owner and/or operator of the
establishment found vilating the provisions of this
ordinance is a corporation or a partnership, the penalty
prescribed in Section 5 hereof shall be imposed upon its
president and/or General Manager or Managing Partner
and/or Manager, as the case maybe [sic].
Section 7. Any existing ordinance or any provision of any
ordinance inconsistent to [sic] this ordinance is deemed
repealed.
Section 8. This Ordinance shall take effect on January 1,
1993.
SO ORDAINED.
xxx
2. To implement said city ordinance, then Acting City
Mayor Amado L. Lucero issued Office Order No. 23, Series
of 1993 dated January 22, 1993 which reads as follows:
In the interest of public service and for purposes of City
Ordinance No. PD426-14-74, otherwise known as AN
ORDINANCE REQUIRING ANY PERSON ENGAGED OR
INTENDING TO ENGAGE IN ANY BUSINESS, TRADE,
OCCUPATION, CALLING OR PROFESSION OR HAVING IN HIS
POSSESSION ANY OF THE ARTICLES FOR WHICH A PERMIT IS
REQUIRED TO BE HAD, TO OBTAIN FIRST A MAYORS
PERMIT and City Ordinance No. 15-92, AN ORDINANCE
BANNING THE SHIPMENT OF ALL LIVE FISH AND LOBSTER
OUTSIDE PUERTO PRINCESA CITY FROM JANUARY 1, 1993
TO JANUARY 1, 1998, you are hereby authorized and
directed to check or conduct necessary inspections on
cargoes containing live fish and lobster being shipped out
from the Puerto Princesa Airport, Puerto Princesa Wharf or
571

at any port within the jurisdiction of the City to any point of
destinations [sic] either via aircraft or seacraft.
The purpose of the inspection is to ascertain whether the
shipper possessed the required Mayors Permit issued by
this Office and the shipment is covered by invoice or
clearance issued by the local office of the Bureau of
Fisheries and Aquatic Resources and as to compliance with
all other existing rules and regulations on the matter.
Any cargo containing live fish and lobster without the
required documents as stated herein must be held for
proper disposition.
In the pursuit of this Order, you are hereby authorized to
coordinate with the PAL Manager, the PPA Manager, the
local PNP Station and other offices concerned for the
needed support and cooperation. Further, that the usual
courtesy and diplomacy must be observed at all times in
the conduct of the inspection.
Please be guided accordingly.
xxx
3. On February 19, 1993, the Sangguniang Panlalawigan,
Provincial Government of Palawan enacted Resolution No.
33 entitled: A RESOLUTION PROHIBITING THE CATCHING,
GATHERING, POSSESSING, BUYING, SELLING AND
SHIPMENT OF LIVE MARINE CORAL DWELLING AQUATIC
ORGANISMS, TO WIT: FAMILY: SCARIDAE (MAMENG), EPINE
PHELUS FASCIATUS(SUNO). CROMILEPTES
ALTIVELIS (PANTHER OR SENORITA), LOBSTER BELOW 200
GRAMS AND SPAWNING, TRADACNA
GIGAS (TAKLOBO), PINCTADA MARGARITEFERA (MOTHER
PEARL, OYSTERS, GIANT CLAMS AND OTHER
SPECIES), PENAEUS MONODON (TIGER PRAWN-BREEDER
SIZE OR MOTHER), EPINEPHELUS SUILLUS (LOBA OR GREEN
GROUPER) AND FAMILY: BALISTIDAE (TROPICAL AQUARIUM
FISHES) FOR A PERIOD FIVE (5) YEARS IN AND COMING
FROM PALAWAN WATERS, the full text of which reads as
follows:
WHEREAS, scientific and factual researches *sic+ and
studies disclose that only five (5) percent of the corals of
our province remain to be in excellent condition as [a]
habitat of marine coral dwelling aquatic organisms;
WHEREAS, it cannot be gainsaid that the destruction and
devastation of the corals of our province were principally
due to illegal fishing activities like dynamite fishing, sodium
cyanide fishing, use of other obnoxious substances and
other related activities;
WHEREAS, there is an imperative and urgent need to
protect and preserve the existence of the remaining
excellent corals and allow the devastated ones to
reinvigorate and regenerate themselves into vitality within
the span of five (5) years;
572

WHEREAS, Sec. 468, Par. 1, Sub-Par. VI of the [sic] R.A. 7160
otherwise known as the Local Government Code of 1991
empowers the Sangguniang Panlalawigan to protect the
environment and impose appropriate penalties [upon] acts
which endanger the environment such as dynamite fishing
and other forms of destructive fishing, among others.
NOW, THEREFORE, on motion by Kagawad Nelson P.
Peneyra and upon unanimous decision of all the members
present;
Be it resolved as it is hereby resolved, to approve
Resolution No. 33, Series of 1993 of the Sangguniang
Panlalawigan and to enact Ordinance No. 2 for the purpose,
to wit:
ORDINANCE NO. 2
Series of 1993
BE IT ORDAINED BY THE SANGGUNIANG PANLALAWIGAN IN
SESSION ASSEMBLED:
Section 1. TITLE - This Ordinance shall be known as an
Ordinance Prohibiting the catching, gathering, possessing,
buying, selling and shipment of live marine coral dwelling
aquatic organisms, to wit: 1. Family: Scaridae (Mameng), 2.
Epinephelus Fasciatus (Suno), 3. Cromileptes altivelis
(Panther or Senorita), lobster below 200 grams and
spawning), 4. Tridacna Gigas (Taklobo), 5. Pinctada
Margaretefera (Mother Pearl, Oysters, Giant Clams and
other species), 6. Penaeus Monodon (Tiger Prawn-breeder
size or mother), 7. Epinephelus Suillus (Loba or Green
Grouper) and 8. Family: Balistidae (Topical Aquarium
Fishes) for a period of five (5) years in and coming from
Palawan Waters.
Section II. PRELIMINARY CONSIDERATIONS
1. Sec. 2-A (Rep. Act 7160). 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.
2. Sec. 5-A (R.A. 7160). Any provision on a power of [a]
local Government Unit shall be liberaly 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
government units. Any fair and reasonable doubts as to
the existence of the power shall be interpreted in favor of
the Local Government Unit concerned.
3. Sec. 5-C (R.A. 7160). The general welfare provisions in
this Code shall be liberally interpreted to give more powers
573

to local government units in accelerating economic
development and upgrading the quality of life for the
people in the community.
4. Sec. 16 (R.A. 7160). 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.
Section III. DECLARATION OF POLICY. - It is hereby declared
to be the policy of the Province of Palawan to protect and
conserve the marine resources of Palawan not only for the
greatest good of the majority of the present generation but
with [the] proper perspective and consideration of [sic]
their prosperity, and to attain this end, the Sangguniang
Panlalawigan henceforth declares that is [sic] shall be
unlawful for any person or any business entity to engage in
catching, gathering, possessing, buying, selling and
shipment of live marine coral dwelling aquatic organisms as
enumerated in Section 1 hereof in and coming out of
Palawan Waters for a period of five (5) years;
Section IV. PENALTY CLAUSE. - Any person and/or business
entity violating this Ordinance shall be penalized with a fine
of not more than Five Thousand Pesos (P5,000.00),
Philippine Currency, and/or imprisonment of six (6) months
to twelve (12) months and confiscation and forfeiture of
paraphernalias [sic] and equipment in favor of the
government at the discretion of the Court;
Section V. SEPARABILITY CLAUSE. - If for any reason, a
Section or provision of this Ordinance shall be held as
unconditional [sic] or invalid, it shall not affect the other
provisions hereof.
Section VI. REPEALING CLAUSE. - Any existing Ordinance or
a provision of any ordinance inconsistent herewith is
deemed modified, amended or repealed.
Section VII. EFFECTIVITY. - This Ordinance shall take effect
ten (10) days after its publication.
SO ORDAINED.
xxx
4. The respondents implemented the said ordinances,
Annexes A and C hereof thereby depriving all the
fishermen of the whole province of Palawan and the City of
Puerto Princesa of their only means of livelihood and the
petitioners Airline Shippers Association of Palawan and
other marine merchants from performing their lawful
occupation and trade;
5. Petitioners Alfredo Tano, Baldomero Tano, Teocenes
Midello, Angel de Mesa, Eulogio Tremocha, and Felipe
Ongonion, Jr. were even charged criminally under criminal
case no. 93-05-C in the 1st Municipal Circuit Trial Court of
574

Cuyo-Agutaya-Magsaysay, an original carbon copy of the
criminal complaint dated April 12, 1993 is hereto attached
as Annex D; while xerox copies are attached as Annex D
to the copies of the petition;
6. Petitioners Robert Lim and Virginia Lim, on the other
hand, were charged by the respondent PNP with the
respondent City Prosecutor of Puerto Princesa City, a xerox
copy of the complaint is hereto attached as Annex E;
Without seeking redress from the concerned local
government units, prosecutors office and courts,
petitioners directly invoked our original jurisdiction by filing
this petition on 4 June 1993. In sum, petitioners contend
that:
First, the Ordinances deprived them of due process of
law, their livelihood, and unduly restricted them from the
practice of their trade, in violation of Section 2, Article XII
and Sections 2 and 7 of Article XIII of the 1987 Constitution.
Second, Office Order No. 23 contained no regulation
nor condition under which the Mayors permit could be
granted or denied; in other words, the Mayor had the
absolute authority to determine whether or not to issue
permit.
Third, as Ordinance No. 2 of the Province of Palawan
altogether prohibited the catching, gathering, possession,
buying, selling and shipping of live marine coral dwelling
organisms, without any distinction whether it was caught or
gathered through lawful fishing method, the Ordinance
took away the right of petitioners-fishermen to earn their
livelihood in lawful ways; and insofar as petitioners-
members of Airline Shippers Association are concerned,
they were unduly prevented from pursuing their vocation
and entering into contracts which are proper, necessary,
and essential to carry out their business endeavors to a
successful conclusion.
Finally, as Ordinance No. 2 of the Sangguniang
Panlalawigan is null and void, the criminal cases based
thereon against petitioners Tano and the others have to be
dismissed.
In the Resolution of 15 June 1993 we required
respondents to comment on the petition, and furnished the
Office of the Solicitor General with a copy thereof.
In their comment filed on 13 August 1993, public
respondents Governor Socrates and Members of the
Sangguniang Panlalawigan of Palawan defended the validity
of Ordinance No.2, Series of 1993, as a valid exercise of the
Provincial Governments power under the general welfare
clause (Section 16 of the Local Government Code of 1991
[hereafter, LGC]), and its specific power to protect the
environment and impose appropriate penalties for acts
which endanger the environment, such as dynamite fishing
and other forms of destructive fishing under Section 447 (a)
(1) (vi), Section 458 (a) (1) (vi), and Section 468 (a) (1) (vi),
of the LGC. They claimed that in the exercise of such
powers, the Province of Palawan had the right and
responsibilty to insure that the remaining coral reefs,
575

where fish dwells [sic], within its territory remain healthy
for the future generation. The Ordinance, they further
asserted, covered only live marine coral dwelling aquatic
organisms which were enumerated in the ordinance and
excluded other kinds of live marine aquatic organisms not
dwelling in coral reefs; besides the prohibition was for only
five (5) years to protect and preserve the pristine coral and
allow those damaged to regenerate.
Aforementioned respondents likewise maintained that
there was no violation of due process and equal protection
clauses of the Constitution. As to the former, public
hearings were conducted before the enactment of the
Ordinance which, undoubtedly, had a lawful purpose and
employed reasonable means; while as to the latter, a
substantial distinction existed between a fisherman who
catches live fish with the intention of selling it live, and a
fisherman who catches live fish with no intention at all of
selling it live, i.e., the former uses sodium cyanide while
the latter does not. Further, the Ordinance applied equally
to all those belonging to one class.
On 25 October 1993 petitioners filed an Urgent Plea for
the Immediate Issuance of a Temporary Restraining Order
claiming that despite the pendency of this case, Branch 50
of the Regional Trial Court of Palawan was bent on
proceeding with Criminal Case No. 11223 against
petitioners Danilo Tano, Alfredo Tano, Eulogio Tremocha,
Romualdo Tano, Baldomero Tano, Andres Lemihan and
Angel de Mesa for violation of Ordinance No. 2 of the
Sangguniang Panlalawigan of Palawan. Acting on said plea,
we issued on 11 November 1993 a temporary restraining
order directing Judge Angel Miclat of said court to cease
and desist from proceeding with the arraignment and pre-
trial of Criminal Case No. 11223.
On 12 July 1994, we excused the Office of the Solicitor
General from filing a comment, considering that as claimed
by said office in its Manifestation of 28 June 1994,
respondents were already represented by counsel.
The rest of the respondents did not file any comment
on the petition.
In the resolution of 15 September 1994, we resolved to
consider the comment on the petition as the Answer, gave
due course to the petition and required the parties to
submit their respective memoranda.
[2]

On 22 April 1997 we ordered impleaded as party
respondents the Department of Agriculture and the Bureau
of Fisheries and Aquatic Resources and required the Office
of the Solicitor General to comment on their behalf. But in
light of the latters motion of 9 July 1997 for an extension of
time to file the comment which would only result in further
delay, we dispensed with said comment.
After due deliberation on the pleadings filed, we
resolved to dismiss this petition for want of merit, on 22
July 1997, and assigned it to the ponente for the writing of
the opinion of the Court.
I
576

There are actually two sets of petitioners in this
case. The first is composed of Alfredo Tano, Baldomero
Tano, Danilo Tano, Romualdo Tano, Teocenes Midello,
Angel de Mesa, Eulogio Tremocha, Felipe Ongonion, Jr.,
Andres Linijan, and Felimon de Mesa, who were criminally
charged with violating Sangguniang
Panlalawigan Resolution No. 33 and Ordinance No. 2,
Series of 1993, of the Province of Palawan, in Criminal Case
No. 93-05-C of the 1
st
Municipal Circuit Trial Court (MCTC)
of Palawan;
[3]
and Robert Lim and Virginia Lim who were
charged with violating City Ordinance No. 15-92 of Puerto
Princesa City and Ordinance No. 2, Series of 1993, of the
Province of Palawan before the Office of the City
Prosecutor of Puerto Princesa.
[4]
All of them, with the
exception of Teocenes Midello, Felipe Ongonion, Jr.,
Felimon de Mesa, Robert Lim and Virginia Lim, are likewise
the accused in Criminal Case No. 11223 for the violation of
Ordinance No. 2 of the Sangguniang Panlalawigan of
Palawan, pending before Branch 50 of the Regional Trial
Court of Palawan.
[5]

The second set of petitioners is composed of the rest of
the petitioners numbering seventy-seven (77), all of whom,
except the Airline Shippers Association of Palawan -- an
alleged private association of several marine merchants --
are natural persons who claim to be fishermen.
The primary interest of the first set of petitioners is, of
course, to prevent the prosecution, trial and determination
of the criminal cases until the constitutionality or legality of
the Ordinances they allegedly violated shall have been
resolved. The second set of petitioners merely claim that
they being fishermen or marine merchants, they would be
adversely affected by the ordinances.
As to the first set of petitioners, this special civil
for certiorari must fail on the ground of prematurity
amounting to a lack of cause of action. There is no showing
that the said petitioners, as the accused in the criminal
cases, have filed motions to quash the informations therein
and that the same were denied. The ground available for
such motions is that the facts charged therein do not
constitute an offense because the ordinances in question
are unconstitutional.
[6]
It cannot then be said that the lower
courts acted without or in excess of jurisdiction or with
grave abuse of discretion to justify recourse to the
extraordinary remedy of certiorari or prohibition. It must
further be stressed that even if the petitioners did file
motions to quash, the denial thereof would not forthwith
give rise to a cause of action under Rule 65 of the Rules of
Court. The general rule is that where a motion to quash is
denied, the remedy therefrom is not certiorari, but for the
party aggrieved thereby to go to trial without prejudice to
reiterating special defenses involved in said motion, and if,
after trial on the merits of adverse decision is rendered, to
appeal therefrom in the manner authorized by law.
[7]
And ,
even where in an exceptional circumstance such denial may
be the subject of a special civil action for certiorari, a
motion for reconsideration must have to be filed to allow
the court concerned an opportunity to correct its errors,
unless such motion may be dispensed with because of
577

existing exceptional circumstances.
[8]
Finally, even if a
motion for reconsideration has been filed and denied, the
remedy under Rule 65 is still unavailable absent any
showing of the grounds provided for in Section 1
thereof.
[9]
For obvious reasons, the petition at bar does not,
and could not have , alleged any of such grounds.
As to the second set of petitioners, the instant petition
is obviously one for DECLARATORY RELIEF, i.e., for a
declaration that the Ordinances in question are a nullity ...
for being unconstitutional.
[10]
As such, their petition must
likewise fail, as this Court is not possessed of original
jurisdiction over petitions for declaratory relief even if only
questions of law are involved,
[11]
it being settled that the
Court merely exercises appellate jurisdiction over such
petitions.
[12]

II
Even granting arguendo that the first set of petitioners
have a cause of action ripe for the extraordinary writ
of certiorari, there is here a clear disregard of the hierarchy
of courts, and no special and important reason or
exceptional or compelling circumstance has been adduced
why direct recourse to us should be allowed. While we have
concurrent jurisdiction with Regional Trial courts and with
the Court of Appeals to issue writs of certiorari,
prohibition, mandamus, quo warranto, habeas corpus and
injunction, such concurrence gives petitioners no
unrestricted freedom of choice of court forum, so we held
in People v. Cuaresma:
[13]

This concurrence of jurisdiction is not to be taken as
according to parties seeking any of the writs an absolute
unrestrained freedom of choice of the court to which
application therefor will be directed. There is after all
hierarchy of courts. That hierarchy is determinative of the
venue of appeals, and should also serve as a general
determinant of the appropriate forum for petitions for the
extraordinary writs. A becoming regard for that judicial
hierarchy most certainly indicates that petitions for the
issuance of extraordinary writs against first level (inferior)
courts should be filed with the Regional Trial Court, and
those against the latter, with the Court of Appeals. A direct
invocation of the Supreme Courts original jurisdiction to
issue these writs should be allowed only when there are
special and important reasons therefor, clearly and
specifically set out in the petition. This is established policy.
It is a policy necessary to prevent inordinate demands upon
the Courts time and attention which are better devoted to
those matters within its exclusive jurisdiction, and to
prevent further over-crowding of the Courts docket.
The Court feels the need to reaffirm that policy at this time,
and to enjoin strict adherence thereto in the light of what it
perceives to be a growing tendency on the part of litigants
and lawyers to have their applications for the so-called
extraordinary writs, and sometimes even their appeals,
passed upon and adjudicated directly and immediately by
the highest tribunal of the land.
578

In Santiago v. Vasquez,
[14]
this Court forcefully
expressed that the propensity of litigants and lawyers to
disregard the hierarchy of courts must be put to a halt, not
only because of the imposition upon the precious time of
this Court, but also because of the inevitable and resultant
delay, intended or otherwise, in the adjudication of the
case which often has to be remanded or referred to the
lower court, the proper forum under the rules of
procedure, or as better equipped to resolve the issues since
this Court is not a trier of facts. We reiterated the judicial
policy that this Court will not entertain direct resort to it
unless 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 *its+ primary jurisdiction.
III
Notwithstanding the foregoing procedural obstacles
against the first set of petitioners, we opt to resolve this
case on its merits considering that the lifetime of the
challenged Ordinances is about to end. Ordinance No. 15-
92 of the City of Puerto Princesa is effective only up to 1
January 1998, while Ordinance No. 2 of the Province of
Palawan, enacted on 19 February 1993, is effective for only
five (5) years. Besides, these Ordinances were undoubtedly
enacted in the exercise of powers under the new LGC
relative to the protection and preservation of the
environment and are thus novel and of paramount
importance. No further delay then may be allowed in the
resolution of the issues raised.
It is of course settled that laws (including ordinances
enacted by local government units) enjoy the presumption
of constitutionality.
[15]
To overthrow this presumption,
there must be a clear and unequivocal breach of the
Constitution, not merely a doubtful or argumentative
contradiction. In short, the conflict with the Constitution
must be shown beyond reasonable doubt.
[16]
Where doubt
exists, even if well founded, there can be no finding of
unconstitutionality. To doubt is to sustain.
[17]

After a scrunity of the challenged Ordinances and the
provisions of the Constitution petitioners claim to have
been violated, we find petitioners contentions baseless and
so hold that the former do not suffer from any infirmity,
both under the Constitution and applicable laws.
Petitioners specifically point to Section 2, Article XII and
Sections 2 and 7, Article XIII of the Constitution as having
been transgressed by the Ordinances.
The pertinent portion of Section 2 of Article XII reads:
SEC. 2. x x x
The State shall protect the nation's marine wealth in its
archipelagic waters, territorial sea, and exclusive economic
zone, and reserve its use and enjoyment exclusively to
Filipino citizens.
The Congress may, by law, allow small-scale utilization of
natural resources by Filipino citizens, as well as cooperative
579

fish farming, with priority to subsistence fishermen and
fishworkers in rivers, lakes, bays, and lagoons.
Sections 2 and 7 of Article XIII provide:
Sec. 2. The promotion of social justice shall include the
commitment to create economic opportunities based on
freedom of initiative and self-reliance.
xxx
SEC. 7. The State shall protect the rights of subsistence
fishermen, especially of local communities, to the
preferential use of the communal marine and fishing
resources, both inland and offshore. It shall provide
support to such fishermen through appropriate technology
and research, adequate financial, production, and
marketing assistance, and other services. The State shall
also protect, develop, and conserve such resources. The
protection shall extend to offshore fishing grounds of
subsistence fishermen against foreign
intrusion. Fishworkers shall receive a just share from their
labor in the utilization of marine and fishing resources.
There is absolutely no showing that any of the
petitioners qualifies as a subsistence or marginal
fisherman. In their petition, petitioner Airline Shippers
Association of Palawan is described as a private
association composed of Marine Merchants; petitioners
Robert Lim and Virginia Lim, as merchants; while the rest
of the petitioners claim to be fishermen, without any
qualification, however, as to their status.
Since the Constitution does not specifically provide a
definition of the terms subsistence or marginal
fishermen,
[18]
they should be construed in their general and
ordinary sense. Amarginal fisherman is an individual
engaged in fishing whose margin of return or reward in his
harvest of fish as measured by existing price levels is barely
sufficient to yield a profit or cover the cost of gathering the
fish,
[19]
while a subsistence fisherman is one whose catch
yields but the irreducible minimum for his
livelihood.
[20]
Section 131(p) of the LGC (R.A. No. 7160)
defines amarginal farmer or fisherman as an individual
engaged in subsistence farming or fishing which shall be
limited to the sale, barter or exchange of agricultural or
marine products produced by himself and his immediate
family. It bears repeating that nothing in the record
supports a finding that any petitioner falls within these
definitions.
Besides, Section 2 of Article XII aims primarily not to
bestow any right to subsistence fishermen, but to lay stress
on the duty of the State to protect the nations marine
wealth. What the provision merely recognizes is that the
State may allow, by law, cooperative fish farming, with
priority to subsistence fishermen and fishworkers in rivers,
lakes, bays, and lagoons. Our survey of the statute books
reveals that the only provision of law which speaks of the
preferential right of marginal fishermen is Section 149 of
the LGC of 1991 which pertinently provides:
580

SEC. 149. Fishery Rentals, Fees and Charges. -- x x x
(b) The sangguniang bayan may:
(1) Grant fishery privileges to erect fish corrals, oyster,
mussels or other aquatic beds or bangus fry areas, within a
definite zone of the municipal waters, as determined by
it: Provided, however, That duly registered organizations
and cooperatives of marginal fishermen shall have
preferential right to such fishery privileges ....
In a Joint Administrative Order No. 3, dated 25 April 1996,
the Secretary of the Department of Agriculture and the
Secretary of the Department of Interior and Local
Government prescribed the guidelines on the preferential
treatment of small fisherfolk relative to the fishery right
mentioned in Section 149. This case, however, does not
involve such fishery right.
Anent Section 7 of Article XIII, it speaks not only of the
use of communal marine and fishing resources, but of their
protection, development, and conservation. As hereafter
shown, the ordinances in question are meant precisely to
protect and conserve our marine resources to the end that
their enjoyment by the people may be guaranteed not only
for the present generation, but also for the generations to
come.
The so-called preferential right of subsistence or
marginal fishermen to the use of marine resources is not at
all absolute. In accordance with the Regalian Doctrine,
marine resources belong to the State, and, pursuant to the
first paragraph of Section 2, Article XII of the Constitution,
their exploration, development and utilization ... shall be
under the full control and supervision of the
State. Moreover, their mandated protection,
development, and conservation as necessarily recognized
by the framers of the Constitution, imply certain restrictions
on whatever right of enjoyment there may be in favor of
anyone. Thus, as to the curtailment of the preferential
treatment of marginal fisherman, the following exchange
between Commissioner Francisco Rodrigo and
Commissioner Jose F.S. Bengzon, Jr., took place at the
plenary session of the Constitutional Commission:
MR. RODRIGO:
Let us discuss the implementation of this because I
would not raise the hopes of our people, and
afterwards fail in the implementation. How will this
be implemented? Will there be a licensing or giving
of permits so that government officials will know
that one is really a marginal fisherman? Or if
policeman say that a person is not a marginal
fisherman, he can show his permit, to prove that
indeed he is one.
MR. BENGZON:
Certainly, there will be some mode of licensing
insofar as this is concerned and this particular
581

question could be tackled when we discuss the
Article on Local Governments -- whether we will
leave to the local governments or to Congress on
how these things will be implemented. But
certainly, I think our Congressmen and our local
officials will not be bereft of ideas on how to
implement this mandate.
x x x
MR. RODRIGO:
So, once one is licensed as a marginal fisherman, he
can go anywhere in the Philippines and fish in any
fishing grounds.
MR. BENGZON:
Subject to whatever rules and regulations and local
laws that may be passed, may be existing or will be
passed.
[21]
(underscoring supplied for emphasis).
What must likewise be borne in mind is the state policy
enshrined in the Constitution regarding the duty of the
State to protect and advance the right of the people to a
balanced and healthful ecology in accord with the rhythm
and harmony of nature.
[22]
On this score, in Oposa v.
Factoran,
[23]
this Court declared:
While the right to balanced and healthful ecology is to be
found under the Declaration of Principles the State Policies
and not under the Bill of Rights, it does not follow that it is
less important than any of the civil and political rights
enumerated in the latter. Such a right belongs to a different
category of rights altogether for it concerns nothing less
than self-preservation and self-perpetuation - aptly and
fittingly stressed by the petitioners - the advancement of
which may even be said to predate all governments and
constitutions. As a matter of fact, these basic rights need
not even be written in the Constitution for they are
assumed to exist from the inception of humankind. If they
are now explicitly mentioned in the fundamental charter, it
is because of the well-founded fear of its framers that
unless the rights to a balanced and healthful ecology and to
health are mandated as state policies by the Constitution
itself, thereby highlighting their continuing importance and
imposing upon the state a solemn obligation to preserve
the first and protect and advance the second , the day
would not be too far when all else would be lost not only
for the present generation, but also for those to come -
generations which stand to inherit nothing but parched
earth incapable of sustaining life.
The right to a balanced and healthful ecology carries with it
a correlative duty to refrain from impairing the
environment ...
The LGC provisions invoked by private respondents
merely seek to give flesh and blood to the right of the
people to a balanced and healthful ecology. In fact, the
General Welfare Clause, expressly mentions this right:
582

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. (underscoring supplied).
Moreover, Section 5(c) of the LGC explicitly mandates that
the general welfare provisions of the LGC shall be liberally
interpreted to give more powers to the local government
units in accelerating economic development and upgrading
the quality of life for the people of the community.
The LGC vests municipalities with the power to grant
fishery privileges in municipal waters and to impose rentals,
fees or charges therefor; to penalize, by appropriate
ordinances, the use of explosives, noxious or poisonous
substances, electricity, muro-ami, and other deleterious
methods of fishing; and to prosecute any violation of the
provisions of applicable fishery laws.
[24]
Further,
the sangguniang bayan, the sangguniang panlungsod and
the sangguniang panlalawigan are directed to enact
ordinances for the general welfare of the municipality and
its inhabitants, which shall include, inter alia, ordinances
that *p+rotect the environment and impose appropriate
penalties for acts which endanger the environment such as
dynamite fishing and other forms of destructive fishing ...
and such other activities which result in pollution,
acceleration of eutrophication of rivers and lakes or of
ecological imbalance.
[25]

Finally, the centerpiece of LGC is the system of
decentralization
[26]
as expressly mandated by the
Constitution.
[27]
Indispensable thereto is devolution and the
LGC expressly provides that *a+ny 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,
[28]
Devolution refers
to the act by which the National Government confers
power and authority upon the various local government
units to perform specific functions and responsibilities.
[29]

One of the devolved powers enumerated in the section
of the LGC on devolution is the enforcement of fishery laws
in municipal waters including the conservation of
mangroves.
[30]
This necessarily includes enactment of
ordinances to effectively carry out such fishery laws within
the municipal waters.
583

The term municipal waters, in turn, include not only
streams, lakes, and tidal waters within the municipality, not
being the subject of private ownership and not comprised
within the national parks, public forest, timber lands, forest
reserves, or fishery reserves, but also marine waters
included between two lines drawn perpendicularly to the
general coastline from points where the boundary lines of
the municipality or city touch the sea at low tide and a third
line parallel with the general coastline and fifteen
kilometers from it.
[31]
Under P.D. No. 704, the marine
waters included in municipal waters is limited to three
nautical miles from the general coastline using the above
perpendicular lines and a third parallel line.
These fishery laws which local government units may
enforce under Section 17(b), (2), (i) in municipal waters
include: (1) P.D. No. 704; (2) P.D. No. 1015 which, inter alia,
authorizes the establishment of a closed season in any
Philippine water if necessary for conservation or ecological
purposes; (3) P.D. No. 1219 which provides for the
exploration, exploitation, utilization, and conservation of
coral resources; (4) R.A. No. 5474, as amended by B.P. Blg.
58, which makes it unlawful for any person, association, or
corporation to catch or cause to be caught, sell, offer to
sell, purchase, or have in possession any of the fish specie
called gobiidae or ipon during closed season; and (5) R.A.
No. 6451 which prohibits and punishes electrofishing, as
well as various issuances of the BFAR.
To those specifically devolved insofar as the control and
regulation of fishing in municipal waters and the protection
of its marine environment are concerned, must be added
the following:
1. Issuance of permits to construct fish cages within
municipal waters;
2. Issuance of permits to gather aquarium fishes
within municipal waters;
3. Issuance of permits to gather kapis shells within
municipal waters;
4. Issuance of permits to gather/culture shelled
mollusks within municipal waters;
5. Issuance of licenses to establish seaweed farms
within municipal waters;
6. Issuance of licenses to establish culture pearls
within municipal waters;
7. Issuance of auxiliary invoice to transport fish and
fishery products; and
8. Establishment of closed season in municipal
waters.
These functions are covered in the Memorandum of
Agreement of 5 April 1994 between the Department of
Agriculture and the Department of Interior and Local
Government.
In light then of the principles of decentralization and
devolution enshrined in the LGC and the powers granted to
local government units under Section 16 (the General
Welfare Clause), and under Sections 149, 447 (a) (1) (vi),
458 (a) (1) (vi) and 468 (a) (1) (vi), which unquestionably
584

involve the exercise of police power, the validity of the
questioned Ordinances cannot be doubted.
Parenthetically, we wish to add that these Ordinances
find full support under R.A. No. 7611, otherwise known as
the Strategic Environmental Plan (SEP) for Palawan Act,
approved on 19 July 1992. This statute adopts a
comprehensive framework for the sustainable
development of Palawan compatible with protecting and
enhancing the natural resources and endangered
environment of the province, which shall serve to guide
the local government of Palawan and the government
agencies concerned in the formulation and implementation
of plans, programs and projects affecting said province.
[32]

At this time then, it would be appropriate to determine
the relation between the assailed Ordinances and the
aforesaid powers of the Sangguniang Panlungsod of the
City of Puerto Princesa and the Sangguniang
Panlalawigan of the Province of Palawan to protect the
environment. To begin, we ascertain the purpose of the
Ordinances as set forth in the statement of purposes or
declaration of policies quoted earlier.
It is clear to the Court that both Ordinances have two
principal objectives or purposes: (1) to establish a closed
season for the species of fish or aquatic animals covered
therein for a period of five years, and (2) to protect the
corals of the marine waters of the City of Puerto Princesa
and the Province of Palawan from further destruction due
to illegal fishing activities.
The accomplishment of the first objective is well within
the devolved power to enforce fishery laws in municipal
waters, such as P.D. No. 1015, which allows the
establishment of closed seasons. The devolution of such
power has been expressly confirmed in the Memorandum
of Agreement of 5 April 1994 between the Department of
Agriculture and the Department of Interior and Local
Government.
The realization of the second objective falls within both
the general welfare clause of the LGC and the express
mandate thereunder to cities and provinces to protect the
environment and impose appropriate penalties for acts
which endanger the environment.
[33]

The destruction of the coral reefs results in serious, if
not irreparable, ecological imbalance, for coral reefs are
among the natures life-support systems.
[34]
They collect,
retain, and recycle nutrients for adjacent nearshore areas
such as mangroves, seagrass beds, and reef flats; provide
food for marine plants and animals; and serve as a
protective shelter for aquatic organisms.
[35]
It is said that
*e+cologically, the reefs are to the oceans what forests are
to continents: they are shelter and breeding grounds for
fish and plant species that will disappear without them.
[36]

The prohibition against catching live fish stems, in part,
from the modern phenomenon of live-fish trade which
entails the catching of so-called exotic tropical species of
fish not only for aquarium use in the West, but also for the
market for live banquet fish [which] is virtually insatiable in
585

ever more affluent Asia.
[37]
These exotic species are coral-
dwellers, and fishermen catch them by diving in shallow
water with corraline habitats and squirting sodium cyanide
poison at passing fish directly or onto coral crevices; once
affected the fish are immobilized [merely stunned] and
then scooped by hand.
[38]
The diver then surfaces and
dumps his catch into a submerged net attached to the skiff
. Twenty minutes later, the fish can swim normally. Back
on shore, they are placed in holding pens, and within a few
weeks, they expel the cyanide from their system and are
ready to be hauled. Then they are placed in saltwater tanks
or packaged in plastic bags filled with seawater for
shipment by air freight to major markets for live food
fish.
[39]
While the fish are meant to survive, the opposite
holds true for their former home as *a+fter the fisherman
squirts the cyanide, the first thing to perish is the reef
algae, on which fish feed. Days later, the living coral starts
to expire. Soon the reef loses its function as habitat for the
fish, which eat both the algae and invertebrates that cling
to the coral. The reef becomes an underwater graveyard,
its skeletal remains brittle, bleached of all color and
vulnerable to erosion from the pounding of the
waves.
[40]
It has been found that cyanide fishing kills most
hard and soft corals within three months of repeated
application.
[41]

The nexus then between the activities barred by
Ordinance No. 15-92 of the City of Puerto Princesa and the
prohibited acts provided in Ordinance No. 2, Series of 1993
of the Province of Palawan, on one hand, and the use of
sodium cyanide, on the other, is painfully obvious. In sum,
the public purpose and reasonableness of the Ordinances
may not then be controverted.
As to Office Order No. 23, Series of 1993, issued by
Acting City Mayor Amado L. Lucero of the City of Puerto
Princesa, we find nothing therein violative of any
constitutional or statutory provision. The Order refers to
the implementation of the challenged ordinance and is not
the Mayors Permit.
The dissenting opinion of Mr. Justice Josue N. Bellosillo
relies upon the lack of authority on the part of
the Sangguniang Panlungsod of Puerto Princesa to enact
Ordinance No. 15, Series of 1992, on the theory that the
subject thereof is within the jurisdiction and responsibility
of the Bureau of Fisheries and Aquatic Resources (BFAR)
under P.D. No. 704, otherwise known as the Fisheries
Decree of 1975; and that, in any event, the Ordinance is
unenforceable for lack of approval by the Secretary of the
Department of Natural Resources (DNR), likewise in
accordance with P.D. No. 704.
The majority is unable to accommodate this view. The
jurisdiction and responsibility of the BFAR under P. D. no.
704, over the management, conservation, development,
protection, utilization and disposition of all fishery and
aquatic resources of the country is not all-encompassing.
First, Section 4 thereof excludes from such jurisdiction and
responsibility municipal waters, which shall be under the
municipal or city government concerned, except insofar as
586

fishpens and seaweed culture in municipal in municipal
centers are concerned. This section provides, however, that
all municipal or city ordinances and resolutions affecting
fishing and fisheries and any disposition thereunder shall be
submitted to the Secretary of the Department of Natural
Resources for appropriate action and shall have full force
and effect only upon his approval.
[42]

Second, it must at once be pointed out that the BFAR is
no longer under the Department of Natural Resources (now
Department of Environment and Natural Resources).
Executive Order No. 967 of 30 June 1984 transferred the
BFAR from the control and supervision of the Minister
(formerly Secretary) of Natural Resources to the Ministry of
Agriculture and Food (MAF) and converted it into a mere
staff agency thereof, integrating its functions with the
regional offices of the MAF.
In Executive Order No. 116 of 30 January 1987, which
reorganized the MAF, the BFAR was retained as an attached
agency of the MAF. And under the Administrative Code of
1987,
[43]
the BFAR is placed under the Title concerning the
Department of Agriculture.
[44]

Therefore, it is incorrect to say that the challenged
Ordinance of the City of Puerto Princesa is invalid or
unenforceable because it was not approved by the
Secretary of the DENR. If at all, the approval that should be
sought would be that of the Secretary of the Department of
Agriculture (not DENR) of municipal ordinances affecting
fishing and fisheries in municipal waters has been
dispensed with in view of the following reasons:
(1) Section 534 (Repealing Clause) of the LGC
expressly repeals or amends Section 16 and 29 of P.D. No.
704
[45]
insofar that they are inconsistent with the provisions
of the LGC.
(2) As discussed earlier, under the general
welfare clause of the LGC, local government units have the
power, inter alia, to enact ordinances to enhance the right
of the people to a balanced ecology. It likewise specifically
vests municipalities with the power to grant fishery
privileges in municipal waters, and impose rentals, fees or
charges therefor; to penalize, by appropriate ordinances,
the use of explosives, noxious or poisonous substances,
electricity, muro-ami, and other deleterious methods of
fishing; and to prosecute other methods of fishing; and to
prosecute any violation of the provisions of applicable
fishing laws.
[46]
Finally, it imposes upon the sangguniang
bayan, the sangguniang panlungsod, and the sangguniang
panlalawigan the duty to enact ordinances to *p+rotect the
environment and impose appropriate penalties for acts
which endanger the environment such as dynamite fishing
and other forms of destructive fishing and such other
activities which result in pollution, acceleration of
eutrophication of rivers and lakes or of ecological
imbalance.
[47]

In closing, we commend the Sangguniang
Panlungsod of the City of Puerto Princesa and Sangguniang
587

Panlalawigan of the Province of Palawan for exercising the
requisite political will to enact urgently needed legislation
to protect and enhance the marine environment, thereby
sharing in the herculean task of arresting the tide of
ecological destruction. We hope that other local
government units shall now be roused from their lethargy
and adopt a more vigilant stand in the battle against the
decimation of our legacy to future generations. At this time,
the repercussions of any further delay in their response
may prove disastrous, if not, irreversible.
WHEREFORE, the instant petition is DISMISSED for lack
of merit and the temporary restraining order issued on 11
November 1993 is LIFTED.
No pronouncement as to costs.
SO ORDERED.
Narvasa, C.J., Padilla, Vitug, Panganiban, and Torres, Jr.,
JJ., concur.
Romero, Melo, Puno, and Francisco, JJ., joined the
ponencias of Justices Davide and Mendoza.
Bellosillo, J., see dissenting opinion.
Kapunan and Hermosisima, Jr., JJ., join Justice Bellosillo
in his dissenting opinion.
Mendoza, see concurring opinion.
Regalado, J., on official leave.



[1]
None, however, exists in Puerto Princesa City.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 175527 December 8, 2008
HON. GABRIEL LUIS QUISUMBING, HON. ESTRELLA P.
YAPHA, HON. VICTORIA G. COROMINAS, HON. RAUL D.
BACALTOS (Members of the Sangguniang Panlalawigan of
Cebu), petitioners,
vs.
HON. GWENDOLYN F. GARCIA (In her capacity as Governor
of the Province of Cebu), HON. DELFIN P. AGUILAR (in his
capacity as Director IV (Cluster Director) of COA), Cluster
IV Visayas Local Government Sector, HON. HELEN S.
HILAYO (In her capacity as Regional Cluster Director of
COA), and HON. ROY L. URSAL (In his capacity as Regional
Legal and Adjudication Director of COA), respondents.
D E C I S I O N
TINGA, J.:
Gabriel Luis Quisumbing (Quisumbing), Estrella P. Yapha,
Victoria G. Corominas, and Raul D. Bacaltos (Bacaltos),
collectively petitioners, assail the Decision
1
of the Regional
Trial Court (RTC) of Cebu City, Branch 9, in Civil Case No.
588

CEB-31560, dated July 11, 2006, which declared that under
the pertinent provisions of Republic Act No. 7160 (R.A. No.
7160), or the Local Government Code, and Republic Act No.
9184 (R.A. No. 9184), or the Government Procurement
Reform Act, respondent Cebu Provincial Governor
Gwendolyn F. Garcia (Gov. Garcia), need not secure the
prior authorization of the Sangguniang
Panlalawigan before entering into contracts committing
the province to monetary obligations.
The undisputed facts gathered from the assailed Decision
and the pleadings submitted by the parties are as follows:
The Commission on Audit (COA) conducted a financial
audit on the Province of Cebu for the period ending
December 2004. Its audit team rendered a report, Part II of
which states: "Several contracts in the total amount
ofP102,092,841.47 were not supported with a Sangguniang
Panlalawigan resolution authorizing
the Provincial Governor to enter into a contract, as required
under Section 22 of R.A. No. 7160."
2
The audit team then
recommended that, "Henceforth, the local chief
executive must secure a sanggunian resolution authorizing
the former to enter into a contract as provided under
Section 22 of R.A. No. 7160."
3

Gov. Garcia, in her capacity as the Provincial Governor of
Cebu, sought the reconsideration of the findings and
recommendation of the COA. However, without waiting for
the resolution of the reconsideration sought, she instituted
an action for Declaratory Relief before the RTC of Cebu City,
Branch 9. Impleaded as respondents were Delfin P. Aguilar,
Helen S. Hilayo and Roy L. Ursal in their official capacities as
Cluster Director IV, Regional Cluster Director and Regional
Legal and Adjudication Director of the COA, respectively.
The Sangguniang Panlalawigan of the Province of Cebu,
represented by Vice-Governor Gregorio Sanchez, Jr., was
also impleaded as respondent.
Alleging that the infrastructure contracts
4
subject of
the audit report complied with the bidding procedures
provided under R.A. No. 9184 and were entered into
pursuant to the general and/or supplemental appropriation
ordinances passed by the Sangguniang Panlalawigan, Gov.
Garcia alleged that a separate authority to enter into such
contracts was no longer necessary.
On the basis of the parties respective memoranda, the trial
court rendered the assailed Decision dated July 11, 2006,
declaring that Gov. Garcia need not secure prior
authorization from the Sangguniang Panlalawigan of Cebu
before entering into the questioned contracts. The
dispositive portion of the Decision provides:
WHEREFORE, premises considered, this court hereby
renders judgment in favor of Petitioner and against
the Respondent COA officials and declares that
pursuant to Sections 22 paragraph in relation to
Sections 306 and 346 of the Local Government Code
589

and Section 37 of the Government
Procurement Reform Act, the Petitioner Governor of
Cebu need not secure prior authorization by way of a
resolution from theSangguniang Panlalawigan of the
Province of Cebu before she enters into a contract
involving monetary obligations on the part of the
Province of Cebu when there is a prior appropriation
ordinance enacted.
Insofar as Respondent Sangguniang Panlalawigan,
this case is hereby dismissed.
5

In brief, the trial court declared that the Sangguniang
Panlalawigan does not have juridical personality nor is it
vested by R.A. No. 7160 with authority to sue and be sued.
The trial court accordingly dismissed the case against
respondent members of the Sangguniang Panlalawigan. On
the question of the remedy of declaratory relief being
improper because a breach had already been committed,
the trial court held that the case would ripen into and be
treated as an ordinary civil action. The trial court further
ruled that it is only when the contract (entered into by the
local chief executive) involves obligations which are not
backed by prior ordinances that the prior authority of
thesanggunian concerned is required. In this case,
the Sangguniang Panlalawigan of Cebu had already given
its prior authorization when it passed the appropriation
ordinances which authorized the expenditures in the
questioned contracts.
The trial court denied the motion for reconsideration
6
filed
by Quisumbing, Bacaltos, Carmiano Kintanar, Jose Ma.
Gastardo, and Agnes Magpale, in their capacities as
members of the Sangguniang Panlalawigan of Cebu, in an
Order
7
dated October 25, 2006.
In the Petition for Review
8
dated November 22, 2006,
petitioners insisted that the RTC committed reversible error
in granting due course to Gov. Garcias petition for
declaratory relief despite a breach of the law subject of the
petition having already been committed. This breach was
allegedly already the subject of a pending investigation by
the Deputy Ombudsman for the Visayas. Petitioners further
maintained that prior authorization from theSangguniang
Panlalawigan should be secured before Gov. Garcia could
validly enter into contracts involving monetary obligations
on the part of the province.
Gov. Garcia, in her Comment
9
dated April 10, 2007, notes
that the RTC had already dismissed the case against the
members of the Sangguniang Panlalawigan of Cebu on the
ground that they did not have legal personality to sue and
be sued. Since the COA officials also named as respondents
in the petition for declaratory relief neither filed a motion
for reconsideration nor appealed the RTC Decision, the said
Decision became final and executory. Moreover, only two
of the members of the Sangguniang Panlalawigan, namely,
petitioners Quisumbing and Bacaltos, originally named as
respondents in the petition for declaratory relief, filed the
instant petition before the Court.
590

Respondent Governor insists that at the time of the filing of
the petition for declaratory relief, there was not yet any
breach of R.A. No. 7160. She further argues that the
questioned contracts were executed after a public bidding
in implementation of specific items in the regular or
supplemental appropriation ordinances passed by
theSangguniang Panlalawigan. These ordinances allegedly
serve as the authorization required under R.A. No. 7160,
such that the obtention of another authorization becomes
not only redundant but also detrimental to the speedy
delivery of basic services.
Gov. Garcia also claims that in its Comment to the petition
for declaratory relief, the Office of the Solicitor General
(OSG) took a stand supportive of the governors arguments.
The OSGs official position allegedly binds the COA.
Expressing gratitude for having been allowed by this Court
to file a comment on the petition, respondent COA officials
in their Comment
10
dated March 8, 2007, maintain that
Sections 306 and 346 of R.A. No. 7160 cannot be
considered exceptions to Sec. 22(c) of R.A. No. 7160. Sec.
346 allegedly refers to disbursements which must be made
in accordance with an appropriation ordinance without
need of approval from the sanggunian concerned. Sec. 306,
on the other hand, refers to the authorization for the
effectivity of the budget and should not be mistaken for the
specific authorization by the Sangguniang Panlalawigan for
the local chief executive to enter into contracts under Sec.
22(c) of R.A. No. 7160.
The question that must be resolved by the Court should
allegedly be whether the appropriation ordinance referred
to in Sec. 346 in relation to Sec. 306 of R.A. No. 7160 is the
same prior authorization required under Sec. 22(c) of the
same law. To uphold the assailed Decision would allegedly
give the local chief executive unbridled authority to enter
into any contract as long as an appropriation ordinance or
budget has been passed by the sanggunianconcerned.
Respondent COA officials also claim that the petition for
declaratory relief should have been dismissed for the failure
of Gov. Garcia to exhaust administrative remedies,
rendering the petition not ripe for judicial determination.
The OSG filed a Comment
11
dated March 12, 2007, pointing
out that the instant petition raises factual issues warranting
its denial. For instance, petitioners, on one hand, claim that
there was no appropriation ordinance passed for 2004 but
only a reenacted appropriations ordinance and that the
unauthorized contracts did not proceed from a public
bidding pursuant to R.A. No. 9184. Gov. Garcia, on the
other hand, claims that the contracts were entered into in
compliance with the bidding procedures in R.A. No. 9184
and pursuant to the general and/or supplemental
appropriations ordinances passed by the Sangguniang
Panlalawigan. She further asserts that there were
ordinances allowing the expenditures made.
On the propriety of the action for declaratory relief filed by
Gov. Garcia, the OSG states in very general terms that such
591

an action must be brought before any breach or violation of
the statute has been committed and may be treated as an
ordinary action only if the breach occurs after the filing of
the action but before the termination thereof. However, it
does not say in this case whether such recourse is proper.
Nonetheless, the OSG goes on to discuss that Sec. 323 of
R.A. No. 7160 allows disbursements for salaries and wages
of existing positions, statutory and contractual obligations
and essential operating expenses authorized in the annual
and supplemental budgets of the preceding year (which are
deemed reenacted in case the sanggunianconcerned fails
to pass the ordinance authorizing the annual appropriations
at the beginning of the ensuing fiscal year). Contractual
obligations not included in the preceding years annual and
supplemental budgets allegedly require the prior approval
or authorization of the local sanggunian.
In their Consolidated Reply
12
dated August 8, 2007,
petitioners insist that the instant petition raises only
questions of law not only because the parties have agreed
during the proceedings before the trial court that the case
involves purely legal questions, but also because there is no
dispute that the Province of Cebu was operating under a
reenacted budget in 2004.
They further defend their standing to bring suit not only as
members of the sanggunian whose powers Gov. Garcia has
allegedly usurped, but also as taxpayers whose taxes have
been illegally spent. Petitioners plead leniency in the
Courts ruling regarding their legal standing, as this case
involves a matter of public policy.
Petitioners finally draw attention to the OSGs seeming
change of heart and adoption of their argument that Gov.
Garcia has violated R.A. No. 7160.
It should be mentioned at the outset that a reading of the
OSGs Comment
13
on the petition for declaratory relief
indeed reveals its view that Sec. 22(c) of R.A. No. 7160
admits of exceptions. It maintains, however, that the said
law is clear and leaves no room for interpretation, only
application. Its Comment on the instant petition does not
reflect a change of heart but merely an amplification of its
original position.
Although we agree with the OSG that there are factual
matters that have yet to be settled in this case, the records
disclose enough facts for the Court to be able to make a
definitive ruling on the basic legal arguments of the parties.
The trial courts pronouncement that "the parties in this
case all agree that the contracts referred to in the above
findings are contracts entered into pursuant to the bidding
procedures allowed in Republic Act No. 9184 or the
Government Procurement Reform Acti.e., public bidding,
and negotiated bid. The biddings were made pursuant to
the general and/or supplemental appropriation ordinances
passed by the Sangguniang Panlalawigan of Cebu x x x"
14
is
clearly belied by the Answer
15
filed by petitioners herein.
592

Petitioners herein actually argue in their Answer that the
contracts subject of the COAs findings did not proceed
from a public bidding. Further, there was no budget passed
in 2004. What was allegedly in force was the reenacted
2003 budget.
16

Gov. Garcias contention that the questioned contracts
complied with the bidding procedure in R.A. No. 9184 and
were entered into pursuant to the general and
supplemental appropriation ordinances allowing these
expenditures is diametrically at odds with the facts as
presented by petitioners in this case. It is notable, however,
that while Gov. Garcia insists on the existence of
appropriation ordinances which allegedly authorized her to
enter into the questioned contracts, she does not squarely
deny that these ordinances pertain to the previous years
budget which was reenacted in 2004.
Thus, contrary to the trial courts finding, there was no
agreement among the parties with regard to the operative
facts under which the case was to be resolved.
Nonetheless, we can gather from Gov. Garcias silence on
the matter and the OSGs own discussion on the effect of a
reenacted budget on the local chief executives ability to
enter into contracts, that during the year in question, the
Province of Cebu was indeed operating under a reenacted
budget.
Note should be taken of the fact that Gov. Garcia, both in
her petition for declaratory relief and in her Comment on
the instant petition, has failed to point out the specific
provisions in the general and supplemental appropriation
ordinances copiously mentioned in her pleadings which
supposedly authorized her to enter into the questioned
contracts.
Based on the foregoing discussion, there appear two basic
premises from which the Court can proceed to discuss the
question of whether prior approval by the Sangguniang
Panlalawigan was required before Gov. Garcia could have
validly entered into the questioned contracts. First, the
Province of Cebu was operating under a reenacted budget
in 2004. Second, Gov. Garcia entered into contracts on
behalf of the province while this reenacted budget was in
force.
Sec. 22(c) of R.A. No. 7160 provides:
Sec. 22. Corporate Powers.(a) Every local
government unit, as a corporation, shall have the
following powers:
x x x
(c) Unless otherwise provided in this Code, no
contract may be entered into by the local chief
executive in behalf of the local government unit
without prior authorization by
the sanggunian concerned. A legible copy of such
contract shall be posted at a conspicuous place in the
593

provincial capitol or the city, municipal or barangay
hall.
As it clearly appears from the foregoing provision, prior
authorization by the sanggunian concerned is required
before the local chief executive may enter into contracts on
behalf of the local government unit.
Gov. Garcia posits that Sections 306 and 346 of R.A. No.
7160 are the exceptions to Sec. 22(c) and operate to allow
her to enter into contracts on behalf of the Province of
Cebu without further authority from the Sangguniang
Panlalawigan other than that already granted in the
appropriation ordinance for 2003 and the supplemental
ordinances which, however, she did not care to elucidate
on.
The cited provisions state:
Sec. 306. Definition of Terms.When used in this
Title, the term:
(a) "Annual Budget" refers to a financial plan
embodying the estimates of income and
expenditures for one (1) fiscal year;
(b) "Appropriation" refers to an authorization made
by ordinance, directing the payment of goods and
services from local government funds under specified
conditions or for specific purposes;
(c) "Budget Document" refers to the instrument used
by the local chief executive to present a
comprehensive financial plan to
the sanggunian concerned;
(d) "Capital Outlays" refers to appropriations for the
purchase of goods and services, the benefits of which
extend beyond the fiscal year and which add to the
assets of the local government unit concerned,
including investments in public utilities such as public
markets and slaughterhouses;
(e) "Continuing Appropriation" refers to an
appropriation available to support obligations for a
specified purpose or projects, such as those for the
construction of physical structures or for the
acquisition of real property or equipment, even when
these obligations are incurred beyond the budget
year;
(f) "Current Operating Expenditures" refers to
appropriations for the purchase of goods and
services for the conduct of normal government
operations within the fiscal year, including goods and
services that will be used or consumed during the
budget year;
(g) "Expected Results" refers to the services,
products, or benefits that will accrue to the public,
594

estimated in terms of performance measures or
physical targets;
(h) "Fund" refers to a sum of money, or other assets
convertible to cash, set aside for the purpose of
carrying out specific activities or attaining certain
objectives in accordance with special regulations,
restrictions, or limitations, and constitutes an
independent fiscal and accounting entity;
(i) "Income" refers to all revenues and receipts
collected or received forming the gross accretions of
funds of the local government unit;
(j) "Obligations" refers to an amount committed to
be paid by the local government unit for any lawful
act made by an accountable officer for and in behalf
of the local government unit concerned;
(k) "Personal Services" refers to appropriations for
the payment of salaries, wages and other
compensation of permanent, temporary, contractual,
and casual employees of the local government unit;
(l) "Receipts" refers to income realized from
operations and activities of the local government or
are received by it in the exercise of its corporate
functions, consisting of charges for services rendered,
conveniences furnished, or the price of a commodity
sold, as well as loans, contributions or aids from
other entities, except provisional advances for
budgetary purposes; and
(m) "Revenue" refers to income derived from the
regular system of taxation enforced under authority
of law or ordinance and, as such, accrue more or less
regularly every year.
x x x
Sec. 346. Disbursements of Local Funds and
Statement of Accounts.Disbursements shall be made
in accordance with the ordinance authorizing the
annual or supplemental appropriations without the
prior approval of the sanggunian concerned. Within
thirty (3) days after the close of each month, the local
accountant shall furnish the sanggunian with such
financial statements as may be prescribed by the
COA. In the case of the year-end statement of
accounts, the period shall be sixty (60) days after the
thirty-first (31
st
) of December.
Sec. 306 of R.A. No. 7160 merely contains a definition of
terms. Read in conjunction with Sec. 346, Sec. 306
authorizes the local chief executive to make disbursements
of funds in accordance with the ordinance authorizing the
annual or supplemental appropriations. The "ordinance"
referred to in Sec. 346 pertains to that which enacts the
local government units budget, for which reason no further
authorization from the local council is required, the
595

ordinance functioning, as it does, as the legislative
authorization of the budget.
17

To construe Sections 306 and 346 of R.A. No. 7160 as
exceptions to Sec. 22(c) would render the requirement of
prior sanggunian authorization superfluous, useless and
irrelevant. There would be no instance when such prior
authorization would be required, as in contracts involving
the disbursement of appropriated funds. Yet, this is
obviously not the effect Congress had in mind when it
required, as a condition to the local chief executives
representation of the local government unit in business
transactions, the prior authorization of
the sanggunianconcerned. The requirement was
deliberately added as a measure of check and balance, to
temper the authority of the local chief executive, and in
recognition of the fact that the corporate powers of the
local government unit are wielded as much by its chief
executive as by its council.
18
However, as will be discussed
later, the sanggunianauthorization may be in the form of an
appropriation ordinance passed for the year which
specifically covers the project, cost or contract to be
entered into by the local government unit.
The fact that the Province of Cebu operated under a
reenacted budget in 2004 lent a complexion to this case
which the trial court did not apprehend. Sec. 323 of R.A.
No. 7160 provides that in case of a reenacted budget, "only
the annual appropriations for salaries and wages of existing
positions, statutory and contractual obligations, and
essential operating expenses authorized in the annual and
supplemental budgets for the preceding year shall be
deemed reenacted and disbursement of funds shall be in
accordance therewith."
19

It should be observed that, as indicated by the word "only"
preceding the above enumeration in Sec. 323, the items for
which disbursements may be made under a reenacted
budget are exclusive. Clearly, contractual obligations which
were not included in the previous years annual and
supplemental budgets cannot be disbursed by the local
government unit. It follows, too, that new contracts
entered into by the local chief executive require the prior
approval of the sanggunian.
We agree with the OSG that the words "disbursement" and
"contract" separately referred to in Sec. 346 and 22(c) of
R.A. No. 7160 should be understood in their common
signification. Disbursement is defined as "To pay out,
commonly from a fund. To make payment in settlement of
a debt or account payable."
20
Contract, on the other hand,
is defined by our Civil Code as "a meeting of minds between
two persons whereby one binds himself, with respect to the
other, to give something or to render some service."
21

And so, to give life to the obvious intendment of the law
and to avoid a construction which would render Sec. 22(c)
of R.A. No. 7160 meaningless,
22
disbursement, as used in
Sec. 346, should be understood to pertain to payments for
statutory and contractual obligations which
596

the sanggunian has already authorized thru ordinances
enacting the annual budget and are therefore already
subsisting obligations of the local government unit.
Contracts, as used in Sec. 22(c) on the other hand, are those
which bind the local government unit to new obligations,
with their corresponding terms and conditions, for which
the local chief executive needs prior authority from
the sanggunian.
Elsewhere in R.A. No. 7160 are found provisions which
buttress the stand taken by petitioners against Gov.
Garcias seemingly heedless actions. Sec. 465, Art. 1,
Chapter 3 of R.A. No. 7160 states that the provincial
governor shall "[r]epresent the province in all its business
transactions and sign in its behalf all bonds, contracts, and
obligations, and such other documents upon authority of
the Sangguniang Panlalawiganor pursuant to law or
ordinances." Sec. 468, Art. 3 of the same chapter also
establishes the sanggunians power, as the provinces
legislative body, to authorize the provincial governor to
negotiate and contract loans, lease public buildings held in
a proprietary capacity to private parties, among other
things.
The foregoing inexorably confirms the indispensability of
the sanggunians authorization in the execution of
contracts which bind the local government unit to new
obligations. Note should be taken of the fact that R.A. No.
7160 does not expressly state the form that the
authorization by the sanggunian has to take. Such
authorization may be done by resolution enacted in the
same manner prescribed by ordinances, except that the
resolution need not go through a third reading for final
consideration unless the majority of all the members of
the sangguniandecides otherwise.
23

As regards the trial courts pronouncement that R.A. No.
9184 does not require the head of the procuring entity to
secure a resolution from the sanggunian concerned before
entering into a contract, attention should be drawn to the
very same provision upon which the trial court based its
conclusion. Sec. 37 provides: "The Procuring Entity shall
issue the Notice to Proceed to the winning bidder not later
than seven (7) calendar days from the date of approval of
the contract by the appropriate authority x x x."
R.A. No. 9184 establishes the law and procedure for public
procurement. Sec. 37 thereof explicitly makes the approval
of the appropriate authority which, in the case of local
government units, is the sanggunian, the point of reference
for the notice to proceed to be issued to the winning
bidder. This provision, rather than being in conflict with or
providing an exception to Sec. 22(c) of R.A. No. 7160,
blends seamlessly with the latter and even acknowledges
that in the exercise of the local government units
corporate powers, the chief executive acts merely as an
instrumentality of the local council. Read together, the
cited provisions mandate the local chief executive to secure
the sanggunians approval before entering into
procurement contracts and to transmit the notice to
597

proceed to the winning bidder not later than seven (7)
calendar days therefrom.
Parenthetically, Gov. Garcias petition for declaratory relief
should have been dismissed because it was instituted after
the COA had already found her in violation of Sec. 22(c) of
R.A. No. 7160.
One of the important requirements for a petition for
declaratory relief under Sec. 1, Rule 63 of the Rules of Court
is that it be filed before breach or violation of a deed, will,
contract, other written instrument, statute, executive
order, regulation, ordinance or any other governmental
regulation.
In Martelino v. National Home Mortgage Finance
Corporation,
24
we held that the purpose of the action is to
secure an authoritative statement of the rights and
obligations of the parties under a statute, deed,
contract, etc., for their guidance in its enforcement or
compliance and not to settle issues arising from its alleged
breach. It may be entertained only before the breach or
violation of the statute, deed, contract, etc. to which it
refers. Where the law or contract has already been
contravened prior to the filing of an action for declaratory
relief, the court can no longer assume jurisdiction over the
action. Under such circumstances, inasmuch as a cause of
action has already accrued in favor of one or the other
party, there is nothing more for the court to explain or
clarify, short of a judgment or final order.
Thus, the trial court erred in assuming jurisdiction over the
action despite the fact that the subject thereof had already
been breached by Gov. Garcia prior to the filing of the
action. Nonetheless, the conversion of the petition into an
ordinary civil action is warranted under Sec. 6, Rule 63
25
of
the Rules of Court.
Erroneously, however, the trial court did not treat the COA
report as a breach of the law and proceeded to resolve the
issues as it would have in a declaratory relief action. Thus, it
ruled that prior authorization is not required if there exist
ordinances which authorize the local chief executive to
enter into contracts. The problem with this ruling is that it
fails to take heed of the incongruent facts presented by the
parties. What the trial court should have done, instead of
deciding the case based merely on the memoranda
submitted by the parties, was to conduct a full-blown trial
to thresh out the facts and make an informed and complete
decision.
As things stand, the declaration of the trial court to the
effect that no prior authorization is required when there is
a prior appropriation ordinance enacted does not put the
controversy to rest. The question which should have been
answered by the trial court, and which it failed to do was
whether, during the period in question, there did exist
ordinances (authorizing Gov. Garcia to enter into the
questioned contracts) which rendered the obtention of
another authorization from the Sangguniang
Panlalawigan superfluous. It should also have determined
598

the character of the questioned contracts, i.e., whether
they were, as Gov. Garcia claims, mere disbursements
pursuant to the ordinances supposedly passed by
the sanggunian or, as petitioners claim, new contracts
which obligate the province without the provincial boards
authority.
It cannot be overemphasized that the paramount
consideration in the present controversy is the fact that the
Province of Cebu was operating under a re-enacted budget
in 2004, resulting in an altogether different set of rules as
directed by Sec. 323 of R.A. 7160. This Decision, however,
should not be so construed as to proscribe any and all
contracts entered into by the local chief executive without
formal sanggunian authorization. In cases, for instance,
where the local government unit operates under an annual
as opposed to a re-enacted budget, it should be
acknowledged that the appropriation passed by
the sanggunian may validly serve as the authorization
required under Sec. 22(c) of R.A. No. 7160. After all, an
appropriation is an authorization made by ordinance,
directing the payment of goods and services from local
government funds under specified conditions or for specific
purposes. The appropriation covers the expenditures which
are to be made by the local government unit, such as
current operating expenditures
26
and capital outlays.
27

The question of whether a sanggunian authorization
separate from the appropriation ordinance is required
should be resolved depending on the particular
circumstances of the case. Resort to the appropriation
ordinance is necessary in order to determine if there is a
provision therein which specifically covers the expense to
be incurred or the contract to be entered into. Should the
appropriation ordinance, for instance, already contain in
sufficient detail the project and cost of a capital outlay such
that all that the local chief executive needs to do after
undergoing the requisite public bidding is to execute the
contract, no further authorization is required, the
appropriation ordinance already being sufficient.
On the other hand, should the appropriation ordinance
describe the projects in generic terms such as
"infrastructure projects," "inter-municipal waterworks,
drainage and sewerage, flood control, and irrigation
systems projects," "reclamation projects" or "roads and
bridges," there is an obvious need for a covering contract
for every specific project that in turn requires approval by
the sanggunian. Specific sanggunian approval may also be
required for the purchase of goods and services which are
neither specified in the appropriation ordinance nor
encompassed within the regular personal services and
maintenance operating expenses.
In view of the foregoing, the instant case should be treated
as an ordinary civil action requiring for its complete
adjudication the confluence of all relevant facts. Guided by
the framework laid out in this Decision, the trial court
should receive further evidence in order to determine the
nature of the questioned contracts entered into by Gov.
599

Garcia, and the existence of ordinances authorizing her
acts.
WHEREFORE, the petition is GRANTED IN PART. The
Decision dated July 11, 2006, of the Regional Trial Court of
Cebu City, Branch 9, in Civil Case No. CEB-31560, and its
Order dated October 25, 2006, are REVERSED andSET
ASIDE. The case is REMANDED to the court a quo for
further proceedings in accordance with this Decision. No
pronouncement as to costs.
SO ORDERED.
EN BANC


SEVERINO B. VERGARA, G.R. No. 174567
Petitioner,
Present:

PUNO, C.J.,
*

QUISUMBING,
**

YNARES-SANTIAGO,
CARPIO,
AUSTRIA-MARTINEZ,
- versus - CORONA,
CARPIO MORALES,
TINGA,
CHICO-NAZARIO,
VELASCO, JR.,
NACHURA,
LEONARDO-DE
CASTRO,
BRION, and
PERALTA, JJ.
THE HON. OMBUDSMAN,
SEVERINO J. LAJARA, and
VIRGINIA G. BARORO, Promulgated:
Respondents. March 12, 2009
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - x


D E C I S I O N


CARPIO, J.:


The Case

This petition for certiorari and mandamus
[1]
assails the
17 March 2004 Resolution
[2]
and 22 August 2005 Order
[3]
of
the Office of the Deputy Ombudsman for Luzon
(Ombudsman) in OMB-L-C-02-1205-L. The Ombudsman
dismissed the case filed by Severino B. Vergara (petitioner)
and Edgardo H. Catindig against Severino J. Lajara as
Calamba City Mayor (Mayor Lajara), Virginia G. Baroro
600

(Baroro) as City Treasurer, Razul Requesto as President of
Pamana, Inc. (Pamana), and Lauro Jocson as Vice President
and Trust Officer of the Prudential Bank and Trust Company
(Prudential Bank) for violation of Section 3(e) of the Anti
Graft and Corrupt Practices Act (RA 3019).
[4]


The Facts

On 25 June 2001, the City Council of Calamba (City
Council), where petitioner was a member, issued
Resolution No. 115, Series of 2001. The resolution
authorized Mayor Lajara to negotiate with landowners
within the vicinity of Barangays Real, Halang, and Uno, for a
new city hall site.
[5]
During the public hearing on 3 October
2001, the choice for the new city hall site was limited to
properties owned by Pamana and a lot in Barangay Saimsin,
Calamba.
[6]


On 29 October 2001, the City Council passed
Resolution No. 280, Series of 2001, authorizing Mayor
Lajara to purchase several lots owned by Pamana with a
total area of 55,190 square meters for the price
of P129,017,600.
[7]
Mayor Lajara was also authorized to
execute, sign and deliver the required documents.
[8]


On 13 November 2001, the City Government of
Calamba (Calamba City), through Mayor Lajara, entered
into the following agreements:

1. Memorandum of Agreement (MOA)
The MOA with Pamana and Prudential Bank
discussed the terms and conditions of the sale of 15
lots with a total area of 55,190 square meters. The
total purchase price ofP129,017,600 would be
payable in installment as follows: P10,000,000 on
or before 15 November 2001, P19,017,600 on or
before 31 January 2002, and the balance
ofP100,000,000 in four equal installments payable
on or before 31 April 2002, 31 July 2002, 31
October 2002, and 31 January 2003.
[9]

2. Deed of Sale
Under the Deed of Sale, Calamba City purchased
from Pamana and Prudential Bank 15 lots with a
total area of 55,190 square meters, more or less,
located in Brgy. Lecheria/Real, Calamba, Laguna
with Transfer Certificate of Title (TCT) Numbers
159893, 159894, 159895, 159896, 159897,
158598, 162412, 162413, 204488, 66140, 61703,
66141, 66142, 66143, and 61705.
3. Deed of Real Estate Mortgage
Calamba City mortgaged to Pamana and Prudential
Bank the same properties subject of the Deed of
Sale as security for the balance of the purchase
price.
4. Deed of Assignment of Internal Revenue
Allotment (IRA)
601

Calamba Citys IRAs from January 2002 to 31
January 2003 were assigned to Pamana and
Prudential Bank in the amount of P119,017,600.
On 19 November 2001, the above documents were
endorsed to the City Council. Petitioner alleged that all
these documents were not ratified by the City Council, a
fact duly noted in an Audit Observation Memorandum
dated 9 August 2002 and issued by State Auditor Ruben C.
Pagaspas of the Commission on Audit.

Petitioner stated that he called the attention of the
City Council on the following observations:

a) TCT Nos. 66141, 66142, 66143, 61705 and 66140
were registered under the name of Philippine
Sugar Estates Development Company (PSEDC) and
neither Pamana nor Prudential Bank owned these
properties. Petitioner pointed out that although
PSEDC had executed a Deed of Assignment
[10]
in
favor of Pamana to maintain the road lots within
the PSEDC properties, PSEDC did not convey, sell
or transfer these properties to Pamana.
Moreover, petitioner claimed that the signature of
Fr. Efren O. Rivera (Fr. Rivera) in Annex A of the
Deed of Assignment appeared to be a forgery. Fr.
Rivera had also submitted an Affidavit refuting his
purported signature in Annex A.
[11]

b) Petitioner claimed that there was no relocation
survey prior to the execution of the Deed of
Sale.
[12]

c) Petitioner alleged that with respect to the two
lots covered by TCT No. 61703 with an area of
5,976 square meters and TCT No. 66140 with an
area of 3,747 square meters, Fr. Boyd R. Sulpico
(Fr. Sulpico) of the Dominican Province of the
Philippines had earlier offered the same for
only P300 per square meter.
[13]


d) Petitioner contended that TCT Nos. 66141,
66142, 66143 and 61705 are road lots. The dorsal
sides of the TCTs bear the common annotation
that the road lots cannot be closed or disposed
without the prior approval of the National
Housing Authority and the conformity of the duly
organized homeowners association.
[14]

e) Petitioner claimed that an existing barangay
road and an access road to Bacnotan Steel
Corporation and Danlex Corporation were
included in the Deed of Sale
[15]


Petitioner maintained that since the pieces of evidence
in support of the complaint were documentary,
respondents have admitted them impliedly.
[16]


The Ruling of the Ombudsman
602


On 17 March 2004, the Ombudsman issued a
Resolution (Resolution) finding no probable cause to hold
any of the respondents liable for violation of Section 3(e) of
RA 3019.
[17]


The Ombudsman found that the subject properties
have been transferred and are now registered in the name
of Calamba City under new Certificates of
Title.
[18]
Moreover, the reasonableness of the purchase
price for the subject lots could be deduced from the fact
that Calamba City bought them at P3,800 per square meter,
an amount lower than their zonal valuation at P6,000 per
square meter. The Ombudsman added that it was common
knowledge that the fair market value of the lots was higher
than their zonal valuation, yet the lots were acquired at a
lower price. The Ombudsman also found that the terms and
conditions of payment were neither onerous nor
burdensome to the city government as it was able to
immediately take possession of the lots even if it had paid
only less than ten percent of the contract price and was
even relieved from paying interests on the installment
payments. The Ombudsman ruled that there was no
compelling evidence showing actual injury or damage to
the city government to warrant the indictment of
respondents for violation of Section 3(e) of RA 3019.
[19]


On 27 September 2004, petitioner filed a Motion for
Reconsideration. Petitioner questioned the lack of
ratification by the City Council of the contracts, the
overpricing of lots covered by TCT Nos. 61703 and 66140 in
the amount of P19,812,546, the inclusion of road lots and
creek lots with a total value of P35,000,000, and the lack of
a relocation survey.
[20]


In an Order dated 22 August 2005 (Order), the
Ombudsman denied the Motion for Reconsideration for
lack of merit.
[21]
The Ombudsman held that the various
actions performed by Mayor Lajara in connection with the
purchase of the lots were all authorized by the Sangguniang
Panlungsod as manifested in the numerous resolutions.
With such authority, it could not be said that there was
evident bad faith in purchasing the lands in question. The
lack of ratification alone did not characterize the purchase
of the properties as one that gave unwarranted benefits to
Pamana or Prudential Bank or one that caused undue injury
to Calamba City.
[22]


On the alleged overpricing of the lots covered by TCT
Nos. 61703 and 66140, the Ombudsman ruled that it could
be discerned from Fr. Sulpicos affidavit that the said
parcels of land were excluded from the offer, being creek
easement lots.
[23]


603

On the lots covered by TCT Nos. 66141, 66142, and
66143, the Ombudsman resolved that new titles were
issued in the name of Pamana with PSEDC as the former
registered owner.
[24]


The Ombudsman finally declared that the absence of a
relocation survey did not affect the validity of the subject
transactions.
[25]


Petitioner contended that the assailed Ombudsmans
Resolution and Order discussed only the alleged
reasonableness of the price of the property. The
Ombudsman did not consider the issue that Calamba City
paid for lots that were either easement/creeks, road lots or
access roads. Petitioner alleged that it is erroneous to
conclude that the price was reasonable because Calamba
City should not have paid for the creeks, road lots and
access roads at the same price per square meter. Petitioner
claimed that the additional evidence of overpricing was a
letter from Fr. Sulpico who offered the road lots covered by
TCT Nos. 61703 and 66140 at P300
[26]
per square meter.
[27]


In their Comment, Mayor Lajara and Baroro
(respondents) argued that as frequently ruled by this Court,
it is not sound practice to depart from the policy of non-
interference in the Ombudmans exercise of discretion to
determine whether to file an information against an
accused. In the assailed Resolution and Order, the
Ombudsman stated clearly and distinctly the facts and the
law on which the case was based and as such, petitioner
had the burden of proving that grave abuse of discretion
attended the issuance of the Resolution and Order of the
Ombudsman. Respondents maintained that in a meager
three pages of argumentation, petitioner failed to point out
the grave errors in the assailed Resolution and merely
raised issues which have been disposed of by the
Ombudsman.
[28]


Respondents claimed that out of the six PSEDC-owned
lots that were sold to Calamba City, the ownership of the
four lots had already been transferred to Pamana as
evidenced by the new TCTs. Respondents added that even
if TCT Nos. 66140 and 61703 were still in PSEDCs name,
ownership of these lots had been transferred to Pamana as
confirmed by Fr. Sulpico, the custodian of all the assets of
the Dominican Province of the Philippines.
[29]
Respondents
also refuted the alleged overpricing of the lots covered by
TCT Nos. 66140 and 61703. Respondents contended that Fr.
Sulpicos letter offering the lots at P350
[30]
per square meter
had been superseded by his own denial of said offer during
the meeting of the Sangguniang Panlungsod on 14
November 2002.
[31]


On the absence of ratification by the City Council of
the MOA, Deed of Sale, Deed of Mortgage, and Deed of
Assignment, respondents explained that Section 22
[32]
of
604

Republic Act No. 7160 (RA 7160) spoke of prior authority
and not ratification. Respondents pointed out that
petitioner did not deny the fact that Mayor Lajara was given
prior authority to negotiate and sign the subject contracts.
In fact, it was petitioner who made the motion to enact
Resolution No. 280.
[33]


On the non-conduct of a relocation survey,
respondents noted that while a relocation survey may be of
use in determining which lands should be purchased, the
absence of a relocation survey would not, in any manner,
affect the validity of the subject transactions.
[34]


The Ombudsman, as represented by the Office of the
Solicitor General, claimed that there was no grave abuse of
discretion committed in dismissing the complaint-affidavit
for violation of Section 3(e) of RA 3019.
[35]
The Ombudsman
reasoned that to warrant conviction under Section 3(e) of
RA 3019, the following essential elements must concur: (a)
the accused is a public officer discharging administrative,
judicial, or official functions; (b) he must have acted with
manifest partiality, evident bad faith, or inexcusable
negligence; and (c) his action caused undue injury to any
party, including the government, or gave any private party
unwarranted benefits, advantage, or preference in the
discharge of his functions.
[36]
The Ombudsman contended
that when Mayor Lajara entered into and implemented the
subject contracts, he complied with the resolutions issued
by the City Council.

The Ombudsman cites the following circumstances to
show that the action taken by Mayor Lajara neither caused
any undue injury to Calamba City nor gave a private party
any unwarranted benefits, advantage, or preference. First,
the purchase price of P3,800 per square meter or a total
of P129,017,600 for the site of the new City Hall was
reasonable. The initial offer of the seller for the property
was P6,000 per square meter, an amount equal to the zonal
value. Second, Calamba City took immediate possession of
the properties despite an initial payment of
only P10,000,000 out of the total purchase price. Third, the
total purchase price was paid under liberal terms as it was
paid in installments for one year from date of purchase.
Fourth, the parties agreed that the last installment
of P25,000,000 was subject to the condition that titles to
the properties were first transferred to Calamba City.
[37]


In its Memorandum, the Ombudsman asserted that
petitioner had not substantiated his claim by clear and
convincing evidence that TCT Nos. 66141, 66142, and 66143
are road lots. The sketch plan presented by petitioner could
not be regarded as conclusive evidence to support his
claim. The Ombudsman also refuted petitioners claim that
TCT Nos. 68601 and 68603 were included in the Deed of
Sale.
[38]

605


The Ombudsman maintained that petitioners
contention that the prices for TCT Nos. 66140 and 61703
were jacked up was belied by the affidavit of Fr. Sulpico
stating that the said lots were excluded from the offer as
they were creek/easement lots.
[39]


The Ombudsman explained that ratification by the City
Council was not a condition sine qua non for the local chief
executive to enter into contracts on behalf of the city. The
law requires prior authorization from the City Council and
in this case, Resolution Nos. 115 and 280 were the City
Councils stamp of approval and authority for Mayor Lajara
to purchase the subject lots.
[40]


The Ombudsman added that mandamus is not meant
to control or review the exercise of judgment or discretion.
To compel the Ombudsman to pursue a criminal case
against respondents is outside the ambit of the courts.
[41]


Aggrieved by the Ombudmans Resolution and
Order, petitioner elevated the case before this Court.
Hence, this petition.

The Issues

The issues in this petition are:
1. Whether the Ombudsman committed grave
abuse of discretion amounting to lack or excess of
jurisdiction when the Ombudsman dismissed for
lack of probable cause the case against
respondents for violation of Section 3(e) of RA
3019;
2. Whether the Ombudsman committed grave
abuse of discretion amounting to lack or excess of
jurisdiction when the Ombudsman failed to
consider the issue that Calamba City had
acquired road lots which should not have been
paid at the same price as the other lots; and
3. Whether all the documents pertaining to the
purchase of the lots should bear the ratification
by the City Council of Calamba.

The Ruling of the Court

On the determination of probable cause by the Ombudsman
and the grave abuse of discretion in the acquisition of road
lots

The mandate of the Office of the Ombudsman is
expressed in Section 12, Article XI of the Constitution which
states:
606

Sec. 12. The Ombudsman and his
Deputies, as protectors of the people, shall act
promptly on complaints filed in any form or
manner against public officials or employees of
the Government, or any subdivision, agency or
instrumentality thereof, including government-
owned or controlled corporations, and shall, in
appropriate cases, notify the complainants of
the action taken and the result thereof.

Section 13, Article XI of the Constitution vests in the
Office of the Ombudsman the following powers, functions,
and duties:

Sec. 13. The Office of the Ombudsman
shall have the following powers, functions, and
duties:
(1) Investigate on its own, or
on complaint by any person, any act or
omission of any public official, employee,
office or agency, when such act or
omission appears to be illegal, unjust,
improper, or inefficient.
(2) Direct, upon complaint or at
its own instance, any public official or
employee of the government, or any
subdivision, agency or instrumentality
thereof, as well as of any government-
owned or controlled corporation with
original charter, to perform and expedite
any act or duty required by law, or to
stop, prevent, and correct any abuse or
impropriety in the performance of duties.
(3) Direct the officer concerned
to take appropriate action against a public
official or employee at fault, and
recommend his removal, suspension,
demotion, fine, censure, or prosecution,
and ensure compliance therewith.
(4) Direct the officer concerned,
in any appropriate case, and subject to
such limitations as may be provided by
law, to furnish it with copies of
documents relating to contracts or
transactions entered into by his office
involving the disbursement or use of
public funds or properties, and report any
irregularity to the Commission on Audit
for appropriate action.
(5) Request any government
agency for assistance and information
necessary in the discharge of its
responsibilities, and to examine, if
necessary, pertinent records and
documents.
607

(6) Publicize matters covered by its
investigation when circumstances so
warrant and with due prudence.
(7) Determine the causes of
inefficiency, red tape, mismanagement,
fraud, and corruption in the government,
and make recommendations for their
elimination and the observance of high
standards of ethics and efficiency.
(8) Promulgate its rules of
procedure and exercise such other powers
or perform such functions or duties as
may be provided by law. (Boldfacing
supplied)


Republic Act No. 6770 (RA 6770), or the Ombudsman
Act of 1989, granted the Office of the Ombudsman full
administrative authority. Section 13 of RA 6770 restates the
mandate of the Office of the Ombudsman:

Sec. 13. Mandate. - The Ombudsman and
his Deputies, as protectors of the people, shall
act promptly on complaints filed in any form or
manner against officers or employees of the
government, or of any subdivision, agency or
instrumentality thereof, including government-
owned or controlled corporations, and enforce
their administrative, civil and criminal liability
in every case where the evidence warrants in
order to promote efficient service by the
Government to the people.

Section 15(1) of RA 6770 substantially reiterates the
investigatory powers of the Office of the Ombudsman:
Sec. 15. Powers, Functions and Duties. - The Office of
the Ombudsman shall have the following powers, functions
and duties:
(1) Investigate and prosecute on its own or on
complaint by any person, any act or omission of
any public officer or employee, office or agency,
when such act or omission appears to be illegal,
unjust, improper or inefficient. It has primary
jurisdiction over cases cognizable by the
Sandiganbayan and, in the exercise of his primary
jurisdiction, it may take over, at any stage, from
any investigatory agency of government, the
investigation of such cases;

Jurisprudence explains that the Office of the
Ombudsman is vested with the sole power to investigate
and prosecute, motu proprio or on complaint of any person,
any act or omission of any public officer or employee,
office, or agency when such act or omission appears to be
608

illegal, unjust, improper, or inefficient.
[42]
The
Ombudsmans power to investigate and to prosecute is
plenary and unqualified.
[43]


The Ombudsman has the discretion to determine
whether a criminal case, given its attendant facts and
circumstances, should be filed or not. The Ombudsman may
dismiss the complaint should the Ombudsman find the
complaint insufficient in form or substance, or the
Ombudsman may proceed with the investigation if, in the
Ombudsmans view, the complaint is in due form and
substance.
[44]
Hence, the filing or non-filing of the
information is primarily lodged within the full discretion
of the Ombudsman.
[45]


This Court has consistently adopted a policy of non-
interference in the exercise of the Ombudsmans
constitutionally mandated powers. The Ombudsman,
which is beholden to no one, acts as the champion of the
people and the preserver of the integrity of the public
service.
[46]
However, this Court is not precluded from
reviewing the Ombudsmans action when there is grave
abuse of discretion, in which case the certiorari jurisdiction
of the Court may be exceptionally invoked pursuant to
Section 1, Article VIII of the Constitution.
[47]
We have
enumerated instances where the courts may interfere with
the Ombudsmans investigatory powers:
(a) To afford protection to the constitutional
rights of the accused;
(b) When necessary for the orderly
administration of justice or to avoid oppression
or multiplicity of actions;
(c) When there is a prejudicial question which
is sub judice;
(d) When the acts of the officer are without or
in excess of authority;
(e) Where the prosecution is under an invalid
law, ordinance or regulation;
(f) When double jeopardy is clearly apparent;
(g) Where the court has no jurisdiction over the
offense;
(h) Where it is a case of persecution rather
than prosecution;
(i) Where the charges are manifestly false and
motivated by the lust for vengeance.
[48]


These exceptions are not present in this
case. However, petitioner argues that the assailed
Resolution of the Ombudsman dwelt only on the alleged
reasonableness of the price of the property. Petitioner
claims that the Resolution did not pass upon the more
serious issue that Calamba City had paid for several lots
609

that the City should not have paid for because they were
road lots.


The Ombudsman, in issuing the assailed Resolution,
found no probable cause to hold any of the respondents
liable for violation of Section 3(e) of RA 3019. The
Ombudsman found that the subject lots were bought
at P3,800 per square meter, an amount lower than their
zonal valuation of P6,000 per square meter.

Based on this computation, Calamba City paid for a
total area of 33,952 square meters
[49]
instead of the original
55,000 square meters as authorized in the City Councils
Resolution No. 280, Series of 2001. Contrary to petitioners
allegation that Lot 5 with an area of 3,062 square meters
and Lot 8 with an area of 3,327 square meters are
easement/creeks and road lot respectively,
[50]
the sketch
plan
[51]
submitted by petitioner as Annex L in his Affidavit-
Complaint and the TCTs
[52]
of the properties indicate that
these are parcels of land.

A perusal of the records shows that the findings of fact
by the Ombudsman are supported by substantial evidence.
As long as substantial evidence supports it, the
Ombudsmans ruling will not be overturned.
[53]
Petitioner,
in arguing that the Ombudsman committed grave abuse of
discretion, raises questions of fact. This Court is not a trier
of facts, more so in the extraordinary writ of certiorari
where neither questions of fact nor even of law are
entertained, but only questions of lack of jurisdiction or
grave abuse of discretion can be raised.
[54]
The rationale
behind this rule is explained in this wise:

The rule is based not only upon respect
for the investigatory and prosecutory powers
granted by the Constitution to the Office of the
Ombudsman but upon practicality as well.
Otherwise, the functions of the courts will be
grievously hampered by innumerable petitions
assailing the dismissal of investigatory
proceedings conducted by the Office of the
Ombudsman with regard to complaints filed
before it, in much the same way that the
courts would be extremely swamped if they
could be compelled to review the exercise of
discretion on the part of the fiscals or
prosecuting attorneys each time they decide to
file an information in court or dismiss a
complaint by a private complainant.
[55]


In this case, the Ombudsman dismissed petitioners
complaint for lack of probable cause based on the
Ombudsmans appreciation and review of the evidence
610

presented. In dismissing the complaint, the Ombudsman
did not commit grave abuse of discretion.

Probable cause is defined as the existence of such
facts and circumstances as would excite the belief in a
reasonable mind, acting on the facts within the knowledge
of the prosecutor, that the person charged was guilty of the
crime for which he was prosecuted.
[56]
Probable cause need
not be based on clear and convincing evidence of guilt, or
on evidence establishing guilt beyond reasonable doubt,
and definitely not on evidence establishing absolute
certainty of guilt, but it certainly demands more than bare
suspicion and can never be left to presupposition,
conjecture, or even convincing logic.
[57]


In Rubio v. Ombudsman,
[58]
this Court held that what is
contextually punishable under Section 3(e) of RA 3019 is
the act of causing any undue injury to any party, or the
giving to any private party unwarranted benefits, advantage
or preference in the discharge of the public officers
functions. In this case, after evaluating the evidence
presented,
[59]
the Ombudsman categorically ruled that there
was no evidence to show actual injury or damage to the city
government to warrant the indictment of respondents for
violation of Section 3(e) of RA 3019. Further, this Court held
in Pecho v. Sandiganbayan,
[60]
that causing undue injury to
any party, including the government, could only mean
actual injury or damage which must be established by
evidence. Here, the Ombudsman found that petitioner had
not substantiated his claim against respondents for the
crime charged. This Court is not inclined to interfere with
the evaluation of the evidence presented before the
Ombudsman.

We reiterate the rule that courts do not interfere in
the Ombudsmans exercise of discretion in determining
probable cause unless there are compelling reasons. The
Ombudsmans finding of probable cause, or lack of it, is
entitled to great respect absent a showing of grave abuse of
discretion. Besides, to justify the issuance of the writ of
certiorari on the ground of abuse of discretion, the abuse
must be grave, as when the power is exercised in an
arbitrary or despotic manner by reason of passion or
personal hostility, and it must be so patent as to amount to
an evasion of a positive duty or to a virtual refusal to
perform the duty enjoined, or to act at all, in contemplation
of law, as to be equivalent to having acted without
jurisdiction.
[61]






On the ratification by the City Council of all
documents pertaining to the purchase of the lots
611


Petitioner contends that all the documents, like the
Memorandum of Agreement, Deed of Sale, Deed of
Mortgage, and Deed of Assignment, do not bear the
ratification by the City Council.

In the assailed Order, the Ombudsman held that the
various actions performed by Mayor Lajara in connection
with the purchase of the lots were all authorized by the
Sangguniang Panlungsod as manifested in numerous
resolutions. The lack of ratification alone does not
characterize the purchase of the properties as one that
gave unwarranted benefits.

In its Memorandum submitted before this Court, the
Ombudsman, through the Office of the Solicitor General,
pointed out that the ratification by the City Council is not a
condition sine qua non for the local chief executive to enter
into contracts on behalf of the city. The law requires prior
authorization from the City Council and in this case,
Resolution No. 280 is the City Councils stamp of approval
and authority for Mayor Lajara to purchase the subject lots.

Section 22(c), Title I of RA 7160, otherwise known as
the Local Government Code of 1991, provides:
Section 22. Corporate Powers. - x x x

(c) Unless otherwise provided in this
Code, no contract may be entered into by the
local chief executive in behalf of the local
government unit without prior
authorization by the sanggunian concerned. A
legible copy of such contract shall be posted at
a conspicuous place in the provincial capitol or
the city, municipal or barangay hall. (Boldfacing
and underscoring supplied)



Section 455, Title III of RA 7160 enumerates the
powers, duties, and compensation of the Chief Executive.
Specifically, it states that :
Section 455. Chief Executive: Powers,
Duties and Compensation. - x x x
(b) For efficient, effective and
economical governance the purpose of which
is the general welfare of the city and its
inhabitants pursuant to Section 16 of this
Code, the city mayor shall:
x x x
(vi) Represent the city in all
its business transactions and sign
in its behalf all bonds, contracts,
and obligations, and such other
documents upon authority of the
612

sangguniang panlungsod or
pursuant to law or ordinance;
(Boldfacing and underscoring
supplied)


Clearly, when the local chief executive enters into
contracts, the law speaks of prior authorization or authority
from the Sangguniang Panlungsod and not ratification. It
cannot be denied that the City Council issued Resolution
No. 280 authorizing Mayor Lajara to purchase the subject
lots.

Resolution No. 280 states:
RESOLUTION NO. 280
Series of 2001

A RESOLUTION AUTHORIZING THE CITY MAYOR
OF CALAMBA, HON. SEVERINO J. LAJARA TO
PURCHASE LOTS OF PAMANA INC. WITH A
TOTAL AREA OF FIFTY FIVE THOUSAND SQUARE
METERS (55,000 SQ. M.) SITUATED AT
BARANGAY REAL, CITY OF CALAMBA FOR A
LUMP SUM PRICE OF ONE HUNDRED TWENTY
NINE MILLION SEVENTEEN THOUSAND SIX
HUNDRED PESOS (P129,017,600), SUBJECT TO
THE AVAILABILITY OF FUNDS, AND FOR THIS
PURPOSE, FURTHER AUTHORIZING THE HON.
MAYOR SEVERINO J. LAJARA TO REPRESENT
THE CITY GOVERNMENT AND TO EXECUTE,
SIGN AND DELIVER SUCH DOCUMENTS AND
PAPERS AS MAYBE SO REQUIRED IN THE
PREMISES.

WHEREAS, the City of Calamba is in need
of constructing a modern City Hall to
adequately meet the requirements of
governing new city and providing all adequate
facilities and amenities to the general public
that will transact business with the city
government.




WHEREAS, as the City of Calamba has at
present no available real property of its own
that can serve as an appropriate site of said
modern City Hall and must therefore purchase
such property from the private sector under
terms and conditions that are most beneficial
and advantageous to the people of the City of
Calamba;

NOW THEREFORE, on motion of
Kagawad S. VERGARA duly seconded by
Kagawad R. HERNANDEZ, be it resolved as it is
hereby resolved to authorize the City Mayor of
613

Calamba, Hon. Severino J. Lajara to purchase
lots of Pamana, Inc. with a total area of fifty
five thousand square meters (55,000 sq.m.)
situated at Barangay Real, City of Calamba for a
lump sum price of One Hundred Twenty Nine
Million Seventeen Thousand Six Hundred Pesos
(P129,017,600) subject to the availability of
funds, and for this purpose, further authorizing
the Hon. Mayor Severino J. Lajara to
represent the City Government and to
execute, sign and deliver such documents and
papers as maybe so required in the
premises.
[62]
(Emphasis supplied)


As aptly pointed out by the Ombudsman, ratification
by the City Council is not a condition sine qua non for
Mayor Lajara to enter into contracts. With the resolution
issued by the Sangguniang Panlungsod, it cannot be said
that there was evident bad faith in purchasing the subject
lots. The lack of ratification alone does not characterize the
purchase of the properties as one that gave unwarranted
benefits to Pamana or Prudential Bank or one that caused
undue injury to Calamba City.

In sum, this Court has maintained its policy of non-
interference with the Ombudsmans exercise of its
investigatory and prosecutory powers in the absence of
grave abuse of discretion, not only out of respect for these
constitutionally mandated powers but also upon
considerations of practicality owing to the myriad functions
of the courts.
[63]
Absent a clear showing of grave abuse of
discretion, we uphold the findings of the Ombudsman.





WHEREFORE, we DISMISS the petition.
We AFFIRM the Resolution and Order of the Ombudsman in
OMB-L-C-02-1205-L dated 17 March 2004 and 22 August
2005, respectively.

SO ORDERED.


ANTONIO T.
CARPIO
Associate
Justice

WE CONCUR:


614

Republic of the Philippines
Supreme Court
Manila

FIRST DIVISION

MUNICIPALITY OF TIWI, G.R. No. 171873
represented by Hon.
Mayor

JAIME C. VILLANUEVA and
the SANGGUNIANG
BAYAN
Present:
of TIWI,
Petitioners, CORONA, C. J.,
Chairperson,
BRION,
*

DEL CASTILLO,
- versus - ABAD,
**
and
PEREZ, JJ.

ANTONIO B. BETITO, Promulgated:
Respondent. July 9, 2010
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - x


D E C I S I O N


DEL CASTILLO, J.:

A judgment on the pleadings is proper when the answer
admits all the material averments of the complaint. But where
several issues are properly tendered by the answer, a trial on
the merits must be resorted to in order to afford each party his
day in court.

This Petition for Review on Certiorari seeks to reverse and
set aside the Court of Appeals (CA) October 19, 2005
Decision
[1]
in CA G.R. CV No. 79057, which affirmed the March 3,
2001 Partial Decision
[2]
of the Regional Trial Court (RTC) of
Quezon City, Branch 96 in Civil Case No. Q-99-39370, and the
March 10, 2006 Resolution
[3]
denying petitioners motion for
reconsideration.

Factual Antecedents

The instant case is an offshoot of National Power
Corporation v. Province of Albay
[4]
and Salalima v. Guingona,
Jr.
[5]
It is, thus, necessary to revisit some pertinent facts from
these cases in order to provide an adequate backdrop for the
present controversy.

On June 4, 1990, this Court issued a Decision in the case
of National Power Corporation v. Province of Albay finding,
among others, the National Power Corporation (NPC) liable for
unpaid real estate taxes from June 11, 1984 to March 10, 1987
on its properties located in the Province of Albay (Albay). These
615

properties consisted of geothermal plants in the Municipality of
Tiwi (Tiwi) and substations in the Municipality of
Daraga. Previously, the said properties were sold at an auction
sale conducted by Albay to satisfy NPCs tax liabilities. As the
sole bidder at the auction, Albay acquired ownership over said
properties.

On July 29, 1992, the NPC, through its then President
Pablo Malixi (President Malixi), and Albay, represented by then
Governor Romeo R. Salalima (Governor Salalima), entered into a
Memorandum of Agreement (MOA) where the former agreed
to settle its tax liabilities estimated at P214,845,104.76. The
MOA provided, among others, that: (1) the actual amount
collectible from NPC will have to be recomputed/revalidated; (2)
NPC shall make an initial payment of P17,763,000.00 upon
signing of the agreement; (3) the balance of the recomputed/
revalidated amount (less the aforesaid initial payment), shall be
paid in 24 equal monthly installments to commence in
September 1992; and (4) ownership over the auctioned
properties shall revert to NPC upon satisfaction of the tax
liabilities.
On August 3, 1992, then Mayor Naomi C. Corral (Mayor
Corral) of Tiwi formally requested Governor Salalima to remit
the rightful tax shares of Tiwi and its barangays where the NPCs
properties were located relative to the payments already made
by NPC to Albay. On even date, the Sangguniang Bayan of Tiwi
passed Resolution No. 12-92 requesting theSangguniang
Panlalawigan of Albay to hold a joint session for the purpose of
discussing the distribution of the NPC payments.

On August 10, 1992, Governor Salalima replied that the
request cannot be granted as the initial payment amounting
to P17,763,000.00 was only an earnest money and that the
total amount to be collected from the NPC was still being
validated.

Due to the brewing misunderstanding between Tiwi and
the concerned barangays on the one hand, and Albay on the
other, and so as not to be caught in the middle of the
controversy, NPC requested a clarification from the Office of the
President as to the scope and extent of the shares of the local
government units in the real estate tax collections.

On August 30, 1992, the Sangguniang Bayan of Tiwi
passed Resolution No. 15-92 authorizing Mayor Corral to hire a
lawyer to represent Tiwi and its barangays in the recovery of
their rightful share in the aforesaid realty taxes. Thereafter,
Mayor Corral sought the services of respondent Atty. Antonio B.
Betito (respondent) and Atty. Alberto Lawenko (Atty.
Lawenko). As a result, on January 25, 1993, Mayor Corral,
representing Tiwi, and respondent and Atty. Lawenko entered
into a Contract of Legal Services (subject contract). The subject
contract provided, among others, that respondent and Atty.
Lawenko would receive a 10% contingent fee on whatever
616

amount of realty taxes that would be recovered by Tiwi through
their efforts.

On December 3, 1992, the Office of the President,
through then Chief Presidential Legal Counsel Antonio T.
Carpio,
[6]
opined that the MOA entered into by NPC and Albay
merely recognized and established NPCs realty taxes. He
further clarified that the sharing scheme and those entitled to
the payments to be made by NPC under the MOA should be
that provided under the law, and since Tiwi is entitled to share
in said realty taxes, NPC may remit such share directly to
Tiwi, viz:

x x x x

The Memorandum of Agreement entered
into by the Province of Albay and NPC merely
enunciates the tax liability of NPC. The
Memorandum of Agreement does not provide for
the manner of payment of NPC's liability. Thus, the
manner of payment as provided for by law shall
govern. In any event, the Memorandum of
Agreement cannot amend the law allowing the
payment of said taxes to the Municipality of Tiwi.

The decision in the case of NPC v. Province
of Albay (186 SCRA 198), likewise, only established
the liability of NPC for real property taxes but does
not specifically provide that said back taxes be
paid exclusively to Albay province.

Therefore, it is our opinion that the NPC
may pay directly to the municipality of Tiwi the
real property taxes accruing to the same.

Please be guided accordingly.

Very
truly yours,
(Sgd.)
ANTONI
O T. CARPIO
Chief
Presidential Legal Counsel
[7]



Because of this opinion, NPC President Malixi, through a
letter dated December 9, 1992, informed Mayor Corral and
Governor Salalima that starting with the January 1993
installment, NPC will directly pay Tiwi its share in the payments
under the MOA. As of December 9, 1992, payments made by
NPC to Albay reached P40,724,471.74.

On December 19, 1992, in an apparent reaction to NPCs
Decision to directly remit to Tiwi its share in the payments made
and still to be made pursuant to the MOA, the Sangguniang
Panlalawigan of Albay passed Ordinance No. 09-92, which,
617

among others: (1) authorized the Provincial Treasurer upon the
direction of the Provincial Governor to sell the real properties
(acquired by Albay at the auction sale) at a public auction, and
to cause the immediate transfer thereof to the winning bidder;
and (2) declared as forfeited in favor of Albay, all the payments
already made by NPC under the MOA.

From Albays refusal to remit Tiwis share in the
aforementioned P40,724,471.74 stemmed several
administrative complaints and court cases that respondent
allegedly handled on behalf of Tiwi to recover the latters
rightful share in the unpaid realty taxes, including the case
of Salalima v. Guingona, Jr. In this case, the Court held, among
others, that the elective officials of Albay are administratively
liable for abuse of authority due to their unjustified refusal to
remit the rightful share of Tiwi in the subject realty taxes.

The present controversy arose when respondent sought
to enforce the Contract of Legal Services after rendering the
aforementioned legal services which allegedly benefited Tiwi. In
his Complaint
[8]
for sum of money against Tiwi, represented by
then Mayor Patricia Gutierrez, Vice Mayor Vicente Tomas Vera
III, Sangguniang Bayan Members Rosana Parcia, Nerissa Cotara,
Raul Corral, Orlando Lew Velasco, Liberato Ulysses Pacis,
Lorenzo Carlet, Bernardo Costo, Jaime Villanueva, Benneth
Templado and Municipal Treasurer Emma Cordovales
(collectively petitioners), respondent claims that he handled
numerous cases which resulted to the recovery of Tiwis share in
the realty taxes. As a result of these efforts, Tiwi was able to
collect the amount of P110,985,181.83 and
another P35,594,480.00 from the NPC as well as other amounts
which will be proven during the trial. Under the Contract of
Legal Services, respondent is entitled to 10% of whatever
amount that would be collected from the NPC. However,
despite repeated demands for the Sangguniang Bayan of Tiwi
to pass an appropriate ordinance for the payment of his
attorneys fees, the former refused to pass the ordinance and to
pay what is justly owed him. Respondent prayed that Tiwi be
ordered to pay P11,000,000.00 in attorneys fees and 10% of the
other amounts to be determined during trial plus interest and
damages; that the Sangguniang Bayan be ordered to pass the
necessary appropriation ordinance; that the municipal treasurer
surrender all the receipts of payments made by the NPC to Tiwi
from January 1993 to December 1996 for the examination of
the court; and that Tiwi payP500,000.00 as attorneys fees.

In their Answer,
[9]
petitioners admitted that
the Sangguniang Bayan of Tiwi passed Resolution No. 15-92 but
denied that said resolution authorized then Mayor Corral to
enter into the subject contract. In particular, Mayor Corral
exceeded her authority when she bound Tiwi to a gargantuan
amount equivalent to 10% of the amount of realty taxes
recovered from NPC. Further, the legal services under the
subject contract should have been limited to the execution of
the decision in National Power Corporation v. Province of
Albay as per Resolution No. 15-92. For these reasons, the
618

subject contract is void, unenforceable, unconscionable and
unreasonable. Petitioners further claim that they are not aware
of the cases which respondent allegedly handled on behalf of
Tiwi since these cases involved officials of the previous
administration; that some of these cases were actually handled
by the Office of the Solicitor General; and that these were
personal cases of said officials. In addition, the Contract of Legal
Services was not ratified by the Sangguniang Bayan of Tiwi in
order to become effective. Petitioners also raise the defense
that the realty taxes were recovered by virtue of the opinion
rendered by then Chief Presidential Legal Counsel Antonio T.
Carpio and not through the efforts of respondent.

As to the amount of P110,985,181.83 in realty taxes, the
same was received by Albay and not Tiwi while the amount
of P35,594,480.00 is part of the share of Tiwi in the utilization of
the national wealth. Furthermore, in a Commission on Audit
(COA) Memorandum dated January 15, 1996, the COA ruled
that the authority to pass upon the reasonableness of the
attorneys fees claimed by respondent lies with
the Sangguniang Bayan of Tiwi. Pursuant to this memorandum,
the Sangguniang Bayan of Tiwi passed Resolution No. 27-98
which declared the subject contract invalid. Petitioners also
allege that the contract is grossly disadvantageous to Tiwi and
that respondent is guilty of laches because he lodged the
present complaint long after the death of Mayor Corral; and
that the amount collected from NPC has already been spent by
Tiwi.

On November 7, 2000, respondent filed a motion
[10]
for
partial judgment on the pleadings and/or partial summary
judgment.

Regional Trial Courts Ruling

On March 3, 2001, the trial court rendered a partial
judgment on the pleadings in favor of respondent:

WHEREFORE, partial judgment on the
pleadings is rendered ordering the defendant
Municipality of Tiwi, Albay to pay the plaintiff the
sum of P14,657,966.18 plus interest at the legal
rate from the filing of the complaint until payment
is fully delivered to the plaintiff; and, for this
purpose, the defendant Sangguniang Bayan of
Tiwi, represented by the co-defendants officials,
shall adopt and approve the necessary
appropriation ordinance.

Trial to receive evidence on the remaining
amounts due and payable to the plaintiff pursuant
to the contract of legal services shall hereafter
continue, with notice to all the parties.

SO ORDERED.
[11]



619

The trial court held that petitioners answer to the complaint
failed to tender an issue, thus, partial judgment on the pleadings
is proper. It noted that petitioners did not specifically deny
under oath the actionable documents in this case, particularly,
the Contract of Legal Services and Resolution No. 15-
92. Consequently, the genuineness and due execution of these
documents are deemed admitted pursuant to Section 8, Rule 8
of the Rules of Court. Thus, the authority of Mayor Corral to
enter into the subject contract was deemed established.

It added that the authority given to Mayor Corral to hire a
lawyer was not only for the purpose of executing the decision
in National Power Corporation v. Province of Albay but extended
to representing the interest of Tiwi in other cases as
well. Further, the said resolution did not impose as a condition
precedent the ratification of the subject contract by
theSangguniang Bayan in order to render it effective. Lastly,
the trial court ruled that the answer admitted, through a
negative pregnant, that Tiwi was paid the amounts
of P110,985,181.83 andP35,594,480.00, hence, respondent is
entitled to 10% thereof as attorneys fees under the terms of
the subject contract.

Court of Appeals Ruling

In its assailed October 19, 2005 Decision, the CA affirmed
the Decision of the trial court:

WHEREFORE, premises considered, the
Partial Decision of the Regional Trial Court of
Quezon City, Branch 96, dated March 3, 2001,
is AFFIRMED.

SO ORDERED.
[12]



The appellate court agreed with the trial court that the
genuineness and due execution of the Contract of Legal Services
and Resolution No. 15-92 was impliedly admitted by petitioners
because of their failure to make a verified specific denial
thereof. Further, the answer filed by the petitioners admitted
the material averments of the complaint concerning Tiwis
liability under the subject contract and its receipt from the NPC
of a total of P146,579,661.84 as realty
taxes. Petitioners cannot claim that the subject
contract required ratification because this

is not a requisite for the enforceability of a contract against a
local government unit under the express terms of the contract
and the provisions of the Local Government Code (LGC). Also,
petitioners are estopped from questioning the enforceability of
the contract after having collected and enjoyed the benefits
derived therefrom.

The appellate court found nothing objectionable in the
stipulated contingent fee of 10% as this was voluntarily agreed
620

upon by the parties and allowed under existing
jurisprudence. The fee was justified given the numerous
administrative and court cases successfully prosecuted and
defended by the respondent in the face of the provincial
governments stubborn refusal to release Tiwis share in the
realty taxes paid by NPC. The stipulated fee is not illegal,
unreasonable or unconscionable. It is enforceable as the law
between the parties.

Issues

Petitioners raise the following issues for our resolution:

1. The amount of award of attorneys fees to
respondent is unreasonable, unconscionable and
without any proof of the extent, nature and result of
his legal service as required by the purported
contract of legal services and pursuant to Section
24, Rule 138 of the Rules of Court.

2. The application of the rule of judgment on the
pleadings and/or summary judgment is baseless,
improper and unwarranted in the case at bar.

3. The purported contract of legal services
exceeded the authority of the late Mayor Corral and
should have been ratified by
the Sangguniang Bayan of Tiwi in order to be
enforceable.
[13]


Petitioners Arguments

Petitioners claim that their answer raised factual issues
and defenses which merited a full-blown trial. In their answer,
they asserted that the 10% contingent fee is unreasonable,
unconscionable and unfounded considering that respondent did
not render any legal service which accrued to the benefit of
Tiwi. The Contract of Legal Services specifically provided that for
the attorneys fees to accrue, respondents legal services should
result to the recovery of Tiwis claims against Albay and NPC. It
is, thus, incumbent upon respondent to prove in a trial on the
merits that his legal efforts resulted to the collection of the
realty taxes in favor of Tiwi. Petitioners belittle as mere
messengerial service the legal services rendered by respondent
on the ground that what remained to be done was the
execution of the judgment of this Court in National Power
Corporation v. Province of Albay and the opinion of then Chief
Presidential Legal Counsel Antonio T. Carpio.

In their answer, petitioners also questioned the authority
of Mayor Corral to enter into the subject contract providing for
a 10% contingent fee because the provisions of Resolution No.
15-92 do not grant her such power. In addition, under the said
contract, Tiwi was made liable for legal services outside of those
related to the satisfaction of the judgment in National Power
621

Corporation v. Province of Albay. These stipulations are void
and unenforceable. Hence, any claim of respondent must be
based on quantum meruit which should be threshed out during
a full-blown trial.

Finally, petitioners argue that respondent cannot
capitalize on the admission of the genuineness and due
execution of the subject contract because this merely means
that the signature of the party is authentic and the execution of
the contract complied with the formal solemnities. This does
not extend to the documents substantive validity and efficacy.

Respondents Arguments

Respondent counters that the Contract of Legal Services
was not limited to the NPC case but to other services done
pursuant to said contract. Thus, the attorneys fees should cover
these services as well. He also stresses that despite this Courts
ruling in National Power Corporation v. Province of Albay and
the opinion of then Chief Presidential Legal Counsel Antonio T.
Carpio, Governor Salalima and the Sangguniang
Panlalawigan of Albay stubbornly resisted and disobeyed the
same. Consequently, respondent prosecuted and defended on
behalf of Tiwi several administrative and court cases involving
the elective officials of Albay to compel the latter to comply with
the aforesaid issuances. He also filed a civil case to prevent the
NPC from remitting Tiwis share in the realty taxes directly to
Albay.

Respondent adds that he also acted as counsel for Mayor
Corral after Governor Salalima and his allies sought to remove
Mayor Corral in retaliation to the administrative cases that she
(Mayor Corral) previously filed against Governor Salalima for the
latters failure to remit Tiwis share in the realty taxes. These
administrative cases reached this Court in Salalima v. Guingona,
Jr. where respondent appears as the counsel of record of Mayor
Corral and the other local officials of Tiwi. The filing and handling
of these cases belies petitioners claim that what respondent did
for Tiwi was a mere messengerial service.

Respondent also argues that the Contract of Legal
Services is valid and enforceable due to petitioners failure to
specifically deny the same under oath in their
Answer. Moreover, the law does not require that the subject
contract be ratified by the Sangguniang Bayan in order to
become enforceable. Instead, the law merely requires that
the Sangguniang Bayan authorize the mayor to enter into
contracts as was done here through Resolution No. 15-92.

Last, the 10% attorneys fees in the subject contract is
reasonable, more so because the fee is contingent in nature. In
a long line of cases, it has been ruled that a 10% attorneys fees
of the amount recoverable is reasonable.

Our Ruling

622

The petition is meritorious.

Judgment on the
pleadings is improper
when the answer to the
complaint tenders
several issues.

A motion for judgment on the pleadings admits the truth
of all the material and relevant allegations of the opposing party
and the judgment must rest on those allegations taken together
with such other allegations as are admitted in the
pleadings.
[14]
It is proper when an answer fails to tender an
issue, or otherwise admits the material allegations of the
adverse partys pleading.
[15]
However, when it appears that not
all the material allegations of the complaint were admitted in
the answer for some of them were either denied or disputed,
and the defendant has set up certain special defenses which, if
proven, would have the effect of nullifying plaintiffs main cause
of action, judgment on the pleadings cannot be rendered.
[16]


In the instant case, a review of the records reveal that
respondent (as plaintiff) and petitioners (as defendants) set-up
multiple levels of claims and defenses, respectively, with some
failing to tender an issue while others requiring the presentation
of evidence for resolution. The generalized conclusion of both
the trial and appellate courts that petitioners answer admits all
the material averments of the complaint is, thus, without
basis. For this reason, a remand of this case is unavoidable.
However, in the interest of justice and in order to expedite the
disposition of this case which was filed with the trial court way
back in 1999, we shall settle the issues that can be resolved
based on the pleadings and remand only those issues that
require a trial on merits as hereunder discussed.

Preliminarily, it was erroneous for the trial court to rule
that the genuineness and due execution of the Contract of Legal
Services was impliedly admitted by petitioners for failure to
make a sworn specific denial thereof as required by Section
8,
[17]
Rule 8 of the Rules of Court. This rule is not applicable
when the adverse party does not appear to be a party to the
instrument.
[18]
In the instant case, the subject contract was
executed between respondent and Atty. Lawenko, on the one
hand, and Tiwi, represented by Mayor Corral, on the
other. None of the petitioners, who are the incumbent elective
and appointive officials of Tiwi as of the filing of the Complaint,
were parties to said contract. Nonetheless, in their subsequent
pleadings,
[19]
petitioners admitted the genuineness and due
execution of the subject contract. We shall, thus, proceed from
the premise that the genuineness and due execution of the
Contract of Legal Services has already been
established. Furthermore, both parties concede the contents
and efficacy of Resolution 15-92. As a result of these
admissions, the issue, at least as to the coverage of the subject
contract, may be resolved based on the pleadings as it merely
requires the interpretation and application of the provisions of
623

Resolution 15-92 vis--vis the stipulations in the subject
contract.

Mayor Corral was
authorized to enter into
the Contract of Legal
Services

Petitioners argue that Resolution No. 15-92 did not
authorize Mayor Corral to enter into the subject contract,
hence, the contract must first be ratified to become binding on
Tiwi.

The argument is unpersuasive. Section 444(b)(1)(vi) of
the LGC provides:

SECTION 444. The Chief Executive: Powers,
Duties, Functions and Compensation. x x x

(b) For efficient, effective and
economical governance the purpose of which is
the general welfare of the municipality and its
inhabitants pursuant to Section 16 of this Code,
the municipal mayor shall: x x x

(1) Exercise general supervision
and control over all programs, projects,
services, and activities of the municipal
government, and in this connection, shall: x
x x

(vi) Upon authorization
by the sangguniang bayan,
represent the municipality in all its
business transactions and sign on its
behalf all bonds, contracts, and
obligations, and such other
documents made pursuant to law or
ordinance; x x x


Pursuant to this provision, the municipal mayor is required to
secure the prior authorization of the Sangguniang Bayan before
entering into a contract on behalf of the municipality. In the
instant case, the Sangguniang Bayan of Tiwi unanimously
passed Resolution No. 15-92 authorizing Mayor Corral to hire a
lawyer of her choice to represent the interest of Tiwi in the
execution of this Courts Decision in National Power Corporation
v. Province of Albay

RESOLUTION AUTHORIZING THE MUNICIPAL
MAYOR OF TIWI TO HIRE THE SERVICES OF A
LAWYER TO REPRESENT THE MUNICIPALITY OF
TIWI AND THE SIX GEOTHERMAL BARANGAYS IN
THE EXECUTION OF G.R. NO. 87479 AND
DIVESTING THE LAWYER HIRED BY THE
PROVINCIAL GOVERNOR AND THE PROVINCE OF
624

ALBAY OF ITS AUTHORITY TO REPRESENT THE
MUNICIPALITY OF TIWI AND THE SIX BARANGAYS

WHEREAS, In an en banc decision G.R.
No. 87479, the Supreme Court sustained the
posture of the Province of Albay and legally
declared that the NAPOCOR is under obligation to
pay the Province of Albay, the Municipality of Tiwi
and Daraga the amount of P 214 Million
representing Realty Taxes covering the period
from the year 1984 to 1987 which decision had
already been final and executory per entry of
judgment dated June 4, 1990;

WHEREAS, NAPOCOR finally paid the
Province of Albay the amount of P 17.7 Million as
initial payment [d]ated July 29, 1992 that amount
will inevitably increase the financial resources of
the Local Government Units concerned;

WHEREAS, the Province of Albay headed by
Governor Salalima and his men are still reconciling
the P 214 Million with NAPOCOR which
contravene the final decision of the Supreme
Court and considered the P17.7 Million as an
Earnest money to the damage and prejudice of
the Municipality of Tiwi and the Six Barangays,
since that amount should be pro-rated accordingly
as mandated by Law after deducting the
legitimate expenses and attorneys fees;

WHEREAS, not (sic) of [the] P 17.7 Million
already paid by NAPOCOR as per decision of the
court nothing has yet been given by Governor
Salalima to the Municipality of Tiwi as its share
cost (sic) to be 45% of said amount nor the
affected barangays of Tiwi has ever been given
each corresponding shares despite representation
made by the Municipal Mayor Naomi Corral, the
Governor is hesitant and showing signs that the
share of the Municipality will never be given;

WHEREAS, on motion of Kagawad Bennett
Templado duly seconded by Joselito Cantes and
Kagawad Francisco Alarte, be it

RESOLVED, as it is hereby resolved, To
authorize the Mayor to hire the Services of a
lawyer to represent the interest of the
Municipality of Tiwi and its Barangays and for this
purpose and authorization be given to the
Municipal Mayor to hire a lawyer of her choice;
Further divesting the lawyer hired by Governor
Salalima and on (sic) the Province of Albay of its
authority to represent the Municipality of Tiwi and
the six Geothermal Barangays;

FINALLY RESOLVED, that copy of this
resolution be furnished [the] Office of the
Provincial Governor, Vice Governor, Office of the
625

Sangguniang Panlalawigan, President Malixi of
NAPOCOR for [their] information and guidance.

Approved unanimously.
[20]



The above-quoted authority necessarily carried with it the
power to negotiate, execute and sign on behalf of Tiwi the
Contract of Legal Services. That the authorization did not set
the terms and conditions of the compensation signifies that the
council empowered Mayor Corral to reach a mutually agreeable
arrangement with the lawyer of her choice subject, of course, to
the general limitation that the contracts stipulations should not
be contrary to law, morals, good customs, public order or public
policy,
[21]
and, considering that this is a contract of legal services,
to the added restriction that the agreed attorneys fees must
not be unreasonable and unconscionable.
[22]
On its face, and
there is no allegation to the contrary, this prior authorization
appears to have been given by the council in good faith to the
end of expeditiously safeguarding the rights of Tiwi. Under the
particular circumstances of this case, there is, thus, nothing
objectionable to this manner of prior
authorization. In Constantino v. Hon.
Ombudsman,Desierto,
[23]
we reached a similar conclusion:

More persuasive is the Mayor's second
contention that no liability, whether criminal or
administrative, may be imputed to him since he
merely complied with the mandate of Resolution
No. 21, series of 1996 and Resolution No. 38,
series of 1996, of the Municipal Council; and that
the charges leveled against him are politically
motivated. A thorough examination of the records
convinces this Court that the evidence against him
is inadequate to warrant his dismissal from the
service on the specified grounds of grave
misconduct, conduct prejudicial to the best
interest of the service and gross neglect of duty.

The explicit terms of Resolution No. 21,
Series of 1996 clearly authorized Mayor
Constantino to "lease/purchase one (1) fleet of
heavy equipment" composed of seven (7)
generally described units, through a "negotiated
contract." That resolution, as observed at the
outset, contained no parameters as to rate of
rental, period of lease, purchase price. Pursuant
thereto, Mayor Constantino, representing the
Municipality of Malungon, and Norberto Lindong,
representing the Norlovanian Corporation,
executed two written instruments on the same
date and occasion, viz.:

One an agreement (on a standard
printed form) dated February 28, 1996 for
the lease by the corporation to the municipality of
heavy equipment of the number and description
required by Resolution No. 21, and

626

Two an undertaking for the subsequent
conveyance and transfer of ownership of the
equipment to the municipality at the end of the
term of the lease.

x x x x

In light of the foregoing facts, which appear
to the Court to be quite apparent on the record, it
is difficult to perceive how the Office of the
Ombudsman could have arrived at a conclusion of
any wrongdoing by the Mayor in relation to the
transaction in question. It is difficult to see how
the transaction between the Mayor and
Norlovanian Corporation entered into pursuant
to Resolution No. 21 and tacitly accepted and
approved by the town Council through its
Resolution No. 38 could be deemed an
infringement of the same Resolution No. 21. In
truth, an examination of the pertinent writings
(the resolutions, the two (2) instruments
constituting the negotiated contract, and the
certificate of delivery) unavoidably confirms their
integrity and congruity. It is, in fine, difficult to see
how those pertinent written instruments," could
establish a prima facie case to warrant the
preventive suspension of Mayor Constantino. A
person with the most elementary grasp of the
English language would, from merely scanning
those material documents, at once realize that the
Mayor had done nothing but carry out the
expressed wishes of the Sangguniang Bayan.

x x x x

[T]he Court is thus satisfied that it was in fact the
Council's intention, which it expressed in clear
language, to confer on the Mayor ample discretion
to execute a "negotiated contract" with any
interested party, without regard to any official acts
of the Council prior to Resolution No. 21.
[24]



Prescinding therefrom, petitioners next contention that the
subject contract should first be ratified in order to become
enforceable as against Tiwi must necessarily fail. As correctly
held by the CA, the law speaks of prior authorization and not
ratification with respect to the power of the local chief executive
to enter into a contract on behalf of the local government
unit.
[25]
This authority, as discussed above, was granted by
the Sangguniang Bayan to Mayor Corral as per Resolution No.
15-92.

The scope of the legal
services contemplated
in Resolution No. 15-92
was limited to the
execution of the
decision in National
627

Power Corporation v.
Province of Albay.


For his part, respondent claims that the Contract of Legal
Services should be construed to include such services even
outside the scope of the execution of the ruling in National
Power Corporation v. Province of Albay. Respondent relies on
the broad wording of paragraph 4 of the subject contract to
support this contention, viz:

4. That the legal services which the Party
of the FIRST PART is obliged to render to the Party
of the SECOND PART under this AGREEMENT
consists of the following:

a) To prepare and file
cases in courts, Office of the
President, Ombudsman,
Sandiganbayan, Department of
Interior and Local Government and
Department of Finance or to
represent the Party of the SECOND
PART in cases before said bodies;
b) To coordinate or assist
the Commission on Audit, The
National Bureau of Investigation or
the Fiscals Office in the prosecution
of cases for the Party of the SECOND
PART;
c) To follow-up all fees,
taxes, penalties and other
receivables from National Power
Corporation (NPC) and Philippine
Geothermal Inc. due to the
Municipality of Tiwi;
d) To provide/give legal
advice to the Party of the SECOND
PART in her administration of the
Municipal Government of Tiwi
where such advice is necessary or
proper; and
e) To provide other
forms of legal assistance that may be
necessary in the premises.
[26]



The contention is erroneous. The wording of Resolution
No. 15-92 is clear. Its title and whereas clauses, previously
quoted above, indicate that the hiring of a lawyer was for the
sole purpose of executing the judgment in National Power
Corporation v. Province of Albay, that is, to allow Tiwi to recover
its rightful share in the unpaid realty taxes of NPC. In his
Complaint, respondent admits that he was furnished and read a
copy of the said resolution before he entered into the subject
contract. He cannot now feign ignorance of the limitations of
628

the authority of Mayor Corral to enter into the subject contract
and the purpose for which his services were employed.

We cannot accept respondents strained reading of
Resolution No. 15-92 in that the phrase to represent the
interest of the Municipality of Tiwi and its Barangays is taken to
mean such other matters not related to the execution of the
decision in National Power Corporation v. Province of Albay. It
could not have been the intention of the Sangguniang Bayan of
Tiwi to authorize the hiring of a lawyer to perform general legal
services because this duty devolves upon the municipal legal
officer. The council sought the services of a lawyer because the
dispute was between the municipality (Tiwi) and province
(Albay) so much so that it f
ell under the exception provided in Section
481(b)(3)(i)
[27]
of the LGC

which permits a local government unit to employ the services of
a special legal officer. Thus, the provisions of paragraph 4 of the
Contract of Legal Services to the contrary notwithstanding, the
basis of respondents compensation should be limited to the
services he rendered which reasonably contributed to the
recovery of Tiwis share in the subject realty taxes.

In sum, the allegations and admissions in the pleadings
are sufficient to rule that Mayor Corral was duly authorized to
enter into the Contract of Legal Services. However, the legal
services contemplated therein, which are properly
compensable, are limited to such services which reasonably
contributed to the recovery of Tiwis rightful share in the unpaid
realty taxes of NPC. Paragraph 4 of the Contract of Legal
Services, insofar as it covers legal services outside of this
purpose, is therefore unenforceable.

While the foregoing issues may be settled through the
admissions in the pleadings, the actual attorneys fees due to
respondent cannot still be determined.

The issue of the
reasonable legal fees
due to respondent still
needs to be resolved in
a trial on the merits.


The subject contract stipulated that respondents 10%
fee shall be based on whatever amount or payment collected
from the National Power Corporation (NPC) as a result of the
legal service rendered by [respondent].
[28]
As will be discussed
hereunder, the extent and significance of respondents legal
services that reasonably contributed to the recovery of Tiwis
share as well as the amount of realty taxes recovered by Tiwi
arising from these alleged services requires a full-blown trial.

The main source of respondents claim for
attorneys fees lies with respect

629

to several administrative and court cases that he allegedly
prosecuted and defended on behalf of Tiwi against the elective
officials of Albay in order to compel the latter to remit the
rightful share of Tiwi in the unpaid realty taxes. In their Answer,
petitioners denied knowledge of these cases on the pretext that
they were filed during the prior term of Mayor Corral. However,
we can take judicial notice of Salalima v. Guingona, Jr. where
respondent appears as the counsel of record. In Salalima v.
Guingona, Jr., the Court found, among others, that the elective
officials of Albay are administratively liable for (1) their
unjustified refusal to release the share of Tiwi in the subject
realty taxes, and (2) initiating unfounded and harassment
disciplinary actions against Mayor Corral as a retaliatory tactic.
This case, at the minimum, is evidence of the efforts of
respondent in recovering Tiwis share. Nevertheless, the other
cases allegedly handled by respondent cannot be deemed
admitted for purposes of fixing respondents compensation
because petitioners controverted the same on several grounds,
to wit: (1) these cases where not handled by respondent, (2) the
OSG was the lead counsel in these cases, and (3) these cases
were the personal cases of Mayor Corral and other officials of
Tiwi which had no bearing in the eventual recovery of Tiwis
share in the subject realty taxes. With our previous finding that
the subject contract only covers legal services which reasonably
contributed to the recovery of Tiwis share, these defenses
properly tender issues which should be determined in a trial on
the merits.

More important, in their Answer, petitioners raise the
main defense that the subject realty taxes were recovered by
virtue of the opinion rendered by then Chief Presidential Legal
Counsel Antonio T. Carpio and not through the efforts of
respondent. As narrated earlier, the said opinion was issued
after then NPC President Malixi asked clarification from the
Office of the President regarding the distribution of the unpaid
realty taxes to Albay and its municipalities and barangays,
including Tiwi. Significantly, respondent himself stated in his
Complaint that pursuant to the advice of Sec. Carpio, NPC
started to remit their shares directly to Tiwi and its barangays in
January 1993.
[29]
Our pronouncements in Salalima v.
Guingona, Jr., which respondent himself relies on in his
pleadings, tell the same story, viz:

Fortunately, the Municipalities of Tiwi and
Daraga and the National Government eventually
received their respective shares, which were paid
directly to them by the NPC pursuant to the
directive of the Office of the President issued
after the NPC requested clarification regarding
the right of the municipalities concerned to share
in the realty tax delinquencies. But this fact does
not detract from the administrative liability of the
petitioners. Notably, when the NPC advised the
Province of Albay on 9 December 1992 that
starting with the January 1993 installment it would
pay directly to the Municipality of Tiwi by applying
the sharing scheme provided by law, the
630

petitioners passed on 19 December 1992 an
ordinance declaring as forfeited in favor of the
Province all the payments made by the NPC under
the MOA and authorizing the sale of the NPC
properties at public auction. This actuation of the
petitioners reveals all the more their intention to
deprive the municipalities concerned of their
shares in the NPC payments.
[30]
(Emphasis
supplied)


What appears then from the pleadings is that
respondent, by his own admission, concedes the immense
importance of the aforesaid opinion to the eventual recovery of
the unpaid realty taxes. However, respondent never asserted
the degree of his participation in the crafting or issuance of this
opinion. It is evident, therefore, that the recovery of the realty
taxes is not solely attributable to the efforts of respondent. This
aspect of the case is decisive because it goes into the central
issue of whether the 10% contingent fee is unreasonable and
unconscionable. Consequently, it becomes necessary to weigh,
based on the evidence that will be adduced during trial, the
relative importance of the aforesaid opinion vis--vis the cases
allegedly handled by respondent on behalf of Tiwi insofar as
they aided in the eventual recovery of the unpaid realty
taxes. And from here, the trial court may reasonably determine
what weight or value to assign the legal services which were
rendered by respondent.

Apart from this, there is another vital issue tendered by
the pleadings regarding the extent of the benefits which Tiwi
allegedly derived from the legal services rendered by
respondent. In partially ruling that these amounts should
be P110,985,181.83 and P35,594,480.00, respectively, the trial
court explained in this wise:

The complaint alleged as to this:

18. Based on the available records
obtained by the plaintiff from the NPC, the
Municipality of Tiwi received One Hundred Ten
Million Nine Hundred Eighty Five Thousand One
Hundred Eighty One & 83/100 (P110,985.83) [sic]
plus Thirty Five Million Five Hundred Ninety Four
Thousand Four Hundred Eighty (P35,594,480.00)
Pesos remittances from the said agency. The total
receipts of taxes by Tiwi remitted by the NPC could
be higher and this will be proven during the trial
when all the records of remittances of taxes of the
NPC-SLRC in Bian, Laguna are subpoenaed,
marked as ANNEXES-P; Q and R;

In relation thereto, the answer stated:

14. With respect to the allegation in
paragraph 18 of the complaint answering
defendant admits that the amount of P110,985.83
[sic] was remitted to Albay province so far as the
631

annex is concerned but the same is immaterial,
useless as there was no allegation that this was
recovered/received by Tiwi. With respect to the
amount of P35,594,480.00, the said amount was
received as a matter of the clear provision of the
law, specifically Sections 286-293 of the present
Local Government Code and not through the
effort of the plaintiff. Annex R is hearsay and
self-serving.

While the plaintiff directly averred that
the Municipality of Tiwi received One Hundred
Ten Million Nine Hundred Eighty Five Thousand
One Hundred Eighty One & 83/100 (P110,985.83)
[sic] plus Thirty Five Million Five Hundred Ninety
Four Thousand Four Hundred Eighty
(P35,594,480.00) Pesos remittances from the said
agency, the defendant evasively stated that the
amount of P110,985.83 [sic] was remitted to
Albay province and that the same is immaterial,
useless as there was no allegation that this was
recovered/received by Tiwi. Thereby, the answer
was a negative pregnant because its denial was
not specific. Hence, the defendants have admitted
that Tiwi was paid the stated amounts.

The defendants further stated that Tiwi
received the amount of P35,594,480.00 as a
matter of the clear provision of the law, [sic] and
not through the effort of the plaintiff. However,
considering that the legal services of the plaintiff
were rendered under a written contract, the
qualification as to the P35,594,480.00 was
meaningless.

The pleadings render it indubitable,
therefore, that the total amount
of P146,579,661.84, which was received by Tiwi
from NPC, is subject to the 10% attorneys fees
under the plaintiffs contract of legal services.
[31]



We disagree. Although concededly petitioners counter-
allegations in their Answer were not well-phrased, the overall
tenor thereof plainly evinces the defense that the amount
ofP110,985,181.83 was received by Albay and not by
Tiwi.
[32]
Consequently, the said amount cannot be deemed
admitted for the purpose of fixing respondents
compensation. There is no occasion to apply the rule on
negative pregnant because the denial of the receipt of the said
amount by Tiwi is fairly evident. The dictates of simple justice
and fairness precludes us from unduly prejudicing the rights of
petitioners by the poor phraseology of their counsel. Verily, the
Rules of Court were designed to ascertain the truth and not to
deprive a party of his legitimate defenses. In fine, we cannot
discern based merely on the pleadings that this line of defense
employed by petitioners is patently sham especially since the
documentary evidence showing the alleged schedule of
payments made by NPC to Albay and its municipalities
632

and barangays, including Tiwi, was not even authenticated by
NPC.

We also disagree with the trial courts above-quoted
finding that the qualification as to the amount
of P35,594,480.00 which was received as a matter of the clear
provision of the law, [sic] and not through the effort of the
plaintiff is meaningless. The error appears to have been
occasioned by the failure to quote the exact allegation in
petitioners Answer which reads the said amount
[P35,594,480.00] was received as a matter of the clear provision
of the law, specifically Sections 286-293 of the present Local
Government Code and not through the effort of the
plaintiff.
[33]
The omitted portion is significant because Sections
286-293 of the LGC refer to the share of the local government
unit in the utilization of the national wealth. Petitioners are, in
effect, claiming that the P35,594,480.00 was received by Tiwi as
its share in the utilization and development of the national
wealth within its area and not as its share in the unpaid realty
taxes of NPC subject of National Power Corporation v. Province
of Albay. Whats more, respondents own documentary
evidence, appended to his Complaint, confirms this posture
because said document indicates that the P35,594,480.00 was
derived from the Computation of the Share of Local
Government from Proceeds Derived in the Utilization of
National Wealth SOUTHERN LUZON For CY 1992 and First
Quarter 1993.
[34]
It may be added that the unpaid realty taxes
of NPC subject of National Power Corporation v. Province of
Albay covered the period from June 11, 1984 to March 10, 1987
and not from 1992 to 1993. There is, thus, nothing from the
above which would categorically establish that the amount
of P35,594,480.00 was part of the realty taxes that NPC paid to
Tiwi or that said amount was recovered from the legal services
rendered by respondent on behalf of Tiwi.

Based on the preceding discussion, it was, thus,
erroneous for the trial and appellate courts to peg the amount
of realty taxes recovered for the benefit of Tiwi
at P110,985,181.83 andP35,594,480.00 considering that
petitioners have alleged defenses in their Answer and, more
importantly, considering that said amounts have not been
sufficiently established as reasonably flowing from the legal
services rendered by respondent.

Conclusion

The foregoing considerations cannot be brushed aside for
it would be iniquitous for Tiwi to compensate respondent for
legal services which he did not render; or which has no
reasonable connection to the recovery of Tiwis share in the
subject realty taxes; or whose weight or value has not been
properly appraised in view of respondents admission in his
Complaint that the opinion issued by then Chief Presidential
Legal Counsel Antonio T. Carpio (in which respondent had no
clear participation) was instrumental to the recovery of the
633

subject realty taxes. Hence, the necessity of a remand of this
case to determine these issues of substance.

To recap, the following are deemed resolved based on
the allegations and admissions in the pleadings: (1) then Mayor
Corral was authorized to enter into the Contract of Legal
Services, (2) the legal services contemplated in Resolution No.
15-92 was limited to such services which reasonably contributed
to the recovery of Tiwis rightful share in the unpaid realty taxes
of NPC, and (3) paragraph 4 of the Contract of Legal Services,
insofar as it covers services outside of this purpose, is
unenforceable. Upon the other hand, the issue of the
reasonable legal fees due to respondent still needs to be
resolved in a trial on the merits with the following integral sub-
issues: (1) the reasonableness of the 10% contingent fee given
that the recovery of Tiwis share was not solely attributable to
the legal services rendered by respondent, (2) the nature, extent
of legal work, and significance of the cases allegedly handled by
respondent which reasonably contributed, directly or indirectly,
to the recovery of Tiwis share, and (3) the relative benefit
derived by Tiwi from the services rendered by respondent. In
addition, we should note here that the amount of reasonable
attorneys fees finally determined by the trial court should be
without legal interest in line with well-settled jurisprudence.
[35]


As earlier noted, this case was filed with the trial court in
1999, however, we are constrained to remand this case for
further proceedings because the subject partial judgment on
the pleadings was clearly not proper under the premises. At any
rate, we have narrowed down the triable issue to the
determination of the exact extent of the reasonable attorneys
fees due to respondent. The trial court is, thus, enjoined to
resolve this case with deliberate dispatch in line with the
parameters set in this Decision.

To end, justice and fairness require that the issue of the
reasonable attorneys fees due to respondent be ventilated in a
trial on the merits amidst the contentious assertions by both
parties because in the end, neither party must be allowed to
unjustly enrich himself at the expense of the other. More so
here because contracts for attorneys services stand upon an
entirely different footing from contracts for the payment of
compensation for any other services. Verily, a lawyers
compensation for professional services rendered are subject to
the supervision of the court, not just to guarantee that the fees
he charges and receives remain reasonable and commensurate
with the services rendered, but also to maintain the dignity and
integrity of the legal profession to which he belongs.
[36]


WHEREFORE, the petition is GRANTED. The October 19,
2005 Decision and March 10, 2006 Resolution of the Court of
Appeals in CA G.R. CV No. 79057 are REVERSEDand SET
ASIDE. This case is REMANDED to the trial court for further
proceedings to determine the reasonable amount of attorneys
fees which respondent is entitled to in accordance with the
guidelines set in this Decision.
634


SO ORDERED.