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sanggunian concerned, as the case may be, shall require the respondent to submit his verified answer

within fifteen (15) days from receipt thereof, and commence investigation of the case within ten (10) days
after receipt of such answer of the respondent.
xxx." EN BANC
[G.R. No. L-24440. March 28, 1968.]
THE PROVINCE OF ZAMBOANGA DEL NORTE, Plaintiff-Appellee, v. CITY OF ZAMBOANGA,
SECRETARY OF FINANCE AND COMMISSIONER OF INTERNAL REVENUE, Defendants-Appellants.
Fortugaleza, Lood, Sarmiento, M .T . Yap & Associates for Plaintiff-Appellee.
Solicitor General, for Defendant-Appellant.
SYLLABUS
1. SPECIAL CIVIL ACTIONS; DECLARATORY RELIEF; CONVERSION INTO AN ORDINARY ACTION.
Assuming that the law had already been violated and that plaintiff sought to give it coercive effect, sec. 6 of Rule 64
of the Rules of Court authorizes the conversion of a petition for declaratory relief into an ordinary action.
2. MUNICIPAL CORPORATIONS; EXTENT OF CONGRESSIONAL CONTROL OVER MUNICIPAL
PROPERTY. The principle is this: If the property is owned by the municipal corporation or municipality in its
public and governmental capacity, the property is public and Congress has absolute control over it; if the property is
owned in its private or proprietary capacity, then it is patrimonial and Congress has no absolute control, in which
case, the municipality cannot be deprived of it without due process and payment of just compensation.
3. ID.; ID.; SUBJECT TO TWO NORMS PROVIDED BY THE CIVIL CODE AND THE LAW OF MUNICIPAL
CORPORATIONS. The capacity in which the property is held is dependent on the use to which it is intended and
devoted. There are two norms, i.e., of the Civil Code and of the law of Municipal Corporations in classifying
whether municipal properties are patrimonial or public.
4. ID.; ID.; UNDER CIVIL CODE, ALL MUNICIPAL PROPERTIES EXCEPT THOSE ENUMERATED IN ART.
424 ARE PATRIMONIAL. The Civil Code classification is found in articles 423 and 424 of the same Code.
Under Art. 424, property for public, use, consists of provincial roads, city streets, municipal streets, the squares,
fountains, public waters, promenades and public works for public service paid for by said municipal corporations.
All other property possessed by any of them is patrimonial and is governed by the Code without prejudice to
provisions of special laws. Under this classification, all the properties in question save two lots used as High School
playgrounds are patrimonial properties of Zamboanga Province; this includes the capitol site, the hospital and
leprosarium sites, and the school sites which are patrimonial as they are not for public use. They fall outside the
phrase "public works for public service" because under the ejusdem generis rule, such public works must be for free
and for the indiscriminate use by anyone.
5. ID.; ID.; CLASSIFICATION OF MUNICIPAL PROPERTIES UNDER MUNICIPAL CORPORATION LAW.
Under the norm provided for by the law of Municipal Corporations, all those properties which are devoted to public
service are deemed public; the rest remain patrimonial. Under this norm, to be considered public, it is enough that
the property be held and devoted for governmental purposes like local administration, public education, public
health, etc.
6. ID.; ID.; BUILDINGS EXISTING ON LOTS PARTAKE OF NATURE OF THE LATTER. Although the
records do not show whether the buildings on the lots in question were constructed at the expense of the municipal
corporation, since said buildings were constructed even before the enactment of Commonwealth Act 39 in 1936 and
the provinces then had no power to authorize construction of buildings at their own expense, it is presumed that the
buildings were erected by national funds, In this case, Congress could dispose of said buildings in the same manner
as it did with the lots in question. And even assuming that provincial funds were used in their construction, the
buildings are mere accessories to the lands which are public, and so they follow the nature of the lands, i.e., public.
Moreover, although located in the city, the buildings are not for the exclusive use and benefit of city residents but
also for provincial residents, wherefore the province is not really deprived of its benefits.
7. ID.; ID.; MUNICIPAL PROPERTY HELD AND DEVOTED TO PUBLIC SERVICE IS NOT IN THE SAME
CATEGORY AS ORDINARY PRIVATE PROPERTY. The controversy is more along the domains of the law of
Municipal Corporations State v. Province than along that of Civil Law. The Court is not inclined to hold that
municipal property held and devoted to public service is in the same category as ordinary private property. Else, the
consequences are dire. As ordinary private properties, they can be levied upon and attached, they can be acquired
thru adverse possession - to the detriment of the local community.

8. ID.; ID.; REGISTRATION CANNOT CONVERT PUBLIC PROPERTY INTO PRIVATE PROPERTY. The
fact that the lots used for government purposes are registered is of no significance since registration cannot convert
public property to private.
9. ID.; ID.; CLASSIFICATION OF PROPERTIES UNDER CIVIL CODE, WITHOUT PREJUDICE TO
PROVISIONS OF LAW ON MUNICIPAL CORPORATIONS. The classification of properties other than those
for public use in the municipalities as patrimonial under art. 424 of the Civil Code is without prejudice to provisions
of special laws. For purposes of this article, the law of Municipal Corporations is considered as "special laws."
Hence, the classification of municipal property devoted for distinctly governmental purposes as public should
prevail over the Civil Code classification in this particular case.
10. ID.; NO LACHES UNDER FACTS OF THE CASE. Under Commonwealth Act No. 39, sec. 50, the cause of
action in favor of the defunct province of Zamboanga arose only in 1948 when the Auditor General fixed the value
of the properties in issue. In 1951, when the Cabinet transferred the properties for free to Zamboanga City, a
reconsideration thereof was sought on time. In 1952, the old province was dissolved and as successor-in-interest to
over half of the properties, Zamboanga del Norte obtained a reconsideration of the cabinet resolution of 1959 and in
fact partial payments were later made. It was only after the enactment of Republic Act 3039 in 1961 that the present
controversy arose and since plaintiff brought suit in 1962 all these facts negative laches.
DECISION
BENGZON, J.P., J.:
Prior to its incorporation as a chartered city, the Municipality of Zamboanga used to be the provincial capital of the
then Zamboanga Province. On October 12, 1936, Commonwealth Act 39 was approved converting the Municipality
of Zamboanga into Zamboanga City. Sec. 50 of the Act also provided that
"Buildings and properties which the province shall abandon upon the transfer of the capital to another place will be
acquired and paid for by the City of Zamboanga at a price to be fixed by the Auditor General."cralaw virtua1aw
library
The properties and buildings referred to consisted of 50 lots and some buildings constructed thereon, located in the
City of Zamboanga and covered individually by Torrens certificates of title in the name of Zamboanga Province. As
far as can be gleaned from the records 1 said properties were being utilized as follows
No. of Lots Use
1 Capitol Site
3 School Site
3 Hospital Site
3 Leprosarium
1 Curuan School
1 Trade School
2 Burleigh School
2 High School Playground
9 Burleighs
1 Hydro-Electric Site (Magay)
1 San Roque
23 vacant
It appears that in 1945, the capital of Zamboanga Province was transferred to Dipolog 2 Subsequently, or on June
16, 1948, Republic Act 286 was approved creating the municipality of Molave and making it the capital of
Zamboanga Province.

On May 26, 1949, the Appraisal Committee formed by the Auditor General, pursuant to Commonwealth Act 39,
fixed the value of the properties and buildings in question left by Zamboanga Province in Zamboanga City at
P1,294,244.00. 3
On June 6, 1952, Republic Act 711 was approved dividing the province of Zamboanga into two (2): Zamboanga del
Norte and Zamboanga del Sur. As to how the assets and obligations of the old province were to be divided between
the two new ones, Sec. 6 of the law provided:jgc:chanrobles.com.ph
"Upon the approval of this Act, the funds, assets and other properties and the obligations of the province of
Zamboanga shall be divided equitably between the Province of Zamboanga del Norte and the Province of
Zamboanga del Sur by the President of the Philippines, upon the recommendation of the Auditor General."cralaw
virtua1aw library
Pursuant thereto, the Auditor General, on January 11, 1955, apportioned the assets and obligations of the defunct
Province of Zamboanga as follows: 54.39% for Zamboanga del Norte and 45.61% for Zamboanga del Sur,
Zamboanga del Norte therefore became entitled to 54,39% of P1,294,244.00, the total value of the lots and buildings
in question, or P704,220.05 payable by Zamboanga City.
On March 17, 1959, the Executive Secretary, by order of the President, issued a ruling 4 holding that Zamboanga del
Norte had a vested right as owner (should be co-owner pro-indiviso) of the properties mentioned in Sec. 50 of
Commonwealth Act 39, and is entitled to the price thereof, payable by Zamboanga City. This ruling revoked the
previous Cabinet Resolution of July 13, 1951 conveying all the said 50 lots and buildings thereon to Zamboanga
City for P1.00, effective as of 1945, when the provincial capital of the then Zamboanga Province was transferred to
Dipolog.
The Secretary of Finance then authorized the Commissioner of Internal Revenue to deduct an amount equal to 25%
of the regular internal revenue allotment for the City of Zamboanga for the quarter ending March 31, 1960, then for
the quarter ending June 30, 1960, and again for the first quarter of the fiscal year 1960-1961. The deductions, all
aggregating P57,373.46 was credited to the province of Zamboanga del Norte, in partial payment of the P704,220,05
due it.
However, on June 17, 1961, Republic Act 3039 was approved amending Sec. 50 of Commonwealth Act 39 by
providing that
"All buildings, properties and assets belonging to the former province of Zamboanga and located within the City of
Zamboanga are hereby transferred, free of charge, in favor of the said City of Zamboanga." (Stressed for emphasis)
Consequently, the Secretary of Finance, on July 12, 1961, ordered the Commissioner of Internal Revenue to stop
from effecting further payments to Zamboanga del Norte and to return to Zamboanga City the sum of P57,373.46
taken from it out of the internal revenue allotment of Zamboanga del Norte. Zamboanga City admits that since the
enactment of Republic Act 3039, P43,030.11 of the P57,373.46 has already been returned to it.
This constrained plaintiff-appellee Zamboanga del Norte to file on March 5, 1962, a complaint entitled "Declaratory
Relief with Preliminary Mandatory Injunction" in the Court of First Instance of Zamboanga del Norte against
defendants-appellants Zamboanga City, the Secretary of Finance and the Commissioner of Internal Revenue. It was
prayed that: (a) Republic Act 3039 be declared unconstitutional for depriving plaintiff province of property without
due process and just compensation; (b) Plaintiffs nights and obligations under said law be declared; (c) The
Secretary of Finance and the Internal Revenue Commissioner be enjoined from reimbursing the sum of 57,373.46 to
defendant City; and (d) The latter be ordered to continue paying the balance of P704,220.05 in quarterly installments
of 25% of its internal revenue allotments.
On June 4, 1962, the lower court ordered the issuance of preliminary injunction as prayed for. After defendants filed
their respective answers, trial was held. On August 12, 1963, judgment was rendered, the dispositive portion of
which reads:jgc:chanrobles.com.ph
"WHEREFORE, judgment is hereby rendered declaring Republic Act No. 3039 unconstitutional in so far as it
deprives plaintiff Zamboanga del Norte of its private properties, consisting of 50 parcels of land and the
improvements thereon under certificates of titles (Exhibits A to A-49) in the name of the defunct province of
Zamboanga; ordering defendant City of Zamboanga to pay to the plaintiff the sum of P704,220.05, payment thereof
to be deducted from its regular quarterly internal revenue allotment equivalent to 25% thereof every quarter until
said amount shall have been fully paid; ordering defendant Secretary of Finance to direct defendant Commissioner
of Internal Revenue to deduct 25% from the regular quarterly internal revenue allotment for defendant City of
Zamboanga and to remit the same to plaintiff Zamboanga del Norte until said sum of P704,220.00 shall have been
fully paid; ordering plaintiff Zamboanga del Norte to execute through its proper officials the corresponding public
instrument deeding to defendant City of Zamboanga the 50 parcels of land and the improvements thereon under the
certificates of tide (Exhibits A to A-49) upon payment by the latter of the aforesaid sum of P704,220.00 in full;
dismissing the counterclaim of defendant City of Zamboanga; and declaring permanent the preliminary mandatory
injunction issued on June 8, 1967, pursuant to the order of the Court dated June 47 1962. No costs are assessed

against the defendant.


"It is SO ORDERED."cralaw virtua1aw library
Subsequently, but prior to the perfection of defendants appeal, plaintiff province fled a motion to reconsider praying
that Zamboanga City be ordered instead to pay the P704,220.05 in lump sum with 6% interest per annum. Over
defendants opposition, the lower court granted plaintiff province motion.
The defendants then brought the case before Us on appeal.
Brushing aside the procedural point concerning the propriety of declaratory relief filed in the lower court on the
assertion that the law had already been violated and that plaintiff sought to give it coercive effect, since assuming the
same to be true, the Rules anyway authorize the conversion of the proceedings to an ordinary action, 5 We proceed
to the more important and principal question of the validity of Republic Act 3039.
The validity of the law ultimately depends on the nature of the 50 lots and buildings thereon in question. For, the
matter involved here is the extent of legislative control over the properties of a municipal corporation, of which a
province is one. The principle itself is simple: If the property is owned by the municipality (meaning municipal
corporation) in its public and governmental capacity, the property is public and Congress has absolute control over
it. But if the property is owned in its private or proprietary capacity, then it is patrimonial and Congress has no
absolute control. The municipality cannot be deprived of it without due process and payment of just compensation.
6
The capacity in which the property is held is, however, dependent on the use to which it is intended and devoted.
Now, which of two norms, i.e., that of the Civil Code or that obtaining under the law of Municipal Corporations,
must be used in classifying the properties in question?
The Civil Code classification is embodied in its Arts. 423 and 424 which provide.
"ART. 423. The property of provinces, cities and municipalities, is divided into property for public use and
patrimonial properly."cralaw virtua1aw library
"ART. 424. Property for public use, in the provinces, cities, and municipalities, consists of the provincial roads, city
streets, municipal streets, the squares, fountains, public waters, promenades, and public works for public service
paid for by said provinces, cities, or municipalities.
"All other property possessed by any of them is patrimonial and shall be governed by this Code, without prejudice to
the provisions of special laws." (Stressed for emphasis)
Applying the above cited norm, all the properties in question, except the two (2) lots used as High School
playgrounds, could be considered as patrimonial properties of the former Zamboanga province. Even the capitol site,
the hospital and leprosarium sites, and the school sites will be considered patrimonial for they are not for public use.
They would not fall under the phrase "public works for public service" for it has been held that under the ejusdem
generis rule, such public works must be for free and indiscriminate use by anyone, just like the preceding
enumerated properties in the first paragraph of Art. 424. 7 The playgrounds, however, would fit into this category.
This was the norm applied by the lower court. And it cannot be said that its actuation was without jurisprudential
precedent for in Municipality of Catbalogan v. Director of Lands, 8 and in Municipality of Tacloban v. Director of
Lands, 9 it was held that the capitol site and the school sites in municipalities constitute their patrimonial properties.
This result is understandable because, unlike in the classification regarding State properties, properties for public
service in the municipalities are not classified as public. Assuming then the Civil Code classification to be the
chosen norm, the lower court must be affirmed except with regard to the two (2) lots used as playgrounds.
On the other hand, applying the norm obtaining under the principles constituting the law of Municipal Corporations,
all those of the 50 properties in question which are devoted to public service are deemed public; the rest remain
patrimonial. Under this norm, to be considered public, it is enough that the property be held and devoted for
governmental purposes like local administration, public education, public health, etc. 10
Supporting jurisprudence are found in the following cases: (1) Hinunangan v. Director of Lands, 11 where it was
stated that." . . where the municipality has occupied lands distinctly for public purposes, such as for the municipal
court house, the public school, the public market, or other necessary municipal building, we will, in the absence of
proof to the contrary, presume a grant from the State in favor of the municipality; but, as indicated by the wording,
that rule may be invoked only as to property which is used distinctly for public purposes . . ." (2) Viuda de Tantoco
v. Municipal Council of Iloilo 12 held that municipal properties necessary for governmental purposes are public in
nature. Thus, the auto trucks used by the municipality for street sprinkling, the police patrol automobile, police
stations and concrete structures with the corresponding lots used as markets were declared exempt from execution
and attachment since they were not patrimonial properties. (3) Municipality of Batangas v. Cantos, 13 held squarely
that a municipal lot which had always been devoted to school purposes is one dedicated to public use and is not
patrimonial property of a municipality.

Following this classification, Republic Act 3039 is valid insofar as it affects the lots used as capitol site, school sites
and its grounds, hospital and leprosarium sites and the high school playground sites a total of 24 lots since
these were held by the former Zamboanga province in its governmental capacity and therefore are subject to the
absolute control of Congress. Said lots considered as public property are the following:chanrob1es virtual 1aw
library
TCT Number Lot Number Use
2220 4-B Capitol Site
2816 149 School Site
3281 1224 Hospital Site
3282 1226 Hospital Site
3283 1225 Hospital Site
3748 434-A-1 School Site
5406 171 School Site
5564 168 High School
Playground
5567 157 & 158 Trade School
15583 167 High School
Playground
6181 (O.C.T.) Curuan School
11942 926 Leprosarium
11943 927 Leprosarium
11944 925 Leprosarium
5557 170 Burleigh School
5562 180 Burleigh School
5565 172-B Burleigh
5570 171-A Burleigh
5571 172-C Burleigh
5572 174 Burleigh
5573 178 Burleigh
5585 171-B Burleigh
5586 173 Burleigh
5587 172-A Burleigh
We noticed that the eight Burleigh lots above described are adjoining each other and in turn are between the two lots
wherein the Burleigh schools arc built as per records appearing herein and in the Bureau of Lands. Hence. there is
sufficient basis for holding that said eight lots constitute-the the appurtenant grounds of the Burleigh schools and
partake of the nature of the same.
Regarding the several buildings existing on the lots above- mentioned, the records do not disclose whether they were
constructed at the expense of the former Province of Zamboanga, Considering however the fact that said buildings

must have been erected even before 1936 when Commonwealth Act 39 was enacted and the further fact that
provinces then had no power to authorize construction of buildings such as those in the case at bar at their own
expense, 14 it can be assumed that said buildings were erected by the National Government, using national funds.
Hence, Congress could very well dispose of said buildings in the same manner that it did with the lots in question.
But even assuming that provincial funds were used, still the buildings constitute mere accessories to the lands, which
are public in nature, and so, they follow the nature of said lands, i.e., public Moreover, said buildings, those located
in the city, will not be for the exclusive use and benefit of city residents for they could be availed of also by the
provincial residents. The province then and its successors-in-interest are not really deprived of the benefits
thereof.
But Republic Act 3039 cannot be applied to deprive Zamboanga del Norte of its share in the value of the rest of the
26 remaining lots which are patrimonial properties since they are not being utilized for distinctly governmental
purposes. Said lots are:chanrob1es virtual 1aw library
TCT Number Lot Number Use
5577 177 Mydro, Magay
13198 127-D San Roque
5569 169 Burleigh 15
5558 175 Vacant
5559 188"
5560 183"
5561 186"
5563 191"
5566 176"
5568 179"
5574 196"
5575 181-A"
5576 181-B"
5578 182"
5579 197"
5580 195"
5581 159-B"
5582 194"
5584 190"
5588 184"
5589 187"
5590 189"
5591 192"
5592 193"
5593 185"
7379 4147"

Moreover, the fact that these 26 lots are registered strengthens the proposition that they are truly private in nature.
On the other hand, that the 24 lots used for governmental purposes are also registered is of no significance since
registration cannot convert public property to private. 16
We are more inclined to uphold this latter view. The controversy here is more along the domains of the Law of
Municipal Corporations State v. Province than along that of Civil Law. Moreover, this Court is not inclined to
hold that municipal property held and devoted to public service is in the same category as ordinary private property.
The consequences are dire. As ordinary private properties, they can be levied upon and attached. They can even be
acquired thru adverse possession all these to the detriment of the local community. Lastly, the classification of
properties other than those for public use in the municipalities as patrimonial under Art. 424 of the Civil Code is." . .
without prejudice to the provisions of special laws." For purposes of this article, the principles obtaining under the
Law of Municipal Corporations can be considered as "special laws." Hence, the classification of municipal property
devoted for governmental purposes as public should prevail over the Civil Code classification in this particular case.
Defendants claim that plaintiff and its predecessor-in-interest are guilty of laches is without merit. Under
Commonwealth Act 39, Sec. 50, the cause of action in favor of the defunct Zamboanga Province arose only in 1949
after the Auditor General fixed the value of the properties in question. While in 1951, the Cabinet resolved to
transfer said properties practically for free to Zamboanga City, a reconsideration thereof was seasonably sought. In
1952, the old province was dissolved. As successor-in-interest to more than half of the properties involved,
Zamboanga del Norte was able to get a reconsideration of the Cabinet Resolution in 1959. In fact, partial payments
were effected subsequently and it was only after the passage of Republic Act 3039 in 1961 that the present
controversy arose. Plaintiff brought suit in 1962. All the foregoing, negative laches.
It results then that Zamboanga del Norte is still entitled to collect from the City of Zamboanga the formers 54.39%
share in the 26 properties which are patrimonial in nature, said share to be computed on the basis of the valuation of
said 26 properties as contained in Resolution No. 7, dated March 26, 1949, of the Appraisal Committee formed by
the Auditor General.
Plaintiffs share, however, cannot be paid in lump sum, except as to the P43,030.11 already returned to defendant
City. The return of said amount to defendant was without legal basis. Republic Act 3039 took effect only on June 17,
1961 after a partial payment of P57,373.46 had already been made. Since the law did not provide for retroactivity, it
could not have validly affected a completed act. Hence, the amount of P43,030.11 should be immediately returned
by defendant City to plaintiff province. The remaining balance, if any, in the amount of plaintiffs 54.39% share in
the 26 lots should then be paid by defendant City in the same manner originally adopted by the Secretary of Finance
and the Commissioner of Internal Revenue, and not in lump sum. Plaintiffs prayer, particularly pars. 5 and 6, read
together with pars. 10 and 11 of the first cause of action recited in the complaint 17 clearly shows that the relief
sought was merely the continuance of the quarterly payments from the internal revenue allotments of defendant City.
Art. 1169 of the Civil Code on reciprocal obligations invoked by plaintiff to justify lump sum payment is
inapplicable since there has been so far in legal contemplation no complete delivery of the lots in question. The titles
to the registered lots are not yet in the name of defendant Zamboanga City.
WHEREFORE, the decision appealed from is hereby set aside and another judgment is hereby entered as follows:.
(1) Defendant Zamboanga City is hereby ordered to return to plaintiff Zamboanga del Norte in lump sum the
amount of P43,030,11 which the former took back from the latter out of the sum of P57,373.46 previously paid to
the latter, and
(2) Defendants are hereby ordered to effect payments in favor of plaintiff of whatever balance remains of plaintiffs
54.39% share in the 26 patrimonial properties, after deducting therefrom the sum of P57,373.46, on the basis of
Resolution No. 7 dated March 26, 1949 of the Appraisal Committee formed by the Auditor General, by way of
quarterly payments from the allotments of defendant City, in the manner originally adopted by the Secretary of
Finance and the Commissioner of Internal Revenue. No costs. So ordered.
Reyes, J.B.L., Actg. C . J., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur.
Concepcion, C.J., is on leave.

[G.R. No. 91649. May 14, 1991.]


ATTORNEYS HUMBERTO BASCO, EDILBERTO BALCE, SOCRATES MARANAN AND LORENZO
SANCHEZ, Petitioners, v. PHILIPPINE AMUSEMENTS AND GAMING CORPORATION
(PAGCOR),Respondent.

H .B . Basco & Associates, for Petitioners.


Valmonte Law Offices collaborating counsel, for Petitioners.
Aquirre, Laborte and Capule for respondent PAGCOR.
SYLLABUS
1. STATUTORY CONSTRUCTION; PRESUMPTION OF VALIDITY OF STATUTE; MUST BE INDULGED IN
FAVOR OF ITS CONSTITUTIONALITY. As We enter upon the task of passing on the validity of an act of a coequal and coordinate branch of the government We need not be reminded of the time-honored principle, deeply
ingrained in our jurisprudence, that a statute is presumed to be valid. Every presumption must be indulged in favor
of its constitutionality. This is not to say that We approach Our task with diffidence or timidity. Where it is clear that
the legislature or the executive for that matter, has over-stepped the limits of its authority under the constitution, We
should not hesitate to wield the axe and let it fall heavily, as fall it must, on the offending statute (Lozano v.
Martinez, supra). In Victoriano v. Elizalde Rope Workers Union, et al, 59 SCRA 54, the Court thru Mr. Justice
Zaldivar underscored the ." . . thoroughly established principle which must be followed in all cases where
questions of constitutionality as obtain in the instant cases are involved. All presumptions are indulged in favor of
constitutionality; one who attacks a statute alleging unconstitutionality must prove its invalidity beyond a reasonable
doubt; that a law may work hardship does not render it unconstitutional; that if any reasonable basis may be
conceived which supports the statute, it will be upheld and the challenger must negate all possible basis; that the
courts are not concerned with the wisdom, justice, policy or expediency of a statute and that a liberal interpretation
of the constitution in favor of the constitutionality of legislation should be adopted." (Danner v. Hass, 194 N.W. 2nd
534, 539, Spurbeck v. Statton, 106 N.W. 2nd 660, 663; 59 SCRA 66; see also e.g. Salas v. Jarencio, 46 SCRA 734,
739 [1970]; Peralta v. Commission on Elections, 82 SCRA 30, 55 [1978]; and Heirs of Ordona v. Reyes, 125 SCRA
220, 241-242 [1983] cited in Citizens Alliance for Consumer Protection v. Energy Regulatory Board, 162 SCRA
521, 540).chanroblesvirtuallawlibrary
2. ID.; IN NULLIFYING A LAW, IT MUST BE SHOWN THAT THERE IS A CLEAR AND UNEQUIVOCAL
BREACH OF THE CONSTITUTION. Every law has in its favor the presumption of constitutionality (Yu Cong
Eng v. Trinidad, 47 Phil. 387; Salas v. Jarencio, 48 SCRA 734; Peralta v. Comelec, 82 SCRA 30; Abbas v. Comelec,
179 SCRA 287). Therefore, for PD 1869 to be nullified, it must be shown that there is a clear and unequivocal
breach of the Constitution, not merely a doubtful and equivocal one. In other words, the grounds for nullity must be
clear and beyond reasonable doubt. (Peralta v. Comelec, supra) Those who petition this Court to declare a law, or
parts thereof, unconstitutional must clearly establish the basis for such a declaration. Otherwise, their petition must
fail. Based on the grounds raised by petitioners to challenge the constitutionality of P.D. 1869, the Court finds that
petitioners have failed to overcome the presumption. The dismissal of this petition is therefore, inevitable. But as to
whether P.D. 1869 remains a wise legislation considering the issues of "morality, monopoly, trend to free enterprise,
privatization as well as the state principles on social justice, role of youth and educational values" being raised, is up
for Congress to determine.
3. POLITICAL LAW; JUDICIAL DEPARTMENT; TECHNICALITIES OF PROCEDURE MAYBE BRUSHED
ASIDE FOR THE PROPER EXERCISE OF ITS POWERS. Considering however the importance to the public
of the case at bar, and in keeping with the Courts duty, under the 1987 Constitution, to determine whether or not the
other branches of government have kept themselves within the limits of the Constitution and the laws and that they
have not abused the discretion given to them, the Court has brushed aside technicalities of procedure and has taken
cognizance of this petition. (Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas Inc. v. Tan, 163 SCRA 371)
"With particular regard to the requirement of proper party as applied in the cases before us, We hold that the same is
satisfied by the petitioners and intervenors because each of them has sustained or is in danger of sustaining an
immediate injury as a result of the acts or measures complained of And even if, strictly speaking they are not
covered by the definition, it is still within the wide discretion of the Court to waive the requirement and so remove
the impediment to its addressing and resolving the serious constitutional questions raised. "In the first Emergency
Powers Cases, ordinary citizens and taxpayers were allowed to question the constitutionality of several executive
orders issued by President Quirino although they were involving only an indirect and general interest shared in
common with the public. The Court dismissed the objection that they were not proper parties and ruled that the
transcendental importance to the public of these cases demands that they be settled promptly and definitely, brushing
aside, if we must technicalities of procedure. We have since then applied the exception in many other cases."
(Association of Small Landowners in the Philippines, Inc. v. Sec. of Agrarian Reform, 175 SCRA 343).
4. ID.; ID.; NO POWER TO SETTLE POLICY ISSUES. Anent petitioners claim that PD 1869 is contrary to the
"avowed trend of the Cory Government away from monopolies and crony economy and toward free enterprise and
privatization" suffice it to state that this is not a ground for this Court to nullify P.D. 1869. If, indeed, PD 1869 runs
counter to the governments policies then it is for the Executive Department to recommend to Congress its repeal or
amendment. "The judiciary does not settle policy issues. The Court can only declare what the law is and not what
the law should be. Under our system of government, policy issues are within the domain of the political branches of

government and of the people themselves as the repository of all state power." (Valmonte v. Belmonte, Jr., 170
SCRA 256.)chanrobles law library
5. ID.; CONCEPT OF POLICE POWER; CONSTRUED. The concept of police power is well-established in this
jurisdiction. It has been defined as the "state authority to enact legislation that may interfere with personal liberty or
property in order to promote the general welfare." (Edu v. Ericta, 35 SCRA 481, 487) As defined, it consists of (1)
an imposition or restraint upon liberty or property, (2) in order to foster the common good. It is not capable of an
exact definition but has been, purposely, veiled in general terms to underscore its all-comprehensive embrace.
(Philippine Association of Service Exporters, Inc. v. Drilon, 163 SCRA 386). Its scope, ever-expanding to meet the
exigencies of the times, even to anticipate the future where it could be done, provides enough room for an efficient
and flexible response to conditions and circumstances thus assuming the greatest benefits. (Edu v. Ericta, supra). It
finds no specific Constitutional grant for the plain reason that it does not owe its origin to the charter. Along with the
taxing power and eminent domain, it is inborn in the very fact of statehood and sovereignty. It is a fundamental
attribute of government that has enabled it to perform the most vital functions of governance. Marshall, to whom the
expression has been credited, refers to it succinctly as the plenary power of the state "to govern its citizens." (Tribe,
American Constitutional Law, 323, 1978). The police power of the State is a power co-extensive with selfprotection. and is most aptly termed the "law of overwhelming necessity." (Rubi v. Provincial Board of Mindoro, 39
Phil. 660, 708) It is "the most essential, insistent, and illimitable of powers." (Smith Bell & Co. v. National, 40 Phil.
136) It is a dynamic force that enables the state to meet the exigencies of the winds of change.
6. PHILIPPINE AMUSEMENT AND GAMING CORPORATION (P.D. NO. 1869); PURPOSE FOR ITS
CREATION. P.D. 1869 was enacted pursuant to the policy of the government to "regulate and centralize thru an
appropriate institution all games of chance authorized by existing franchise or permitted by law" (1st whereas
clause, PD 1869). As was subsequently proved, regulating and centralizing gambling operations in one corporate
entity the PAGCOR, was beneficial not just to the Government but to society in general. It is a reliable source of
much needed revenue for the cash strapped Government. It provided funds for social impact projects and subjected
gambling to "close scrutiny, regulation, supervision and control of the Government" (4th Whereas Clause, PD 1869).
With the creation of PAGCOR and the direct intervention of the Government, the evil practices and corruptions that
go with gambling will be minimized if not totally eradicated. Public welfare, then, lies at the bottom of the
enactment of PD 1896.
7. ID.; DOES NOT CONSTITUTE A WAIVER OF THE RIGHT OF LOCAL GOVERNMENT TO IMPOSE
TAXES AND LOCAL FEES; REASONS THEREFOR. Petitioners contend that P.D. 1869 constitutes a waiver of
the right of the City of Manila to impose taxes and legal fees; that the exemption clause in P.D. 1869 is violative of
the principle of local autonomy. They must be referring to Section 13 par. (2) of P.D. 1869 which exempts
PAGCOR, as the franchise holder from paying any "tax of any kind or form, income or otherwise, as well as fees,
charges or levies of whatever nature, whether National or Local." Their contention stated hereinabove is without
merit for the following reasons: (a) The City of Manila, being a mere Municipal corporation has no inherent right to
impose taxes (Icard v. City of Baguio, 83 Phil. 870; City of Iloilo v. Villanueva, 105 Phil. 337; Santos v.
Municipality of Caloocan, 7 SCRA 643). Thus, "the Charter or statute must plainly show an intent to confer that
power or the municipality cannot assume it" (Medina v. City of Baguio, 12 SCRA 62). Its "power to tax" therefore
must always yield to a legislative act which is superior having been passed upon by the state itself which has the
"inherent power to tax" (b) The Charter of the City of Manila is subject to control by Congress. It should be stressed
that "municipal corporations are mere creatures of Congress" (Unson v. Lacson, G.R. No. 7909, January 18, 1957)
which has the power to "create and abolish municipal corporations" due to its "general legislative powers"
(Asuncion v. Yriantes, 28 Phil. 67; Merdanillo v. Orandia, 5 SCRA 541). Congress, therefore, has the power of
control over Local governments (Hebron v. Reyes, G.R. No. 9124, July 2, 1950). And if Congress can grant the City
of Manila the power to tax certain matters, it can also provide for exemptions or even take back the power. (c) The
City of Manilas power to impose license fees on gambling, has long been revoked. As early as 1975, the power of
local governments to regulate gambling thru the grant of "franchise, licenses or permits" was withdrawn by P.D. No.
771 and was vested exclusively on the National Government. Therefore, only the National Government has the
power to issue "licenses or permits" for the operation of gambling. Necessarily, the power to demand or collect
license fees which is a consequence of the issuance of "licenses or permits" is no longer vested in the City of
Manila. (d) Local governments have no power to tax instrumentalities of the National Government. PAGCOR is a
government owned or controlled corporation with an original charter, PD 1869. All of its shares of stocks are owned
by the National Government. In addition to its corporate powers (Sec. 3, Title II, PD 1869) it also exercises
regulatory powers.chanroblesvirtuallawlibrary:red
8. ID.; EXEMPT FROM LOCAL TAXES; REASONS THEREOF. PAGCOR has a dual role, to operate and to
regulate gambling casinos. The latter role is governmental, which places it in the category of an agency or
instrumentality of the Government. Being an instrumentality of the Government, PAGCOR should be and actually is
exempt from local taxes. Otherwise, its operation might be burdened, impeded or subjected to control by a mere
Local government. "The states have no power by taxation or otherwise, to retard impede, burden or in any manner
control the operation of constitutional laws enacted by Congress to carry into execution the powers vested in the
federal government." (MC Culloch v. Marland, 4 Wheat 316, 4 L Ed. 579). This doctrine emanates from the
"supremacy" of the National Government over local governments. "Justice Holmes, speaking for the Supreme
Court, made reference to the entire absence of power on the part of the States to touch, in that way (taxation) at least,
the instrumentalities of the United States (Johnson v. Maryland, 254 US 51) and it can be agreed that no state or

political subdivision can regulate a federal instrumentality in such a way as to prevent it from consummating its
federal responsibilities, or even to seriously burden it in the accomplishment of them." (Antieau, Modern
Constitutional Law, Vol. 2, p. 140, Emphasis supplied) Otherwise, mere creatures of the State can defeat National
policies thru extermination of what local authorities may perceive to be undesirable activates or enterprise using the
power to tax as "a tool for regulation" (U.S. v. Sanchez, 340 US 42). The power to tax which was called by Justice
Marshall as the "power to destroy" (Mc Culloch v. Maryland, supra) cannot be allowed to defeat an instrumentality
or creation of the very entity which has the inherent power to wield it.
9. ID.; NOT A VIOLATION OF THE LOCAL AUTONOMY CLAUSE IN THE CONSTITUTION. The power
of local government to "impose taxes and fees" is always subject to "limitations" which Congress may provide by
law. Since PD 1869 remains an "operative" law until "amended, repealed or revoked" (Sec. 3, Art. XVIII, 1987
Constitution), its "exemption clause" remains as an exception to the exercise of the power of local governments to
impose taxes and fees. It cannot therefore be violative but rather is consistent with the principle of local autonomy.
Besides, the principle of local autonomy under the 1987 Constitution simply means "decentralization" (III Records
of the 1987 Constitutional Commission, pp. 436-436, as cited in Bernas, The Constitution of the Republic of the
Philippines, Vol. II, First Ed., 1988, p. 374). It does not make local governments sovereign within the state or an
"imperium in imperio." "Local Government has been described as a political subdivision of a nation or state which is
constituted by law and has substantial control of local affairs. In a unitary system of government, such as the
government under the Philippine Constitution, local governments can only be an intra sovereign subdivision of one
sovereign nation, it cannot be an imperium in imperio. Local government in such a system can only mean a measure
of decentralization of the function of government. (Emphasis supplied) As to what state powers should be
"decentralized" and what may be delegated to local government units remains a matter of policy, which concerns
wisdom. It is therefore a political question. (Citizens Alliance for Consumer Protection v. Energy Regulatory Board,
162 SCRA 539). What is settled is that the matter of regulating, taxing or otherwise dealing with gambling is a State
concern and hence, it is the sole prerogative of the State to retain it or delegate it to local governments.
10. ID.; NOT A VIOLATION OF EQUAL PROTECTION CLAUSE. Petitioners next contend that P.D. 1869
violates the equal protection clause of the Constitution, because "it legalized PAGCOR conducted gambling,
while most gambling are outlawed together with prostitution, drug trafficking and other vices" We, likewise, find no
valid ground to sustain this contention. The petitioners posture ignores the well-accepted meaning of the clause
"equal protection of the laws." The clause does not preclude classification of individuals who may be accorded
different treatment under the law as long as the classification is not unreasonable or arbitrary (Itchong v. Hernandez,
101 Phil. 1155). A law does not have to operate in equal force on all persons or things to be conformable to Article
III, Section 1 of the Constitution (DECS v. San Diego, G.R. No. 89572, December 21, 1989). The "equal protection
clause" does not prohibit the Legislature from establishing classes of individuals or objects upon which different
rules shall operate (Laurel v. Misa, 43 O.G. 2847). The Constitution does not require situations which are different
in fact or opinion to be treated in law as though they were the same (Gomez v. Palomar, 25 SCRA 827). Just how
P.D. 1869 in legalizing gambling conducted by PAGCOR is violative of the equal protection is not clearly explained
in the petition. The mere fact that some gambling activities like cockfighting (P.D. 449) horse racing (R.A. 306 as
amended by RA 983), sweepstakes, lotteries and races (RA 1169 as amended by B.P. 42) are legalized under certain
conditions, while others are prohibited, does not render the applicable laws, P.D. 1869 for one, unconstitutional. "If
the law presumably hits the evil where it is most felt, it is not to be overthrown because there are other instances to
which it might have been applied." (Gomez v. Palomar, 25 SCRA 827) "The equal protection clause of the 14th
Amendment does not mean that all occupations called by the same name must be treated the same way; the state
may do what it can to prevent which is deemed as evil and stop short of those cases in which harm to the few
concerned is not less than the harm to the public that would insure if the rule laid down were made mathematically
exact." (Dominican Hotel v. Arizana, 249 US 2651)
11. ID.; PRESUMED VALID AND CONSTITUTIONAL. As this Court held in Citizens Alliance for Consumer
Protection v. Energy regulatory Board, 162 SCRA 521 "Presidential Decree No. 1956, as amended by Executive
Order No. 137 has, in any case, in its favor the presumption of validity and constitutionality which petitioners
Valmonte and the KMU have not overturned. Petitioners have not undertaken to identity the provisions in the
Constitution which they claim to have been violated by that statute. This Court, however, is not compelled to
speculate and to imagine how the assailed legislation may possibly offend some provision of the Constitution. The
Court notes, further, in this respect that petitioners have in the main put in question the wisdom, justice and
expediency of the establishment of the OPSF, issues which are not properly addressed to this Court and which this
Court may not constitutionally pass upon. Those issues should be addressed rather to the political departments of
government: the President and the Congress." chanroblesvirtuallawlibrary:red
PADILLA, J., concurring:chanrob1es virtual 1aw library
1. POLITICAL LAW; LEGISLATIVE AND EXECUTIVE DEPARTMENT; VESTED WITH POWER TO DECIDE
STATE POLICY. J. Padilla concur in the result of the learned decision penned by my brother Mr. Justice Paras.
This means that I agree with the decision insofar as it holds that the prohibition, control, and regulation of the entire
activity known as gambling properly pertain to "state policy." It is, therefore, the political departments of
government, namely, the legislative and the executive that should decide on what government should do in the entire
area of gambling, and assume full responsibility to the people for such policy. The courts, as the decision states,
cannot inquire into the wisdom, morality or expediency of policies adopted by the political departments of

government in areas which fall within their authority, except only when such policies pose a clear and present
danger to the life, liberty or property of the individual. This case does not involve such a factual situation.
2. ID.; LEGISLATIVE DEPARTMENT; MUST OUTLAW ALL FORMS OF GAMBLING, AS A
FUNDAMENTAL STATE OF POLICY; REASON THEREFOR. J. Padilla hasten to make of record that I do not
subscribe to gambling in any form. It demeans the human personality, destroys self-confidence and eviscerates ones
self-respect, which in the long run will corrode whatever is left of the Filipino moral character. Gambling has
wrecked and will continue to wreck families and homes; it is an antithesis to individual reliance and reliability as
well as personal industry which are the touchstones of real economic progress and national development. Gambling
is reprehensible whether maintained by government or privatized. The revenues realized by the government out of
"legalized" gambling will, in the long run, be more than offset and negated by the irreparable damage to the peoples
moral values. Also, the moral standing of the government in its repeated avowals against "illegal gambling" is fatally
flawed and becomes untenable when it itself engages in the very activity it seeks to eradicate. One can go through
the Courts decision today and mentally replace the activity referred to therein as gambling, which is legal only
because it is authorized by law and run by the government, with the activity known as prostitution. Would
prostitution be any less reprehensible were it to be authorized by law, franchised, and "regulated" by the
government, in return for the substantial revenues it would yield the government to carry out its laudable projects,
such as infrastructure and social amelioration? The question, I believe, answers itself. I submit that the sooner the
legislative department outlaws all forms of gambling, as a fundamental state policy, and the sooner the executive
implements such policy, the better it will be for the nation.
DECISION
PARAS, J.:
A TV ad proudly announces:jgc:chanrobles.com.ph
"The new PAGCOR responding through responsible gaming."cralaw virtua1aw library
But the petitioners think otherwise, that is why, they filed the instant petition seeking to annul the Philippine
Amusement and Gaming Corporation (PAGCOR) Charter PD 1869, because it is allegedly contrary to morals,
public policy and order, and because
"A. It constitutes a waiver of a right prejudicial to a third person with a right recognized by law. It waived the
Manila City governments right to impose taxes and license fees, which is recognized by law;
"B. For the same reason stated in the immediately preceding paragraph, the law has intruded into the local
governments right to impose local taxes and license fees. This, in contravention of the constitutionally enshrined
principle of local autonomy;
"C. It violates the equal protection clause of the constitution in that it legalizes PAGCOR conducted gambling,
while most other forms of gambling are outlawed, together with prostitution, drug trafficking and other vices;
"D. It violates the avowed trend of the Cory government away from monopolistic and crony economy, and toward
free enterprise and privatization." (p. 2, Amended Petition; p. 7, Rollo)
In their Second Amended Petition, petitioners also claim that PD 1869 is contrary to the declared national policy of
the "new restored democracy" and the peoples will as expressed in the 1987 Constitution. The decree is said to have
a "gambling objective" and therefore is contrary to Sections 11, 12 and 13 of Article II, Sec. 1 of Article VIII and
Section 3 (2) of Article XIV, of the present Constitution (p. 3, Second Amended Petition; p. 21,
Rollo).chanroblesvirtuallawlibrary
The procedural issue is whether petitioners, as taxpayers and practicing lawyers (petitioner Basco being also the
Chairman of the Committee on Laws of the City Council of Manila), can question and seek the annulment of PD
1869 on the alleged grounds mentioned above.
The Philippine Amusements and Gaming Corporation (PAGCOR) was created by virtue of P.D. 1067-A dated
January 1, 1977 and was granted a franchise under P.D. 1067-B also dated January 1, 1977 "to establish, operate and
maintain gambling casinos on land or water within the territorial jurisdiction of the Philippines." Its operation was
originally conducted in the well known floating casino "Philippine Tourist." The operation was considered a success
for it proved to be a potential source of revenue to fund infrastructure and socioeconomic projects, thus, P.D. 1399
was passed on June 2, 1978 for PAGCOR to fully attain this objective.
Subsequently, on July 11, 1983, PAGCOR was created under P.D. 1869 to enable the Government to regulate and
centralize all games of chance authorized by existing franchise or permitted by law, under the following declared

policy
"Section 1. Declaration of Policy. It is hereby declared to be the policy of the State to centralize and integrate all
games of chance not heretofore authorized by existing franchises or permitted by law in order to attain the following
objectives:jgc:chanrobles.com.ph
"(a) To centralize and integrate the right and authority to operate and conduct games of chance into one corporate
entity to be controlled, administered and supervised by the Government.
"(b) To establish and operate clubs and casinos, for amusement and recreation, including sports gaming pools,
(basketball, football, lotteries, etc.) and such other forms of amusement and recreation including games of chance,
which may be allowed by law within the territorial jurisdiction of the Philippines and which will: (1) generate
sources of additional revenue to fund infrastructure and socio-civic projects, such as flood control programs,
beautification, sewerage and sewage projects, Tulungan ng Bayan Centers, Nutritional Programs Population Control
and such other essential public services; (2) create recreation and integrated facilities which will expand and
improve the countrys existing tourist attractions; and (3) minimize, if not totally eradicate, all the evils, malpractices
and corruptions that are normally prevalent on the conduct and operation of gambling clubs and casinos without
direct government involvement." (Section 1, P.D. 1869)
To attain these objectives PAGCOR is given territorial jurisdiction all over the Philippines. Under its Charters
repealing clause, all laws, decrees, executive orders, rules and regulations, inconsistent therewith, are accordingly
repealed, amended or modified.
It is reported that PAGCOR is the third largest source of government revenue, next to the Bureau of Internal
Revenue and the Bureau of Customs. In 1989 alone, PAGCOR earned P3.43 Billion, and directly remitted to the
National Government a total of P2.5 Billion in form of franchise tax, governments income share, the Presidents
Social Fund and Host Cities share. In addition, PAGCOR sponsored other socio-cultural and charitable projects on
its own or in cooperation with various governmental agencies, and other private associations and organizations. In
its 3 1/2 years of operation under the present administration, PAGCOR remitted to the government a total of P6.2
Billion. As of December 31, 1989, PAGCOR was employing 4,494 employees in its nine (9) casinos nationwide,
directly supporting the livelihood of Four Thousand Four Hundred Ninety-Four (4,494) families.chanrobles
virtualawlibrary chanrobles.com:chanrobles.com.ph
But the petitioners, are questioning the validity of P.D. No. 1869. They allege that the same is "null and void" for
being "contrary to morals, public policy and public order," monopolistic and tends toward "crony economy", and is
violative of the equal protection clause and local autonomy as well as for running counter to the state policies
enunciated in Sections 11 (Personal Dignity and Human Rights), 12 (Family) and 13 (Role of Youth) of Article II,
Section 1 (Social Justice) of Article XIII and Section 2 (Educational Values) of Article XIV of the 1987 Constitution.
This challenge to P.D. No. 1869 deserves a searching and thorough scrutiny and the most deliberate consideration by
the Court, involving as it does the exercise of what has been described as "the highest and most delicate function
which belongs to the judicial department of the government." (State v. Manuel, 20 N.C. 144; Lozano v. Martinez,
146 SCRA 323).
As We enter upon the task of passing on the validity of an act of a co-equal and coordinate branch of the government
We need not be reminded of the time-honored principle, deeply ingrained in our jurisprudence, that a statute is
presumed to be valid. Every presumption must be indulged in favor of its constitutionality. This is not to say that We
approach Our task with diffidence or timidity. Where it is clear that the legislature or the executive for that matter,
has over-stepped the limits of its authority under the constitution, We should not hesitate to wield the axe and let it
fall heavily, as fall it must, on the offending statute (Lozano v. Martinez, supra).
In Victoriano v. Elizalde Rope Workers Union, et al, 59 SCRA 54, the Court thru Mr. Justice Zaldivar underscored
the
". . . thoroughly established principle which must be followed in all cases where questions of constitutionality as
obtain in the instant cases are involved. All presumptions are indulged in favor of constitutionality; one who attacks
a statute alleging unconstitutionality must prove its invalidity beyond a reasonable doubt; that a law may work
hardship does not render it unconstitutional; that if any reasonable basis may be conceived which supports the
statute, it will be upheld and the challenger must negate all possible basis; that the courts are not concerned with the
wisdom, justice, policy or expediency of a statute and that a liberal interpretation of the constitution in favor of the
constitutionality of legislation should be adopted." (Danner v. Hass, 194 N.W. 2nd 534, 539, Spurbeck v. Statton,
106 N.W. 2nd 660, 663; 59 SCRA 66; see also e.g. Salas v. Jarencio, 46 SCRA 734, 739 [1970]; Peralta v.
Commission on Elections, 82 SCRA 30, 55 [1978]; and Heirs of Ordona v. Reyes, 125 SCRA 220, 241-242 [1983]
cited in Citizens Alliance for Consumer Protection v. Energy Regulatory Board, 162 SCRA 521, 540).
Of course, there is first, the procedural issue. The respondents are questioning the legal personality of petitioners to
file the instant petition.

Considering however the importance to the public of the case at bar, and in keeping with the Courts duty, under the
1987 Constitution, to determine whether or not the other branches of government have kept themselves within the
limits of the Constitution and the laws and that they have not abused the discretion given to them, the Court has
brushed aside technicalities of procedure and has taken cognizance of this petition. (Kapatiran ng mga Naglilingkod
sa Pamahalaan ng Pilipinas Inc. v. Tan, 163 SCRA 371)chanroblesvirtual|awlibrary
"With particular regard to the requirement of proper party as applied in the cases before us, We hold that the same is
satisfied by the petitioners and intervenors because each of them has sustained or is in danger of sustaining an
immediate injury as a result of the acts or measures complained of And even if, strictly speaking they are not
covered by the definition, it is still within the wide discretion of the Court to waive the requirement and so remove
the impediment to its addressing and resolving the serious constitutional questions raised.
"In the first Emergency Powers Cases, ordinary citizens and taxpayers were allowed to question the constitutionality
of several executive orders issued by President Quirino although they were involving only an indirect and general
interest shared in common with the public. The Court dismissed the objection that they were not proper parties and
ruled that the transcendental importance to the public of these cases demands that they be settled promptly and
definitely, brushing aside, if we must technicalities of procedure. We have since then applied the exception in many
other cases." (Association of Small Landowners in the Philippines, Inc. v. Sec. of Agrarian Reform, 175 SCRA 343).
Having disposed of the procedural issue, We will now discuss the substantive issues raised.
Gambling in all its forms, unless allowed by law, is generally prohibited. But the prohibition of gambling does not
mean that the Government cannot regulate it in the exercise of its police power.
The concept of police power is well-established in this jurisdiction. It has been defined as the "state authority to
enact legislation that may interfere with personal liberty or property in order to promote the general welfare." (Edu
v. Ericta, 35 SCRA 481, 487) As defined, it consists of (1) an imposition or restraint upon liberty or property, (2) in
order to foster the common good. It is not capable of an exact definition but has been, purposely, veiled in general
terms to underscore its all-comprehensive embrace. (Philippine Association of Service Exporters, Inc. v. Drilon, 163
SCRA 386).
Its scope, ever-expanding to meet the exigencies of the times, even to anticipate the future where it could be done,
provides enough room for an efficient and flexible response to conditions and circumstances thus assuming the
greatest benefits. (Edu v. Ericta, supra).
It finds no specific Constitutional grant for the plain reason that it does not owe its origin to the charter. Along with
the taxing power and eminent domain, it is inborn in the very fact of statehood and sovereignty. It is a fundamental
attribute of government that has enabled it to perform the most vital functions of governance. Marshall, to whom the
expression has been credited, refers to it succinctly as the plenary power of the state "to govern its citizens." (Tribe,
American Constitutional Law, 323, 1978). The police power of the State is a power co-extensive with selfprotection. and is most aptly termed the "law of overwhelming necessity." (Rubi v. Provincial Board of Mindoro, 39
Phil. 660, 708) It is "the most essential, insistent, and illimitable of powers." (Smith Bell & Co. v. National, 40 Phil.
136) It is a dynamic force that enables the state to meet the exigencies of the winds of change.
What was the reason behind the enactment of P.D. 1869?
P.D. 1869 was enacted pursuant to the policy of the government to "regulate and centralize thru an appropriate
institution all games of chance authorized by existing franchise or permitted by law" (1st whereas clause, PD 1869).
As was subsequently proved, regulating and centralizing gambling operations in one corporate entity the
PAGCOR, was beneficial not just to the Government but to society in general. It is a reliable source of much needed
revenue for the cash strapped Government. It provided funds for social impact projects and subjected gambling to
"close scrutiny, regulation, supervision and control of the Government" (4th Whereas Clause, PD 1869). With the
creation of PAGCOR and the direct intervention of the Government, the evil practices and corruptions that go with
gambling will be minimized if not totally eradicated. Public welfare, then, lies at the bottom of the enactment of PD
1896.chanrobles lawlibrary : rednad
Petitioners contend that P.D. 1869 constitutes a waiver of the right of the City of Manila to impose taxes and legal
fees; that the exemption clause in P.D. 1869 is violative of the principle of local autonomy. They must be referring to
Section 13 par. (2) of P.D. 1869 which exempts PAGCOR, as the franchise holder from paying any "tax of any kind
or form, income or otherwise, as well as fees, charges or levies of whatever nature, whether National or
Local."cralaw virtua1aw library
"(2) Income and other taxes. (a) Franchise Holder: No tax of any kind or form, income or otherwise as well as
fees, charges or levies of whatever nature, whether National or Local, shall be assessed and collected under this
franchise from the Corporation; nor shall any form of tax or charge attach in any way to the earnings of the
Corporation, except a franchise tax of five (5%) percent of the gross revenues or earnings derived by the
Corporation from its operations under this franchise. Such tax shall be due and payable quarterly to the National
Government and shall be in lien of all kinds of taxes, levies, fees or assessments of any kind, nature or description,

levied, established or collected by any municipal, provincial or national government authority" (Section 13 [2]).
Their contention stated hereinabove is without merit for the following reasons:chanrob1es virtual 1aw library
(a) The City of Manila, being a mere Municipal corporation has no inherent right to impose taxes (Icard v. City of
Baguio, 83 Phil. 870; City of Iloilo v. Villanueva, 105 Phil. 337; Santos v. Municipality of Caloocan, 7 SCRA 643).
Thus, "the Charter or statute must plainly show an intent to confer that power or the municipality cannot assume it"
(Medina v. City of Baguio, 12 SCRA 62). Its "power to tax" therefore must always yield to a legislative act which is
superior having been passed upon by the state itself which has the "inherent power to tax" (Bernas, the Revised
[1973] Philippine Constitution, Vol. 1, 1983 ed. p. 445).
(b) The Charter of the City of Manila is subject to control by Congress. It should be stressed that "municipal
corporations are mere creatures of Congress" (Unson v. Lacson, G.R. No. 7909, January 18, 1957) which has the
power to "create and abolish municipal corporations" due to its "general legislative powers" (Asuncion v. Yriantes,
28 Phil. 67; Merdanillo v. Orandia, 5 SCRA 541). Congress, therefore, has the power of control over Local
governments (Hebron v. Reyes, G.R. No. 9124, July 2, 1950). And if Congress can grant the City of Manila the
power to tax certain matters, it can also provide for exemptions or even take back the power.
(c) The City of Manilas power to impose license fees on gambling, has long been revoked. As early as 1975, the
power of local governments to regulate gambling thru the grant of "franchise, licenses or permits" was withdrawn by
P.D. No. 771 and was vested exclusively on the National Government, thus:jgc:chanrobles.com.ph
"Section 1. Any provision of law to the contrary notwithstanding, the authority of chartered cities and other local
governments to issue license, permit or other form of franchise to operate, maintain and establish horse and dog race
tracks, jai-alai and other forms of gambling is hereby revoked.
"Section 2. Hereafter, all permits or franchises to operate, maintain and establish, horse and dog race tracks, jai-alai
and other forms of gambling shall be issued by the national government upon proper application and verification of
the qualification of the applicant. . . ."cralaw virtua1aw library
Therefore, only the National Government has the power to issue "licenses or permits" for the operation of gambling.
Necessarily, the power to demand or collect license fees which is a consequence of the issuance of "licenses or
permits" is no longer vested in the City of Manila.
(d) Local governments have no power to tax instrumentalities of the National Government. PAGCOR is a
government owned or controlled corporation with an original charter, PD 1869. All of its shares of stocks are owned
by the National Government. In addition to its corporate powers (Sec. 3, Title II, PD 1869) it also exercises
regulatory powers, thus:jgc:chanrobles.com.ph
"Sec. 9. Regulatory Power. The Corporation shall maintain a Registry of the affiliated entities, and shall exercise
all the powers, authority and the responsibilities vested in the Securities and Exchange Commission over such
affiliating entities mentioned under the preceding section, including, but not limited to amendments of Articles of
Incorporation and By-Laws, changes in corporate term, structure, capitalization and other matters concerning the
operation of the affiliated entities, the provisions of the Corporation Code of the Philippines to the contrary
notwithstanding, except only with respect to original incorporation." chanroblesvirtual|awlibrary
PAGCOR has a dual role, to operate and to regulate gambling casinos. The latter role is governmental, which places
it in the category of an agency or instrumentality of the Government. Being an instrumentality of the Government,
PAGCOR should be and actually is exempt from local taxes. Otherwise, its operation might be burdened, impeded
or subjected to control by a mere Local government.
"The states have no power by taxation or otherwise, to retard impede, burden or in any manner control the operation
of constitutional laws enacted by Congress to carry into execution the powers vested in the federal government."
(MC Culloch v. Marland, 4 Wheat 316, 4 L Ed. 579)
This doctrine emanates from the "supremacy" of the National Government over local governments.
"Justice Holmes, speaking for the Supreme Court, made reference to the entire absence of power on the part of the
States to touch, in that way (taxation) at least, the instrumentalities of the United States (Johnson v. Maryland, 254
US 51) and it can be agreed that no state or political subdivision can regulate a federal instrumentality in such a way
as to prevent it from consummating its federal responsibilities, or even to seriously burden it in the accomplishment
of them." (Antieau, Modern Constitutional Law, Vol. 2, p. 140, Emphasis supplied)
Otherwise, mere creatures of the State can defeat National policies thru extermination of what local authorities may
perceive to be undesirable activates or enterprise using the power to tax as "a tool for regulation" (U.S. v. Sanchez,
340 US 42).
The power to tax which was called by Justice Marshall as the "power to destroy" (Mc Culloch v. Maryland, supra)

cannot be allowed to defeat an instrumentality or creation of the very entity which has the inherent power to wield it.
(e) Petitioners also argue that the Local Autonomy Clause of the Constitution will be violated by P.D. 1869. This is a
pointless argument. Article X of the 1987 Constitution (on Local Autonomy) provides:jgc:chanrobles.com.ph
"Sec. 5. Each local government unit shall have the power to create its own source of revenue and to levy taxes, fees,
and other charges subject to such guidelines and limitation as the congress may provide, consistent with the basic
policy on local autonomy. Such taxes, fees and charges shall accrue exclusively to the local government." (Emphasis
supplied).
The power of local government to "impose taxes and fees" is always subject to "limitations" which Congress may
provide by law. Since PD 1869 remains an "operative" law until "amended, repealed or revoked" (Sec. 3, Art. XVIII,
1987 Constitution), its "exemption clause" remains as an exception to the exercise of the power of local
governments to impose taxes and fees. It cannot therefore be violative but rather is consistent with the principle of
local autonomy.chanroblesvirtualawlibrary
Besides, the principle of local autonomy under the 1987 Constitution simply means "decentralization" (III Records
of the 1987 Constitutional Commission, pp. 436-436, as cited in Bernas, The Constitution of the Republic of the
Philippines, Vol. II, First Ed., 1988, p. 374). It does not make local governments sovereign within the state or an
"imperium in imperio."cralaw virtua1aw library
"Local Government has been described as a political subdivision of a nation or state which is constituted by law and
has substantial control of local affairs. In a unitary system of government, such as the government under the
Philippine Constitution, local governments can only be an intra sovereign subdivision of one sovereign nation, it
cannot be an imperium in imperio. Local government in such a system can only mean a measure of decentralization
of the function of government. (Emphasis supplied)
As to what state powers should be "decentralized" and what may be delegated to local government units remains a
matter of policy, which concerns wisdom. It is therefore a political question. (Citizens Alliance for Consumer
Protection v. Energy Regulatory Board, 162 SCRA 539).
What is settled is that the matter of regulating, taxing or otherwise dealing with gambling is a State concern and
hence, it is the sole prerogative of the State to retain it or delegate it to local governments.
"As gambling is usually an offense against the State, legislative grant or express charter power is generally
necessary to empower the local corporation to deal with the subject. . . . In the absence of express grant of power to
enact, ordinance provisions on this subject which are inconsistent with the state laws are void." (Ligan v. Gadsden,
Ala App. 107 So. 733 Ex-Parte Solomon, 9, Cals. 440, 27 PAC 757 following in re Ah You, 88 Cal. 99, 25 PAC 974,
22 Am St. Rep. 280, 11 LRA 480, as cited in Mc Quinllan Vol. 3 ibid, p. 548, Emphasis supplied).
Petitioners next contend that P.D. 1869 violates the equal protection clause of the Constitution, because "it legalized
PAGCOR conducted gambling, while most gambling are outlawed together with prostitution, drug trafficking
and other vices" (p. 82, Rollo).
We, likewise, find no valid ground to sustain this contention. The petitioners posture ignores the well-accepted
meaning of the clause "equal protection of the laws." The clause does not preclude classification of individuals who
may be accorded different treatment under the law as long as the classification is not unreasonable or arbitrary
(Itchong v. Hernandez, 101 Phil. 1155). A law does not have to operate in equal force on all persons or things to be
conformable to Article III, Section 1 of the Constitution (DECS v. San Diego, G.R. No. 89572, December 21, 1989).
The "equal protection clause" does not prohibit the Legislature from establishing classes of individuals or objects
upon which different rules shall operate (Laurel v. Misa, 43 O.G. 2847). The Constitution does not require situations
which are different in fact or opinion to be treated in law as though they were the same (Gomez v. Palomar, 25
SCRA 827).
Just how P.D. 1869 in legalizing gambling conducted by PAGCOR is violative of the equal protection is not clearly
explained in the petition. The mere fact that some gambling activities like cockfighting (P.D. 449) horse racing (R.A.
306 as amended by RA 983), sweepstakes, lotteries and races (RA 1169 as amended by B.P. 42) are legalized under
certain conditions, while others are prohibited, does not render the applicable laws, P.D. 1869 for one,
unconstitutional.
"If the law presumably hits the evil where it is most felt, it is not to be overthrown because there are other instances
to which it might have been applied." (Gomez v. Palomar, 25 SCRA 827)
"The equal protection clause of the 14th Amendment does not mean that all occupations called by the same name
must be treated the same way; the state may do what it can to prevent which is deemed as evil and stop short of
those cases in which harm to the few concerned is not less than the harm to the public that would insure if the rule
laid down were made mathematically exact." (Dominican Hotel v. Arizana, 249 US 2651)

Anent petitioners claim that PD 1869 is contrary to the "avowed trend of the Cory Government away from
monopolies and crony economy and toward free enterprise and privatization" suffice it to state that this is not a
ground for this Court to nullify P.D. 1869. If, indeed, PD 1869 runs counter to the governments policies then it is
for the Executive Department to recommend to Congress its repeal or amendment.chanrobles law library : red
"The judiciary does not settle policy issues. The Court can only declare what the law is and not what the law should
be. Under our system of government, policy issues are within the domain of the political branches of government
and of the people themselves as the repository of all state power." (Valmonte v. Belmonte, Jr., 170 SCRA 256.)
On the issue of "monopoly," however, the Constitution provides that:jgc:chanrobles.com.ph
"Sec. 19. The State shall regulate or prohibit monopolies when public interest so requires. No combinations in
restraint of trade or unfair competition shall be allowed." (Art. XII, National Economy and Patrimony)
It should be noted that, as the provision is worded, monopolies are not necessarily prohibited by the Constitution.
The state must still decide whether public interest demands that monopolies be regulated or prohibited. Again, this is
a matter of policy for the Legislature to decide.
On petitioners allegation that P.D. 1869 violates Sections 11 (Personality Dignity) 12 (Family) and 13 (Role of
Youth) of Article II; Section 13 (Social Justice) of Article XIII and Section 2 (Educational Values) of Article XIV of
the 1987 Constitution, suffice it to state also that these are merely statements of principles and policies. As such,
they are basically not self-executing, meaning a law should be passed by Congress to clearly define and effectuate
such principles.chanrobles virtual lawlibrary
"In general, therefore, the 1935 provisions were not intended to be self-executing principles ready for enforcement
through the Courts. They were rather directives addressed to the executive and the legislature. If the executive and
the legislature failed to heed the directives of the articles the available remedy was not judicial or political. The
electorate could express their displeasure with the failure of the executive and the legislature through the language of
the ballot." (Bernas, Vol. II, p. 2)
Every law has in its favor the presumption of constitutionality (Yu Cong Eng v. Trinidad, 47 Phil. 387; Salas v.
Jarencio, 48 SCRA 734; Peralta v. Comelec, 82 SCRA 30; Abbas v. Comelec, 179 SCRA 287). Therefore, for PD
1869 to be nullified, it must be shown that there is a clear and unequivocal breach of the Constitution, not merely a
doubtful and equivocal one. In other words, the grounds for nullity must be clear and beyond reasonable doubt.
(Peralta v. Comelec, supra) Those who petition this Court to declare a law, or parts thereof, unconstitutional must
clearly establish the basis for such a declaration. Otherwise, their petition must fail. Based on the grounds raised by
petitioners to challenge the constitutionality of P.D. 1869, the Court finds that petitioners have failed to overcome
the presumption. The dismissal of this petition is therefore, inevitable. But as to whether P.D. 1869 remains a wise
legislation considering the issues of "morality, monopoly, trend to free enterprise, privatization as well as the state
principles on social justice, role of youth and educational values" being raised, is up for Congress to
determine.chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph
As this Court held in Citizens Alliance for Consumer Protection v. Energy regulatory Board, 162 SCRA 521
"Presidential Decree No. 1956, as amended by Executive Order No. 137 has, in any case, in its favor the
presumption of validity and constitutionality which petitioners Valmonte and the KMU have not overturned.
Petitioners have not undertaken to identity the provisions in the Constitution which they claim to have been violated
by that statute. This Court, however, is not compelled to speculate and to imagine how the assailed legislation may
possibly offend some provision of the Constitution. The Court notes, further, in this respect that petitioners have in
the main put in question the wisdom, justice and expediency of the establishment of the OPSF, issues which are not
properly addressed to this Court and which this Court may not constitutionally pass upon. Those issues should be
addressed rather to the political departments of government: the President and the Congress."cralaw virtua1aw
library
Parenthetically, We wish to state that gambling is generally immoral, and this is precisely so when the gambling
resorted to is excessive. This excessiveness necessarily depends not only on the financial resources of the gambler
and his family but also on his mental, social, and spiritual outlook-on life. However, the mere fact that some persons
may have lost their material fortunes, mental control, physical health, or even their lives does not necessarily mean
that the same are directly attributable to gambling. Gambling may have been the antecedent, out certainly not
necessarily the cause. For the same consequences could have been preceded by an overdose of food, drink, exercise,
work, and even sex.chanrobles.com : virtual law library
WHEREFORE, the petition is DISMISSED for lack of merit.
SO ORDERED.
Fernan, C.J., Narvasa, Gutierrez, Jr., Cruz, Feliciano, Gancayco, Bidin, Sarmiento, Grio-Aquino, Medialdea,

Regalado and Davide, Jr., JJ., concur.


Melencio-Herrera, J., concurring in the result with Justice Padilla.
Separate Opinions
PADILLA, J., concurring:chanrob1es virtual 1aw library
I concur in the result of the learned decision penned by my brother Mr. Justice Paras. This means that I agree with
the decision insofar as it holds that the prohibition, control, and regulation of the entire activity known as gambling
properly pertain to "state policy." It is, therefore, the political departments of government, namely, the legislative
and the executive that should decide on what government should do in the entire area of gambling, and assume full
responsibility to the people for such policy.chanroblesvirtualawlibrary
The courts, as the decision states, cannot inquire into the wisdom, morality or expediency of policies adopted by the
political departments of government in areas which fall within their authority, except only when such policies pose a
clear and present danger to the life, liberty or property of the individual. This case does not involve such a factual
situation.
However, I hasten to make of record that I do not subscribe to gambling in any form. It demeans the human
personality, destroys self-confidence and eviscerates ones self-respect, which in the long run will corrode whatever
is left of the Filipino moral character. Gambling has wrecked and will continue to wreck families and homes; it is an
antithesis to individual reliance and reliability as well as personal industry which are the touchstones of real
economic progress and national development.
Gambling is reprehensible whether maintained by government or privatized. The revenues realized by the
government out of "legalized" gambling will, in the long run, be more than offset and negated by the irreparable
damage to the peoples moral values.
Also, the moral standing of the government in its repeated avowals against "illegal gambling" is fatally flawed and
becomes untenable when it itself engages in the very activity it seeks to eradicate.chanrobles.com:cralaw:red
One can go through the Courts decision today and mentally replace the activity referred to therein as gambling,
which is legal only because it is authorized by law and run by the government, with the activity known as
prostitution. Would prostitution be any less reprehensible were it to be authorized by law, franchised, and
"regulated" by the government, in return for the substantial revenues it would yield the government to carry out its
laudable projects, such as infrastructure and social amelioration? The question, I believe, answers itself. I submit
that the sooner the legislative department outlaws all forms of gambling, as a fundamental state policy, and the
sooner the executive implements such policy, the better it will be for the nation.

[G.R. No. 118303. January 31, 1996.]


SENATOR HEHERSON T. ALVAREZ, SENATOR JOSE D. LINA, JR., MR. NICASIO B. BAUTISTA, MR.
JESUS P. GONZAGA, MR. SOLOMON D. MAYLEM, LEONORA C. MEDINA, CASIANO S.
ALIPON, Petitioners, v. HON. TEOFISTO T. GUINGONA, JR., in his capacity as Executive Secretary, HON.
RAFAEL ALUNAN, in his capacity as Secretary of Local Government, HON. SALVADOR ENRIQUEZ, in
his capacity as Secretary of Budget, THE COMMISSION ON AUDIT, HON. JOSE MIRANDA, in his
capacity as Municipal Mayor of Santiago and HON. CHARITO MANUBAY, HON. VICTORINO
MIRANDA, JR., HON. ARTEMIO ALVAREZ, HON. DANILO VERGARA, HON. PETER DE JESUS,
HON. NELIA NATIVIDAD, HON. CELSO CALEON and HON. ABEL MUSNGI, in their capacity as
SANGGUNIANG BAYAN MEMBERS, MR. RODRIGO L. SANTOS, in his capacity as Municipal Treasurer,
and ATTY. ALFREDO S. DIRIGE, in his capacity as Municipal Administrator, Respondents.
Belo, Gozon, Elma, Parel, Asuncion & Lucila, for Petitioners.
Rene P. Pine, for Private Respondents.
SYLLABUS
1. ADMINISTRATIVE LAW; LOCAL GOVERNMENT CODE; LOCAL GOVERNMENT, CONSTRUED. A
local Government Unit is a political subdivision of the State which is constituted by law and possessed of substantial

control over its own affairs. Remaining to be an intra sovereign subdivision of one sovereign nation, but not
intended, however, to be an emperium in emperia, the local government unit is autonomous in the sense that it is
given more powers, authority, responsibilities and resources.
2. ID.; ID.; INCOME DEFINED. Income is defined in the Local Government Code to be all revenues and
receipts collected or received forming the gross accretions of funds of the local government unit.
3. ID.; ID.; INTERNAL REVENUE ALLOTMENT (IRA) ARE ITEMS OF INCOME. The IRAs are items of
income because they form part of the gross accretion of the funds of the local government unit. The IRAs regularly
and automatically accrue to the local treasury without need of any further action on the part of the local government
unit. They thus constitute income which the local government can invariably rely upon as the source of much needed
funds.
4. ID.; ID.; ANNUAL INCOME DEFINED. Department of Finance Order No. 35-93 correctly encapsulizes the
full import of the above disquisition when it defined ANNUAL INCOME to be "revenues and receipts realized by
provinces, cities and municipalities from regular sources of the Local General Fund including the internal revenue
allotment and other shares provided for in Sections 284, 290 and 291 of the Code, but exclusive of n.on.-recurring
receipts, such as other national aids, grants, financial assistance, loan proceeds, sales of fixed assets, and similar
others" (Emphasis ours).
5. STATUTORY CONSTRUCTION; ORDER CONSTITUTING EXECUTIVE OR CONTEMPORANEOUS
CONSTRUCTION OF A STATUTE BY ADMINISTRATIVE AGENCY CHARGED WITH THE TASK OF
INTERPRETING THE SAME, ENTITLED TO FULL RESPECT. Such order, constituting executive or
contemporaneous construction of a statute by an administrative agency charged with the task of interpreting and
applying the same, is entitled to full respect and should be accorded great weight by the courts, unless such
construction is clearly shown to be in sharp conflict with the Constitution, the governing statute, or other laws.
6. CONSTITUTIONAL LAW; LEGISLATIVE; BILL CONVERTING MUNICIPALITY TO CITY MUST
ORIGINATE FROM THE HOUSE; PASSING OF SUBSEQUENT BILL COVERING THE SAME
MUNICIPALITY, NO ADVERSE EFFECT. Although a bill of local application like HB No. 8817 should, by
constitutional prescription, originate exclusively in the House of Representatives, the claim of petitioners that
Republic Act No. 7720 did not originate exclusively in the House of Representatives because a bill of the same
import, SB No. 1243, was passed in the Senate, is untenable because it cannot be denied that HB No. 8817 was filed
in the House of Representatives first before SB No. 1243 was filed in the Senate. Petitioners themselves cannot
disavow their own admission that HB No. 8817 was filed on April 18, 1993 while SB No. 1243 was filed on May
19, 1993. The filing of HB No. 8817 was thus precursive not only of the said Act in question but also of SB No.
1243. Thus, HB No. 8817, was the bill that initiated the legislative process that culminated in the enactment of
Republic Act No. 7720. No violation of Section 24, Article VI, of the 1987 Constitution is perceptible under the
circumstances attending the instant controversy.
7. ID.; ID.; FILING IN THE SENATE OF A SUBSTITUTE BILL IN ANTICIPATION OF ITS RECEIPT OF THE
HOUSE BILL WITHOUT ACTING THEREON DOES NOT CONTRAVENE CONSTITUTIONAL
REQUIREMENT. Petitioners themselves acknowledge that HB No. 8817 was already approved on Third
Reading and duly transmitted to the Senate when the Senate Committee on Local Government conducted its public
hearing on HB No. 8817. HB No. 8817 was approved on the Third Reading on December 17, 1993 and transmitted
to the Senate on January 28, 1994; a little less than a month thereafter, or on February 23, 1994, the Senate
Committee on Local Government conducted public hearings on SB No. 1243. Clearly, the Senate held in abeyance
any action on SB No. 1243 until it received HB No. 8817, already approved on the Third Reading, from the House
of Representatives. The filing in the Senate of a substitute bill in anticipation of its receipt of the bill from the
House, does not contravene the constitutional requirement that a bill of local application should originate in the
House of Representatives, for as long as the Senate does not act thereupon until it receives the House bill.
8. REMEDIAL LAW; EVIDENCE; PRESUMPTIONS; EVERY LAW IS PRESUMED CONSTITUTIONAL;
CONSTITUTIONALITY OF R.A. 7720 NOT OVERCOME IN CASE AT BAR. It is a well-entrenched
jurisprudential rule that on the side of every law lies the presumption of constitutionality. Consequently, for RA No.
7720 to be nullified, it must be shown that there is a clear and unequivocal breach of the Constitution, not merely a
doubtful and equivocal one; in other words, the grounds for nullity must be clear and beyond reasonable doubt.
Those who petition this court to declare a law to be unconstitutional must clearly and fully establish the basis that
will justify such a declaration; otherwise, their petition must fail. Taking into consideration the justification of our
stand on the immediately preceding ground raised by petitioners to challenge the constitutionality of RA No. 7720,
the Court stands on the holding that petitioners have failed to overcome the presumption. The dismissal of this
petition is, therefore, inevitable.
DECISION
HERMOSISIMA. JR., J.:

Of main concern to the petitioners is whether Republic Act No. 7720, just recently passed by Congress and signed
by the President into law, is constitutionally infirm.
Indeed, in this Petition for Prohibition with prayer for Temporary Restraining Order and Preliminary Prohibitory
Injunction, petitioners assail the validity of Republic Act No. 7720, entitled, "An Act Converting the Municipality of
Santiago, Isabela into an Independent Component City to be known as the City of Santiago," mainly because the Act
allegedly did not originate exclusively in the House of Representatives as mandated by Section 24, Article VI of the
1987 Constitution.chanroblesvirtuallawlibrary
Also, petitioners claim that the Municipality of Santiago has not met the minimum average annual income required
under Section 450 of the Local Government Code of 1991 in order to be converted into a component city.
Undisputed is the following chronicle of the metamorphosis of House Bill No. 8817 into Republic Act No.
7720:chanrob1es virtual 1aw library
On April 18, 1993, HB No. 8817, entitled "An Act Converting the Municipality of Santiago into an Independent
Component City to be known as the City of Santiago," was filed in the House of Representatives with
Representative Antonio Abaya as principal author. Other sponsors included Representatives Ciriaco Alfelor, Rodolfo
Albano, Santiago Respicio and Faustino Dy. The bill was referred to the House Committee on Local Government
and the House Committee on Appropriations on May 5, 1993.chanroblesvirtuallawlibrary
On May 19, 1993, June 1, 1993, November 28, 1993, and December 1, 1993, public hearings on HB No. 8817 were
conducted by the House Committee on Local Government. The committee submitted to the House a favorable
report, with amendments, on December 9, 1993.
On December 13, 1993, HB No. 8817 was passed by the House of Representatives on Second Reading and was
approved on Third Reading on December 17, 1993. On January 28, 1994, HB No. 8817 was transmitted to the
Senate.
Meanwhile, a counterpart of HB No. 8817, Senate Bill No. 1243, entitled, "An Act Converting the Municipality of
Santiago into an Independent Component City to be Known as the City of Santiago," was filed in the Senate. It was
introduced by Senator Vicente Sotto III, as principal sponsor, on May 19, 1993. This was just after the House of
Representatives had conducted its first public hearing on HB No. 8817.chanroblesvirtuallawlibrary
On February 23, 1994, or a little less than a month after HB No. 8817 was transmitted to the Senate, the Senate
Committee on Local Government conducted public hearings on SB No. 1243. On March 1, 1994, the said committee
submitted Committee Report No. 378 on HB No. 8817, with the recommendation that it be approved without
amendment, taking into consideration the reality that H.B. No. 8817 was on all fours with SB No. 1243. Senator
Heherson T. Alvarez, one of the herein petitioners, indicated his approval thereto by signing said report as member
of the Committee on Local Government.
On March 3, 1994, Committee Report No. 378 was passed by the Senate on Second Reading and was approved on
Third Reading on March 14, 1994. On March 22, 1994, the House of Representatives, upon being apprised of the
action of the Senate, approved the amendments proposed by the Senate.
The enrolled bill, submitted to the President on April 12, 1994, was signed by the Chief Executive on May 5, 1994
as Republic Act No. 7720. When a plebiscite on the Act was held on July 13, 1994, a great majority of the registered
voters of Santiago voted in favor of the conversion of Santiago into a city.chanroblesvirtuallawlibrary
The question as to the validity of Republic Act No. 7720 hinges on the following twin issues: (I) Whether or not the
Internal Revenue Allotments (IRAs) are to included in the computation of the average annual income of a
municipality for purposes of its conversion into an independent component city, and (II) Whether or not, considering
that the Senate passed SB No. 1243, its own version of HB No. 8817, Republic Act No. 7720 can be said to have
originated in the House of Representatives.
I. The annual income of a local government unit includes the IRAs.
Petitioners claim that Santiago could not qualify into a component city because its average annual last two (2)
consecutive years based on 1991 constant prices falls below the required annual income of Pesos (P20,000,000.00)
for its conversion into a city, petitioners having computed Santiagos average annual income in the following
manner:
Total income (at 1991 constant prices) for 1991 P20,379,057.07
Total income (at 1991 constant prices) for 1992 P21,570,106.87


Total income for 1991 and 1992 P41,949,163.94
Minus:
IRAs for 1991 and 1992 P15,730,043.00

Total income for 1991 and 1992 P26,219,120.94


Average Annual Income P13,109,560.47
====================================
By dividing the total income of Santiago for calendar years 1991 and 1992, after deducting the IRAs, the average
annual income arrived at would only be P13,109,560.47 based on the 1991 constant prices. Thus, petitioners claim
that Santiagos income is far below the aforesaid Twenty Million Pesos average annual income requirement.
The certification issued by the Bureau of Local Government Finance of the Department of Finance, which indicates
Santiagos average annual income to be P20,974,581.97, is allegedly not accurate as the Internal Revenue
Allotments were not excluded from the computation. Petitioners asseverate that the IRAs are not actually income but
transfers and/or budgetary aid from the national government and that they fluctuate, increase or decrease, depending
on factors like population, land and equal sharing.
In this regard, we hold that petitioners asseverations are untenable because Internal Revenue Allotments form part
of the income of Local Government Units.chanroblesvirtuallawlibrary
It is true that for a municipality to be converted into a component city, it must, among others, have an average
annual income of at least Twenty Million Pesos for the last two (2) consecutive years based on 1991 constant prices.
1 Such income must be duly certified by the Department of Finance. 2
Resolution of the controversy regarding compliance by the Municipality of Santiago with the aforecited income
requirement hinges on a correlative and contextual explication of the meaning of internal revenue allotments (IRAs)
vis-a-vis the notion of income of a local government unit and the principles of local autonomy and decentralization
underlying the institutionalization and intensified empowerment of the local government system.
A Local Government Unit is a political subdivision of the State which is constituted by law and possessed of
substantial control over its own affairs. 3 Remaining to be an intra sovereign subdivision of one sovereign nation,
but not intended, however, to be an imperium in imperio, 4 the local government unit is autonomous in the sense
that it is given more powers, authority, responsibilities and resources. 5 Power which used to be highly centralized in
Manila, is thereby deconcentrated, enabling especially the peripheral local government units to develop not only at
their own pace and discretion but also with their own resources and assets. 6
The practical side to development through a decentralized local government system certainly concerns the matter of
financial resources. With its broadened powers and increased responsibilities, a local government unit must now
operate on a much wider scale. More extensive operations, in turn, entail more expenses. Understandably, the
vesting of duty, responsibility and accountability in every local government unit is accompanied with a provision for
reasonably adequate resources to discharge its powers and effectively carry out its functions. 7 Availment of such
resources is effectuated through the vesting in every local government unit of (1) the right to create and broaden its
own source of revenue; (2) the right to be allocated a just share in national taxes such share being in the form of
internal revenue allotments (IRAs); and (3) the right to be given its equitable share in the proceeds of the utilization
and development of the national wealth, if any, within its territorial boundaries. 8
The funds generated from local taxes, IRAs and national wealth utilization proceeds accrue to the general fund of
the local government and are used to finance its operations subject to specified modes of spending the same as
provided for in the Local Government Code and its implementing rules and regulations. For instance, not less than
twenty percent (20%) of the IRAs must be set aside for local development projects. 9 As such, for purposes of
budget preparation, which budget should reflect the estimates of the income of the local government unit, among
others, the IRAs and the share in the national wealth utilization proceeds are considered items of income. This is as
it should be, since income is defined in the Local Government Code to be all revenues and receipts collected or
received forming the gross accretions of funds of the local government unit. 10
The IRAs are items of income because they form part of the gross accretion of the funds of the local government
unit. The IRAs regularly and automatically accrue to the local treasury without need of any further action on the part
of the local government unit. 11 They thus constitute income which the local government can invariably rely upon as
the source of much needed funds. For purposes of converting the Municipality of Santiago into a city, the

Department of Finance certified, among others, that the municipality had an average annual income of at least
Twenty Million Pesos for the last two (2) consecutive years based on 1991 constant prices. This, the Department of
Finance did after including the IRAs in its computation of said average annual income.chanroblesvirtuallawlibrary
Furthermore, Section 450 (c) of the Local Government Code provides that "the average annual income shall include
the income accruing to the general fund, exclusive of special funds, transfers, and non-recurring income. To
reiterate, IRAs are a regular, recurring item of income; nil is there a basis, too, to classify the same as a special fund
or transfer, since IRAs have a technical definition and meaning all its own as used in the Local Government Code
that unequivocally makes it distinct from special funds or transfers referred to when the Code speaks of "funding
support from the national government, its instrumentalities and government-owned- or -controlled corporations." 12
Thus, Department of Finance Order No. 35-93 13 correctly encapsulizes the full import of the above disquisition
when it defined ANNUAL INCOME to be "revenues and receipts realized by provinces cities and municipalities
from regular sources of the Local General Fund including the internal revenue allotment and other shares provided
for in Sections 284, 290 and 291 of the Code, but exclusive of non-recurring receipts, such as other national aids,
grants, financial assistance, loan proceeds, sales of fixed assets, and similar others" (Underscoring ours). 14 Such
order, constituting executive or contemporaneous construction of a statute by an administrative agency charged with
the task of interpreting and applying the same, is entitled to full respect and should be accorded great weight by the
courts, unless such construction is clearly shown to be in sharp conflict with the Constitution, the governing statute,
or other laws. 15
II. In the enactment of RA No. 7720, there was compliance with Section 24, Article VI of the 1987 Constitution.
Although a bill of local application like HB No. 8817 should, by constitutional prescription, 16 originate exclusively
in the House of Representatives, the claim of petitioners that Republic Act No. 7720 did not originate exclusively in
the House of Representatives because a bill of the same import, SB No. 1243, was passed in the Senate, is untenable
because it cannot be denied that HB No. 8817 was filed in the House of Representatives first before SB No. 1243
was filed in the Senate. Petitioners themselves cannot disavow their own admission that HB No. 8817 was filed on
April 18, 1993 while SB No. 1243 was filed on May 19, 1993. The filing of HB No. 8817 was thus precursive not
only of the said Act in question but also of SB No. 1243. Thus, HB No. 8817, was the bill that initiated the
legislative process that culminated in the enactment of Republic Act No. 7720. No violation of Section 24, Article
VI, of the 1987 Constitution is perceptible under the circumstances attending the instant
controversy.chanroblesvirtuallawlibrary
Furthermore, petitioners themselves acknowledge that HB No. 8817 was already approved on Third Reading and
duly transmitted to the Senate when the Senate Committee on Local Government conducted its public hearing on
HB No. 8817. HB No. 8817 was approved on the Third Reading on December 17, 1993 and transmitted to the
Senate on January 28, 1994; a little less than a month thereafter or on February 23, 1994, the Senate Committee on
Local Government conducted public hearings on SB No. 1243. Clearly, the Senate held in abeyance any action on
SB No. 1243 until it received HB No. 8817, already approved on the Third Reading, from the House of
Representatives. The filing in the Senate of a substitute bill in anticipation of its receipt of the bill from the House,
does not contravene the constitutional requirement that a bill of local application should originate in the House of
Representatives, for as long as the Senate does not act thereupon until it receives the House bill.
We have already addressed this issue in the case of Tolentino v. Secretary of Finance. 17 There, on the matter of the
Expanded Value Added Tax (EVAT) Law, which, as a revenue bill, is nonetheless constitutionally required to
originate exclusively in the House of Representatives, we explained:jgc:chanrobles.com.ph
". . . To begin with, it is not the law but the revenue bill which is required by the Constitution to originate
exclusively in the House of Representatives. It is important to emphasize this, because a bill originating in the
House may undergo such extensive changes in the Senate that the result may be a rewriting of the whole. . . . as a
result of the Senate action, a distinct bill may be produced. To insist that a revenue statute and not only the bill
which initiated the legislative process culminating in the enactment of the law must substantially be the same as
the House bill would be to deny the Senates power not only to concur with amendments but also to propose
amendments. It would be to violate the co-equality of legislative power of the two houses of Congress and in fact
make the House superior to the Senate.
x

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

authorizing an increase of the public debt, private bills and bills of local application must come from the House of
Representatives on the theory that, elected as they are from the districts, the members of the House can be expected
to be more sensitive to the local needs and problems. On the other hand, the senators, who are elected at large, are
expected to approach the same problems from the national perspective. Both views are thereby made to bear n the
enactment of such laws.
Nor does the Constitution prohibit the filing in the Senate of a substitute bill in anticipation of its receipt of the bill
from the House, so long as action by the Senate as a body is withheld pending receipt of the House Bill. . . ." 18
III. Every law, including RA No. 7720, has in its favor the presumption of constitutionality.
It is a well-entrenched jurisprudential rule that on the side of every law lies the presumption of constitutionality. 19
Consequently, for RA No. 7720 to be nullified it must be shown that there is a clear and unequivocal breach of the
Constitution, not merely a doubtful and equivocal one; in other words, the grounds for nullity must be clear and
beyond reasonable doubt. 20 Those who petition this court to declare a law to be unconstitutional must clearly and
fully establish the basis that will justify such a declaration; otherwise, their petition must fail. Taking into
consideration the justification of our stand on the immediately preceding ground raised by petitioners to challenge
the constitutionality of RA No. 7720, the Court stands on the holding that petitioners have failed to overcome the
presumption. The dismissal of this petition is, therefore, inevitable.
WHEREFORE, the instant petition is DISMISSED for lack of merit with costs against petitioners.
SO ORDERED.chanroblesvirtuallawlibrary
Narvasa, C.J., Padilla, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Francisco
and Panganiban, JJ., concur.
[G.R. No. 118303. January 31, 1996.]
SENATOR HEHERSON T. ALVAREZ, SENATOR JOSE D. LINA, JR., MR. NICASIO B. BAUTISTA, MR.
JESUS P. GONZAGA, MR. SOLOMON D. MAYLEM, LEONORA C. MEDINA, CASIANO S.
ALIPON, Petitioners, v. HON. TEOFISTO T. GUINGONA, JR., in his capacity as Executive Secretary, HON.
RAFAEL ALUNAN, in his capacity as Secretary of Local Government, HON. SALVADOR ENRIQUEZ, in
his capacity as Secretary of Budget, THE COMMISSION ON AUDIT, HON. JOSE MIRANDA, in his
capacity as Municipal Mayor of Santiago and HON. CHARITO MANUBAY, HON. VICTORINO
MIRANDA, JR., HON. ARTEMIO ALVAREZ, HON. DANILO VERGARA, HON. PETER DE JESUS,
HON. NELIA NATIVIDAD, HON. CELSO CALEON and HON. ABEL MUSNGI, in their capacity as
SANGGUNIANG BAYAN MEMBERS, MR. RODRIGO L. SANTOS, in his capacity as Municipal Treasurer,
and ATTY. ALFREDO S. DIRIGE, in his capacity as Municipal Administrator, Respondents.
Belo, Gozon, Elma, Parel, Asuncion & Lucila, for Petitioners.
Rene P. Pine, for Private Respondents.
SYLLABUS
1. ADMINISTRATIVE LAW; LOCAL GOVERNMENT CODE; LOCAL GOVERNMENT, CONSTRUED. A
local Government Unit is a political subdivision of the State which is constituted by law and possessed of substantial
control over its own affairs. Remaining to be an intra sovereign subdivision of one sovereign nation, but not
intended, however, to be an emperium in emperia, the local government unit is autonomous in the sense that it is
given more powers, authority, responsibilities and resources.
2. ID.; ID.; INCOME DEFINED. Income is defined in the Local Government Code to be all revenues and
receipts collected or received forming the gross accretions of funds of the local government unit.
3. ID.; ID.; INTERNAL REVENUE ALLOTMENT (IRA) ARE ITEMS OF INCOME. The IRAs are items of
income because they form part of the gross accretion of the funds of the local government unit. The IRAs regularly
and automatically accrue to the local treasury without need of any further action on the part of the local government
unit. They thus constitute income which the local government can invariably rely upon as the source of much needed
funds.
4. ID.; ID.; ANNUAL INCOME DEFINED. Department of Finance Order No. 35-93 correctly encapsulizes the
full import of the above disquisition when it defined ANNUAL INCOME to be "revenues and receipts realized by
provinces, cities and municipalities from regular sources of the Local General Fund including the internal revenue
allotment and other shares provided for in Sections 284, 290 and 291 of the Code, but exclusive of n.on.-recurring

receipts, such as other national aids, grants, financial assistance, loan proceeds, sales of fixed assets, and similar
others" (Emphasis ours).
5. STATUTORY CONSTRUCTION; ORDER CONSTITUTING EXECUTIVE OR CONTEMPORANEOUS
CONSTRUCTION OF A STATUTE BY ADMINISTRATIVE AGENCY CHARGED WITH THE TASK OF
INTERPRETING THE SAME, ENTITLED TO FULL RESPECT. Such order, constituting executive or
contemporaneous construction of a statute by an administrative agency charged with the task of interpreting and
applying the same, is entitled to full respect and should be accorded great weight by the courts, unless such
construction is clearly shown to be in sharp conflict with the Constitution, the governing statute, or other laws.
6. CONSTITUTIONAL LAW; LEGISLATIVE; BILL CONVERTING MUNICIPALITY TO CITY MUST
ORIGINATE FROM THE HOUSE; PASSING OF SUBSEQUENT BILL COVERING THE SAME
MUNICIPALITY, NO ADVERSE EFFECT. Although a bill of local application like HB No. 8817 should, by
constitutional prescription, originate exclusively in the House of Representatives, the claim of petitioners that
Republic Act No. 7720 did not originate exclusively in the House of Representatives because a bill of the same
import, SB No. 1243, was passed in the Senate, is untenable because it cannot be denied that HB No. 8817 was filed
in the House of Representatives first before SB No. 1243 was filed in the Senate. Petitioners themselves cannot
disavow their own admission that HB No. 8817 was filed on April 18, 1993 while SB No. 1243 was filed on May
19, 1993. The filing of HB No. 8817 was thus precursive not only of the said Act in question but also of SB No.
1243. Thus, HB No. 8817, was the bill that initiated the legislative process that culminated in the enactment of
Republic Act No. 7720. No violation of Section 24, Article VI, of the 1987 Constitution is perceptible under the
circumstances attending the instant controversy.
7. ID.; ID.; FILING IN THE SENATE OF A SUBSTITUTE BILL IN ANTICIPATION OF ITS RECEIPT OF THE
HOUSE BILL WITHOUT ACTING THEREON DOES NOT CONTRAVENE CONSTITUTIONAL
REQUIREMENT. Petitioners themselves acknowledge that HB No. 8817 was already approved on Third
Reading and duly transmitted to the Senate when the Senate Committee on Local Government conducted its public
hearing on HB No. 8817. HB No. 8817 was approved on the Third Reading on December 17, 1993 and transmitted
to the Senate on January 28, 1994; a little less than a month thereafter, or on February 23, 1994, the Senate
Committee on Local Government conducted public hearings on SB No. 1243. Clearly, the Senate held in abeyance
any action on SB No. 1243 until it received HB No. 8817, already approved on the Third Reading, from the House
of Representatives. The filing in the Senate of a substitute bill in anticipation of its receipt of the bill from the
House, does not contravene the constitutional requirement that a bill of local application should originate in the
House of Representatives, for as long as the Senate does not act thereupon until it receives the House bill.
8. REMEDIAL LAW; EVIDENCE; PRESUMPTIONS; EVERY LAW IS PRESUMED CONSTITUTIONAL;
CONSTITUTIONALITY OF R.A. 7720 NOT OVERCOME IN CASE AT BAR. It is a well-entrenched
jurisprudential rule that on the side of every law lies the presumption of constitutionality. Consequently, for RA No.
7720 to be nullified, it must be shown that there is a clear and unequivocal breach of the Constitution, not merely a
doubtful and equivocal one; in other words, the grounds for nullity must be clear and beyond reasonable doubt.
Those who petition this court to declare a law to be unconstitutional must clearly and fully establish the basis that
will justify such a declaration; otherwise, their petition must fail. Taking into consideration the justification of our
stand on the immediately preceding ground raised by petitioners to challenge the constitutionality of RA No. 7720,
the Court stands on the holding that petitioners have failed to overcome the presumption. The dismissal of this
petition is, therefore, inevitable.
DECISION
HERMOSISIMA. JR., J.:
Of main concern to the petitioners is whether Republic Act No. 7720, just recently passed by Congress and signed
by the President into law, is constitutionally infirm.
Indeed, in this Petition for Prohibition with prayer for Temporary Restraining Order and Preliminary Prohibitory
Injunction, petitioners assail the validity of Republic Act No. 7720, entitled, "An Act Converting the Municipality of
Santiago, Isabela into an Independent Component City to be known as the City of Santiago," mainly because the Act
allegedly did not originate exclusively in the House of Representatives as mandated by Section 24, Article VI of the
1987 Constitution.chanroblesvirtuallawlibrary
Also, petitioners claim that the Municipality of Santiago has not met the minimum average annual income required
under Section 450 of the Local Government Code of 1991 in order to be converted into a component city.
Undisputed is the following chronicle of the metamorphosis of House Bill No. 8817 into Republic Act No.
7720:chanrob1es virtual 1aw library

On April 18, 1993, HB No. 8817, entitled "An Act Converting the Municipality of Santiago into an Independent
Component City to be known as the City of Santiago," was filed in the House of Representatives with
Representative Antonio Abaya as principal author. Other sponsors included Representatives Ciriaco Alfelor, Rodolfo
Albano, Santiago Respicio and Faustino Dy. The bill was referred to the House Committee on Local Government
and the House Committee on Appropriations on May 5, 1993.chanroblesvirtuallawlibrary
On May 19, 1993, June 1, 1993, November 28, 1993, and December 1, 1993, public hearings on HB No. 8817 were
conducted by the House Committee on Local Government. The committee submitted to the House a favorable
report, with amendments, on December 9, 1993.
On December 13, 1993, HB No. 8817 was passed by the House of Representatives on Second Reading and was
approved on Third Reading on December 17, 1993. On January 28, 1994, HB No. 8817 was transmitted to the
Senate.
Meanwhile, a counterpart of HB No. 8817, Senate Bill No. 1243, entitled, "An Act Converting the Municipality of
Santiago into an Independent Component City to be Known as the City of Santiago," was filed in the Senate. It was
introduced by Senator Vicente Sotto III, as principal sponsor, on May 19, 1993. This was just after the House of
Representatives had conducted its first public hearing on HB No. 8817.chanroblesvirtuallawlibrary
On February 23, 1994, or a little less than a month after HB No. 8817 was transmitted to the Senate, the Senate
Committee on Local Government conducted public hearings on SB No. 1243. On March 1, 1994, the said committee
submitted Committee Report No. 378 on HB No. 8817, with the recommendation that it be approved without
amendment, taking into consideration the reality that H.B. No. 8817 was on all fours with SB No. 1243. Senator
Heherson T. Alvarez, one of the herein petitioners, indicated his approval thereto by signing said report as member
of the Committee on Local Government.
On March 3, 1994, Committee Report No. 378 was passed by the Senate on Second Reading and was approved on
Third Reading on March 14, 1994. On March 22, 1994, the House of Representatives, upon being apprised of the
action of the Senate, approved the amendments proposed by the Senate.
The enrolled bill, submitted to the President on April 12, 1994, was signed by the Chief Executive on May 5, 1994
as Republic Act No. 7720. When a plebiscite on the Act was held on July 13, 1994, a great majority of the registered
voters of Santiago voted in favor of the conversion of Santiago into a city.chanroblesvirtuallawlibrary
The question as to the validity of Republic Act No. 7720 hinges on the following twin issues: (I) Whether or not the
Internal Revenue Allotments (IRAs) are to included in the computation of the average annual income of a
municipality for purposes of its conversion into an independent component city, and (II) Whether or not, considering
that the Senate passed SB No. 1243, its own version of HB No. 8817, Republic Act No. 7720 can be said to have
originated in the House of Representatives.
I. The annual income of a local government unit includes the IRAs.
Petitioners claim that Santiago could not qualify into a component city because its average annual last two (2)
consecutive years based on 1991 constant prices falls below the required annual income of Pesos (P20,000,000.00)
for its conversion into a city, petitioners having computed Santiagos average annual income in the following
manner:
Total income (at 1991 constant prices) for 1991 P20,379,057.07
Total income (at 1991 constant prices) for 1992 P21,570,106.87

Total income for 1991 and 1992 P41,949,163.94


Minus:
IRAs for 1991 and 1992 P15,730,043.00

Total income for 1991 and 1992 P26,219,120.94


Average Annual Income P13,109,560.47
====================================

By dividing the total income of Santiago for calendar years 1991 and 1992, after deducting the IRAs, the average
annual income arrived at would only be P13,109,560.47 based on the 1991 constant prices. Thus, petitioners claim
that Santiagos income is far below the aforesaid Twenty Million Pesos average annual income requirement.
The certification issued by the Bureau of Local Government Finance of the Department of Finance, which indicates
Santiagos average annual income to be P20,974,581.97, is allegedly not accurate as the Internal Revenue
Allotments were not excluded from the computation. Petitioners asseverate that the IRAs are not actually income but
transfers and/or budgetary aid from the national government and that they fluctuate, increase or decrease, depending
on factors like population, land and equal sharing.
In this regard, we hold that petitioners asseverations are untenable because Internal Revenue Allotments form part
of the income of Local Government Units.chanroblesvirtuallawlibrary
It is true that for a municipality to be converted into a component city, it must, among others, have an average
annual income of at least Twenty Million Pesos for the last two (2) consecutive years based on 1991 constant prices.
1 Such income must be duly certified by the Department of Finance. 2
Resolution of the controversy regarding compliance by the Municipality of Santiago with the aforecited income
requirement hinges on a correlative and contextual explication of the meaning of internal revenue allotments (IRAs)
vis-a-vis the notion of income of a local government unit and the principles of local autonomy and decentralization
underlying the institutionalization and intensified empowerment of the local government system.
A Local Government Unit is a political subdivision of the State which is constituted by law and possessed of
substantial control over its own affairs. 3 Remaining to be an intra sovereign subdivision of one sovereign nation,
but not intended, however, to be an imperium in imperio, 4 the local government unit is autonomous in the sense
that it is given more powers, authority, responsibilities and resources. 5 Power which used to be highly centralized in
Manila, is thereby deconcentrated, enabling especially the peripheral local government units to develop not only at
their own pace and discretion but also with their own resources and assets. 6
The practical side to development through a decentralized local government system certainly concerns the matter of
financial resources. With its broadened powers and increased responsibilities, a local government unit must now
operate on a much wider scale. More extensive operations, in turn, entail more expenses. Understandably, the
vesting of duty, responsibility and accountability in every local government unit is accompanied with a provision for
reasonably adequate resources to discharge its powers and effectively carry out its functions. 7 Availment of such
resources is effectuated through the vesting in every local government unit of (1) the right to create and broaden its
own source of revenue; (2) the right to be allocated a just share in national taxes such share being in the form of
internal revenue allotments (IRAs); and (3) the right to be given its equitable share in the proceeds of the utilization
and development of the national wealth, if any, within its territorial boundaries. 8
The funds generated from local taxes, IRAs and national wealth utilization proceeds accrue to the general fund of
the local government and are used to finance its operations subject to specified modes of spending the same as
provided for in the Local Government Code and its implementing rules and regulations. For instance, not less than
twenty percent (20%) of the IRAs must be set aside for local development projects. 9 As such, for purposes of
budget preparation, which budget should reflect the estimates of the income of the local government unit, among
others, the IRAs and the share in the national wealth utilization proceeds are considered items of income. This is as
it should be, since income is defined in the Local Government Code to be all revenues and receipts collected or
received forming the gross accretions of funds of the local government unit. 10
The IRAs are items of income because they form part of the gross accretion of the funds of the local government
unit. The IRAs regularly and automatically accrue to the local treasury without need of any further action on the part
of the local government unit. 11 They thus constitute income which the local government can invariably rely upon as
the source of much needed funds. For purposes of converting the Municipality of Santiago into a city, the
Department of Finance certified, among others, that the municipality had an average annual income of at least
Twenty Million Pesos for the last two (2) consecutive years based on 1991 constant prices. This, the Department of
Finance did after including the IRAs in its computation of said average annual income.chanroblesvirtuallawlibrary
Furthermore, Section 450 (c) of the Local Government Code provides that "the average annual income shall include
the income accruing to the general fund, exclusive of special funds, transfers, and non-recurring income. To
reiterate, IRAs are a regular, recurring item of income; nil is there a basis, too, to classify the same as a special fund
or transfer, since IRAs have a technical definition and meaning all its own as used in the Local Government Code
that unequivocally makes it distinct from special funds or transfers referred to when the Code speaks of "funding
support from the national government, its instrumentalities and government-owned- or -controlled corporations." 12
Thus, Department of Finance Order No. 35-93 13 correctly encapsulizes the full import of the above disquisition
when it defined ANNUAL INCOME to be "revenues and receipts realized by provinces cities and municipalities
from regular sources of the Local General Fund including the internal revenue allotment and other shares provided
for in Sections 284, 290 and 291 of the Code, but exclusive of non-recurring receipts, such as other national aids,
grants, financial assistance, loan proceeds, sales of fixed assets, and similar others" (Underscoring ours). 14 Such

order, constituting executive or contemporaneous construction of a statute by an administrative agency charged with
the task of interpreting and applying the same, is entitled to full respect and should be accorded great weight by the
courts, unless such construction is clearly shown to be in sharp conflict with the Constitution, the governing statute,
or other laws. 15
II. In the enactment of RA No. 7720, there was compliance with Section 24, Article VI of the 1987 Constitution.
Although a bill of local application like HB No. 8817 should, by constitutional prescription, 16 originate exclusively
in the House of Representatives, the claim of petitioners that Republic Act No. 7720 did not originate exclusively in
the House of Representatives because a bill of the same import, SB No. 1243, was passed in the Senate, is untenable
because it cannot be denied that HB No. 8817 was filed in the House of Representatives first before SB No. 1243
was filed in the Senate. Petitioners themselves cannot disavow their own admission that HB No. 8817 was filed on
April 18, 1993 while SB No. 1243 was filed on May 19, 1993. The filing of HB No. 8817 was thus precursive not
only of the said Act in question but also of SB No. 1243. Thus, HB No. 8817, was the bill that initiated the
legislative process that culminated in the enactment of Republic Act No. 7720. No violation of Section 24, Article
VI, of the 1987 Constitution is perceptible under the circumstances attending the instant
controversy.chanroblesvirtuallawlibrary
Furthermore, petitioners themselves acknowledge that HB No. 8817 was already approved on Third Reading and
duly transmitted to the Senate when the Senate Committee on Local Government conducted its public hearing on
HB No. 8817. HB No. 8817 was approved on the Third Reading on December 17, 1993 and transmitted to the
Senate on January 28, 1994; a little less than a month thereafter or on February 23, 1994, the Senate Committee on
Local Government conducted public hearings on SB No. 1243. Clearly, the Senate held in abeyance any action on
SB No. 1243 until it received HB No. 8817, already approved on the Third Reading, from the House of
Representatives. The filing in the Senate of a substitute bill in anticipation of its receipt of the bill from the House,
does not contravene the constitutional requirement that a bill of local application should originate in the House of
Representatives, for as long as the Senate does not act thereupon until it receives the House bill.
We have already addressed this issue in the case of Tolentino v. Secretary of Finance. 17 There, on the matter of the
Expanded Value Added Tax (EVAT) Law, which, as a revenue bill, is nonetheless constitutionally required to
originate exclusively in the House of Representatives, we explained:jgc:chanrobles.com.ph
". . . To begin with, it is not the law but the revenue bill which is required by the Constitution to originate
exclusively in the House of Representatives. It is important to emphasize this, because a bill originating in the
House may undergo such extensive changes in the Senate that the result may be a rewriting of the whole. . . . as a
result of the Senate action, a distinct bill may be produced. To insist that a revenue statute and not only the bill
which initiated the legislative process culminating in the enactment of the law must substantially be the same as
the House bill would be to deny the Senates power not only to concur with amendments but also to propose
amendments. It would be to violate the co-equality of legislative power of the two houses of Congress and in fact
make the House superior to the Senate.
x

It is insisted, however, that S. No. 1630 was passed not in substitution of H. No. 11197 but of another Senate bill (S.
No. 1129) earlier filed and that what the Senate did was merely to take [H. No. 11197] into consideration in
enacting S. No. 1630. There is really no difference between the Senate preserving H. No. 11197 up to the enacting
clause and then writing its own version following the enacting clause (which, it would seem petitioners admit is an
amendment by substitution), and, on the other hand, separately presenting a bill of its own on the same subject
matter. In either case the result are two bills on the same subject.
Indeed, what the Constitution simply means is that the initiative for filing revenue, tariff, or tax bills, bills
authorizing an increase of the public debt, private bills and bills of local application must come from the House of
Representatives on the theory that, elected as they are from the districts, the members of the House can be expected
to be more sensitive to the local needs and problems. On the other hand, the senators, who are elected at large, are
expected to approach the same problems from the national perspective. Both views are thereby made to bear n the
enactment of such laws.
Nor does the Constitution prohibit the filing in the Senate of a substitute bill in anticipation of its receipt of the bill
from the House, so long as action by the Senate as a body is withheld pending receipt of the House Bill. . . ." 18
III. Every law, including RA No. 7720, has in its favor the presumption of constitutionality.
It is a well-entrenched jurisprudential rule that on the side of every law lies the presumption of constitutionality. 19
Consequently, for RA No. 7720 to be nullified it must be shown that there is a clear and unequivocal breach of the
Constitution, not merely a doubtful and equivocal one; in other words, the grounds for nullity must be clear and
beyond reasonable doubt. 20 Those who petition this court to declare a law to be unconstitutional must clearly and
fully establish the basis that will justify such a declaration; otherwise, their petition must fail. Taking into

consideration the justification of our stand on the immediately preceding ground raised by petitioners to challenge
the constitutionality of RA No. 7720, the Court stands on the holding that petitioners have failed to overcome the
presumption. The dismissal of this petition is, therefore, inevitable.
WHEREFORE, the instant petition is DISMISSED for lack of merit with costs against petitioners.
SO ORDERED.chanroblesvirtuallawlibrary
Narvasa, C.J., Padilla, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Francisco
and Panganiban, JJ., concur.

EN BANC
[G.R. No. 111097. July 20, 1994.]
MAYOR PABLO P. MAGTAJAS & THE CITY OF CAGAYAN DE ORO, Petitioners, v. PRYCE
PROPERTIES CORPORATION, INC. & PHILIPPINE AMUSEMENT AND GAMING
CORPORATION,Respondents.
SYLLABUS
DAVIDE, JR., J., separate opinion:chanrob1es virtual 1aw library
1. REMEDIAL LAW; SPECIAL CIVIL ACTIONS; PRINCIPAL CAUSE OF ACTION IN CASE AT BAR ONE
FOR DECLARATORY RELIEF. It must at once be noted that private respondent Pryce Properties Corporation
(PRYCE) directly filed with the Court of Appeals its so-called petition for prohibition, thereby invoking the said
courts original jurisdiction to issue writs of prohibition under Section 9(1) of B.P. Blg. 129. As I see it, however, the
principal cause of action therein is one for declaratory relief: to declare null and unconstitutional for, inter alia,
having been enacted without or in excess of jurisdiction, for impairing the obligation of contracts, and for being
inconsistent with public policy the challenged ordinances enacted by the Sangguniang Panlungsod of the City of
Cagayan de Oro. The intervention therein of public respondent Philippine Amusement and Gaming Corporation
(PAGCOR) further underscores the "declaratory relief" nature of the action. PAGCOR assails the ordinances for
being contrary to the non-impairment and equal protection clauses of the Constitution, violative of the Local
Government Code, and against the States national policy declared in P.D. No. 1869. Accordingly, the Court of
Appeals does not have jurisdiction over the nature of the action.
2. ID.; ID.; PROHIBITION; ESTABLISHED POLICY RELATIVE TO HIERARCHY OF COURTS NOT
OBSERVED IN FILING OF PETITION IN CASE AT BAR. Assuming arguendo that the case is one for
prohibition, then, under this Courts established policy relative to the hierarchy of courts, the petition should have
been filed with the Regional Trial Court of Cagayan de Oro City. I find no special or compelling reason why it was
not filed with the said court. I do not wish to entertain the thought that PRYCE doubted a favorable verdict
therefrom, in which case the filing of the petition with the Court of Appeals may have been impelled by tactical
considerations. A dismissal of the petition by the Court of Appeals would have been in order pursuant to our
decisions in People v. Cuaresma (172 SCRA 415, [1989]) and Defensor-Santiago v. Vasquez (217 SCRA 633 1993]).
3. STATUTORY CONSTRUCTION; PRESIDENTIAL DECREE NO. 1869 NOT REPEALED PRO TANTO BY
LOCAL GOVERNMENT CODE. The challenged ordinances were enacted pursuant to the Sangguniang
Panglungsods express powers conferred by Section 458paragraph (a)subparagraphs (1)-(V), (3)-(ii), and (4)-(i),
(iv), and (vii), Local Government Code, and pursuant to its implied power under Section 16 thereof. . . . . The issue
that necessarily arises is whether in granting local governments (such as the City of Cagayan de Oro) the above
powers and functions, the Local Government Code has, pro tanto, repealed P.D. No. 1869 insofar as PAGCORS
general authority to establish and maintain gambling casinos anywhere in the Philippines is concerned.I join the
majority in holding that the ordinances cannot repeal P.D. No. 1869.
4. CONTRAVENTION OF LAW NOT NECESSARILY A CONTRAVENTION OF THE CONSTITUTION;
ORDINANCES IN CASE AT BAR RECONCILED WITH PRESIDENTIAL DECREE NO. 1869. The
nullification by the Court of Appeals of the challenged ordinances as unconstitutional primarily because it is in
contravention to P.D. No. 1869 is unwarranted. A contravention of a law is not necessarily a contravention of the
constitution. In any case, the ordinances can still stand even if they be conceded as offending P.D. No. 1869. They
can be reconciled, which is not impossible to do. So reconciled, the ordinances should be construed as not applying
to PAGCOR.

DECISION
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 and objection and so did the womens
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:chanrob1es virtual 1aw library
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:chanrob1es virtual 1aw library
SECTION 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.
SECTION 2. That it shall be violation of existing business permit by any persons, partnership or corporation to use
its business establishment or portion thereof, or allow the use thereof by others for casino operation and other
gambling activities.
SECTION 3. PENALTIES. Any violation of such existing business permit as defined in the preceding section
shall suffer the following penalties, to wit:chanrob1es virtual 1aw library
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.
SECTION 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:chanrob1es
virtual 1aw library
ORDINANCE NO. 3375-93
AN ORDINANCE PROHIBITING THE OPERATION OF CASINO AND PROVIDING PENALTY FOR
VIOLATION THEREFOR.
WHEREAS, the City Council established a policy as early as 1990 against CASINO under its Resolution No. 2295;
WHEREAS, on October 14, 1992, the City Council passed another Resolution No. 2673, reiterating its policy
against the establishment of CASINO;
WHEREAS, subsequently, thereafter, it likewise passed Ordinance No. 3353, prohibiting the issuance of Business
Permit and to cancel existing Business Permit to any establishment for the using and allowing to be used its
premises or portion thereof for the operation of CASINO.
WHEREAS, under Art. 3, section 458, No. (4), sub paragraph VI of the Local Government Code of 1991 (Rep. Act

7160) and under Art. 99, No. (4), Paragraph VI of the implementing rules of the Local Government Code, the City
Council as the Legislative Body shall enact measure to suppress any activity inimical to public morals and general
welfare of the people and/or regulated 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:chanrob1es virtual 1aw library
SECTION 1. The operation of gambling CASINO in the City of Cagayan de Oro is hereby prohibited.
SECTION 2. Any violation of this Ordinance shall be subject to the following penalties:chanrob1es virtual 1aw
library
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.
SECTION 3. This Ordinance shall take effect ten (10) days after its publication in a local newspaper of general
circulation.
Pryce assailed the ordinances before the Court of Appeals, where it was joined by PAGCOR as intervenor and
supplemental petitioner. Their challenge 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 of Court. 3 They aver
that the respondent Court of Appeals erred in holding that:chanrob1es virtual 1aw library
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 the PAGCOR gambling casino within the Citys territorial
limits.
2. The phrase "gambling and other prohibited games of chance" found in Sec. 458, par. (a), sub-par. (1) - (v) of R.A.
7160 could only mean "illegal gambling."cralaw virtua1aw library
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,
195 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 Gambling 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.chanroblesvirtuallawlibrary
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:chanrob1es virtual 1aw library
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.

In addition, Section 458 of the said Code specifically declares that:chanrob1es virtual 1aw library
SECTION 458. Powers, Duties, Functions and Compensation. (1) 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:chanrob1es virtual 1aw library
(1) Approve ordinances and pass resolutions necessary for an efficient and effective city government, and in this
connection, shall:chanrob1es virtual 1aw library
x

(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 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 business within their territorial
limits in the interest of the general welfare. 5
The petitioners argue that by virtue of these provisions, the Sangguniang Panlungsod may prohibit the operation and
casinos because they involve games of chance, which are detrimental to the people. Gambling is not allowed by
general law and even by the Constitution itself. The legislative power conferred upon local government units may be
exercised over all kinds of gambling and not only over "illegal gambling" as the respondents erroneously argue.
Even if the operation of casinos may have been permitted under P.D. 1869, the government of Cagayan de Oro City
has the authority to prohibit them within its territory pursuant to the authority entrusted to it by the Local
Government Code.
It is submitted that this interpretation is consonant with the policy of local autonomy as mandated in Article II,
Section 25, and Article X of the Constitution, as well as various other provisions therein seeking to strengthen the
character of the nation. In giving the local government units the power to prevent or suppress gambling and other
social problems, the Local Government Code has recognized the competence of such communities to determine and
adopt the measures best expected to promote the general welfare of their inhabitants in line with the policies of the
State.
The petitioners also stress that when the Code expressly authorized the local government units to prevent and
suppress gambling and other prohibited games of chance, like craps, baccarat, blackjack and roulette, it meant all
forms of gambling within 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.chanrobles
virtual lawlibrary
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:chanrob1es virtual 1aw library
(f) All general and special laws, acts, city charters, decrees, executives orders, proclamations and administrative
regulations, or part or parts thereof which are inconsistent with any of the provisions of this Code are hereby
repealed or modified accordingly.
It is also maintained that assuming there is doubt regarding the effect of the Local Government Code on P.D. 1869,
the doubt must be resolved in favor of the petitioners, in accordance with the direction in the Code calling for its
liberal interpretation in favor of the local government units. Section 5 of the Code specifically provides:chanrob1es
virtual 1aw library
SECTION 5. Rules of Interpretation. In the interpretation of the provisions of this Code, the following rules shall
apply:chanrob1es virtual 1aw library
(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;

(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." cralawnad
This is the opportune time to stress an important point.
The morality of gambling is not 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 no sit to resolve the merits of conflicting theories. 8 That is the prerogative of the political
departments. It is settled that questions regarding the wisdom, morality, or practicibility of statutes are not addressed
to the judiciary but may be resolved only by the legislative and executive departments, to which the function
belongs in our scheme of government. That function is exclusive. Whichever way these branches decide, they are
answerable only to their own conscience and the constituents who will ultimately judge their acts, and not to the
courts of justice.chanroblesvirtuallawlibrary:red
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 time of decisions 9 has held to be valid, an ordinance must
conform to the following substantive requirements:chanrob1es virtual 1aw library
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 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 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.chanrobles law library : red
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 the operate a casino in
Cagayan de Oro City. The petitioners have an ingenious answer to this misgiving. They deny that it is the ordinances

that have changed P.D. 1869 for an ordinance admittedly cannot prevail against a statute. Their theory is that the
change has been made by the Local Government Code itself, which was also enacted by the national lawmaking
authority. In their view, the decree has been, not really repealed by the Code, but merely "modified pro tanto" in the
sense that PAGCOR cannot now operate a casino over the objection of the local government unit concerned. This
modification of P.D. 1869 by the Local Government Code is permissible because one law can change or repeal
another law.
It seems to us that the petitioner are playing with words. While insisting that the decree has only been "modified pro
tanto," they are actually arguing that it is already dead, repealed and useless for all intents and purposes because the
Code has shorn PAGCOR of all power to centralize and regulate casinos. Strictly speaking, it operates may now be
not only prohibited by the local government unit; in fact, the prohibition is not only discretionary by 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 on choice but to prevent and suppress gambling, which in the petitioners view includes both legal
and illegal gambling. Under this connection, 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 price 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:chanrob1es virtual 1aw library
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.chanrobles.com.ph : virtual law library
(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.
Furthermore, it is a familiar rule that implied repeals are not lightly presumed in the absence of a clear and
unmistakable showing of such intentions. In Lichauco & Co. v. Apostol, 10 this Court explained:chanrob1es virtual
1aw library
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 of the part of the lawmaking power to abrogate the prior law, this intention must be given
effect; but there must always be a sufficient revelation of this intention, and it has become an unbending rule of
statutory construction that the intention to repeal a former law will not be imputed to the Legislature when it appears
that the two statutes, or provisions, with reference to which the question arises bear to each other the relation of
general to special.
There is no sufficient indication of an implied repeal of P.D. 1869. On the contrary, as the private respondent points,
out, PAGCOR is mentioned as the source of funding in two later enactments of Congress, to wit, R.A. 7309, creating
a Board of Claims under the Department of Justice for the benefit of victims of unjust punishment or detention or of
violent crimes, and R.A. 7648, providing for measures for the solution of the power crisis. PAGCOR revenues are
tapped by these two statutes. This would show that the PAGCOR charter has not been repealed by the Local
Government Code but has in fact been improved as it were to make the entity more responsive to the fiscal problems
of the government.
It is a canon of legal hermeneutics that instead of pitting one statute against another in an inevitably destructive
confrontation, courts must exert every effort to reconcile them, remembering that both laws deserve a becoming

respect as the handiwork of a coordinate branch of the government. On the assumption of a conflict between P.D.
1869 and the Code, the proper action is not to uphold one and annul the other but to give effect to both by
harmonizing them if possible. This is possible in the case before us. The proper resolution of the problem at hand is
to hold that under the Local Government Code, local government units may (and indeed must) prevent and suppress
all kinds of gambling within their territories except only those allowed by statutes like P.D. 1869. The exception
reserved in such laws must be read in 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 authorize 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 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.cralawnad
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 corporation 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, the corporation could not prevent it. We know of no 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 in 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.chanrobles lawlibrary : rednad
Casino gambling is authorized by P.D. 1869. This decree has the status of a statute that cannot be amended or
nullified by a mere ordinance. Hence, it was not competent for the Sangguniang Panlungsod of Cagayan de Oro City
to enact Ordinance No. 3353 prohibiting the use of buildings for the operation of a casino and Ordinance No. 337593 prohibiting the operation of casinos. For all their praiseworthy motives, these ordinance 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 the 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.
Separate Opinions
PADILLA, J., concurring:chanrob1es virtual 1aw library
I concur with the majority holding that the city ordinances in question cannot modify much less repeal PAGCORs
general authority to establish and maintain gambling casinos anywhere in the Philippines under Presidential Decree
No. 1869.cralawnad
In Basco v. Philippine Amusement and Gaming Corporation (PAGCOR), 197 SCRA 52, I stated in a separate
opinion that:jgc:chanrobles.com.ph
". . . I agree with the decision insofar as it holds that the prohibition, control, and regulation of the entire activity
known as gambling properly pertain to state policy. It is, therefore, the political departments of government,
namely, the legislative and the executive that should decide on what government should do in the entire area of
gambling, and assume full responsibility to the people for such policy." (Emphasis supplied)
However, despite the legality of the opening and operation of a casino in Cagayan de Oro City by respondent
PAGCOR, I wish to reiterate my view that gambling in any form runs counter to the governments own efforts to reestablish and resurrect the Filipino moral character which is generally perceived to be in a state of continuing
erosion.
It is in the light of this alarming perspective that I call upon government to carefully weigh the advantages and
disadvantages of setting up more gambling facilities in the country.
That the PAGCOR contributes greatly to the coffers of the government is not enough reason for setting up more
gambling casinos because, undoubtedly, this will not help improve, but will cause a further deterioration in the
Filipino moral character.
It is worth remembering in this regard that, 1) What is legal is not always moral and 2) the ends do no always justify
the means.
As in Basco, I can easily visualize prostitution at par with gambling. And yet, legalization of the former will not
render it any less reprehensible even if substantial revenue for the government can be realized from it. The same is
true of gambling.
In the present case, it is my considered view that the national government (through PAGCOR) should re-examine
and re-evaluate its decision of imposing the gambling casino on the residents of Cagayan de Oro City; for it is
abundantly clear that public opinion in the city is very much against it, and again the question must be seriously
deliberated: will the prospects of revenue to be realized from the casino outweigh the further destruction of the
Filipino sense of values?
DAVIDE, JR., J., concurring:chanrob1es virtual 1aw library
While I concur in part with the majority, I wish, however, to express my views on certain aspects of this case.
I
It must at once be noted that private respondent Pryce Properties Corporation (PRYCE) directly filed with the Court
of Appeals its so-called petition for prohibition, thereby invoking the said courts original jurisdiction to issue writs
of prohibition under Section 9(1) of B.P. Blg. 129. As I see it, however, the principal cause of action therein is one
for declaratory relief: to declare null and unconstitutional for, inter alia, having been enacted without or in excess
of jurisdiction, for impairing the obligation of contracts, and for being inconsistent with public policy the
challenged ordinances enacted by the Sangguniang Panlungsod of the City of Cagayan de Oro. The intervention
therein of public respondent Philippine Amusement and Gaming Corporation (PAGCOR) further underscores the
"declaratory relief" nature of the action. PAGCOR assails the ordinances for being contrary to the non-impairment
and equal protection clauses of the Constitution, violative of the Local Government Code, and against the States
national policy declared in P.D. No. 1869. Accordingly, the Court of Appeals does not have jurisdiction over the
nature of the action. Even assuming arguendo that the case is one for prohibition, then, under this Courts established
policy relative to the hierarchy of courts, the petition should have been filed with the Regional Trial Court of
Cagayan de Oro City. I find no special or compelling reason why it was not filed with the said court. I do not wish to
entertain the thought that PRYCE doubted a favorable verdict therefrom, in which case the filing of the petition with
the Court of Appeals may have been impelled by tactical considerations. A dismissal of the petition by the Court of

Appeals would have been in order pursuant to our decisions in People v. Cuaresma (172 SCRA 415, [1989]) and
Defensor-Santiago v. Vasquez (217 SCRA 633 1993]). In Cuaresma, this Court stated:jgc:chanrobles.com.ph
"A last word. This courts original jurisdiction to issue writs of certiorari (as well as prohibition, mandamus, quo
warranto, habeas corpus and injunction) is not exclusive . It is shared by this Court with Regional Trial Courts
(formerly Courts of First Instance), which may issue the writ, enforceable in any part of their respective regions. It is
also shared by this court, and by the Regional Trial Court, with the Court of Appeals (formerly, Intermediate
Appellate Court), although prior to the effectivity of Batas Pambansa Bilang 129 on August 14, 1981, the latters
competence to issue the extraordinary writs was restricted by those `in aid of its appellate jurisdiction. This
concurrence of jurisdiction is not, however, 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 a
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 therefore, clearly and specifically set out in the petition. This is established policy. It is
a policy that is 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. Indeed, the removal of the restriction of the jurisdiction of the Court of Appeals in this regard, supra
resulting from the deletion of the qualifying phrase, in aid of its appellate jurisdiction was evidently intended
precisely to relieve this Court pro tanto of the burden of dealing with applications for extraordinary writs which, but
for the expansions for extraordinary writs which, but for the expansion of the Appellate Courts corresponding
jurisdiction, would have had to be filed with it." (Citations omitted)
And in Vasquez, this Court said:jgc:chanrobles.com.ph
"One final observation. We discern in the proceedings in this case a propensity on the part of petitioner, and, for that
matter, the same may be said of a number of litigants who initiate recourses before us, to disregard the hierarchy of
courts in our judicial system by seeking relief directly from this Court despite the fact that the same is available in
the lower courts in the exercise of their original or concurrent jurisdiction, or its even mandated by law to be sought
therein. This practice must be stopped, not only because of the imposition upon the previous 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 as 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, therefore, reiterate 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 our primary jurisdiction." chanrobles law library : red
II.
The challenged ordinance are (a) Ordinance No. 3353 entitled, "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," and (b) Ordinance No. 3375-93 entitled, "An Ordinance
Prohibiting the Operation of Casino and Providing Penalty for Violation Therefore." They were enacted to
implement Resolution No. 2295 entitled, "Resolution Declaring As a Matter of Policy to Prohibit and/or Not to
Allow the Establishment of the Gambling Casino in the City of Cagayan de Oro," which was promulgated on 19
November 1990 - nearly two years before PRYCE and PAGCOR entered into a contract of lease under which the
latter leased a portion of the formers Pryce Plaza Hotel for the operation of a gambling casino which resolution
was vigorously reiterated in Resolution No. 2673 of 19 October 1992.
The challenged ordinances were enacted pursuant to the Sangguniang Panglungsods express powers conferred by
Section 458paragraph (a)subparagraphs (1)-(V), (3)-(ii), and (4)-(i), (iv), and , , (vii), Local Government Code, and
pursuant to its implied power under Section 16 thereof (the general welfare clause) which
reads:jgc:chanrobles.com.ph
"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 amount their residents, maintain peace
and order, and preserve the comfort and convenience of their inhabitants."cralaw virtua1aw library
The issue that necessarily arises is whether in granting local governments (such as the City of Cagayan de Oro) the
above powers and functions, the Local Government Code has, pro tanto, repealed P.D. No. 1869 insofar as

PAGCORS general authority to establish and maintain gambling casinos anywhere in the Philippines is
concerned.chanrobles law library
I join the majority in holding that the ordinances cannot repeal P.D. No. 1869.
III.
The nullification by the Court of Appeals of the challenged ordinances as unconstitutional primarily because it is in
contravention to P.D. No. 1869 is unwarranted. A contravention of a law is not necessarily a contravention of the
constitution. In any case, the ordinances can still stand even if they be conceded as offending P.D. No. 1869. They
can be reconciled, which is not impossible to do. So reconciled, the ordinances should be construed as not applying
to PAGCOR.
IV.
From the pleadings, it is obvious that the government and the people of Cagayan de Oro City are, for obvious
reasons, strongly against the opening of the gambling casino in their city. Gambling, even if legalized, would be
inimical to the general welfare of the inhabitants of the city, or of any place for that matter. The PAGCOR, as a
government-owned corporation, must consider the valid concerns of the people of the City of Cagayan de Oro and
should not impose its will upon them in an arbitrary, if not despotic, manner.
Endnotes:

EN BANC
[G.R. No. 132988. July 19, 2000.]
AQUILINO Q. PIMENTEL, JR., Petitioner, v. Hon. ALEXANDER AGUIRRE in his capacity as Executive
Secretary, Hon. EMILIA BONCODIN in her capacity as Secretary of the Department of Budget and
Management, Respondents.
ROBERTO PAGDANGANAN, intervenor.
DECISION
PANGANIBAN, J.:
The Constitution vests the President with the power of supervision, not control, over local government units (LGUs).
Such power enables him to see to it that LGUs and their officials execute their tasks in accordance with law. While
he may issue advisories and seek their cooperation in solving economic difficulties, he cannot prevent them from
performing their tasks and using available resources to achieve their goals. He may not withhold or alter any
authority or power given them by the law. Thus, the withholding of a portion of internal revenue allotments legally
due them cannot be directed by administrative fiat.chanrobles virtual lawlibrary
The Case
Before us is an original Petition for Certiorari and Prohibition seeking (1) to annul Section 1 of Administrative
Order (AO) No. 372, insofar as it requires local government units to reduce their expenditures by 25 percent of their
authorized regular appropriations for non-personal services; and (2) to enjoin respondents from implementing
Section 4 of the Order, which withholds a portion of their internal revenue allotments.
On November 17, 1998, Roberto Pagdanganan, through Counsel Alberto C. Agra, filed a Motion for
Intervention/Motion to Admit Petition for Intervention, 1 attaching thereto his Petition in Intervention 2 joining
petitioner in the reliefs sought. At the time, intervenor was the provincial governor of Bulacan, national president of
the League of Provinces of the Philippines and chairman of the League of Leagues of Local Governments. In a
Resolution dated December 15, 1998, the Court noted said Motion and Petition.
The Facts and the Arguments

On December 27, 1997, the President of the Philippines issued AO 372. Its full text, with emphasis on the assailed
provisions, is as follows:jgc:chanrobles.com.ph
"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 countrys 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:chanrob1es virtual 1aw library
SECTION 1. All government departments and agencies, including state universities and colleges, governmentowned 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:chanrob1es virtual 1aw library
1. Continued implementation of the streamlining policy on organization and staffing by deferring action on the
following:chanrob1es virtual 1aw library
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:chanrob1es virtual 1aw library
a. Implementation of new capital/infrastructure projects, except those which have already been contracted out;
b. Acquisition of new equipment and motor vehicles;
c. All foreign travels of government personnel, except those associated with scholarships and trainings funded by
grants;
d. Attendance in conferences abroad where the cost is charged to the government except those clearly essential to
Philippine commitments in the international field as may be determined by the Cabinet;
e. Conduct of trainings/workshops/seminars, except those conducted by government training institutions and
agencies in the performance of their regular functions and those that are funded by grants;
f. Conduct of cultural and social celebrations and sports activities, except those associated with the Philippine
Centennial celebration and those involving regular competitions/events;
g. Grant of honoraria, except in cases where it constitutes the only source of compensation from government
received by the person concerned;
h. Publications, media advertisements and related items, except those required by law or those already being
undertaken on a regular basis;
i. Grant of new/additional benefits to employees, except, those expressly and specifically authorized by law; and
j. Donations, contributions, grants and gifts, except those given by institutions to victims of calamities.
3. Suspension of all tax expenditure subsidies to all GOCCs and LGUs
4. Reduction in the volume of consumption of fuel, water, office supplies, electricity and other utilities
5. Deferment of projects that are encountering significant implementation problems
6. Suspension of all realignment of funds and the use of savings and reserves

SECTION 2. Agencies are given the flexibility to identify the specific sources of cost-savings, provided the 25%
minimum savings under Section 1 is complied with.
SECTION 3. A report on the estimated savings generated from these measures shall be submitted to the Office of the
President, through the Department of Budget and Management, on a quarterly basis using the attached format.
SECTION 4. Pending the assessment and evaluation by the Development Budget Coordinating Committee of the
emerging fiscal situation, the amount equivalent to 10% of the internal revenue allotment to local government units
shall be withheld.
SECTION 5. The Development Budget Coordination Committee shall conduct a monthly review of the fiscal
position of the National Government and if necessary, shall recommend to the President the imposition of additional
reserves or the lifting of previously imposed reserves.
SECTION 6. This Administrative Order shall take effect January 1, 1998 and shall remain valid for the entire year
unless otherwise lifted.
DONE in the City of Manila, this 27th day of December, in the year of our Lord, nineteen hundred and ninetyseven."cralaw virtua1aw library
Subsequently, on December 10, 1998, President Joseph E. Estrada issued AO 43, amending Section 4 of AO 372, by
reducing to five percent (5%) the amount of internal revenue allotment (IRA) to be withheld from the LGUs.
Petitioner contends that the President, in issuing AO 372, was in effect exercising the power of control over LGUs.
The Constitution vests in the President, however, only the power of general supervision over LGUs, consistent with
the principle of local autonomy. Petitioner further argues that the directive to withhold ten percent (10%) of their
IRA is in contravention of Section 286 of the Local Government Code and of Section 6, Article X of the
Constitution, providing for the automatic release to each of these units its share in the national internal revenue.
The solicitor general, on behalf of the respondents, claims on the other hand that AO 372 was issued to alleviate the
"economic difficulties brought about by the peso devaluation" and constituted merely an exercise of the Presidents
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."cralaw virtua1aw library
The Issues
The Petition 3 submits the following issues for the Courts resolution:jgc:chanrobles.com.ph
"A. Whether or not the president committed grave abuse of discretion [in] ordering all LGUS to adopt a 25% cost
reduction program in violation of the LGU[]S fiscal autonomy
"B. Whether or not the president committed grave abuse of discretion in ordering the withholding of 10% of the
LGU[]S IRA"
In sum, the main issue is whether (a) Section 1 of AO 372, insofar as it "directs" LGUs to reduce their expenditures
by 25 percent; and (b) Section 4 of the same issuance, which withholds 10 percent of their internal revenue
allotments, are valid exercises of the Presidents 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 Courts Ruling
The Petition is partly meritorious.
Main Issue:chanrob1es virtual 1aw library
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 Presidents power of general supervision over local governments and (2) the extent of the local
governments autonomy.
Scope of Presidents Power of
Supervision Over LGUs
Section 4 of Article X of the Constitution confines the Presidents power over local governments to one of general
supervision. It reads as follows:jgc:chanrobles.com.ph
"SECTION 4. The President of the Philippines shall exercise general supervision over local
governments. . . ."cralaw virtua1aw library
This provision has been interpreted to exclude the power of control. In Mondano v. Silvosa, 5 the Court contrasted
the Presidents 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:jgc:chanrobles.com.ph
". . . In administrative law, supervision means overseeing or the power or authority of an officer to see that
subordinate officers perform their duties. If the latter fail or neglect to fulfill them, the former may take such action
or step as prescribed by law to make them perform their duties. Control, on the other hand, means the power of an
officer to alter or modify or nullify or set aside what a subordinate officer ha[s] done in the performance of his duties
and to substitute the judgment of the former for that of the latter." 6
In Taule v. Santos, 7 we further stated that the Chief Executive wielded no more authority than that of checking
whether local governments or their officials were performing their duties as provided by the fundamental law and by
statutes. He cannot interfere with local governments, so long as they act within the scope of their authority.
"Supervisory power, when contrasted with control, is the power of mere oversight over an inferior body; it does not
include any restraining authority over such body," 8 we said.
In a more recent case, Drilon v. Lim, 9 the difference between control and supervision was further delineated.
Officers in control lay down the rules in the performance or accomplishment of an act. If these rules are not
followed, they may, in their discretion, order the act undone or redone by their subordinates or even decide to do it
themselves. On the other hand, supervision does not cover such authority. Supervising officials merely see to it that
the rules are followed, but they themselves do not lay down such rules, nor do they have the discretion to modify or
replace them. If the rules are not observed, they may order the work done or redone, but only to conform to such
rules. They may not prescribe their own manner of execution of the act. They have no discretion on this matter
except to see to it that the rules are followed.
Under our present system of government, executive power is vested in the President. 10 The members of the Cabinet
and other executive officials are merely alter egos. As such, they are subject to the power of control of the President,
at whose will and behest they can be removed from office; or their actions and decisions changed, suspended or
reversed. 11 In contrast, the heads of political subdivisions are elected by the people. Their sovereign powers
emanate from the electorate, to whom they are directly accountable. By constitutional fiat, they are subject to the
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 Presidents 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, . . . not . . . to end the relation of partnership and interdependence between the central administration
and local government units . . ." 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:jgc:chanrobles.com.ph
"Now, autonomy is either decentralization of administration or decentralization of power. There is decentralization
of administration when the central government delegates administrative powers to political subdivisions in order to
broaden the base of government power and in the process to make local governments more responsive and
accountable, 17 and ensure their fullest development as self-reliant communities and make them more effective

partners in the pursuit of national development and social progress. 18 At the same time, it relieves the central
government of the burden of managing local affairs and enables it to concentrate on national concerns. The President
exercises general supervision 19 over them, but only to ensure that local affairs are administered according to
law. 20 He has no control over their acts in the sense that he can substitute their judgments with his own. 21
Decentralization of power, on the other hand, involves an abdication of political power in the favor of local
government units declared to be autonomous. In that case, the autonomous government is free to chart its own
destiny and shape its future with minimum intervention from central authorities. According to a constitutional
author, decentralization of power amounts to self-immolation, since in that event, the autonomous government
becomes accountable not to the central authorities but to its constituency." 22
Under the Philippine concept of local autonomy, the national government has not completely relinquished all its
powers over local governments, including autonomous regions. Only administrative powers over local affairs are
delegated to political subdivisions. The purpose of the delegation is to make governance more directly responsive
and effective at the local levels. In turn, economic, political and social development at the smaller political units are
expected to propel social and economic growth and development. But to enable the country to develop as a whole,
the programs and policies effected locally must be integrated and coordinated towards a common national goal.
Thus, policy-setting for the entire country still lies in the President and Congress. As we stated in Magtajas v. Pryce
Properties Corp., Inc., municipal governments are still agents of the national government. 23
The Nature of AO 372
Consistent with the foregoing jurisprudential precepts, let us now look into the nature of AO 372. As its preambular
clauses declare, the Order was a "cash management measure" adopted by the government "to match expenditures
with available resources," which were presumably depleted at the time due to "economic difficulties brought about
by the peso depreciation." Because of a looming financial crisis, the President deemed it necessary to "direct all
government agencies, state universities and colleges, government owned and controlled corporations as well as local
governments to reduce their total expenditures by at least 25 percent along suggested areas mentioned in AO 372.
Under existing law, local government units, in addition to having administrative autonomy in the exercise of their
functions, enjoy fiscal autonomy as well. Fiscal autonomy means that local governments have the power to create
their own sources of revenue in addition to their equitable share in the national taxes released by the national
government, as well as the power to allocate their resources in accordance with their own priorities. It extends to the
preparation of their budgets, and local officials in turn-have to work within the constraints thereof. They are not
formulated at the national level and imposed on local governments, whether they are relevant to local needs and
resources or not. Hence, the necessity of a balancing of viewpoints and the harmonization of proposals from both
local and national officials, 24 who in any case are partners in the attainment of national goals.
Local fiscal autonomy does not however rule out any manner of national government intervention by way of
supervision, in order to ensure that local programs, fiscal and otherwise, are consistent with national goals.
Significantly, the President, by constitutional fiat, is the head of the economic and planning agency of the
government, 25 primarily responsible for formulating and implementing continuing, coordinated and integrated
social and economic policies, plans and programs 26 for the entire country. However, under the Constitution, the
formulation and the implementation of such policies and programs are subject to "consultations with the appropriate
public agencies, various private sectors, and local government units." The President cannot do so unilaterally.
Consequently, the Local Government Code provides: 27
". . . [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 . . ."cralaw
virtua1aw library
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 LGUs 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 generals assurance that the directive to "identify and implement measures . . . that will reduce total
expenditures . . . 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 Presidents 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 generals
contention in regard to Section 1.
Withholding a Part
of LGUs IRA
Section 4 of AO 372 cannot, however, be upheld. A basic feature of local fiscal autonomy is the automatic release of
the shares of LGUs in the national internal revenue. This is mandated by no less than the Constitution. 28 The Local
Government Code 29 specifies further that the release shall be made directly to the LGU concerned within five (5)
days after every quarter of the year and "shall not be subject to any lien or holdback that may be imposed by the
national government for whatever purpose." 30 As a rule, the term "shall" is a word of command that must be given
a compulsory meaning. 31 The provision is, therefore, imperative.chanrobles.com : virtual law library
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 holdbacks 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 Kapunans 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 Presidents 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."cralaw virtua1aw library
This is a rather novel theory that people should await the implementing evil to befall on them before they can
question acts that are illegal or unconstitutional. Be it remembered that the real issue here is whether the
Constitution and the law are contravened by Section 4 of AO 372, not whether they are violated by the acts
implementing it. In the unanimous en banc case 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:jgc:chanrobles.com.ph
"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 . . ., it becomes a legal issue which the Court is bound by constitutional mandate
to decide. 35
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."cralaw
virtua1aw library
In the same vein, the Court also held in Tatad v. Secretary of the Department of Energy: 37
". . . 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."cralaw virtua1aw
library
By the same token, when an act of the President, who in our constitutional scheme is a coequal of Congress, is
seriously alleged to have infringed the Constitution and the laws, as in the present case, settling the dispute becomes
the duty and the responsibility of the courts.
Besides, the issue that the Petition is premature has not been raised by the parties; hence it is deemed waived.
Considerations of due process really prevents its use against a party that has not been given sufficient notice of its
presentation, and thus has not been given the opportunity to refute it. 38
Second, on the Presidents power as chief fiscal officer of the country. Justice Kapunan posits that Section 4 of AO
372 conforms with the Presidents 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 Presidents authority to adjust the RA 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 . . . hew to national policies and standards." The
problem is that no such interaction or consultation was ever held prior to the issuance of AO 372. This is why the
petitioner and the intervenor (who was a provincial governor and at the same time president of the League of
Provinces of the Philippines and chairman of the League of Leagues of Local Governments) have protested and
instituted this action. Significantly, respondents do not deny the lack of consultation.
In addition, Justice Kapunan cites Section 287 40 of the LGC as impliedly authorizing the President to withhold the
IRA of an LGU, pending its compliance with certain requirements. Even a cursory reading of the provision reveals
that it is totally inapplicable to the issue at bar. It directs LGUs to appropriate in their annual budgets 20 percent of

their respective IRAs for development projects. It speaks of no positive power granted the President to priorly
withhold any amount. Not at all.
WHEREFORE, the Petition is GRANTED. Respondents and their successors are hereby permanently
PROHIBITED from implementing Administrative Order Nos. 372 and 43, respectively dated December 27, 1997
and December 10, 1998, insofar as local government units areconcerned.
SO ORDERED.
Davide, Jr., C.J., Bellosillo, Melo, Puno, Vitug, Mendoza, Quisumbing, Pardo, Buena, Gonzaga-Reyes and De Leon,
Jr., JJ., concur.
Separate Opinions
KAPUNAN, J., dissenting:chanrob1es virtual 1aw library
In striking down as unconstitutional and illegal Section 4 of Administrative Order No. 372 ("AO No. 372"), the
majority opinion posits that the President exercised power of control over the local government units ("LGU"),
which he does not have, and violated the provisions of Section 6, Article X of the Constitution, which
states:chanrob1es virtual 1aw library
SECTION 6. Local government units shall have a just share, as determined by law, in the national taxes which shall
be automatically released to them.
and Section 286(a) of the Local Government Code, which provides:chanrob1es virtual 1aw library
SECTION 286. Automatic Release of Shares. (a) The share of each local government unit shall be released,
without need of any further action, directly to the provincial, city, municipal or barangay treasurer, as the case may
be, on a quarterly basis within five (5) days after the end of each quarter, and which shall not be subject to any lien
or holdback that may be imposed by the national government for whatever purpose.
The share of the LGUs in the national internal revenue taxes is defined in Section 284 of the same Local
Government Code, to wit:chanrob1es virtual 1aw library
SECTION 284. Allotment of Internal Revenue Taxes. Local government units shall have a share in the national
internal revenue taxes based on the collection of the third fiscal year preceding the current fiscal year as
follows:chanrob1es virtual 1aw library
(a) On the first year of the effectivity of this Code, thirty percent (30%);
(b) On the second year, thirty-five (35%) percent; and
(c) On the third year and thereafter, forty percent (40%).
Provided, That in the event that the national government incurs an unmanageable public sector deficit, the President
of the Philippines is hereby authorized, upon the recommendation of Secretary of Finance, Secretary of Interior and
Local Government and Secretary of Budget and Management, and subject to consultation with the presiding officers
of both Houses of Congress and the presidents of the "liga," to make the necessary adjustments in the internal
revenue allotment of local government units but in no case shall the allotment be less than thirty percent (30%) of
the collection of national internal revenue taxes of the third fiscal year preceding the current fiscal year: Provided,
further, That in the first year of the effectivity of this Code, the local government units shall, in addition to the thirty
percent (30%) internal revenue allotment which shall include the cost of devolved functions for essential public
services, be entitled to receive the amount equivalent to the cost of devolved personal services.
x

The majority opinion takes the view that the withholding of ten percent (10%) of the internal revenue allotment
("IRA") to the LGUs pending the assessment and evaluation by the Development Budget Coordinating Committee
of the emerging fiscal situation as called for in Section 4 of AO No. 372 transgresses against the above-quoted
provisions which mandate the "automatic" release of the shares of the LGUs in the national internal revenue in
consonance with local fiscal autonomy. The pertinent portions of AO No. 372 are reproduced hereunder:chanrob1es
virtual 1aw library
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 countrys 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:chanrob1es virtual 1aw library
SECTION 1. All government departments and agencies, including . . . local government units will identify and
implement measures in FY 1998 that will reduce total appropriations for non-personal services items, along the
following suggested areas:chanrob1es virtual 1aw library
x

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.
x

Subsequently, on December 10, 1998, President Joseph E. Estrada issued Administrative Order No. 43 ("AO No.
43"), amending Section 4 of AO No. 372, by reducing to five percent (5%) the IRA to be withheld from the LGUs,
thus:chanrob1es virtual 1aw library
ADMINISTRATIVE ORDER NO. 43
AMENDING ADMINISTRATIVE ORDER NO. 372 DATED 27 DECEMBER 1997 ENTITLED "ADOPTION OF
ECONOMY MEASURES IN GOVERNMENT FOR FY 1998"
WHEREAS, Administrative Order No. 372 dated 27 December 1997 entitled "Adoption of Economy Measures in
Government for FY 1998" was issued to address the economic difficulties brought about by the peso devaluation in
1997;
WHEREAS, Section 4 of Administrative Order No. 372 provided that the amount equivalent to 10% of the internal
revenue allotment to local government units shall be withheld; and,
WHEREAS, there is a need to release additional funds to local government units for vital projects and expenditures.
NOW, THEREFORE, I, JOSEPH EJERCITO ESTRADA President of the Republic of the Philippines, by virtue of
the powers vested in me by law, do hereby order the reduction of the withheld Internal Revenue Allotment (IRA) of
local government units from ten percent to five percent.
The five percent reduction in the IRA withheld for 1998 shall be released before 25 December 1998.
DONE in the City of Manila, this 10th day of December, in the year of our Lord, nineteen hundred and ninety eight.
With all due respect, I beg to disagree with the majority opinion.
Section 4 of AO No. 372 does not present a case ripe for adjudication. The language of Section 4 does not
conclusively show that, on its face, the constitutional provision on the automatic release of the IRA shares of the
LGUs has been violated. Section 4, as worded, expresses the idea that the withholding is merely temporary which
fact alone would not merit an outright conclusion of its unconstitutionality, especially in light of the reasonable
presumption that administrative agencies act in conformity with the law and the Constitution. Where 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.
Petitioners have not shown that the alleged 5% IRA share of LGUs that was temporarily withheld has not yet been
released, or that the Department of Budget and Management (DBM) has refused and continues to refuse its release.
In view thereof, the Court should not decide as this case suggests an abstract proposition on constitutional issues.
The President is the chief fiscal officer of the country. He is ultimately responsible for the collection and distribution
of public money:chanrob1es virtual 1aw library
SECTION 3. Powers and Functions. The Department of Budget and Management shall assist the President in the
preparation of a national resources and expenditures budget, preparation, execution and control of the National

Budget, preparation and maintenance of accounting systems essential to the budgetary process, achievement of more
economy and efficiency in the management of government operations, administration of compensation and position
classification systems, assessment of organizational effectiveness and review and evaluation of legislative proposals
having budgetary or organizational implications. 1
In a larger context, his role as chief fiscal officer is directed towards "the nations efforts at economic and social
upliftment 2 for which more specific economic powers are delegated. Within statutory limits, the President can, thus,
fix "tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within the
framework of the national development program of the government," 3 as he is also responsible for enlisting the
country in international economic agreements. 4 More than this, to achieve "economy and efficiency in the
management of government operations," the President is empowered to create appropriation reserves, 5 suspend
expenditure appropriations, 6 and institute cost reduction schemes. 7
As chief fiscal officer of the country, the President supervises fiscal development in the local government units and
ensures that laws are faithfully executed. 8 For this reason, he can set aside tax ordinances if he finds them contrary
to the Local Government Code. 9 Ordinances cannot contravene statutes and public policy as declared by the
national government. 10 The goal of local economy is not to "end the relation of partnership and inter-dependence
between the central administration and local government units," 11 but to make local governments "more responsive
and accountable" [to] "ensure their fullest development as self-reliant communities and make them more effective
partners in the pursuit of national development and social progress." 12
The interaction between the national government and the local government units is mandatory at the planning level.
Local development plans must thus hew to "national policies and standards" 13 as these are integrated into the
regional development plans for submission to the National Economic Development Authority." 14 Local budget
plans and goals must also be harmonized, as far as practicable, with "national development goals and strategies in
order to optimize the utilization of resources and to avoid duplication in the use of fiscal and physical resources." 15
Section 4 of AO No. 372 was issued in the exercise by the President not only of his power of general supervision,
but also in conformity with his role as chief fiscal officer of the country in the discharge of which he 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 16 and statutory 17 mandates.
However, the phrase "automatic release" of the LGUs shares does not mean that the release of the funds is
mechanical, spontaneous, self-operating or reflex. IRAs must first be determined, and the money for their payment
collected. 18 In this regard, administrative documentations are also undertaken to ascertain their availability, limits
and extent. The phrase, thus, should be used in the context of the whole budgetary process and in relation to
pertinent laws relating to audit and accounting requirements. In the workings of the budget for the fiscal year,
appropriations for expenditures are supported by existing funds in the national coffers and by proposals for revenue
raising. The money, therefore, available for IRA release may not be existing but merely inchoate, or a mere
expectation. It is not infrequent that the Executive Departments proposals for raising revenue in the form of
proposed legislation may not be passed by the legislature. As such, the release of IRA should not mean release of
absolute amounts based merely on mathematical computations. There must be a prior determination of what exact
amount the local government units are actually entitled in light of the economic factors which affect the fiscal
situation in the country. Foremost of these is where, due to an unmanageable public sector deficit, the President may
make the necessary adjustments in the IRA of LGUs. Thus, as expressly provided in Article 284 of the Local
Government Code:chanrob1es virtual 1aw library
. . . (I)n the event that the national government incurs an unmanageable public sector deficit, the President of the
Philippines is hereby authorized, upon the recommendation of Secretary of Finance, Secretary of Interior and Local
Government and Secretary of Budget and Management, and subject to consultation with the presiding officers of
both Houses of Congress and the presidents of the "liga," to make the necessary adjustments in the internal revenue
allotment of local government units but in no case shall the allotment be less than thirty percent (30%) of the
collection of national internal revenue taxes of the third fiscal year preceding the current fiscal year. . .
Under the aforecited provision, if facts reveal that the economy has sustained or will likely sustain such
"unmanageable public sector deficit," then the LGUs cannot assert absolute right of entitlement to the full amount of
forty percent (40%) share in the IRA, because the President is authorized to make an adjustment and to reduce the
amount to not less than thirty percent (30%). It is, therefore, impractical to immediately release the full amount of
the IRAs and subsequently require the local government units to return at most ten percent (10%) once the President
has ascertained that there exists an unmanageable public sector deficit.
By necessary implication, the power to make necessary adjustments (including reduction) in the IRA in case of an
unmanageable public sector deficit, includes the discretion to withhold the IRAs temporarily until such time that the
determination of the actual fiscal situation is made. The test in determining whether one power is necessarily
included in a stated authority is: "The exercise of a more absolute power necessarily includes the lesser power
especially where it is needed to make the first power effective." 19 If the discretion to suspend temporarily the
release of the IRA pending such examination is withheld from the President, his authority to make the necessary
IRA adjustments brought about by the unmanageable public sector deficit would be emasculated in the midst of

serious economic crisis. In the situation conjured by the majority opinion, the money would already have been gone
even before it is determined that fiscal crisis is indeed happening.
The majority opinion overstates the requirement in Section 286 of the Local Government Code that the IRAs "shall
not be subject to any lien or holdback that may be imposed by the national government for whatever purpose" as
proof that no withholding of the release of the IRAs is allowed albeit temporary in nature.
It is worthy to note that this provision does not appear in the Constitution. Section 6, Art X of the Constitution
merely directs that LGUs "shall have a just share" in the national taxes "as determined by law" and which share
"shall be automatically released to them." This means that before the LGUs share is released, there should be first a
determination, which requires a process, of what is the correct amount as dictated by existing laws. For one, the
Implementing Rules of the Local Government Code allows deductions from the IRAs, to wit:chanrob1es virtual 1aw
library
Article 384. Automatic Release of IRA Shares of LGUs:chanrob1es virtual 1aw library
x

(c) The IRA share of LGUs shall not be subject to any lien or hold back that may be imposed by the National
Government for whatever purpose unless otherwise provided in the Code or other applicable laws and loan contract
on project agreements arising from foreign loans and international commitments, such as premium contributions of
LGUs to the Government Service Insurance System and loans contracted by LGUS under foreign-assisted projects.
Apart from the above, other mandatory deductions are made from the IRAs prior to their release, such as: (1) total
actual cost of devolution and the cost of city-funded hospitals; 20 and (2) compulsory contributions 21 and other
remittances. 22 It follows, therefore, that the President can withhold portions of IRAs in order to set-off or
compensate legitimately incurred obligations and remittances of LGUs.
Significantly, Section 286 of the Local Government Code does not make mention of the exact amount that should be
automatically released to the LGUs. The provision does not mandate that the entire 40% share mentioned in Section
284 shall be released. It merely provides that the "share" of each LGU shall be released and which "shall not be
subject to any lien or holdback that may be imposed by the national government for whatever purpose." The
provision on automatic release of IRA share should, thus, be read together with Section 284, including the proviso
on adjustment or reduction of IRAs, as well as other relevant laws. It may happen that the share of the LGUs may
amount to the full forty percent (40%) or the reduced amount of thirty percent (30%) as adjusted without any law
being violated. In other words, all that Section 286 requires is the automatic release of the amount that the LGUs are
rightfully and legally entitled to, which, as the same section provides, should not be less than thirty percent (30%) of
the collection of the national revenue taxes. So that even if five percent (5%) or ten percent (10%) is either
temporarily or permanently withheld, but the minimum of thirty percent (30%) allotment for the LGUs is released
pursuant to the Presidents authority to make the necessary adjustment in the LGUs share, there is still full
compliance with the requirements of the automatic release of the LGUs share.
Finally, the majority insists that the withholding of ten percent (10%) or five percent (5%) of the IRAs could not
have been done pursuant to the power of the President to adjust or reduce such shares under Section 284 of the Local
Government Code because there was no showing of an unmanageable public sector deficit by the national
government, nor was there evidence that consultations with the presiding officers of both Houses of Congress and
the presidents of the various leagues had taken place and the corresponding recommendations of the Secretary of
Finance, Secretary of Interior and Local Government and the Budget Secretary were
made.chanroblesvirtuallawlibrary
I beg to differ. The power to determine whether there is an unmanageable public sector deficit is lodged in the
President. The Presidents determination, as fiscal manager of the country, of the existence of economic difficulties
which could amount to "unmanageable public sector deficit" should be accorded respect. In fact, the withholding of
the ten percent (10%) of the LGUs share was further justified by the current economic difficulties brought about by
the peso depreciation as shown by one of the "WHEREASES" of AO No. 372. 23 In the absence of any showing to
the contrary, it is presumed that the President had made prior consultations with the officials thus mentioned and had
acted upon the recommendations of the Secretaries of finance, Interior and Local Government and Budget. 24
Therefore, even assuming hypothetically that there was effectively a deduction of five percent (5%) of the LGUs
share, which was in accordance with the Presidents prerogative in view of the pronouncement of the existence of an
unmanageable public sector deficit, the deduction would still be valid in the absence of any proof that the LGUs
allotment was less than the thirty percent (30%) limit provided for in Section 284 of the Local Government Code.
In resum, the withholding of the amount equivalent to five percent (5%) of the IRA to the LGUs was temporary
pending determination by the Executive of the actual share which the LGUs are rightfully entitled to on the basis of
the applicable laws, particularly Section 284 of the Local Government Code, authorizing the President to make the
necessary adjustments in the IRA of LGUs in the event of an unmanageable public sector deficit. And assuming that

the said five percent (5%) of the IRA pertaining to the 1998 Fiscal Year has been permanently withheld, there is no
showing that the amount actually released to the LGUs that same year was less than thirty percent (30%) of the
national internal revenue taxes collected, without even considering the proper deductions allowed by law.
WHEREFORE, I vote to DISMISS the petition.chanrobles virtual lawlibrary
Purisima and Ynares-Santiago, JJ., concur.
Endnotes:
EN BANC
G.R. No. 133495. September 3, 1998
BENJAMIN U. BORJA, JR., petitioner vs. COMMISSION ON ELECTIONS and JOSE T. CAPCO,
JR., Respondents.
DECISION
MENDOZA, J.:
This case presents for determination the scope of the constitutional provision barring elective officials, with the
exception of barangay officials, from serving more than three consecutive terms. In particular, the question is
whether a vice-mayor who succeeds to the office of mayor by operation of law and serves the remainder of the term
is considered to have served a term in that office for the purpose of the three-term limit.
Private respondent Jose T. Capco, Jr. was elected vice-mayor of Pateros on January 18, 1988 for a term ending June
30, 1992. On September 2, 1989, he became mayor, by operation of law, upon the death of the incumbent, Cesar
Borja. On May 11, 1992, he ran and was elected mayor for a term of three years which ended on June 30, 1995. On
May 8, 1995, he was reelected mayor for another term of three years ending June 30, 1998.1crlwvirtualibrry
On March 27, 1998, private respondent Capco filed a certificate of candidacy for mayor of Pateros relative to the
May 11, 1998 elections. Petitioner Benjamin U. Borja, Jr., who was also a candidate for mayor, sought Capcos
disqualification on the theory that the latter would have already served as mayor for three consecutive terms by June
30, 1998 and would therefore be ineligible to serve for another term after that.
On April 30, 1998, the Second Division of the Commission on Elections ruled in favor of petitioner and declared
private respondent Capco disqualified from running for reelection as mayor of Pateros. 2 However, on motion of
private respondent, the COMELEC en banc, voting 5-2, reversed the decision and declared Capco eligible to run for
mayor in the May 11, 1998 elections.3 The majority stated in its decision:
In both the Constitution and the Local Government Code,
the three-term limitation refers to the term of office for
which the local official was elected. It made no reference to
succession to an office to which he was not elected. In the
case before the Commission, respondent Capco was not
elected to the position of mayor in the January 18, 1988
local elections. He succeeded to such office by operation of
law and served for the unexpired term of his predecessor.
Consequently, such succession into office is not counted as
one (1) term for purposes of the computation of the threeterm limitation under the Constitution and the Local
Government Code.
Accordingly, private respondent was voted for in the elections. He received 16,558 votes against petitioners 7,773
votes and was proclaimed elected by the Municipal Board of Canvassers.
This is a petition for certiorari brought to set aside the resolution, dated May 7, 1998, of he COMELEC and to seed
a declaration that private respondent is disqualified to serve another term as Mayor of Pateros, Metro Manila.
Petitioner contends that private respondent Capcos service as mayor from September 2, 1989 to June 30, 992 should
be considered as service for full one term, and since he thereafter served from 1992 to 1998 two more terms as
mayor, he should be considered to have served three consecutive terms within the contemplation of Art. X, 8 of the
Constitution and 43(b) of the Local Government Code. Petitioner stresses the fact that, upon the death of Mayor
Cesar Borja on September 2, 1989, private respondent became the mayor and thereafter served the remainder of the

term. Petitioner argues that it is irrelevant that private respondent became mayor by succession because the purpose
of the constitutional provision in limiting the number of terms elective local officials may serve is to prevent a
monopolization of political power.
This contention will not bear analysis. Article X, 8 of the Constitution provides:
SEC. 8. The term of office of elective local officials, except barangay officials, which shall be determined by law,
shall be three years and no such official shall serve for more than three consecutive terms. Voluntary renunciation of
the office for any length of time shall not be considered as an interruption in the continuity of his service for the full
term for which he was elected.
This provision is restated in 43(b) of the Local Government Code (R.A. No. 7160):
Sec. 43. Term of Office - . . .
(b) No local elective official shall serve for more than three (3) consecutive terms in the same position.
Voluntary renunciation of the office for any length of time shall not be considered as an interruption in the
continuity of service for the full term for which the elective official concerned was elected.
First, to prevent the establishment of political dynasties is not the only policy embodied in the constitutional
provision in question. The other policy is that of enhancing the freedom of choice of the people. To consider,
therefore, only stay in office regardless of how the official concerned came to that office whether by election or by
succession by operation of law would be to disregard one of the purposes of the constitutional provision in question.
Thus, a consideration of the historical background of Art. X, 8 of the Constitution reveals that the members of the
Constitutional Commission were as much concerned with preserving the freedom of choice of the people as they
were with preventing the monopolization of political power. Indeed, they rejected a proposal put forth by
Commissioner Edmundo F. Garcia that after serving three consecutive terms or nine years there should be no further
reelection for local and legislative officials. Instead, they adopted the alternative proposal of Commissioner
Christian Monsod that such officials be simply barred from running for the same position in the succeeding election
following the expiration of the third consecutive term.4 Monsod warned against prescreening candidates [from]
whom the people will choose as a result of the proposed absolute disqualification, considering that the draft
constitution provision recognizing peoples power.5crlwvirtualibrry
Commissioner Blas F. Ople, who supported the Monsod proposal, said:
The principle involved is really whether this Commission shall impose a temporary or a perpetual disqualification
on those who have served their terms in accordance with the limits on consecutive service as decided by the
Constitutional Commission. I would be very wary about this Commission exercising a sort of omnipotent power in
order to disqualify those who will already have served their terms from perpetuating themselves in office. I think the
Commission achieves its purpose in establishing safeguards against the excessive accumulation of power as a result
of consecutive terms. We do put a cap on consecutive service in the case of the President, six years; in the case of
the Vice-President, unlimited; and in the case of the Senators, one reelection. In the case of the Members of
Congress, both from the legislative districts and from the party list and sectoral representation, this is now under
discussion and later on the policy concerning local officials will be taken up by the Committee on Local
Governments. The principle remains the same. I think we want to prevent future situations where, as a result of
continuous service and frequent reelections, officials from the President down to the municipal mayor tend to
develop a proprietary interest in their position and to accumulate those powers and perquisites that permit them to
stay on indefinitely or to transfer these posts to members of their families in a subsequent election. I think that is
taken care of because we put a gap on the continuity or the unbroken service of all of these officials. But where we
now decide to put these prospective servants of the people or politicians, if we want to use the coarser term, under a
perpetual disqualification, I have a feeling that we are taking away too much from the people, whereas we should be
giving as much to the people as we can in terms of their own freedom of choice.6crlwvirtualibrry
Other commissioners went on record against perpetually disqualifying elective officials who have served a certain
number of terms as this would deny the right of the people to choose. As Commissioner Yusup R. Abubakar asked,
why should we arrogate unto ourselves the right to decide what the people want?7crlwvirtualibrry
Commisioner Felicitas S. Aquino spoke in the same vein when she called on her colleagues to "allow the people to
exercise their own sense of proportion and [rely] on their own strength to curtail power when it overreaches
itself.8crlwvirtualibrry
Commissioner Teodoro C. Bacani stressed: Why should we not leave [perpetual disqualification after serving a
number of terms] to the premise accepted by practically everybody here that our people are politically mature?
Should we use this assumption only when it is convenient for us, and not when it may also lead to a freedom of
choice for the people and for politicians who may aspire to serve them longer? 9crlwvirtualibrry

Two ideas thus emerge from a consideration of the proceedings of the Constitutional Commission. The first is the
notion of service of term, derived from the concern about the accumulation of power as a result of a prolonged stay
in office. The second is the idea of election, derived from the concern that the right of the people to choose those
whom they wish to govern them be preserved.
It is likewise noteworthy that, in discussing term limits, the drafters of the Constitution did so on the assumption that
the officials concerned were serving by reason of reelection. This is clear from the following exchange in the
Constitutional Commission concerning term limits, now embodied in Art. VI 4 and 7 of the Constitution, for
members of Congress:
MR. GASCON. I would like to ask a question with regard to the issue after the second term. We will allow the
Senator to rest for a period of time before he can run again?
MR. DAVIDE. That is correct.
MR. GASCON. And the question that we left behind before if the Gentlemen will remember- was: How long will
that period of rest be? Will it be one election which is three years or one term which is six years?
MR. DAVIDE. If the Gentlemen will remember, Commissioner Rodrigo expressed the view that during
the election following the expiration of the first 12 years, whether suchelection will be on the third year or on the
sixth year thereafter, this particular member of the Senate can run. So it is not really a period of hibernation for six
years. That was the Committees stand.10crlwvirtualibrry
Indeed, a fundamental tenet of representative democracy is that the people should be allowed to choose whom they
please to govern them.11 To bar the election of a local official because he has already served three terms, although
the first as a result of succession by operation of law rather than election, would therefore be to violate this principle.
Second, not only historical examination but textual analysis as well supports the ruling of the COMELEC that Art.
X, 8 contemplates service by local officials for three consecutive terms as a result of election. The first sentence
speaks of the term of office of elective local officials and bars such official[s] from serving for more than three
consecutive terms. The second sentence, in explaining when an elective local official may be deemed to have served
his full term of office, states that voluntary renunciation of the office for any length of time shall not be considered
as an interruption in the continuity of his service for the full term for which he was elected. The term served must
therefore be one for which [the official concerned] was elected. The purpose of this provision is to prevent a
circumvention of the limitation on the number of terms an elective official may serve. Conversely, if he is not
serving a term for which he was elected because he is simply continuing the service of the official he succeeds, such
official cannot be considered to have fully served the term now withstanding his voluntary renunciation of office
prior to its expiration.
Reference is made to Commissioner Bernas comment on Art. VI, 7, which similarly bars members of the House of
Representatives from serving for more than three terms. Commissioner Bernas states that if one is elected
Representative to serve the unexpired term of another, that unexpired term, no matter how short, will be considered
one term for the purpose of computing the number of successive terms allowed.12crlwvirtualibrry
This is actually based on the opinion expressed by Commissioner Davide in answer to a query of Commissioner
Suarez: For example, a special election is called for a Senator, and the Senator newly elected would have to serve
the unexpired portion of the term. Would that mean that serving the unexpired portion of the term is already
considered one term? So, half a term, which is actually the correct statement, plus one term would disqualify the
Senator concerned from running? Is that the meaning of this provision on disqualification, Madam President?
Commissioner Davide said: Yes, because we speak of term and if there is a special election, he will serve only for
the unexpired portion of that particular term plus one more term for the Senator and two more terms for the
Members of the Lower House.13crlwvirtualibrry
There is a difference, however, between the case of a vice-mayor and that of a member of the House of
Representatives who succeeds another who dies, resigns, becomes incapacitated, or is removed from office. The
vice-mayor succeeds to the mayorship by operation of law.14 On the other hand, the Representative is elected to fill
the vacancy.15 In a real sense, therefore, such Representative serves a term for which he was elected. As the purpose
of the constitutional provision is to limit the right ot be elected and to serve in Congress, his service of the unexpired
term is rightly counted as his first term. Rather than refute what we believe to be the intendment of Art. X, 8 with
regard to elective local officials, the case of a Representative who succeeds another confirms the theory.
Petitioner also cites Art. VII, 4 of the Constitution which provides for succession of the Vice-President to the
Presidency in case of vacancy in that office. After stating that The President shall not be eligible for any reelection,
this provision says that No person who has succeeded as President and has served as such for more than four years
shall be qualified for election to the same office at any time. Petitioner contends that, by analogy, the vice-mayor

should likewise be considered to have served a full term as mayor if he succeeds to the latters office and serves for
the remainder of the term.
The framers of the Constitution included such a provision because, without it, the Vice-President, who simply steps
into the Presidency by succession would be qualified to run for President even if he has occupied that office for
more than four years. The absence of a similar provision in Art. X, 8 on elective local officials throws in bold relief
the difference between the two cases. It underscores the constitutional intent to cover only the terms of office to
which one may have been elected for purpose of the three-term limit on local elective officials, disregarding for this
purpose service by automaticsuccession.
There is another reason why the Vice-President who succeeds to the Presidency and serves in that office for more
than four years is ineligible for election as President. The Vice-President is elected primarily to succeed the
President in the event of the latters death, permanent disability, removal or resignation. While he may be appointed
to the cabinet, his becoming so is entirely dependent on the good graces of the President. In running for VicePresident, he may thus be said to also seek the Presidency. For their part, the electors likewise choose as VicePresident the candidate who they think can fill the Presidency in the event it becomes vacant. Hence, service in the
presidency for more than four years may rightly be considered as service for a full term.
This is not so in the case of the vice-mayor. Under the local Government Code, he is the presiding officer of the
sanggunian and he appoints all officials and employees of such local assembly. He has distinct powers and
functions, succession to mayorship in the event of vacancy therein being only one of them.16 It cannot be said of
him, as much as of the Vice-President in the event of a vacancy in the Presidency, that in running for vice-mayor, he
also seeks the mayorship. His assumption of the mayorship in the event of vacancy is more a matter of chance than
of design. Hence, his service in that office should not be counted in the application of any term limit.
To recapitulate, the term limit for elective local officials must be taken to refer to theright to be elected as well as the
right to serve in the same elective position.Consequently, it is not enough that an individual has served three
consecutive terms in an elective local office, he must also have been elected to the same position for the same
number of times before the disqualification can apply. This point can be made clearer by considering the following
cases or situations:
Case No. 1. Suppose A is a vice-mayor who becomes mayor by reason of the death of the incumbent. Six months
before the next election, he resigns and is twice elected thereafter. Can he run again for mayor in the next election.
Yes, because although he has already first served as mayor by succession and subsequently resigned from office
before the full term expired, he has not actually served three full terms in all for the purpose of applying the term
limit. Under Art. X, 8, voluntary renunciation of the office is not considered as an interruption in the continuity of
his service for the full term only if the term is one for which he was elected. Since A is only completing the service
of the term for which the deceased and not he was elected.A cannot be considered to have completed one term. His
resignation constitutes an interruption of the full term.
Case No. 2. Suppose B is elected Mayor and, during his first term, he is twice suspended for misconduct for a total
of 1 year. If he is twice reelected after that, can he run for one more term in the next election?
Yes, because he has served only two full terms successively.
In both cases, the mayor is entitled to run for reelection because the two conditions for the application of the
disqualification provisions have not concurred, namely, that the local official concerned has been elected three
consecutive times and that he has fully served three consecutive terms. In the first case, even if the local official is
considered to have served three full terms notwithstanding his resignation before the end of the first term, the fact
remains that he has not been elected three times. In the second case, the local official has been elected three
consecutive times, but he has not fullyserved three consecutive terms.
Case No. 3. The case of vice-mayor C who becomes mayor by succession involves a total failure of the two
conditions to concur for the purpose of applying Art. X 8. Suppose he is twice elected after that term, is he qualified
to run again in the next election?
Yes, because he was not elected to the office of the mayor in the first term but simply found himself thrust into it by
operation of law. Neither had he served the full term because he only continued the service, interrupted by the
death , of the deceased mayor.
To consider C in the third case to have served the first term in full and therefore ineligible to run a third time for
reelection would be not only to falsify reality but also to unduly restrict the right of the people to choose whom they
wish to govern them. If the vice-mayor turns out to be a bad mayor, the people can remedy the situation by simply
not reelecting him for another term. But if, on the other hand, he proves to be a good mayor, there will be no way the

people can return him to office (even if it is just the third time he is standing for reelection) if his service of the first
term is counted as one of the purpose of applying the term limit.
To consider C as eligible for reelection would be in accord with the understanding of the Constitutional Commission
that while the people should be protected from the evils that a monopoly of political power may bring about, care
should be taken that their freedom of choice is not unduly curtailed.
WHEREFORE, the petition is DISMISSED.
SO ORDERED.
Narvasa, C.J., Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan, Panganiban, Martinez,
Quisumbing and Purisima, JJ., concur.
Regalado, J., on official leave.
Endnotes:
EN BANC

[G.R. No. 152774. May 27, 2004]

THE PROVINCE OF BATANGAS, represented by its Governor, HERMILANDO I. MANDANAS, petitioner,


vs. HON. ALBERTO G. ROMULO, Executive Secretary and Chairman of the Oversight Committee
on Devolution; HON. EMILIA BONCODIN, Secretary, Department of Budget and Management;
HON. JOSE D. LINA, JR., Secretary, Department of Interior and Local Government, respondents.
DECISION
CALLEJO, SR., J.:
The Province of Batangas, represented by its Governor, Hermilando I. Mandanas, filed the present petition
for certiorari, prohibition and mandamus under Rule 65 of the Rules of Court, as amended, to declare as
unconstitutional and void certain provisos contained in the General Appropriations Acts (GAA) of 1999, 2000 and
2001, insofar as they uniformly earmarked for each corresponding year the amount of five billion pesos
(P5,000,000,000.00) of the Internal Revenue Allotment (IRA) for the Local Government Service Equalization Fund
(LGSEF) and imposed conditions for the release thereof.
Named as respondents are Executive Secretary Alberto G. Romulo, in his capacity as Chairman of the
Oversight Committee on Devolution, Secretary Emilia Boncodin of the Department of Budget and Management
(DBM) and Secretary Jose Lina of the Department of Interior and Local Government (DILG).

Background
On December 7, 1998, then President Joseph Ejercito Estrada issued Executive Order (E.O.) No. 48 entitled
ESTABLISHING A PROGRAM FOR DEVOLUTION ADJUSTMENT AND EQUALIZATION. The program
was established to facilitate the process of enhancing the capacities of local government units (LGUs) in the
discharge of the functions and services devolved to them by the National Government Agencies concerned pursuant
to the Local Government Code.[1] The Oversight Committee (referred to as the Devolution Committee in E.O. No.
48) constituted under Section 533(b) of Republic Act No. 7160 (The Local Government Code of 1991) has been
tasked to formulate and issue the appropriate rules and regulations necessary for its effective implementation.
[2]
Further, to address the funding shortfalls of functions and services devolved to the LGUs and other funding
requirements of the program, the Devolution Adjustment and Equalization Fund was created. [3] For 1998, the
DBM was directed to set aside an amount to be determined by the Oversight Committee based on the devolution
status appraisal surveys undertaken by the DILG. [4] The initial fund was to be sourced from the available savings of
the national government for CY 1998.[5] For 1999 and the succeeding years, the corresponding amount required to
sustain the program was to be incorporated in the annual GAA. [6] The Oversight Committee has been authorized to
issue the implementing rules and regulations governing the equitable allocation and distribution of said fund to the
LGUs.[7]

The LGSEF in the GAA of 1999


In Republic Act No. 8745, otherwise known as the GAA of 1999, the program was renamed as the LOCAL
GOVERNMENT SERVICE EQUALIZATION FUND (LGSEF). Under said appropriations law, the amount
of P96,780,000,000 was allotted as the share of the LGUs in the internal revenue taxes. Item No. 1, Special
Provisions, Title XXXVI A. Internal Revenue Allotment of Rep. Act No. 8745 contained the following proviso:
... PROVIDED, That the amount of FIVE BILLION PESOS (P5,000,000,000) shall be earmarked for the Local
Government Service Equalization Fund for the funding requirements of projects and activities arising from the full
and efficient implementation of devolved functions and services of local government units pursuant to R.A. No.
7160, otherwise known as the Local Government Code of 1991: PROVIDED, FURTHER, That such amount shall
be released to the local government units subject to the implementing rules and regulations, including such
mechanisms and guidelines for the equitable allocations and distribution of said fund among local government units
subject to the guidelines that may be prescribed by the Oversight Committee on Devolution as constituted pursuant
to Book IV, Title III, Section 533(b) of R.A. No. 7160. The Internal Revenue Allotment shall be released directly by
the Department of Budget and Management to the Local Government Units concerned.
On July 28, 1999, the Oversight Committee (with then Executive Secretary Ronaldo B. Zamora as Chairman)
passed Resolution Nos. OCD-99-003, OCD-99-005 and OCD-99-006 entitled as follows:
OCD-99-005
RESOLUTION ADOPTING THE ALLOCATION SCHEME FOR THE PhP5 BILLION CY 1999
LOCAL GOVERNMENT SERVICE EQUALIZATION FUND (LGSEF) AND REQUESTING HIS
EXCELLENCY PRESIDENT JOSEPH EJERCITO ESTRADA TO APPROVE SAID ALLOCATION
SCHEME.
OCD-99-006
RESOLUTION ADOPTING THE ALLOCATION SCHEME FOR THE PhP4.0 BILLION OF THE
1999 LOCAL GOVERNMENT SERVICE EQUALIZATION FUND AND ITS CONCOMITANT
GENERAL FRAMEWORK, IMPLEMENTING GUIDELINES AND MECHANICS FOR ITS
IMPLEMENTATION AND RELEASE, AS PROMULGATED BY THE OVERSIGHT
COMMITTEE ON DEVOLUTION.
OCD-99-003
RESOLUTION REQUESTING HIS EXCELLENCY PRESIDENT JOSEPH EJERCITO ESTRADA
TO APPROVE THE REQUEST OF THE OVERSIGHT COMMITTEE ON DEVOLUTION TO SET
ASIDE TWENTY PERCENT (20%) OF THE LOCAL GOVERNMENT SERVICE
EQUALIZATION FUND (LGSEF) FOR LOCAL AFFIRMATIVE ACTION PROJECTS AND
OTHER PRIORITY INITIATIVES FOR LGUs INSTITUTIONAL AND CAPABILITY BUILDING
IN ACCORDANCE WITH THE IMPLEMENTING GUIDELINES AND MECHANICS AS
PROMULGATED BY THE COMMITTEE.
These OCD resolutions were approved by then President Estrada on October 6, 1999.
Under the allocation scheme adopted pursuant to Resolution No. OCD-99-005, the five billion pesos LGSEF
was to be allocated as follows:
1.

The PhP4 Billion of the LGSEF shall be allocated in accordance with the allocation scheme and
implementing guidelines and mechanics promulgated and adopted by the OCD. To wit:
a. The first PhP2 Billion of the LGSEF shall be allocated in accordance with the codal formula sharing
scheme as prescribed under the 1991 Local Government Code;
b. The second PhP2 Billion of the LGSEF shall be allocated in accordance with a modified 1992 cost of
devolution fund (CODEF) sharing scheme, as recommended by the respective leagues of
provinces, cities and municipalities to the OCD. The modified CODEF sharing formula is as
follows:
Province
: 40%
Cities
: 20%
Municipalities : 40%

This is applied to the P2 Billion after the approved amounts granted to individual provinces, cities
and municipalities as assistance to cover decrease in 1999 IRA share due to reduction in land area
have been taken out.
2.

The remaining PhP1 Billion of the LGSEF shall be earmarked to support local affirmative action
projects and other priority initiatives submitted by LGUs to the Oversight Committee on Devolution
for approval in accordance with its prescribed guidelines as promulgated and adopted by the OCD.

In Resolution No. OCD-99-003, the Oversight Committee set aside the one billion pesos or 20% of the LGSEF
to support Local Affirmative Action Projects (LAAPs) of LGUs. This remaining amount was intended to respond
to the urgent need for additional funds assistance, otherwise not available within the parameters of other existing
fund sources. For LGUs to be eligible for funding under the one-billion-peso portion of the LGSEF, the OCD
promulgated the following:
III.

CRITERIA FOR ELIGIBILITY:


1. LGUs (province, city, municipality, or barangay), individually or by group or multi-LGUs or leagues of
LGUs, especially those belonging to the 5th and 6th class, may access the fund to support any
projects or activities that satisfy any of the aforecited purposes. A barangay may also access this
fund directly or through their respective municipality or city.
2. The proposed project/activity should be need-based, a local priority, with high development impact and
are congruent with the socio-cultural, economic and development agenda of the Estrada
Administration, such as food security, poverty alleviation, electrification, and peace and order,
among others.
3. Eligible for funding under this fund are projects arising from, but not limited to, the following areas of
concern:
a. delivery of local health and sanitation services, hospital services and other tertiary services;
b. delivery of social welfare services;
c. provision of socio-cultural services and facilities for youth and community development;
d. provision of agricultural and on-site related research;
e. improvement of community-based forestry projects and other local projects on environment and
natural resources protection and conservation;
f. improvement of tourism facilities and promotion of tourism;
g. peace and order and public safety;
h. construction, repair and maintenance of public works and infrastructure, including public
buildings and facilities for public use, especially those destroyed or damaged by manmade or natural calamities and disaster as well as facilities for water supply, flood control
and river dikes;
i. provision of local electrification facilities;
j. livelihood and food production services, facilities and equipment;
k. other projects that may be authorized by the OCD consistent with the aforementioned objectives
and guidelines;
4. Except on extremely meritorious cases, as may be determined by the Oversight Committee on
Devolution, this portion of the LGSEF shall not be used in expenditures for personal costs or
benefits under existing laws applicable to governments. Generally, this fund shall cover the
following objects of expenditures for programs, projects and activities arising from the
implementation of devolved and regular functions and services:
a. acquisition/procurement of supplies and materials critical to the full and effective
implementation of devolved programs, projects and activities;

b. repair and/or improvement of facilities;


c. repair and/or upgrading of equipment;
d. acquisition of basic equipment;
e. construction of additional or new facilities;
f. counterpart contribution to joint arrangements or collective projects among groups of
municipalities, cities and/or provinces related to devolution and delivery of basic
services.
5. To be eligible for funding, an LGU or group of LGU shall submit to the Oversight Committee on
Devolution through the Department of Interior and Local Governments, within the prescribed
schedule and timeframe, a Letter Request for Funding Support from the Affirmative Action
Program under the LGSEF, duly signed by the concerned LGU(s) and endorsed by cooperators
and/or beneficiaries, as well as the duly signed Resolution of Endorsement by the respective
Sanggunian(s) of the LGUs concerned. The LGU-proponent shall also be required to submit the
Project Request (PR), using OCD Project Request Form No. 99-02, that details the following:
(a) general description or brief of the project;
(b) objectives and justifications for undertaking the project, which should highlight the benefits to
the locality and the expected impact to the local program/project arising from the full and
efficient implementation of social services and facilities, at the local levels;
(c) target outputs or key result areas;
(d) schedule of activities and details of requirements;
(e) total cost requirement of the project;
(f) proponents counterpart funding share, if any, and identified source(s) of counterpart funds for
the full implementation of the project;
(g) requested amount of project cost to be covered by the LGSEF.
Further, under the guidelines formulated by the Oversight Committee as contained in Attachment - Resolution
No. OCD-99-003, the LGUs were required to identify the projects eligible for funding under the one-billion-peso
portion of the LGSEF and submit the project proposals thereof and other documentary requirements to the DILG for
appraisal. The project proposals that passed the DILGs appraisal would then be submitted to the Oversight
Committee for review, evaluation and approval. Upon its approval, the Oversight Committee would then serve
notice to the DBM for the preparation of the Special Allotment Release Order (SARO) and Notice of Cash
Allocation (NCA) to effect the release of funds to the said LGUs.

The LGSEF in the GAA of 2000


Under Rep. Act No. 8760, otherwise known as the GAA of 2000, the amount of P111,778,000,000 was allotted
as the share of the LGUs in the internal revenue taxes. As in the GAA of 1999, the GAA of 2000 contained a
proviso earmarking five billion pesos of the IRA for the LGSEF. This proviso, found in Item No. 1, Special
Provisions, Title XXXVII A. Internal Revenue Allotment, was similarly worded as that contained in the GAA of
1999.
The Oversight Committee, in its Resolution No. OCD-2000-023 dated June 22, 2000, adopted the following
allocation scheme governing the five billion pesos LGSEF for 2000:
1. The PhP3.5 Billion of the CY 2000 LGSEF shall be allocated to and shared by the four levels of LGUs,
i.e., provinces, cities, municipalities, and barangays, using the following percentage-sharing
formula agreed upon and jointly endorsed by the various Leagues of LGUs:
For Provinces
26% or P 910,000,000
For Cities 23% or 805,000,000
For Municipalities 35% or 1,225,000,000

For Barangays 16% or

560,000,000

Provided that the respective Leagues representing the provinces, cities, municipalities and
barangays shall draw up and adopt the horizontal distribution/sharing schemes among the member
LGUs whereby the Leagues concerned may opt to adopt direct financial assistance or projectbased arrangement, such that the LGSEF allocation for individual LGU shall be released directly
to the LGU concerned;
Provided further that the individual LGSEF shares to LGUs are used in accordance with the
general purposes and guidelines promulgated by the OCD for the implementation of the LGSEF at
the local levels pursuant to Res. No. OCD-99-006 dated October 7, 1999 and pursuant to the
Leagues guidelines and mechanism as approved by the OCD;
Provided further that each of the Leagues shall submit to the OCD for its approval their respective
allocation scheme, the list of LGUs with the corresponding LGSEF shares and the corresponding
project categories if project-based;
Provided further that upon approval by the OCD, the lists of LGUs shall be endorsed to the DBM
as the basis for the preparation of the corresponding NCAs, SAROs, and related budget/release
documents.
2. The remaining P1,500,000,000 of the CY 2000 LGSEF shall be earmarked to support the following
initiatives and local affirmative action projects, to be endorsed to and approved by the Oversight
Committee on Devolution in accordance with the OCD agreements, guidelines, procedures and
documentary requirements:
On July 5, 2000, then President Estrada issued a Memorandum authorizing then Executive Secretary Zamora
and the DBM to implement and release the 2.5 billion pesos LGSEF for 2000 in accordance with Resolution No.
OCD-2000-023.
Thereafter, the Oversight Committee, now under the administration of President Gloria Macapagal-Arroyo,
promulgated Resolution No. OCD-2001-29 entitled ADOPTING RESOLUTION NO. OCD-2000-023 IN THE
ALLOCATION, IMPLEMENTATION AND RELEASE OF THE REMAINING P2.5 BILLION LGSEF FOR CY
2000. Under this resolution, the amount of one billion pesos of the LGSEF was to be released in accordance with
paragraph 1 of Resolution No. OCD-2000-23, to complete the 3.5 billion pesos allocated to the LGUs, while the
amount of 1.5 billion pesos was allocated for the LAAP. However, out of the latter amount, P400,000,000 was to be
allocated and released as follows: P50,000,000 as financial assistance to the LAAPs of LGUs;P275,360,227 as
financial assistance to cover the decrease in the IRA of LGUs concerned due to reduction in land area;
and P74,639,773 for the LGSEF Capability-Building Fund.

The LGSEF in the GAA of 2001


In view of the failure of Congress to enact the general appropriations law for 2001, the GAA of 2000 was
deemed re-enacted, together with the IRA of the LGUs therein and the proviso earmarking five billion pesos thereof
for the LGSEF.
On January 9, 2002, the Oversight Committee adopted Resolution No. OCD-2002-001 allocating the five
billion pesos LGSEF for 2001 as follows:
Modified Codal Formula
P 3.000 billion
Priority Projects
1.900 billion
Capability Building Fund
.100 billion
P 5.000 billion
RESOLVED FURTHER, that the P3.0 B of the CY 2001 LGSEF which is to be allocated according to the modified
codal formula shall be released to the four levels of LGUs, i.e., provinces, cities, municipalities and barangays, as
follows:
LGUs

Percentage

Provinces
Cities

25
25

Amount
P 0.750 billion
0.750

Municipalities
Barangays

35
15

1.050
0.450
100 P 3.000 billion

RESOLVED FURTHER, that the P1.9 B earmarked for priority projects shall be distributed according to the
following criteria:
1.0

For projects of the 4th, 5th and 6th class LGUs; or


2.0 Projects in consonance with the Presidents State of the Nation Address (SONA)/summit
commitments.

RESOLVED FURTHER, that the remaining P100 million LGSEF capability building fund shall be distributed in
accordance with the recommendation of the Leagues of Provinces, Cities, Municipalities and Barangays, and
approved by the OCD.
Upon receipt of a copy of the above resolution, Gov. Mandanas wrote to the individual members of the
Oversight Committee seeking the reconsideration of Resolution No. OCD-2002-001. He also wrote to Pres.
Macapagal-Arroyo urging her to disapprove said resolution as it violates the Constitution and the Local Government
Code of 1991.
On January 25, 2002, Pres. Macapagal-Arroyo approved Resolution No. OCD-2002-001.

The Petitioners Case


The petitioner now comes to this Court assailing as unconstitutional and void the provisos in the GAAs of
1999, 2000 and 2001, relating to the LGSEF. Similarly assailed are the Oversight Committees Resolutions Nos.
OCD-99-003, OCD-99-005, OCD-99-006, OCD-2000-023, OCD-2001-029 and OCD-2002-001 issued pursuant
thereto. The petitioner submits that the assailed provisos in the GAAs and the OCD resolutions, insofar as they
earmarked the amount of five billion pesos of the IRA of the LGUs for 1999, 2000 and 2001 for the LGSEF and
imposed conditions for the release thereof, violate the Constitution and the Local Government Code of 1991.
Section 6, Article X of the Constitution is invoked as it mandates that the just share of the LGUs shall be
automatically released to them. Sections 18 and 286 of the Local Government Code of 1991, which enjoin that the
just share of the LGUs shall be automatically and directly released to them without need of further action are,
likewise, cited.
The petitioner posits that to subject the distribution and release of the five-billion-peso portion of the IRA,
classified as the LGSEF, to compliance by the LGUs with the implementing rules and regulations, including the
mechanisms and guidelines prescribed by the Oversight Committee, contravenes the explicit directive of the
Constitution that the LGUs share in the national taxes shall be automatically released to them. The petitioner
maintains that the use of the word shall must be given a compulsory meaning.
To further buttress this argument, the petitioner contends that to vest the Oversight Committee with the
authority to determine the distribution and release of the LGSEF, which is a part of the IRA of the LGUs, is an
anathema to the principle of local autonomy as embodied in the Constitution and the Local Government Code of
1991. The petitioner cites as an example the experience in 2001 when the release of the LGSEF was long delayed
because the Oversight Committee was not able to convene that year and no guidelines were issued therefor. Further,
the possible disapproval by the Oversight Committee of the project proposals of the LGUs would result in the
diminution of the latters share in the IRA.
Another infringement alleged to be occasioned by the assailed OCD resolutions is the improper amendment to
Section 285 of the Local Government Code of 1991 on the percentage sharing of the IRA among the LGUs. Said
provision allocates the IRA as follows: Provinces 23%; Cities 23%; Municipalities 34%; and Barangays
20%.[8] This formula has been improperly amended or modified, with respect to the five-billion-peso portion of the
IRA allotted for the LGSEF, by the assailed OCD resolutions as they invariably provided for a different sharing
scheme.
The modifications allegedly constitute an illegal amendment by the executive branch of a substantive
law. Moreover, the petitioner mentions that in the Letter dated December 5, 2001 of respondent Executive Secretary
Romulo addressed to respondent Secretary Boncodin, the former endorsed to the latter the release of funds to certain
LGUs from the LGSEF in accordance with the handwritten instructions of President Arroyo. Thus, the LGUs are at
a loss as to how a portion of the LGSEF is actually allocated. Further, there are still portions of the LGSEF that, to
date, have not been received by the petitioner; hence, resulting in damage and injury to the petitioner.

The petitioner prays that the Court declare as unconstitutional and void the assailed provisos relating to the
LGSEF in the GAAs of 1999, 2000 and 2001 and the assailed OCD resolutions (Resolutions Nos. OCD-99-003,
OCD-99-005, OCD-99-006, OCD-2000-023, OCD-2001-029 and OCD-2002-001) issued by the Oversight
Committee pursuant thereto. The petitioner, likewise, prays that the Court direct the respondents to rectify the
unlawful and illegal distribution and releases of the LGSEF for the aforementioned years and release the same in
accordance with the sharing formula under Section 285 of the Local Government Code of 1991. Finally, the
petitioner urges the Court to declare that the entire IRA should be released automatically without further action by
the LGUs as required by the Constitution and the Local Government Code of 1991.

The Respondents Arguments


The respondents, through the Office of the Solicitor General, urge the Court to dismiss the petition on
procedural and substantive grounds. On the latter, the respondents contend that the assailed provisos in the GAAs of
1999, 2000 and 2001 and the assailed resolutions issued by the Oversight Committee are not constitutionally
infirm. The respondents advance the view that Section 6, Article X of the Constitution does not specify that the
just share of the LGUs shall be determined solely by the Local Government Code of 1991. Moreover, the phrase
as determined by law in the same constitutional provision means that there exists no limitation on the power of
Congress to determine what is the just share of the LGUs in the national taxes. In other words, Congress is the
arbiter of what should be the just share of the LGUs in the national taxes.
The respondents further theorize that Section 285 of the Local Government Code of 1991, which provides for
the percentage sharing of the IRA among the LGUs, was not intended to be a fixed determination of their just
share in the national taxes. Congress may enact other laws, including appropriations laws such as the GAAs of
1999, 2000 and 2001, providing for a different sharing formula. Section 285 of the Local Government Code of 1991
was merely intended to be the default share of the LGUs to do away with the need to determine annually by law
their just share. However, the LGUs have no vested right in a permanent or fixed percentage as Congress may
increase or decrease the just share of the LGUs in accordance with what it believes is appropriate for their
operation. There is nothing in the Constitution which prohibits Congress from making such determination through
the appropriations laws. If the provisions of a particular statute, the GAA in this case, are within the constitutional
power of the legislature to enact, they should be sustained whether the courts agree or not in the wisdom of their
enactment.
On procedural grounds, the respondents urge the Court to dismiss the petition outright as the same is
defective. The petition allegedly raises factual issues which should be properly threshed out in the lower courts, not
this Court, not being a trier of facts. Specifically, the petitioners allegation that there are portions of the LGSEF
that it has not, to date, received, thereby causing it (the petitioner) injury and damage, is subject to proof and must be
substantiated in the proper venue, i.e., the lower courts.
Further, according to the respondents, the petition has already been rendered moot and academic as it no longer
presents a justiciable controversy. The IRAs for the years 1999, 2000 and 2001, have already been released and the
government is now operating under the 2003 budget. In support of this, the respondents submitted certifications
issued by officers of the DBM attesting to the release of the allocation or shares of the petitioner in the LGSEF for
1999, 2000 and 2001. There is, therefore, nothing more to prohibit.
Finally, the petitioner allegedly has no legal standing to bring the suit because it has not suffered any injury. In
fact, the petitioners just share has even increased. Pursuant to Section 285 of the Local Government Code of
1991, the share of the provinces is 23%. OCD Nos. 99-005, 99-006 and 99-003 gave the provinces 40% of P2
billion of the LGSEF. OCD Nos. 2000-023 and 2001-029 apportioned 26% of P3.5 billion to the provinces. On the
other hand, OCD No. 2001-001 allocated 25% of P3 billion to the provinces. Thus, the petitioner has not suffered
any injury in the implementation of the assailed provisos in the GAAs of 1999, 2000 and 2001 and the OCD
resolutions.

The Ruling of the Court

Procedural Issues
Before resolving the petition on its merits, the Court shall first rule on the following procedural issues raised by
the respondents: (1) whether the petitioner has legal standing or locus standi to file the present suit; (2) whether the
petition involves factual questions that are properly cognizable by the lower courts; and (3) whether the issue had
been rendered moot and academic.

The petitioner has locus standi

to maintain the present suit


The gist of the question of standing is whether a party has alleged such a personal stake in the outcome of the
controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court so
largely depends for illumination of difficult constitutional questions. [9] Accordingly, it has been held that the
interest of a party assailing the constitutionality of a statute must be direct and personal. Such party must be able to
show, not only that the law or any government act is invalid, but also that he has sustained or is in imminent danger
of sustaining some direct injury as a result of its enforcement, and not merely that he suffers thereby in some
indefinite way. It must appear that the person complaining has been or is about to be denied some right or privilege
to which he is lawfully entitled or that he is about to be subjected to some burdens or penalties by reason of the
statute or act complained of.[10]
The Court holds that the petitioner possesses the requisite standing to maintain the present suit. The petitioner,
a local government unit, seeks relief in order to protect or vindicate an interest of its own, and of the other
LGUs. This interest pertains to the LGUs share in the national taxes or the IRA. The petitioners constitutional
claim is, in substance, that the assailed provisos in the GAAs of 1999, 2000 and 2001, and the OCD resolutions
contravene Section 6, Article X of the Constitution, mandating the automatic release to the LGUs of their share in
the national taxes. Further, the injury that the petitioner claims to suffer is the diminution of its share in the IRA, as
provided under Section 285 of the Local Government Code of 1991, occasioned by the implementation of the
assailed measures. These allegations are sufficient to grant the petitioner standing to question the validity of the
assailed provisos in the GAAs of 1999, 2000 and 2001, and the OCD resolutions as the petitioner clearly has a
plain, direct and adequate interest in the manner and distribution of the IRA among the LGUs.

The petition involves a significant


legal issue
The crux of the instant controversy is whether the assailed provisos contained in the GAAs of 1999, 2000 and
2001, and the OCD resolutions infringe the Constitution and the Local Government Code of 1991. This is
undoubtedly a legal question. On the other hand, the following facts are not disputed:
1.

The earmarking of five billion pesos of the IRA for the LGSEF in the assailed provisos in the GAAs
of 1999, 2000 and re-enacted budget for 2001;

2.

The promulgation of the assailed OCD resolutions providing for the allocation schemes covering the
said five billion pesos and the implementing rules and regulations therefor; and

3.

The release of the LGSEF to the LGUs only upon their compliance with the implementing rules and
regulations, including the guidelines and mechanisms, prescribed by the Oversight Committee.

Considering that these facts, which are necessary to resolve the legal question now before this Court, are no
longer in issue, the same need not be determined by a trial court. [11] In any case, the rule on hierarchy of courts will
not prevent this Court from assuming jurisdiction over the petition. The said rule may be relaxed when the redress
desired cannot be obtained in the appropriate courts or where exceptional and compelling circumstances justify
availment of a remedy within and calling for the exercise of this Courts primary jurisdiction. [12]
The crucial legal issue submitted for resolution of this Court entails the proper legal interpretation of
constitutional and statutory provisions. Moreover, the transcendental importance of the case, as it necessarily
involves the application of the constitutional principle on local autonomy, cannot be gainsaid. The nature of the
present controversy, therefore, warrants the relaxation by this Court of procedural rules in order to resolve the case
forthwith.

The substantive issue needs to be resolved


notwithstanding the supervening events
Granting arguendo that, as contended by the respondents, the resolution of the case had already been overtaken
by supervening events as the IRA, including the LGSEF, for 1999, 2000 and 2001, had already been released and the
government is now operating under a new appropriations law, still, there is compelling reason for this Court to
resolve the substantive issue raised by the instant petition. Supervening events, whether intended or accidental,
cannot prevent the Court from rendering a decision if there is a grave violation of the Constitution. [13] Even in cases
where supervening events had made the cases moot, the Court did not hesitate to resolve the legal or constitutional
issues raised to formulate controlling principles to guide the bench, bar and public. [14]
Another reason justifying the resolution by this Court of the substantive issue now before it is the rule that
courts will decide a question otherwise moot and academic if it is capable of repetition, yet evading review. [15] For
the GAAs in the coming years may contain provisos similar to those now being sought to be invalidated, and yet, the

question may not be decided before another GAA is enacted. It, thus, behooves this Court to make a categorical
ruling on the substantive issue now.

Substantive Issue
As earlier intimated, the resolution of the substantive legal issue in this case calls for the application of a most
important constitutional policy and principle, that of local autonomy.[16] In Article II of the Constitution, the State has
expressly adopted as a policy that:
Section 25. The State shall ensure the autonomy of local governments.
An entire article (Article X) of the Constitution has been devoted to guaranteeing and promoting the autonomy
of LGUs. Section 2 thereof reiterates the State policy in this wise:
Section 2. The territorial and political subdivisions shall enjoy local autonomy.
Consistent with the principle of local autonomy, the Constitution confines the Presidents power over the LGUs
to one of general supervision.[17] This provision has been interpreted to exclude the power of control. The distinction
between the two powers was enunciated in Drilon v. Lim:[18]
An officer in control lays down the rules in the doing of an act. If they are not followed, he may, in his discretion,
order the act undone or re-done by his subordinate or he may even decide to do it himself. Supervision does not
cover such authority. The supervisor or superintendent merely sees to it that the rules are followed, but he himself
does not lay down such rules, nor does he have the discretion to modify or replace them. If the rules are not
observed, he may order the work done or re-done but only to conform to the prescribed rules. He may not prescribe
his own manner for doing the act. He has no judgment on this matter except to see to it that the rules are followed.
[19]

The Local Government Code of 1991 [20] was enacted to flesh out the mandate of the Constitution. [21] The State
policy on local autonomy is amplified in Section 2 thereof:
Sec. 2. Declaration of Policy. (a) It is hereby declared the policy of the State that the territorial and political
subdivisions of the State shall enjoy genuine and meaningful local autonomy to enable them to attain their fullest
development as self-reliant communities and make them more effective partners in the attainment of national
goals. Toward this end, the State shall provide for a more responsive and accountable local government structure
instituted through a system of decentralization whereby local government units shall be given more powers,
authority, responsibilities, and resources. The process of decentralization shall proceed from the National
Government to the local government units.
Guided by these precepts, the Court shall now determine whether the assailed provisos in the GAAs of 1999,
2000 and 2001, earmarking for each corresponding year the amount of five billion pesos of the IRA for the LGSEF
and the OCD resolutions promulgated pursuant thereto, transgress the Constitution and the Local Government Code
of 1991.

The assailed provisos in the GAAs of 1999, 2000


and 2001 and the OCD resolutions violate the
constitutional precept on local autonomy
Section 6, Article X of the Constitution reads:
Sec. 6. Local government units shall have a just share, as determined by law, in the national taxes which shall
be automatically released to them.
When parsed, it would be readily seen that this provision mandates that (1) the LGUs shall have a just share
in the national taxes; (2) the just share shall be determined by law; and (3) the just share shall be automatically
released to the LGUs.
The Local Government Code of 1991, among its salient provisions, underscores the automatic release of the
LGUs just share in this wise:
Sec. 18. Power to Generate and Apply Resources. Local government units shall have the power and authority to
establish an organization that shall be responsible for the efficient and effective implementation of their development

plans, program objectives and priorities; to create their own sources of revenue and to levy taxes, fees, and charges
which shall accrue exclusively for their use and disposition and which shall be retained by them; to have a just share
in national taxes which shall be automatically and directly released to them without need of further action;
...
Sec. 286. Automatic Release of Shares. (a) The share of each local government unit shall be released, without need
of any further action, directly to the provincial, city, municipal or barangay treasurer, as the case may be, on a
quarterly basis within five (5) days after the end of each quarter, and which shall not be subject to any lien or
holdback that may be imposed by the national government for whatever purpose.
(b) Nothing in this Chapter shall be understood to diminish the share of local government units under existing laws.
Websters Third New International Dictionary defines automatic as involuntary either wholly or to a major
extent so that any activity of the will is largely negligible; of a reflex nature; without volition; mechanical; like or
suggestive of an automaton. Further, the word automatically is defined as in an automatic manner: without
thought or conscious intention. Being automatic, thus, connotes something mechanical, spontaneous and
perfunctory. As such, the LGUs are not required to perform any act to receive the just share accruing to them
from the national coffers. As emphasized by the Local Government Code of 1991, the just share of the LGUs
shall be released to them without need of further action. Construing Section 286 of the LGC, we held inPimentel,
Jr. v. Aguirre,[22] viz:
Section 4 of AO 372 cannot, however, be upheld. A basic feature of local fiscal autonomy is the automatic release
of the shares of LGUs in the National internal revenue. This is mandated by no less than the Constitution. The
Local Government Code specifies further that the release shall be made directly to the LGU concerned within five
(5) days after every quarter of the year and shall not be subject to any lien or holdback that may be imposed by the
national government for whatever purpose. As a rule, the term SHALL is a word of command that must be
given a compulsory meaning. The provision is, therefore,IMPERATIVE.
Section 4 of AO 372, however, orders the withholding, effective January 1, 1998, of 10 percent of the LGUs IRA
pending the assessment and evaluation by the Development Budget Coordinating Committee of the emerging fiscal
situation in the country. Such withholding clearly contravenes the Constitution and the law. Although temporary, it
is equivalent to a holdback, which means something held back or withheld, often temporarily. Hence, the
temporary nature of the retention by the national government does not matter. Any retention is prohibited.
In sum, while Section 1 of AO 372 may be upheld as an advisory effected in times of national crisis, Section 4
thereof has no color of validity at all. The latter provision effectively encroaches on the fiscal autonomy of local
governments. Concededly, the President was well-intentioned in issuing his Order to withhold the LGUs IRA, but
the rule of law requires that even the best intentions must be carried out within the parameters of the Constitution
and the law. Verily, laudable purposes must be carried out by legal methods.[23]
The just share of the LGUs is incorporated as the IRA in the appropriations law or GAA enacted by Congress
annually. Under the assailed provisos in the GAAs of 1999, 2000 and 2001, a portion of the IRA in the amount of
five billion pesos was earmarked for the LGSEF, and these provisos imposed the condition that such amount shall
be released to the local government units subject to the implementing rules and regulations, including such
mechanisms and guidelines for the equitable allocations and distribution of said fund among local government units
subject to the guidelines that may be prescribed by the Oversight Committee on Devolution. Pursuant thereto, the
Oversight Committee, through the assailed OCD resolutions, apportioned the five billion pesos LGSEF such that:
For 1999
P2 billion - allocated according to Sec. 285 LGC
P2 billion - Modified Sharing Formula (Provinces 40%;
Cities 20%; Municipalities 40%)
P1 billion projects (LAAP) approved by OCD.[24]
For 2000
P3.5 billion Modified Sharing Formula (Provinces 26%;
Cities 23%; Municipalities 35%; Barangays 16%);
P1.5 billion projects (LAAP) approved by the OCD.[25]
For 2001
P3 billion Modified Sharing Formula (Provinces 25%;

Cities 25%; Municipalities 35%; Barangays 15%)


P1.9 billion priority projects
P100 million capability building fund.[26]
Significantly, the LGSEF could not be released to the LGUs without the Oversight Committees prior
approval. Further, with respect to the portion of the LGSEF allocated for various projects of the LGUs (P1 billion
for 1999; P1.5 billion for 2000 and P2 billion for 2001), the Oversight Committee, through the assailed OCD
resolutions, laid down guidelines and mechanisms that the LGUs had to comply with before they could avail of
funds from this portion of the LGSEF. The guidelines required (a) the LGUs to identify the projects eligible for
funding based on the criteria laid down by the Oversight Committee; (b) the LGUs to submit their project proposals
to the DILG for appraisal; (c) the project proposals that passed the appraisal of the DILG to be submitted to the
Oversight Committee for review, evaluation and approval. It was only upon approval thereof that the Oversight
Committee would direct the DBM to release the funds for the projects.
To the Courts mind, the entire process involving the distribution and release of the LGSEF is constitutionally
impermissible. The LGSEF is part of the IRA or just share of the LGUs in the national taxes. To subject its
distribution and release to the vagaries of the implementing rules and regulations, including the guidelines and
mechanisms unilaterally prescribed by the Oversight Committee from time to time, as sanctioned by the assailed
provisos in the GAAs of 1999, 2000 and 2001 and the OCD resolutions, makes the release not automatic, a flagrant
violation of the constitutional and statutory mandate that the just share of the LGUs shall be automatically
released to them. The LGUs are, thus, placed at the mercy of the Oversight Committee.
Where the law, the Constitution in this case, is clear and unambiguous, it must be taken to mean exactly what it
says, and courts have no choice but to see to it that the mandate is obeyed. [27]Moreover, as correctly posited by the
petitioner, the use of the word shall connotes a mandatory order. Its use in a statute denotes an imperative
obligation and is inconsistent with the idea of discretion. [28]
Indeed, the Oversight Committee exercising discretion, even control, over the distribution and release of a
portion of the IRA, the LGSEF, is an anathema to and subversive of the principle of local autonomy as embodied in
the Constitution. Moreover, it finds no statutory basis at all as the Oversight Committee was created merely to
formulate the rules and regulations for the efficient and effective implementation of the Local Government Code of
1991 to ensure compliance with the principles of local autonomy as defined under the Constitution. [29] In fact, its
creation was placed under the title of Transitory Provisions, signifying its ad hoc character. According to Senator
Aquilino Q. Pimentel, the principal author and sponsor of the bill that eventually became Rep. Act No. 7160, the
Committees work was supposed to be done a year from the approval of the Code, or on October 10, 1992. [30] The
Oversight Committees authority is undoubtedly limited to the implementation of the Local Government Code of
1991, not to supplant or subvert the same. Neither can it exercise control over the IRA, or even a portion thereof, of
the LGUs.
That the automatic release of the IRA was precisely intended to guarantee and promote local autonomy can be
gleaned from the discussion below between Messrs. Jose N. Nolledo and Regalado M. Maambong, then members of
the 1986 Constitutional Commission, to wit:
MR. MAAMBONG. Unfortunately, under Section 198 of the Local Government Code, the existence of
subprovinces is still acknowledged by the law, but the statement of the Gentleman on this point will have to be taken
up probably by the Committee on Legislation. A second point, Mr. Presiding Officer, is that under Article 2, Section
10 of the 1973 Constitution, we have a provision which states:
The State shall guarantee and promote the autonomy of local government units, especially the barrio, to
insure their fullest development as self-reliant communities.
This provision no longer appears in the present configuration; does this mean that the concept of giving
local autonomy to local governments is no longer adopted as far as this Article is concerned?
MR. NOLLEDO. No. In the report of the Committee on Preamble, National Territory, and Declaration of
Principles, that concept is included and widened upon the initiative of Commissioner Bennagen.
MR. MAAMBONG. Thank you for that.
With regard to Section 6, sources of revenue, the creation of sources as provided by previous law was subject to
limitations as may be provided by law, but now, we are using the term subject to such guidelines as may be fixed
by law. In Section 7, mention is made about the unique, distinct and exclusive charges and contributions, and in
Section 8, we talk about exclusivity of local taxes and the share in the national wealth. Incidentally, I was one of
the authors of this provision, and I am very thankful. Does this indicate local autonomy, or was the wording of the
law changed to give more autonomy to the local government units?[31]
MR. NOLLEDO. Yes. In effect, those words indicate also decentralization because local political units can collect
taxes, fees and charges subject merely to guidelines, as recommended by the league of governors and city mayors,

with whom I had a dialogue for almost two hours. They told me that limitations may be questionable in the sense
that Congress may limit and in effect deny the right later on.
MR. MAAMBONG. Also, this provision on automatic release of national tax share points to more local
autonomy. Is this the intention?
MR. NOLLEDO. Yes, the Commissioner is perfectly right.[32]
The concept of local autonomy was explained in Ganzon v. Court of Appeals[33] in this wise:
As the Constitution itself declares, local autonomy means a more responsive and accountable local government
structure instituted through a system of decentralization. The Constitution, as we observed, does nothing more than
to break up the monopoly of the national government over the affairs of local governments and as put by political
adherents, to liberate the local governments from the imperialism of Manila. Autonomy, however, is not meant to
end the relation of partnership and interdependence between the central administration and local government units,
or otherwise, to usher in a regime of federalism. The Charter has not taken such a radical step. Local governments,
under the Constitution, are subject to regulation, however limited, and for no other purpose than precisely, albeit
paradoxically, to enhance self-government.
As we observed in one case, decentralization means devolution of national administration but not power to the
local levels. Thus:
Now, autonomy is either decentralization of administration or decentralization of power. There is decentralization of
administration when the central government delegates administrative powers to political subdivisions in order to
broaden the base of government power and in the process to make local governments more responsive and
accountable and ensure their fullest development as self-reliant communities and make them more effective
partners in the pursuit of national development and social progress. At the same time, it relieves the central
government of the burden of managing local affairs and enables it to concentrate on national concerns. The
President exercises general supervision over them, but only to ensure that local affairs are administered according
to law. He has no control over their acts in the sense that he can substitute their judgments with his own.
Decentralization of power, on the other hand, involves an abdication of political power in the [sic] favor of local
governments [sic] units declared to be autonomous. In that case, the autonomous government is free to chart its own
destiny and shape its future with minimum intervention from central authorities. According to a constitutional
author, decentralization of power amounts to self-immolation, since in that event, the autonomous government
becomes accountable not to the central authorities but to its constituency.[34]
Local autonomy includes both administrative and fiscal autonomy. The fairly recent case of Pimentel v.
Aguirre[35] is particularly instructive. The Court declared therein that local fiscal autonomy includes the power of the
LGUs to, inter alia, allocate their resources in accordance with their own priorities:
Under existing law, local government units, in addition to having administrative autonomy in the exercise of their
functions, enjoy fiscal autonomy as well. Fiscal autonomy means that local governments have the power to create
their own sources of revenue in addition to their equitable share in the national taxes released by the national
government, as well as the power to allocate their resources in accordance with their own priorities. It extends to the
preparation of their budgets, and local officials in turn have to work within the constraints thereof. They are not
formulated at the national level and imposed on local governments, whether they are relevant to local needs and
resources or not ...[36]
Further, a basic feature of local fiscal autonomy is the constitutionally mandated automatic release of the
shares of LGUs in the national internal revenue.[37]
Following this ratiocination, the Court in Pimentel struck down as unconstitutional Section 4 of Administrative
Order (A.O.) No. 372 which ordered the withholding, effective January 1, 1998, of ten percent of the LGUs IRA
pending the assessment and evaluation by the Development Budget Coordinating Committee of the emerging fiscal
situation.
In like manner, the assailed provisos in the GAAs of 1999, 2000 and 2001, and the OCD resolutions constitute
a withholding of a portion of the IRA. They put on hold the distribution and release of the five billion pesos
LGSEF and subject the same to the implementing rules and regulations, including the guidelines and mechanisms
prescribed by the Oversight Committee from time to time. Like Section 4 of A.O. 372, the assailed provisos in the
GAAs of 1999, 2000 and 2001 and the OCD resolutions effectively encroach on the fiscal autonomy enjoyed by the
LGUs and must be struck down. They cannot, therefore, be upheld.

The assailed provisos in the GAAs of 1999, 2000

and 2001 and the OCD resolutions cannot amend


Section 285 of the Local Government Code of 1991
Section 284[38] of the Local Government Code provides that, beginning the third year of its effectivity, the
LGUs share in the national internal revenue taxes shall be 40%. This percentage is fixed and may not be reduced
except in the event the national government incurs an unmanageable public sector deficit" and only upon
compliance with stringent requirements set forth in the same section:
Sec. 284.

...

Provided, That in the event that the national government incurs an unmanageable public sector deficit, the President
of the Philippines is hereby authorized, upon recommendation of Secretary of Finance, Secretary of Interior and
Local Government and Secretary of Budget and Management, and subject to consultation with the presiding officers
of both Houses of Congress and the presidents of the liga, to make the necessary adjustments in the internal revenue
allotment of local government units but in no case shall the allotment be less than thirty percent (30%) of the
collection of the national internal revenue taxes of the third fiscal year preceding the current fiscal
year; Provided, further That in the first year of the effectivity of this Code, the local government units shall, in
addition to the thirty percent (30%) internal revenue allotment which shall include the cost of devolved functions for
essential public services, be entitled to receive the amount equivalent to the cost of devolved personnel services.
Thus, from the above provision, the only possible exception to the mandatory automatic release of the LGUs
IRA is if the national internal revenue collections for the current fiscal year is less than 40 percent of the collections
of the preceding third fiscal year, in which case what should be automatically released shall be a proportionate
amount of the collections for the current fiscal year. The adjustment may even be made on a quarterly basis
depending on the actual collections of national internal revenue taxes for the quarter of the current fiscal year. In the
instant case, however, there is no allegation that the national internal revenue tax collections for the fiscal years
1999, 2000 and 2001 have fallen compared to the preceding three fiscal years.
Section 285 then specifies how the IRA shall be allocated among the LGUs:
Sec. 285. Allocation to Local Government Units. The share of local government units in the internal revenue
allotment shall be allocated in the following manner:
(a)

Provinces Twenty-three (23%)


(b) Cities Twenty-three percent (23%);
(c) Municipalities Thirty-four (34%); and
(d) Barangays Twenty percent (20%).
However, this percentage sharing is not followed with respect to the five billion pesos LGSEF as the assailed
OCD resolutions, implementing the assailed provisos in the GAAs of 1999, 2000 and 2001, provided for a different
sharing scheme. For example, for 1999, P2 billion of the LGSEF was allocated as follows: Provinces 40%; Cities
20%; Municipalities 40%.[39] For 2000, P3.5 billion of the LGSEF was allocated in this manner: Provinces
26%; Cities 23%; Municipalities 35%; Barangays 26%. [40] For 2001, P3 billion of the LGSEF was allocated,
thus: Provinces 25%; Cities 25%; Municipalities 35%; Barangays 15%.[41]
The respondents argue that this modification is allowed since the Constitution does not specify that the just
share of the LGUs shall only be determined by the Local Government Code of 1991. That it is within the power of
Congress to enact other laws, including the GAAs, to increase or decrease the just share of the LGUs. This
contention is untenable. The Local Government Code of 1991 is a substantive law. And while it is conceded that
Congress may amend any of the provisions therein, it may not do so through appropriations laws or GAAs. Any
amendment to the Local Government Code of 1991 should be done in a separate law, not in the appropriations law,
because Congress cannot include in a general appropriation bill matters that should be more properly enacted in a
separate legislation.[42]
A general appropriations bill is a special type of legislation, whose content is limited to specified sums of
money dedicated to a specific purpose or a separate fiscal unit. [43] Any provision therein which is intended to amend
another law is considered an inappropriate provision. The category of inappropriate provisions includes
unconstitutional provisions and provisions which are intended to amend other laws, because clearly these kinds of
laws have no place in an appropriations bill.[44]
Increasing or decreasing the IRA of the LGUs or modifying their percentage sharing therein, which are fixed in
the Local Government Code of 1991, are matters of general and substantive law. To permit Congress to undertake
these amendments through the GAAs, as the respondents contend, would be to give Congress the unbridled
authority to unduly infringe the fiscal autonomy of the LGUs, and thus put the same in jeopardy every year. This,
the Court cannot sanction.
It is relevant to point out at this juncture that, unlike those of 1999, 2000 and 2001, the GAAs of 2002 and
2003 do not contain provisos similar to the herein assailed provisos. In other words, the GAAs of 2002 and 2003

have not earmarked any amount of the IRA for the LGSEF. Congress had perhaps seen fit to discontinue the
practice as it recognizes its infirmity. Nonetheless, as earlier mentioned, this Court has deemed it necessary to make
a definitive ruling on the matter in order to prevent its recurrence in future appropriations laws and that the
principles enunciated herein would serve to guide the bench, bar and public.

Conclusion
In closing, it is well to note that the principle of local autonomy, while concededly expounded in greater detail
in the present Constitution, dates back to the turn of the century when President William McKinley, in his
Instructions to the Second Philippine Commission dated April 7, 1900, ordered the new Government to devote their
attention in the first instance to the establishment of municipal governments in which the natives of the Islands, both
in the cities and in the rural communities, shall be afforded the opportunity to manage their own affairs to the fullest
extent of which they are capable, and subject to the least degree of supervision and control in which a careful study
of their capacities and observation of the workings of native control show to be consistent with the maintenance of
law, order and loyalty. [45] While the 1935 Constitution had no specific article on local autonomy, nonetheless, it
limited the executive power over local governments to general supervision ... as may be provided by
law.[46] Subsequently, the 1973 Constitution explicitly stated that [t]he State shall guarantee and promote the
autonomy of local government units, especially the barangay to ensure their fullest development as self-reliant
communities.[47] An entire article on Local Government was incorporated therein. The present Constitution, as
earlier opined, has broadened the principle of local autonomy. The 14 sections in Article X thereof markedly
increased the powers of the local governments in order to accomplish the goal of a more meaningful local autonomy.
Indeed, the value of local governments as institutions of democracy is measured by the degree of autonomy
that they enjoy.[48] As eloquently put by M. De Tocqueville, a distinguished French political writer, [l]ocal
assemblies of citizens constitute the strength of free nations. Township meetings are to liberty what primary schools
are to science; they bring it within the peoples reach; they teach men how to use and enjoy it. A nation may
establish a system of free governments but without the spirit of municipal institutions, it cannot have the spirit of
liberty.[49]
Our national officials should not only comply with the constitutional provisions on local autonomy but should
also appreciate the spirit and liberty upon which these provisions are based. [50]
WHEREFORE, the petition is GRANTED. The assailed provisos in the General Appropriations Acts of
1999, 2000 and 2001, and the assailed OCD Resolutions, are declared UNCONSTITUTIONAL.
SO ORDERED.
Vitug, (Acting Chief Justice), Panganiban, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio,
Austria-Martinez, Corona, Carpio-Morales, Azcuna, and Tinga, JJ., concur.
Davide, Jr., C.J., and Puno, J., on official leave.

[G.R. No. 130230. April 15, 2005]

METROPOLITAN
MANILA
GARIN, respondent.

DEVELOPMENT

AUTHORITY, petitioner,

vs. DANTE

O.

DECISION
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 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 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
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 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 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.
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.

SECOND DIVISION

[G.R. No. 131255. May 20, 1998]

HON. EDUARDO NONATO JOSON, in his capacity as the Governor of the Province of Nueva
Ecija, petitioner, vs. EXECUTIVE SECRETARY RUBEN D. TORRES, the DEPARTMENT OF THE
INTERIOR & LOCAL GOVERNMENTS, represented by SECRETARY ROBERT Z. BARBERS
and UNDERSECRETARY MANUEL R. SANCHEZ, MR. OSCAR C. TINIO, in his capacity as
Provincial Vice-Governor of Nueva Ecija, and MR. LORETO P. PANGILINAN, MR. CRISPULO S.
ESGUERRA, MS. SOLITA C. SANTOS, MR.VICENTE C. PALILIO, and MR. NAPOLEON G.
INTERIOR, in their capacity as Provincial Board Members of Nueva Ecija, respondents.
DECISION
PUNO, J.:
The case at bar involves the validity of the suspension from office of petitioner Eduardo Nonato Joson as
Governor of the province of Nueva Ecija. Private respondent Oscar C. Tinio is the Vice-Governor of said province
while private respondents Loreto P. Pangilinan, Crispulo S. Esguerra, Solita C. Santos, Vicente C. Palilio and
Napoleon G. Interior are members of the Sangguniang Panlalawigan.
On September 17, 1996, private respondents filed with the Office of the President a letter-complaint dated
September 13, 1997 charging petitioner with grave misconduct and abuse of authority. Private respondents alleged
that in the morning of September 12, 1996, they were at the session hall of the provincial capitol for a scheduled
session of the Sangguniang Panlalawigan when petitioner belligerently barged into the Hall; petitioner angrily
kicked the door and chairs in the Hall and uttered threatening words at them; close behind petitioner were several
men with long and short firearms who encircled the area. Private respondents claim that this incident was an
offshoot of their resistance to a pending legislative measure supported by petitioner that the province of Nueva
Ecija obtain a loan of P150 million from the Philippine National Bank; that petitioner's acts were intended to harass
them into approving this loan; that fortunately, no session of the Sangguniang Panlalawigan was held that day for
lack of quorum and the proposed legislative measure was not considered; that private respondents opposed the loan
because the province of Nueva Ecija had an unliquidated obligation of more than P70 million incurred without prior
authorization from the Sangguniang Panlalawigan; that the provincial budget officer and treasurer had earlier
disclosed that the province could not afford to contract another obligation; that petitioner's act of barging in and
intimidating private respondents was a serious insult to the integrity and independence of the Sangguniang
Panlalawigan; and that the presence of his private army posed grave danger to private respondents' lives and
safety. Private respondents prayed for the suspension or removal of petitioner; for an emergency audit of the
provincial treasury of Nueva Ecija; and for the review of the proposed loan in light of the financial condition of the
province, to wit:
"In this regard, we respectfully request for the following assistance from your good office:
1. To immediately suspend Governor N. [sic] Joson considering the actual dangers that we are facing now, and
provide adequate police security detail for the Sangguniang Panlalawigan of Nueva Ecija. Should the evidence
warrant after investigation, to order his removal from office.
2. To conduct an emergency audit of the provincial treasury of Nueva Ecija by the auditors from the Commission on
Audit Central Office with adequate police security assistance. Should the evidence so warrant, to file necessary
charges against responsible and accountable officers.

3. To advise the Philippine National Bank to review the capability of the province of Nueva Ecija to secure more
loans and the feasibility of the same in the light of the present financial condition of the province. Or if said loan
will be contrary to sound banking practice, recommend its disapproval." [1]
The letter-complaint was submitted with the joint affidavit of Elnora Escombien and Jacqueline Jane Perez,
two (2) employees of the Sangguniang Panlalawigan who witnessed the incident. The letter was endorsed by
Congressmen Eleuterio Violago and Pacifico Fajardo of the Second and Third Districts of Nueva Ecija, former
Congressman Victorio Lorenzo of the Fourth District, and Mayor Placido Calma, President of the Mayors' League of
said province.[2]
The President acted on the complaint by writing on its margin the following:
"17 Sep 96
To: SILG info Exec. Sec. and Sec. of Justice:
1. Noted. There appears no justification for the use of force, intimidation or armed followers in the
situation of 12 Sep at the Session Hall. 2. Take appropriate preemptive and investigative actions. 3.
BREAK NOT the PEACE.
FIDEL V. RAMOS
(Signed)."[3]
President Ramos noted that the situation of "12 Sep at the Session Hall," i.e., the refusal of the members of the
Sangguniang Panlalawigan to approve the proposed loan, did not appear to justify "the use of force, intimidation or
armed followers." He thus instructed the then Secretary of the Interior and Local Governments (SILG) Robert
Barbers to "[t]ake appropriate preemptive and investigative actions," but to "[b]reak not the peace."
The letter-complaint together with the President's marginal notes were sent to Secretary Robert Z. Barbers on
September 20, 1996. Acting upon the instructions of the President, Secretary Barbers notified petitioner of the case
against him[4] and attached to the notice a copy of the complaint and its annexes. In the same notice, Secretary
Barbers directed petitioner "to submit [his] verified/sworn answer thereto, not a motion to dismiss, together with
such documentary evidence that [he] has in support thereof, within fifteen (15) days from receipt." [5]
Immediately thereafter, Secretary Barbers proceeded to Nueva Ecija and summoned petitioner and private
respondents to a conference to settle the controversy. The parties entered into an agreement whereby petitioner
promised to maintain peace and order in the province while private respondents promised to refrain from filing cases
that would adversely affect their peaceful co-existence.[6]
The peace agreement was not respected by the parties and the private respondents reiterated their lettercomplaint. Petitioner was again ordered to file his answer to the letter-complaint within fifteen days from
receipt. Petitioner received a copy of this order on November 13, 1996. On the same day, petitioner requested for
an extension of thirty (30) days to submit his answer because he was "trying to secure the services of legal counsel
experienced in administrative law practice." [7] The Department of the Interior and Local Government (DILG), acting
through Director Almario de los Santos, Officer-In-Charge of the Legal Service, granted the motion, with the thirtyday extension to be reckoned, however, from November 13, 1996, i.e., the day petitioner received the order to
answer.[8]
In a letter dated December 9, 1996, petitioner moved for another extension of thirty (30) days to file his
answer. He stated that he had already sent letters to various law firms in Metro Manila but that he had not yet
contracted their services; that the advent of the Christmas season kept him busy with "numerous and inevitable
official engagements."[9] The DILG granted the request for extension "for the last time up to January 13 only." [10]
On January 7, 1997, petitioner requested for another extension of thirty (30) days to file his answer. According
to him, the Christmas season kept him very busy and preoccupied with his numerous official engagements; that the
law firms he invited to handle his case have favorably replied but that he needed time to confer with them
personally; and that during this period, he, with the help of his friends, was exploring the possibility of an amicable
settlement of the case. [11] The DILG granted petitioner's request "for the last time" but gave him an extension of only
ten (10) days from January 13, 1997 to January 23, 1997. The DILG also informed him that his "failure to submit
answer will be considered a waiver and that the plaintiff [shall] be allowed to present his evidence ex-parte."[12]
Petitioner moved for reconsideration of the order. He reiterated his prayer for an extension of thirty (30) days
on the following grounds: (a) that he was still in the process of choosing competent and experienced counsel; (b)
that some law firms refused to accept his case because it was perceived to be politically motivated; and (c) the
multifarious activities, appointments and official functions of his office hindered his efforts to secure counsel of
choice.[13]
Three months later, on April 22, 1997, Undersecretary Manuel Sanchez, then Acting Secretary of the DILG,
issued an order declaring petitioner in default and to have waived his right to present evidence. Private respondents
were ordered to present their evidence ex-parte. The order reads as follows:

"ORDER
It appearing that respondent failed to submit his answer to the complaint despite the grant to him of three
(3) extensions, such unreasonable failure is deemed a waiver of his right to present evidence in his behalf
pursuant to Section 4, Rule 4 of Administrative Order No. 23 dated December 17, 1992, as amended.
Respondent is hereby declared in default, meanwhile, complainants are directed to present their
evidence ex-parte. However, considering the prohibition on the conduct of administrative investigation
due to the forthcoming barangay elections, complainants will be notified on the date after the barangay
election for them to present their evidence.
SO ORDERED."[14]
Two days later, on April 24, 1997, the law firm of Padilla, Jimenez, Kintanar & Asuncion, representing
petitioner, filed with the DILG an "Entry of Appearance with Motion for Time to File Answer Ad Cautelam."
Petitioner received a copy of the order of default on May 2, 1997. Through counsel, he moved for
reconsideration. On May 19, 1997, Undersecretary Sanchez reconsidered the order of default in the interest of
justice. He noted the appearance of petitioner's counsel and gave petitioner "for the last time" fifteen (15) days from
receipt to file his answer.[15]
On June 23, 1997, Undersecretary Sanchez issued an order stating that petitioner's counsel, whose office is in
Manila, should have received a copy of the May 19, 1997 order ten days after mailing on May 27, 1997. Since
petitioner still failed to file his answer, he was deemed to have waived his right to present evidence in his
behalf. Undersecretary Sanchez reinstated the order of default and directed private respondents to present their
evidence ex-parte on July 15, 1997.[16]
The following day, June 24, 1997, petitioner, through counsel, filed a "Motion to Dismiss." Petitioner alleged
that the letter-complaint was not verified on the day it was filed with the Office of the President; and that the DILG
had no jurisdiction over the case and no authority to require him to answer the complaint.
On July 4, 1997, petitioner filed an "Urgent Ex-Parte Motion for Reconsideration" of the order of June 23,
1997 reinstating the order of default. Petitioner also prayed that the hearing on the merits of the case be held in
abeyance until after the "Motion to Dismiss" shall have been resolved.
On July 11, 1997, on recommendation of Secretary Barbers, Executive Secretary Ruben Torres issued an order,
by authority of the President, placing petitioner under preventive suspension for sixty (60) days pending
investigation of the charges against him.[17]
Secretary Barbers directed the Philippine National Police to assist in the implementation of the order of
preventive suspension. In petitioner's stead, Secretary Barbers designated Vice-Governor Oscar Tinio as Acting
Governor until such time as petitioner's temporary legal incapacity shall have ceased to exist. [18]
Forthwith, petitioner filed a petition for certiorari and prohibition with the Court of Appeals challenging the
order of preventive suspension and the order of default.[19]
Meanwhile, the proceedings before the DILG continued. On August 20, 1997, Undersecretary Sanchez issued
an order denying petitioner's "Motion to Dismiss" and "Urgent Ex-ParteMotion for Reconsideration." In the same
order, he required the parties to submit their position papers within an inextendible period of ten days from receipt
after which the case shall be deemed submitted for resolution, to wit:
"WHEREFORE, for lack of merit, both motions are denied. However, for this office to have a better
appreciation of the issues raised in the instant case, the parties, through their respective counsels are
hereby directed to submit their position papers within a period of ten (10) days from receipt hereof, which
period is inextendible, after which the case is deemed submitted for resolution."[20]
On August 27, 1997, petitioner filed with the DILG a "Motion to Lift Order of Preventive Suspension." On
September 10, 1997, petitioner followed this with a "Motion to Lift Default Order and Admit Answer Ad
Cautelam."[21] Attached to the motion was the "Answer Ad Cautelam"[22] and sworn statements of his witnesses. On
the other hand, complainants (private respondents herein) manifested that they were submitting the case for decision
based on the records, the complaint and affidavits of their witnesses. [23]
In his Answer Ad Cautelam, petitioner alleged that in the morning of September 12, 1996, while he was at his
district office in the town of Munoz, he received a phone call from Sangguniang Panlalawigan member Jose del
Mundo. Del Mundo, who belonged to petitioner's political party, informed him that Vice-Governor Tinio was
enraged at the members of the Sangguniang Panlalawigan who were in petitioner's party because they refused to
place on the agenda the ratification of the proposed P150 million loan of the province. Petitioner repaired to the
provincial capitol to advise his party-mates on their problem and at the same time attend to his official
functions. Upon arrival, he went to the Session Hall and asked the members present where Vice-Governor Tinio
was. However, without waiting for their reply, he left the Hall and proceeded to his office.
Petitioner claimed that there was nothing in his conduct that threatened the members of the Sangguniang
Panlalawigan or caused alarm to the employees. He said that like Vice-Governor Tinio, he was always accompanied

by his official security escorts whenever he reported for work. He also alleged that the joint affidavit of Elnora
Escombien and Jacqueline Jane Perez was false. Escombien was purportedly not inside the session hall during the
incident but was at her desk at the office and could not in any way have seen petitioner in the hall. To attest to the
truth of his allegations, petitioner submitted three (3) joint affidavits -- two (2) affidavits executed by six (6) and ten
(10) employees, respectively, of the provincial government, and a third by four members of the Sangguniang
Panlalawigan.[24]
On September 11, 1997, petitioner filed an "Urgent Motion for Reconsideration" of the order of August 20,
1997 denying his motion to dismiss. The "Urgent Motion for Reconsideration" was rejected by Undersecretary
Sanchez on October 8, 1997. Undersecretary Sanchez, however, granted the "Motion to Lift Default Order and to
Admit Answer Ad Cautelam" and admitted the "Answer Ad Cautelam" as petitioner's position paper pursuant to the
order of August 20, 1997.[25]
On October 15, 1997, petitioner filed a "Motion to Conduct Formal Investigation." Petitioner prayed that a
formal investigation of his case be conducted pursuant to the provisions of the Local Government Code of 1991 and
Rule 7 of Administrative Order No. 23; and that this be held at the province of Nueva Ecija. [26] On October 29, 1997,
petitioner submitted a "Manifestation and Motion" before the DILG reiterating his right to a formal investigation.
In the meantime, on October 24, 1997, the Court of Appeals dismissed petitioner's petition.[27]
Hence this recourse.
The proceedings before the DILG continued however. In an order dated November 11, 1997, the DILG denied
petitioner's "Motion to Conduct Formal Investigation" declaring that the submission of position papers substantially
complies with the requirements of procedural due process in administrative proceedings. [28]
A few days after filing the petition before this Court, petitioner filed a "Motion for Leave to File Herein
Incorporated Urgent Motion for the Issuance of a Temporary Restraining Order and/or a Writ of Preliminary
Injunction." Petitioner alleged that subsequent to the institution of this petition, the Secretary of the Interior and
Local Governments rendered a resolution on the case finding him guilty of the offenses charged. [29] His finding was
based on the position papers and affidavits of witnesses submitted by the parties. The DILG Secretary found the
affidavits of complainants' witnesses to be "more natural, reasonable and probable" than those of herein petitioner
Joson's.[30]
On January 8, 1998, the Executive Secretary, by authority of the President, adopted the findings and
recommendation of the DILG Secretary. He imposed on petitioner the penalty of suspension from office for six (6)
months without pay, to wit:
"WHEREFORE, as recommended by the Secretary of the Interior and Local Government, respondent
Nueva Ecija Governor Eduardo Nonato Joson is hereby found guilty of the offenses charged and is meted
the penalty of suspension from office for a period of six (6) months without pay." [31]
On January 14, 1998, we issued a temporary restraining order enjoining the implementation of the order of the
Executive Secretary.
On January 19, 1998, private respondents submitted a Manifestation informing this Court that the suspension
of petitioner was implemented on January 9, 1998; that on the same day, private respondent Oscar Tinio was
installed as Acting Governor of the province; and that in view of these events, the temporary restraining order had
lost its purpose and effectivity and was fait accompli.[32] We noted this Manifestation.
In his petition, petitioner alleges that:
"I
THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT RULES OF
PROCEDURE AND EVIDENCE SHOULD NOT BE STRICTLY APPLIED IN THE
ADMINISTRATIVE DISCIPLINARY AND CLEARLY PUNITIVE PROCEEDINGS IN THE CASE
AGAINST PETITIONER GOVERNOR EDNO JOSON;
II
THE COURT OF APPEALS GRAVELY ERRED IN APPLYING THE ALTER-EGO
PRINCIPLE BECAUSE, CONTRARY TO LAW, IT WAS THE SECRETARY OF THE DILG WHO
WAS EXERCISING THE POWERS OF THE PRESIDENT WHICH ARE CLEARLY VESTED BY
LAW ONLY UPON HIM OR THE EXECUTIVE SECRETARY.
III
THE COURT OF APPEALS ERRED IN RULING THAT THE PETITIONER WAS PROPERLY
DECLARED IN DEFAULT WHEN HE FILED A MOTION TO DISMISS INSTEAD OF AN ANSWER,
AS DIRECTED BY THE DILG, BECAUSE A MOTION TO DISMISS BASED ON JURISDICTIONAL
GROUNDS IS NOT A PROHIBITIVE [sic] PLEADING IN ADMINISTRATIVE DISCIPLINARY
CASES.
IV
THE COURT OF APPEALS ERRED IN RULING THAT THE IMPOSITION OF PREVENTIVE
SUSPENSION AGAINST THE PETITIONER WAS PROPER BECAUSE THERE WAS NO JOINDER
OF ISSUES YET UPON ITS IMPOSITION AND THERE WAS NO EVIDENCE OF GUILT AGAINST
PETITIONER."[33]

In his "Motion for Leave to File Herein Incorporated Urgent Motion for the Issuance of a Temporary Restraining
Order and/or a Writ of Preliminary Injunction," petitioner also claims that:
"I THE RESOLUTION OF JANUARY 8, 1998 AND THE MEMORANDA ISSUED PURSUANT
THERETO (i.e., ANNEXES "C," "D," "E," "F," AND "G" HEREOF) WERE ISSUED WITH UNDUE
HASTE, IN VIOLATION OF THE PERTINENT PROVISIONS OF THE 1991 LOCAL
GOVERNMENT CODE AND ADMINISTRATIVE ORDER NO. 23, AND IN COMPLETE
DISREGARD OF PETITIONER'S CONSTITUTIONAL RIGHT TO DUE PROCESS.
II THE IMPLEMENTATION OF THE INVALID RESOLUTION OF JANUARY 8, 1998 (ANNEX "C"
HEREOF) BY THE PUBLIC RESPONDENTS ENTITLES PETITIONER TO THE IMMEDIATE
ISSUANCE OF THE TEMPORARY RESTRAINING ORDER/WRIT OF PRELIMINARY
INJUNCTION HEREIN PRAYED FOR."[34]
We find merit in the petition.
Administrative disciplinary proceedings against elective local officials are governed by the Local Government
Code of 1991, the Rules and Regulations Implementing the Local Government Code of 1991, and Administrative
Order No. 23 entitled "Prescribing the Rules and Procedures on the Investigation of Administrative Disciplinary
Cases Against Elective Local Officials of Provinces, Highly Urbanized Cities, Independent Component Cities, and
Cities and Municipalities in Metropolitan Manila."[35] In all matters not provided in A.O. No. 23, the Rules of Court
and the Administrative Code of 1987 apply in a suppletory character.[36]
I
Section 60 of Chapter 4, Title II, Book I of the Local Government Code enumerates the grounds for which an
elective local official may be disciplined, suspended or removed from office. Section 60 reads:
"Sec. 60. Grounds for Disciplinary Actions. -- An elective local official may be disciplined, suspended, or
removed from office on any of the following grounds:
(a) Disloyalty to the Republic of the Philippines;
(b) Culpable violation of the Constitution;
(c) Dishonesty, oppression, misconduct in office, gross negligence, or dereliction of duty;
(d) Commission of any offense involving moral turpitude or an offense punishable by at least prision mayor;
(e) Abuse of authority;
(f) Unauthorized absence for fifteen (15) consecutive working days, except in the case of members of the
sangguniang panlalawigan, sangguniang panlunsod, sangguniang bayan, and sangguniang barangay;
(g) Application for, or acquisition of, foreign citizenship or residence or the status of an immigrant of another
country; and
(h) Such other grounds as may be provided in this Code and other laws.
An elective local official may be removed from office on the grounds enumerated above by order of the proper
court."
When an elective local official commits an act that falls under the grounds for disciplinary action, the
administrative complaint against him must be verified and filed with any of the following:
"Sec. 61. Form and Filing of Administrative Complaints.-- A verified complaint against any erring local
elective official shall be prepared as follows:
(a)
A complaint against any elective official of a province, a highly urbanized city, an independent component
city or component city shall be filed before the Office of the President.
(b)
A complaint against any elective official of a municipality shall be filed before the sangguniang
panlalawigan whose decision may be appealed to the Office of the President; and
(c)
A complaint against any elective barangay official shall be filed before the sangguniang panlungsod or
sangguniang bayan concerned whose decision shall be final and executory." [37]

An administrative complaint against an erring elective official must be verified and filed with the proper
government office. A complaint against an elective provincial or city official must be filed with the Office of the
President. A complaint against an elective municipal official must be filed with the Sangguniang Panlalawigan
while that of a barangay official must be filed before the Sangguniang Panlungsod or Sangguniang Bayan.
In the instant case, petitioner Joson is an elective official of the province of Nueva Ecija. The letter-complaint
against him was therefore properly filed with the Office of the President. According to petitioner, however, the
letter-complaint failed to conform with the formal requirements set by the Code. He alleges that the complaint was
not verified by private respondents and was not supported by the joint affidavit of the two witnesses named therein;
that private respondents later realized these defects and surreptitiously inserted the verification and sworn statement
while the complaint was still pending with the Office of the President. [38] To prove his allegations, petitioner
submitted: (a) the sworn statement of private respondent Solita C. Santos attesting to the alleged fact that after the
letter-complaint was filed, Vice-Governor Tinio made her and the other members of the Sangguniang Panlalawigan
sign an additional page which he had later notarized; and (b) the fact that the verification of the letter-complaint and
the joint affidavit of the witnesses do not indicate the document, page or book number of the notarial register of the
notary public before whom they were made.[39]
We find no merit in the contention of the petitioner. The absence of the document, page or book number of the
notarial register of the subscribing officer is insufficient to prove petitioner's claim. The lack of these entries may
constitute proof of neglect on the part of the subscribing officer in complying with the requirements for notarization
and proper verification. They may give grounds for the revocation of his notarial commission. [40] But they do not
indubitably prove that the verification was inserted or intercalated after the letter-complaint was filed with the Office
of the President.
Nor is the fact of intercalation sufficiently established by the affidavit of Solita C. Santos. Private respondent
Santos was one of the signatories to the letter-complaint. In her affidavit, she prayed that she be dropped as one of
the complainants since she had just joined the political party of petitioner Joson. She decided to reveal the
intercalation because she was disillusioned with the "dirty tactics" of Vice-Governor Tinio to grab power from
petitioner Joson.[41] Private respondent Santos cannot in any way be considered an unbiased witness. Her motive and
change of heart render her affidavit suspect.
Assuming, nonetheless, that the letter-complaint was unverified when submitted to the Office of the President,
the defect was not fatal. The requirement of verification was deemed waived by the President himself when he
acted on the complaint.
Verification is a formal, not jurisdictional requisite. [42] Verification is mainly intended to secure an assurance
that the allegations therein made are done in good faith or are true and correct and not mere speculation. [43] The lack
of verification is a mere formal defect. [44] The court may order the correction of the pleading, if not verified, or act
on the unverified pleading if the attending circumstances are such that a strict compliance with the rule may be
dispensed with in order that the ends of justice may be served.[45]
II
In his second assigned error, petitioner questions the jurisdiction and authority of the DILG Secretary over the
case. He contends that under the law, it is the Office of the President that has jurisdiction over the letter-complaint
and that the Court of Appeals erred in applying the alter-ego principle because the power to discipline elective local
officials lies with the President, not with the DILG Secretary.
Jurisdiction over administrative disciplinary actions against elective local officials is lodged in two authorities:
the Disciplining Authority and the Investigating Authority. This is explicit from A.O. No. 23, to wit:
"Sec. 2. Disciplining Authority.
All administrative complaints, duly verified, against elective local
officials mentioned in the preceding Section shall be acted upon by the President. The President, who
may act through the Executive Secretary, shall hereinafter be referred to as the Disciplining Authority."
Sec. 3. Investigating Authority.
The Secretary of the Interior and Local Government is hereby
designated as the Investigating Authority. He may constitute an Investigating Committee in the
Department of the Interior and Local Government for the purpose.
The Disciplining Authority may, however, in the interest of the service, constitute a Special Investigating
Committee in lieu of the Secretary of the Interior and Local Government." [46]
Pursuant to these provisions, the Disciplining Authority is the President of the Philippines, whether acting by
himself or through the Executive Secretary. The Secretary of the Interior and Local Government is the Investigating
Authority, who may act by himself or constitute an Investigating Committee. The Secretary of the DILG, however,
is not the exclusive Investigating Authority. In lieu of the DILG Secretary, the Disciplining Authority may designate
a Special Investigating Committee.
The power of the President over administrative disciplinary cases against elective local officials is derived
from his power of general supervision over local governments. Section 4, Article X of the 1987 Constitution
provides:
"Sec. 4. The President of the Philippines shall exercise general supervision over local
governments. Provinces with respect to component cities and municipalities, and cities and

municipalities with respect to component barangays shall ensure that the acts of their component units are
within the scope of their prescribed powers and functions."[47]
The power of supervision means "overseeing or the authority of an officer to see that the subordinate officers
perform their duties."[48] If the subordinate officers fail or neglect to fulfill their duties, the official may take such
action or step as prescribed by law to make them perform their duties. [49] The President's power of general
supervision means no more than the power of ensuring that laws are faithfully executed, or that subordinate officers
act within the law.[50] Supervision is not incompatible with discipline.[51] And the power to discipline and ensure that
the laws be faithfully executed must be construed to authorize the President to order an investigation of the act or
conduct of local officials when in his opinion the good of the public service so requires. [52] Thus:
"Independently of any statutory provision authorizing the President to conduct an investigation of the
nature involved in this proceeding, and in view of the nature and character of the executive authority with
which the President of the Philippines is invested, the constitutional grant to him of power to exercise
general supervision over all local governments and to take care that the laws be faithfully executed must
be construed to authorize him to order an investigation of the act or conduct of the petitioner
herein. Supervision is not a meaningless thing. It is an active power. It is certainly not without limitation,
but it at least implies authority to inquire into facts and conditions in order to render the power real and
effective. If supervision is to be conscientious and rational, and not automatic and brutal, it must be
founded upon a knowledge of actual facts and conditions disclosed after careful study and
investigation."[53]
The power to discipline evidently includes the power to investigate. As the Disciplining Authority, the President
has the power derived from the Constitution itself to investigate complaints against local government officials. A.
O. No. 23, however, delegates the power to investigate to the DILG or a Special Investigating Committee, as may be
constituted by the Disciplining Authority. This is not undue delegation, contrary to petitioner Joson's claim. The
President remains the Disciplining Authority. What is delegated is the power to investigate, not the power to
discipline.[54]
Moreover, the power of the DILG to investigate administrative complaints is based on the alter-ego principle or
the doctrine of qualified political agency. Thus:
"Under this doctrine, which recognizes the establishment of a single executive, all executive and
administrative organizations are adjuncts of the Executive Department, the heads of the various executive
departments are assistants and agents of the Chief Executive, and, except in cases where the Chief
Executive is required by the Constitution or law to act in person or the exigencies of the situation demand
that he act personally, the multifarious executive and administrative functions of the Chief Executive are
performed by and through the executive departments, and the acts of the Secretaries of such departments,
performed and promulgated in the regular course of business, are, unless disapproved or reprobated by the
Chief Executive presumptively the acts of the Chief Executive." [55]
This doctrine is corollary to the control power of the President. [56] The power of control is provided in the
Constitution, thus:
"Sec. 17. The President shall have control of all the executive departments, bureaus, and offices. He shall
ensure that the laws be faithfully executed."[57]
Control is said to be the very heart of the power of the presidency. [58] As head of the Executive Department, the
President, however, may delegate some of his powers to the Cabinet members except when he is required by the
Constitution to act in person or the exigencies of the situation demand that he acts personally. [59] The members of
Cabinet may act for and in behalf of the President in certain matters because the President cannot be expected to
exercise his control (and supervisory) powers personally all the time. Each head of a department is, and must be,
the President's alter ego in the matters of that department where the President is required by law to exercise
authority.[60]
The procedure how the Disciplining and Investigating Authorities should exercise their powers is distinctly set
forth in the Local Government Code and A.O. No. 23. Section 62 of the Code provides:
"Sec. 62. Notice of Hearing.-- (a) Within seven (7) days after the administrative complaint is
filed, the Office of the President or the
Sections 1 and 3, Rule 5[61] of A.O. No. 23 provide:
"Sec. 1. Commencement. Within forty-eight (48) hours from receipt of the answer, the Disciplining
Authority shall refer the complaint and answer, together with their attachments and other relevant papers,
to the Investigating Authority who shall commence the investigation of the case within ten (10) days from
receipt of the same.
"x x x

"Sec. 3. Evaluation. Within twenty (20) days from receipt of the complaint and answer, the Investigating
Authority shall determine whether there is a prima facie case to warrant the institution of formal
administrative proceedings."
When an administrative complaint is therefore filed, the Disciplining Authority shall issue an order requiring the
respondent to submit his verified answer within fifteen (15) days from notice. Upon filing of the answer, the
Disciplining Authority shall refer the case to the Investigating Authority for investigation.
In the case at bar, petitioner claims that the DILG Secretary usurped the power of the President when he
required petitioner to answer the complaint. Undisputably, the letter-complaint was filed with the Office of the
President but it was the DILG Secretary who ordered petitioner to answer.
Strictly applying the rules, the Office of the President did not comply with the provisions of A.O. No. 23. The
Office should have first required petitioner to file his answer. Thereafter, the complaint and the answer should have
been referred to the Investigating Authority for further proceedings. Be that as it may, this procedural lapse is not
fatal. The filing of the answer is necessary merely to enable the President to make a preliminary assessment of the
case.[62] The President found the complaint sufficient in form and substance to warrant its further investigation. The
judgment of the President on the matter is entitled to respect in the absence of grave abuse of discretion.
III
In his third assigned error, petitioner also claims that the DILG erred in declaring him in default for filing a
motion to dismiss. He alleges that a motion to dismiss is not a pleading prohibited by the law or the rules and
therefore the DILG Secretary should have considered it and given him time to file his answer.
It is true that a motion to dismiss is not a pleading prohibited under the Local Government Code of 1991 nor in
A.O. No. 23. Petitioner, however, was instructed not to file a motion to dismiss in the order to file answer. Thrice,
he requested for extension of time to file his answer citing as reasons the search for competent counsel and the
demands of his official duties. And thrice, his requests were granted. Even the order of default was reconsidered
and petitioner was given additional time to file answer. After all the requests and seven months later, he filed a
motion to dismiss!
Petitioner should know that the formal investigation of the case is required by law to be finished within one
hundred twenty (120) days from the time of formal notice to the respondent. The extensions petitioner requested
consumed fifty-five (55) days of this period.[63] Petitioner, in fact, filed his answer nine (9) months after the first
notice. Indeed, this was more than sufficient time for petitioner to comply with the order to file answer.
The speedy disposition of administrative complaints is required by public service. The efficiency of officials
under investigation is impaired when a case hangs over their heads. Officials deserve to be cleared expeditiously if
they are innocent, also expeditiously if guilty, so that the business of government will not be prejudiced. [64]
IV
In view of petitioner's inexcusable failure to file answer, the DILG did not err in recommending to the
Disciplining Authority his preventive suspension during the investigation. Preventive suspension is authorized
under Section 63 of the Local Government Code, viz:
"Sec. 63. Preventive Suspension.-- (a) Preventive suspension may be imposed:
(1) By the President, if the respondent is an elective official of a province, a highly urbanized
or an independent component city;
x x x.
(b) Preventive suspension may be imposed at any time after the issues are joined, when the evidence of
guilt is strong, and given the gravity of the offense, there is great probability that the continuance in office
of the respondent could influence the witnesses or pose a threat to the safety and integrity of the records
and other evidence; Provided, That, any single preventive suspension of local elective officials shall not
extend beyond sixty (60) days: Provided, further, That in the event that several administrative cases are
filed against an elective official, he cannot be preventively suspended for more than ninety (90) days
within a single year on the same ground or grounds existing and known at the time of the first suspension.
x x x."
In sum, preventive suspension may be imposed by the Disciplining Authority at any time (a) after the issues are
joined; (b) when the evidence of guilt is strong; and (c) given the gravity of the offense, there is great probability
that the respondent, who continues to hold office, could influence the witnesses or pose a threat to the safety and
integrity of the records and other evidence.
Executive Secretary Torres, on behalf of the President, imposed preventive suspension on petitioner Joson after
finding that:

"x x x
DILG Secretary Robert Z. Barbers, in a memorandum for the President, dated 23 June 1997, recommends
that respondent be placed under preventive suspension considering that all the requisites to justify the
same are present. He stated therein that:
'Preventive suspension may be imposed at any time after the issues are joined, that is, after
respondent has answered the complaint, when the evidence of guilt is strong and, given the
gravity of the offense, there is a great possibility that the continuance in office of the
respondent could influence the witnesses or pose a threat to the safety and integrity of the
records and other evidence (Sec. 3, Rule 6 of Administrative Order No. 23).
The failure of respondent to file his answer despite several opportunities given him is
construed as a waiver of his right to present evidence in his behalf (Sec. 4, Rule 4 of
Administrative Order No. 23). The requisite of joinder of issues is squarely met with
respondent's waiver of right to submit his answer. The act of respondent in allegedly barging
violently into the session hall of the Sangguniang Panlalawigan in the company of armed men
constitutes grave misconduct. The allegations of complainants are bolstered by the jointaffidavit of two (2) employees of the Sangguniang Panlalawigan. Respondent who is the chief
executive of the province is in a position to influence the witnesses. Further, the history of
violent confrontational politics in the province dictates that extreme precautionary measures be
taken.'
Upon scrutiny of the records and the facts and circumstances attendant to this case, we concur with the
findings of the Secretary of the Interior and Local Government and find merit in the aforesaid
recommendation.
WHEREFORE, and as recommended by the Department of the Interior and Local Government,
respondent EDUARDO N. JOSON, Governor of Nueva Ecija, is hereby placed under PREVENTIVE
SUSPENSION FOR A PERIOD OF SIXTY (60) DAYS, effective 11 July 1997, pending investigation of
the charges filed against him.
SO ORDERED."[65]
Executive Secretary Torres found that all the requisites for the imposition of preventive suspension had been
complied with. Petitioner's failure to file his answer despite several opportunities given him was construed as a
waiver of his right to file answer and present evidence; and as a result of this waiver, the issues were deemed to have
been joined. The Executive Secretary also found that the evidence of petitioner Joson's guilt was strong and that his
continuance in office during the pendency of the case could influence the witnesses and pose a threat to the safety
and integrity of the evidence against him.
V
We now come to the validity of the January 8, 1998 Resolution of the Executive Secretary finding petitioner
guilty as charged and imposing on him the penalty of suspension from office for six (6) months from office without
pay.
Petitioner claims that the suspension was made without formal investigation pursuant to the provisions of Rule
7 of A.O. No. 23. Petitioner filed a "Motion To Conduct Formal Investigation" three months before the issuance of
the order of suspension and this motion was denied by the DILG for the following reasons:
"On November 19, 1997, complainants, through counsel, filed a Manifestation calling our attention to the
Decision dated October 24, 1997 of the Court of Appeals, Fifth Division in CA-G.R. SP No. 44694,
entitled "Eduardo Nonato Joson versus Executive Secretary Ruben D. Torres, et. al." In the aforestated
decision, the Court of Appeals resolved to sustain the authority of this Department to investigate this
administrative case and has likewise validated the order of default as well as the order of preventive
suspension of the respondent.
We offer no objection and concur with the assertion of respondent that he has the right for the conduct of
formal investigation. However, before there shall be a formal investigation, joinder of issues must already
be present or respondent's answer has already been filed. In the case at bar, the admission of respondent's
answer after having been declared in default was conditioned on the fact of submission of position papers
by the parties, after which, the case shall be deemed submitted for resolution. Respondent, instead of
submitting his position paper filed his subject motion while complainants manifested to forego the
submission of position paper and submit the case for resolution on the basis of the pleadings on hand.
Settled is the rule that in administrative proceedings, technical rules of procedure and evidence are not
strictly applied (Concerned Officials of the Metropolitan Waterworks and Sewerage System v. Vasquez,
240 SCRA 502). The essence of due process is to be found in the reasonable opportunity to be heard and
to submit evidence one may have in support of one's defense (Tajonera v. Lamaroza, 110 SCRA 438). To
be heard does not only mean verbal arguments in court; one may be heard also through pleadings. Where

opportunity to be heard, either through oral arguments or pleadings, is accorded, there is no denial of
procedural due process (Juanita Y. Say, et. al;. vs. IAC, G.R. No. 73451). Thus, when respondent failed to
submit his position paper as directed and insisted for the conduct of formal investigation, he was not
denied of his right of procedural process.
WHEREFORE, the Motion for the Conduct of Formal Investigation, for lack of merit, is DENIED.
SO ORDERED."[66]
The denial of petitioner's Motion to Conduct Formal Investigation is erroneous. Petitioner's right to a formal
investigation is spelled out in the following provisions of A.O. No. 23, viz:
"SEC. 3 Evaluation. Within twenty (20) days from receipt of the complaint and answer, the Investigating
Authority shall determine whether there is a prima facie case to warrant the institution of formal
administrative proceedings.
SEC. 4. Dismissal motu proprio. If the Investigating Authority determines that there is no prima
facie case to warrant the institution of formal administrative proceedings, it shall, within the same period
prescribed under the preceding Section, submit its recommendation to the Disciplining Authority for
the motu proprio dismissal of the case, together with the recommended decision, resolution, and order.
SEC. 5. Preliminary conference. If the Investigating Authority determines that there is prima facie case
to warrant the institution of formal administrative proceedings, it shall, within the same period prescribed
under the preceding Section, summon the parties to a preliminary conference to consider the following:
a)

whether the parties desire a formal investigation or are willing to submit the case for
resolution on the basis of the evidence on record; and

b)

If the parties desire a formal investigation, to consider the simplification of issues, the
possibility of obtaining stipulation or admission of facts and of documents, specifically
affidavits and depositions, to avoid unnecessary proof, the limitation of number of
witnesses, and such other matters as may be aid the prompt disposition of the case.

The Investigating Authority shall encourage the parties and their counsels to enter, at any stage of the
proceedings, into amicable settlement, compromise and arbitration, the terms and conditions of which
shall be subject to the approval of the Disciplining Authority.
After the preliminary conference, the Investigating Authority shall issue an order reciting the matters
taken up thereon, including the facts stipulated and the evidences marked, if any. Such order shall limit
the issues for hearing to those not disposed of by agreement or admission of the parties, and shall
schedule the formal investigation within ten (10) days from its issuance, unless a later date is mutually
agreed in writing by the parties concerned."[67]
The records show that on August 27, 1997, petitioner submitted his Answer Ad Cautelam where he disputed
the truth of the allegations that he barged into the session hall of the capitol and committed physical violence to
harass the private respondents who were opposed to any move for the province to contract a P150 million loan from
PNB. In his Order of October 8, 1997, Undersecretary Sanchez admitted petitioner's Answer Ad Cautelam but
treated it as a position paper. On October 15, 1997, petitioner filed a Motion to Conduct Formal
Investigation. Petitioner reiterated this motion on October 29, 1997. Petitioner's motion was denied on November
11, 1997. Secretary Barbers found petitioner guilty as charged on the basis of the parties' position papers. On
January 8, 1998, Executive Secretary Torres adopted Secretary Barbers' findings and recommendations and imposed
on petitioner the penalty of six (6) months suspension without pay.
The rejection of petitioner's right to a formal investigation denied him procedural due process. Section 5 of A.
O. No. 23 provides that at the preliminary conference, the Investigating Authority shall summon the parties to
consider whether they desire a formal investigation. This provision does not give the Investigating Authority the
discretion to determine whether a formal investigation would be conducted. The records show that petitioner filed a
motion for formal investigation. As respondent, he is accorded several rights under the law, to wit:
"Sec. 65. Rights of Respondent. -- The respondent shall be accorded full opportunity to appear and defend
himself in person or by counsel, to confront and cross-examine the witnesses against him, and to require
the attendance of witnesses and the production of documentary evidence in his favor through compulsory
process of subpoena or subpoena duces tecum."
An erring elective local official has rights akin to the constitutional rights of an accused. [68] These rights are
essentially part of procedural due process. [69] The local elective official has the (1) right to appear and defend himself
in person or by counsel; (2) the right to confront and cross-examine the witnesses against him; and (3) the right to
compulsory attendance of witness and the production of documentary evidence. These rights are reiterated in the
Rules Implementing the Local Government Code[70] and in A.O. No. 23.[71] Well to note, petitioner formally claimed
his right to a formal investigation after his Answer Ad Cautelam has been admitted by Undersecretary Sanchez.
Petitioner's right to a formal investigation was not satisfied when the complaint against him was decided on the
basis of position papers. There is nothing in the Local Government Code and its Implementing Rules and
Regulations nor in A.O. No. 23 that provide that administrative cases against elective local officials can be decided

on the basis of position papers. A.O. No. 23 states that the Investigating Authority may require the parties to submit
their respective memoranda but this is only after formal investigation and hearing. [72] A.O. No. 23 does not authorize
the Investigating Authority to dispense with a hearing especially in cases involving allegations of fact which are not
only in contrast but contradictory to each other. These contradictions are best settled by allowing the examination
and cross-examination of witnesses. Position papers are often-times prepared with the assistance of lawyers and
their artful preparation can make the discovery of truth difficult. The jurisprudence cited by the DILG in its order
denying petitioner's motion for a formal investigation applies to appointive officials and employees. Administrative
disciplinary proceedings against elective government officials are not exactly similar to those
against appointive officials. In fact, the provisions that apply to elective local officials are separate and distinct
from appointive government officers and employees. This can be gleaned from the Local Government Code itself.
In the Local Government Code, the entire Title II of Book I of the Code is devoted to elective officials. It
provides for their qualifications and election,[73] vacancies and succession,[74] local legislation,[75] disciplinary actions,
[76]
and recall.[77] Appointive officers and employees are covered in Title III of Book I of the Code entitled "Human
Resources and Development." All matters pertinent to human resources and development in local government units
are regulated by "the civil service law and such rules and regulations and other issuances promulgated thereto,
unless otherwise provided in the Code." [78] The "investigation and adjudication of administrative complaints against
appointive local officials and employees as well as their suspension and removal" are "in accordance with the civil
service law and rules and other pertinent laws," the results of which "shall be reported to the Civil Service
Commission."[79]
It is the Administrative Code of 1987, specifically Book V on the Civil Service, that primarily governs
appointive officials and employees. Their qualifications are set forth in the Omnibus Rules Implementing Book V
of the said Code. The grounds for administrative disciplinary action in Book V are much more in number and are
specific than those enumerated in the Local Government Code against elective local officials. [80] The disciplining
authority in such actions is the Civil Service Commission [81] although the Secretaries and heads of agencies and
instrumentalities, provinces, cities and municipalities are also given the power to investigate and decide disciplinary
actions against officers and employees under their jurisdiction. [82] When a complaint is filed and the respondent
answers, he must "indicate whether or not he elects a formal investigation if his answer is not considered
satisfactory."[83] If the officer or employee elects a formal investigation, the direct evidence for the complainant and
the respondent "consist[s] of the sworn statement and documents submitted in support of the complaint and answer,
as the case may be, without prejudice to the presentation of additional evidence deemed necessary x x x, upon which
the cross-examination by respondent and the complainant, respectively, is based." [84] The investigation is conducted
without adhering to the technical rules applicable in judicial proceedings." [85] Moreover, the appointive official or
employee may be removed or dismissed summarily if (1) the charge is serious and the evidence of guilt is strong; (2)
when the respondent is a recidivist; and (3) when the respondent is notoriously undesirable. [86]
The provisions for administrative disciplinary actions against elective local officials are markedly different
from appointive officials.[87] The rules on the removal and suspension of elective local officials are more
stringent. The procedure of requiring position papers in lieu of a hearing in administrative cases is expressly
allowed with respect to appointive officials but not to those elected. An elective official, elected by popular vote, is
directly responsible to the community that elected him. The official has a definite term of office fixed by law which
is relatively of short duration. Suspension and removal from office definitely affects and shortens this term of
office. When an elective official is suspended or removed, the people are deprived of the services of the man they
had elected. Implicit in the right of suffrage is that the people are entitled to the services of the elective official of
their choice.[88] Suspension and removal are thus imposed only after the elective official is accorded his rights and
the evidence against him strongly dictates their imposition.
IN VIEW WHEREOF, the Resolution of January 8, 1998 of the public respondent Executive Secretary is
declared null and void and is set aside. No Cost.
SO ORDERED.
Regalado, (Chairman), Melo, Mendoza, and Martinez, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-3282

January 9, 1908

RICARDO AGUADO, plaintiff-appellee,


vs.
THE CITY OF MANILA, as administrator of the water supply and Carriedo funds, defendant-appellant.
Modesto Reyes, for appellant.
Haussermann, Cohn and Williams, for appellee.

JOHNSON, J.:
This was an action commenced by the plaintiff, as assignor of certain claims held by Tomas Luna Muoz against the
defendant, on the 28th day of April, 1903, in the Court of First Instance of the city of Manila, for the purpose of
recovering of the city of Manila the sum of P5,621.40, with interest and costs.
The complaint contains three separate causes of action against the defendant, two of them being for coal sold and
delivered to the predecessor of the present city of Manila, the Ayuntamiento de Manila, as administrator de las
aguas de Carriedo, for which the plaintiff claims there was due him upon the first cause of action the sum of
P3,116.40 and upon the third cause of action the sum of P585. The second cause of action alleges that the plaintiff
deposited with the said Ayuntamiento de Manila the sum of P1,920 as a guaranty for the fulfillment of the contract
sued upon. The plaintiff prayed for judgment for the sum of P5,621.40, with interest and costs.
After the respective parties had filed their pleadings they entered into a stipulation as to the facts which should be
admitted as true in said cause, which stipulation is as follows:
Now come the respective parties hereto, plaintiff and defendant, duly represented by counsel, and stipulate
and agree that, for the purposes of the above-entitled action, the following statement of facts shall be
regarded as established and proved and that the decision in said above-entitled action shall be upon said
statement of facts:
I.
That the defendant, the city of Manila, is now and ever since the 31st day of July, 1901, has been a
municipal corporation, duly organized and existing under and by virtue of the laws of the Philippine
Islands.
II.
That on the 11th day of June, 1897, and for many years prior thereto and for more than one year thereafter,
the Ayuntamiento of Manila was a municipal corporation duly organized and existing under and by virtue of
the laws of the Kingdom of Spain.
III.
That on or about the 11th day of June, 1897, Tomas Luna Muoz made and entered into a certain contract
with the said Ayuntamiento of Manila, said contract being in the terms and figures appearing in the copy
thereof annexed to the complaint. (See record, pp. 4-19.)
IV.
That prior to the 1st day of April, 1898, under and in pursuance of the terms of said contract, the said
Tomas Luna Muoz sold and delivered unto the said Ayuntamiento of Manila 1,340.30 tons of coal and
received and collected therefor, of and from the said Ayuntamiento of Manila, the sum of 16,083.60 pesos,
Mexican currency, the contract price thereof; that between the 1st day of April, 1898, and the 30th day of
April, 1898, under and in pursuance of the terms of the said contract, the said Tomas Luna Muoz sold and
delivered unto the said Ayuntamiento of Manila, 259.70 tons of coal of the value of 3,116.40 pesos,
Mexican currency, at the contract price of 12 pesos, Mexican currency, per ton.
V.
That thereafter, to wit, on or about the 26th day of July, 1898, the said Tomas Luna Muoz made due
demand in the manner required by law and by the terms of said contract for the payment of said sum of
3,116.40 pesos, being the amount due as aforesaid for said 259.70 tons of coal delivered, as aforesaid,
during the month of April, 1898. That, notwithstanding said demand, the said sum was not paid by
saidAyuntamiento of Manila and the same, and the whole thereof, remained and now remains wholly due
and unpaid.
VI.
That thereafter, to wit, on or about the 13th day of August, 1898, the said Ayuntamiento of Manila was
forcibly suspended in the exercise of all of its functions by the conquest and occupation of the city of
Manila by the military forces of the United States of America. That at all times between the said 13th day
of August, 1898, and the 6th day of August, 1901, the Military Government of the United States of America

was the acting successor of the Ayuntamiento of Manila and as such was possessed of the funds, property,
and revenue theretofore in the possession of the said Ayuntamiento of Manila.
VII.
That at various times between the 13th day of August, 1898, and the 6th day of August, 1901, demand was
duly made upon the said Military Government of the United States in and for the Philippine Islands, in the
manner required by law and by the terms of said contract, for the payment of said sum of 3,116.40 pesos,
Mexican currency, due, payable, and unpaid as aforesaid, and the said sum, and the whole thereof, was not
paid but remained and now remains due, payable, and unpaid.
VIII.
That on or about the 1st day of February, 1899, the said Tomas Luna Muoz sold, transferred, and assigned
all of his right, title, and interest in and to said sum of 3,116.40 pesos, Mexican currency, unto the plaintiff
hereinbefore named, and said plaintiff, ever since said last-named date, has been and now is the sole and
exclusive owner of said credit of 3,116.40 pesos, Mexican currency.
IX.
That on or about the 6th of August, 1901, the defendant, the city of Manila, became the acting successor of
the above-named entities in the discharge of all of the municipal functions.
X.
That at various times since the said 6th day of August, 1901, plaintiff has made due demand upon the
defendant in the manner required by law and by the terms of said contract for the payment of said sum of
3,116.40 pesos, Mexican currency, and the said defendant has failed and refused to pay said sum or any part
thereof and the same remains due and wholly unpaid.
XI.
That in addition to the foregoing facts and under and in the pursuance of the terms of said contract, said
Tomas Luna Muoz did, on or about the 1st day of June, 1897, deposit the sum of 1,920 pesos, Mexican
currency, with the said Ayuntamiento of Manila as security to guarantee the fulfillment and completion of
the above-mentioned contract. That prior to the 30th day of April, 1898, said Tomas Luna Muoz had well
and truly fulfilled all the terms and requirements of said contract and had faithfully and truly discharged
and fulfilled the obligation therein prescribed and contained.
XII.
That at various times thereafter the said Tomas Luna Muoz and his successor in interest has made due
demand in the manner required by law and by the terms of said contract for the return and repayment by
the Ayuntamiento of Manila, by the Military Government of the United States in the Philippine Islands, and
by the defendant, the city of Manila, respectively, for the return and payment of said sum of 1,920 pesos,
that said entities have successively wholly failed to return the whole or any part of said sum, and the whole
thereof remains due, unpaid, and payable.
XIII.
That on or about the 10th day of February, 1899, the said Tomas Luna Muoz sold and transferred and
assigned all of his right, title, and interest in and to said sum of 1,920 pesos, Mexican currency, above
mentioned, unto the plaintiff herein, and the said plaintiff ever since has been and now is the sole and
exclusive owner of said credit.
XIV.
That on or about the 30th day of June, 1898, the Ayuntamiento of Manila had and received of plaintiff 39
tons of Australian coal for the uses and purposes of the said Carriedo waterworks, that said 39 tons of
Australian coal was reasonably worth the sum of 15 pesos per ton, or a sum total of 585 pesos. That
thereafter and on or about the 26th day of July, 1898, the said plaintiff made due demand in the manner
required by law for the payment of said sum of 585 pesos, Mexican currency. That notwithstanding said
demand said sum was not paid by said Ayuntamiento of Manila. That thereafter, at various times, said
plaintiff has similarly made due demand upon the Military Government of the United States in the

Philippine Islands and of the defendant, the present city of Manila, for the payment of said sum so due as
aforesaid, and the same has successively refused and denied by said entity and still remains due and unpaid.
XV.
That the facts contained and recited in the pamphlet entitled Carriedo y sus obras marked for identification,
"Plaintiff's Exhibit A," in so far as they are material and relevant, are deemed to be true.
XVI.
That the city of Manila at the present time and ever since the organization of said city on the 6th day of
August, 1901, has been in possession of the water system known as the "Carriedo waterworks" and of the
lands belonging and pertaining to said water works, and of 94 shares of the capital stock of the Banco
Espanol-Filipino of the value of about 18,400 pesos, Philippine currency, which said shares of stock
constituted a part of the Carriedo Funds in the hands of the Ayuntamiento of Manila prior to August 13,
1898; that the dividends and income accruing to said shares have been received and collected at all times
since the 6th day of August, 1901, by the defendant, the city of Manila. That said defendant, the city of
Manila, has exclusive charge of the maintenance and operation of said water system, collects and receives
the moneys due and payable for the consumption of the water supplied thereby, and disburses the money
necessary for salaries, supplies, repairs, and improvements according to the terms and conditions of its
Charter, Act No. 183 of the Philippine Commission.
It is further agreed and stipulated by the parties through their respective attorneys as follows:
A.
That on or about August 13, 1898, at the time of the suspension of the Ayuntamiento of Manila herein
referred to, all funds and moneys pertaining to the said Ayuntamiento (including all moneys deposited with
the said Ayuntamiento as security for the performance of contracts with said Ayuntamiento) and of the said
Carriedo waterworks were turned over the Military Government of the Philippine Islands and covered into
the general funds of the said Military Government called "Public civil funds," which said funds were
disbursed upon general orders of the Military Government of the said Islands.
B.
That all taxes of the city of Manila and those corresponding to the Carriedo waterworks collected during
the Military Government were covered into the said "Public civil funds" and disbursed as aforesaid.
C.
That all moneys and funds pertaining to the said "Public civil funds" were, on or about September 1, 1900,
turned over to the Insular Treasurer of the Philippine Islands and disbursed pursuant to appropriation by the
Philippine Civil Commission.
D.
That in the year 1884 said Carriedo waterworks were constructed at a cost of about 1,027,000 pesos; that of
the said cost price said city of Manila, by means of raising a tax upon meat, pursuant to royal order of
November , 1876, contributed a material portion.
E.
That since the construction of the said waterworks the Ayuntamiento has considered it necessary to make
certain repairs, alterations, and extensions in the said waterworks and has made the same. That the moneys
collected by the said Ayuntamiento as taxes for the use of said water by consumers, together with other
incomes from the said Carriedo property, has been insufficient to pay for all of said repairs, alterations, and
extensions and that the deficit has been paid by the said Ayuntamiento of Manila.
F.
That the said Military Government in a like manner deemed it necessary and made said repairs, alterations,
and extensions of said system with the money raised as taxes upon the use of said water; the proceeds from
other sources pertaining the said Carriedo being insufficient to meet said repairs, alterations, and
extensions, the deficit was supplied by the said Military Government by means of said tax on meat. That
the said deficits for the years 1898, 1899, 1900, 1901, and 1902 amounted to about 34,000 pesos.

G.
That since August 6, 1901, the city of Manila, through its Municipal Board, deemed it necessary to make
further repairs, alterations, and extensions of the said waterworks and that the taxes upon the consumers of
the said water, together with the incomes of all properties of the said waterworks have been insufficient to
meet the said expenses, and that the said city, out of its common funds, has paid the difference for said
repairs, alterations, and extensions. That said deficit for the years 1903, 1904, to June 30, 1905, amounted
to 9,205 pesos, Philippine currency.
H.
That the said tax upon meat collected pursuant to said royal order of November, 1876, has been collected
from said date up to and including July, 1902, when the same was repealed.
It is further agreed that up to the 13th day of August, 1898, the funds of the Carriedo waterworks were kept
separate and distinct by the Ayuntamiento of Manila.
It was further stipulated by the parties to the action that the following exhibits should constitute a part of the agreed
statement of facts:
(1) A publication entitled Carriedo y sus obras, as Exhibit A of the plaintiff.
(2) A deposition presented by Carlos de las Heras dated the 22nd day of May, 1902.
(3) Exhibits A, B, and C of the record.
(4) Exhibit B of the plaintiff, which is a document referring to the payment made to Tomas Muoz for the coal
delivered in March, 1898.
(5) Exhibit C of the plaintiff, being the record of the delivery of the coal by the said Tomas Muoz, with the unpaid
bill therefor.
After a consideration of the facts stipulated between the respective parties to the action and the foregoing exhibits,
the lower court on the 27th of March, 1906, rendered a judgment against the defendant, the city of Manila, as
trustee, for the sum of P5,621.40 and interest, amounting to the sum of P3,260.98, making a total sum of P7,982.38
and costs, and ordered that an execution be issued to be levied upon the property of the said Carriedo fund,
consisting, as per said stipulation, of the Carriedo waterworks, the lands belonging and pertaining to the said
waterworks, and 94 shares of the capital stock of the Spanish-Filipino Bank, now in the hands of and being
administered by the defendant, as trustee of the said Carriedo fund.
From this decision the defendant appealed to the Supreme Court and made the following assignments of error:
(1) The court erred in finding that the contract entered into by and between Tomas Luna Muoz on June 11,
1897, and the Ayuntamiento of Manila was a contract between said Muoz and the Carriedo funds and
waterworks.
(2) The court erred in finding that the title of the city of Manila to the Carriedo funds and waterworks was
one of possession and not of complete ownership.
(3) The court erred in finding that the Carriedo funds and waterworks constituted and still constitute a trust
estate and that the present city of Manila has been since its organization trustee for the same.
(4) The court erred in finding that the contract between the Ayuntamiento of Manila and the said Muoz
was made with reference to the funds in trust.
(5) The court erred in finding that the property styled "Carriedo funds and waterworks" is responsible for
the payment of the debt sued for by plaintiff.
(6) The court erred in finding that Ricardo Aguado was entitled to recover from defendant city of Manila as
trustee of the Carriedo fund the sum of P7,982.38, Philippine currency, and the costs of this suit, or any
sum of money whatever, for the coal delivered under his contract by the said Muoz to the
saidAyuntamiento of Manila, and for money deposited by said Muoz with the said Ayuntamiento as
guaranty for carrying out said contract.

(7) The court erred in ordering execution against the property of the city of Manila consisting of
waterworks and lands pertaining to it and to 94 shares of the Spanish-Filipino Bank.
(8) The court erred in finding that the said waterworks, lands, and shares are subject to execution.
(9) The court erred in finding that the title of the city of Manila was not of absolute ownership but as trustee
for said lands and shares.
(10) The court erred in finding that the Ayuntamiento of Manila could be trustee of a trust estate for the
benefit of its inhabitants and act as such with regards to contracts in respect of such funds.
(11) The court erred in finding that the present city of Manila may be a trustee of a trust estate for the
benefit of its inhabitants and act as such with regards to contracts in respect of such funds.
(12) The court erred in finding that a particular fund belonging to the city of Manila can be subject to suit
and execution before the same has been appropriated by the United States Philippine Commission.
(13) The court erred in giving judgment in favor of plaintiff against defendant (sued as fideicomisario and
administrator of the Carriedo waterworks) as trustee for said works.
(14) The court erred in giving judgment against defendant and granting execution against its property.
The appellants assigns many errors alleged to have been committed by the lower court. The questions presented by
all the said assignments of error are (1) whether or not the present city of Manila is liable under the contracts
referred to in the agreed statement of facts, for the obligations created therein by the old city of Manila
(Ayuntamiento de Manila) as its successor, and (2) if it is, whether the plaintiff is entitled to a writ of execution
against any of the property of the present city for the purpose of satisfying that liability when the same has been
reduced to a judgment.
The lower court held that the present city of Manila was liable upon such contracts, upon the theory that it was the
successor of the old city of Manila (Ayuntamiento de Manila) as it existed under the Spanish Government. The lower
court held that the old city of Manila (Ayuntamiento de Manila) was the trustee and administrator of the Carriedo
waterworks, and as such trustee was responsible for all the debts created or contracted in the administration of such
works. This fact is neither admitted nor denied in the agreed statement of facts; neither is there anything in the
record which justifies that conclusion. The contract upon which the plaintiff relies for recovery in no way indicate
that the Ayuntamiento de Manila made said contracts as trustee, nor in a representative capacity, but, upon the
contrary, the contracts themselves show that they were made by the Ayuntamiento de Manila with the assignor of the
present plaintiff simply as the Ayuntamiento de Manila and not as trustee or agent. Our conclusion is, then, upon this
question, that the contract which the assignor of the present plaintiff made with the Ayuntamiento de Manila was
made with the old city in its corporate capacity simply and not in a representative capacity as trustee or agent. If
there has been a violation of the terms of the contract such violation was made by the Ayuntamiento de Manila and
not by the present city of Manila. This conclusion makes it unnecessary for us to discuss the relation of trust so ably
presented in the briefs of the different attorneys.
A municipal corporation is a governmental agent of the state, given authority to govern the people in a limited
portion of the state. This power, however, is limited to certain particular governmental functions, which are always
expressed in writing in the form of a charter or grant of powers. To ascertain what this power is in each particular
case, reference must be made to such grant of powers. Powers not expressly given therein or necessarily implied
from such express powers can not be exercised by such governmental agent.
Experience has taught nations that when men congregate in large numbers in a small portion of the state, it is
convenient to permit such persons, in a limited way, to overn themselves, the state retaining the authority to modify,
enlarge, restrain, or to absolutely revoked such grant of power at any time this convenience ceases. In all cases a
municipal corporation is a mere instrumentality of the state for the convenient administration of a local government
over limited territory, and as such is vested with subordinate power for local purposes only. The very moment it
subverts these powers or arrogates to itself others not granted, or for any other reasons deemed to be sufficient, the
state may revoke its authority, dissolve such corporation, and bring all the inhabitants and such property again under
the direct control of the state or central government in all their relations among themselves and with the state. There
is no contract between the state and the public that the charter of a city shall not be at all times subject to legislative
control. There is no such thing as a vested right held by any individual in the granting of legislative power to
municipal corporations. (Meriwether vs. Garrett, 102 U.S., 472, 511; U.S. vs. Ry. Co., 17 Wallace, 322;
Commissioners vs. Lucas, Treasurer, 93 U.S., 108; Philadelphia vs. Fox, 64 Penn. State, 169; Cooley Constitutional
Limitations, 192, 193.)
Many instances might be cited to show where the central government has exercised this prerogative.

It being a doctrine well established then that a municipal corporation is a mere agent of the state, what then is the
status of said corporation when the state itself is destroyed? Certainly the general consequences of the death of the
principal must follow in its effect upon the authority of the agent. The death of the principal always revokes the
agency when there are no vested rights involved. A municipal corporation has not vested right to exist as such. The
state may at any time revoke its charter. Of course the state might, by such revocation, incur certain moral
obligations, but the performance of these obligations would always rest upon the conscience of the law-making or
charter-granting authority of the state. The courts have no equitable or legal authority to compel the state to comply
with obligations of this kind in the absence of proper legislation.
The principal of the old city of Manila (Ayuntamiento de Manila) was the Spanish Government in the Philippine
Islands, and when that Government, on the 11th day of April, 1899, at least, ceased to exercise any power or control
over this territory (the Philippine Islands), all its agents, including the Ayuntamiento de Manila, also ceased to exist,
and therefore this agent was without authority either to make or to perform contracts. There was no functionary of
either Government left with any authority whatever. The Spanish Government, with all its governmental agencies,
upon the 11th day of April, 1899, at least, ceased to have or to exercise any functions within the Philippine Islands.
Upon that day the people who formerly constituted the Ayuntamiento de Manilabecame subject to the general laws
(not political) applicable to the whole territory and to such rules and regulations as the new authority might see fit to
promulgate. After that date all persons who had rights or obligations preexisting against such defunct governments
were left to their remedy against such defunct governments, unless such rights were vested rights, or unless by treaty
obligation or otherwise the new government had in some way obligated itself to respond to such individuals. It
becomes important, therefore, to ascertain whether the new authority has in any way obligated itself to respond to
the plaintiff herein. Our attention is called to article 8 of the treaty of Paris. But this is a compact between the United
States Government and the Crown of Spain, and of course the city of Manila could not, if it would, be obligated by
any terms of that compact without an express authorization on the part of the proper power or authority.
The city of Manila is in no way the successor of the Ayuntamiento de Manila in law. The mere fact that the present
authority in these Islands has given to the present city powers like those exercised by the Ayuntamiento de Manilain
no way makes the former the successor of the latter. It is an entirely new organization, a new agent of a new
principal, and only has such authority, such powers, and such obligations and responsibilities as the new principal
has seen fit to grant and impose. The grant of powers (the Charter of Manila) has been examined in vain to find
anything which would make the present city of Manila liable in any way to comply, even though it desired to do so,
with the obligations contracted by the Ayuntamiento de Manila, and therefore we must hold, as we do hereby, that
the present city of Manila is in no wise responsible to the plaintiff upon the contracts made between its assignor and
the old city of Manila.
These foregoing conclusions do not amount to a denial of the obligations or a refusal to comply with the same. They
are simply that the obligations upon which the plaintiff seeks to recover never were incurred by the present city of
Manila; neither can the foregoing conclusion be construed to be an attempt to violate the terms of the contracts.
They are simply to the effect that no contract obligation, with reference to the claim of the plaintiff, ever existed.
These conclusions make it unnecessary for us to discuss the second question above suggested, for the reason that the
city not being liable upon the contract, no question as to the right to take out a writ of execution against the property
of said city can arise in the present case.
For the foregoing reasons the judgment of the lower court is hereby revoked, and, without any finding as to costs, it
is so ordered.