You are on page 1of 28

G.R. No.

91649 May 14, 1991 ATTORNEYS HUMBERTO BASCO, EDILBERTO BALCE, SOCRATES MARANAN AND LORENZO SANCHEZ, petitioners, vs. PHILIPPINE AMUSEMENTS AND GAMING CORPORATION (PAGCOR), respondent. 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 casin os on land or water within the territorial jurisdiction of the Philippines." Its operation was originally conducted in the well known floating casino "Philippin e Tourist." The operation was considered a success for it proved to be a potenti al source of revenue to fund infrastructure and socio-economic projects, thus, P .D. 1399 was passed on June 2, 1978 for PAGCOR to fully attain this objective. Subsequently, on July 11, 1983, PAGCOR was created under P.D. 1869 to enable the Government to regulate and centralize all games of chance authorized by existin g franchise or permitted by law To attain these objectives PAGCOR is given territorial jurisdiction all over the Philippines. Under its Charter's repealing clause, all laws, decrees, executive orders, rules and regulations, inconsistent therewith, are accordingly repealed , amended or modified. It is reported that PAGCOR is the third largest source of government revenue, ne xt to the Bureau of Internal Revenue and the Bureau of Customs. 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 an d public order," monopolistic and tends toward "crony economy", and is violative of the equal protection clause and local autonomy as well as for running counte r to the state policies enunciated in Sections 11 (Personal Dignity and Human Ri ghts), 12 (Family) and 13 (Role of Youth) of Article II, Section 1 (Social Justi ce) of Article XIII and Section 2 (Educational Values) of Article XIV of the 198 7 Constitution. This challenge to P.D. No. 1869 deserves a searching and thorough scrutiny and t he 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 bel ongs to the judicial department of the government." (State v. Manuel, 20 N.C. 14 4; 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-ste pped 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 stat ute (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 stat ute alleging unconstitutionality must prove its invalidity beyond a reasonable d

oubt; 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 uph eld and the challenger must negate all possible basis; that the courts are not c oncerned 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. Of course, there is first, the procedural issue. The respondents are questioning the legal personality of petitioners to file the instant petition. With particular regard to the requirement of proper party as applied in the case s before us, We hold that the same is satisfied by the petitioners and interveno rs 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 di scretion of the Court to waive the requirement and so remove the impediment to i ts addressing and resolving the serious constitutional questions raised. Having disposed of the procedural issue, We will now discuss the substantive iss ues raised. Gambling in all its forms, unless allowed by law, is generally prohibited. But t he 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 bee n defined as the "state authority to enact legislation that may interfere with p ersonal liberty or property in order to promote the general welfare." 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, i t is inborn in the very fact of statehood and sovereignty. It is a fundamental a ttribute of government that has enabled it to perform the most vital functions o f governance. Marshall, to whom the expression has been credited, refers to it s uccinctly as the plenary power of the state "to govern its citizens". (Tribe, Am erican Constitutional Law, 323, 1978). The police power of the State is a power co-extensive with self-protection and is most aptly termed the "law of overwhelm ing necessity." 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 exi sting franchise or permitted by law" (1st whereas clause, PD 1869). As was subse quently 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 Go vernment. It provided funds for social impact projects and subjected gambling to "close scrutiny, regulation, supervision and control of the Government" (4th Wh ereas Clause, PD 1869). 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. 186 9 is violative of the principle of local autonomy. They must be referring to Sec tion 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, char ges 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 r ight to impose taxes (Icard v. City of Baguio, 83 Phil. 870; City of Iloilo v. V illanueva, 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 "pow er to tax" therefore must always yield to a legislative act which is superior ha ving 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 "creat e and abolish municipal corporations" due to its "general legislative powers" (A suncion 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 powe r to tax certain matters, it can also provide for exemptions or even take back t he power. (c) The City of Manila's power to impose license fees on gambling, has long been revoked. As early as 1975, the power of local governments to regulate gambl ing thru the grant of "franchise, licenses or permits" was withdrawn by P.D. No. 771 and was vested exclusively on the National. Therefore, only the National Government has the power to issue "licenses or perm its" 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 orig inal charter, PD 1869. All of its shares of stocks are owned by the National Gov ernment. In addition to its corporate powers (Sec. 3, Title II, PD 1869) it also exercises regulatory. 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 instrument ality of the Government. Being an instrumentality of the Government, PAGCOR shou ld be and actually is exempt from local taxes. Otherwise, its operation might be burdened, impeded or subjected to control by a mere Local government. This doctrine emanates from the "supremacy" of the National Government over loca l governments. Justice Holmes, speaking for the Supreme Court, made reference to the entire abs ence of power on the part of the States to touch, in that way (taxation) at leas t, the instrumentalities of the United States (Johnson v. Maryland, 254 US 51) a nd it can be agreed that no state or political subdivision can regulate a federa l instrumentality in such a way as to prevent it from consummating its federal r esponsibilities, or even to seriously burden it in the accomplishment of them. Otherwise, mere creatures of the State can defeat National policies thru extermi nation of what local authorities may perceive to be undesirable activities or en terprise using the power to tax as "a tool for regulation". (e) Petitioners also argue that the Local Autonomy Clause of the Constitutio n will be violated by P.D. 1869. This is a pointless argument. Article X of the 1987 Constitution (on Local Autonomy) provides: Sec. 5. Each local government unit shall have the power to create its own source

of revenue and to levy taxes, fees, and other charges subject to such guideline s and limitation as the congress may provide, consistent with the basic policy o n local autonomy. Such taxes, fees and charges shall accrue exclusively to the l ocal government. (emphasis supplied) The power of local government to "impose taxes and fees" is always subject to "l imitations" which Congress may provide by law. Since PD 1869 remains an "operati ve" law until "amended, repealed or revoked" (Sec. 3, Art. XVIII, 1987 Constitut ion), its "exemption clause" remains as an exception to the exercise of the powe r of local governments to impose taxes and fees. It cannot therefore be violativ e but rather is consistent with the principle of local autonomy. Besides, the principle of local autonomy under the 1987 Constitution simply mean s "decentralization" (III Records of the 1987 Constitutional Commission, pp. 435 -436, as cited in Bernas, The Constitution of the Republic of the Philippines, V ol. II, First Ed., 1988, p. 374). It does not make local governments sovereign w ithin the state or an "imperium in imperio." Local Government has been described as a political subdivision of a nation or st ate 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 Con stitution, local governments can only be an intra sovereign subdivision of one s overeign 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 governmen t. (emphasis supplied) As to what state powers should be "decentralized" and what may be delegated to l ocal government units remains a matter of policy, which concerns wisdom. It is t herefore a political question. (Citizens Alliance for Consumer Protection v. Ene rgy Regulatory Board, 162 SCRA 539). What is settled is that the matter of regulating, taxing or otherwise dealing wi th gambling is a State concern and hence, it is the sole prerogative of the Stat e to retain it or delegate it to local governments. Petitioners next contend that P.D. 1869 violates the equal protection clause of the Constitution, because "it legalized PAGCOR conducted gambling, while most ga mbling 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 ac corded different treatment under the law as long as the classification is not un reasonable or arbitrary (Itchong v. Hernandez, 101 Phil. 1155). A law does not h ave to operate in equal force on all persons or things to be conformable to Arti cle III, Section 1 of the Constitution (DECS v. San Diego, G.R. No. 89572, Decem ber 21, 1989). The "equal protection clause" does not prohibit the Legislature from establishin g classes of individuals or objects upon which different rules shall operate (La urel v. Misa, 43 O.G. 2847). Just how P.D. 1869 in legalizing gambling conducted by PAGCOR is violative of th e 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 a mended 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 no t 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 overt hrown because there are other instances to which it might have been applied. (Go mez v. Palomar, 25 SCRA 827) Anent petitioners' claim that PD 1869 is contrary to the "avowed trend of the Co ry Government away from monopolies and crony economy and toward free enterprise and privatization" suffice it to state that this is not a ground for this Court to nullify P.D. 1869. If, indeed, PD 1869 runs counter to the government's polic ies 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 i ssues are within the domain of the political branches of government and of the p eople themselves as the repository of all state power. (Valmonte v. Belmonte, Jr ., 170 SCRA 256). On the issue of,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. Agai n, this is a matter of policy for the Legislature to decide. On petitioners' allegation that P.D. 1869 violates Sections 11 (Personality Dign ity) 12 (Family) and 13 (Role of Youth) of Article II; Section 13 (Social Justic e) 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 prin ciples and, policies. As such, they are basically not self-executing, meaning a law should be passed by Congress to clearly define and effectuate such principle s. Parenthetically, We wish to state that gambling is generally immoral, and this i s precisely so when the gambling resorted to is excessive. This excessiveness ne cessarily depends not only on the financial resources of the gambler and his fam ily but also on his mental, social, and spiritual outlook on life. WHEREFORE, the petition is DISMISSED for lack of merit.

G.R. No. 80391 February 28, 1989 SULTAN ALIMBUSAR P. LIMBONA, petitioner, vs. CONTE MANGELIN, et al, respondents. The acts of the Sangguniang Pampook of Region XII are assailed in this petition. The antecedent facts are as follows: 1. On September 24, 1986, petitioner Sultan Alimbusar Limbona was appointed as a member of the Sangguniang Pampook, Regional Autonomous Government, Region XII, representing Lanao del Sur. 2. On March 12, 1987 petitioner was elected Speaker of the Regional Legislative Assembly or Batasang Pampook of Central Mindanao (Assembly for brevity). 3. Said Assembly is composed of eighteen (18) members. Two of said members, resp ondents Acmad Tomawis and Pakil Dagalangit, filed on March 23, 1987 with the Com mission on Elections their respective certificates of candidacy in the May 11, 1 987 congressional elections for the district of Lanao del Sur but they later wit hdrew from the aforesaid election and thereafter resumed again their positions a

s members of the Assembly. 4. On October 21, 1987 Congressman Datu Guimid Matalam, Chairman of the Committe e on Muslim Affairs of the House of Representatives, invited Mr. Xavier Razul, P ampook Speaker of Region XI, Zamboanga City and the petitioner in his capacity a s Speaker of the Assembly, Region XII, in a letter which reads: 5. Consistent with the said invitation, petitioner sent a telegram to Acting Sec retary Johnny Alimbuyao of the Assembly to wire all Assemblymen that there shall be no session in November as "our presence in the house committee hearing of Co ngress take (sic) precedence over any pending business in batasang pampook ... . " 6. In compliance with the aforesaid instruction of the petitioner, Acting Secret ary Alimbuyao sent to the members of the Assembly the following telegram: TRANSMITTING FOR YOUR INFORMATION AND GUIDANCE TELEGRAM RECEIVED FROM SPEAKER LI MBONA QUOTE CONGRESSMAN JIMMY MATALAM CHAIRMAN OF THE HOUSE COMMITTEE ON MUSLIM AFFAIRS REQUESTED ME TO ASSIST SAID COMMITTEE IN THE DISCUSSION OF THE PROPOSED AUTONOMY ORGANIC NOV. 1ST TO 15. HENCE WERE ALL ASSEMBLYMEN THAT THERE SHALL BE NO SESSION IN NOVEMBER AS OUR PRESENCE IN THE HOUSE COMMITTEE HEARING OF CONGRES S TAKE PRECEDENCE OVER ANY PENDING BUSINESS IN BATASANG PAMPOOK OF MATALAM FOLLO WS UNQUOTE REGARDS. 7. On November 2, 1987, the Assembly held session in defiance of petitioner's ad vice. After declaring the presence of a quorum, the Speaker Pro-Tempore was authorized to preside in the session. On Motion to declare the seat of the Speaker vacant, all Assemblymen in attendance voted in the affirmative, hence, the chair declar ed said seat of the Speaker vacant. 8. On November 5, 1987, the session of the A ssembly resumed. Twelve (12) members voted in favor of the motion to declare the seat of the Spea ker vacant; one abstained and none voted against. 1 Accordingly, the petitioner prays for judgment as follows: WHEREFORE, this petition. Pending further proceedings, this Court, on January 19, 1988, received a resolut ion filed by the Sangguniang Pampook, "EXPECTING ALIMBUSAR P. LIMBONA FROM MEMBE RSHIP OF THE SANGGUNIANG PAMPOOK AUTONOMOUS REGION XII," and that he had "filed a case before the Supreme Court against some members of the Assembly on questio n which should have been resolved within the confines of the Assembly," 7 for wh ich the respondents now submit that the petition had become "moot and academic". 8 The first question, evidently, is whether or not the expulsion of the petitioner (pending litigation) has made the case moot and academic. We do ly of done t, it not agree that the case has been rendered moot and academic by reason simp the expulsion resolution so issued. For, if the petitioner's expulsion was purposely to make this petition moot and academic, and to preempt the Cour will not make it academic.

On the ground of the immutable principle of due process alone, we hold that the expulsion in question is of no force and effect. In the first place, there is no showing that the Sanggunian had conducted an investigation, and whether or not

the petitioner had been heard in his defense, assuming that there was an investi gation, or otherwise given the opportunity to do so. We therefore order reinstatement, with the caution that should the past acts of the petitioner indeed warrant his removal, the Assembly is enjoined, should it s till be so minded, to commence proper proceedings therefor in line with the most elementary requirements of due process. And while it is within the discretion o f the members of the Sanggunian to punish their erring colleagues, their acts ar e nonetheless subject to the moderating band of this Court in the event that suc h discretion is exercised with grave abuse. It is, to be sure, said that precisely because the Sangguniang Pampook(s) are "a utonomous," the courts may not rightfully intervene in their affairs, much less strike down their acts. We come, therefore, to the second issue: Are the so-called autonomous governments of Mindanao, as they are now constitute d, subject to the jurisdiction of the national courts? In other words, what is t he extent of self-government given to the two autonomous governments of Region I X and XII? The autonomous governments of Mindanao were organized in Regions IX and XII by P residential Decree No. 1618 15 promulgated on July 25, 1979. Among other things, the Decree established "internal autonomy" 16 in the two regions "[w]ithin the framework of the national sovereignty and territorial integrity of the Republic of the Philippines and its Constitution," 17 with legislative and executive mach inery to exercise the powers and responsibilities 18 specified therein. It requires the autonomous regional governments to "undertake all internal admin istrative matters for the respective regions," 19 except to "act on matters whic h are within the jurisdiction and competence of the National Government. In relation to the central government, it provides that "[t]he President shall h ave the power of general supervision and control over the Autonomous Regions ... " 22 Now, autonomy is either decentralization of administration or decentralization o f power. There is decentralization of administration when the central government delegates administrative powers to political subdivisions in order to broaden t he base of government power and in the process to make local governments "more r esponsive and accountable," 23 "and ensure their fullest development as self-rel iant communities and make them more effective partners in the pursuit of nationa l development and social progress." 24 At the same time, it relieves the central government of the burden of managing local affairs and enables it to concentrat e on national concerns. The President exercises "general supervision" 25 over th em, but only to "ensure that local affairs are administered according to law." 2 6 He has no control over their acts in the sense that he can substitute their ju dgments with his own. 27 Decentralization of power, on the other hand, involves an abdication of politica l power in the favor of local governments units declare to be autonomous . In th at case, the autonomous government is free to chart its own destiny and shape it s future with minimum intervention from central authorities. According to a cons titutional author, decentralization of power amounts to "self-immolation," since in that event, the autonomous government becomes accountable not to the central authorities but to its constituency. 28 But the question of whether or not the grant of autonomy Muslim Mindanao under t he 1987 Constitution involves, truly, an effort to decentralize power rather tha n mere administration is a question foreign to this petition, since what is invo lved herein is a local government unit constituted prior to the ratification of

the present Constitution. Hence, the Court will not resolve that controversy now , in this case, since no controversy in fact exists. We will resolve it at the p roper time and in the proper case. Under the 1987 Constitution, local government units enjoy autonomy in these two senses, thus: Section 1. The territorial and political subdivisions of the Republic of the Phi lippines are the provinces, cities, municipalities, and barangays. Here shall be autonomous regions in Muslim Mindanao ,and the Cordilleras as hereinafter provi ded. 29 Sec. 2. The territorial and political subdivisions shall enjoy local autonomy. 3 0 xxx xxx xxx

See. 15. Mere shall be created autonomous regions in Muslim Mindanao and in the Cordilleras consisting of provinces, cities, municipalities, and geographical ar eas sharing common and distinctive historical and cultural heritage, economic an d social structures, and other relevant characteristics within the framework of this Constitution and the national sovereignty as well as territorial integrity of the Republic of the Philippines. 31 An autonomous government that enjoys autonomy of the latter category [CONST. (19 87), art. X, sec. 15.] is subject alone to the decree of the organic act creatin g it and accepted principles on the effects and limits of "autonomy." On the oth er hand, an autonomous government of the former class is, as we noted, under the supervision of the national government acting through the President (and the De partment of Local Government). 32 If the Sangguniang Pampook (of Region XII), th en, is autonomous in the latter sense, its acts are, debatably beyond the domain of this Court in perhaps the same way that the internal acts, say, of the Congr ess of the Philippines are beyond our jurisdiction. But if it is autonomous in t he former category only, it comes unarguably under our jurisdiction. An examinat ion of the very Presidential Decree creating the autonomous governments of Minda nao persuades us that they were never meant to exercise autonomy in the second s ense, that is, in which the central government commits an act of self-immolation . Presidential Decree No. 1618, in the first place, mandates that "[t]he Preside nt shall have the power of general supervision and control over Autonomous Regio ns." The President shall exercise such powers as may be necessary to assure that enac tment and acts of the Sangguniang Pampook and the Lupong Tagapagpaganap ng Pook are in compliance with this Decree, national legislation, policies, plans and pr ograms. The Sangguniang Pampook shall maintain liaison with the Batasang Pambansa. 34 Hence, we assume jurisdiction. And if we can make an inquiry in the validity of the expulsion in question, with more reason can we review the petitioner's remov al as Speaker. Briefly, the petitioner assails the legality of his ouster as Speaker on the gro unds that: (1) the Sanggunian, in convening on November 2 and 5, 1987 (for the s ole purpose of declaring the office of the Speaker vacant), did so in violation of the Rules of the Sangguniang Pampook since the Assembly was then on recess; a nd (2) assuming that it was valid, his ouster was ineffective nevertheless for l ack of quorum. Upon the facts presented, we hold that the November 2 and 5, 1987 sessions were

invalid. It is true that under Section 31 of the Region XII Sanggunian Rules, "[ s]essions shall not be suspended or adjourned except by direction of the Sanggun iang Pampook," 35 but it provides likewise that "the Speaker may, on [sic] his d iscretion, declare a recess of "short intervals." In view hereof, we find no need in dwelling on the issue of quorum. WHEREFORE, premises considered, the petition is GRANTED. The Sangguniang Pampook , Region XII, is ENJOINED to (1) REINSTATE the petitioner as Member, Sangguniang Pampook, Region XII; and (2) REINSTATE him as Speaker thereof. No costs.

G.R. No. 129093

August 30, 2001

HON. JOSE D. LINA, vs.HON. FRANCISCO DIZON PAO and TONY CALVENTO, respondents. On December 29, 1995, respondent Tony Calvento was appointed agent by the Philip pine Charity Sweepstakes Office (PCSO) to install Terminal OM 20 for the operati on of lotto. He asked Mayor Calixto Cataquiz, Mayor of San Pedro, Laguna, for a mayor's permit to open the lotto outlet. This was denied by Mayor Cataquiz in a letter dated February 19, 1996. The ground for said denial was an ordinance pass ed by the Sangguniang Panlalawigan of Laguna entitled Kapasiyahan Blg. 508, T. 1 995 which was issued on September 18, 1995, prohibiting any form of gambling. As a result of this resolution of denial, respondent Calvento filed a complaint for declaratory relief with prayer for preliminary injunction and temporary rest raining order. On February 10, 1997, the respondent judge, Francisco Dizon Pao, promulgated his decision enjoining the petitioners from implementing or enforcing resolution or Kapasiyahan Blg. 508, T. Petitioners filed a motion for reconsideration which was subsequently denied. Hence this petition for review on certiorari. Issue or ruling: The issues to be resolved now are the following: (1) whether Kapasiyahan Blg. 50 8, T. 1995 of the Sangguniang Panlalawigan of Laguna and the denial of a mayor's permit based thereon are valid; and (2) whether prior consultations and approva l by the concerned Sanggunian are needed before a lotto system can be operated i n a given local government unit. The entire controversy stemmed from the refusal of Mayor Cataquiz to issue a may or's permit for the operation of a lotto outlet in favor of private respondent. According to the mayor, he based his decision on an existing ordinance prohibiti ng the operation of lotto in the province of Laguna. The ordinance, however, mer ely states the "objection" of the council to the said game. It is but a mere pol icy statement on the part of the local council, which is not self-executing. Nor could it serve as a valid ground to prohibit the operation of the lotto system in the province of Laguna. Even petitioners admit as much when they stated in th eir petition that: 5.7. The terms of the Resolution and the validity thereof are express and cle ar. The Resolution is a policy declaration of the Provincial Government of Lagun a of its vehement opposition and/or objection to the operation of and/or all for ms of gambling including the Lotto operation in the Province of Laguna.12

As a policy statement expressing the local government's objection to the lotto, such resolution is valid. This is part of the local government's autonomy to air its views which may be contrary to that of the national government's. However, this freedom to exercise contrary views does not mean that local governments may actually enact ordinances that go against laws duly enacted by Congress. Given this premise, the assailed resolution in this case could not and should not be i nterpreted as a measure or ordinance prohibiting the operation of lotto. The game of lotto is a game of chance duly authorized by the national government through an Act of Congress. Republic Act 1169, as amended by Batas Pambansa Blg . 42, is the law which grants a franchise to the PCSO and allows it to operate t he This statute remains valid today. While lotto is clearly a game of chance, the n ational government deems it wise and proper to permit it. Hence, the Sangguniang Panlalawigan of Laguna, a local government unit, cannot issue a resolution or a n ordinance that would seek to prohibit permits. Stated otherwise, what the nati onal legislature expressly allows by law, such as lotto, a provincial board may not disallow by ordinance or resolution. In our system of government, the power of local government units to legislate an d enact ordinances and resolutions is merely a delegated power coming from Congr ess. As held in Tatel vs. Virac,13 ordinances should not contravene an existing statute enacted by Congress. The reasons for this is obvious, as elucidated in M agtajas v. Pryce Properties Corp.14 Municipal governments are only agents of the national government. Local councils exercise only delegated legislative powers conferred upon them by Congress as t he 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 d erived their power in the first place, and negate by mere ordinance the mandate of the statute. Municipal corporations owe their origin to, and derive their powers and rights w holly from the legislature. It breathes into them the breath of life, without wh ich they cannot exist. As it creates, so it may destroy. As it may destroy, it m ay abridge and control. Unless there is some constitutional limitation on the ri ght, 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 municipa l corporations in the state, and the corporation could not prevent it. We know o f no limitation on the right so far as the corporation themselves are concerned. Nothing in the present constitutional provision enhancing local autonomy dictate s a different conclusion. Ours is still a unitary form of government, not a federal state. Being so, any f orm of autonomy granted to local governments will necessarily be limited and con fined within the extent allowed by the central authority. Besides, the principle of local autonomy under the 1987 Constitution simply means "decentralization". It does not make local governments sovereign within the state or an "imperium in imperio".16 To conclude our resolution of the first issue, respondent mayor of San Pedro, ca nnot avail of Kapasiyahan Bilang 508, Taon 1995, of the Provincial Board of Lagu na as justification to prohibit lotto in his municipality. For said resolution i s nothing but an expression of the local legislative unit concerned.

As for the second issue, we hold that petitioners erred in declaring that Sectio ns 2 (c) and 27 of Republic Act 7160, otherwise known as the Local Government Co de of 1991, apply mandatorily in the setting up of lotto outlets around the coun try. From a careful reading of said provisions, we find that these apply only to nati onal programs and/or projects which are to be implemented in a particular local community. Lotto is neither a program nor a project of the national government, but of a charitable institution, the PCSO. Though sanctioned by the national gov ernment, it is far fetched to say that lotto falls within the contemplation of S ections 2 (c) and 27 of the Local Government Code. Moreover, the argument regarding lack of consultation raised by petitioners is c learly an afterthought on their part. WHEREFORE, the petition is DENIED for lack of merit.

G.R. No. 125350

December 3, 2002

HON. RTC JUDGES MERCEDES G. DADOLE vs.COMMISSION ON AUDIT, respondent. In 1986, the RTC and MTC judges of Mandaue City started receiving monthly allowa nces of P1,260 each through the yearly appropriation ordinance enacted by the Sa ngguniang Panlungsod of the said city. In 1991, Mandaue City increased the amoun t to P1,500 for each judge. On March 15, 1994, the Department of Budget and Management (DBM) issued the disp uted Local Budget Circular No. 55 (LBC 55) which provides that the additional al lowances in the form of horarium shall not exceed 1000 in provinces and 700 in m unicipalities. the grant is mandatory, and effective immediately without publica tion. Acting on the DBM directive, the Mandaue City Auditor issued notices of disallow ance to herein petitioner judges, reducing it to 1000 each, and to reimburse tha t amount they recieved. The petitioner judges filed with the Office of the City Auditor a protest agains t the notices of disallowance. But the City Auditor treated the protest as a mot ion for reconsideration and indorsed the same to the COA Regional Office, which referred the motion to the head office with a recommendation that the same be de nied. On September 21, 1995, respondent COA rendered a decision denying petitioners' m otion for reconsideration. On November 27, 1995, Executive Judge Mercedes Gozo-Dadole, for and in behalf of the petitioner judges, filed a motion for reconsideration of the decision of th e COA. In a resolution dated May 28, 1996, the COA denied the motion. Hence, this petition for certiorari under rule 64 by the petitioner judges. Issue and ruling: To resolve the instant petition, there are two issues that we must address: (1) whether LBC 55 of the DBM is void for going beyond the supervisory powers of the President and for not having been published and (2) whether the yearly appropri ation ordinance enacted by the City of Mandaue that provides for additional allo wances to judges contravenes the annual appropriation laws enacted by Congress.

We rule in favor of the petitioner judges. On the first issue, we declare LBC 55 to be null and void. We recognize that, although our Constitution6 guarantees autonomy to local gover nment units, the exercise of local autonomy remains subject to the power of cont rol by Congress and the power of supervision by the President. Section 4 of Arti cle X of the 1987 Philippine Constitution provides that, the President of the Ph ilippines shall exercise general supervision over local governments. x x x In Pimentel vs. Aguirre7, we defined the supervisory power of the President and distinguished it from the power of control exercised by Congress. "x x x In administrative law, supervision means overseeing or the power or autho rity 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 h and, means the power of an officer to alter or modify or nullify or set aside wh at a subordinate officer ha[s] done in the performance of his duties and to subs titute the judgment of the former for that of the latter."ii 6 In Taule v. Santos,iii 7 we further stated that the Chief Executive wielded no m ore 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 sco pe of their authority. "Supervisory power, when contrasted with control, is the power of mere oversight over an inferior body; it does not include any restraini ng authority over such body,"iv 8 we said. In a more recent case, Drilon v. Lim,v 9 the difference between control and supe rvision was further delineated. Officers in control lay down the rules in the pe rformance 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 e ven decide to do it themselves. On the other hand, supervision does not cover su ch 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 discretio n to modify or replace them. If the rules are not observed, they may order the w ork done or redone, but only to conform to such rules. They may not prescribe th eir own manner of execution of the act. Under our present system of government, executive power is vested in the Preside nt.vi10 The members of the Cabinet and other executive officials are merely alte r egos. As such, they are subject to the power of control of the President, at w hose will and behest they can be removed from office; or their actions and decis ions changed, suspended or reversed.vii 11 In contrast, the heads of political s ubdivisions are elected by the people. Their sovereign powers emanate from the e lectorate, to whom they are directly accountable. By constitutional fiat, they a re subject to the President's supervision only, not control, so long as their ac ts 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 t he Constitution and the law. Clearly then, the President can only interfere in the affairs and activities of a local government unit if he or she finds that the latter has acted contrary to law. This is the scope of the President's supervisory powers over local governm ent units. Hence, the President or any of his or her alter egos cannot interfere in local affairs as long as the concerned local government unit acts within the parameters of the law and the Constitution. Any directive therefore by the Pres ident or any of his or her alter egos seeking to alter the wisdom of a law-confo

rming judgment on local affairs of a local government unit is a patent nullity b ecause it violates the principle of local autonomy and separation of powers of t he executive and legislative departments in governing municipal corporations. Does LBC 55 go beyond the law it seeks to implement? Yes. LBC 55 provides that the additional monthly allowances to be given by a local go vernment unit should not exceed P1,000 in provinces and cities and P700 in munic ipalities. Section 458, par. (a)(1)(xi), of RA 7160, the law that supposedly ser ves as the legal basis of LBC 55, allows the grant of additional allowances to j udges "when the finances of the city government allow." The said provision does not authorize setting a definite maximum limit to the additional allowances gran ted to judges. Thus, we need not belabor the point that the finances of a city g overnment may allow the grant of additional allowances higher than P1,000 if the revenues of the said city government exceed its annual expenditures. Thus, to i llustrate, a city government with locally generated annual revenues of P40 milli on and expenditures of P35 million can afford to grant additional allowances of more than P1,000 each to, say, ten judges inasmuch as the finances of the city c an afford it. The DBM over-stepped its power of supervision over local government units by imp osing a prohibition that did not correspond with the law it sought to implement. In other words, the prohibitory nature of the circular had no legal basis. Furthermore, LBC 55 is void on account of its lack of publication, in violation of our ruling in Taada vs. Tuvera8 where we held that: xxx. Administrative rules and regulations must also be published if their purpos e is to enforce or implement existing law pursuant to a valid delegation. Interpretative regulations and those merely internal in nature, that is, regulat ing only the personnel of an administrative agency and the public, need not be p ublished. Respondent COA claims that publication is not required for LBC 55 inasmuch as it is merely an interpretative regulation applicable to the personnel of an LGU. W e disagree. In De Jesus vs. Commission on Audit9 where we dealt with the same is sue, this Court declared void, for lack of publication, a DBM circular that disa llowed payment of allowances and other additional compensation to government off icials and employees. In the present case under scrutiny, it is decisively clear that DBM-CCC No. 10, which completely disallows payment of allowances and other additional compensati on to government officials and employees, starting November 1, 1989, is not a me re interpretative or internal regulation. It is something more than that. And wh y not, when it tends to deprive government workers of their allowance and additi onal compensation sorely needed to keep body and soul together. It has come to our knowledge that DBM-CCC No. 10 has been re-issued in its entir ety and submitted for publication in the Official Gazette per letter to the Nati onal Printing Office dated March 9, 1999. Would the subsequent publication there of cure the defect and retroact to the time that the above-mentioned items were disallowed in audit? The answer is in the negative, precisely for the reason that publication is requ ired as a condition precedent to the effectivity of a law to inform the public o f the contents of the law or rules and regulations before their rights and inter ests are affected by the same. We now resolve the second issue of whether the yearly appropriation ordinance en

acted by Mandaue City providing for fixed allowances for judges contravenes any law and should therefore be struck down as null and void. We disagree. Respondent COA failed to prove that Mandaue City used the IRA to spend for the a dditional allowances of the judges. There was no evidence submitted by COA showi ng the breakdown of the expenses of the city government and the funds used for s aid expenses. All the COA presented were the amounts expended, the locally gener ated revenues, the deficit, the surplus and the IRA received each year. Aside fr om these items, no data or figures were presented to show that Mandaue City dedu cted the subject allowances from the IRA. Moreover, the DBM neither conducted a formal review nor ordered a disapproval of Mandaue City's appropriation ordinances, in accordance with the procedure outli ned by Sections 326 and 327 of RA 7160. Within 90 days from receipt of the copies of the appropriation ordinance, the DB M should have taken positive action. Otherwise, such ordinance was deemed to hav e been properly reviewed and deemed to have taken effect. Inasmuch as, in the in stant case, the DBM did not follow the appropriate procedure for reviewing the s ubject ordinance of Mandaue City and allowed the 90-day period to lapse, it can no longer question the legality of the provisions in the said ordinance granting additional allowances to judges stationed in the said city. WHEREFORE, the petition is hereby GRANTED, decision of COA reversed.

G.R. No. L-52179

April 8, 1991

MUNICIPALITY OF SAN FERNANDO vs.HON. JUDGE ROMEO N. FIRME, Petitioner Municipality of San Fernando, La Union is a municipal corporation exi sting under and in accordance with the laws of the Republic of the Philippines. Respondent Honorable Judge Romeo N. Firme is impleaded in his official capacity as the presiding judge of the Court of First Instance of La Union. While private respondents Juana Rimando-Bania, Laureano Bania, Jr., Sor Marietta Bania, Montano Bania, Orja Bania and Lydia R. Bania are heirs of the deceased Laureano Bania Sr. an d plaintiffs in Civil Case No. 107-Bg before the aforesaid court. At about 7 o'clock in the morning of December 16, 1965, a collision occurred inv olving a passenger jeepney driven by Bernardo Balagot and owned by the Estate of Macario Nieveras, a gravel and sand truck driven by Jose Manandeg and owned by Tanquilino Velasquez and a dump truck of the Municipality of San Fernando, La Un ion and driven by Alfredo Bislig. Due to the impact, several passengers of the j eepney including Laureano Bania Sr. died as a result of the injuries they sustain ed and four (4) others suffered varying degrees of physical injuries. On December 11, 1966, the private respondents instituted a compliant for damages against the Estate of Macario Nieveras and Bernardo Balagot, owner and driver, respectively, of the passenger jeepney, in the Court of First Instance of La Uni on, Branch I, San Fernando, La Union. However, the aforesaid defendants filed a Third Party Complaint against the petitioner and the driver of a dump truck of p etitioner. Thereafter, the case was subsequently transferred to Branch IV, presided over by respondent judge. By virtue of a court order dated May 7, 1975, the private res pondents amended the complaint wherein the petitioner and its regular employee, Alfredo Bislig were impleaded for the first time as defendants. Petitioner filed

its answer and raised affirmative defenses such as lack of cause of action, non -suability of the State, prescription of cause of action and the negligence of t he owner and driver of the passenger jeepney as the proximate cause of the colli sion. On October 10, 1979 the trial court rendered a decision, renderring judgement fo r the plaintiffs, and ordered defendants Municipality of San Fernando, La Union and Alfredo Bislig to pay jointly and severally, plaintiffs. The Complaint is di smissed as to defendants Estate of Macario Nieveras and Bernardo Balagot. Motions for reconsideration and new trial are also denied. Hence, this petition. issue ruling: The controversy boils down to the main issue of whether or not the respondent co urt committed grave abuse of discretion when it deferred and failed to resolve t he defense of non-suability of the State amounting to lack of jurisdiction in a motion to dismiss. The respondent judge did not commit grave abuse of discretion when in the exerci se of its judgment it arbitrarily failed to resolve the vital issue of non-suabi lity of the State in the guise of the municipality. However, said judge acted in excess of his jurisdiction when in his decision dated October 10, 1979 he held the municipality liable for the quasi-delict committed by its regular employee. The doctrine of non-suability of the State is expressly provided for in Article XVI, Section 3 of the Constitution, to wit: "the State may not be sued without i ts consent." Consent takes the form of express or implied consent.Express consent may be embo died in a general law or a special law. The standing consent of the State to be sued in case of money claims involving liability arising from contracts is found in Act No. 3083. A special law may be passed to enable a person to sue the gove rnment for an alleged quasi-delict, as in Merritt v. Government of the Philippin e Islands (34 Phil 311). Consent is implied when the government enters into busi ness contracts, thereby descending to the level of the other contracting party, and also when the State files a complaint, thus opening itself to a counterclaim . (Ibid) Municipal corporations, for example, like provinces and cities, are agencies of the State when they are engaged in governmental functions and therefore should e njoy the sovereign immunity from suit. Nevertheless, they are subject to suit ev en in the performance of such functions because their charter provided that they can sue and be sued. (Cruz, Philippine Political Law, 1987 Edition, p. 39) A distinction should first be made between suability and liability. "Suability d epends on the consent of the state to be sued, liability on the applicable law a nd the established facts. The circumstance that a state is suable does not neces sarily mean that it is liable; on the other hand, it can never be held liable if it does not first consent to be sued. Liability is not conceded by the mere fac t that the state has allowed itself to be sued. When the state does waive its so vereign immunity, it is only giving the plaintiff the chance to prove, if it can , that the defendant is liable." Anent the issue of whether or not the municipality is liable for the torts commi tted by its employee, the test of liability of the municipality depends on wheth er or not the driver, acting in behalf of the municipality, is performing govern mental or proprietary functions. Another statement of the test is given in City of Kokomo vs. Loy, decided by the

Supreme Court of Indiana in 1916, thus: Municipal corporations exist in a dual capacity, and their functions are twofold . In one they exercise the right springing from sovereignty, and while in the pe rformance of the duties pertaining thereto, their acts are political and governm ental. Their officers and agents in such capacity, though elected or appointed b y them, are nevertheless public functionaries performing a public service, and a s such they are officers, agents, and servants of the state. In the other capaci ty the municipalities exercise a private, proprietary or corporate right, arisin g from their existence as legal persons and not as public agencies. Their office rs and agents in the performance of such functions act in behalf of the municipa lities in their corporate or individual capacity, and not for the state or sover eign power." (112 N.E., 994-995) (Ibid, pp. 605-606.) It has already been remarked that municipal corporations are suable because thei r charters grant them the competence to sue and be sued. Nevertheless, they are generally not liable for torts committed by them in the discharge of governmenta l functions and can be held answerable only if it can be shown that they were ac ting in a proprietary capacity. In permitting such entities to be sued, the Stat e merely gives the claimant the right to show that the defendant was not acting in its governmental capacity when the injury was committed or that the case come s under the exceptions recognized by law. Failing this, the claimant cannot reco ver. In the case at bar, the driver of the dump truck of the municipality insists tha t "he was on his way to the Naguilian river to get a load of sand and gravel for the repair of San Fernando's municipal streets." Hence, We rule that the driver of the dump truck was performing duties or tasks pertaining to his office. After a careful examination of existing laws and jurisprudence, We arrive at the conclusion that the municipality cannot be held liable for the torts committed by its regular employee, who was then engaged in the discharge of governmental f unctions. Hence, the death of the passenger tragic and deplorable though it may b e imposed on the municipality no duty to pay monetary compensation. ACCORDINGLY, the petition is GRANTED and the decision of the respondent court is hereby modified, absolving the petitioner municipality of any liability in favo r of private respondents.

G.R. No. 136809

July 27, 2004

DEMOCRITO D. PLAZA II and VIRGINIA V. TUAZON, petitioners, vs.CAROLINA M. CASSIO N Before the passage of Republic Act No. 7160, the task of delivering basic social services was dispensed by the national government through the Department of Soc ial Welfare and Development (DSWD). Upon the promulgation and implementation of the Local Government Code, some of the functions of the DSWD were transferred to the local government units. The City of Butuan, through its Sangguniang Panglungsod (Sanggunian) passed SP R esolution 427-92,3 entitled "Resolution Authorizing the City Mayor, Honorable De mocrito D. Plaza II, to Sign the Memorandum of Agreement for the Devolution of t he DSWD to the City of Butuan." Pursuant to the Memorandum of Agreement (MOA)4 entered into between the City of

Butuan, through then Mayor Democrito Plaza II, petitioner, and the DSWD, the lat ter's services, personnel, assets and liabilities, and technical support systems were transferred to its city counterpart. By virtue of the same MOA, Mayor Plaza issued Executive Order (EO) No. 06-925 da ted October 5, 1992 reconstituting the City Social Services Development Office ( CSSDO), devolving or adding thereto 19 national DSWD employees headed by petitio ner Virginia Tuazon, Mayor Plaza designated her as Officer-in-Charge of the reco nstituted CSSDO. Its office was transferred from the original CSSDO building to the DSWD building. The CSSDO was originally composed of herein respondents, headed by Carolina M. C assion, Social Welfare Officer IV. Aggrieved by such development, they refused t o recognize petitioner Tuazon as their new head and to report at the DSWD buildi ng. Despite Mayor Plaza's series of orders to respondents to report for work at the DSWD building, they failed to do so. On January 18, 1993, Mayor Plaza issued a memorandum to the City Legal Officer d irecting him to conduct an administrative investigation against respondents. The y then submitted their respective explanations. Thereafter, they were charged ad ministratively for grave misconduct and insubordination and were preventively su spended for 60 days. This prompted them to file with the Civil Service Regional Office No. 10 a complaint against Mayor Plaza for violation of the Civil Service Law. Upon expiration of their preventive suspension, respondents informed Mayor Plaza that they are willing to return to work, but to their old office, not to the DS WD building.For the last time, or on April 14, 1993, Mayor Plaza notified respon dents to report to petitioner Tuazon at the new office in the DSWD building, but they remained obstinate. On February 16, 1994, Mayor Plaza upon advice of the CSC, issued an Order droppi ng respondents from the rolls pursuant to the said CSC Memorandum Circular.Forth with, respondents appealed to the CSC, which dismissed their appeal. Respondents then filed with the Court of Appeals a petition for review, which se ts aside the judgement of the CSC, and reinstated the petitioner. Motion for re consideration of petitioners were denied. Hence, this petition. Issue/ruling: In the main, petitioners contend that the Court of Appeals erred in setting asid e the CSC Resolutions dropping respondents from the rolls and EO No. 06-92 direc ting the devolution of 19 national DSWD employees to the local or city DSWD to b e headed by petitioner Virginia Tuazon. Private respondents, on the other hand, aver that their refusal to report for wo rk is justified since EO No. 06-92 is not valid as it was issued without prior a pproval by the Sanggunian in violation of Article 164, Rule XXII of the Rules an d Regulations Implementing the Local Government Code. Section 17 of the Local Government Code authorizes the devolution of personnel, assets and liabilities, records of basic services, and facilities of a national government agency to local government units. Under this Code, the term "devoluti on" refers to the act by which the national government confers power and authori ty upon the various local government units to perform specific functions and res ponsibilities.

As a consequence of the devolution of national agencies, Executive Order No. 503 was enacted by then President Corazon C. Aquino to govern and ensure the effici ent transfer of responsibilities to the local government unit concerned. Section 2 (g) provides: "The local chief executive shall be responsible for all devolved functions. He m ay delegate such powers and functions to his duly authorized representative whos e position shall preferably not be lower than the rank of a local government dep artment head. In all cases of delegated authority, the local chief executive sha ll at all times observe the principle of command responsibility." Section 2 (a) states that: "Except as herein otherwise provided, devolved permanent personnel shall be auto matically reappointed by the local chief executive concerned immediately upon th eir transfer which shall not go beyond June 30, 1992." Likewise, Section 22 of CSC Memorandum Circular No. 19, Series of 1992, specifie s that: "The positions absorbed by the local government units from the national governme nt agencies shall be automatically created upon transfer of their corresponding budgetary allocation. "Devolved permanent personnel shall be automatically reappointed by the local ch ief executive concerned immediately upon their transfer. "However, pending the completion of the new organizational structure and staffin g pattern, the local government executives may assign devolved personnel to divi sions/sections/units where their qualifications are best suited or appropriate." It is thus clear that Mayor Plaza is empowered to issue EO No. 06-92 in order to give effect to the devolution decreed by the Local Government Code. As the loca l chief executive of Butuan City, Mayor Plaza has the authority to reappoint dev olved personnel and may designate an employee to take charge of a department unt il the appointment of a regular head, as was done by the Mayor here. CSC Memorandum Circular No. 19, Series of 1992, provides further that heads of d epartments appointed by the local chief executive must have the concurrence of t he majority of all the members of the Sanggunian concerned. While initially, the Sanggunian rejected petitioner Tuazon's appointment as the City Government Depa rtment Head II of the CSSDO, however, it later confirmed her appointment. The Court Appeals erred in ruling that EO No. 06-92 violated respondents' securi ty of tenure as they were transferred to another office without their consent. T here was no such transfer. Transfer is a movement from one position to another w hich is of equivalent rank, level or salary without break in service and may be imposed as an administrative penalty.6 The change of respondents' place of work from the original CSSDO office to the DSWD building is not a transfer. It was on ly a physical transfer of their office to a new one. no movement or appointment from one position to another. Private respondents argue that they were denied due process when they were dropp ed from the rolls. Pursuant to the above provisions and as ruled by the CSC, the dropping from the rolls of private respondents is not disciplinary in nature. Thus, their assertio n that they were denied due process is untenable. Since the dropping from the ro lls is not an administrative sanction, they need not be notified or be heard.

WHEREFORE, the Decision dated February 14, 1996 of the Court of Appeals is REVER SED. The CSC Resolution No. 94-4626 dated August 22, 1994, and Resolution No. 94 -6243 dated November 17, 1994 dropping private respondents from the rolls are AF FIRMED.

G.R. No. 147402

January 14, 2004

ENGR. RANULFO C. FELICIANo vs.COMMISSION ON AUDIT A Special Audit Team from COA Regional Office No. VIII audited the accounts of L MWD. Subsequently, LMWD received a letter from COA dated 19 July 1999 requesting payment of auditing fees. As General Manager of LMWD, petitioner sent a reply d ated 12 October 1999 informing COA s Regional Director that the water district cou ld not pay the auditing fees. Petitioner cited as basis for his action Sections 6 and 20 of Presidential Decree 198 ("PD 198")2, as well as Section 18 of Republ ic Act No. 6758 ("RA 6758"). The Regional Director referred petitioner s reply to the COA Chairman on 18 October 1999. On 19 October 1999, petitioner wrote COA through the Regional Director asking fo r refund of all auditing fees LMWD previously paid to COA. On 16 March 2000, petitioner received COA Chairman Celso D. Gangan s Resolution da ted 3 January 2000 denying his requests. Petitioner filed a motion for reconside ration on 31 March 2000, which COA denied on 30 January 2001. On 13 March 2001, petitioner filed this instant petition. Attached to the petiti on were resolutions of the Visayas Association of Water Districts (VAWD) and the Philippine Association of Water Districts (PAWD) supporting the petition. Issue and ruling: The Constitution and existing laws4 mandate COA to audit all government agencies , including government-owned and controlled corporations ("GOCCs") with original charters. An LWD is a GOCC with an original charter. The COA s audit jurisdiction extends not only to government "agencies or instrumen talities," but also to "government-owned and controlled corporations with origin al charters" as well as "other government-owned or controlled corporations" with out original charters. Whether LWDs are Private or Government-Owned and Controlled Corporations with Original Charters? We begin by explaining the general framework under the fundamental law. The Cons titution recognizes two classes of corporations. The first refers to private cor porations created under a general law. The second refers to government-owned or controlled corporations created by special charters. Section 16, Article XII of the Constitution provides: Sec. 16. The Congress shall not, except by general law, provide for the formatio n, organization, or regulation of private corporations. Government-owned or cont rolled corporations may be created or established by special charters in the int erest of the common good and subject to the test of economic viability. The Constitution emphatically prohibits the creation of private corporations exc ept by a general law applicable to all citizens.9 The purpose of this constituti onal provision is to ban private corporations created by special charters, which

historically gave certain individuals, families or groups special privileges de nied to other citizens.10 In short, Congress cannot enact a law creating a private corporation with a spec ial charter. Such legislation would be unconstitutional. Private corporations ma y exist only under a general law. If the corporation is private, it must necessa rily exist under a general law. Stated differently, only corporations created un der a general law can qualify as private corporations. Under existing laws, that general law is the Corporation Code,11 except that the Cooperative Code governs the incorporation of cooperatives.12 The Constitution authorizes Congress to create government-owned or controlled co rporations through special charters. Since private corporations cannot have spec ial charters, it follows that Congress can create corporations with special char ters only if such corporations are government-owned or controlled. Obviously, LWDs are not private corporations because they are not created under the Corporation Code. LWDs are not registered with the Securities and Exchange C ommission. There are no stockholders or members to elect the board directors of LWDs as in the case of all corporations registered with the Securities and Excha nge Commission. The local mayor or the provincial governor appoints the director s of LWDs for a fixed term of office. From the foregoing pronouncement, it is clear that what has been excluded from t he coverage of the CSC are those corporations created pursuant to the Corporatio n Code. Significantly, petitioners are not created under the said code, but on t he contrary, they were created pursuant to a special law and are governed primar ily by its provision.13 (Emphasis supplied) Clearly, LWDs exist as corporations only by virtue of PD 198, which expressly co nfers on LWDs corporate powers. Section 6 of PD 198 provides that LWDs "shall ex ercise the powers, rights and privileges given to private corporations under exi sting laws."The ineluctable conclusion is that LWDs are government-owned and con trolled corporations with a special charter. The phrase "government-owned and controlled corporations with original charters" means GOCCs created under special laws and not under the general incorporation law. There is no difference between the term "original charters" and "special ch arters." "The Court, in National Service Corporation (NASECO) v. National Labor Relations Commission, G.R. No. 69870, promulgated on 29 November 1988, quoting extensivel y from the deliberations of the 1986 Constitutional Commission in respect of the intent and meaning of the new phrase with original charter, in effect held that g overnment-owned and controlled corporations with original charter refer to corpo rations chartered by special law as distinguished from corporations organized un der our general incorporation statute the Corporation Code. In NASECO, the compa ny involved had been organized under the general incorporation statute and was a subsidiary of the National Investment Development Corporation (NIDC) which in t urn was a subsidiary of the Philippine National Bank, a bank chartered by a spec ial statute. Thus, government-owned or controlled corporations like NASECO are e ffectively, excluded from the scope of the Civil Service." Petitioner s contention that the Sangguniang Bayan resolution creates the LWDs ass umes that the Sangguniang Bayan has the power to create corporations. This is a patently baseless assumption. The Local Government Code17 does not vest in the S angguniang Bayan the power to create corporations.18 What the Local Government C ode empowers the Sangguniang Bayan to do is to provide for the establishment of a waterworks system "subject to existing laws." The Sangguniang Bayan may establish a waterworks system only in accordance with

the provisions of PD 198. The Sangguniang Bayan has no power to create a corpora te entity that will operate its waterworks system. However, the Sangguniang Baya n may avail of existing enabling laws, like PD 198, to form and incorporate a wa ter district. Besides, even assuming for the sake of argument that the Sanggunia ng Bayan has the power to create corporations, the LWDs would remain governmentowned or controlled corporations subject to COA s audit jurisdiction. The resoluti on of the Sangguniang Bayan would constitute an LWD s special charter, making the LWD a government-owned and controlled corporation with an original charter. While it is true that a resolution of a local sanggunian is still necessary for the final creation of a district, this Court is of the opinion that said resolut ion cannot be considered as its charter, the same being intended only to impleme nt the provisions of said decree. Petitioner further contends that a law must create directly and explicitly a GOC C in order that it may have an original charter. In short, petitioner argues tha t one special law cannot serve as enabling law for several GOCCs but only for on e GOCC. Section 16, Article XII of the Constitution mandates that "Congress shal l not, except by general law,"20 provide for the creation of private corporation s. Thus, the Constitution prohibits one special law to create one private corpor ation, requiring instead a "general law" to create private corporations. In cont rast, the same Section 16 states that "Government-owned or controlled corporatio ns may be created or established by special charters." Thus, the Constitution pe rmits Congress to create a GOCC with a special charter. There is, however, no pr ohibition on Congress to create several GOCCs of the same class under one specia l enabling charter. Petitioner also contends that LWDs are private corporations because Section 6 of PD 19821 declares that LWDs "shall be considered quasi-public" in nature. Petitioner forgets that the constitutional criterion on the exercise of COA s audi t jurisdiction depends on the government s ownership or control of a corporation. The nature of the corporation, whether it is private, quasi-public, or public is immaterial. The Constitution vests in the COA audit jurisdiction over "government-owned and controlled corporations with original charters," as well as "government-owned or controlled corporations" without original charters. GOCCs with original charter s are subject to COA pre-audit, while GOCCs without original charters are subjec t to COA post-audit. GOCCs without original charters refer to corporations creat ed under the Corporation Code but are owned or controlled by the government. The determining factor of COA s audit jurisdiction is government ownership or cont rol of the corporation. In Philippine Veterans Bank Employees Union-NUBE v. Phil ippine Veterans Bank,22 the Court even ruled that the criterion of ownership and control is more important than the issue of original charter, thus: This point is important because the Constitution provides in its Article IX-B, S ection 2(1) that "the Civil Service embraces all branches, subdivisions, instrum entalities, and agencies of the Government, including government-owned or contro lled corporations with original charters." As the Bank is not owned or controlle d by the Government although it does have an original charter in the form of R.A . No. 3518,23 it clearly does not fall under the Civil Service and should be reg arded as an ordinary commercial corporation. While Section 8 of PD 198 states that "[N]o public official shall serve as direc tor" of an LWD, it only means that the appointees to the board of directors of L WDs shall come from the private sector. Once such private sector representatives assume office as directors, they become public officials governed by the civil

service law and anti-graft laws. Petitioner argues that upon the enactment of PD 198, LWDs became private entitie s through the transfer of ownership of water facilities from local government un its to their respective water districts as mandated by PD 198. Petitioner is gra sping at straws. Petitioner concedes that the owner of the assets transferred un der Section 6 (c) of PD 198 is no other than the LWD itself.32 33 In short, the transfer is from one government entity to another government entity. Finally, petitioner claims that even on the assumption that the government owns and controls LWDs, Section 20 of PD 198 prevents COA from auditing LWDs. PD 198 cannot prevail over the Constitution. No amount of clever legislation can exclude GOCCs like LWDs from COA s audit jurisdiction. Section 3, Article IX-C of the Constitution outlaws any scheme or devise to escape COA s audit jurisdiction, thus: Sec. 3. No law shall be passed exempting any entity of the Government or its sub sidiary in any guise whatever, or any investment of public funds, from the juris diction of the Commission on Audit. (Emphasis supplied) On the Legality of COA s Practice of Charging Auditing Fees? Petitioner claims that the auditing fees COA charges LWDs for audit services vio late the prohibition in Section 18 of RA 6758. Petitioner s claim has no basis. Section 18 of RA 6758 prohibits COA personnel from receiving any kind of compens ation from any government entity except "compensation paid directly by COA out o f its appropriations and contributions." Thus, RA 6758 itself recognizes an exce ption to the statutory ban on COA personnel receiving compensation from GOCCs. COA may charge GOCCs "actual audit cost" but GOCCs must pay the same directly to COA and not to COA auditors. Petitioner has not alleged that COA charges LWDs a uditing fees in excess of COA s "actual audit cost." Neither has petitioner allege d that the auditing fees are paid by LWDs directly to individual COA auditors. T hus, petitioner s contention must fail. WHEREFORE, the Resolution of the Commission on Audit dated 3 January 2000 and th e Decision dated 30 January 2001 denying petitioner s Motion for Reconsideration a re AFFIRMED. The second sentence of Section 20 of Presidential Decree No. 198 is declared VOID for unconstitutional.

G.R. No. 131512

January 20, 2000

LAND TRANSPORTATION OFFICE [LTO], vs.CITY OF BUTUAN Relying on the provisions of the constitution and the local government code whic h allows local government units to create its own sources of revenues and to lev y taxes, fees, and charges subject to such guidelines and limitations as the Con gress may provide, consistent with the basic policy of local autonomy, the Sangg uniang Panglungsod ("SP") of Butuan, on 16 August 1992, passed SP Ordinance No. 916-92 entitled "An Ordinance Regulating the Operation of Tricycles-for-Hire, pr oviding mechanism for the issuance of Franchise, Registration and Permit, and im posing Penalties for Violations thereof and for other Purposes."

In order to settle the variant positions of the parties, the City of Butuan, rep resented by its City Mayor Democrito D. Plaza, filed on 28 June 1994 with the tr ial court a petition for "prohibition, mandamus, injunction with a prayer for pr eliminary restraining order ex-parte" seeking the declaration of the validity of SP Ordinance No. 962-93 and the prohibition of the registration of tricycles-fo r-hire and the issuance of licenses for the driving thereof by the LTO. The Regional Trial Court rendered judgment in favor of the petitioner. Motion f or reconsideration of the respondent was denied. Thus respondent appealed to th e CA, which affirmed the judgment of rtc. Hence this petition for review on certiorari Issue/Ruling: The Court of Appeals [has] erred in sustaining the validity of the writ of injun ction issued by the trial court which enjoined LTO from (1) registering tricycle s-for-hire and (2) issuing licenses for the driving thereof since the Local Gove rnment Code devolved only the franchising authority of the LTFRB. Functions of t he LTO were not devolved to the LGU's.8 The petition is impressed with merit. The Department of Transportation and Communications9 ("DOTC"), through the LTO a nd the LTFRB, has since been tasked with implementing laws pertaining to land tr ansportation. The LTO is a line agency under the DOTC whose powers and functions , pursuant to Article III, Section 4 (d) [1],10 of R.A. No. 4136, otherwise know n as Land Transportation and Traffic Code, as amended, deal primarily with the r egistration of all motor vehicles and the licensing of drivers thereof. The LTFR B, upon the other hand, is the governing body tasked by E.O. No. 202, dated 19 J une 1987, to regulate the operation of public utility or "for hire" vehicles and to grant franchises or certificates of public convenience ("CPC").11 Finely put , registration and licensing functions are vested in the LTO while franchising a nd regulatory responsibilities had been vested in the LTFRB. Under the Local Government Code, certain functions of the DOTC were transferred to the LGUs. LGUs indubitably now have the power to regulate the operation of tricycles-for-h ire and to grant franchises for the operation thereof. "To regulate" means to fi x, establish, or control; to adjust by rule, method, or established mode; to dir ect by rule or restriction; or to subject to governing principles or laws.12 A f ranchise is defined to be a special privilege to do certain things conferred by government on an individual or corporation, and which does not belong to citizen s generally of common right.13 On the other hand, "to register" means to record formally and exactly, to enroll, or to enter precisely in a list or the like,14 and a "driver's license" is the certificate or license issued by the government which authorizes a person to operate a motor vehicle.15 The devolution of the fu nctions of the DOTC, performed by the LTFRB, to the LGUs, as so aptly observed b y the Solicitor General, is aimed at curbing the alarming increase of accidents in national highways involving tricycles. It has been the perception that local governments are in good position to achieve the end desired by the law-making bo dy because of their proximity to the situation that can enable them to address t hat serious concern better than the national government. It may not be amiss to state, nevertheless, that under Article 458 (a)[3-VI] of the Local Government Code, the power of LGUs to regulate the operation of tricyc les and to grant franchises for the operation thereof is still subject to the gu idelines prescribed by the DOTC. In compliance therewith, the Department of Tran

sportation and Communications ("DOTC") issued "Guidelines to Implement the Devol ution of LTFRBs Franchising Authority over Tricycles-For-Hire to Local Governmen t units pursuant to the Local Government Code." Such as can be gleaned from the explicit language of the statute, as well as the corresponding guidelines issued by DOTC, the newly delegated powers pertain to the franchising and regulatory powers theretofore exercised by the LTFRB and not to the functions of the LTO relative to the registration of motor vehicles and issuance of licenses for the driving thereof. Clearly unaffected by the Local Go vernment Code are the powers of LTO under R.A. No. 4136 requiring the registrati on of all kinds of motor vehicles "used or operated on or upon any public highwa y" in the country. If the tricycle registration function of respondent LTO is decentralized, the in cidence of theft of tricycles will most certainly go up, and stolen tricycles re gistered in one local government could be registered in another with ease. The d etermination of ownership thereof will also become very difficult.Fake driver's licenses will likewise proliferate. The Court cannot end this decision without expressing its own serious concern ov er the seeming laxity in the grant of franchises for the operation of tricyclesfor-hire and in allowing the indiscriminate use by such vehicles on public highw ays and principal thoroughfares. Tricycles are a popular means of transportation, specially in the countryside. T hey are, unfortunately, being allowed to drive along highways and principal thor oughfares where they pose hazards to their passengers arising from potential col lisions with buses, cars and jeepneys.The operation of tricycles within a munici pality may be regulated by the Sangguniang Bayan. In this connection, the Sanggu niang concerned would do well to consider prohibiting the operation of tricycles along or across highways invite collisions with faster and bigger vehicles and impede the flow of traffic.22 The need for ensuring public safety and convenience to commuters and pedestrians alike is paramount. It might be well, indeed, for public officials concerned to pay heed to a number of provisions in our laws that can warrant in appropriate cases an incurrence of criminal and civil liabilities. Thus The Revised Penal Code Art. 208. Prosecution of offenses; negligence and tolerance. The penalty of pris ion correccional in its minimum period and suspension shall be imposed upon any public officer, or officer of the law, who, in dereliction of the duties of his office, shall maliciously refrain from instituting prosecution for the punishmen t of violators of the law, or shall tolerate the commission of offenses. The Civil Code Art. 27. Any person suffering material or moral loss because a public servant or employee refuses or neglects, without just cause, to perform his official duty may file an action for damages and other relief against the latter, without prej udice to any disciplinary administrative action that may be taken.1wphi1.nt Art. 34. When a member of a city or municipal police force refuses or fails to r ender aid or protection to any person in case of danger to life or property, suc h peace officer shall be primarily liable for damages, and the city or municipal ity shall be subsidiarily responsible therefor. The civil action herein recogniz ed shall be independent of any criminal proceedings, and a preponderance of evid ence shall suffice to support such action.

Art. 2189. Provinces, cities and municipalities shall be liable for damages for the death of, or injuries suffered by, any person by reason of the defective con dition of roads, streets, bridges, public buildings, and other public works unde r their control or supervision. The Local Government Code Sec. 24. Liability for Damages. Local government units and their officials are n ot exempt from liability for death or injury to persons or damage to property. WHEREFORE, the assailed decision which enjoins the Land Transportation Office fr om requiring the due registration of tricycles and a license for the driving the reof is REVERSED and SET ASIDE. G.R. No. 111097 July 20, 1994 MAYOR PABLO P. MAGTAJAS & THE CITY OF CAGAYAN DE ORO vs.PRYCE PROPERTIES CORP. The trouble arose when in 1992, flush with its tremendous success in several cit ies, 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, I nc., one of the herein private respondents, renovated and equipped the same, and prepared to inaugurate its casino there during the Christmas season. The reaction of the Sangguniang Panlungsod of Cagayan de Oro City was swift and hostile. On December 7, 1992, it enacted Ordinance No. 3353 reading as follows: ORDINANCE NO. 3353. AN ORDINANCE PROHIBITING THE ISSUANCE OF BUSINESS PERMIT AN D CANCELLING EXISTING BUSINESS PERMIT TO ANY ESTABLISHMENT FOR THE USING AND ALL OWING TO BE USED ITS PREMISES OR PORTION THEREOF FOR THE OPERATION OF CASINO. Nor was this all. On January 4, 1993, it adopted a sterner Ordinance No. 3375-93 reading as follows:ORDINANCE NO. 3375-93. AN ORDINANCE PROHIBITING THE OPERATIO N OF CASINO AND PROVIDING PENALTY FOR VIOLATION THEREFOR. Pryce assailed the ordinances before the Court of Appeals, where it was joined b y PAGCOR as intervenor and supplemental petitioner. Their challenge succeeded. O n March 31, 1993, the Court of Appeals declared the ordinances invalid and issue d the writ prayed for to prohibit their enforcement. 1 Reconsideration of this d ecision was denied on July 13, 1993. 2 Cagayan de Oro City and its mayor are now before us in this petition for review under Rule 45 of the Rules of Court. Issue or Ruling: PAGCOR is a corporation created directly by P.D. 1869 to help centralize and reg ulate all games of chance, including casinos on land and sea within the territor ial jurisdiction of the Philippines. In Basco v. Philippine Amusements and Gamin g Corporation, 4 this Court sustained the constitutionality of the decree and ev en 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 Custom s. Cagayan de Oro City, like other local political subdivisions, is empowered to en act ordinances for the purposes indicated in the Local Government Code. It is ex pressly vested with the police power under what is known as the General Welfare Clause now embodied in Section 16 as follows:

Sec. 16. General Welfare. Every local government unit shall exercise the powers expressly granted, those necessarily implied therefrom, as well as powers necessary, appropriate, or incidental for its efficient and effective governanc e, 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, pr omote 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 prosper ity and social justice, promote full employment among their residents, maintain peace and order, and preserve the comfort and convenience of their inhabitants. In addition, Section 458 of the said Code specifically declares that: Sec. 458. Powers, Duties, Functions and Compensation. (a) The Sangguniang Panlungsod, as the legislative body of the city, shall enact ordinances, approve resolutions and appropriate funds for the general welfare of the city and its i nhabitants pursuant to Section 16 of this Code and in the proper exercise of the corporate powers of the city as provided for under Section 22 of this Code, and shall: (1) Approve ordinances and pass resolutions necessary for an efficient and e ffective city government, and in this connection, shall: xxx xxx xxx

(v) Enact ordinances intended to prevent, suppress and impose appropriate pe nalties for habitual drunkenness in public places, vagrancy, mendicancy, prostit ution, establishment and maintenance of houses of ill repute, gambling and other prohibited games of chance, fraudulent devices and ways to obtain money or prop erty, drug addiction, maintenance of drug dens, drug pushing, juvenile delinquen cy, the printing, distribution or exhibition of obscene or pornographic material s or publications, and such other activities inimical to the welfare and morals of the inhabitants of the city; The only question we can and shall resolve in this petition is the validity of O rdinance No. 3355 and Ordinance No. 3375-93 as enacted by the Sangguniang Panlun gsod of Cagayan de Oro City. And we shall do so only by the criteria laid down b y law and not by our own convictions on the propriety of gambling. The tests of a valid ordinance are well established. A long line of decisions 9 has held that to be valid, an ordinance must conform to the following substantiv e requirements: 1) 2) 3) 4) 5) 6) It must not contravene the constitution or any statute. It must not be unfair or oppressive. It must not be partial or discriminatory. It must not prohibit but may regulate trade. It must be general and consistent with public policy. It must not be unreasonable.

We begin by observing that under Sec. 458 of the Local Government Code, local go vernment units are authorized to prevent or suppress, among others, "gambling an d other prohibited games of chance." Obviously, this provision excludes games of chance which are not prohibited but are in fact permitted by law. The petitione

rs are less than accurate in claiming that the Code could have excluded such gam es 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 b e interpreted in relation to, or given the same meaning of, words with which it is associated. Accordingly, we conclude that since the word "gambling" is associ ated with "and other prohibited games of chance," the word should be read as ref erring 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 conclu sively. But we will not. The vigorous efforts of the petitioners on behalf of th e inhabitants of Cagayan de Oro City, and the earnestness of their advocacy, des erve more than short shrift from this Court. The apparent flaw in the ordinances in question is that they contravene P.D. 186 9 and the public policy embodied therein insofar as they prevent PAGCOR from exe rcising the power conferred on it to operate a casino in Cagayan de Oro City. Th e petitioners have an ingenious answer to this misgiving. They deny that it is t he ordinances that have changed P.D. 1869 for an ordinance admittedly cannot pre vail against a statute. Their theory is that the change has been made by the Loc al Government Code itself, which was also enacted by the national lawmaking auth ority. 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 chang e or repeal another law. It seems to us that the petitioners are playing with words. While insisting that the decree has only been "modified pro tanto," they are actually arguing that i t is already dead, repealed and useless for all intents and purposes because the Code has shorn PAGCOR of all power to centralize and regulate casinos. Strictly speaking, its operations may now be not only prohibited by the local government unit; in fact, the prohibition is not only discretionary but mandated by Sectio n 458 of the Code if the word "shall" as used therein is to be given its accepte d meaning. Local government units have now no choice but to prevent and suppress gambling, which in the petitioners' view includes both legal and illegal gambli ng. Under this construction, PAGCOR will have no more games of chance to regulat e or centralize as they must all be prohibited by the local government units pur suant to the mandatory duty imposed upon them by the Code. In this situation, PA GCOR cannot continue to exist except only as a toothless tiger or a white elepha nt and will no longer be able to exercise its powers as a prime source of govern ment revenue through the operation of casinos. In light of all the above considerations, we see no way of arriving at the concl usion 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 ch aracter and force of a statute, as well as the public policy expressed in the de cree 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 sta tute is obvious. Municipal governments are only agents of the national governmen t. Local councils exercise only delegated legislative powers conferred on them b y Congress as the national lawmaking body. The delegate cannot be superior to th e principal or exercise powers higher than those of the latter. It is a heresy t o suggest that the local government units can undo the acts of Congress, from wh ich they have derived their power in the first place, and negate by mere ordinan ce the mandate of the statute. Municipal corporations owe their origin to, and derive their powers and rights w

holly from the legislature. It breathes into them the breath of life, without wh ich they cannot exist. As it creates, so it may destroy. As it may destroy, it m ay abridge and control. Unless there is some constitutional limitation on the ri ght, 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 municipa l corporations in the State, and the corporation could not prevent it. We know o f no limitation on the right so far as to the corporation themselves are concern ed. They are, so to phrase it, the mere tenants at will of the legislature. 11 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 Ph ilippines, remains unimpaired. P.D. 1869 has not been modified by the Local Gove rnment Code, which empowers the local government units to prevent or suppress on ly those forms of gambling prohibited by law. WHEREFORE, the petition is DENIED and the challenged decision of the respondent Court of Appeals is AFFIRMED.