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Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 9321 September 24, 1914
NORBERTO ASUNCION, ET AL., petitioners-appellants,
vs.
MANUEL DE YRIARTE, respondent-appellee.
Modesto Reyes for appellants.
Attorney-General Villamor for appellee.
MORELAND, J.:
This is an action to obtain a writ of mandamus to compel
the chief of the division of achieves of the Executive Bureau
to file a certain articles of incorporation.
The chief of the division of archives, the respondent,
refused to file the articles of incorporation, hereinafter
referred to, upon the ground that the object of the
corporation, as stated in the articles, was not lawful and
that, in pursuance of section 6 of Act No. 1459, they were
not registerable.
The proposed incorporators began an action in the Court of
First Instance of the city of Manila to compel the chief of
the division of archives to receive and register said articles
of incorporation and to do any and all acts necessary for the
complete incorporation of the persons named in the
articles. The court below found in favor of the defendant
and refused to order the registration of the articles
mentioned, maintaining ad holding that the defendant,
under the Corporation Law, had authority to determine
both the sufficiency of the form of the articles and the
legality of the object of the proposed corporation. This
appeal is taken from that judgment.
The first question that arises is whether or not the chief of
the division of archives has authority, under the
Corporation for registration, to decide not only as to the
sufficiency of the form of the articles, but also as to the
lawfulness of the purpose of the proposed corporation.
It is strongly urged on the part of the appellants that the
duties of the defendant are purely ministerial and that he
has no authority to pass upon the lawfulness of the object
for which the incorporators propose to organize. No
authorities are cited to support this proposition and we are
of the opinion that it is not sound.
Section 6 of the Corporation Law reads in part as follows:
Five or more persons, not exceeding fifteen, a
majority of whom are residents of the Philippine
Islands, may form a private corporation for any lawful
purpose by filing with the division of archives,
patents, copyrights, and trademarks if the Executive
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Bureau articles of incorporation duly executed and
acknowledged before a notary public, . . . .
Simply because the duties of an official happens to be
ministerial, it does not necessarily follow that he may not,
in the administration of his office, determine questions of
law. We are of the opinion that it is the duty of the division
of archives, when articles of incorporation are presented
for registration, to determine whether the objects of the
corporation as expressed in the articles are lawful. We do
not believe that, simply because articles of incorporation
presented foe registration are perfect in form, the division
of archives must accept and register them and issue the
corresponding certificate of incorporation no matter what
the purpose of the corporation may be as expressed in the
articles. We do not believe it was intended that the division
of archives should issue a certificate of incorporation to,
and thereby put the seal of approval of the Government
upon, a corporation which was organized for base of
immoral purposes. That such corporation might later, if it
sought to carry out such purposes, be dissolved, or its
officials imprisoned or itself heavily fined furnished no
reason why it should have been created in the first
instance. It seems to us to be not only the right but the duty
of the divisions of archives to determine the lawfulness of
the objects and purposes of the corporation before it issues
a certificate of incorporation.
It having determined that the division of archives, through
its officials, has authority to determine not only the
sufficiency as to form of the articles of incorporation
offered for registration, but also the lawfulness of the
purposes of leads us to the determination of the question
whether or not the chief of the division of archives, who is
the representative thereof and clothed by it with authority
to deal subject to mandamus in the performance of his
duties.
We are of the opinion that he may be mandamused if he
act in violation of law or if he refuses, unduly, to comply
with the law. While we have held that defendant has power
to pass upon the lawfulness of the purposes of the
proposed corporation and that he may, in the fulfillment of
his duties, determine the question of law whether or not
those purposes are lawful and embraced within that class
concerning which the law permits corporations to be
formed, that does not necessarily mean, as we have already
intimated, that his duties are not ministerial. On the
contrary, there is no incompatibility in holding, as we do
hold, that his duties are ministerial and that he has no
authority to exercise discretion in receiving and registering
articles of incorporation. He may exercise judgment — that
is, the judicial function — in the determination of the
question of law referred to, but he may not use discretion.
The question whether or not the objects of a proposed
corporation are lawful is one that can be decided one way
only. If he err in the determination of that question and
refuse to file articles which should be filed under the law,
the decision is subject to review and correction and, upon
proper showing, he will be ordered to file the articles. This
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is the same kind of determination which a court makes
when it decides a case upon the merits, the court makes
when it decides a case upon the merits. When a case is
presented to a court upon the merits, the court can decide
only one way and be right. As a matter of law, there is only
one way and be right. As a matter of law, there is only one
course to pursue. In a case where the court or other official
has discretion in the resolution of a question, then, within
certain limitations, he may decide the question either way
and still be right. Discretion, it may be said generally, is a
faculty conferred upon a court or other official by which he
may decide a question either way and still be right. The
power conferred upon the division of archives with respect
to the registration of articles of incorporation is not of that
character. It is of the same character as the determination
of a lawsuit by a court upon the merits. It can be decided
only one way correctly.
If, therefore, the defendant erred in determining the
question presented when the articles were offered for
registration, then that error will be corrected by this court
in this action and he will be compelled to register the
articles as offered. If, however, he did not commit an error,
but decided that question correctly, then, of course, his
action will be affirmed to the extent that we will deny the
relief prayed for.
The next question leads us to the determination of whether
or not the purposes of the corporation as stated in the
articles of incorporation are lawful within the meaning of
the Corporation Law.
The purpose of the incorporation as stated in the articles is:
"That the object of the corporation is (a) to organize and
regulate the management, disposition, administration and
control which the barrio of Pulo or San Miguel or its
inhabitants or residents have over the common property of
said residents or inhabitants or property belonging to the
whole barrio as such; and (b) to use the natural products of
the said property for institutions, foundations, and
charitable works of common utility and advantage to the
barrio or its inhabitants."
The municipality of Pasig as recognized by law contains
within its limits several barrios or small settlements, like
Pulo or San Miguel, which have no local government of
their own but are governed by the municipality of Pasig
through its municipal president and council. The president
and members of the municipal council are elected by a
general vote of the municipality, the qualified electors of all
the barrios having the right to participate.
The municipality of Pasig is a municipal corporation
organized by law. It has the control of all property of the
municipality. The various barrios of the municipality have
no right to own or hold property, they not being recognized
as legal entities by any law. The residents of the barrios
participate in the advantages which accrue to the
municipality from public property and receive all the
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benefits incident to residence in a municipality organized by
law. If there is any public property situated in the barrio of
Pulo or San Miguel not belonging to the general
government or the province, it belongs to the municipality
of Pasig and the sole authority to manage and administer
the same resides in that municipality. Until the present laws
upon the subject are charged no other entity can be the
owner of such property or control or administer it.
The object of the proposed corporation, as appears from
the articles offered for registration, is to make of the barrio
of Pulo or San Miguel a corporation which will become the
owner of and have the right to control and administer any
property belonging to the municipality of Pasig found
within the limits of that barrio. This clearly cannot be
permitted. Otherwise municipalities as now established by
law could be deprived of the property which they now own
and administer. Each barrio of the municipality would
become under the scheme proposed, a separate
corporation, would take over the ownership,
administration, and control of that portion of the municipal
territory within its limits. This would disrupt, in a sense, the
municipalities of the Islands by dividing them into a series
of smaller municipalities entirely independent of the
original municipality.
What the law does not permit cannot be obtained by
indirection. The object of the proposed corporation is
clearly repugnant to the provisions of the Municipal Code
and the governments of municipalities as they have been
organized thereunder. (Act No. 82, Philippine Commission.)
The judgment appealed from is affirmed, with costs against
appellants.
Arellano, C.J., Torres, Johnson, Carson and Araullo,
JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-18081 April 30, 1963
SOCIAL SECURITY SYSTEM EMPLOYEES ASSOCIATION
(PAFLU), petitioner,
vs.
THE HON. JUDGE E. SORIANO, ETC., ET AL., respondents.
Cipriano Cid and Associates for petitioner.
Office of the Solicitor General for respondents.
BAUTISTA ANGELO, J.:
The Social Security System Employees Association (PAFLU),
composed of employees of the Social Security Commission,
transmitted on October 20, 1960 to the latter a set of
demands containing terms and conditions of employment
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including a request for recognition as a collective bargaining
agent. Instead of answering the demands, the Commission
filed on December 14, 1960 before the Court of First
Instance of Manila a petition for declaratory relief wherein
it asked that the Social Security System which was created
by Republic Act No. 1161 be declared as a governmental
agency performing governmental functions so that its
employees may be prohibited from joining labor
unions and from compelling petitioners to enter into a
collective bargaining agreement with them as well as from
declaring strikes detrimental to the System.
The union answered the petition with a counter-prayer that
the SSS be declared as an agency of the government
exercising proprietary functions. In the meantime, a
conference was held between the union and the SSC in
connection with the demands submitted by the former and
sensing that the Commission was not disposed to enter into
a collective bargaining agreement with it, the union filed
before the Court of Industrial Relations a change for unfair
labor practice against said Commission pursuant to Section
14, paragraph (b), of Republic Act 875. Two days later, or on
February 16, 1961, the union went on strike and picketed
the premises of the Social Security Commission.
Without losing time, the Commission filed on the very same
date before the Court of First Instance of Manila an urgent
petition with preliminary injunction praying that an order
be immediately issued requiring the union members to
return to work and desist from picketing the premises of
the Commission. The court, presided over by Judge E.
Soriano, issued on the same date an ex parte preliminary
injunction ordering the union members not only to desist
from picketing the above premises but also to refrain from
doing any act of violence. As a consequence, the union filed
before this Court petition for certiorari with preliminary
injunction praying that the respondent judge be restrained
from enforcing his writ of preliminary injunction on the
ground that he had no jurisdiction to issue itex parte. This
Court issued the injunction prayed for. Respondents filed an
urgent petition to dissolve the injunction, but the same was
denied. After respondents had filed their answer, hearing
was held, and later the case was submitted for decision..
The main issue to be determined is whether the SSS is
a government agency exercising governmental functions,
claimed by respondents, or whether it exercises proprietary
functions, as contended by petitioner, on which issue will
necessarily hinge whether respondent judge had acted in
excess of his jurisdiction in issuing the ex parte writ of
preliminary injunction subject of the present petition for
certiorari..
In Bacani v. National Coconut Corporation, 53 O.G., 2798,
this Court said:.
Wherefore, the parties respectfully pray that the foregoing
stipulation of facts be admitted and approved by this
Honorable Court, without prejudice to the parties adducing
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other evidence to prove their case not covered by this
stipulation of facts. 1äwphï1.ñët
... There are function which our government is
required to exercise to promote its objective as
expressed in our Constitution and which are
exercised by it as an attribute of sovereignty and
those which it may exercise to promote merely the
welfare, progress and prosperity of the people. To
this latter class belongs the organization of these
corporations owned or controlled by the government
to promote certain aspects of the economic life of
our people such as the National Coconut
Corporation. These are what we may call
government-owned or controlled corporations which
may take the form of private enterprise or one
organized with powers and formal characteristic of
a private corporation under the Corporation Law.
The question that now arises is: Does the fact that
these corporations perform certain functions of the
government make them a part of the Government of
the Philippines?
The answer is simple: they do not acquire that status
for the simple reason that they do not come under
the classification of municipal or public corporations.
Take for instance the National Coconut Corporation.
... it was given a corporate power separate and
distinct from our government, for it was made
subject to the provisions of our Corporation Law in so
far as its corporate existence and the powers it may
exercise are concerned (sections 2 and 4,
Commonwealth Act No. 518). It may sue and be sued
in the same manner as any other private
corporations, and in this sense it is an entity different
from other Government.
x x x x x x x x x
To recapitulate, we may mention that the term
"Government of the Republic of the Philippines' ...
refers only to that government entity through which
the functions of the government are exercised as an
attribute of sovereignty, and in these are included
those arms through which political authority is made
effective whether they be provincial, municipal or
other form of local government. These are what we
call municipal corporations. They do not include
government entities which are given corporate
personality separate and distinct from the
government and which are governed by the
Corporation Law. Their powers, duties and liabilities
have to be determined in the light of that law and of
their corporate charters."
It appears that the National Coconut Corporation was
declared to be an entity separate from the government or
not exercising governmental functions because (1) it is not
a municipal corporation, (2) its powers are not exercised as
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an attribute of sovereignty, (3) it was given a separate
personality and powers separate and distinct from the
government, and (4) it may sue and be sued as any other
private corporations. As evidence of its having been
endowed with powers separate and distinct from those of
the government is the fact that it is made subject to the
provisions of the Corporation Law. But to enjoy such
powers, it is not, however, necessary that it be declared
expressly that it is subject to the provisions of the
Corporation Law, because such may be inferred from the
law creating it and its corporate charter.
It may now be asked: Do these reasons hold true with
regard to the Social Security System?
To begin with, the System is not a municipal corporation. In
its strict and proper sense, a municipal corporation is a
body politic established by law partly as an agency of the
state to assist in the civil government of the country, chiefly
to regulate and administer the local and internal affairs of
the city, town or district which is incorporated.
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The
Social Security Commission does not regulate or administer
the local affairs of a town, city, or district which is
incorporated.
Again, the Social Security Commission or System has a
personality of its own, by virtue of which it can sue and be
sued. This is clearly inferred from Section 4(k) of Republic
Act No. 1161, as amended. In fact, it is endowed with
practically the same powers that are conferred by law upon
any other private corporations. Hence, we may say that
there is a substantial similarity between the Social Security
Commission on System and the National Coconut
Corporation.
In this connection, it is interesting to note the nature of the
functions that the government may exercise to accomplish
its objectives. These functions are two-fold, constituent and
ministrant: the former constitutes the very bonds of society
and are compulsory in nature; the latter the those that are
undertaken only by way of advancing the general interest
of society, and are merely optional. President Wilson
enumerated the constituent functions as follows:
(1) The keeping of order and providing for the
protection of persons and property from violence
and robbery.
(2) The fixing of the legal relations between man and
wife and between parents and children.
(3) The regulation of the holding, transmission, and
interchange of property, and the determination of its
liabilities for debt or crime.
(4) The determination of contract rights between
individuals.
(5) The definition and punishment of crimes.
(6) The administration of justice in civil cases.
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(7) The determination of the political duties,
privileges, and relations of citizens.
(8) Dealings of the state with foreign powers; the
preservation of the state from external danger or
encroachment and the advancement of its
international interests. (Malcolm, The Government of
the Philippine Islands p. 19) (Bacani v. National
Coconut Corporation, supra).
The most important of the ministrant functions are: public
works, public education, public charity, health and safety
regulations, and regulations of trade and industry. The
principles determining whether or not a government shall
exercise certain of these optional functions are: (1) that a
government should do for the public welfare those things
which private capital would not naturally undertake, and (2)
that the government should do those things which by their
very nature it is better equipped to administer for the
public welfare than is any private individual or group of
individual (Bacani v. National Coconut Corporation, supra).
It is noteworthy to state that the main objective of the SSS
is certainly not one of the constituent functions
enumerated above but one which merely aims advancing
the general interest of society which is optional. In effect,
its main aim is to provide social security to a large group of
employees who are not in the government service because
as a rule private capital cannot undertake it while the
government by its very nature is better equipped to do so
than any individual or group of individuals. It may be true
that social security is generally handled by the government,
but it does not follow that it cannot be exercised or
performed by a private entity or individual, for, as a matter
of fact, before the SSS was established there were already
many private systems adopted by private entities thru
insurance companies and mutual aid associations which
served as forerunners of the SSS (International Labor Office,
Social Security, p. 5).
It is without doubt that the state created the SSS in the
exercise of its police power and that it was for a
governmental purpose, or the promotion of social justice,
but it does not follow that the System should necessarily be
a government function or one in the exercise of its
sovereign powers. In fact, the System is not so essential and
indispensable that the government cannot exist without it.
History shows that our government has existed for a long
time before the creation of the SSS. And this indicates that
its creation is merely optional or a means of promoting the
welfare and general interest of society.
It is true that the SSS is a creation of Congress (Republic Act
No. 1161)and its existence and operation is financed by it. It
is likewise true that the under said Act the insurance is
made compulsory in order that its coverage might be as
universal as possible. We may even say that the
Commission is given by law quasi-judicial powers in order to
have an expeditious adjudication of the benefits of social
insurance. But these government functions are merely
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incidental in the sense that they are necessary to
implement and carry out of the objective of the law. The
fact is that the main bulk of the questions of the SSS is
proprietary in nature judging from its main functions
of investmentand insurance, which were essentially
proprietary, without which its main objective cannot be
carried out.
A factor that is noteworthy are the similarities between the
Social Security System and the Government Service
Insurance System. One is as to their powers and duties. The
Social Security Act gives to the System the power to adopt,
amend, and rescind such rules and regulations as may be
necessary to carry out the provisions and purposes of the
Act. The same power is given to the GSIS by the law of its
creation (Commonwealth Act No. 186, Section 17[a]).The
Commission has the power to enter into agreements for
such services and aids as may be needed. The same power
is given to the GSIS. The Commission has the power to
establish branches whenever and wherever it may be
necessary. Similar power is given to the GSIS. The
Commission is given the power to a adopt a budget of its
expenditures, including the salaries of its personnel. Similar
powers are given to the GSIS. The Commission has the
power to acquire property, real or personal, that may be
necessary for the attainment of its purpose. The GSIS may
also exercise similar powers. The Commission can sue and
be sued in court, so with the GSIS.
As to investments, the SSS is required to invest its funds (1)
in interest-bearing bonds and securities of the Government
of the Philippines or bonds or securities for the payment of
the interest and principal of which the faith and credit of
the Republic of the Philippines is pledged; (2) in interest-
bearing deposits in any domestic bank doing business in the
Philippines provided that said bank shall have been
designated as a depository for this purpose by the
President; (3) in loans or advances to the national
government for the construction of permanent toll bridges
in accordance with law; (4) in housing loans to members up
to a maximum of 60% of the appraised value of the
properties; (5) in loans to members, and (6) in other
projects and investments subject to approval by the
Insurance Commissioner. Similar powers are given by law to
the GSIS.
The appointment of the members of the governing bodies
in both the SSC and the GSIS are the same; they are
appointed by the President of the Philippines, with the
consent of the Commission on Appointments. Their tenure
is the same — three years. Their compensation is also the
same — a per diem of P25.00 for each day actually
attended by them.
Finally, the funds of the SSS are treated as special funds in
the same manner as those of the GSIS. They are distinct and
separate from those of the government such that the
government cannot dispose of them in any manner.
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To recapitulate, all the above similarities as found in the
charters of both entities cannot but point to one significant
fact: that it was the intention of Congress to pattern the SSS
after that of the GSIS. Consequently, the two entities must
exercise functions of the same nature.
These, functions are proprietary as declared by this; Court
with regard to the GSlS.
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WHEREFORE, petition is granted. The writ of preliminary
injunction issued ex parte by respondent judge is hereby set
aside. The writ issued by this Court is made permanent. No
costs.
Bengzon, C.J., Labrador, Concepcion, Barrera, Paredes,
Regala and Makalintal, JJ., concur.
Padilla, Reyes, J.B.L. and Dizon, JJ., took no part.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 72807 September 9, 1991
MARILAO WATER CONSUMERS ASSOCIATION,
INC., petitioners,
vs.
INTERMEDIATE APPELLATE COURT, MUNICIPALITY OF
MARILAO, BULACAN, SANGGUNIANG BAYAN, MARILAO,
BULACAN, and MARILAO WATER DISTRICT, respondents.
Magtanggol C. Gunigundo for petitioner.
Prospero A. Crescini for Marilao Water District.

NARVASA, J.:p
Involved in this appeal is the determination of which
triburial has jurisdiction over the dissolution of a water
district organized and operating as a quasi-public
corporation under the provisions of Presidential Decree No.
198, as amended;
1
the Regional Trial Court, or the
Securities & Exchange Commission.
PD 198 authorizes the formation, lays down the powers and
functions, and governs the operation of water districts
throughout the country; it is "the source of authorization
and power to form and maintain a (water) district." Once
formed, it says, a district is subject to its provisions and is
not under the jurisdiction of any political subdivision.
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Under PD 198, water districts may be created by the
different local legislative bodies by the passage of a
resolution to this effect, subject to the terms of the decree.
The primary function of these water districts is to sell
water to residents within their territory, under such
schedules of rates and charges as may be determined by
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their boards.
3
They shall manage, administer, operate and
maintain all watersheds within their territorial boundaries,
safeguard and protect the use of the waters therein,
supervise and control structures within their service areas,
and prohibit any person from selling or otherwise disposing
of water for public purposes within their service areas
where district facilities are available to provide such
service.
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The decree specifies the terms under which water districts
may be formed and operate. It prescribes, particularly —
a) the name by which a water district shad be known, which
shall be contained in the enabling resolution, and shall
include the name of the city, municipality, or province, or
region thereof, served by said system, followed by the
words, 'Water District;'
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b) the number and qualifications of the members of
the boards of directors, with the date of expiration of term
of office for each;
6
the manner of their selection and initial
appointment by the head of the local political
subdivision;
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their terms of office (which shall be in
staggered periods of two, four and six years);
8
the manner
of filling up vacancies in the board;
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the compensation and
liabilities of members of the board.
10
The resolution shall
contain a "statement that the district may only be dissolved
on the grounds and under the conditions set forth in
Section 44" of the law, but nothing in the resolution of
formation, the decree adds, "shall state or infer that the
local legislative body has the power to dissolve, alter or
affect the district beyond that specifically provided for in
this Act."
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The juridical entities thus created and organized under PD
198 are considered quasi-public corporations, performing
public services and supplying public wants. They are
authorized not only to "exercise all the powers which are
expressly granted" by said decree, and those "which are
necessarily implied from or incidental to" said powers, but
also "the power of eminent domain, the exercise .. (of
which) shall however be subject to review by the
Administration" (LWUA). In addition to the powers granted
in, and subject to such restrictions imposed under, the Act,
they may also exercise the powers, rights and privileges
given to private corporations under existing laws.
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The decree also established a government corporation
attached to the Office of the President, known as the Local
Water Utilities Administration (LWUA)
13
to function
primarily as "a specialized lending institution for the
promotion development and financing of local water
utilities." It has the following specific powers and duties;
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(1) prescribe minimum standards and
regulations in order to assure acceptable
standards ofconstruction materials and
supplies, maintenance, operation, personnel
training, accounting and fiscal practices for
local water utilities;
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(2) furnish technical assistance and personnel
training programs for local water utilities;
(3) monitor and evaluate local water
standards; and
(4) effect systems integration,
joint investment and operations, district
annexation and deannexation whenever
economically warranted.
It was pursuant to the foregoing rules and norms that the
Marilao Water District was formed by Resolution of the
Sangguniang Bayan of the Municipality of Marilao dated
September 18, 1982, which resolution was thereafter
forwarded to the LWUA and "duly filed" by it on October 4,
1982 after ascertaining that it conformed to the
requirements of the law.
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The claim was thereafter made that the creation of the
Marilao Water District in the manner aforestated was
defective and illegal. The claim was made by a non-stock,
non-profit corporation known as the Marilao Water
Consumers Association, Inc., in a petition dated December
12, 1983 filed with the Regional Trial Court at Malolos,
Bulacan. Impleaded as respondents were the Marilao
Water District, as well as the Municipality of Marilao,
Bulacan; its Sangguniang Bayan; and Mayor Nicanor V.
GUILLERMO. The petition prayed for the dissolution of the
water district on the basis chiefly of the following
allegations, to wit:
1) there had been no real, but only a "farcical" public
hearing prior to the creation of the Water District;
2) not only was the waterworks system turned over to the
Water District without compensation. but a subsidy was
illegally authorized for it;
3) the Water District was being run with "negligence,
apathy, indifference and mismanagement," and was not
providing adequate and efficient service to the community,
but this notwithstanding, the consumers were being billed
in full and threatened with disconnection for failure to pay
bills on time; in fact, one of the consumers who complained
had his water service cut off;
4) the consumers were consequently "forced to organize
themselves into a corporation last October 3, 1983 ... for
the purpose of demanding adequate and sufficient supply
of water and efficient management of the waterworks in
Marilao, Bulacan.
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Acting on the complaint, particularly on the application
for temporary restraining order and preliminary injunction
set out therein, the Trial Court issued an Order on
December 22, 1983 setting the application for preliminary
hearing, requiring the respondents to answer the petition
and restraining them until further orders from collecting
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any water bill, disconnecting any water service, transferring
any property of the waterworks, or disbursing any amount
in favor of any person. The order was modified on January
6, 1984 to allow the respondents to pay the district's
outstanding obligations to Meralco, by way of exception to
the restraining order.
On January 13, 1984 the Marilao Water District filed its
Answer with Compulsory Counterclaim, denying the
material allegations of the petition and asserting as
affirmative defenses (a) the Court's lack of jurisdiction of
the subject matter, and (b) the failure of the petition to
state a cause of action. The answer alleged that the matter
of the water district's dissolution fell under the original and
exclusive jurisdiction of the Securities & Exchange
Commission (SEC); and the matter of the propriety of water
rates, within the primary administrative jurisdiction of the
LWUA and the quasi-judicial jurisdiction of the National
Water Resources Council. On the same date, Marilao Water
District filed a motion for admission of its third-party
complaint against the officers and directors of the
petitioner corporation, it being claimed that they had
instigated the filing of the petition simply because one of
them was a political adversary of the respondent Mayor.
The other respondents also filed their answer through the
Provincial Fiscal of Bulacan, setting up the same affirmative
defense of lack of jurisdiction on the part of the Trial Court;
and failure of the petition to state a cause of action since it
admitted that it was by resolution of the Marilao
Sangguniang Bayan that the Marilao Water District was
constituted.
The petitioner — the Marilao Consumers Association filed a
reply, and an answer to the counterclaim, on January 26,
1984. It averred that since the Marilao Water District had
not been organized under the Corporation Code, the SEC
had no jurisdiction over a proceeding for its dissolution; and
that under Section 45 of PD 198, the proceeding to
determine if the dissolution of the water district is for the
best interest of the people, is within the competence of a
regular court of justice, and neither the LWUA nor the
National Water Resources Council is competent to take
cognizance of the matter of dissolution of the water district
and recovery of its waterworks system, or the exorbitant
rates imposed by it. The Consumers Association also
opposed admission of the third-party complaint on the
ground that its individual officers are not personally
amenable to suit for acts of the corporation,
17
which has a
personality distinct from theirs.
The Trial Court found for the respondents. It dismissed the
Consumers Association's suit by Order handed down on
June 8, 1984 which pertinently reads as follows:
After a consideration of the arguments raised
by the herein parties, the Court is more
inclined to take the position of the
respondents that the Securities and Exchange
14

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


D E C I S I O N


CARPIO, J.:
26

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

PD 198 cannot prevail over the Constitution. No amount of
clever legislation can exclude GOCCs like LWDs from 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 subsidiary in any guise
whatever, or any investment of public funds, from
the jurisdiction of the Commission on Audit.
(Emphasis supplied)
The framers of the Constitution added Section 3, Article IX-
D of the Constitution precisely to annul provisions of
Presidential Decrees, like that of Section 20 of PD 198, that
exempt GOCCs from COA audit. The following exchange in
37

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


Promulgated:

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


D E C I S I O N


LEONARDO-DE CASTRO, J.:
47



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


Antecedent Facts and
Background of the Case

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

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

x x x x

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

48


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

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

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

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

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

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

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

49

x x x x

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

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

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

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


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


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

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

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

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



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

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



51

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


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


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

The Issue

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




The Parties’ Respective
Arguments

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


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


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

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


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

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

x x x x

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

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



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

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

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

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

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



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


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

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


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

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

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


x x x x

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


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

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


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

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


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

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

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

In compliance with the Court’s resolution, the parties
filed their respective Comments.

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

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

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



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

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

x x x x

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


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


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

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


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


The Ruling of the Court

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

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

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


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

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

58

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


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

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

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

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

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

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

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

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

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

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

60

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

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

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

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

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

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

x x x x

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


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

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

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

Art. 44. The following are juridical persons:

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


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

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


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

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


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

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

The BSP’s Classification
Under the Administrative
Code of 1987

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

TITLE VI – EDUCATION, CULTURE AND
SPORTS

Chapter 8 – Attached Agencies

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

x x x x

(12) Boy Scouts of the Philippines;

(13) Girl Scouts of the Philippines.


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

BOOK IV

THE EXECUTIVE BRANCH

Chapter 7 – ADMINISTRATIVE
RELATIONSHIP

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

x x x x

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

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


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

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


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

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

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

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

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


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

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

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


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

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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

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



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

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

x x x x

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

x x x x

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

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


68

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

Economic Viability and
Ownership and Control
Tests Inapplicable to Public
Corporations


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


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

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

THE PRESIDENT. Commissioner Foz is
recognized.

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

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

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

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

x x x x

THE PRESIDENT. Commissioner Quesada
is recognized.

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

THE PRESIDENT. Please proceed.

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

x x x x

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

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

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

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

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

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

x x x x

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

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

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

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

x x x x

THE PRESIDENT. Commissioner Padilla is
recognized.

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

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

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

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

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


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

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

72

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

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



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

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


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

73

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


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

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

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

x x x x

MR. ESCUDERO: Mr. Chairman, there
may be a disadvantage if the Boy Scouts of
the Philippines will be required to register
with the SEC. If we are registered with the SEC,
there could be a danger of proliferation of
scout organization. Anybody can organize and
then register with the SEC. If there will be a
proliferation of this, then the organization will
lose control of the entire organization. Another
disadvantage, Mr. Chairman, anybody can file a
complaint in the SEC against the Boy Scouts of
the Philippines and the SEC may suspend the
operation or freeze the assets of the
organization and hamper the operation of the
organization. I don’t know, Mr. Chairman, how
you look at it but there could be a danger for
anybody filing a complaint against the
organization in the SEC and the SEC might
75

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

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

MR. ESCUDERO: Yes.

HON. AQUINO: Exclusive franchise of
that movement?

MR. ESCUDERO: Yes.

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


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

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

Requisites for Declaration
of Unconstitutionality Not
Met in this Case

76

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

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


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

Re: the COA’s Jurisdiction

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

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


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

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

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



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

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

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

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

MR. ESCUDERO: No, Mr. Chairman.

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

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

x x x x

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

THE CHAIRMAN: Yeah, Gentleman from
Zamboanga.

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

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

THE CHAIRMAN: Yes, gentleman.

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



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


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

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



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

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

SO ORDERED.




TERESITA J. LEONARDO-DE
CASTRO
Associate Justice



WE CONCUR:




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

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

Sports pursuant to its Charter and the Administrative Code
of 1987. It is not a privatecorporation which is required to
be owned or controlled by the government and be
economically viable to justify its existence under a special
law. The economic viability test would only apply if
thecorporation is engaged in some economic activity or
business function for the government, which is not the case
for BSP. Therefore, being a public corporation, the funds of
the BSP fall under the jurisdiction of the Commission on
Audit
EN BANC
[G.R. No. 132988. July 19, 2000]
AQUILINO Q. PIMENTEL JR., petitioner, vs. Hon.
ALEXANDER AGUIRRE in his capacity as Executive
Secretary, Hon. EMILIA BONCODIN in her capacity as
Secretary of the Department of Budget and
Management, respondents.
ROBERTO PAGDANGANAN, intervenor.
D E C I S I O N
PANGANIBAN, J.:
The Constitution vests the President with the power of
supervision, not control, over local government units
(LGUs). Such power enables him to see to it that LGUs and
their officials execute their tasks in accordance with
law. While he may issue advisories and seek their
cooperation in solving economic difficulties, he cannot
prevent them from performing their tasks and using
available resources to achieve their goals. He may not
withhold or alter any authority or power given them by the
law. Thus, the withholding of a portion of internal revenue
allotments legally due them cannot be directed by
administrative fiat.
The Case

Before us is an original Petition for Certiorari and
Prohibition seeking (1) to annul Section 1 of Administrative
Order (AO) No. 372, insofar as it requires local government
units to reduce their expenditures by 25 percent of their
authorized regular appropriations for non-personal
services; and (2) to enjoin respondents from implementing
Section 4 of the Order, which withholds a portion of their
internal revenue allotments.
On November 17, 1998, Roberto Pagdanganan, through
Counsel Alberto C. Agra, filed a Motion for
Intervention/Motion to Admit Petition for
Intervention,
[1]
attaching thereto his Petition in
Intervention
[2]
joining petitioner in the reliefs sought. At
the time, intervenor was the provincial governor of
Bulacan, national president of the League of Provinces of
81

the Philippines and chairman of the League of Leagues of
Local Governments. In a Resolution dated December 15,
1998, the Court noted said Motion and Petition.
The Facts and the Arguments

On December 27, 1997, the President of the Philippines
issued AO 372. Its full text, with emphasis on the assailed
provisions, is as follows:
"ADMINISTRATIVE ORDER NO. 372
ADOPTION OF ECONOMY MEASURES IN GOVERNMENT FOR
FY 1998
WHEREAS, the current economic difficulties brought about
by the peso depreciation requires continued prudence in
government fiscal management to maintain economic
stability and sustain the country's growth momentum;
WHEREAS, it is imperative that all government agencies
adopt cash management measures to match expenditures
with available resources;
NOW, THEREFORE, I, FIDEL V. RAMOS, President of the
Republic of the Philippines, by virtue of the powers vested
in me by the Constitution, do hereby order and direct:
SECTION 1. All government departments and agencies,
including state universities and colleges, government-
owned and controlled corporations and local governments
units will identify and implement measures in FY 1998 that
will reduce total expenditures for the year by at least 25%
of authorized regular appropriations for non-personal
services items, along the following suggested areas:
1. Continued implementation of the streamlining
policy on organization and staffing by deferring
action on the following:
a. Operationalization of new agencies;
b. Expansion of organizational units and/or creation of
positions;
c. Filling of positions; and
d. Hiring of additional/new consultants, contractual and
casual personnel, regardless of funding source.
2. Suspension of the following activities:
a. Implementation of new capital/infrastructure
projects, except those which have already
been contracted out;
b. Acquisition of new equipment and motor
vehicles;
82

c. All foreign travels of government personnel,
except those associated with scholarships and
trainings funded by grants;
d. Attendance in conferences abroad where the
cost is charged to the government except
those clearly essential to Philippine
commitments in the international field as may
be determined by the Cabinet;
e. Conduct of trainings/workshops/seminars,
except those conducted by government
training institutions and agencies in the
performance of their regular functions and
those that are funded by grants;
f. Conduct of cultural and social celebrations
and sports activities, except those associated
with the Philippine Centennial celebration and
those involving regular competitions/events;
g. Grant of honoraria, except in cases where it
constitutes the only source of compensation
from government received by the person
concerned;
h. Publications, media advertisements and
related items, except those required by law or
those already being undertaken on a regular
basis;
i. Grant of new/additional benefits to
employees, except those expressly and
specifically authorized by law; and
j. Donations, contributions, grants and gifts,
except those given by institutions to victims of
calamities.
3. Suspension of all tax expenditure subsidies to all
GOCCs and LGUs
4. Reduction in the volume of consumption of fuel,
water, office supplies, electricity and other
utilities
5. Deferment of projects that are encountering
significant implementation problems
6. Suspension of all realignment of funds and the
use of savings and reserves
SECTION 2. Agencies are given the flexibility to identify the
specific sources of cost-savings, provided the 25% minimum
savings under Section 1 is complied with.
SECTION 3. A report on the estimated savings generated
from these measures shall be submitted to the Office of the
President, through the Department of Budget and
Management, on a quarterly basis using the attached
format.
83

SECTION 4. Pending the assessment and
evaluation by the Development Budget
Coordinating Committee of the emerging fiscal
situation, the amount equivalent to 10% of the
internal revenue allotment to local government
units shall be withheld.
SECTION 5. The Development Budget Coordination
Committee shall conduct a monthly review of the
fiscal position of the National Government and if
necessary, shall recommend to the President the
imposition of additional reserves or the lifting of
previously imposed reserves.
SECTION 6. This Administrative Order shall take
effect January 1, 1998 and shall remain valid for
the entire year unless otherwise lifted.
DONE in the City of Manila, this 27
th
day of December, in
the year of our Lord, nineteen hundred and ninety-seven."
Subsequently, on December 10, 1998, President Joseph
E. Estrada issued AO 43, amending Section 4 of AO 372, by
reducing to five percent (5%) the amount of internal
revenue allotment (IRA) to be withheld from the LGUs.
Petitioner contends that the President, in issuing AO
372, was in effect exercising the power of control over
LGUs. The Constitution vests in the President, however,
only the power of generalsupervision over LGUs, consistent
with the principle of local autonomy. Petitioner further
argues that the directive to withhold ten percent (10%) of
their IRA is in contravention of Section 286 of the Local
Government Code and of Section 6, Article X of the
Constitution, providing for the automatic release to each of
these units its share in the national internal revenue.
The solicitor general, on behalf of the respondents,
claims on the other hand that AO 372 was issued to
alleviate the "economic difficulties brought about by the
peso devaluation" and constituted merely an exercise of
the President's power of supervision over LGUs. It allegedly
does not violate local fiscal autonomy, because it
merely directs local governments to identify measures that
will reduce their total expenditures for non-personal
services by at least 25 percent. Likewise, the withholding of
10 percent of the LGUs’ IRA does not violate the statutory
prohibition on the imposition of any lien or holdback on
their revenue shares, because such withholding is
"temporary in nature pending the assessment and
evaluation by the Development Coordination Committee of
the emerging fiscal situation."
The Issues

The Petition
[3]
submits the following issues for the
Court's resolution:
"A. Whether or not the president committed grave abuse of
discretion [in] ordering all LGUS to adopt a 25% cost
84

reduction program in violation of the LGU[']S fiscal
autonomy
"B. Whether or not the president committed grave
abuse of discretion in ordering the withholding of 10% of
the LGU[']S IRA"
In sum, the main issue is whether (a) Section 1 of AO
372, insofar as it "directs" LGUs to reduce their
expenditures by 25 percent; and (b) Section 4 of the same
issuance, which withholds 10 percent of their internal
revenue allotments, are valid exercises of the President's
power of general supervision over local governments.
Additionally, the Court deliberated on the question
whether petitioner had the locus standi to bring this suit,
despite respondents' failure to raise the issue.
[4]
However,
the intervention of Roberto Pagdanganan has rendered
academic any further discussion on this matter.
The Court's Ruling

The Petition is partly meritorious.
Main Issue:

Validity of AO 372

Insofar as LGUs Are Concerned

Before resolving the main issue, we deem it important
and appropriate to define certain crucial concepts: (1) the
scope of the President's power of general supervision over
local governments and (2) the extent of the local
governments' autonomy.
Scope of President's Power of Supervision Over LGUs

Section 4 of Article X of the Constitution confines the
President's power over local governments to one of general
supervision. It reads as follows:
"Sec. 4. The President of the Philippines shall exercise
general supervision over local governments. x x x"
This provision has been interpreted to exclude the
power of control. In Mondano v. Silvosa,
[5]
the Court
contrasted the President's power of supervision over local
government officials with that of his power of control over
executive officials of the national government. It was
emphasized that the two terms -- supervision and control --
differed in meaning and extent. The Court distinguished
them as follows:
"x x x In administrative law, supervision means overseeing
or the power or authority of an officer to see that
subordinate officers perform their duties. If the latter fail
or neglect to fulfill them, the former may take such action
or step as prescribed by law to make them perform their
duties. Control, on the other hand, means the power of an
officer to alter or modify or nullify or set aside what a
subordinate officer ha[s] done in the performance of his
85

duties and to substitute the judgment of the former for that
of the latter."
[6]

In Taule v. Santos,
[7]
we further stated that the Chief
Executive wielded no more authority than that of checking
whether local governments or their officials were
performing their duties as provided by the fundamental law
and by statutes. He cannot interfere with local
governments, so long as they act within the scope of their
authority. "Supervisory power, when contrasted with
control, is the power of mere oversight over an inferior
body; it does not include any restraining authority over
such body,"
[8]
we said.
In a more recent case, Drilon v. Lim,
[9]
the difference
between control and supervision was further
delineated. Officers in control lay down the rules in the
performance or accomplishment of an act. If these rules
are not followed, they may, in their discretion, order the act
undone or redone by their subordinates or even decide to
do it themselves. On the other hand, supervision does not
cover such authority. Supervising officials merely see to it
that the rules are followed, but they themselves do not lay
down such rules, nor do they have the discretion to modify
or replace them. If the rules are not observed, they may
order the work done or redone, but only to conform to such
rules. They may not prescribe their own manner of
execution of the act. They have no discretion on this
matter except to see to it that the rules are followed.
Under our present system of government, executive
power is vested in the President.
[10]
The members of the
Cabinet and other executive officials are merely alter
egos. As such, they are subject to the power of control of
the President, at whose will and behest they can be
removed from office; or their actions and decisions
changed, suspended or reversed.
[11]
In contrast, the heads
of political subdivisions are elected by the people. Their
sovereign powers emanate from the electorate, to whom
they are directly accountable. By constitutional fiat, they
are subject to the President’s supervision only, not control,
so long as their acts are exercised within the sphere of their
legitimate powers. By the same token, the President may
not withhold or alter any authority or power given them by
the Constitution and the law.
Extent of Local Autonomy

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

In Ganzon v. Court of Appeals,
[13]
we said that local
autonomy signified "a more responsive and accountable
local government structure instituted through a system of
decentralization." The grant of autonomy is intended to
"break up the monopoly of the national government over
the affairs of local governments, x x x not x x x to end the
relation of partnership and interdependence between the
86

central administration and local government units x x
x." Paradoxically, local governments are still subject to
regulation, however limited, for the purpose of enhancing
self-government.
[14]

Decentralization simply means the devolution of
national administration, not power, to local
governments. Local officials remain accountable to the
central government as the law may provide.
[15]
The
difference between decentralization of administration and
that of power was explained in detail in Limbona v.
Mangelin
[16]
as follows:
"Now, autonomy is either decentralization of
administration or decentralization of power. There is
decentralization of administration when the central
government delegates administrative powers to political
subdivisions in order to broaden the base of government
power and in the process to make local governments 'more
responsive and accountable,'
[17]
and 'ensure their fullest
development as self-reliant communities and make them
more effective partners in the pursuit of national
development and social progress.'
[18]
At the same time, it
relieves the central government of the burden of managing
local affairs and enables it to concentrate on national
concerns. The President exercises 'general
supervision'
[19]
over them, but only to 'ensure that local
affairs are administered according to law.'
[20]
He has no
control over their acts in the sense that he can substitute
their judgments with his own.
[21]

Decentralization of power, on the other hand, involves an
abdication of political power in the favor of local
government units declared to be autonomous. In that case,
the autonomous government is free to chart its own
destiny and shape its future with minimum intervention
from central authorities. According to a constitutional
author, decentralization of power amounts to 'self-
immolation,' since in that event, the autonomous
government becomes accountable not to the central
authorities but to its constituency."
[22]

Under the Philippine concept of local autonomy, the
national government has not completely relinquished all its
powers over local governments, including autonomous
regions. Only administrative powers over local affairs are
delegated to political subdivisions. The purpose of the
delegation is to make governance more directly responsive
and effective at the local levels. In turn, economic, political
and social development at the smaller political units are
expected to propel social and economic growth and
development. But to enable the country to develop as a
whole, the programs and policies effected locally must be
integrated and coordinated towards a common national
goal. Thus, policy-setting for the entire country still lies in
the President and Congress. As we stated in Magtajas v.
Pryce Properties Corp., Inc., municipal governments are still
agents of the national government.
[23]

The Nature of AO 372

87

Consistent with the foregoing jurisprudential precepts,
let us now look into the nature of AO 372. As its
preambular clauses declare, the Order was a "cash
management measure" adopted by the government "to
match expenditures with available resources," which were
presumably depleted at the time due to "economic
difficulties brought about by the peso
depreciation." Because of a looming financial crisis, the
President deemed it necessary to "direct all government
agencies, state universities and colleges, government-
owned and controlled corporations as well as local
governments to reduce their total expenditures by at least
25 percent along suggested areas mentioned in AO 372.
Under existing law, local government units, in addition
to having administrative autonomy in the exercise of their
functions, enjoy fiscal autonomy as well. Fiscal autonomy
means that local governments have the power to create
their own sources of revenue in addition to their equitable
share in the national taxes released by the national
government, as well as the power to allocate their
resources in accordance with their own priorities. It
extends to the preparation of their budgets, and local
officials in turn have to work within the constraints
thereof. They are not formulated at the national level and
imposed on local governments, whether they are relevant
to local needs and resources or not. Hence, the necessity of
a balancing of viewpoints and the harmonization of
proposals from both local and national officials,
[24]
who in
any case are partners in the attainment of national goals.
Local fiscal autonomy does not however rule out any
manner of national government intervention by way of
supervision, in order to ensure that local programs, fiscal
and otherwise, are consistent with national
goals. Significantly, the President, by constitutional fiat, is
the head of the economic and planning agency of the
government,
[25]
primarily responsible for formulating and
implementing continuing, coordinated and integrated social
and economic policies, plans and programs
[26]
for the entire
country. However, under the Constitution, the formulation
and the implementation of such policies and programs are
subject to "consultations with the appropriate public
agencies, various private sectors, and local government
units." The President cannot do so unilaterally.
Consequently, the Local Government Code provides:
[27]

"x x x [I]n the event the national government incurs an
unmanaged public sector deficit, the President of the
Philippines is hereby authorized, upon the recommendation
of [the] Secretary of Finance, Secretary of the Interior and
Local Government and Secretary of Budget and
Management, and subject to consultation with the
presiding officers of both Houses of Congress and the
presidents of the liga, to make the necessary adjustments in
the internal revenue allotment of local government units
but in no case shall the allotment be less than thirty percent
(30%) of the collection of national internal revenue taxes of
the third fiscal year preceding the current fiscal year x x x."
88

There are therefore several requisites before the
President may interfere in local fiscal matters: (1) an
unmanaged public sector deficit of the national
government; (2) consultations with the presiding officers of
the Senate and the House of Representatives and the
presidents of the various local leagues; and (3) the
corresponding recommendation of the secretaries of the
Department of Finance, Interior and Local Government, and
Budget and Management. Furthermore, any adjustment in
the allotment shall in no case be less than thirty percent
(30%) of the collection of national internal revenue taxes of
the third fiscal year preceding the current one.
Petitioner points out that respondents failed to comply
with these requisites before the issuance and the
implementation of AO 372. At the very least, they did not
even try to show that the national government was
suffering from an unmanageable public sector
deficit. Neither did they claim having conducted
consultations with the different leagues of local
governments. Without these requisites, the President has
no authority to adjust, much less to reduce, unilaterally the
LGU's internal revenue allotment.
The solicitor general insists, however, that AO 372 is
merely directory and has been issued by the President
consistent with his power of supervision over local
governments. It is intended only to advise all government
agencies and instrumentalities to undertake cost-reduction
measures that will help maintain economic stability in the
country, which is facing economic difficulties. Besides, it
does not contain any sanction in case of
noncompliance. Being merely an advisory, therefore,
Section 1 of AO 372 is well within the powers of the
President. Since it is not a mandatory imposition, the
directive cannot be characterized as an exercise of the
power of control.
While the wordings of Section 1 of AO 372 have a rather
commanding tone, and while we agree with petitioner that
the requirements of Section 284 of the Local Government
Code have not been satisfied, we are prepared to accept
the solicitor general's
assurance that the directive to "identify and implement
measures x x x that will reduce total expenditures x x x by
at least 25% of authorized regular appropriation" is merely
advisory in character, and does not constitute a mandatory
or binding order that interferes with local autonomy. The
language used, while authoritative, does not amount to a
command that emanates from a boss to a subaltern.
Rather, the provision is merely an advisory to prevail
upon local executives to recognize the need for fiscal
restraint in a period of economic difficulty. Indeed, all
concerned would do well to heed the President's call to
unity, solidarity and teamwork to help alleviate the crisis. It
is understood, however, that no legal sanction may be
imposed upon LGUs and their officials who do not follow
such advice. It is in this light that we sustain the solicitor
general's contention in regard to Section 1.
89

Withholding a Part of LGUs' IRA

Section 4 of AO 372 cannot, however, be upheld. A
basic feature of local fiscal autonomy is
the automatic release of the shares of LGUs in the national
internal revenue. This is mandated by no less than the
Constitution.
[28]
The Local Government Code
[29]
specifies
further that the release shall be made directly to the LGU
concerned within five (5) days after every quarter of the
year and "shall not be subject to any lien or holdback that
may be imposed by the national government for whatever
purpose."
[30]
As a rule, the term "shall" is a word of
command that must be given a compulsory meaning.
[31]
The
provision is, therefore, imperative.
Section 4 of AO 372, however, orders the withholding,
effective January 1, 1998, of 10 percent of the LGUs' IRA
"pending the assessment and evaluation by the
Development Budget Coordinating Committee of the
emerging fiscal situation" in the country. Such withholding
clearly contravenes the Constitution and the law. Although
temporary, it is equivalent to a holdback, which means
"something held back or withheld, often
temporarily."
[32]
Hence, the "temporary" nature of the
retention by the national government does not
matter. Any retention is prohibited.
In sum, while Section 1 of AO 372 may be upheld as an
advisory effected in times of national crisis, Section 4
thereof has no color of validity at all. The latter provision
effectively encroaches on the fiscal autonomy of local
governments. Concededly, the President was well-
intentioned in issuing his Order to withhold the LGUs’ IRA,
but the rule of law requires that even the best intentions
must be carried out within the parameters of the
Constitution and the law. Verily, laudable purposes must
be carried out by legal methods.
Refutation of Justice Kapunan's Dissent

Mr. Justice Santiago M. Kapunan dissents from our
Decision on the grounds that, allegedly, (1) the Petition is
premature; (2) AO 372 falls within the powers of the
President as chief fiscal officer; and (3) the withholding of
the LGUs’ IRA is implied in the President's authority to
adjust it in case of an unmanageable public sector deficit.
First, on prematurity. According to the Dissent, when
"the conduct has not yet occurred and the challenged
construction has not yet been adopted by the agency
charged with administering the administrative order, the
determination of the scope and constitutionality of the
executive action in advance of its immediate adverse effect
involves too remote and abstract an inquiry for the proper
exercise of judicial function."
This is a rather novel theory -- that people should await
the implementing evil to befall on them before they can
question acts that are illegal or unconstitutional. Be it
remembered that the real issue here is whether the
90

Constitution and the law are contravened by Section 4 of
AO 372, not whether they are violated by the acts
implementing it. In the unanimous en banc case Tañada v.
Angara,
[33]
this Court held that when an act of the legislative
department is seriously alleged to have infringed the
Constitution, settling the controversy becomes the duty of
this Court. By the mere enactment of the questioned law
or the approval of the challenged action, the dispute is said
to have ripened into a judicial controversy even without any
other overt act. Indeed, even a singular violation of the
Constitution and/or the law is enough to awaken judicial
duty. Said the Court:
"In seeking to nullify an act of the Philippine Senate on the
ground that it contravenes the Constitution, the petition no
doubt raises a justiciable controversy. Where an action of
the legislative branch is seriously alleged to have infringed
the Constitution, it becomes not only the right but in fact
the duty of the judiciary to settle the dispute. 'The question
thus posed is judicial rather than political. The duty (to
adjudicate) remains to assure that the supremacy of the
Constitution is upheld.'
[34]
Once a 'controversy as to the
application or interpretation of a constitutional provision is
raised before this Court x x x , it becomes a legal issue
which the Court is bound by constitutional mandate to
decide.'
[35]

x x x x x x x x x
"As this Court has repeatedly and firmly emphasized in
many cases,
[36]
it will not shirk, digress from or abandon its
sacred duty and authority to uphold the Constitution in
matters that involve grave abuse of discretion brought
before it in appropriate cases, committed by any officer,
agency, instrumentality or department of the government."
In the same vein, the Court also held in Tatad v.
Secretary of the Department of Energy:
[37]

"x x x Judicial power includes not only the duty of the
courts to settle actual controversies involving rights which
are legally demandable and enforceable, but also the duty
to determine whether or not there has been grave abuse of
discretion amounting to lack or excess of jurisdiction on the
part of any branch or instrumentality of government. The
courts, as guardians of the Constitution, have the inherent
authority to determine whether a statute enacted by the
legislature transcends the limit imposed by the
fundamental law. Where the statute violates the
Constitution, it is not only the right but the duty of the
judiciary to declare such act unconstitutional and void."
By the same token, when an act of the President, who
in our constitutional scheme is a coequal of Congress, is
seriously alleged to have infringed the Constitution and the
laws, as in the present case, settling the dispute becomes
the duty and the responsibility of the courts.
Besides, the issue that the Petition is premature has not
been raised by the parties; hence it is deemed
91

waived. Considerations of due process really prevents its
use against a party that has not been given sufficient notice
of its presentation, and thus has not been given the
opportunity to refute it.
[38]

Second, on the President's power as chief fiscal officer
of the country. Justice Kapunan posits that Section 4 of AO
372 conforms with the President's role as chief fiscal
officer, who allegedly "is clothed by law with certain
powers to ensure the observance of safeguards and
auditing requirements, as well as the legal prerequisites in
the release and use of IRAs, taking into account the
constitutional and statutory mandates."
[39]
He cites
instances when the President may lawfully intervene in the
fiscal affairs of LGUs.
Precisely, such powers referred to in the Dissent have
specifically been authorized by law and have not been
challenged as violative of the Constitution. On the other
hand, Section 4 of AO 372, as explained earlier, contravenes
explicit provisions of the Local Government Code (LGC) and
the Constitution. In other words, the acts alluded to in the
Dissent are indeed authorized by law; but, quite the
opposite, Section 4 of AO 372 is bereft of any legal or
constitutional basis.
Third, on the President's authority to adjust the IRA of
LGUs in case of an unmanageable public sector deficit. It
must be emphasized that in striking down Section 4 of AO
372, this Court is not ruling out any form of reduction in the
IRAs of LGUs. Indeed, as the President may make necessary
adjustments in case of an unmanageable public sector
deficit, as stated in the main part of this Decision, and in
line with Section 284 of the LGC, which Justice Kapunan
cites. He, however, merely glances over a specific
requirement in the same provision -- that such reduction is
subject to consultation with the presiding officers of both
Houses of Congress and, more importantly, with the
presidents of the leagues of local governments.
Notably, Justice Kapunan recognizes the need for
"interaction between the national government and the
LGUs at the planning level," in order to ensure that "local
development plans x x x hew to national policies and
standards." The problem is that no such interaction or
consultation was ever held prior to the issuance of AO
372. This is why the petitioner and the intervenor (who
was a provincial governor and at the same time president of
the League of Provinces of the Philippines and chairman of
the League of Leagues of Local Governments) have
protested and instituted this action. Significantly,
respondents do not deny the lack of consultation.
In addition, Justice Kapunan cites Section 287
[40]
of the
LGC as impliedly authorizing the President to withhold the
IRA of an LGU, pending its compliance with certain
requirements. Even a cursory reading of the provision
reveals that it is totally inapplicable to the issue at bar. It
directs LGUs to appropriate in their annual budgets 20
percent of their respective IRAs for development
projects. It speaks of no positive power granted the
President to priorly withhold any amount. Not at all.
92

WHEREFORE, the Petition is GRANTED. Respondents
and their successors are hereby
permanently PROHIBITED from implementing
Administrative Order Nos. 372 and 43, respectively dated
December 27, 1997 and December 10, 1998, insofar as local
government units are concerned.
SO ORDERED.
Davide, Jr., C.J., Bellosillo, Melo, Puno, Vitug, Mendoza,
Quisumbing, Pardo, Buena, Gonzaga-Reyes, and De Leon,
Jr., JJ., concur.
Kapunan, J., see dissenting opinion.
Purisima, and Ynares-Santiago, JJ., join J. Kapunan in his
dissenting opinion.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC

G.R. No. L-31711 September 30, 1971
ANTONIO J. VILLEGAS as Mayor of the City of Manila and
MANUEL D. LAPID, petitioners-appellants,
vs.
ABELARDO SUBIDO as Civil Service Commissioner,
EDUARDO Z. ROMUALDEZ as Secretary of Finance, JOSE R.
GLORIA as Acting Asst. City Treasurer of Manila, and HON.
CONRADO M. VASQUEZ as Presiding Judge of Branch V,
Court of First Instance of Manila, respondents-appellees.
Gregorio A. Ejercito and Restituto R. Villanueva for
petitioners-appellants.
Office of the Solicitor General Felix Q. Antonio, Acting
Assistant Solicitor General Hector C. Fule and Solicitor
Santiago M. Kapunan for respondents-appellees.

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

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

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

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

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

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

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

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

Dizon and Teehankee, JJ., took no part.


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

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

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

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

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

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

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

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

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

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

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

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

Now, autonomy is either decentralization of administration
or decentralization of power. There is decentralization of
administration when the central government delegates
administrative powers to political subdivisions in order to
broaden the base of government power and in the process
to make local governments "more responsive and
accountable,"
23
"and ensure their fullest development as
self-reliant communities and make them more effective
partners in the pursuit of national development and social
progress."
24
At the same time, it relieves the central
government of the burden of managing local affairs and
enables it to concentrate on national concerns. The
President exercises "general supervision"
25
over them, but
only to "ensure that local affairs are administered according
to law."
26
He has no control over their acts in the sense
that he can substitute their judgments with his own.
27

Decentralization of power, on the other hand, involves an
abdication of political power in the favor of local
governments units declare to be autonomous . In that case,
the autonomous government is free to chart its own
destiny and shape its future with minimum intervention
from central authorities. According to a constitutional
author, decentralization of power amounts to "self-
immolation," since in that event, the autonomous
government becomes accountable not to the central
authorities but to its constituency.
28

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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



Separate Opinions

Republic of the Philippines
SUPREME COURT
Manila
EN BANC

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

February 10, 1997 of the Regional Trial Court of San Pedro,
Laguna, Branch 93, enjoining petitioners from
implementing or enforcing Kapasiyahan Bilang 508, Taon
1995, of the Sangguniang Panlalawigan of Laguna and its
subsequent Order
[2]
dated April 21, 1997 denying
petitioners’ motion for reconsideration.
On December 29, 1995, respondent Tony Calvento was
appointed agent by the Philippine Charity Sweepstakes
Office (PCSO) to install Terminal OM 20 for the operation of
lotto. He asked Mayor Calixto Cataquiz, Mayor of San
Pedro, Laguna, for a 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 passed by theSangguniang Panlalawigan of
Laguna entitled Kapasiyahan Blg. 508, T. 1995 which was
issued on September 18, 1995. The ordinance reads:
ISANG KAPASIYAHAN TINUTUTULAN ANG MGA “ILLEGAL
GAMBLING” LALO NA ANG LOTTO SA LALAWIGAN NG
LAGUNA
SAPAGKA’T, ang sugal dito sa lalawigan ng Laguna ay
talamak na;
SAPAGKA’T, ang sugal ay nagdudulot ng masasamang
impluwensiya lalo’t higit sa mga kabataan;
KUNG KAYA’T DAHIL DITO, at sa mungkahi nina Kgg. Kgd.
Juan M. Unico at Kgg. Kgd. Gat-Ala A. Alatiit,
pinangalawahan ni Kgg. Kgd. Meliton C. Larano at buong
pagkakaisang sinangayunan ng lahat ng dumalo sa pulong;
IPINASIYA, na tutulan gaya ng dito ay mahigpit na
TINUTUTULAN ang ano mang uri ng sugal dito sa lalawigan
ng Laguna lalo’t higit ang Lotto;
IPINASIYA PA RIN na hilingin tulad ng dito ay hinihiling sa
Panlalawigang pinuno ng Philippine National Police (PNP)
Col. [illegible] na mahigpit na pag-ibayuhin ang pagsugpo
sa lahat ng uri ng illegal na sugal sa buong lalawigan ng
Laguna lalo na ang “Jueteng”.
[3]

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

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

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

On May 23, 1997, petitioners filed this petition alleging
that the following errors were committed by the
respondent trial court:
I
THE TRIAL COURT ERRED IN ENJOINING THE PETITIONERS
FROM IMPLEMENTING KAPASIYAHAN BLG. 508, T. 1995 OF
THE SANGGUNIANG PANLALAWIGAN OF LAGUNA
PROHIBITING THE OPERATION OF THE LOTTO IN THE
PROVINCE OF LAGUNA.
II
THE TRIAL COURT FAILED TO APPRECIATE THE ARGUMENT
POSITED BY THE PETITIONERS THAT BEFORE ANY
GOVERNMENT PROJECT OR PROGRAM MAY BE
IMPLEMENTED BY THE NATIONAL AGENCIES OR OFFICES,
PRIOR CONSULTATION AND APPROVAL BY THE LOCAL
GOVERNMENT UNITS CONCERNED AND OTHER
CONCERNED SECTORS IS REQUIRED.
Petitioners contend that the assailed resolution is a
valid policy declaration of the Provincial Government of
Laguna of its vehement objection to the operation of lotto
and all forms of gambling. It is likewise a valid exercise of
the provincial government’s police power under the
General Welfare Clause of Republic Act 7160, otherwise
known as the Local Government Code of 1991.
[6]
They also
maintain that respondent’s lotto operation is illegal
because no prior consultations and approval by the local
government were sought before it was implemented
contrary to the express provisions of Sections 2 (c) and 27
of R.A. 7160.
[7]

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

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

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

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

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

Municipal governments are only agents of the national
government. Local councils exercise only delegated
legislative powers conferred upon them by Congress as the
national lawmaking body. The delegate cannot be superior
to the principal or exercise powers higher than those of the
latter. It is a heresy to suggest that the local government
units can undo the acts of Congress, from which they have
derived their power in the first place, and negate by mere
ordinance the mandate of the statute.
139

Municipal corporations owe their origin to, and derive their
powers and rights wholly from the legislature. It breathes
into them the breath of life, without which they cannot
exist. As it creates, so it may destroy. As it may destroy, it
may abridge and control. Unless there is some
constitutional limitation on the right, the legislature might,
by a single act, and if we can suppose it capable of so great
a folly and so great a wrong, sweep from existence all of the
municipal corporations in the state, and the corporation
could not prevent it. We know of no limitation on the right
so far as the corporation themselves are concerned. They
are, so to phrase it, the mere tenants at will of the
legislature (citing Clinton vs. Ceder Rapids, etc. Railroad Co.,
24 Iowa 455).
Nothing in the present constitutional provision
enhancing local autonomy dictates a different conclusion.
The basic relationship between the national legislature and
the local government units has not been enfeebled by the
new provisions in the Constitution strengthening the policy
of local autonomy. Without meaning to detract from that
policy, we here confirm that Congress retains control of the
local government units although in significantly reduced
degree now than under our previous Constitutions. The
power to create still includes the power to destroy. The
power to grant still includes the power to withhold or
recall. True, there are certain notable innovations in the
Constitution, like the direct conferment on the local
government units of the power to tax (citing Art. X, Sec. 5,
Constitution), which cannot now be withdrawn by mere
statute. By and large, however, the national legislature is
still the principal of the local government units, which
cannot defy its will or modify or violate it.
[15]

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

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

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

part. There is no indication in the letter of Mayor Cataquiz
that this was one of the reasons for his refusal to issue a
permit. That refusal was predicated solely but erroneously
on the provisions of Kapasiyahan Blg. 508, Taon 1995, of
the Sangguniang Panlalawigan of Laguna.
In sum, we find no reversible error in the RTC decision
enjoining Mayor Cataquiz from enforcing or implementing
the Kapasiyahan Blg. 508, T. 1995, of the Sangguniang
Panlalawigan of Laguna. That resolution expresses merely
a policy statement of the Laguna provincial board. It
possesses no binding legal force nor requires any act of
implementation. It provides no sufficient legal basis for
respondent mayor’s refusal to issue the permit sought by
private respondent in connection with a legitimate business
activity authorized by a law passed by Congress.
WHEREFORE, the petition is DENIED for lack of
merit. The Order of the Regional Trial Court of San Pedro,
Laguna enjoining the petitioners from implementing or
enforcing Resolution or Kapasiyahan Blg. 508, T. 1995, of
the Provincial Board of Laguna is hereby AFFIRMED. No
costs.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Buena, and De Leon,
Jr., JJ., concur.



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

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

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

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

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

144

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


D E C I S I O N


156

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

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

157

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

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

district to be known as the First Engineering District
of the Province of Lanao del Sur.
SEC. 2. The office of the engineering district hereby
created shall be established in Marawi City, Province
of Lanao del Sur.
SEC. 3. The amount necessary to carry out the
provisions of this Act shall be included in the General
Appropriations Act of the year following its
enactment into law. Thereafter, such sums as may be
necessary for the maintenance and continued
operation of the engineering district office shall be
included in the annual General Appropriations Act.
SEC. 4. This Act shall take effect upon its approval.
(Emphasis supplied)
Congress later passed Republic Act No. 9054 (R.A. 9054),
entitled "An Act to Strengthen and Expand the Organic Act
for the Autonomous Region in Muslim Mindanao,
Amending for the Purpose Republic Act No. 6734, entitled
An Act Providing for the Autonomous Region in Muslim
Mindanao, as Amended." Like its forerunner, R.A. 9054
contains detailed provisions on the powers of the Regional
Government and the retained areas of governance of the
National Government.
11

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

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

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

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

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

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

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

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

Jurisdictional Considerations
First, the jurisdictional predicates.
160

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

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

In seeking to nullify acts of the legislature and the executive
department on the ground that they contravene the
Constitution, the petition no doubt raises a justiciable
controversy. As held in Tañada v. Angara,
27
"where an
action of the legislative branch is seriously alleged to have
infringed the Constitution, it becomes not only the right but
in fact the duty of the judiciary to settle the dispute." But in
deciding to take jurisdiction over this petition questioning
acts of the political departments of government, the Court
will not review the wisdom, merits, or propriety thereof,
but will strike them down only on either of two grounds: (1)
unconstitutionality or illegality and (2) grave abuse of
discretion.
28

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

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

A party challenging the constitutionality of a law, act, or
statute must show "not only that the law is invalid, but also
that he has sustained or is in immediate, or imminent
danger of sustaining some direct injury as a result of its
enforcement, and not merely that he suffers thereby in
some indefinite way." He must show that he has been, or is
about to be, denied some right or privilege to which he is
lawfully entitled, or that he is about to be subjected to
some burdens or penalties by reason of the statute
complained of.
31

161

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

A necessary prerequisite of autonomy is decentralization.
63

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

168

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

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

This Court elucidated the concept of autonomy in Limbona
v. Mangelin,
69
thus:
Autonomy is either decentralization of administration
or decentralization of power. There is
decentralization of administration when the central
government delegates administrative powers to
political subdivisions in order to broaden the base of
government power and in the process to make local
governments "more responsive and accountable,"
and "ensure their fullest development as self-reliant
communities and make them more effective partners
in the pursuit of national development and social
progress." At the same time, it relieves the central
government of the burden of managing local affairs
and enables it to concentrate on national concerns.
The President exercises "general supervision" over
them, but only to "ensure that local affairs are
administered according to law." He has no control
over their acts in the sense that he can substitute
their judgments with his own.
Decentralization of power, on the other hand,
involves an abdication of political power in the favor
of local government units declared to be
autonomous. In that case, the autonomous
government is free to chart its own destiny and
shape its future with minimum intervention from
central authorities. According to a constitutional
author, decentralization of power amounts to "self-
immolation," since in that event the autonomous
government becomes accountable not to the central
authorities but to its constituency.
In the case, the Court reviewed the expulsion of a member
from the Sangguniang Pampook, Autonomous Region. It
held that the Court may assume jurisdiction as the local
government unit, organized before 1987, enjoys autonomy
of the former category. It refused, though, to resolve
whether the grant of autonomy to Muslim Mindanao under
the 1987 Constitution involves, truly, an effort to
decentralize power rather than mere administration.
70

169

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

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

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

The diminution of Congress' powers over autonomous
regions was confirmed in Ganzon v. Court of
Appeals,
79
wherein this Court held that "the omission (of "as
may be provided by law") signifies nothing more than to
underscore local governments' autonomy from Congress
and to break Congress' 'control' over local government
affairs."
This is true to subjects over which autonomous regions
have powers, as specified in Sections 18 and 20, Article X of
the 1987 Constitution. Expressly not included therein are
powers over certain areas. Worthy of note is that the area
of public works is not excluded and neither is it reserved for
the National Government. The key provisions read, thus:
SEC. 18. The Congress shall enact an organic act for
each autonomous region with the assistance and
participation of the regional consultative commission
composed of representatives appointed by the
President from a list of nominees from multisectoral
bodies. The organic act shall define the basic
structure of government for the region consisting of
the executive department and legislative assembly,
both of which shall be elective and representative of
the constituent political units. The organic acts shall
170

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Coincidentally, respondents justify their exercise of
regulatory power over petitioner’s CATV operation under
the general welfare clause of the Local Government Code of
1983. The Court of Appeals sustained their stance.
There is no dispute that respondent Sangguniang
Panlungsod, like other local legislative bodies, has been
empowered to enact ordinances and approve resolutions
under the general welfare clause of B.P. Blg. 337, the Local
Government Code of 1983. That it continues to posses such
power is clear under the new law, R.A. No. 7160 (the Local
Government Code of 1991). Section 16 thereof provides:
“SECTION 16. General Welfare. – Every local government
unit shall exercise the powers expressly granted, those
necessarily implied therefrom, as well as powers necessary,
appropriate, or incidental for its efficient and effective
governance, and those which are essential to the
promotion of the general welfare. Within their respective
territorial jurisdictions, local government units shall ensure
and support, among others, the preservation and
enrichment of culture, promote health and safety, enhance
the right of the people to a balanced ecology, encourage
and support the development of appropriate and self-
reliant, scientific and technological capabilities, improve
189

public morals, enhance economic prosperity and social
justice, promote full employment among their residents,
maintain peace and order, and preserve the comfort and
convenience of their inhabitants.”
In addition, Section 458 of the same Code specifically
mandates:
“SECTION 458. Powers, Duties, Functions and
Compensation. — (a) The Sangguniang Panlungsod, as the
legislative body of the city, shall enact ordinances, approve
resolutions and appropriate funds for the general welfare
of the city and its inhabitants pursuant to Section 16 of
this Code and in the proper exercise of the corporate
powers of the city as provided for under Section 22 of this
Code, x x x:”
The general welfare clause is the delegation in
statutory form of the police power of the State to
LGUs.
[28]
Through this, LGUs may prescribe regulations to
protect the lives, health, and property of their constituents
and maintain peace and order within their respective
territorial jurisdictions. Accordingly, we have upheld
enactments providing, for instance, the regulation of
gambling,
[29]
the occupation of rig drivers,
[30]
the installation
and operation of pinball machines,
[31]
the maintenance and
operation of cockpits,
[32]
the exhumation and transfer of
corpses from public burial grounds,
[33]
and the operation of
hotels, motels, and lodging houses
[34]
as valid exercises by
local legislatures of the police power under the general
welfare clause.
Like any other enterprise, CATV operation maybe
regulated by LGUs under the general welfare clause. This is
primarily because the CATV system commits the
indiscretion of crossing public properties. (It uses public
properties in order to reach subscribers.) The physical
realities of constructing CATV system – the use of public
streets, rights of ways, the founding of structures, and the
parceling of large regions – allow an LGU a certain degree
of regulation over CATV operators.
[35]
This is the same
regulation that it exercises over all private enterprises
within its territory.
But, while we recognize the LGUs’ power under the
general welfare clause, we cannot sustain Resolution No.
210. We are convinced that respondents strayed from the
well recognized limits of its power. The flaws in Resolution
No. 210 are: (1) it violates the mandate of existing laws and
(2) it violates the State’s deregulation policy over the CATV
industry.
I.
Resolution No. 210 is an enactment of an LGU acting
only as agent of the national legislature. Necessarily, its act
must reflect and conform to the will of its principal. To test
its validity, we must apply the particular requisites of a valid
ordinance as laid down by the accepted principles
governing municipal corporations.
[36]

190

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

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

Local councils exercise only delegated legislative powers
conferred on them by Congress as the national lawmaking
body. The delegate cannot be superior to the principal or
exercise powers higher than those of the latter. It is a
heresy to suggest that the local government units can undo
the acts of Congress, from which they have derived their
power in the first place, and negate by mere ordinance the
mandate of the statute.
‘Municipal corporations owe their origin to, and derive their
powers and rights wholly from the legislature. It breathes
into them the breath of life, without which they cannot
exist. As it creates, so it may destroy. As it may destroy, it
may abridge and control. Unless there is some
constitutional limitation on the right, the legislature might,
by a single act, and if we can suppose it capable of so great
a folly and so great a wrong, sweep from existence all of the
municipal corporations in the State, and the corporation
could not prevent it. We know of no limitation on the right
so far as to the corporation themselves are concerned. They
are, so to phrase it, the mere tenants at will of the
legislature.’
This basic relationship between the national legislature and
the local government units has not been enfeebled by the
new provisions in the Constitution strengthening the policy
of local autonomy. Without meaning to detract from that
policy, we here confirm that Congress retains control of the
local government units although in significantly reduced
degree now than under our previous Constitutions. The
power to create still includes the power to destroy. The
power to grant still includes the power to withhold or
recall. True, there are certain notable innovations in the
Constitution, like the direct conferment on the local
government units of the power to tax, which cannot now
be withdrawn by mere statute. By and large, however, the
national legislature is still the principal of the local
government units, which cannot defy its will or modify or
violate it.”
Respondents have an ingenious retort against the
above disquisition. Their theory is that the regulatory
power of the LGUs is granted by R.A. No. 7160 (the Local
Government Code of 1991), a handiwork of the national
lawmaking authority. They contend that R.A. No. 7160
repealed E.O. No. 205 (issued by President Aquino).
Respondents’ argument espouses a bad precedent. To say
that LGUs exercise the same regulatory power over matters
which are peculiarly within the NTC’s competence is to
promote a scenario of LGUs and the NTC locked in constant
clash over the appropriate regulatory measure on the same
subject matter. LGUs must recognize that technical
matters concerning CATV operation are within the
exclusive regulatory power of the NTC.
At any rate, we find no basis to conclude that R.A. No.
7160 repealed E.O. No. 205, either expressly or impliedly. It
is noteworthy that R.A. No. 7160 repealing clause, which
painstakingly mentions the specific laws or the parts
192

thereof which are repealed, does not include E.O. No. 205,
thus:
“SECTION 534. Repealing Clause. — (a) Batas Pambansa
Blg. 337, otherwise known as the Local Government Code."
Executive Order No. 112 (1987), and Executive Order No.
319 (1988) are hereby repealed.
(b) Presidential Decree Nos. 684, 1191, 1508 and such
other decrees, orders, instructions, memoranda and
issuances related to or concerning the barangay are hereby
repealed.
(c) The provisions of Sections 2, 3, and 4 of Republic Act
No. 1939 regarding hospital fund; Section 3, a (3) and b (2)
of Republic Act. No. 5447 regarding the Special Education
Fund; Presidential Decree No. 144 as amended by
Presidential Decree Nos. 559 and 1741; Presidential Decree
No. 231 as amended; Presidential Decree No. 436 as
amended by Presidential Decree No. 558; and Presidential
Decree Nos. 381, 436, 464, 477, 526, 632, 752, and 1136
are hereby repealed and rendered of no force and effect.
(d) Presidential Decree No. 1594 is hereby repealed
insofar as it governs locally-funded projects.
(e) The following provisions are hereby repealed or
amended insofar as they are inconsistent with the
provisions of this Code: Sections 2, 16, and 29 of
Presidential Decree No. 704; Section 12 of Presidential
Decree No. 87, as amended; Sections 52, 53, 66, 67, 68, 69,
70, 71, 72, 73, and 74 of Presidential Decree No. 463, as
amended; and Section 16 of Presidential Decree No. 972, as
amended, and
(f) All general and special laws, acts, city charters,
decrees, executive orders, proclamations and
administrative regulations, or part or parts thereof which
are inconsistent with any of the provisions of this Code are
hereby repealed or modified accordingly.”
Neither is there an indication that E.O. No. 205 was
impliedly repealed by R.A. No. 7160. It is a settled rule that
implied repeals are not lightly presumed in the absence of a
clear and unmistakable showing of such intentions.
In Mecano vs. Commission on Audit,
[46]
we ruled:
“Repeal by implication proceeds on the premise that where
a statute of later date clearly reveals an intention on the
part of the legislature to abrogate a prior act on the subject,
that intention must be given effect. Hence, before there
can be a repeal, there must be a clear showing on the part
of the lawmaker that the intent in enacting the new law
was to abrogate the old one. The intention to repeal must
be clear and manifest; otherwise, at least, as a general rule,
the later act is to be construed as a continuation of, and not
a substitute for, the first act and will continue so far as the
two acts are the same from the time of the first
enactment.”
193

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

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

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

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

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



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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

injunction. After all, any future operation of a cockpit by
Tan in Daanbantayan, assuming all other requisites are
complied with, would be validly authorized should
Ordinance No. 7 subsist.
So it seems, for all intents and purposes, that the Court
of Appeals did deem Ordinance No. 7 a nullity. Through
such resort, did the appellate court in effect allow a
collateral attack on the validity of an ordinance through an
action for damages, as the petitioners argue?
The initiatory Complaint filed by Pereña deserves close
scrutiny. Immediately, it can be seen that it is not only an
action for damages, but also one for injunction. An action
for injunction will require judicial determination whether
there exists a right in esse which is to be protected, and if
there is an act constituting a violation of such right against
which injunction is sought. At the same time, the mere fact
of injury alone does not give rise to a right to recover
damages. To warrant the recovery of damages, there must
be both a right of action for a legal wrong inflicted by the
defendant, and damage resulting to the plaintiff therefrom.
In other words, in order that the law will give redress for an
act causing damage, there must be damnum et injuria¾that
act must be not only hurtful, but wrongful.
[34]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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


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


DEPARTMENT OF ENERGY,
208

Movant-Intervenor. Promulgated:

February 13,
2008

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


R E S O L U T I O N

CORONA, J.:


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

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


The facts are restated briefly as follows:

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

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

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

xxx xxx xxx

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

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

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

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


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

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


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

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




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

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


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


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


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


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

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

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

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

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

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


HISTORY OF THE
PANDACAN
OIL TERMINALS

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

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


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

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


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


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

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


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

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

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


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

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

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


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

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


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

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

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


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


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

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


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

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


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



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

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

constitutionality of Ordinance No. 8027 instead of
waiting for the RTC’s decision.

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




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


Under Rule 65, Section 3
[59]
of the Rules of Court, a
petition for mandamus may be filed when any tribunal,
corporation, board, officer or person unlawfully neglects
the performance of an act which the law specifically enjoins
as a duty resulting from an office, trust or
station. According to the oil companies, respondent did not
unlawfully fail or neglect to enforce Ordinance No. 8027
because he was lawfully prevented from doing so by virtue
of the injunctive writs and status quo order issued by the
RTC of Manila, Branches 39 and 42.

220

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


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

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

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

221

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

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

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

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

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

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


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

222

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

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

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

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

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

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

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



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

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

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


X — x — x

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


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

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


X — x — x

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


Xxx xxx
xxx

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


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

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



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


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

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

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

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

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


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

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

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

227


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


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


THE RULE
ON JUDICIAL
ADMISSIONS
IS NOT
APPLICABLE
AGAINST
RESPONDEN
T

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

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

228


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

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

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

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

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

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


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

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

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

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


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

230

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

xxx xxx xxx

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

xxx xxx xxx

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


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

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

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

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

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

xxx xxx xxx


6. Pandacan Oil Depot Area

xxx xxx xxx


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

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

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

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

We agree with respondent.

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


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

233

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


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

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



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

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

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


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

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



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

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

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


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


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



236

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

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

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


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

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


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

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




ORDINA
NCE NO.
8027 IS
CONSTIT
UTIONAL
AND
VALID

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

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



THE CITY OF
MANILA HAS
THE POWER
238

TO ENACT
ORDINANCE
NO. 8027


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


Section 16. General Welfare. ― Every local
government unit shall exercise the powers
expressly granted, those necessarily implied
therefrom, as well as powers necessary,
appropriate, or incidental for its efficient and
effective governance, and those which are
essential to the promotion of the general
welfare. Within their respective territorial
jurisdictions, local government units shall
ensure and support, among other things, the
preservation and enrichment of culture,
promote health and safety, enhance the right
of the people to a balanced ecology,
encourage and support the development of
appropriate and self-reliant scientific and
technological capabilities, improve public
morals, enhance economic prosperity and
social justice, promote full employment among
their residents, maintain peace and order, and
preserve the comfort and convenience of their
inhabitants.



239

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

Section. 458. – Powers, Duties, Functions and
Compensation. – (a) The sangguniang
panglungsod, as the legislative branch of the
city, shall enact ordinances, approve
resolutions and appropriate funds for the
general welfare of the city and its inhabitants
pursuant to Section 16 of this Code xxxx


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

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

xxx xxx
xxx

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



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





THE
ENACTMENT OF
ORDINANCE NO.
8027 IS A
240

LEGITIMATE
EXERCISE OF
POLICE POWER


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


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

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

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


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

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

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



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

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


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

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

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

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

Xxx xxx
xxx

243

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


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


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

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

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

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

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



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

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



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

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

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


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



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


ORDINANCE NO. 8027 IS
NOT
PARTIAL AND
DISCRIMINATORY
246



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


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


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

247

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


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


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


248

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

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

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


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


The rationale of the requirement that the
ordinances should not contravene a statute is
obvious. Municipal governments are only agents
of the national government. Local councils
exercise only delegated legislative powers
conferred on them by Congress as the national
lawmaking body. The delegate cannot be
superior to the principal or exercise powers
higher than those of the latter. It is a heresy to
249

suggest that the local government units can
undo the acts of Congress, from which they
have derived their power in the first place, and
negate by mere ordinance the mandate of the
statute.

“Municipal corporations owe their origin
to, and derive their powers and rights wholly
from the legislature. It breathes into them the
breath of life, without which they cannot exist.
As it creates, so it may destroy. As it may
destroy, it may abridge and control. Unless
there is some constitutional limitation on the
right, the legislature might, by a single act, and
if we can suppose it capable of so great a folly
and so great a wrong, sweep from existence all
of the municipal corporations in the State, and
the corporation could not prevent it. We know
of no limitation on the right so far as to the
corporation themselves are concerned. They
are, so to phrase it, the mere tenants at will of
the legislature.”

This basic relationship between the
national legislature and the local government
units has not been enfeebled by the new
provisions in the Constitution strengthening the
policy of local autonomy. Without meaning to
detract from that policy, we here confirm that
Congress retains control of the local
government units although in significantly
reduced degree now than under our previous
Constitutions. The power to create still includes
the power to destroy. The power to grant still
includes the power to withhold or recall. True,
there are certain notable innovations in the
Constitution, like the direct conferment on the
local government units of the power to tax,
which cannot now be withdrawn by mere
statute. By and large, however, the national
legislature is still the principal of the local
government units, which cannot defy its will or
modify or violate it.
[155]



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


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

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




Section 25. The State shall ensure the
autonomy of local governments.


An entire article (Article X) of the Constitution has been
devoted to guaranteeing and promoting the autonomy of
LGUs. The LGC was specially promulgated by Congress to
ensure the autonomy of local governments as mandated by
the Constitution:

Sec. 2. Declaration of Policy. ― (a) It is hereby
declared the policy of the State that the
territorial and political subdivisions of the
State shall enjoy genuine and meaningful local
autonomy to enable them to attain their fullest
development as self-reliant communities and
make them more effective partners in the
attainment of national goals. Toward this end,
the State shall provide for a more responsive
251

and accountable local government structure
instituted through a system of decentralization
whereby local government units shall be given
more powers, authority, responsibilities, and
resources. The process of decentralization shall
proceed from the National Government to the
local government units. (Emphasis supplied)



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

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

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

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

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

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

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

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

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

253

(a) Any provision on a power of a local
government unit shall be liberally interpreted
in its favor, and in case of doubt, any question
thereon shall be resolved in favor of devolution
of powers and of the lower local government
unit. Any fair and reasonable doubt as to the
existence of the power shall be interpreted in
favor of the local government unit concerned;

xxx xxx xxx

(g) IThe general welfare provisions in this
Code shall be liberally interpreted to give
more powers to local government units in
accelerating economic development and
upgrading the quality of life for the people
in the community xxxx


The least we can do to ensure genuine and
meaningful local autonomy is not to force an interpretation
that negates powers explicitly granted to local
governments. To rule against the power of LGUs to
reclassify areas within their jurisdiction will subvert the
principle of local autonomy guaranteed by the
Constitution.
[160]
As we have noted in earlier decisions, our
national officials should not only comply with the
constitutional provisions on local autonomy but should also
appreciate the spirit and liberty upon which these
provisions are based.
[161]




THE DOE
CANNOT
EXERCISE THE
POWER OF
CONTROL OVER
LGUS


254

Another reason that militates against the DOE’s
assertions is that Section 4 of Article X of the Constitution
confines the President’s power over LGUs to one of general
supervision:

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

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

[Supervision] means overseeing or the power or
authority of an officer to see that subordinate
officers perform their duties. If the latter fail or
neglect to fulfill them, the former may take such
action or step as prescribed by law to make
them perform their duties. Control, on the other
hand, means the power of an officer to alter or
modify or nullify or set aside what a subordinate
officer ha[s] done in the performance of his
duties and to substitute the judgment of the
former for that of the latter.
[163]


Supervisory power, when contrasted with control, is
the power of mere oversight over an inferior body; it does
not include any restraining authority over such body.
[164]
It
does not allow the supervisor to annul the acts of the
subordinate.
[165]
Here, what the DOE seeks to do is to set
aside an ordinance enacted by local officials, a power that
not even its principal, the President, has. This is because:

Under our present system of
government, executive power is vested in the
President. The members of the Cabinet and
other executive officials are merely alter egos.
As such, they are subject to the power of
control of the President, at whose will and
behest they can be removed from office; or
their actions and decisions changed, suspended
or reversed. In contrast, the heads of political
subdivisions are elected by the people. Their
255

sovereign powers emanate from the electorate,
to whom they are directly accountable. By
constitutional fiat, they are subject to the
President’s supervision only, not control, so
long as their acts are exercised within the
sphere of their legitimate powers. By the same
token, the President may not withhold or alter
any authority or power given them by the
Constitution and the law.
[166]

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



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


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



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

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

xxx xxx
xxx

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

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

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

257

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

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

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


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

SECTION 1. Plan formulation or updating. ―

xxx xxx
xxx

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

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

Xxx xxx
xxx


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

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

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


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

The argument is flawed.

259

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

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





CONCLUSION

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

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


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

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

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

Xxx xxx xxx

261

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



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


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

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

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

A WARNING TO PETITIONERS’ COUNSEL

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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

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

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

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




DECISION

ABAD, J.:


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

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

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


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


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

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

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

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


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

The Issues Presented

The issues presented in this case are:

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

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

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

The Rulings of the Court

We dismiss the petition.

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

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

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

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

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

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

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

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


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

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

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

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

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


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

exercise of the “calling out” power had no factual basis.
They simply alleged that, since not all areas under the
ARMM were placed under a state of emergency, it follows
that the take over of the entire ARMM by the DILG
Secretary had no basis too.
[21]


But, apart from the fact that there was no such take
over to begin with, the OSG also clearly explained the
factual bases for the President’s decision to call out the
armed forces, as follows:

The Ampatuan and Mangudadatu clans
are prominent families engaged in the
political control of Maguindanao. It is also a
known fact that both families have an arsenal
of armed followers who hold elective
positions in various parts of the ARMM and
the rest of Mindanao.

Considering the fact that the principal
victims of the brutal bloodshed are members
of the Mangudadatu family and the main
perpetrators of the brutal killings are
members and followers of the Ampatuan
family, both the military and police had to
prepare for and prevent reported retaliatory
actions from the Mangudadatu clan and
additional offensive measures from the
Ampatuan clan.

x x x x

The Ampatuan forces are estimated to
be approximately two thousand four hundred
(2,400) persons, equipped with about two
thousand (2,000) firearms, about four
hundred (400) of which have been accounted
for. x x x

As for the Mangudadatus, they have an
estimated one thousand eight hundred
(1,800) personnel, with about two hundred
(200) firearms. x x x

Apart from their own personal forces,
both clans have Special Civilian Auxiliary Army
271

(SCAA) personnel who support them: about
five hundred (500) for the Ampatuans and
three hundred (300) for the Mangudadatus.

What could be worse than the armed
clash of two warring clans and their armed
supporters, especially in light of intelligence
reports on the potential involvement of rebel
armed groups (RAGs).

One RAG was reported to have planned
an attack on the forces of Datu Andal
Ampatuan, Sr. to show support and sympathy
for the victims. The said attack shall worsen
the age-old territorial dispute between the
said RAG and the Ampatuan family.

x x x x

On the other hand, RAG faction which is
based in Sultan Kudarat was reported to have
received three million pesos (P3,000,000.00)
from Datu Andal Ampatuan, Sr. for the
procurement of ammunition. The said faction
is a force to reckon with because the group is
well capable of launching a series of violent
activities to divert the attention of the people
and the authorities away from the multiple
murder case. x x x

In addition, two other factions of a RAG
are likely to support the Mangudadatu family.
The Cotabato-based faction has the strength
of about five hundred (500) persons and three
hundred seventy-two (372) firearms while the
Sultan Kudarat-based faction has the strength
of about four hundred (400) persons and
three hundred (300) firearms and was
reported to be moving towards Maguindanao
to support the Mangudadatu clan in its armed
fight against the Ampatuans.
[22]


In other words, the imminence of violence and
anarchy at the time the President issued Proclamation 1946
was too grave to ignore and she had to act to prevent
further bloodshed and hostilities in the places
272

mentioned. Progress reports also indicated that there was
movement in these places of both high-powered firearms
and armed men sympathetic to the two clans.
[23]
Thus, to
pacify the people’s fears and stabilize the situation, the
President had to take preventive action. She called out the
armed forces to control the proliferation of loose firearms
and dismantle the armed groups that continuously
threatened the peace and security in the affected places.

Notably, the present administration of President
Benigno Aquino III has not withdrawn the declaration of a
state of emergency under Proclamation 1946. It has been
reported
[24]
that the declaration would not be lifted soon
because there is still a need to disband private armies and
confiscate loose firearms. Apparently, the presence of
troops in those places is still necessary to ease fear and
tension among the citizenry and prevent and suppress any
violence that may still erupt, despite the passage of more
than a year from the time of the Maguindanao massacre.

Since petitioners are not able to demonstrate that
the proclamation of state of emergency in the subject
places and the calling out of the armed forces to prevent or
suppress lawless violence there have clearly no factual
bases, the Court must respect the President’s actions.

WHEREFORE, the petition is DISMISSED for lack of
merit.

SO ORDERED.

ROBERTO A. ABAD
Associate Justice


WE CONCUR:

Republic of the Philippines
Supreme Court
Manila

EN BANC

273

LUCIANO VELOSO, ABRAHAM
CABOCHAN, JOCELYN DAWIS-
ASUNCION and MARLON M. LACSON,
Petitioners,






- versus -






G.R. No. 193677

Present:

CORONA, C.J.,
CARPIO,
VELASCO, JR.,
LEONARDO-DE CASTRO,
BRION,
PERALTA,
BERSAMIN,
DEL CASTILLO,
ABAD,
VILLARAMA, JR.,
PEREZ,
MENDOZA,
SERENO,
*
and

COMMISSION ON AUDIT,
Respondent.
REYES,
**
JJ.

Promulgated:

September 6, 2011
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - - - x


D E C I S I O N


PERALTA, J.:

This is a Petition for Review on Certiorari under Rule
65 of the Rules of Court assailing Decision No. 2008-
088
[1]
dated September 26, 2008 and Decision No. 2010-
077
[2]
dated August 23, 2010 of the Commission on Audit
(COA) sustaining Notice of Disallowance (ND) No. 06-010-
100-05
[3]
dated May 24, 2006 disallowing the payment of
monetary reward as part of the Exemplary Public Service
274

Award (EPSA) to former three-term councilors of the City of
Manila authorized by City Ordinance No. 8040.

The facts of the case are as follows:

On December 7, 2000, the City Council of Manila
enacted Ordinance No. 8040 entitled An Ordinance
Authorizing the Conferment of Exemplary Public Service
Award to Elective Local Officials of Manila Who Have Been
Elected for Three (3) Consecutive Terms in the Same
Position. Section 2 thereof provides:

SEC. 2. The EPSA shall consist of a Plaque
of Appreciation, retirement and gratuity pay
remuneration equivalent to the actual time
served in the position for three (3) consecutive
terms, subject to the availability of funds as
certified by the City Treasurer. PROVIDED, That
[it] shall be accorded to qualified elected City
Officials on or before the first day of service in
an appropriated public ceremony to be
conducted for the purpose. PROVIDED
FURTHER, That this Ordinance shall only cover
the Position of Mayor, Vice-Mayor and
Councilor: PROVIDED FURTHERMORE, That
those who were elected for this term and run
for higher elective position thereafter, after
being elected shall still be eligible for this
award for the actual time served: PROVIDED
FINALLY That the necessary and incidental
expenses needed to implement the provisions
of this Ordinance shall be appropriated and be
included in the executive budget for the year
when any city official will qualify for the
Award.
[4]



The ordinance was deemed approved on August 23, 2002.

Pursuant to the ordinance, the City made partial
payments in favor of the following former councilors:

Councilor/Recipient
s
Check Date Amount
Abraham C.
Cabochan
35301
0
06/07/0
5
P1,658,989.09
Julio E. Logarta, Jr. 35315 06/14/0 P1,658,989.08
275

6 5
Luciano M. Veloso 35377
8
06/30/0
5
P1,658,989.08
Jocelyn Dawis-
Asuncion
35315
5
06/14/0
5
P1,658,989.08
Marlon M. Lacson 35315
7
06/14/0
5
P1,658,989.08
Heirs of Hilarion C.
Silva
35309
3
06/09/0
5
P1,628,311.59
TOTAL P9,923,257.00
[5
]



On August 8, 2005, Atty. Gabriel J. Espina (Atty.
Espina), Supervising Auditor of the City of Manila, issued
Audit Observation Memorandum (AOM) No. 2005-
100(05)07(05)
[6]
with the following observations:

1. The initial payment of monetary
reward as part of Exemplary Public Service
Award (EPSA) amounting to P9,923,257.00 to
former councilors of the City Government of
Manila who have been elected for three (3)
consecutive terms to the same position as
authorized by City Ordinance No. 8040 is
without legal basis.

2. The amount granted as monetary
reward is excessive and tantamount to double
compensation in contravention to Article 170
(c) of the IRR of RA 7160 which provides that
no elective or appointive local official shall
receive additional, double or indirect
compensation unless specifically authorized by
law.

3. The appropriations for retirement
gratuity to implement EPSA ordinance was
classified as Maintenance and Other Operating
Expenses instead of Personal Services contrary
to Section 7, Volume III of the Manual on the
New Government Accounting System (NGAS)
for local government units and COA Circular
No. 2004-008 dated September 20, 2004 which
provide the updated description of accounts
under the NGAS.
[7]


276

After evaluation of the AOM, the Director, Legal and
Adjudication Office (LAO)-Local of the COA issued ND No.
06-010-100-05
[8]
dated May 24, 2006.

On November 9, 2006, former councilors Jocelyn
Dawis-Asuncion (Dawis-Asuncion), Luciano M. Veloso
(Veloso), Abraham C. Cabochan (Cabochan), Marlon M.
Lacson (Lacson), Julio E. Logarta, Jr., and Monina U. Silva,
City Accountant Gloria C. Quilantang, City Budget Officer
Alicia Moscaya and then Vice Mayor and Presiding Officer
Danilo B. Lacuna filed a Motion to Lift the Notice of
Disallowance.
[9]
In its Decision No. 2007-171
[10]
dated
November 29, 2007, the LAO-Local decided in favor of the
movants, the pertinent portion of which reads:

WHEREFORE, premises considered, the
motion of former Vice- Mayor Danilo B.
Lacuna, et al., is GRANTED and ND No. 06-010-
100-05 dated May 24, 2006 is hereby ordered
lifted as the reasons for the disallowance have
been sufficiently explained. This decision,
however, should not be taken as precedence
(sic) to other or similar personal benefits that a
local government unit may extend which
should be appreciated based on their separate
and peculiar circumstances.
[11]



Citing Article 170 of the Implementing Rules and
Regulations (IRR) of Republic Act (RA) No. 7160, the LAO-
Local held that the monetary reward given to the former
councilors can be one of gratuity and, therefore, cannot be
considered as additional, double or indirect compensation.
Giving importance to the principle of local autonomy, the
LAO-local upheld the power of local government units
(LGUs) to grant allowances. More importantly, it
emphasized that the Department of Budget and
Management (DBM) did not disapprove the appropriation
for the EPSA of the City which indicate that the same is
valid.
[12]


Upon review, the COA rendered the assailed Decision
No. 2008-088 sustaining ND No. 06-010-100-05.
[13]
The
motion for reconsideration was likewise denied in Decision
No. 2010-077.
[14]
The COA opined that the monetary reward
under the EPSA is covered by the term “compensation.”
Though it recognizes the local autonomy of LGUs, it
emphasized the limitations thereof set forth in the Salary
Standardization Law (SSL). It explained that the SSL does
277

not authorize the grant of such monetary reward or
gratuity. It also stressed the absence of a specific law
passed by Congress which ordains the conferment of such
monetary reward or gratuity to the former councilors.
[15]
In
Decision No. 2010-077, in response to the question on its
jurisdiction to rule on the legality of the disbursement, the
COA held that it is vested by the Constitution the power to
determine whether government entities comply with laws
and regulations in disbursing government funds and to
disallow irregular disbursements.
[16]


Aggrieved, petitioners Veloso, Cabochan, Dawis-
Asuncion and Lacson come before the Court in this special
civil action for certiorari alleging grave abuse of discretion
on the part of the COA. Specifically, petitioners claim that:

The respondent Commission on Audit
did not only commit a reversible error but was,
in fact, guilty of grave abuse of discretion
amounting to lack or excess of jurisdiction
when it ruled that the monetary award given
under the EPSA partakes of the nature of an
additional compensation prohibited under the
Salary Standardization Law, and other existing
laws, rules and regulations, and not a
GRATUITY “voluntarily given in return for a
favor or services rendered purely out of
generosity of the giver or grantor.” (Plastic
Tower Corporation vs. NLRC, 172 SCRA 580-
581).

Apart from being totally oblivious of the
fact that the monetary award given under the
EPSA was intended or given in return for the
exemplary service rendered by its recipient(s),
the respondent COA further committed grave
abuse of discretion when it effectively nullified
a duly-enacted ordinance which is essentially a
judicial function. In other words, in the guise of
disallowing the disbursement in question, the
respondent Commission arrogated unto itself
an authority it did not possess, and a
prerogative it did not have.
[17]



On November 30, 2010, the Court issued a Status
Quo Ante Order
[18]
requiring the parties to maintain
278

the status quo prevailing before the implementation of the
assailed COA decisions.

There are two issues for resolution: (1) whether the
COA has the authority to disallow the disbursement of local
government funds; and (2) whether the COA committed
grave abuse of discretion in affirming the disallowance
of P9,923,257.00 covering the EPSA of former three-term
councilors of the City of Manila authorized by Ordinance
No. 8040.

In their Reply,
[19]
petitioners insist that the power and
authority of the COA to audit government funds and
accounts does not carry with it in all instances the power to
disallow a particular disbursement.
[20]
Citing Guevara v.
Gimenez,
[21]
petitioners claim that the COA has no
discretion or authority to disapprove payments on the
ground that the same was unwise or that the amount is
unreasonable. The COA's remedy, according to petitioners,
is to bring to the attention of the proper administrative
officer such expenditures that, in its opinion, are irregular,
unnecessary, excessive or extravagant.
[22]
While admitting
that the cited case was decided by the Court under the
1935 Constitution, petitioners submit that the same
principle applies in the present case.

We do not agree.

As held in National Electrification Administration v.
Commission on Audit,
[23]
the ruling in Guevara cited by
petitioners has already been overturned by the Court
inCaltex Philippines, Inc. v. Commission on Audit.
[24]
The
Court explained
[25]
that under the 1935 Constitution, the
Auditor General could not correct irregular, unnecessary,
excessive or extravagant expenditures of public funds, but
could only bring the matter to the attention of the proper
administrative officer. Under the 1987 Constitution,
however, the COA is vested with the authority to determine
whether government entities, including LGUs, comply with
laws and regulations in disbursing government funds, and
to disallow illegal or irregular disbursements of these funds.

Section 2, Article IX-D of the Constitution gives a
broad outline of the powers and functions of the COA, to
wit:

Section 2. (1) The Commission on Audit
shall have the power, authority, and duty to
examine, audit, and settle all accounts
279

pertaining to the revenue and receipts of, and
expenditures or uses of funds and property,
owned or held in trust by, or pertaining to, the
Government, or any of its subdivisions,
agencies, or instrumentalities, including
government-owned or controlled corporations
with original charters, and on a post-audit
basis: (a) constitutional bodies, commissions
and offices that have been granted fiscal
autonomy under this Constitution; (b)
autonomous state colleges and universities; (c)
other government-owned or controlled
corporations and their subsidiaries; and (d)
such non-governmental entities receiving
subsidy or equity, directly or indirectly, from or
through the Government, which are required
by law or the granting institution to submit to
such audit as a condition of subsidy or equity.
However, where the internal control system of
the audited agencies is inadequate, the
Commission may adopt such measures,
including temporary or special pre-audit, as are
necessary and appropriate to correct the
deficiencies. It shall keep the general accounts
of the Government and, for such period as may
be provided by law, preserve the vouchers and
other supporting papers pertaining thereto.

(2) The Commission shall have
exclusive authority, subject to the limitations in
this Article, to define the scope of its audit and
examination, establish the techniques and
methods required therefor, and promulgate
accounting and auditing rules and regulations,
including those for the prevention and
disallowance of irregular, unnecessary,
excessive, extravagant, or unconscionable
expenditures, or uses of government funds
and properties.
[26]



Section 11, Chapter 4, Subtitle B, Title I, Book V of the
Administrative Code of 1987 echoes this constitutional
mandate to COA.

Under the first paragraph of the above provision, the
COA's audit jurisdiction extends to the government, or any
of its subdivisions, agencies, or instrumentalities,including
government-owned or controlled corporations with original
charters. Its jurisdiction likewise covers, albeit on a post-
audit basis, the constitutional bodies, commissions and
offices that have been granted fiscal autonomy,
280

autonomous state colleges and universities, other
government-owned or controlled corporations and their
subsidiaries, and such non-governmental entities receiving
subsidy or equity from or through the government. The
power of the COA to examine and audit government
agencies cannot be taken away from it as Section 3, Article
IX-D of the Constitution mandates that “no law shall be
passed exempting any entity of the Government or its
subsidiary in any guise whatever, or any investment of
public funds, from the jurisdiction of the *COA+.”

Pursuant to its mandate as the guardian of public
funds, the COA is vested with broad powers over all
accounts pertaining to government revenue and
expenditures and the uses of public funds and
property.
[27]
This includes the exclusive authority to define
the scope of its audit and examination, establish the
techniques and methods for such review, and promulgate
accounting and auditing rules and regulations.
[28]
The COA is
endowed with enough latitude to determine, prevent and
disallow irregular, unnecessary, excessive, extravagant or
unconscionable expenditures of government funds.
[29]
It is
tasked to be vigilant and conscientious in safeguarding the
proper use of the government's, and ultimately the
people's, property.
[30]
The exercise of its general audit
power is among the constitutional mechanisms that gives
life to the check and balance system inherent in our form of
government.
[31]


The Court had therefore previously upheld the
authority of the COA to disapprove payments which it finds
excessive and disadvantageous to the Government; to
determine the meaning of “public bidding” and when there
is failure in the bidding; to disallow expenditures which it
finds unnecessary according to its rules even if disallowance
will mean discontinuance of foreign aid; to disallow a
contract even after it has been executed and goods have
been delivered.
[32]


Thus, LGUs, though granted local fiscal autonomy,
are still within the audit jurisdiction of the COA.

Now on the more important issue of whether the COA
properly exercised its jurisdiction in disallowing the
disbursement of the City of Manila's funds for the EPSA of
its former three-term councilors.

It is the general policy of the Court to sustain the
decisions of administrative authorities, especially one which
is constitutionally-created not only on the basis of the
281

doctrine of separation of powers but also for their
presumed expertise in the laws they are entrusted to
enforce. Findings of administrative agencies are accorded
not only respect but also finality when the decision and
order are not tainted with unfairness or arbitrariness that
would amount to grave abuse of discretion.
[33]
It is only
when the COA has acted without or in excess of jurisdiction,
or with grave abuse of discretion amounting to lack or
excess of jurisdiction, that this Court entertains a petition
questioning its rulings.
[34]
There is grave abuse of discretion
when there is an evasion of a positive duty or a virtual
refusal to perform a duty enjoined by law or to act in
contemplation of law as when the judgment rendered is
not based on law and evidence but on caprice, whim and
despotism.
[35]


In this case, we find no grave abuse of discretion on
the part of the COA in issuing the assailed decisions as will
be discussed below.


Petitioners claim that the grant of the retirement and
gratuity pay remuneration is a valid exercise of the powers
of the Sangguniang Panlungsod set forth in RA 7160.

We disagree.

Indeed, Section 458 of RA 7160 defines the power,
duties, functions and compensation of the Sangguniang
Panlungsod, to wit:

SEC. 458. Powers, Duties, Functions and
Compensation. - (a) The Sangguniang
Panlungsod, as the legislative body of the city,
shall enact ordinances, approve resolutions
and appropriate funds for the general welfare
of the city and its inhabitants pursuant to
Section 16 of this Code and in the proper
exercise of the corporate powers of the city as
provided for under Section 22 of this Code, and
shall:

x x x x

(viii) Determine the
positions and salaries, wages,
allowances and other emoluments
282

and benefits of officials and
employees paid wholly or mainly
from city funds and provide for
expenditures necessary for the
proper conduct of programs,
projects, services, and activities of
the city government.


In the exercise of the above power, the City Council
of Manila enacted on December 7, 2000 Ordinance No.
8040, but the same was deemed approved on August 23,
2002. The ordinance authorized the conferment of the
EPSA to the former three-term councilors and, as part of
the award, the qualified city officials were to be given
“retirement and gratuity pay remuneration.” We believe
that the award is a “gratuity” which is a free gift, a present,
or benefit of pecuniary value bestowed without claim or
demand, or without consideration.
[36]


However, as correctly held by the COA, the above
power is not without limitations. These limitations are
embodied in Section 81 of RA 7160, to wit:

SEC. 81. Compensation of Local Officials
and Employees. The compensation of local
officials and personnel shall be determined by
the sanggunian concerned: Provided, That the
increase in compensation of elective local
officials shall take effect only after the terms of
office of those approving such increase shall
have expired: Provided, further, That the
increase in compensation of the appointive
officials and employees shall take effect as
provided in the ordinance authorizing such
increase; Provided however, That said increases
shall not exceed the limitations on budgetary
allocations for personal services provided
under Title Five, Book II of this Code: Provided
finally, That such compensation may be based
upon the pertinent provisions of Republic Act
Numbered Sixty-seven fifty-eight (R.A. No.
6758), otherwise known as the “Compensation
and Position Classification Act of 1989.


Moreover, the IRR of RA 7160 reproduced the
Constitutional provision that “no elective or appointive
283

local official or employee shall receive additional, double, or
indirect compensation, unless specifically authorized by
law, nor accept without the consent of the Congress, any
present, emoluments, office, or title of any kind from any
foreign government.” Section 325 of the law limit the total
appropriations for personal services
[37]
of a local
government unit to not more than 45% of its total annual
income from regular sources realized in the next preceding
fiscal year.

While it may be true that the above appropriation did
not exceed the budgetary limitation set by RA 7160, we find
that the COA is correct in sustaining ND No. 06-010-100-05.

Section 2 of Ordinance No. 8040 provides for the
payment of “retirement and gratuity pay remuneration
equivalent to the actual time served in the position for
three (3) consecutive terms” as part of the EPSA. The
recomputation of the award disclosed that it is equivalent
to the total compensation received by each awardee for
nine years that includes basic salary, additional
compensation, Personnel Economic Relief Allowance,
representation and transportation allowance, rice
allowance, financial assistance, clothing allowance,
13
th
month pay and cash gift.
[38]
This is not disputed by
petitioners. There is nothing wrong with the local
government granting additional benefits to the officials and
employees. The laws even encourage the granting of
incentive benefits aimed at improving the services of these
employees. Considering, however, that the payment of
these benefits constitute disbursement of public funds, it
must not contravene the law on disbursement of public
funds.
[39]


As clearly explained by the Court in Yap v. Commission
on Audit,
[40]
the disbursement of public funds, salaries and
benefits of government officers and employees should be
granted to compensate them for valuable public services
rendered, and the salaries or benefits paid to such officers
or employees must be commensurate with services
rendered. In the same vein, additional allowances and
benefits must be shown to be necessary or relevant to the
fulfillment of the official duties and functions of the
government officers and employees. Without this
limitation, government officers and employees may be paid
enormous sums without limit or without justification
necessary other than that such sums are being paid to
someone employed by the government. Public funds are
the property of the people and must be used prudently at
all times with a view to prevent dissipation and waste.
[41]


284

Undoubtedly, the above computation of the
awardees' reward is excessive and tantamount to double
and additional compensation. This cannot be justified by
the mere fact that the awardees have been elected for
three (3) consecutive terms in the same position. Neither
can it be justified that the reward is given as a gratuity at
the end of the last term of the qualified elective official. The
fact remains that the remuneration is equivalent to
everything that the awardees received during the entire
period that he served as such official. Indirectly, their
salaries and benefits are doubled, only that they receive
half of them at the end of their last term.

The purpose of the prohibition against additional or
double compensation is best expressed in Peralta v. Auditor
General,
[42]
to wit:

This is to manifest a commitment to the
fundamental principle that a public office is a
public trust. It is expected of a government
official or employee that he keeps uppermost
in mind the demands of public welfare. He is
there to render public service. He is of course
entitled to be rewarded for the performance of
the functions entrusted to him, but that should
not be the overriding consideration. The
intrusion of the thought of private gain should
be unwelcome. The temptation to further
personal ends, public employment as a means
for the acquisition of wealth, is to be resisted.
That at least is the idea. There is then to be an
awareness on the part of the officer or
employee of the government that he is to
receive only such compensation as may be
fixed by law. With such a realization, he is
expected not to avail himself of devious or
circuitous means to increase the
remuneration attached to his position.
[43]



Verily, the COA's assailed decisions were made in
faithful compliance with its mandate and in judicious
exercise of its general audit power as conferred on it by the
Constitution.
[44]
The COA adheres to the policy that
government funds and property should be fully protected
and conserved and that irregular, unnecessary, excessive or
extravagant expenditures or uses of such funds and
property should be prevented.
[45]


285

However, in line with existing jurisprudence,
[46]
we
need not require the refund of the disallowed amount
because all the parties acted in good faith. In this case, the
questioned disbursement was made pursuant to an
ordinance enacted as early as December 7, 2000 although
deemed approved only on August 22, 2002. The city
officials disbursed the retirement and gratuity pay
remuneration in the honest belief that the amounts given
were due to the recipients and the latter accepted the
same with gratitude, confident that they richly deserve
such reward.

WHEREFORE, the petition is DISMISSED. Decision No.
2008-088 dated September 26, 2008 and Decision No.
2010-077 dated August 23, 2010 of the Commission on
Audit, are AFFIRMED WITH MODIFICATION. The recipients
need not refund the retirement and gratuity pay
remuneration that they already received.

Accordingly, the Status Quo Ante Order issued by the
Court on November 30, 2010 is hereby RECALLED. In view,
however, of this Court's decision not to require the refund
of the amounts already received, the Commission on Audit
is ORDERED to cease and desist from enforcing the Notice
of Finality of Decision
[47]
dated October 5, 2010.

SO ORDERED.

Republic of the Philippines
SUPREME COURT
Manila
EN BANC

G.R. No. 112497 August 4, 1994
HON. FRANKLIN M. DRILON, in his capacity as SECRETARY
OF JUSTICE, petitioner,
vs.
MAYOR ALFREDO S. LIM, VICE-MAYOR JOSE L. ATIENZA,
CITY TREASURER ANTHONY ACEVEDO, SANGGUNIANG
PANGLUNSOD AND THE CITY OF MANILA, respondents.
The City Legal Officer for petitioner.
Angara, Abello, Concepcion, Regala & Cruz for Caltex
(Phils.).
Joseph Lopez for Sangguniang Panglunsod of Manila.
L.A. Maglaya for Petron Corporation.
286


CRUZ, J.:
The principal issue in this case is the constitutionality of
Section 187 of the Local Government Code reading as
follows:
Procedure For Approval And Effectivity Of Tax
Ordinances And Revenue Measures;
Mandatory Public Hearings. — The procedure
for approval of local tax ordinances and
revenue measures shall be in accordance with
the provisions of this Code: Provided, That
public hearings shall be conducted for the
purpose prior to the enactment thereof;
Provided, further, That any question on the
constitutionality or legality of tax ordinances or
revenue measures may be raised on appeal
within thirty (30) days from the effectivity
thereof to the Secretary of Justice who shall
render a decision within sixty (60) days from
the date of receipt of the appeal: Provided,
however, That such appeal shall not have the
effect of suspending the effectivity of the
ordinance and the accrual and paymentof the
tax, fee, or charge levied therein: Provided,
finally, That within thirty (30) days after receipt
of the decision or the lapse of the sixty-day
period without the Secretary of Justice acting
upon the appeal, the aggrieved party may file
appropriate proceedings with a court of
competent jurisdiction.
Pursuant thereto, the Secretary of Justice had, on appeal to
him of four oil companies and a taxpayer, declared
Ordinance No. 7794, otherwise known as the Manila
Revenue Code, null and void for non-compliance with the
prescribed procedure in the enactment of tax ordinances
and for containing certain provisions contrary to law
andpublic policy.
1

In a petition for certiorari filed by the City of Manila, the
Regional Trial Court of Manila revoked the Secretary's
resolution and sustained the ordinance, holding inter
alia that the procedural requirements had been
observed.More importantly, it declared Section 187 of the
Local Government Code as unconstitutional because of its
vesture in the Secretary of Justice of the power of control
over local governments in violation of the policy of local
autonomy mandated in the Constitution and of the specific
provision therein conferring on the President of the
Philippines only the power of supervision over local
governments.
2

The present petition would have us reverse that decision.
The Secretary argues that the annulled Section 187 is
constitutional and that the procedural requirements for the
enactment of tax ordinances as specified in the Local
Government Code had indeed not been observed.
287

Parenthetically, this petition was originally dismissed by the
Court for non-compliance with Circular 1-88, the Solicitor
General having failed to submit a certified true copy of the
challenged decision.
3
However, on motion for
reconsideration with the required certified true copy of the
decision attached, the petition was reinstated in view of the
importance of the issues raised therein.
We stress at the outset that the lower court had jurisdiction
to consider the constitutionality of Section 187, this
authority being embraced in the general definition of the
judicial power to determine what are the valid and binding
laws by the criterion of their conformity to the fundamental
law. Specifically, BP 129 vests in the regional trial courts
jurisdiction over all civil cases in which the subject of the
litigation is incapable of pecuniary estimation,
4
even as the
accused in a criminal action has the right to question in his
defense the constitutionality of a law he is charged with
violating and of the proceedings taken against him,
particularly as they contravene the Bill of Rights. Moreover,
Article X, Section 5(2), of the Constitution vests in the
Supreme Court appellate jurisdiction over final judgments
and orders of lower courts in all cases in which the
constitutionality or validity of any treaty, international or
executive agreement, law, presidential decree,
proclamation, order, instruction, ordinance, or regulation is
in question.
In the exercise of this jurisdiction, lower courts are advised
to act with the utmost circumspection, bearing in mind the
consequences of a declaration of unconstitutionality upon
the stability of laws, no less than on the doctrine of
separation of powers. As the questioned act is usually the
handiwork of the legislative or the executive departments,
or both, it will be prudent for such courts, if only out of a
becoming modesty, to defer to the higher judgment of this
Court in the consideration of its validity, which is better
determined after a thorough deliberation by a collegiate
body and with the concurrence of the majority of those
who participated in its discussion.
5

It is also emphasized that every court, including this Court,
is charged with the duty of a purposeful hesitation before
declaring a law unconstitutional, on the theory that the
measure was first carefully studied by the executive and the
legislative departments and determined by them to be in
accordance with the fundamental law before it was finally
approved. To doubt is to sustain. The presumption of
constitutionality can be overcome only by the clearest
showing that there was indeed an infraction of the
Constitution, and only when such a conclusion is reached by
the required majority may the Court pronounce, in the
discharge of the duty it cannot escape, that the challenged
act must be struck down.
In the case before us, Judge Rodolfo C. Palattao declared
Section 187 of the Local Government Code unconstitutional
insofar as it empowered the Secretary of Justice to review
tax ordinances and, inferentially, to annul them. He cited
the familiar distinction between control and supervision,
288

the first being "the power of an officer to alter or modify or
set aside what a subordinate officer had done in the
performance of his duties and to substitute the judgment of
the former for the latter," while the second is "the power of
a superior officer to see to it that lower officers perform
their functions in accordance with law."
6
His conclusion
was that the challenged section gave to the Secretary the
power of control and not of supervision only as vested by
the Constitution in the President of the Philippines. This
was, in his view, a violation not only of Article X, specifically
Section 4 thereof,
7
and of Section 5 on the taxing powers of
local governments,
8
and the policy of local autonomy in
general.
We do not share that view. The lower court was rather
hasty in invalidating the provision.
Section 187 authorizes the Secretary of Justice to review
only the constitutionality or legality of the tax ordinance
and, if warranted, to revoke it on either or both of these
grounds. When he alters or modifies or sets aside a tax
ordinance, he is not also permitted to substitute his own
judgment for the judgment of the local government that
enacted the measure. Secretary Drilon did set aside the
Manila Revenue Code, but he did not replace it with his
own version of what the Code should be. He did not
pronounce the ordinance unwise or unreasonable as a basis
for its annulment. He did not say that in his judgment it was
a bad law. What he found only was that it was illegal. All he
did in reviewing the said measure was determine if the
petitioners were performing their functions in accordance
with law, that is, with the prescribed procedure for the
enactment of tax ordinances and the grant of powers to the
city government under the Local Government Code. As we
see it, that was an act not of control but of mere
supervision.
An officer in control lays down the rules in the doing of an
act. If they are not followed, he may, in his discretion, order
the act undone or re-done by his subordinate or he may
even decide to do it himself. Supervision does not cover
such authority. The supervisor or superintendent merely
sees to it that the rules are followed, but he himself does
not lay down such rules, nor does he have the discretion to
modify or replace them. If the rules are not observed, he
may order the work done or re-done but only to conform to
the prescribed rules. He may not prescribe his own manner
for the doing of the act. He has no judgment on this matter
except to see to it that the rules are followed. In the
opinion of the Court, Secretary Drilon did precisely this, and
no more nor less than this, and so performed an act not of
control but of mere supervision.
The case of Taule v. Santos
9
cited in the decision has no
application here because the jurisdiction claimed by the
Secretary of Local Governments over election contests in
the Katipunan ng Mga Barangay was held to belong to the
Commission on Elections by constitutional provision. The
conflict was over jurisdiction, not supervision or control.
289

Significantly, a rule similar to Section 187 appeared in the
Local Autonomy Act, which provided in its Section 2 as
follows:
A tax ordinance shall go into effect on the
fifteenth day after its passage, unless the
ordinance shall provide otherwise: Provided,
however, That the Secretary of Finance shall
have authority to suspend the effectivity of any
ordinance within one hundred and twenty days
after receipt by him of a copy thereof, if, in his
opinion, the tax or fee therein levied or
imposed is unjust, excessive, oppressive, or
confiscatory, or when it is contrary to declared
national economy policy, and when the said
Secretary exercises this authority the
effectivity of such ordinance shall be
suspended, either in part or as a whole, for a
period of thirty days within which period the
local legislative body may either modify the tax
ordinance to meet the objections thereto, or
file an appeal with a court of competent
jurisdiction; otherwise, the tax ordinance or
the part or parts thereof declared suspended,
shall be considered as revoked. Thereafter, the
local legislative body may not reimpose the
same tax or fee until such time as the grounds
for the suspension thereof shall have ceased to
exist.
That section allowed the Secretary of Finance to suspend
the effectivity of a tax ordinance if, in his opinion, the tax or
fee levied was unjust, excessive, oppressive or confiscatory.
Determination of these flaws would involve the exercise
of judgment or discretion and not merely an examination of
whether or not the requirements or limitations of the law
had been observed; hence, it would smack of control rather
than mere supervision. That power was never questioned
before this Court but, at any rate, the Secretary of Justice is
not given the same latitude under Section 187. All he is
permitted to do is ascertain the constitutionality or legality
of the tax measure, without the right to declare that, in his
opinion, it is unjust, excessive, oppressive or confiscatory.
He has no discretion on this matter. In fact, Secretary Drilon
set aside the Manila Revenue Code only on two grounds, to
with, the inclusion therein of certain ultra vires provisions
and non-compliance with the prescribed procedure in its
enactment. These grounds affected the legality, not
the wisdom or reasonableness, of the tax measure.
The issue of non-compliance with the prescribed procedure
in the enactment of the Manila Revenue Code is another
matter.
In his resolution, Secretary Drilon declared that there were
no written notices of public hearings on the proposed
Manila Revenue Code that were sent to interested parties
as required by Art. 276(b) of the Implementing Rules of the
Local Government Code nor were copies of the proposed
ordinance published in three successive issues of a
290

newspaper of general circulation pursuant to Art. 276(a).
No minutes were submitted to show that the obligatory
public hearings had been held. Neither were copies of the
measure as approved posted in prominent places in the city
in accordance with Sec. 511(a) of the Local Government
Code. Finally, the Manila Revenue Code was not translated
into Pilipino or Tagalog and disseminated among the people
for their information and guidance, conformably to Sec.
59(b) of the Code.
Judge Palattao found otherwise. He declared that all the
procedural requirements had been observed in the
enactment of the Manila Revenue Code and that the City of
Manila had not been able to prove such compliance before
the Secretary only because he had given it only five days
within which to gather and present to him all the evidence
(consisting of 25 exhibits) later submitted to the trial court.
To get to the bottom of this question, the Court acceded to
the motion of the respondents and called for the elevation
to it of the said exhibits. We have carefully examined every
one of these exhibits and agree with the trial court that the
procedural requirements have indeed been observed.
Notices of the public hearings were sent to interested
parties as evidenced by Exhibits G-1 to 17. The minutes of
the hearings are found in Exhibits M, M-1, M-2, and M-3.
Exhibits B and C show that the proposed ordinances were
published in the Balita and the Manila Standard on April 21
and 25, 1993, respectively, and the approved ordinance
was published in the July 3, 4, 5, 1993 issues of the Manila
Standard and in the July 6, 1993 issue of Balita, as shown by
Exhibits Q, Q-1, Q-2, and Q-3.
The only exceptions are the posting of the ordinance as
approved but this omission does not affect its validity,
considering that its publication in three successive issues of
a newspaper of general circulation will satisfy due process.
It has also not been shown that the text of the ordinance
has been translated and disseminated, but this requirement
applies to the approval of local development plans and
public investment programs of the local government unit
and not to tax ordinances.
We make no ruling on the substantive provisions of the
Manila Revenue Code as their validity has not been raised
in issue in the present petition.
WHEREFORE, the judgment is hereby rendered REVERSING
the challenged decision of the Regional Trial Court insofar
as it declared Section 187 of the Local Government Code
unconstitutional but AFFIRMING its finding that the
procedural requirements in the enactment of the Manila
Revenue Code have been observed. No pronouncement as
to costs.
SO ORDERED.
Narvasa, C.J., Feliciano, Padilla, Bidin, Regalado,
Davide, Jr., Romero, Bellosillo, Melo, Quiason, Puno,
Vitug, Kapunan and Mendoza, JJ., concur.
291

EN BANC
[G.R. No. 125350. December 3, 2002]
HON. RTC JUDGES MERCEDES G. DADOLE (Executive
Judge, Branch 28), ULRIC R. CAÑETE (Presiding
Judge, Branch 25), AGUSTINE R. VESTIL (Presiding
Judge, Branch 56), HON. MTC JUDGES TEMISTOCLES
M. BOHOLST (Presiding Judge, Branch 1), VICENTE C.
FANILAG (Judge Designate, Branch 2), and
WILFREDO A. DAGATAN (Presiding Judge, Branch 3),
all of Mandaue City, petitioners, vs. COMMISSION
ON AUDIT, respondent.
D E C I S I O N
CORONA, J.:
Before us is a petition for certiorari under Rule 64 to
annul the decision
[1]
and resolution
[2]
, dated September 21,
1995 and May 28, 1996, respectively, of the respondent
Commission on Audit (COA) affirming the notices of the
Mandaue City Auditor which diminished the monthly
additional allowances received by the petitioner judges of
the Regional Trial Court (RTC) and Municipal Trial Court
(MTC) stationed in Mandaue City.
The undisputed facts are as follows:
In 1986, the RTC and MTC judges of Mandaue City
started receiving monthly allowances of P1,260 each
through the yearly appropriation ordinance enacted by the
Sangguniang Panlungsod of the said city. In 1991, Mandaue
City increased the amount to P1,500 for each judge.
On March 15, 1994, the Department of Budget and
Management (DBM) issued the disputed Local Budget
Circular No. 55 (LBC 55) which provided that:
“xxx xxx xxx
2.3.2. In the light of the authority granted to the local
government units under the Local Government Code to
provide for additional allowances and other benefits to
national government officials and employees assigned in
their locality, such additional allowances in the form of
honorarium at rates not exceeding P1,000.00 in provinces
and cities and P700.00 in municipalities may be
granted subject to the following conditions:
a) That the grant is not mandatory on the part of the LGUs;
b) That all contractual and statutory obligations of the LGU
including the implementation of R.A. 6758 shall have been
fully provided in the budget;
c) That the budgetary requirements/limitations under
Section 324 and 325 of R.A. 7160 should be satisfied and/or
complied with; and
292

d) That the LGU has fully implemented the devolution of
functions/personnel in accordance with R.A. 7160.
[3]

(italics supplied)
xxx xxx xxx
The said circular likewise provided for its immediate
effectivity without need of publication:
“5.0 EFFECTIVITY
This Circular shall take effect immediately.”
Acting on the DBM directive, the Mandaue City Auditor
issued notices of disallowance to herein petitioners,
namely, Honorable RTC Judges Mercedes G. Dadole, Ulric R.
Cañete, Agustin R. Vestil, Honorable MTC Judges
Temistocles M. Boholst, Vicente C. Fanilag and Wilfredo A.
Dagatan, in excess of the amount authorized by LBC 55.
Beginning October, 1994, the additional monthly
allowances of the petitioner judges were reduced to P1,000
each. They were also asked to reimburse the amount they
received in excess of P1,000 from April to September, 1994.
The petitioner judges filed with the Office of the City
Auditor a protest against the notices of disallowance. But
the City Auditor treated the protest as a motion for
reconsideration and indorsed the same to the COA Regional
Office No. 7. In turn, the COA Regional Office referred the
motion to the head office with a recommendation that the
same be denied.
On September 21, 1995, respondent COA rendered a
decision denying petitioners’ motion for
reconsideration. The COA held that:
The issue to be resolved in the instant appeal is whether or
not the City Ordinance of Mandaue which provides a higher
rate of allowances to the appellant judges may prevail over
that fixed by the DBM under Local Budget Circular No. 55
dated March 15, 1994.
xxx xxx xxx
Applying the foregoing doctrine, appropriation ordinance of
local government units is subject to the organizational,
budgetary and compensation policies of budgetary
authorities (COA 5
th
Ind., dated March 17, 1994 re: Province
of Antique; COA letter dated May 17, 1994 re: Request of
Hon. Renato Leviste, Cong. 1
st
Dist. Oriental Mindoro). In
this regard, attention is invited to Administrative Order No.
42 issued on March 3, 1993 by the President of the
Philippines clarifying the role of DBM in the compensation
and classification of local government positions under RA
No. 7160 vis-avis the provisions of RA No. 6758 in view of
the abolition of the JCLGPA. Section 1 of said Administrative
Order provides that:
“Section 1. The Department of Budget and Management as
the lead administrator of RA No. 6758 shall, through its
Compensation and Position Classification Bureau, continue
293

to have the following responsibilities in connection with the
implementation of the Local Government Code of 1991:
a) Provide guidelines on the classification of
local government positions and on the
specific rates of pay therefore;
b) Provide criteria and guidelines for the
grant of all allowances and additional forms
of compensation to local government
employees; xxx.” (underscoring supplied)
To operationalize the aforecited presidential directive, DBM
issued LBC No. 55, dated March 15, 1994, whose effectivity
clause provides that:
xxx xxx xxx
“5.0 EFFECTIVITY
This Circular shall take effect immediately.”
It is a well-settled rule that implementing rules and
regulations promulgated by administrative or executive
officer in accordance with, and as authorized by law, has
the force and effect of law or partake the nature of a
statute (Victorias Milling Co., Inc., vs. Social Security
Commission, 114 Phil. 555, cited in Agpalo’s Statutory
Construction, 2
nd
Ed. P. 16; Justice Cruz’s Phil. Political Law,
1984 Ed., p. 103; Espanol vs. Phil Veterans Administration,
137 SCRA 314; Antique Sawmills Inc. vs. Tayco, 17 SCRA
316).
xxx xxx xxx
There being no statutory basis to grant additional allowance
to judges in excess of P1,000.00 chargeable against the
local government units where they are stationed, this
Commission finds no substantial grounds or cogent reason
to disturb the decision of the City Auditor, Mandaue City,
disallowing in audit the allowances in question. Accordingly,
the above-captioned appeal of the MTC and RTC Judges of
Mandaue City, insofar as the same is not covered by
Circular Letter No. 91-7, is hereby dismissed for lack of
merit.
xxx xxx xxx
[4]

On November 27, 1995, Executive Judge Mercedes
Gozo-Dadole, for and in behalf of the petitioner judges,
filed a motion for reconsideration of the decision of the
COA. In a resolution dated May 28, 1996, the COA denied
the motion.
Hence, this petition for certiorari by the petitioner
judges, submitting the following questions for resolution:
I
HAS THE CITY OF MANDAUE STATUTORY AND
CONSTITUTIONAL BASIS TO PROVIDE ADDITIONAL
294

ALLOWANCES AND OTHER BENEFITS TO JUDGES
STATIONED IN AND ASSIGNED TO THE CITY?
II
CAN AN ADMINISTRATIVE CIRCULAR OR GUIDELINE SUCH
AS LOCAL BUDGET CIRCULAR NO. 55 RENDER INOPERATIVE
THE POWER OF THE LEGISLATIVE BODY OF A CITY BY
SETTING A LIMIT TO THE EXTENT OF THE EXERCISE OF SUCH
POWER?
III
HAS THE COMMISSION ON AUDIT CORRECTLY
INTERPRETED LOCAL BUDGET CIRCULAR NO. 55 TO
INCLUDE MEMBERS OF THE JUDICIARY IN FIXING THE
CEILING OF ADDITIONAL ALLOWANCES AND BENEFITS TO
BE PROVIDED TO JUDGES STATIONED IN AND ASSIGNED TO
MANDAUE CITY BY THE CITY GOVERNMENT AT P1,000.00
PER MONTH NOTWITHSTANDING THAT THEY HAVE BEEN
RECEIVING ALLOWANCES OF P1,500.00 MONTHLY FOR THE
PAST FIVE YEARS?
IV
IS LOCAL BUDGET CIRCULAR NO. 55 DATED MARCH 15,
1994 ISSUED BY THE DEPARTMENT OF BUDGET AND
MANAGEMENT VALID AND ENFORCEABLE CONSIDERING
THAT IT WAS NOT DULY PUBLISHED IN ACCODANCE WITH
LAW?
[5]

Petitioner judges argue that LBC 55 is void for infringing
on the local autonomy of Mandaue City by dictating a
uniform amount that a local government unit can disburse
as additional allowances to judges stationed therein. They
maintain that said circular is not supported by any law and
therefore goes beyond the supervisory powers of the
President. They further allege that said circular is void for
lack of publication.
On the other hand, the yearly appropriation ordinance
providing for additional allowances to judges is allowed by
Section 458, par. (a)(1)[xi], of RA 7160, otherwise known as
the Local Government Code of 1991, which provides that:
Sec. 458. Powers, Duties, Functions and Compensation. – (a)
The sangguniang panlungsod, as the legislative body of the
city, shall enact ordinances, approve resolutions and
appropriate funds for the general welfare of the city and its
inhabitants pursuant to Section 16 of this Code and in the
proper exercise of the corporate powers of the city as
provided for under Section 22 of this Code, and shall:
(1) Approve ordinances and pass resolutions necessary for
an efficient and effective city government, and in this
connection, shall:
xxx xxx xxx
(xi) When the finances of the city government allow, provide
for additional allowances and other benefits to judges,
prosecutors, public elementary and high school teachers,
295

and other national government officials stationed in or
assigned to the city; (italics supplied)
Instead of filing a comment on behalf of respondent
COA, the Solicitor General filed a manifestation supporting
the position of the petitioner judges. The Solicitor General
argues that (1) DBM only enjoys the power to review and
determine whether the disbursements of funds were made
in accordance with the ordinance passed by a local
government unit while (2) the COA has no more than
auditorial visitation powers over local government units
pursuant to Section 348 of RA 7160 which provides for the
power to inspect at any time the financial accounts of local
government units.
Moreover, the Solicitor General opines that “the DBM
and the respondent are only authorized under RA 7160 to
promulgate a Budget Operations Manual for local
government units, to improve and systematize methods,
techniques and procedures employed in budget
preparation, authorization, execution and
accountability” pursuant to Section 354 of RA 7160. The
Solicitor General points out that LBC 55 was not exercised
under any of the aforementioned provisions.
Respondent COA, on the other hand, insists that the
constitutional and statutory authority of a city government
to provide allowances to judges stationed therein is not
absolute. Congress may set limitations on the exercise of
autonomy. It is for the President, through the DBM, to
check whether these legislative limitations are being
followed by the local government units.
One such law imposing a limitation on a local
government unit’s autonomy is Section 458, par. (a) (1) *xi+,
of RA 7160, which authorizes the disbursement of
additional allowances and other benefits to judges subject
to the condition that the finances of the city government
should allow the same. Thus, DBM is merely enforcing the
condition of the law when it sets a uniform maximum
amount for the additional allowances that a city
government can release to judges stationed therein.
Assuming arguendo that LBC 55 is void, respondent
COA maintains that the provisions of the yearly approved
ordinance granting additional allowances to judges are still
prohibited by the appropriation laws passed by Congress
every year. COA argues that Mandaue City gets the funds
for the said additional allowances of judges from the
Internal Revenue Allotment (IRA). But the General
Appropriations Acts of 1994 and 1995 do not mention the
disbursement of additional allowances to judges as one of
the allowable uses of the IRA. Hence, the provisions of said
ordinance granting additional allowances, taken from the
IRA, to herein petitioner judges are void for being contrary
to law.
To resolve the instant petition, there are two issues that
we must address: (1) whether LBC 55 of the DBM is void for
going beyond the supervisory powers of the President and
for not having been published and (2) whether the yearly
296

appropriation ordinance enacted by the City of Mandaue
that provides for additional allowances to judges
contravenes the annual appropriation laws enacted by
Congress.
We rule in favor of the petitioner judges.
On the first issue, we declare LBC 55 to be null and void.
We recognize that, although our
Constitution
[6]
guarantees autonomy to local government
units, the exercise of local autonomy remains subject to the
power of control by Congress and the power of supervision
by the President. Section 4 of Article X of the 1987
Philippine Constitution provides that:
Sec. 4. The President of the Philippines shall exercise
general supervision over local governments. x x x
In Pimentel vs. Aguirre
[7]
, we defined the supervisory
power of the President and distinguished it from the power
of control exercised by Congress. Thus:
This provision (Section 4 of Article X of the 1987 Philippine
Constitution) has been interpreted to exclude the power of
control. In Mondano v. Silvosa,
[i][5]
the Court contrasted the
President's power of supervision over local government
officials with that of his power of control over executive
officials of the national government. It was emphasized
that the two terms -- supervision and control -- differed in
meaning and extent. The Court distinguished them as
follows:
"x x x In administrative law, supervision means overseeing
or the power or authority of an officer to see that
subordinate officers perform their duties. If the latter fail
or neglect to fulfill them, the former may take such action
or step as prescribed by law to make them perform their
duties. Control, on the other hand, means the power of an
officer to alter or modify or nullify or set aside what a
subordinate officer ha[s] done in the performance of his
duties and to substitute the judgment of the former for that
of the latter."
[ii][6]

In Taule v. Santos,
[iii][7]
we further stated that the Chief
Executive wielded no more authority than that of checking
whether local governments or their officials were
performing their duties as provided by the fundamental law
and by statutes. He cannot interfere with local
governments, so long as they act within the scope of their
authority. "Supervisory power, when contrasted with
control, is the power of mere oversight over an inferior
body; it does not include any restraining authority over
such body,"
[iv][8]
we said.
In a more recent case, Drilon v. Lim,
[v][9]
the difference
between control and supervision was further
delineated. Officers in control lay down the rules in the
performance or accomplishment of an act. If these rules
are not followed, they may, in their discretion, order the act
undone or redone by their subordinates or even decide to
do it themselves. On the other hand, supervision does not
cover such authority. Supervising officials merely see to it
297

that the rules are followed, but they themselves do not lay
down such rules, nor do they have the discretion to modify
or replace them. If the rules are not observed, they may
order the work done or redone, but only to conform to such
rules. They may not prescribe their own manner of
execution of the act. They have no discretion on this
matter except to see to it that the rules are followed.
Under our present system of government, executive power
is vested in the President.
[vi][10]
The members of the Cabinet
and other executive officials are merely alter egos. As such,
they are subject to the power of control of the President, at
whose will and behest they can be removed from office; or
their actions and decisions changed, suspended or
reversed.
[vii][11]
In contrast, the heads of political
subdivisions are elected by the people. Their sovereign
powers emanate from the electorate, to whom they are
directly accountable. By constitutional fiat, they are subject
to the President’s supervision only, not control, so long as
their acts are exercised within the sphere of their legitimate
powers. By the same token, the President may not
withhold or alter any authority or power given them by the
Constitution and the law.
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
government units. Hence, the President or any of his or
her alter egos cannot interfere in local affairs as long as the
concerned local government unit acts within the
parameters of the law and the Constitution. Any directive
therefore by the President or any of his or her alter
egos seeking to alter the wisdom of a law-conforming
judgment on local affairs of a local government unit is a
patent nullity because it violates the principle of local
autonomy and separation of powers of the executive and
legislative departments in governing municipal
corporations.
Does LBC 55 go beyond the law it seeks to implement?
Yes.
LBC 55 provides that the additional monthly allowances
to be given by a local government unit should not
exceed P1,000 in provinces and cities and P700 in
municipalities. Section 458, par. (a)(1)(xi), of RA 7160, the
law that supposedly serves as the legal basis of LBC 55,
allows the grant of additional allowances to judges “when
the finances of the city government allow.” The said
provision does not authorize setting a definite maximum
limit to the additional allowances granted to judges. Thus,
we need not belabor the point that the finances of a city
government may allow the grant of additional allowances
higher than P1,000 if the revenues of the said city
government exceed its annual expenditures. Thus, to
illustrate, a city government with locally generated annual
revenues of P40 million and expenditures of P35 million can
afford to grant additional allowances of more than P1,000
each to, say, ten judges inasmuch as the finances of the city
can afford it.
298

Setting a uniform amount for the grant of additional
allowances is an inappropriate way of enforcing the
criterion found in Section 458, par. (a)(1)(xi), of RA 7160.
The DBM over-stepped its power of supervision over local
government units by imposing a prohibition that did not
correspond with the law it sought to implement. In other
words, the prohibitory nature of the circular had no legal
basis.
Furthermore, LBC 55 is void on account of its lack of
publication, in violation of our ruling in Tañada vs.
Tuvera
[8]
where we held that:
xxx. Administrative rules and regulations must also be
published if their purpose is to enforce or implement
existing law pursuant to a valid delegation.
Interpretative regulations and those merely internal in
nature, that is, regulating only the personnel of an
administrative agency and the public, need not be
published. Neither is publication required of the so-called
letters of instruction issued by administrative superiors
concerning the rules or guidelines to be followed by their
subordinates in the performance of their duties.
Respondent COA claims that publication is not required
for LBC 55 inasmuch as it is merely an interpretative
regulation applicable to the personnel of an LGU. We
disagree. In De Jesus vs. Commission on Audit
[9]
where we
dealt with the same issue, this Court declared void, for lack
of publication, a DBM circular that disallowed payment of
allowances and other additional compensation to
government officials and employees. In refuting respondent
COA’s argument that said circular was merely an internal
regulation, we ruled that:
On the need for publication of subject DBM-CCC No. 10, we
rule in the affirmative. Following the doctrine enunciated
in Tañada v. Tuvera, publication in the Official Gazette or in
a newspaper of general circulation in the Philippines is
required since DBM-CCC No. 10 is in the nature of an
administrative circular the purpose of which is to enforce
or implement an existing law. Stated differently, to be
effective and enforceable, DBM-CCC No. 10 must go
through the requisite publication in the Official Gazette or
in a newspaper of general circulation in the Philippines.
In the present case under scrutiny, it is decisively clear that
DBM-CCC No. 10, which completely disallows payment of
allowances and other additional compensation to
government officials and employees, starting November 1,
1989, is not a mere interpretative or internal regulation. It
is something more than that. And why not, when it tends to
deprive government workers of their allowance and
additional compensation sorely needed to keep body and
soul together. At the very least, before the said circular
under attack may be permitted to substantially reduce
their income, the government officials and employees
concerned should be apprised and alerted by the
publication of subject circular in the Official Gazette or in a
newspaper of general circulation in the Philippines – to
299

the end that they be given amplest opportunity to voice
out whatever opposition they may have, and to ventilate
their stance on the matter. This approach is more in
keeping with democratic precepts and rudiments of
fairness and transparency. (emphasis supplied)
In Philippine International Trading Corporation vs.
Commission on Audit
[10]
, we again declared the same
circular as void, for lack of publication, despite the fact that
it was re-issued and then submitted for publication.
Emphasizing the importance of publication to the effectivity
of a regulation, we therein held that:
It has come to our knowledge that DBM-CCC No. 10 has
been re-issued in its entirety and submitted for publication
in the Official Gazette per letter to the National Printing
Office dated March 9, 1999. Would the subsequent
publication thereof cure the defect and retroact to the time
that the above-mentioned items were disallowed in audit?
The answer is in the negative, precisely for the reason that
publication is required as a condition precedent to the
effectivity of a law to inform the public of the contents of
the law or rules and regulations before their rights and
interests are affected by the same. From the time the COA
disallowed the expenses in audit up to the filing of herein
petition the subject circular remained in legal limbo due to
its non-publication. As was stated inTañada v. Tuvera,
“prior publication of laws before they become effective
cannot be dispensed with, for the reason that it would deny
the public knowledge of the laws that are supposed to
govern it.”
[11]

We now resolve the second issue of whether the yearly
appropriation ordinance enacted by Mandaue City
providing for fixed allowances for judges contravenes any
law and should therefore be struck down as null and void.
According to respondent COA, even if LBC 55 were void,
the ordinances enacted by Mandaue City granting
additional allowances to the petitioner judges would “still
(be) bereft of legal basis for want of a lawful source of
funds considering that the IRA cannot be used for such
purposes.” Respondent COA showed that Mandaue City’s
funds consisted of locally generated revenues and the IRA.
From 1989 to 1995, Mandaue City’s yearly expenditures
exceeded its locally generated revenues, thus resulting in a
deficit. During all those years, it was the IRA that enabled
Mandaue City to incur a surplus. Respondent avers that
Mandaue City used its IRA to pay for said additional
allowances and this violated paragraph 2 of the Special
Provisions, page 1060, of RA 7845 (The General
Appropriations Act of 1995)
[12]
and paragraph 3 of the
Special Provision, page 1225, of RA 7663 (The General
Appropriations Act of 1994)
[13]
which specifically identified
the objects of expenditure of the IRA. Nowhere in said
provisions of the two budgetary laws does it say that the
IRA can be used for additional allowances of judges.
Respondent COA thus argues that the provisions in the
ordinance providing for such disbursement are against the
300

law, considering that the grant of the subject allowances is
not within the specified use allowed by the aforesaid yearly
appropriations acts.
We disagree.
Respondent COA failed to prove that Mandaue City
used the IRA to spend for the additional allowances of the
judges. There was no evidence submitted by COA showing
the breakdown of the expenses of the city government and
the funds used for said expenses. All the COA presented
were the amounts expended, the locally generated
revenues, the deficit, the surplus and the IRA received each
year. Aside from these items, no data or figures were
presented to show that Mandaue City deducted the subject
allowances from the IRA. In other words, just because
Mandaue City’s locally generated revenues were not
enough to cover its expenditures, this did not mean that
the additional allowances of petitioner judges were taken
from the IRA and not from the city’s own revenues.
Moreover, the DBM neither conducted a formal review
nor ordered a disapproval of Mandaue City’s appropriation
ordinances, in accordance with the procedure outlined by
Sections 326 and 327 of RA 7160 which provide that:
Section 326. Review of Appropriation Ordinances of
Provinces, Highly Urbanized Cities, Independent
Component Cities, and Municipalities within the
Metropolitan Manila Area. The Department of Budget and
Management shall review ordinances authorizing the
annual or supplemental appropriations of provinces, highly-
urbanized cities, independent component cities, and
municipalities within the Metropolitan Manila Area in
accordance with the immediately succeeding Section.
Section 327. Review of Appropriation Ordinances of
Component Cities and Municipalities.- The sangguninang
panlalawigan shall review the ordinance authorizing annual
or supplemental appropriations of component cities and
municipalities in the same manner and within the same
period prescribed for the review of other ordinances.
If within ninety (90) days from receipt of copies of such
ordinance, the sangguniang panlalawigan takes no action
thereon, the same shall be deemed to have been reviewed
in accordance with law and shall continue to be in full
force and effect. (emphasis supplied)
Within 90 days from receipt of the copies of the
appropriation ordinance, the DBM should have taken
positive action. Otherwise, such ordinance was deemed to
have been properly reviewed and deemed to have taken
effect. Inasmuch as, in the instant case, the DBM did not
follow the appropriate procedure for reviewing the subject
ordinance of Mandaue City and allowed the 90-day period
to lapse, it can no longer question the legality of the
provisions in the said ordinance granting additional
allowances to judges stationed in the said city.
WHEREFORE, the petition is hereby GRANTED, and the
assailed decision and resolution, dated September 21, 1995
301

and May 28, 1996, respectively, of the Commission on Audit
are hereby set aside.
No costs.
SO ORDERED.
Davide, Jr., C.J., Bellosillo, Vitug, Mendoza, Panganiban,
Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio,
Austria-Martinez, Carpio-Morales, and Callejo, Sr.,
JJ., concur.
Puno, J., on official business.
Azcuna, J., on leave.
Torntv V9.0
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 182574 September 28, 2010
THE PROVINCE OF NEGROS OCCIDENTAL, represented by
its Governor ISIDRO P. ZAYCO, Petitioner,
vs.
THE COMMISSIONERS, COMMISSION ON AUDIT; THE
DIRECTOR, CLUSTER IV-VISAYAS; THE REGIONAL CLUSTER
DIRECTORS; and THE PROVINCIAL AUDITOR, NEGROS
OCCIDENTAL, Respondents.
D E C I S I O N
CARPIO, J.:
The Case
Before the Court is a petition for certiorari
1
assailing
Decision No. 2006-044
2
dated 14 July 2006 and Decision No.
2008-010
3
dated 30 January 2008 of the Commission on
Audit (COA) disallowing premium payment for the
hospitalization and health care insurance benefits of 1,949
officials and employees of the Province of Negros
Occidental.
The Facts
On 21 December 1994, the Sangguniang
Panlalawigan of Negros Occidental passed Resolution No.
720-A
4
allocating P4,000,000 of its retained earnings for the
hospitalization and health care insurance benefits of 1,949
officials and employees of the province. After a public
bidding, the Committee on Awards granted the insurance
coverage to Philam Care Health System Incorporated
(Philam Care).
Petitioner Province of Negros Occidental, represented by its
then Governor Rafael L. Coscolluela, and Philam Care
entered into a Group Health Care Agreement involving a
total payment of P3,760,000 representing the insurance
premiums of its officials and employees. The total premium
amount was paid on 25 January 1996.
302

On 23 January 1997, after a post-audit investigation, the
Provincial Auditor issued Notice of Suspension No. 97-001-
101
5
suspending the premium payment because of lack of
approval from the Office of the President (OP) as provided
under Administrative Order No. 103
6
(AO 103) dated 14
January 1994. The Provincial Auditor explained that the
premium payment for health care benefits violated
Republic Act No. 6758 (RA 6758),
7
otherwise known as the
Salary Standardization Law.
Petitioner complied with the directive post-facto and sent a
letter-request dated 12 January 1999 to the OP. In a
Memorandum dated 26 January 1999,
8
then President
Joseph E. Estrada directed the COA to lift the suspension
but only in the amount of P100,000. The Provincial Auditor
ignored the directive of the President and instead issued
Notice of Disallowance No. 99-005-101(96)
9
dated 10
September 1999 stating similar grounds as mentioned in
Notice of Suspension No. 97-001-101.
Petitioner appealed the disallowance to the COA. In a
Decision dated 14 July 2006, the COA affirmed the
Provincial Auditor’s Notice of Disallowance dated 10
September 1999.
10
The COA ruled that under AO 103, no
government entity, including a local government unit, is
exempt from securing prior approval from the President
granting additional benefits to its personnel. This is in
conformity with the policy of standardization of
compensation laid down in RA 6758. The COA added that
Section 468(a)(1)(viii)
11
of Republic Act No. 7160 (RA 7160)
or the Local Government Code of 1991 relied upon by
petitioner does not stand on its own but has to be
harmonized with Section 12
12
of RA 6758.
Further, the COA stated that the insurance benefits from
Philam Care, a private insurance company, was a
duplication of the benefits provided to employees under
the Medicare program which is mandated by law. Being
merely a creation of a local legislative body, the provincial
health care program should not contravene but instead be
consistent with national laws enacted by Congress from
where local legislative bodies draw their authority.
The COA held the following persons liable: (1) all the 1,949
officials and employees of the province who benefited from
the hospitalization and health care insurance benefits with
regard to their proportionate shares; (2) former Governor
Rafael L. Coscolluela, being the person who signed the
contract on behalf of petitioner as well as the person who
approved the disbursement voucher; and (3)
the Sangguniang Panlalawigan members who passed
Resolution No. 720-A. The COA did not hold Philam Care
and Provincial Accountant Merly P. Fortu liable for the
disallowed disbursement. The COA explained that it was
unjust to require Philam Care to refund the amount
received for services it had duly rendered since insurance
law prohibits the refund of premiums after risks had
already attached to the policy contract. As for the Provincial
Accountant, the COA declared that the Sangguniang
Panlalawigan resolution was sufficient basis for the
303

accountant to sign the disbursement voucher since there
were adequate funds available for the purpose. However,
being one of the officials who benefited from the subject
disallowance, the inclusion of the accountant’s name in the
persons liable was proper with regard to her proportionate
share of the premium.
The dispositive portion of the COA’s 14 July 2006 decision
states:
WHEREFORE, premises considered, and finding no
substantial ground or cogent reason to disturb the subject
disallowance, the instant appeal is hereby denied for lack of
merit. Accordingly, Notice of Disallowance No. 99-005-
101(96) dated 10 September 1999 in the total amount
of P3,760,000.00 representing the hospitalization and
insurance benefits of the officials and employees of the
Province of Negros Occidental is hereby AFFIRMED and the
refund thereof is hereby ordered.
The Cluster Director, Cluster IV-Visayas, COA Regional
Office No. VII, Cebu City shall ensure the proper
implementation of this decision.
13

Petitioner filed a Motion for Reconsideration dated 23
October 2006 which the COA denied in a Resolution dated
30 January 2008.
Hence, the instant petition.
The Issue
The main issue is whether COA committed grave abuse of
discretion in affirming the disallowance of P3,760,000 for
premium paid for the hospitalization and health care
insurance benefits granted by the Province of Negros
Occidental to its 1,949 officials and employees.
The Court’s Ruling
Petitioner insists that the payment of the insurance
premium for the health benefits of its officers and
employees was not unlawful and improper since it was paid
from an allocation of its retained earnings pursuant to a
valid appropriation ordinance. Petitioner states that such
enactment was a clear exercise of its express powers under
the principle of local fiscal autonomy which includes the
power of Local Government Units (LGUs) to allocate their
resources in accordance with their own priorities. Petitioner
adds that while it is true that LGUs are only agents of the
national government and local autonomy simply means
decentralization, it is equally true that an LGU has fiscal
control over its own revenues derived solely from its own
tax base.
Respondents, on the other hand, maintain that although
LGUs are afforded local fiscal autonomy, LGUs are still
bound by RA 6758 and their actions are subject to the
scrutiny of the Department of Budget and Management
(DBM) and applicable auditing rules and regulations
enforced by the COA. Respondents add that the grant of
additional compensation, like the hospitalization and health
304

care insurance benefits in the present case, must have prior
Presidential approval to conform with the state policy on
salary standardization for government workers.
AO 103 took effect on 14 January 1994 or eleven months
before the Sangguniang Panlalawigan of the Province of
Negros Occidental passed Resolution No. 720-A. The main
purpose of AO 103 is to prevent discontentment,
dissatisfaction and demoralization among government
personnel, national or local, who do not receive, or who
receive less, productivity incentive benefits or other forms
of allowances or benefits. This is clear in the Whereas
Clauses of AO 103 which state:
WHEREAS, the faithful implementation of statutes,
including the Administrative Code of 1987 and all laws
governing all forms of additional compensation and
personnel benefits is a Constitutional prerogative vested in
the President of the Philippines under Section 17, Article VII
of the 1987 Constitution;
WHEREAS, the Constitutional prerogative includes the
determination of the rates, the timing and schedule of
payment, and final authority to commit limited resources of
government for the payment of personal incentives, cash
awards, productivity bonus, and other forms of additional
compensation and fringe benefits;
WHEREAS, the unilateral and uncoordinated grant of
productivity incentive benefits in the past gave rise to
discontentment, dissatisfaction and demoralization
among government personnel who have received less or
have not received at all such benefits;
NOW, THEREFORE, I, FIDEL V. RAMOS, President of the
Republic of the Philippines, by virtue of the powers vested
in me by law and in order to forestall further
demoralization of government personnel do hereby direct:
x x x (Emphasis supplied)
Sections 1 and 2 of AO 103 state:
SECTION 1. All agencies of the National Government
including government-owned and/or -controlled
corporations and government financial institutions, and
local government units, are hereby authorized to grant
productivity incentive benefit in the maximum amount of
TWO THOUSAND PESOS (P2,000.00) each to their
permanent and full-time temporary and casual employees,
including contractual personnel with employment in the
nature of a regular employee, who have rendered at least
one (1) year of service in the Government as of December
31, 1993.
SECTION 2. All heads of government offices/agencies,
including government owned and/or controlled
corporations, as well as their respective governing
boards are hereby enjoined and prohibited from
authorizing/granting Productivity Incentive Benefits or any
and all forms of allowances/benefits without prior approval
305

and authorization via Administrative Order by the Office of
the President. Henceforth, anyone found violating any of
the mandates in this Order, including all officials/agency
found to have taken part thereof, shall be accordingly and
severely dealt with in accordance with the applicable
provisions of existing administrative and penal laws.
Consequently, all administrative authorizations to grant any
form of allowances/benefits and all forms of additional
compensation usually paid outside of the prescribed basic
salary under R.A. 6758, the Salary Standardization Law, that
are inconsistent with the legislated policy on the matter or
are not covered by any legislative action are hereby
revoked. (Emphasis supplied)
It is clear from Section 1 of AO 103 that the President
authorized all agencies of the national government as well
as LGUs to grant the maximum amount of P2,000
productivity incentive benefit to each employee who has
rendered at least one year of service as of 31 December
1993. In Section 2, the President enjoined all heads of
government offices and agencies from granting productivity
incentive benefits or any and all similar forms of allowances
and benefits without the President’s prior approval.
In the present case, petitioner, through an
approved Sangguniang Panlalawigan resolution, granted
and released the disbursement for the hospitalization and
health care insurance benefits of the province’s officials and
employees without any prior approval from the President.
The COA disallowed the premium payment for such
benefits since petitioner disregarded AO 103 and RA 6758.
We disagree with the COA. From a close reading of the
provisions of AO 103, petitioner did not violate the rule of
prior approval from the President since Section 2 states
that the prohibition applies only to "government
offices/agencies, including government-owned and/or
controlled corporations, as well as their respective
governing boards." Nowhere is it indicated in Section 2 that
the prohibition also applies to LGUs. The requirement then
of prior approval from the President under AO 103 is
applicable only to departments, bureaus, offices and
government-owned and controlled corporations under the
Executive branch. In other words, AO 103 must be observed
by government offices under the President’s control as
mandated by Section 17, Article VII of the Constitution
which states:
Section 17. The President shall have control of
all executive departments, bureaus and offices. He shall
ensure that the laws be faithfully executed. (Emphasis
supplied)1awphi1
Being an LGU, petitioner is merely under the President’s
general supervision pursuant to Section 4, Article X of the
Constitution:
Sec. 4. The President of the Philippines shall exercise
general supervision over local governments.Provinces with
306

respect to component cities and municipalities, and cities
and municipalities with respect to component barangays
shall ensure that the acts of their component units are
within the scope of their prescribed powers and functions.
(Emphasis supplied)
The President’s power of general supervision means the
power of a superior officer to see to it that subordinates
perform their functions according to law.
14
This is
distinguished from the President’s power of control which
is the power to alter or modify or set aside what a
subordinate officer had done in the performance of his
duties and to substitute the judgment of the President over
that of the subordinate officer.
15
The power of control gives
the President the power to revise or reverse the acts or
decisions of a subordinate officer involving the exercise of
discretion.
16

Since LGUs are subject only to the power of general
supervision of the President, the President’s authority is
limited to seeing to it that rules are followed and laws are
faithfully executed. The President may only point out that
rules have not been followed but the President cannot lay
down the rules, neither does he have the discretion to
modify or replace the rules. Thus, the grant of additional
compensation like hospitalization and health care insurance
benefits in the present case does not need the approval of
the President to be valid.
Also, while it is true that LGUs are still bound by RA 6758,
the COA did not clearly establish that the medical care
benefits given by the government at the time under
Presidential Decree No. 1519
17
were sufficient to cover the
needs of government employees especially those employed
by LGUs.
Petitioner correctly relied on the Civil Service Commission’s
(CSC) Memorandum Circular No. 33 (CSC MC No. 33), series
of 1997, issued on 22 December 1997 which provided the
policy framework for working conditions at the workplace.
In this circular, the CSC pursuant to CSC Resolution No. 97-
4684 dated 18 December 1997 took note of the inadequate
policy on basic health and safety conditions of work
experienced by government personnel. Thus, under CSC MC
No. 33, all government offices including LGUs were directed
to provide a health program for government employees
which included hospitalization services and annual mental,
medical-physical examinations.
Later, CSC MC No. 33 was further reiterated in
Administrative Order No. 402
18
(AO 402) which took effect
on 2 June 1998. Sections 1, 2, and 4 of AO 402 state:
Section 1. Establishment of the Annual Medical Check-up
Program. – An annual medical check-up for government of
officials and employees is hereby authorized to be
established starting this year, in the meantime that this
benefit is not yet integrated under the National Health
307

Insurance Program being administered by the Philippine
Health Insurance Corporation (PHIC).
Section 2. Coverage. – x x x Local Government Units are
also encouraged to establish a similar program for their
personnel.
Section 4. Funding. – x x x Local Government Units, which
may establish a similar medical program for their
personnel, shall utilize local funds for the purpose.
(Emphasis supplied)
The CSC, through CSC MC No. 33, as well as the President,
through AO 402, recognized the deficiency of the state of
health care and medical services implemented at the time.
Republic Act No. 7875
19
or the National Health Insurance
Act of 1995 instituting a National Health Insurance Program
(NHIP) for all Filipinos was only approved on 14 February
1995 or about two months after petitioner’s Sangguniang
Panlalawigan passed Resolution No. 720-A. Even with the
establishment of the NHIP, AO 402 was still issued three
years later addressing a primary concern that basic health
services under the NHIP either are still inadequate or have
not reached geographic areas like that of petitioner.
Thus, consistent with the state policy of local autonomy as
guaranteed by the 1987 Constitution, under Section 25,
Article II
20
and Section 2, Article X,
21
and the Local
Government Code of 1991,
22
we declare that the grant and
release of the hospitalization and health care insurance
benefits given to petitioner’s officials and employees were
validly enacted through an ordinance passed by
petitioner’s Sangguniang Panlalawigan.
In sum, since petitioner’s grant and release of the
questioned disbursement without the President’s approval
did not violate the President’s directive in AO 103, the COA
then gravely abused its discretion in applying AO 103 to
disallow the premium payment for the hospitalization and
health care insurance benefits of petitioner’s officials and
employees.
WHEREFORE, we GRANT the petition. We REVERSE AND
SET ASIDE Decision No. 2006-044 dated 14 July 2006 and
Decision No. 2008-010 dated 30 January 2008 of the
Commission on Audit.
SO ORDERED.
ANTONIO T. CARPIO
Associate Justice
WE CONCUR:
RENATO C. CORONA
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
308

G.R. No. L-23825 December 24, 1965
EMMANUEL PELAEZ, petitioner,
vs.
THE AUDITOR GENERAL, respondent.
Zulueta, Gonzales, Paculdo and Associates for petitioner.
Office of the Solicitor General for respondent.
CONCEPCION, J.:
During the period from September 4 to October 29, 1964
the President of the Philippines, purporting to act pursuant
to Section 68 of the Revised Administrative Code, issued
Executive Orders Nos. 93 to 121, 124 and 126 to 129;
creating thirty-three (33) municipalities enumerated in the
margin.
1
Soon after the date last mentioned, or on
November 10, 1964 petitioner Emmanuel Pelaez, as Vice
President of the Philippines and as taxpayer, instituted the
present special civil action, for a writ of prohibition with
preliminary injunction, against the Auditor General, to
restrain him, as well as his representatives and agents, from
passing in audit any expenditure of public funds in
implementation of said executive orders and/or any
disbursement by said municipalities.
Petitioner alleges that said executive orders are null and
void, upon the ground that said Section 68 has been
impliedly repealed by Republic Act No. 2370 and
constitutes an undue delegation of legislative power.
Respondent maintains the contrary view and avers that the
present action is premature and that not all proper parties
— referring to the officials of the new political subdivisions
in question — have been impleaded. Subsequently, the
mayors of several municipalities adversely affected by the
aforementioned executive orders — because the latter
have taken away from the former the barrios composing
the new political subdivisions — intervened in the case.
Moreover, Attorneys Enrique M. Fernando and Emma
Quisumbing-Fernando were allowed to and did appear
asamici curiae.
The third paragraph of Section 3 of Republic Act No. 2370,
reads:
Barrios shall not be created or their boundaries
altered nor their names changed except under the
provisions of this Act or by Act of Congress.
Pursuant to the first two (2) paragraphs of the same Section
3:
All barrios existing at the time of the passage of this
Act shall come under the provisions hereof.
Upon petition of a majority of the voters in the areas
affected, a new barrio may be created or the name of
an existing one may be changed by the provincial
board of the province, upon recommendation of the
council of the municipality or municipalities in which
309

the proposed barrio is stipulated. The
recommendation of the municipal council shall be
embodied in a resolution approved by at least two-
thirds of the entire membership of the said council:
Provided, however, That no new barrio may be
created if its population is less than five hundred
persons.
Hence, since January 1, 1960, when Republic Act No. 2370
became effective, barrios may "not be created or their
boundaries altered nor their names changed" except by Act
of Congress or of the corresponding provincial board "upon
petition of a majority of the voters in the areas affected"
and the "recommendation of the council of the municipality
or municipalities in which the proposed barrio is situated."
Petitioner argues, accordingly: "If the President, under
this new law, cannot even create a barrio, can he create a
municipality which is composed of several barrios,
since barrios are units of municipalities?"
Respondent answers in the affirmative, upon the theory
that a new municipality can be created without creating
new barrios, such as, by placing old barrios under the
jurisdiction of the new municipality. This theory overlooks,
however, the main import of the petitioner's argument,
which is that the statutory denial of the presidential
authority to create a new barrio implies a negation of the
bigger power to create municipalities, each of which
consists of several barrios. The cogency and force of this
argument is too obvious to be denied or even questioned.
Founded upon logic and experience, it cannot be offset
except by a clear manifestation of the intent of Congress to
the contrary, and no such manifestation, subsequent to the
passage of Republic Act No. 2379, has been brought to our
attention.
Moreover, section 68 of the Revised Administrative Code,
upon which the disputed executive orders are based,
provides:
The (Governor-General) President of the Philippines
may by executive order define the boundary, or
boundaries, of any province, subprovince,
municipality, [township] municipal district, or other
political subdivision, and increase or diminish the
territory comprised therein, may divide any province
into one ormore subprovinces, separate any political
division other than a province, into such portions as
may be required, merge any of such subdivisions or
portions with another, name any new subdivision so
created, and may change the seat of government
within any subdivision to such place therein as the
public welfare may require: Provided, That the
authorization of the (Philippine Legislature) Congress
of the Philippines shall first be obtained whenever
the boundary of any province or subprovince is to be
defined or any province is to be divided into one or
more subprovinces. When action by the (Governor-
General) President of the Philippines in accordance
herewith makes necessary a change of the territory
310

under the jurisdiction of any administrative officer or
any judicial officer, the (Governor-General) President
of the Philippines, with the recommendation and
advice of the head of the Department having
executive control of such officer, shall redistrict the
territory of the several officers affected and assign
such officers to the new districts so formed.
Upon the changing of the limits of political divisions
in pursuance of the foregoing authority, an equitable
distribution of the funds and obligations of the
divisions thereby affected shall be made in such
manner as may be recommended by the (Insular
Auditor) Auditor General and approved by the
(Governor-General) President of the Philippines.
Respondent alleges that the power of the President to
create municipalities under this section does not amount to
an undue delegation of legislative power, relying
upon Municipality of Cardona vs. Municipality of
Binañgonan (36 Phil. 547), which, he claims, has settled it.
Such claim is untenable, for said case involved, not the
creation of a new municipality, but a mere transfer of
territory — from an already existing municipality (Cardona)
to another municipality (Binañgonan), likewise, existing at
the time of and prior to said transfer (See Gov't of the P.I.
ex rel. Municipality of Cardona vs. Municipality, of
Binañgonan [34 Phil. 518, 519-5201) — in consequence of
the fixing and definition, pursuant to Act No. 1748, of the
common boundaries of two municipalities.
It is obvious, however, that, whereas the power to fix such
common boundary, in order to avoid or settle conflicts of
jurisdiction between adjoining municipalities, may partake
of an administrative nature — involving, as it does, the
adoption of means and ways to carry into effect the law
creating said municipalities — the authority to create
municipal corporations is essentially legislative in nature. In
the language of other courts, it is "strictly a legislative
function" (State ex rel. Higgins vs. Aicklen, 119 S. 425,
January 2, 1959) or "solely and exclusively the exercise
oflegislative power" (Udall vs. Severn, May 29, 1938, 79 P.
2d 347-349). As the Supreme Court of Washington has put
it (Territory ex rel. Kelly vs. Stewart, February 13, 1890, 23
Pac. 405, 409), "municipal corporations are purely the
creatures of statutes."
Although
1a
Congress may delegate to another branch of the
Government the power to fill in the details in the execution,
enforcement or administration of a law, it is essential, to
forestall a violation of the principle of separation of powers,
that said law: (a) be complete in itself — it must set forth
therein the policy to be executed, carried out or
implemented by the delegate
2
— and (b) fix a standard —
the limits of which are sufficiently determinate or
determinable — to which the delegate must conform in the
performance of his functions.
2a
Indeed, without a statutory
declaration of policy, the delegate would in effect, make or
formulate such policy, which is the essence of every law;
and, without the aforementioned standard, there would be
no means to determine, with reasonable certainty, whether
311

the delegate has acted within or beyond the scope of his
authority.
2b
Hence, he could thereby arrogate upon himself
the power, not only to make the law, but, also — and this is
worse — to unmake it, by adopting measures inconsistent
with the end sought to be attained by the Act of Congress,
thus nullifying the principle of separation of powers and the
system of checks and balances, and, consequently,
undermining the very foundation of our Republican system.
Section 68 of the Revised Administrative Code does not
meet these well settled requirements for a valid delegation
of the power to fix the details in the enforcement of a law.
It does not enunciate any policy to be carried out or
implemented by the President. Neither does it give a
standard sufficiently precise to avoid the evil effects above
referred to. In this connection, we do not overlook the fact
that, under the last clause of the first sentence of Section
68, the President:
... may change the seat of the government within any
subdivision to such place therein as the public welfare
may require.
It is apparent, however, from the language of this clause,
that the phrase "as the public welfare may require"
qualified, not the clauses preceding the one just quoted,
but only the place to which the seat of the government may
be transferred. This fact becomes more apparent when we
consider that said Section 68 was originally Section 1 of Act
No. 1748,
3
which provided that, "whenever in the judgment
of the Governor-General the public welfare requires, he
may, by executive order," effect the changes enumerated
therein (as in said section 68), including the change of the
seat of the government "to such place ... as the public
interest requires." The opening statement of said Section 1
of Act No. 1748 — which was not included in Section 68 of
the Revised Administrative Code — governed the time at
which, or the conditions under which, the powers therein
conferred could be exercised; whereas the last part of the
first sentence of said section referred exclusively to
the place to which the seat of the government was to be
transferred.
At any rate, the conclusion would be the same, insofar as
the case at bar is concerned, even if we assumed that the
phrase "as the public welfare may require," in said Section
68, qualifies all other clauses thereof. It is true that
in Calalang vs. Williams (70 Phil. 726) and People vs.
Rosenthal (68 Phil. 328), this Court had upheld "public
welfare" and "public interest," respectively, as sufficient
standards for a valid delegation of the authority to execute
the law. But, the doctrine laid down in these cases — as all
judicial pronouncements — must be construed in relation
to the specific facts and issues involved therein, outside of
which they do not constitute precedents and have no
binding effect.
4
The law construed in the Calalang case
conferred upon the Director of Public Works, with the
approval of the Secretary of Public Works and
Communications, the power to issue rules and regulations
topromote safe transit upon national roads and streets.
312

Upon the other hand, the Rosenthal case referred to the
authority of the Insular Treasurer, under Act No. 2581, to
issue and cancel certificates or permits for the
sale ofspeculative securities. Both cases involved grants
to administrative officers of powers related to the exercise
of their administrative functions, calling for the
determination of questions of fact.
Such is not the nature of the powers dealt with in section
68. As above indicated, the creation of municipalities, is not
an administrative function, but one which is essentially
and eminently legislative in character. The question of
whether or not "public interest" demands the exercise of
such power is not one of fact. it is "purely a
legislativequestion "(Carolina-Virginia Coastal Highway vs.
Coastal Turnpike Authority, 74 S.E. 2d. 310-313, 315-318),
or apolitical question (Udall vs. Severn, 79 P. 2d. 347-349).
As the Supreme Court of Wisconsin has aptly characterized
it, "the question as to whether incorporation is for the best
interest of the community in any case is emphatically
a question of public policy and statecraft" (In re Village of
North Milwaukee, 67 N.W. 1033, 1035-1037).
For this reason, courts of justice have annulled, as
constituting undue delegation of legislative powers, state
laws granting the judicial department, the power to
determine whether certain territories should be annexed to
a particular municipality (Udall vs. Severn, supra, 258-359);
or vesting in a Commission the right to determine the plan
and frame of government of proposed villages and what
functions shall be exercised by the same, although the
powers and functions of the village are specifically limited
by statute (In re Municipal Charters, 86 Atl. 307-308); or
conferring upon courts the authority to declare a given
town or village incorporated, and designate its metes and
bounds, upon petition of a majority of the taxable
inhabitants thereof, setting forth the area desired to be
included in such village (Territory ex rel Kelly vs. Stewart, 23
Pac. 405-409); or authorizing the territory of a town,
containing a given area and population, to be incorporated
as a town, on certain steps being taken by the inhabitants
thereof and on certain determination by a court and
subsequent vote of the inhabitants in favor thereof, insofar
as the court is allowed to determine whether the lands
embraced in the petition "ought justly" to be included in
the village, and whether the interest of the inhabitants will
be promoted by such incorporation, and to enlarge and
diminish the boundaries of the proposed village "as justice
may require" (In re Villages of North Milwaukee, 67 N.W.
1035-1037); or creating a Municipal Board of Control which
shall determine whether or not the laying out, construction
or operation of a toll road is in the "public interest" and
whether the requirements of the law had been complied
with, in which case the board shall enter an order creating a
municipal corporation and fixing the name of the same
(Carolina-Virginia Coastal Highway vs. Coastal Turnpike
Authority, 74 S.E. 2d. 310).
Insofar as the validity of a delegation of power by Congress
to the President is concerned, the case of Schechter Poultry
313

Corporation vs. U.S. (79 L. Ed. 1570) is quite relevant to the
one at bar. The Schechter case involved the
constitutionality of Section 3 of the National Industrial
Recovery Act authorizing the President of the United States
to approve "codes of fair competition" submitted to him by
one or more trade or industrial associations or corporations
which "impose no inequitable restrictions on admission to
membership therein and are truly representative,"
provided that such codes are not designed "to promote
monopolies or to eliminate or oppress small enterprises
and will not operate to discriminate against them, and will
tend to effectuate the policy" of said Act. The Federal
Supreme Court held:
To summarize and conclude upon this point: Sec. 3 of
the Recovery Act is without precedent. It supplies no
standards for any trade, industry or activity. It does
not undertake to prescribe rules of conduct to be
applied to particular states of fact determined by
appropriate administrative procedure. Instead of
prescribing rules of conduct, it authorizes the making
of codes to prescribe them. For that legislative
undertaking, Sec. 3 sets up no standards, aside from
the statement of the general aims of rehabilitation,
correction and expansion described in Sec. 1. In view
of the scope of that broad declaration, and of the
nature of the few restrictions that are imposed, the
discretion of the President in approving or
prescribing codes, and thus enacting laws for the
government of trade and industry throughout the
country, is virtually unfettered. We think that the
code making authority thus conferred is an
unconstitutional delegation of legislative power.
If the term "unfair competition" is so broad as to vest in the
President a discretion that is "virtually unfettered." and,
consequently, tantamount to a delegation of legislative
power, it is obvious that "public welfare," which has even a
broader connotation, leads to the same result. In fact, if the
validity of the delegation of powers made in Section 68
were upheld, there would no longer be any legal
impediment to a statutory grant of authority to the
President to do anything which, in his opinion, may be
required by public welfare or public interest. Such grant of
authority would be a virtual abdication of the powers of
Congress in favor of the Executive, and would bring about a
total collapse of the democratic system established by our
Constitution, which it is the special duty and privilege of this
Court to uphold.
It may not be amiss to note that the executive orders in
question were issued after the legislative bills for the
creation of the municipalities involved in this case had failed
to pass Congress. A better proof of the fact that the
issuance of said executive orders entails the exercise of
purely legislative functions can hardly be given.
Again, Section 10 (1) of Article VII of our fundamental law
ordains:
314

The President shall have control of all the executive
departments, bureaus, or offices, exercise general
supervision over all local governments as may be
provided by law, and take care that the laws be
faithfully executed.
The power of control under this provision implies the right
of the President to interfere in the exercise of such
discretion as may be vested by law in the officers of the
executive departments, bureaus, or offices of the national
government, as well as to act in lieu of such officers. This
power is denied by the Constitution to the Executive,
insofar as local governments are concerned. With respect
to the latter, the fundamental law permits him to wield no
more authority than that of checking whether said local
governments or the officers thereof perform their duties as
provided by statutory enactments. Hence, the President
cannot interfere with local governments, so long as the
same or its officers act Within the scope of their authority.
He may not enact an ordinance which the municipal council
has failed or refused to pass, even if it had thereby violated
a duty imposed thereto by law, although he may see to it
that the corresponding provincial officials take appropriate
disciplinary action therefor. Neither may he vote, set aside
or annul an ordinance passed by said council within the
scope of its jurisdiction, no matter how patently unwise it
may be. He may not even suspend an elective official of a
regular municipality or take any disciplinary action against
him, except on appeal from a decision of the corresponding
provincial board.
5

Upon the other hand if the President could create a
municipality, he could, in effect, remove any of its officials,
by creating a new municipality and including therein
the barrio in which the official concerned resides, for his
office would thereby become vacant.
6
Thus, by merely
brandishing the power to create a new municipality (if he
had it), without actually creating it, he could compel local
officials to submit to his dictation, thereby, in effect,
exercising over them the power of control denied to him by
the Constitution.
Then, also, the power of control of the President over
executive departments, bureaus or offices implies no
morethan the authority to assume directly the functions
thereof or to interfere in the exercise of discretion by its
officials. Manifestly, such control does not include the
authority either to abolish an executive department or
bureau, or to create a new one. As a consequence, the
alleged power of the President to create municipal
corporations would necessarily connote the exercise by him
of an authority even greater than that of control which he
has over the executive departments, bureaus or offices. In
other words, Section 68 of the Revised Administrative Code
does not merely fail to comply with the constitutional
mandate above quoted. Instead of giving the President less
power over local governments than that vested in him over
the executive departments, bureaus or offices, it reverses
the process and does the exact opposite, by conferring
upon him more power over municipal corporations than
315

that which he has over said executive departments,
bureaus or offices.
In short, even if it did entail an undue delegation of
legislative powers, as it certainly does, said Section 68, as
part of the Revised Administrative Code, approved on
March 10, 1917, must be deemed repealed by the
subsequent adoption of the Constitution, in 1935, which is
utterly incompatible and inconsistent with said statutory
enactment.
7

There are only two (2) other points left for consideration,
namely, respondent's claim (a) that "not all the proper
parties" — referring to the officers of the newly created
municipalities — "have been impleaded in this case," and
(b) that "the present petition is premature."
As regards the first point, suffice it to say that the records
do not show, and the parties do not claim, that the officers
of any of said municipalities have been appointed or
elected and assumed office. At any rate, the Solicitor
General, who has appeared on behalf of
respondent Auditor General, is the officer authorized by
law "to act and represent the Government of the
Philippines, its offices and agents, in any official
investigation, proceeding or matter requiring the services of
a lawyer" (Section 1661, Revised Administrative Code), and,
in connection with the creation of the aforementioned
municipalities, which involves a political, not proprietary,
function, said local officials, if any, are mere agents or
representatives of the national government. Their interest
in the case at bar has, accordingly, been, in effect, duly
represented.
8

With respect to the second point, respondent alleges that
he has not as yet acted on any of the executive order & in
question and has not intimated how he would act in
connection therewith. It is, however, a matter of common,
public knowledge, subject to judicial cognizance, that the
President has, for many years, issued executive orders
creating municipal corporations and that the same have
been organized and in actual operation, thus indicating,
without peradventure of doubt, that the expenditures
incidental thereto have been sanctioned, approved or
passed in audit by the General Auditing Office and its
officials. There is no reason to believe, therefore, that
respondent would adopt a different policy as regards the
new municipalities involved in this case, in the absence of
an allegation to such effect, and none has been made by
him.
WHEREFORE, the Executive Orders in question are hereby
declared null and void ab initio and the respondent
permanently restrained from passing in audit any
expenditure of public funds in implementation of said
Executive Orders or any disbursement by the municipalities
above referred to. It is so ordered.
Bengzon, C.J., Bautista Angelo, Reyes, J.B.L., Barrera and
Dizon, JJ., concur.
316

Zaldivar, J., took no part.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-28113 March 28, 1969
THE MUNICIPALITY OF MALABANG, LANAO DEL SUR, and
AMER MACAORAO BALINDONG, petitioners,
vs.
PANGANDAPUN BENITO, HADJI NOPODIN MACAPUNUNG,
HADJI HASAN MACARAMPAD, FREDERICK V. DUJERTE
MONDACO ONTAL, MARONSONG ANDOY, MACALABA
INDAR LAO. respondents.
L. Amores and R. Gonzales for petitioners.
Jose W. Diokno for respondents.
CASTRO, J.:
The petitioner Amer Macaorao Balindong is the mayor of
Malabang, Lanao del Sur, while the respondent
Pangandapun Bonito is the mayor, and the rest of the
respondents are the councilors, of the municipality of
Balabagan of the same province. Balabagan was formerly a
part of the municipality of Malabang, having been created
on March 15, 1960, by Executive Order 386 of the then
President Carlos P. Garcia, out of barrios and sitios
1
of the
latter municipality.
The petitioners brought this action for prohibition to
nullify Executive Order 386 and to restrain the respondent
municipal officials from performing the functions of their
respective office relying on the ruling of this Court inPelaez
v. Auditor General
2
and Municipality of San Joaquin v.
Siva.
3

In Pelaez this Court, through Mr. Justice (now Chief
Justice) Concepcion, ruled: (1) that section 23 of Republic
Act 2370 [Barrio Charter Act, approved January 1, 1960], by
vesting the power to create barrios in the provincial board,
is a "statutory denial of the presidential authority to create
a new barrio [and] implies a negation of thebigger power to
create municipalities," and (2) that section 68 of the
Administrative Code, insofar as it gives the President the
power to create municipalities, is unconstitutional (a)
because it constitutes an undue delegation of legislative
power and (b) because it offends against section 10 (1) of
article VII of the Constitution, which limits the President's
power over local governments to mere supervision. As this
Court summed up its discussion: "In short, even if it did not
entail an undue delegation of legislative powers, as it
certainly does, said section 68, as part of the Revised
Administrative Code, approved on March 10, 1917, must be
deemed repealed by the subsequent adoption of the
Constitution, in 1935, which is utterly incompatible and
inconsistent with said statutory enactment."
317

On the other hand, the respondents, while admitting the
facts alleged in the petition, nevertheless argue that the
rule announced in Pelaez can have no application in this
case because unlike the municipalities involved inPelaez,
the municipality of Balabagan is at least a de
facto corporation, having been organized under color of a
statute before this was declared unconstitutional, its
officers having been either elected or appointed, and the
municipality itself having discharged its corporate
functions for the past five years preceding the institution of
this action. It is contended that as a de facto corporation,
its existence cannot be collaterally attacked, although it
may be inquired into directly in an action for quo
warranto at the instance of the State and not of an
individual like the petitioner Balindong.
It is indeed true that, generally, an inquiry into the legal
existence of a municipality is reserved to the State in a
proceeding for quo warranto or other direct proceeding,
and that only in a few exceptions may a private person
exercise this function of government.
4
But the rule
disallowing collateral attacks applies only where the
municipal corporation is at least a de
facto corporations.
5
For where it is neither a corporation de
jure nor de facto, but a nullity, the rule is that its existence
may be, questioned collaterally or directly in any action or
proceeding by any one whose rights or interests ate
affected thereby, including the citizens of the territory
incorporated unless they are estopped by their conduct
from doing so.
6

And so the threshold question is whether the municipality
of Balabagan is a de facto corporation. As earlier stated, the
claim that it is rests on the fact that it was organized before
the promulgation of this Court's decision inPelaez.
7

Accordingly, we address ourselves to the question
whether a statute can lend color of validity to an attempted
organization of a municipality despite the fact that such
statute is subsequently declared
unconstitutional.lawphi1.ñet
This has been a litigiously prolific question, sharply dividing
courts in the United States. Thus, some hold that ade
facto corporation cannot exist where the statute or charter
creating it is unconstitutional because there can be no de
facto corporation where there can be no de jure one,
8
while
others hold otherwise on the theory that a statute is
binding until it is condemned as unconstitutional.
9

An early article in the Yale Law Journal offers the following
analysis:
It appears that the true basis for denying to the
corporation a de facto status lay in the absence of
any legislative act to give vitality to its creation. An
examination of the cases holding, some of them
unreservedly, that a de facto office or municipal
corporation can exist under color of an
unconstitutional statute will reveal that in no
instance did the invalid act give life to the
318

corporation, but that either in other valid acts or in
the constitution itself the office or the corporation
was potentially created....
The principle that color of title under an
unconstitutional statute can exist only where there is
some other valid law under which the organization
may be effected, or at least an authority in
potentia by the state constitution, has its counterpart
in the negative propositions that there can be no
color of authority in an unconstitutional statute that
plainly so appears on its face or that attempts to
authorize the ousting of a de jure or de
facto municipal corporation upon the same territory;
in the one case the fact would imply the imputation
of bad faith, in the other the new organization must
be regarded as a mere usurper....
As a result of this analysis of the cases the following
principles may be deduced which seem to reconcile
the apparently conflicting decisions:
I. The color of authority requisite to the
organization of a de facto municipal
corporation may be:
1. A valid law enacted by the legislature.
2. An unconstitutional law, valid on its
face, which has either (a) been upheld
for a time by the courts or (b) not yet
been declared void; provided that a
warrant for its creation can be found in
some other valid law or in the
recognition of its potential existence by
the general laws or constitution of the
state.
II. There can be no de facto municipal
corporation unless either directly or
potentially, such a de jurecorporation is
authorized by some legislative fiat.
III. There can be no color of authority in an
unconstitutional statute alone, the invalidity of
which is apparent on its face.
IV. There can be no de facto corporation created to
take the place of an existing de jure corporation, as
such organization would clearly be a usurper.
10

In the cases where a de facto municipal corporation was
recognized as such despite the fact that the statute creating
it was later invalidated, the decisions could fairly be made
to rest on the consideration that there was some other
valid law giving corporate vitality to the organization.
Hence, in the case at bar, the mere fact that Balabagan was
organized at a time when the statute had not been
invalidated cannot conceivably make it a de
facto corporation, as, independently of the Administrative
319

Code provision in question, there is no other valid statute
to give color of authority to its creation. Indeed,
in Municipality of San Joaquin v. Siva,
11
this Court granted a
similar petition for prohibition and nullified an executive
order creating the municipality of Lawigan in Iloilo on the
basis of the Pelaez ruling, despite the fact that the
municipality was created in 1961, before section 68 of the
Administrative Code, under which the President had acted,
was invalidated. 'Of course the issue of de factomunicipal
corporation did not arise in that case.
In Norton v. Shelby Count,
12
Mr. Justice Field said: "An
unconstitutional act is not a law; it confers no rights; it
imposes no duties; it affords no protection; it creates no
office; it is, in legal contemplation, as inoperative as though
it had never been passed." Accordingly, he held that bonds
issued by a board of commissioners created under an
invalid statute were unenforceable.
Executive Order 386 "created no office." This is not to say,
however, that the acts done by the municipality of
Balabagan in the exercise of its corporate powers are a
nullity because the executive order "is, in legal
contemplation, as inoperative as though it had never been
passed." For the existence of Executive, Order 386 is "an
operative fact which cannot justly be ignored." As Chief
Justice Hughes explained in Chicot County Drainage District
v. Baxter State Bank:
13

The courts below have proceeded on the theory
that the Act of Congress, having been found to be
unconstitutional, was not a law; that it was
inoperative, conferring no rights and imposing no
duties, and hence affording no basis for the
challenged decree. Norton v. Shelby County, 118 U.S.
425, 442; Chicago, I. & L. Ry. Co. v. Hackett, 228 U.S.
559, 566. It is quite clear, however, that such broad
statements as to the effect of a determination of
unconstitutionality must be taken with qualifications.
The actual existence of a statute, prior to such a
determination, is an operative fact and may have
consequences which cannot justly be ignored. The
past cannot always be erased by a new judicial
declaration. The effect of the subsequent ruling as to
invalidity may have to be considered in various
aspects — with respect to particular relations,
individual and corporate, and particular conduct,
private and official. Questions of rights claimed to
have become vested, of status of prior
determinations deemed to have finality and acted
upon accordingly, of public policy in the light of the
nature both of the statute and of its previous
application, demand examination. These questions
are among the most difficult of those which have
engaged the attention of courts, state and federal,
and it is manifest from numerous decisions that an
all-inclusive statement of a principle of absolute
retroactive invalidity cannot be justified.
320

There is then no basis for the respondents' apprehension
that the invalidation of the executive order creating
Balabagan would have the effect of unsettling many an act
done in reliance upon the validity of the creation of that
municipality.
14

ACCORDINGLY, the petition is granted, Executive Order
386 is declared void, and the respondents are hereby
permanently restrained from performing the duties and
functions of their respective offices. No pronouncement as
to costs.
Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez and
Capistrano, JJ., concur.
Teehankee and Barredo, JJ., took no part.


Separate Opinions
Republic of the Philippines
SUPREME COURT
Manila
EN BANC

G.R. No. 103702 December 6, 1994
MUNICIPALITY OF SAN NARCISO, QUEZON; MAYOR JUAN
K. UY; COUNCILORS: DEOGRACIAS R. ARGOSINO III,
BENITO T. CAPIO, EMMANUEL R. CORTEZ, NORMANDO
MONTILLA, LEONARDO C. UY, FIDEL C. AURELLANA,
PEDRO C. CARABIT, LEONARDO D. AURELLANA, FABIAN M.
MEDENILLA, TRINIDAD F. CORTEZ, SALVADOR M.
MEDENILLA, CERELITO B. AUREADA and FRANCISCA A.
BAMBA, petitioners,
vs.
HON. ANTONIO V. MENDEZ, SR., Presiding Judge, Regional
Trial Court, Branch 62, 4th Judicial Region, Gumaca,
Quezon; MUNICIPALITY OF SAN ANDRES, QUEZON;
MAYOR FRANCISCO DE LEON; COUNCILORS: FE LUPINAC,
TOMAS AVERIA, MANUEL O. OSAS, WILFREDO O.
FONTANIL, ENRICO U. NADRES, RODELITO LUZOIR, LENAC,
JOSE L. CARABOT, DOMING AUSA, VIDAL BANQUELES and
CORAZON M. MAXIMO, respondents.
Manuel Laserna, Jr. for petitioners.
Florante Pamfilo for private respondents.

VITUG, J.:
On 20 August 1959, President Carlos P. Garcia, issued,
pursuant to the then Sections 68 and 2630 of the Revised
Administrative Code, as amended, Executive Order No. 353
creating the municipal district of San Andres, Quezon, by
321

segregating from the municipality of San Narciso of the
same province, the barrios of San Andres, Mangero,
Alibijaban, Pansoy, Camflora and Tala along with their
respective sitios.
Executive Order No. 353 was issued upon the request,
addressed to the President and coursed through the
Provincial Board of Quezon, of the municipal council of
San Narciso, Quezon, in its Resolution No. 8 of 24 May
1959.
1

By virtue of Executive Order No. 174, dated 05 October
1965, issued by President Diosdado Macapagal, the
municipal district of San Andres was later officially
recognized to have gained the status of a fifth class
municipality beginning 01 July 1963 by operation of Section
2 of Republic Act No. 1515.
2
The executive order added
that "(t)he conversion of this municipal district into (a)
municipality as proposed in House Bill No. 4864 was
approved by the House of Representatives."
On 05 June 1989, the Municipality of San Narciso filed a
petition for quo warranto with the Regional Trial Court,
Branch 62, in Gumaca, Quezon, against the officials of the
Municipality of San Andres. Docketed Special Civil
Action No. 2014-G, the petition sought the declaration of
nullity of Executive Order No. 353 and prayed that the
respondent local officials of the Municipality of San Andres
be permanently ordered to refrain from performing the
duties and functions of their respective offices.
3
Invoking
the ruling of this Court in Pelaez v. Auditor General,
4
the
petitioning municipality contended that Executive Order
No. 353, a presidential act, was a clear usurpation of the
inherent powers of the legislature and in violation of the
constitutional principle of separation of powers. Hence,
petitioner municipality argued, the officials of the
Municipality or Municipal District of San Andres had no
right to exercise the duties and functions of their respective
offices that righfully belonged to the corresponding officials
of the Municipality of San Narciso.
In their answer, respondents asked for the dismissal of the
petition, averring, by way of affirmative and special
defenses, that since it was at the instance of petitioner
municipality that the Municipality of San Andres was given
life with the issuance of Executive Order No. 353, it
(petitioner municipality) should be deemed estopped from
questioning the creation of the new municipality;
5
that
because the Municipality of San Andred had been in
existence since 1959, its corporate personality could no
longer be assailed; and that, considering the petition to be
one for quo warranto, petitioner municipality was not the
proper party to bring the action, that prerogative being
reserved to the State acting through the Solicitor General.
6

On 18 July 1991, after the parties had submitted their
respective pre-trial briefs, the trial court resolved to defer
action on the motion to dismiss and to deny a judgment on
the pleadings.
322

On 27 November 1991, the Municipality of San Andres filed
anew a motion to dismiss alleging that the case had
become moot and academic with the enactment of
Republic Act No. 7160, otherwise known as the Local
Government Code of 1991, which took effect on 01 January
1991. The movant municipality cited Section 442(d) of the
law, reading thusly:
Sec. 442. Requisites for Creation. — . . .
(d) Municipalities existing as of the date of the
effectivity of this Code shall continue to exist
and operate as such. Existing municipal
districts organized pursuant to presidential
issuances or executive orders and which have
their respective set of elective municipal
officials holding office at the time of the
effectivity of this Code shall henceforth be
considered as regular municipalities.
The motion was opposed by petitioner municipality,
contending that the above provision of law was
inapplicable to the Municipality of San Andres since
the enactment referred to legally existing
municipalities and not to those whose mode of
creation had been void ab initio.
7

In its Order of 02 December 1991, the lower court
8
finally
dismissed the petition
9
for lack of cause of action on what
it felt was a matter that belonged to the State, adding that
"whatever defects (were) present in the creation of
municipal districts by the President pursuant to presidential
issuances and executive orders, (were) cured by the
enactment of R.A. 7160, otherwise known as Local
Government Code of 1991." In an order, dated 17 January
1992, the same court denied petitioner municipality's
motion for reconsideration.
Hence, this petition "for review on certiorari."
Petitioners
10
argue that in issuing the orders of 02
December 1991 and 17 January 1992, the lower court has
"acted with grave abuse of discretion amounting to lack of
or in excess of jurisdiction." Petitioners assert that the
existence of a municipality created by a null and void
presidential order may be attacked either directly or even
collaterally by anyone whose interests or rights are
affected, and that an unconstitutional act is not a law,
creates no office and is inoperative such as though its has
never been passed.
11

Petitioners consider the instant petition to be one for
"review on certiorari" under Rules 42 and 45 of the Rules of
Court; at the same time, however, they question the orders
of the lower court for having been issued with "grave abuse
of discretion amounting to lack of or in excess of
jurisdiction, and that there is no other plain, speedy and
adequate remedy in the ordinary course of law available to
petitioners to correct said Orders, to protect their rights
and to secure a final and definitive interpretation of the
legal issues involved."
12
Evidently, then, the petitioners
323

intend to submit their case in this instance under Rule 65.
We shall disregard the procedural incongruence.
The special civil action of quo warranto is a "prerogative
writ by which the Government can call upon any person to
show by what warrant he holds a public office or exercises
a public franchise."
13
When the inquiry is focused on the
legal existence of a body politic, the action is reserved to
the State in a proceeding for quo warranto or any
other creditproceeding.
14
It must be brought "in the name
of the Republic of the Philippines"
15
and commenced by
the Solicitor General or the fiscal "when directed by the
President of the Philippines . . . ."
16
Such officers may,
under certain circumstances, bring such an action "at the
request and upon the relation of another person" with the
permission of the court.
17
The Rules of Court also allows an
individual to commence an action for quo warranto in his
own name but this initiative can be done when he claims to
be "entitled to a public office or position usurped or
unlawfully held or exercised by another."
18
While the quo
warranto proceedings filed below by petitioner municipality
has so named only the officials of the Municipality of San
Andres as respondents, it is virtually, however, a
denunciation of the authority of the Municipality or
Municipal District of San Andres to exist and to act in that
capacity.
At any rate, in the interest of resolving any further doubt on
the legal status of the Municipality of San Andres, the Court
shall delve into the merits of the petition.
While petitioners would grant that the enactment of
Republic Act
No. 7160 may have converted the Municipality of San
Andres into a de facto municipality, they, however, contend
that since the petition for quo warranto had been filed prior
to the passage of said law, petitioner municipality had
acquired a vested right to seek the nullification of Executive
Order No. 353, and any attempt to apply Section 442 of
Republic Act 7160 to the petition would perforce be
violative of due process and the equal protection clause of
the Constitution.
Petitioners' theory might perhaps be a point to consider
had the case been seasonably brought. Executive Order No.
353 creating the municipal district of San Andres was issued
on 20 August 1959 but it was only after almost thirty (30)
years, or on 05 June 1989, that the municipality of San
Narciso finally decided to challenge the legality of the
executive order. In the meantime, the Municipal District,
and later the Municipality, of San Andres, began and
continued to exercise the powers and authority of a duly
created local government unit. In the same manner that the
failure of a public officer to question his ouster or the right
of another to hold a position within a one-year period can
abrogate an action belatedly filed,
19
so also, if not indeed
with greatest imperativeness, must a quo
warrantoproceeding assailing the lawful authority of a
political subdivision be timely raised.
20
Public interest
demands it.
324

Granting the Executive Order No. 353 was a complete
nullity for being the result of an unconstitutional delegation
of legislative power, the peculiar circumstances obtaining in
this case hardly could offer a choice other than to consider
the Municipality of San Andres to have at least attained a
status uniquely of its own closely approximating, if not in
fact attaining, that of a de facto municipal corporation.
Conventional wisdom cannot allow it to be otherwise.
Created in 1959 by virtue of Executive Order No. 353, the
Municipality of San Andres had been in existence for more
than six years when, on 24 December 1965, Pelaez v.
Auditor General was promulgated. The ruling could have
sounded the call for a similar declaration of the
unconstitutionality of Executive Order No. 353 but it was
not to be the case. On the contrary, certain governmental
acts all pointed to the State's recognition of the continued
existence of the Municipality of San Andres. Thus, after
more than five years as a municipal district, Executive Order
No. 174 classified the Municipality of San Andres as a fifth
class municipality after having surpassed the income
requirement laid out in Republic Act No. 1515. Section 31 of
Batas Pambansa Blg. 129, otherwise known as the Judiciary
Reorganization Act of 1980, constituted as municipal
circuits, in the establishment of Municipal Circuit Trial
Courts in the country, certain municipalities that comprised
the municipal circuits organized under Administrative Order
No. 33, dated 13 June 1978, issued by this Court pursuant
to Presidential Decree No. 537. Under this administrative
order, the Municipality of San Andres had been covered by
the 10th Municipal Circuit Court of San Francisco-San
Andres for the province of Quezon.
At the present time, all doubts on the de jure standing of
the municipality must be dispelled. Under the Ordinance
(adopted on 15 October 1986) apportioning the seats of the
House of Representatives, appended to the 1987
Constitution, the Municipality of San Andres has been
considered to be one of the twelve (12) municipalities
composing the Third District of the province of Quezon.
Equally significant is Section 442(d) of the Local
Government Code to the effect that municipal districts
"organized pursuant to presidential issuances or executive
orders and which have their respective sets of elective
municipal officials holding office at the time of the
effectivity of (the) Code shall henceforth be considered as
regular municipalities." No pretension of
unconstitutionality per seof Section 442(d) of the Local
Government Code is proferred. It is doubtful whether such
a pretext, even if made, would succeed. The power to
create political subdivisions is a function of the legislature.
Congress did just that when it has incorporated Section
442(d) in the Code. Curative laws, which in essence are
retrospective,
21
and aimed at giving "validity to acts done
that would have been invalid under existing laws, as if
existing laws have been complied with," are validly
accepted in this jurisdiction, subject to the usual
qualification against impairment of vested rights.
22

325

All considered, the de jure status of the Municipality of San
Andres in the province of Quezon must now be conceded.
WHEREFORE, the instant petition for certiorari is hereby
DISMISSED. Costs against petitioners.
SO ORDERED.
Narvasa, C.J., Padilla, Bidin, Regalado, Davide, Jr., Romero,
Bellosillo, Melo, Quiason, Puno, Kapunan and Mendoza, JJ.
concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-59180 January 29, 1987
CLEMENTINO TORRALBA and RESOLUTION L.
RUGAY, petitioners,
vs.
THE MUNICIPALITY OF SIBAGAT, PROVINCE OF AGUSAN
DEL SUR and ITS MUNICIPAL OFFICERS,respondents.

MELENCIO-HERRERA, J.:
Challenged in the instant Petition, as violative of Section 3,
Article XI of the 1973 Constitution, is Batas Pambansa Blg.
56, enacted on 1 February 1980, creating the Municipality
of Sibagat, Province of Agusan del Sur. The pertinent
provisions of BP 56 read:
Sec. 1. The barangays of Ilihan, Sinai, Sibagat, El Rio, Afga,
Tabontabon, Perez, Magsaysay, Santa Cruz, Santa Maria,
San Isidro, Villangit, Del Rosario, Anahauan Mahayahay, and
San Vicente, all in the Municipality of Bayugan, Province of
Agusan del Sur, are hereby separated from said
municipality to form and constitute an independent
Municipality of Sibagat without affecting in any manner the
legal existence of the mother Municipality of Bayugan.
Sec. 2. The boundaries of the new Municipality of Sibagat
will be: Beginning at the point of intersection of the
Cabadbaran-Old Bayugan and Surigao del Sur boundaries;
thence in a southernly direction following the Old Bayugan
and Cabadbaran, Old Bayugan and Butuan City, Old
Bayugan and Las Nieves boundaries, until it reaches the
point of intersection of Old Bayugan, Esperanza and the
Municipality of Las Nieves; ...
Sec. 3. The seat of government of the newly created
municipality shall be in Barangay Sibagat.
Sec. 4. Except as herein provided, all provisions of laws,
now or hereafter applicable to regular municipalities shall
be applicable to the new Municipality of Sibagat.
326

Sec. 5. After ratification by the majority of the votes cast in
a plebiscite to be conducted in the area or areas affected
within a period of ninety (90) days after the approval of this
Act, the President (Prime Minister) shall appoint the Mayor
and other Officials of the new Municipality of Sibagat.
Petitioners are residents and taxpayers of Butuan City, with
petitioner, Clementino Torralba, being a member of the
Sangguniang Panglunsod of the same City. Respondent
municipal officers are the local public officials of the new
Municipality.
Section 3, Article XI of the 1973 Constitution, said to have
been infringed, is reproduced hereunder:
Sec. 3. No province, city, municipality, or barrio may be
created, divided, merged, abolished, or its boundary
substantially altered, except in accordance with the criteria
established in the Local Government Code, and subject to
the approval by a majority of the votes cast in a plebiscite in
the unit or units affected.
The thrust of petitioners' argument is that under the
aforequoted provision, the Local Government Code must
first be enacted to determine the criteria for the creation,
division, merger, abolition, or substantial alteration of the
boundary of any province, city, municipality, or barrio; and
that since no Local Government Code had as yet been
enacted as of the date BP 56 was passed, that statute could
not have possibly complied with any criteria when
respondent Municipality was created, hence, it is null and
void.
It is a fact that the Local Government Code came into being
only on 10 February 1983 so that when BP 56 was enacted,
the code was not yet in existence. The evidence likewise
discloses that a plebiscite had been conducted among the
people of the unit/units affected by the creation of the new
Municipality, who expressed approval thereof; and that
officials of the newly created Municipality had been
appointed and had assumed their respective positions as
such.
We find no trace of invalidity of BP 56. The absence of the
Local Government Code at the time of its enactment did
not curtail nor was it intended to cripple legislative
competence to create municipal corporations. Section 3,
Article XI of the 1973 Constitution does not proscribe nor
prohibit the modification of territorial and political
subdivisions before the enactment of the Local Government
Code. It contains no requirement that the Local
Government Code is a condition sine qua non for the
creation of a municipality, in much the same way that the
creation of a new municipality does not preclude the
enactment of a Local Government Code. What the
Constitutional provision means is that once said Code is
enacted, the creation, modification or dissolution of local
government units should conform with the criteria thus laid
down. In the interregnum before the enactment of such
Code, the legislative power remains plenary except that the
327

creation of the new local government unit should be
approved by the people concerned in a plebiscite called for
the purpose.
The creation of the new Municipality of Sibagat conformed
to said requisite. A plebiscite was conducted and the people
of the unit/units affected endorsed and approved the
creation of the new local government unit (parag. 5,
Petition; p. 7, Memorandum).lwphl@itç In fact, the conduct
of said plebiscite is not questioned herein. The officials of
the new Municipality have effectively taken their oaths
of office and are performing their functions. A dejure entity
has thus been created.
It is a long-recognized principle that the power to create
a municipal corporation is essentially legislative in nature.
In the absence of any constitutional limitations a legislative
body may Create any corporation it deems essential for
the more efficient administration of government (I
McQuillin, Municipal Corporations, 3rd ed., 509). The
creation of the new Municipality of Sibagat was a valid
exercise of legislative power then vested by the 1973
Constitution in the Interim Batasang Pambansa.
We are not unmindful of the case of Tan vs. COMELEC (142
SCRA 727 [1986]), striking down as unconstitutional BP Blg.
885 creating a new province in the Island of Negros known
as the Province of Negros del Norte, and declaring the
plebiscite held in connection therewith as illegal There are
significant differences, however, in the two cases among
which may be mentioned the following. in the Tan case, the
Local Government Code already existed at the time that the
challenged statute was enacted on 3 December 1985; not
so in the case at bar. Secondly, BP Blg. 885 in the Tan case
confined the plebiscite to the "proposed new province" to
the exclusion of the voters in the remaining areas, in
contravention of the Constitutional mandate and of the
Local Government Code that the plebiscite should be held
"in the unit or units affected." In contrast, BP 56 specifically
provides for a plebiscite "in the area or areas affected." In
fact, as previously stated, no question is raised herein as to
the legality of the plebiscite conducted. Thirdly, in
the Tan case, even the requisite area for the creation of a
new province was not complied with in BP Blg. 885. No such
issue in the creation of the new municipality has been
raised here. And lastly, "indecent haste" attended the
enactment of BP Blg. 885 and the holding of the plebiscite
thereafter in the Tan case; on the other hand, BP 56
creating the Municipality of Sibagat, was enacted in the
normal course of legislation, and the plebiscite was held
within the period specified in that law.
WHEREFORE, the Petition is hereby dismissed. No costs.
SO ORDERED.
Teehankee, C.J., Yap, Fernan, Narvasa, Alampay, Gutierrez,
Jr., Paras, Feliciano, Gancayco, Padilla and Bidin, JJ., concur.

328

EN BANC
[G.R. No. 105746. December 2, 1996]
MUNICIPALITY OF JIMENEZ, through its MAYOR
ELEUTERIO A. QUIMBO, VICE MAYOR ROBINSON B.
LOMO, COUNCILORS TEOFILO GALORIO, CASIANO
ADORABLE, MARIO APAO, ANTONIO BIENES, VEDE
SULLANO, MARIETO TAN, SR., HERMINIO SERINO,
BENJAMIN DANO, and CRISPULO MUNAR, and
ELEUTERIO A. QUIMBO, ROBINSON B. LOMO,
TEOFILI GALORIO, CASIANO ADORABLE, MARIO
APAO, ANTONIO BIENES, VEDE SULLANO, MARIETO
TAN SR., HERMINI SERINO, BENJAMIN DANO, and
CRISPULO MUNAR, in their private capacities as
taxpayer in the Province of Misamis Occidental and
the Municipality of Jimenez, Misamis Occidental,
and BENJAMIN C. GALINDO and BENHUR B.
BAUTISTA, in their private capacities as taxpayers in
the Province of Misamis Occidental and the
Municipality of Jimenez, Misamis
Occidental, petitioners, vs., HON. VICENTE T. BAZ,
JR., Presiding Judge REGIONAL TRIAL COURT,
BRANCH 14, 10
th
JUDICIAL REGION, OROQUIETA
CITY, and MUNICIPALITY OF SINACABAN through its
MAYOR EUFRACIO D. LOOD, VICE MAYOR BASILIO
M. BANAAG, COUNCILORS CONCEPCION E. LAGA-
AC, MIGUEL F. ABCEDE, JUANITO B. TIU, CLAUDIO T.
REGIL, ANCIETO S. MEJARES NAZIANCINO B.
MARIQUIT, and FEDERICO QUINIMON, and THE
PROVINCE OF MISAMIS OCCIDENTAL through the
PROVINCIAL BOARD OF MISAMIS OCCIDENTAL and
its members, VICE-GOVERNOR FLORENCIO L.
GARCIA, BOARD MEMBERS MARIVIC S. CHIONG,
PACITA M. YAP, ALEGRIA V. CARINO, JULIO L. TIU,
LEONARDO R. REGALADO II, CONSTACIO C. BALAIS
and ERNESTO P. IRA, and THE COMMISSION ON
AUDIT, through its Chairman, HON. EUFEMIO
DOMINGO, and THE DEPARTMENT OF LOCAL
GOVERNMENT through its Secretary, HON. LUIS
SANTOS (now HON. CESAR SARINO), and THE
DEPARTMENT OF BUDGET AND MANAGEMENT,
through its Secretary, HON. GUILLERMO CARAGUE
(now HON. SALVADOR ENRIQUEZ), and The Hon.
CATALINO MACARAOG (now HON. FRAKLIN
DRILON), EXECUTIVE SECRETARY, OFFICE OF THE
PRESIDENT, respondents.
D E C I S I O N
MENDOZA, J.:
This is a petition for review of the decision dated March
4, 1992 of the Regional Trial Court, Branch 14 of Oroquieta
City,
[1]
affirming the legal existence of the Municipality of
Sinacaban in Misamis Occidental and ordering the
329

relocation of its boundary for the purpose of determining
whether certain areas claimed by it belong to it.
The antecedent facts are as follows:
The Municipality of Sinacaban was created by Executive
Order No. 258 of then President Elpidio Quirino, pursuant
to §68 of the Revised Administrative Code of 1917. The full
text of the Order reads:
EXECUTIVE ORDER NO. 258
CREATING THE MUNICIPALITY OF SINACABAN,
IN THE PROVINCE OF MISAMIS OCCIDENTAL
Upon the recommendation of the Secretary of the Interior,
and pursuant to the provisions of Section 68 of the Revised
Administrative Code, there is hereby created, in the
Province of Misamis Occidental, a municipality to be known
as the municipality of Sinacaban, which shall consist of the
southern portion of the municipality of Jimenez, Misamis
Occidental, more particularly described and bounded as
follows:
On the north by a line starting from point 1, the center of
the lighthouse on the Tabo-o point S. 84
0
30’W., 7,250
meters to point 2 which is on the bank of Palilan River
branch; thence following Palilan River branch 2,400 meters
southwesterly 'to point 3, thence a straight line S 87
0
00’ W,
22,550 meters to point 4, where this intersects the Misamis
Occidental-Zamboanga boundary; on the west, by the
present Misamis Occidental-Zamboanga boundary; and on
the south by the present Jimenez-Tudela boundary; and on
the east, by the limits of the municipal waters which the
municipality of Sinacaban shall have pursuant to section
2321 of the Revised Administrative Code, (Description
based on data shown in Enlarged Map of Poblacion of
Jimenez, Scale 1:8:000).
The municipality of Sinacabn contains the barrios of
Sinacaban, which shall be the seat of the municipal
government, Sinonoc, Libertad, the southern portion of the
barrio of Macabayao, and the sitios of Tipan, Katipunan,
Estrella, Flores, Senior, Adorable, San Isidro, Cagayanon,
Kamanse, Kulupan and Libertad Alto.
The municipality of Jimenez shall have its present territory,
minus the portion thereof included in the municipality of
Sinacaban.
The municipality of Sinacaban shall begin to exist upon the
appointment and qualification of the mayor, vice-mayor,
and a majority of the councilors thereof. The new
municipality shall, however, assume payment of a
proportionate share of the loan of the municipality of
Jimenez with the Rehabilitation Finance Corporation as may
be outstanding on the date of its organization, the
proportion of such payment to be determined by the
Department of Finance.
330

Done in the City of Manila, this 30
th
day of August, in the
year of Our Lord, nineteen hundred and forty-nine, and of
the Independence of the Philippines, the fourth.
(SGD.) ELPIDIO QUIRINO
President of the Philippines
By the President:
(SGD.) TEODORO EVANGELISTA
Executive Secretary
By virtue of Municipal Council Resolution No.
171,
[2]
dated November 22, 1988, Sinacaban laid claim to a
portion of Barrio Tabo-o and to Barrios Macabayao,
Adorable, Sinara Baja, and Sinara Alto,
[3]
based on the
technical description in E.O. No. 258. The claim was filed
with the Provincial Board of Misamis Occidental against the
Municipality of Jimenez.
In its answer, the Municipality of Jimenez, while
conceding that under E.O. No. 258 the disputed area is part
of Sinacaban, nonetheless asserted jurisdiction on the basis
of an agreement it had with the Municipality of
Sinacaban. This agreement was approved by the Provincial
Board of Misamis Occidental, in its Resolution No. 77, dated
February 18, 1950, which fixed the common boundary of
Sinacaban and Jimenez as follows:
[4]

From a point at Cagayanon Beach follow Macabayao Road
until it intersects Tabangag Creek at the back of the
Macabayao Elementary school. Follow the Tabangag Creek
until it intersect the Macabayao River at upper
Adorable. Follow the Macabayao River such that the barrio
of Macabayao, Sitio Adorable and site will be a part of the
Jimenez down and the sitios of San Vicente, Donan, Estrella,
Mapula will be a part of Sinacaban. (Emphasis added)
In its decision dated October 11, 1989,
[5]
the Provincial
Board declared the disputed area to be part of
Sinacaban. It held that the previous resolution approving
the agreement between the municipalities was void
because the Board had no power to alter the boundaries of
Sinacaban as fixed in E.O. No. 258, that power being vested
in Congress pursuant to the Constitution and the Local
Government Code of 1983 (B.P. Blg. 337), §134.
[6]
The
Provincial Board denied in its Resolution No. 13-90 dated
January 30, 1990 the motion of Jimenez seeking
reconsideration.
[7]

On March 20, 1990, Jimenez filed a petition
for certiorari, prohibition, and mandamus in the Regional
Trial Court of Oroquieta City, Branch 14. The suit was filed
against Sinacaban, the Province of Misamis Occidental and
its Provincial Board, the Commission on Audit, the
Departments of Local Government, Budget and
Management, and the Executive Secretary. Jimenez alleged
that, in accordance with the decision in Pelaez v. Auditor
General,
[8]
the power to create municipalities is essentially
legislative and consequently Sinacaban, which was created
by an executive order, had no legal personality and no right
331

to assert a territorial claim vis-à-vis Jimenez, of which it
remains part. Jimenez prayed that Sinacaban be enjoined
from assuming control and supervision over the disputed
barrios; that the Provincial Board be enjoined from
assuming jurisdiction over the claim of Sinacaban; that E.O.
No. 258 be declared null and void; that the decision dated
October 11, 1989 and Resolution No. 13-90 of the Provincial
Board be set aside for having been rendered without
jurisdiction; that the Commission on Audit be enjoined from
passing in audit any expenditure of public funds by
Sinacaban; that the Department of Budget and
Management be enjoined from allotting public funds to
Sinacaban; and that the Executive Secretary be enjoined
from exercising control and supervision over said
municipality.
During pre-trial, the parties agreed to limit the issues to
the following:
A. Whether the Municipality of Sinacaban is a legal
juridical entity, duly created in accordance with
law;
B. If not, whether it is a de facto juridical entity;
C. Whether the validity of the existence of the
Municipality can be properly questioned in this
action on certiorari;
D. Whether the Municipality of Jimenez which had
recognized the existence of the municipality for
more than 40 years is estopped to question its
existence;
E. Whether the existence of the municipality has
been recognized by the laws of the land; and
F. Whether the decision of the Provincial Board had
acquired finality.
On February 10, 1992, the RTC rendered its decision,
the dispositive portion of which reads:
WHEREFORE, premises considered, it is the finding of this
Court that the petition must be denied and judgment is
hereby rendered declaring a STATUS QUO, that is, the
municipality of Sinacaban shall continue to exist and
operate as a regular municipality; declaring the decision
dated October 11, 1989 rendered by the Sangguniang
Panlalawigan fixing the boundaries between Sinacaban and
Jimenez, Missamis Occi. as null and void, the same not
being in accordance with the boundaries provided for in
Executive order No. 258 creating
the municipality of Sinacaban; dismissing the petition for
lack of merit, without pronouncement as to cost and
damages. With respect to the counterclaim, the same is
hereby ordered dismissed.
The Commissioners are hereby ordered to conduct the
relocation survey of the boundary of Sinacaban within 60
days from the time the decision shall have become final and
executory and another 60 days within which to submit their
report from the completion of the said relocation survey.
332

SO ORDERED.
The RTC, inter alia, held that Sinacaban is a de
facto corporation since it had completely organized itself
even prior to the Pelaez case and exercised corporate
powers for forty years before the existence was
questioned; that Jimenez did not have the legal standing to
question the existence of Sinacaban, the same being
reserved to he State as represented by the Office of the
Solicitor General in a quo warranto proceeding; that
Jimenez was estopped from questioning the legal existence
of Sinacaban by entering into an agreement with it
concerning their common boundary; and that any question
as to the legal existence of Sinacaban had been rendered
moot by §442 (d) of the Local Government Code of 1991
(R.A. No. 7160), which provides:
Municipalities existing as of the date of the effectivity of
this Code shall continue to exist and operate as
such. Existing municipal districts organized pursuant to
presidential issuances or executive orders and which
have their respective set of elective municipal officials
holding office at the time of the effectivity of this Code
shall henceforth be considered as regular
municipalities.
On March 17, 1990, petitioner moved for a
reconsideration of the decision but its motion was denied
by the RTC. Hence this petition raising the following issues:
(1) whether Sinacaban has legal personality to file a claim,
and (2) if it has, whether it is the boundary provided for in
E.O. No. 258 or in resolution No. 77 of the Provincial Board
of Misamis Occidental which should be used as the basis for
adjudicating Sinacaban’s territorial claim.
First. The preliminary issue concerns the legal existence
of Sinacaban. If Sinacaban legally exist, then it has standing
to bring a claim in the Provincial Board. Otherwise, it
cannot.
The principal basis for the view that Sinacaban was not
validly created as a municipal corporation is the ruling in
Pelaez v. Auditor General that the creation of municipal
corporations is essentially a legislative matter and therefore
the President was without power to create by executive
order the Municipality of Sinacaban. The ruling in this case
has been reiterated in a number of cases
[9]
later
decided. However, we have since held that where a
municipality created as such by executive order is later
impliedly recognized and its acts are accorded legal validity,
its creation can no longer be questioned. In Municipality of
San Narciso, Quezon v. Mendez, Sr.,
[10]
this Court
considered the following factors as having validated the
creation of a municipal corporation, which, like the
Municipallity of Sinacaban, was created by executive order
of the President before the ruling in Pelaez v. Auditor
general: (1) the fact that for nearly 30 years the validity of
the creation of the municipality had never been challenged;
(2) the fact that following the ruling in Pelaez no quo
warranto suit was filed to question the validity of the
executive order creating such municipality; and (3) the fact
333

that the municipality was later classified as a fifth class
municipality, organized as part of a municipal circuit court
and considered part of a legislative district in the
Constitution apportioning the seats in the House of
Representatives. Above all, it was held that whatever
doubt there might be as to the de jure character of the
municipality must be deemed to have been put to rest by
the local Government Code of 1991 (R.A. no. 7160), §442
(d) of which provides that “municipal districts organized
pursuant to presidential issuances or executive orders and
which have their respective sets of elective officials holding
office at the time of the effectivity of this Code shall
henceforth be considered as regular municipalities.”
Here, the same factors are present so as to confer on
Sinacaban the status of at least a de facto municipal
corporation in the sense that its legal existence has been
recognized and acquiesced publicly and
officially. Sinacaban had been in existence for sixteen years
when Pelaez v. Auditor General was decided on December
24, 1965. Yet the validity of E.O. No. 258 creating it had
never been questioned. Created in 1949, it was only 40
years later that its existence was questioned and only
because it had laid claim to an area that apparently is
desired for its revenue. This fact must be underscored
because under Rule 66, §16 of the Rules of Court, a quo
warranto suit against a corporation for forfeiture of its
charter must be commenced within five (5) years from the
time the act complained of was done or committed. On the
contrary, the State and even the municipality of Jimenez
itself have recognized Sinacaban’s corporate
existence. Under Administrative order no. 33 dated June
13, 1978 of this Court, as reiterated by §31 of the judiciary
Reorganization Act of 1980 (B.P. Blg. 129), Sinacaban is
constituted part of municipal circuit for purposes of the
establishment of Municipal Circuit Trial Courts in the
country. For its part, Jimenez had earlier recognized
Sinacaban in 1950 by entering into an agreement with it
regarding their common boundary. The agreement was
embodied in Resolution no. 77 of the Provincial Board of
Misamis Occidental.
Indeed Sinacaban has attained de