StatCon Chap IX-1

THIRD DIVISION
The second loan, obtained on July 7, 1976 in the amount of P127,000.00, was secured by mortgage of
properties covered by TCT Nos. NT-143002, 143003 and 139575. 2
[G.R. No. 163988. November 17, 2005.]
VALENTINA A. NUEZ, FELIX A. NUEZ, FELIXITA A. NUEZ, LEONILO A. NUEZ, JR.,

ELIZA A. NUEZ, EMMANUEL A. NUEZ and DIVINA A. NUEZ as heirs of LEONILO S.
NUEZ, ** petitioners, vs. GSIS FAMILY BANK (Formerly COMSAVINGS BANK) and the
COURT OF APPEALS, respondents.
DECISION
CARPIO MORALES, J p:
The third loan, obtained also on July 7, 1976 in the amount of P105,900.00, actually amended the first
loan of P55,900.00 to secure which amended loan the same property covered by TCT No. NT-139575-A
3 was mortgaged. The amended loan, no copy of which forms part of the records, was admitted by the
parties during the pre-trial. 4
On June 30, 1978, when the three loans were maturing, Leonilo purportedly obtained a "fourth loan" in
the amount of P1,539,135.00 to secure which he executed a Real Estate Mortgage antedated June 28,
1978 over properties covered by TCT Nos. NT-145734, 143001, 143004, 143005, 143006, 143007. 5
On the maturity of the three loans or on June 30, 1978, Leonilo executed a Promissory Note 6 in the
amount of P1,539,135.00, due and payable on December 27, 1978.
The facts are not disputed:

The details of the loans secured by Leonilo including the purported "fourth loan" are shown in the
following table:
Petitioners are the heirs of Leonilo S. Nuez (Leonilo) who, during his lifetime, obtained three loans
from the GSIS Family Bank, formerly ComSavings Bank which in turn was formerly known as Royal
Savings and Loan Association (the bank).
The first loan, contracted on April 6, 1976 in the amount of P55,900.00, was secured by a mortgage
over a parcel of land covered by TCT NT-139575-A whereon the mortgage was annotated on April 8,
1976. 1
Statutory Construction Chapter IX: Statute Construed as a Whole and in Relation to Other Statutes
Page 1
On September 1, 1999, on petition of the bank, the mortgage over properties covered by TCT Nos.
143001 and 143007, two of the six parcels of land which secured the "fourth loan" that matured on
December 27, 1978, was extrajudicially foreclosed. At the public auction, the bank was the highest
bidder and a Certificate of Sale 11 dated February 18, 2000 was issued in its name.
Leonilo later filed on June 20, 2000 before the Regional Trial Court (RTC) of Gapan, Nueva Ecija a
complaint against the GSIS Family Bank, 12 docketed as Civil Case No. 2269, for Annulment of
Extrajudicial Foreclosure Sale, Reconveyance and Cancellation of Encumbrances.
More than nineteen (19) years after Leonilo's June 30, 1978 Promissory Note matured or on
December 11, 1997, the bank undertook to extrajudicially foreclose 7 the properties covered by TCT
Nos. NT-143002, 143003, 139575 and 139575-A which secured the first two loans.
In its petition for extrajudicial foreclosure, the bank alleged that Leonilo violated the terms and
conditions of the loans secured by the Real Estate Mortgages since June 30, 1978 when he failed,
despite repeated demands, to pay his principal obligations, and interest due thereon from December 27,
1978, up to the time that the petition was filed. 8
Acting on the bank's petition for Extra-judicial Foreclosure of Mortgage, the Ex-Officio Sheriff of Gapan,
Nueva Ecija issued a Notice of Extra-judicial Sale 9 setting the sale of the properties involved at public
auction on January 9, 1998.
In his complaint, Leonilo denied securing a "fourth loan" but nevertheless alleged that "for purposes of
the action, the same shall be assumed to have been validly secured."
Invoking prescription, he citing Articles 1142 13 and 1144 14 of the Civil Code, Leonilo contended that
his first three loans and the "fourth loan" matured on June 30, 1978 and December 27, 1978, hence,
they had prescribed on June 28, 1988 and December 25, 1988, respectively. 15 When, on December
11, 1997 and September 1, 1999 then, the bank filed the Petitions for Extrajudicial Foreclosure of
Mortgage, Leonilo concluded that it no longer had any right as prescription had set in.
Leonilo invited the attention of the court to the fact that although six titles secured the purported "fourth
loan" of P1,539,135.00, only two, TCT Nos. NT-143001 and NT-143007, were the subject of foreclosure
sale on September 1, 1999 and the mortgage was not annotated on the four other mortgaged titles,
TCT Nos. NT-143004, 143005, 143006 and 145734. 16 Moreover, he pointed out that the record 17
shows that the Real Estate Mortgage dated June 28, 1978 purportedly securing the "fourth loan" was
annotated on NT-143001 and NT-143007 subject of the September 1, 1999 foreclosure only on August
31, 1999 or more than 11 years after the prescriptive period to foreclose had set in. 18
The auction took place as scheduled, with the bank as the highest and only bidder in the amount of
P33,026,100.00. A Certificate of Sale 10 was thus issued in favor of the bank.
Page 2
By Decision dated August 9, 2002, Branch 34 of the Gapan RTC found for Leonilo who died during the
pendency of the trial of the case, hence, his substitution by his heirs herein petitioners, declaring that
the bank's cause of action over the loans had prescribed and, therefore, the proceedings for
extrajudicial foreclosure of real estate mortgages were null and void.
The bank filed a motion for reconsideration 19 on September 20, 2002, the last of the 15-day period
within which it could interpose an appeal, but it did not comply with the provision of Section 4, Rule 15
20 of the Rules of Court on notice of hearing, prompting herein petitioners to file a Motion to Strike Out
Motion for Reconsideration with Motion for the issuance of a writ of execution. 21
The bank filed an Opposition with Motion to Admit 22 (the Motion for Reconsideration), attributing its
failure to incorporate the notice of hearing to inadvertent deletion from its computer file of standard
clauses for pleadings the required notice of hearing and to the heavy workload of the handling counsel,
Atty. George Garvida.
The trial court denied the bank's Motion for Reconsideration by Order 23 of November 18, 2002 and
accordingly ordered it stricken off the record:
After a serious evaluation of the arguments for/and against the instant Motion for Reconsideration, the
Court believes and so-holds that, while it is true that the high Court has set aside technicality in order not to
defeat the ends of justice in appropriate cases, it is likewise true that litigations at some point of time must
end otherwise, litigation of cases will be endless.
The bank filed a Notice of Appeal 25 to which petitioners filed a Motion to Dismiss for being filed late, 26
which motion was granted by the trial court by Order 27 of February 10, 2003.
The bank thereupon elevated via petition for certiorari 28 the case before the Court of Appeals (CA)
faulting the trial court to have
I. . . . COMMITTED GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK AND/OR EXCESS OF

JURISDICTION IN ISSUING THE HEREIN ASSAILED ORDER DATED 10 FEBRUARY 2003
CONSIDERING THAT THE TRIAL COURT HAD ALREADY LOST JURISDICTION OF THE
CASE IN VIEW OF THE PERFECTION OF THE PETITIONER'S APPEAL ON DECEMBER 11,
2002.
II. . . . COMMITTED GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK AND/OR EXCESS OF

JURISDICTION
WHEN
IT
DENIED
HEREIN
PETITIONER'S
MOTION
FOR
RECONSIDERATION IN ITS ORDER DATED 18 NOVEMBER 2002, THERE BEING STRONG
AND COMPELLING REASONS TO ADMIT SAID MOTION AND TO CONSIDER THE
ERRONEOUS CONCLUSIONS OF FACT AND LAW ON WHICH THE DECISION OF THE
TRIAL COURT WAS BASED. 29
The bank, which is owned by the Government Service Insurance System, argued that to rigidly and
strictly apply the rules of procedure would result to injustice and irreparable damage to the government
as it stands to lose a substantial amount if not allowed to recover the proceeds of the loans. 30
WHEREFORE, given the foregoing, the instant Motion for Reconsideration is hereby DENIED, for failure to
comply with Rule 15, Section 4, of the 1997 Rules on Civil Procedures (sic).
xxx xxx xxx 24
Page 3
The appellate court, by February 23, 2004 Decision, 31 found for the bank. Citing Labad v. University of
Southeastern Philippines, 32 it ruled that while the right to appeal is a statutory and not a natural right, it
is nevertheless an essential part of the judicial system, hence, courts should be cautious not to deprive
a party of the right to appeal; and in the exercise of its equity jurisdiction, the trial court should have
given the bank's Notice of Appeal due course to better serve the ends, and prevent a miscarriage of
justice. ICDSca
To be sure, the distinctions between Rules 45 and 65 are far and wide. However, the most apparent is
that errors of jurisdiction are best reviewed in a special civil action for certiorari under Rule 65 while
errors of judgment can only be corrected by appeal in a petition for review under Rule 45. 40
This Court, however, in accordance with the liberal spirit which pervades the Rules of Court and in the
interest of justice may treat a petition for certiorari as having filed under Rule 45, more so if the same
was filed within the reglementary period for filing a petition for review. 41
Petitioners' Motion for Reconsideration having been denied by Resolution 33 of May 25, 2004, the
present Petition for Certiorari under Rule 65 was filed, raising these issues:
1. Whether or not the public respondent committed grave abuse of discretion in reversing the order of the
Regional Trial Court denying the notice of appeal and in giving due course to the notice of
appeal.
The records show that the petition was filed on time both under Rules 45 and 65. 42 Following Delsan
Transport, the petition, stripped of allegations of "grave abuse of discretion," actually avers errors of
judgment which are the subject of a petition for review. 43
This Court finds the petition impressed with merit.

2. Whether the private respondent could still appeal a judgment which has become final and executory. 34
At the outset, clarification on petitioners' mode of appeal is in order. Petitioners and counsel confuse
their petition as one Petition for Review under Rule 45 35 with a Petition for Certiorari under Rule 65. 36
For while they treat it as one for Review on Certiorari, they manifest that it is filed "pursuant to Rule 65
of the 1997 Rules of Civil Procedure in relation to Rule 45 of the New Rules of Court." 37
Rule 41 of the 1997 Rules of Civil Procedure which governs appeals from Regional Trial Courts
provides:
SEC. 2. Modes of appeal.
In Ligon v. Court of Appeals 38 where the therein petitioner described her petition as "an appeal under
Rule 45 and at the same time as a special civil action of certiorari under Rule 65 of the Rules of
Court," this Court, in frowning over what it described as a "chimera," reiterated that the remedies of
appeal and certiorari are mutually exclusive and not alternative nor successive. 39
(a) Ordinary appeal. The appeal to the Court of Appeals in cases decided by the Regional Trial Court in
the exercise of its original jurisdiction shall be taken by filing a notice of appeal with the court which
rendered the judgment or final order appealed from and serving a copy thereof upon the adverse party. No
record on appeal shall be required except in special proceedings and other cases of multiple or separate
appeals where the law or these Rules so require. In such cases, the record on appeal shall be filed and
served in like manner.
Page 4
xxx xxx xxx
SEC. 3. Period of ordinary appeal. The appeal shall be taken within fifteen (15) days from notice of the
judgment or final order appealed from. Where a record on appeal is required, the appellants shall file a
notice of appeal and a record on appeal within thirty (30) days from notice of the judgment or final order.
However, on appeal in habeas corpus cases shall be taken within forty-eight (48) hours from notice of the
judgment or final order appealed from.
The period of appeal shall be interrupted by a timely motion for new trial or reconsideration . No motion for
extension of time to file a motion for new trial or reconsideration shall be allowed. (Underscoring supplied).
On the other hand, Rule 22 provides for the manner of computing time and the effect of interruption:
The requirement of notice under Sections 4 and 5 44 of Rule 15 in connection with Section 2, Rule 37 of
the Rules of Court is mandatory. 45 Absence of the mandatory requirement renders the motion a
worthless piece of paper which the clerk of court has no right to receive and which the court has no
authority to act upon. 46 Being a fatal defect, in cases of motions to reconsider a decision, the running
of the period to appeal is not tolled by their filing or pendency. 47
When the bank then filed its Motion for Reconsideration on the last of the 15-day period for taking an
appeal and it was subsequently denied, the bank had only one (1) day from December 9, 2002 when it
received a copy of the order denying the motion or until December 10, 2002 within which to perfect its
appeal. 48
It filed the Notice of Appeal, however, on December 11, 2002, hence, out of time, and the decision of the
trial court had become final and executory. =ISTCHE
SEC. 1. How to compute time. In computing any period of time prescribed or allowed by these Rules, or
by order of the court, or by any applicable statute, the day of the act or event from which the designated
period of time begins to run is to be excluded and the date of performance included. If the last day of the
period, as thus computed, falls on a Saturday, a Sunday or a legal holiday in the place where the court sits,
the time shall not run until the next working day.
While Rules may be relaxed when the party invoking liberality adequately explains his failure to abide
therewith, the bank failed to do so.
SEC. 2. Effect of interruption. Should an act be done which effectively interrupts the running of the
period, the allowable period after such interruption shall start to run on the day after notice of the cessation
of the cause thereof.
The explanations 49 proffered by the bank behind its failure to incorporate a notice of hearing of the
Motion for Reconsideration inadvertent deletion from its computer file of the standard clauses for
pleadings during the printing of the finalized draft of the motion and the handling counsel's heavy
workload are unsatisfactory.
The day of the act that caused the interruption shall be excluded in the computation of the
period. (Emphasis and underscoring supplied).
To credit the foregoing explanations would render the mandatory rule on notice of hearing meaningless
and nugatory as lawyers would simply invoke these grounds should they fail to comply with the rules.
Page 5
As to the claim that the government would suffer loss of substantial amount if not allowed to recover the
proceeds of the loans, this Court finds that any loss was caused by respondent's own doing or undoing.
In justifying its failure to file a collection suit, the bank contended that it would have amounted to a
waiver of its right to foreclose. But if early on it opted to foreclose the mortgages, why it waited until
1997 and 1999, more than nineteen years after the right to do so arose, the bank is glaringly mute.
In fine, the failure to timely perfect an appeal cannot simply be dismissed as a mere technicality, for it is
jurisdictional. 50
Clutching at straws, the bank argues that the applicable provision is Article 1141, 56 not Article 1142 57
of the Civil Code.
Nor can petitioner invoke the doctrine that rules of technicality must yield to the broader interest of
substantial justice. While every litigant must be given the amplest opportunity for the proper and just
determination of his cause, free from the constraints of technicalities, the failure to perfect an appeal within
the reglementary period is not a mere technicality. It raises a jurisdictional problem as it deprives the
appellate court of jurisdiction over the appeal. The failure to file the notice of appeal within the
reglementary period is akin to the failure to pay the appeal fee within the prescribed period. In both
cases, the appeal is not perfected in due time. As we held in Pedrosa v. Hill, the requirement of an
appeal fee is by no means a mere technicality of law or procedure, but an essential requirement without
which the decision appealed from would become final and executory. The same can be said about the late
filing of a notice of appeal. (Emphasis and underscoring supplied). 51
Jurisdictional issue aside, upon the ground of prescription, the bank's case would just the same fail. An
action to foreclose a real estate mortgage prescribes in ten years. 52 The running of the period,
however, may be interrupted. 53
A review of the records of the case shows that, as correctly claimed by petitioners, no letter of demand,
court action, or foreclosure proceeding was undertaken prior to December 11, 1997 and September 1,
1999.
While the bank included in its Formal Offer of Evidence 54 Exhibits "E" and "H" which are the Petitions
for Extra-Judicial Foreclosure alleging that "repeated demands" for payment were made after Leonilo
defaulted and failed to pay the loan obligations, allegations are not proofs. Unless a demand is proven,
one cannot be held in default. 55
Article 1141 of the Civil Code speaks of real actions over immovables or rights. Article 1142 of the Civil
Code speaks of a mortgage action which prescribes in ten years. The strategic location of Article 1142
immediately right after Article 1141 of the same Code, which speaks of real actions, indicates that it is
an exception to the rule in the previous article.
That an action for foreclosure of mortgage over real property prescribes in ten years is in fact settled. In
Buhat, et al. v. Besana, etc., et al. 58 where an action was instituted on December 6, 1952 for the
foreclosure of mortgage over real property to secure an obligation payable on or before May 31, 1930,
this Court affirmed the dismissal of the action by the then Court of First Instance as the action was filed
more than ten years from May 31, 1930 or some 22 years after the obligation had become due and
demandable.
WHEREFORE, the petition is GRANTED. The assailed Court of Appeals decision dated February 23,
2004 and Resolution dated May 25, 2004 are REVERSED and SET ASIDE. The Decision dated August
9, 2002 of the Regional Trial Court of Gapan, Nueva Ecija, Branch 34, which had become final and
executory, stands.
SO ORDERED.
Page 6
10.Id. at 33-34.
Panganiban, Corona and Garcia, JJ., concur.
11.Annex "I", RTC Records at 38-39.
Sandoval-Gutierrez, J., is on leave.
12.RTC Records at 1-8.

13.Art. 1142. A mortgage action prescribes after ten years.
Footnotes
14.Art. 1144. The following actions must be brought within ten years from the time the right of action
accrues:
(1) upon a written contract;
**In some pleadings and motions filed, Leonilo was identified as LEONITO. Hence, in some orders
issued by the Regional Trial Court, the Court of Appeals Rollo cover, and the Resolution
dated May 25, 2004 of the Court of Appeals Leonilo is erroneously typed as LEONITO.
xxx xxx xxx

15.RTC Records at 3.
1.Annex "A" of the Complaint, RTC Records at 9-12.

16.Id. at 5.
2.Annex "B" of the Complaint, RTC Records at 13-16.
17.Id. at 41 for TCT No. NT-143001 and 49 for TCT No. NT-143007.
3.Petition, Rollo at 6; CA Decision, Rollo at 22.
18.Id. at 5.
19.Id. at 139-148.
5.Annex "D" of the Complaint, RTC Records at 18-24.
6.Annex "C" of the Complaint, RTC Records at 17.
7.Re: Petition for Extra-Judicial Foreclosure of Real Estate Mortgage of Leonilo S. Nuez, under Act
No. 3135 as amended by Act 4118, RTC Records at 25-28.
20.SECTION 4. Hearing of motion. Except for motions which the court may act upon without
prejudicing the rights of the adverse party, every written motion shall be set for hearing by
the applicant.
Every written motion required to be heard and the notice of the hearing thereof shall be served in
such a manner as to ensure its receipt by the other party at least three (3) days before the
date of hearing, unless the court for good cause sets the hearing on shorter notice.
8.RTC Records at 27.
21.Rollo at 57-60.
9.Id. at 29-32.
22.Id. at 61-65.
Page 7
37.Rollo at 3.
24.Id. at 166.
38.294 SCRA 73 (1998).
25.Id. at 168-169.
39.Id. at 84 (1998).
26.Id. at 172-175.
40.Riviera Filipina, Inc. v. Court of Appeals, 380 SCRA 245 (2003).
27.Id. at 189.
41.Delsan Transport Lines, Inc. v. Court of Appeals, 268 SCRA 597 (1997).
28.CA Rollo at 2-25.
42.The petition was filed on June 30, 2004. If treated as Petition for Review on certiorari under Rule
45, the reglementary period expires on July 3, 2004 while if the petition is treated as Petition
for certiorari under Rule 65, the period expires on August 17, 2004.
29.Id. at 13-14.
30.Id. at 17-18.
31.Rollo at 21-27.
32.362 SCRA 510 (2001).
33.Rollo at 33.
34.Id. at 11.
35.SECTION 1. Filing of petition with Supreme Court. A party desiring to appeal by certiorari from
a judgment or final order or resolution of the Court of Appeals, the Sandiganbayan, the
Regional Trial Court or other courts whenever authorized by law, may file with the Supreme
Court a verified petition for review on certiorari. The petition shall raise only questions of law
which must be distinctly set forth.
36.SECTION 1. Petition for Certiorari. When any tribunal, board or officer exercising judicial or
quasi-judicial functions has acted without or in excess of its or his jurisdiction, or with grave
abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal, nor
any plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved
thereby may file a verified petition in the proper court, alleging the facts with certainty and
praying that judgment be rendered annulling or modifying the proceedings of such tribunal,
board or officer, and granting such incidental reliefs as law and justice may require. . . .
43.On page 12 of the Rollo, petitioners restated the grounds but termed them as "issues." Thus, the
"issues" in the petition are: (1) whether a motion for reconsideration which contains no
setting of the date of hearing interrupt the period to appeal; and (2) assuming for the sake of
arguments that the motion for reconsideration filed by the respondent stopped the running of
the period to appeal though it did not comply with the provision of Rule 15, Section 4 of the
New Rules of Court, still the judgment has already become final and could no longer be the
subject of an appeal.
44.SECTION 5. Notice of hearing. The notice of hearing shall be addressed to all parties
concerned, and shall specify the time and date of the hearing which must not be later than
ten (10) days after the filing of the motion.
45.National Commercial Bank of Saudi Arabia v. Court of Appeals, 396 SCRA 541 (2003).
46.Pallada v. Regional Trial Court of Kalibo, Aklan, Branch 1, 304 SCRA 440 (1999).
47.Bank of the Philippine Islands v. Far East Molasses Corp., 198 SCRA 689 (1991).
48.Vide, Manila Memorial Park Cemetery, Inc. v. Court of Appeals, 344 SCRA 769 (2000).
49.Rollo at 61-62.
Page 8
50.Delgado v. Court of Appeals, 447 SCRA 402 (2004); Fukuzumi v. Sanritsu Great International
Corporation, 436 SCRA 228 (2004).
51.Republic v. Court of Appeals, 322 SCRA 81, 90 (2000).
52.Art. 1142, Civil Code. A mortgage action prescribes after ten years; Benedicto v. Court of Appeals,
182 SCRA 45 (1990); Buhat, et al. v. Besana, etc. et al., 95 Phil. 721 (1954).
53.Art. 1155. The prescription of actions is interrupted when they are filed before the court, when
there is written extra-judicial demand by the creditors, and when there is any written
acknowledgment of the debt by the debtor.
55.Art. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee
judicially or extrajudicially demands from them the fulfillment of their obligation. . . .
56.Art. 1141. Real actions over immovables prescribe after thirty years.
This provision is without prejudice to what is established for the acquisition of ownership and other
real rights by prescription.
57.Art. 1142. A mortgage action prescribes after ten years.
58.95 Phil. 721 (1954).
||| (Nuez v. GSIS Family Bank, G.R. No. 163988, [November 17, 2005], 511 PHIL 735-751)
FIRST DIVISION
Page 9
[G.R. No. 80593. December 18, 1989.]
PHILIPPINE NATIONAL BANK, petitioner, vs. TERESITA CRUZ, JOSE AGRIPINO,

BERNARDO BAUZON, LUCRECIA BILBAO, MA. LUISA CABRERA, FRANCIS BAACLO,
GUADALUPE CAMACHO, LUZ DE LEON, MIKE VILLAVERDE, NEPOMUCENO MEDINA,
EDGARDO MENDOZA, JENNIFER VELEZ, AMELIA MEDINA, EDUARDO ESPEJO and
RICARDO BATTO, respondents.
The Chief Legal Officer for petitioner.
2. ID.; WORKER'S PREFERENCE IN CASE OF BANKRUPTCY; APPLIES EVEN IF THE

EMPLOYER'S PROPERTIES ARE ENCUMBERED BY A MORTGAGE CONTRACT. Our
pronouncement in A.C. Ransom labor Union-CCLU vs. NLRC, (150 SCRA 498) reinforces the
abovementioned interpretation where this Court, explicitly stated that "(t)he worker preference applies
even if the employer's properties are encumbered by means of a mortgage contract . . . . So that, when
(the) machinery and equipment of RANSOM were sold to Revelations Manufacturing Corporation for P2
M in 1975, the right of the 22 laborers to be paid from the proceeds should have been recognized . . . ."
3. ID.; ID.; EXTENDS TO TAX CLAIMS. Under Article 110 of the Labor Code as amended, the unpaid
wages and other monetary claims of workers should be paid in full before the claims of the Government
and other creditors. Thus not even tax claims could have preference over the workers' claim.
Romualdo C. Delos Santos for respondents.
SYLLABUS
1. LABOR LAW; PROVISIONS IN THE LABOR CODE AS TO WORKERS PREFERENCE AS

REGARDS MONETARY CLAIMS MUST PREVAIL OVER THE PROVISIONS OF THE CIVIL CODE;
REASON. This Court must uphold the preference accorded to the private respondents in view of the
provisions of Article 110 of the Labor Code which are clear and which admit of no other interpretation.
The phrase "any provision of law to the contrary notwithstanding" indicates that such preference shall
prevail despite the order set forth in Articles 2241 to 2245 of the Civil Code. No exceptions were
provided under the said article, henceforth, none shall be considered. Furthermore, the Labor Code was
signed into Law decades after the Civil Code took effect. In Herman vs. Radio Corporation of the
Philippines, this Court declared that whenever two statutes of different dates and of contrary tenor are
of equal theoretical application to a particular case, the statute of later date must prevail being a later
expression of legislative will. Applying the aforecited case in the instant petition, the Civil Code
provisions cited by the petitioner must yield to Article 110 of the Labor Code.
4. ID.; ID.; INTENDED FOR THE PROTECTION OF THE WORKING CLASS. Consistent with the
ruling of this Court in Volkschel Labor Union vs. Bureau of Labor Relations, this court adopts the
doctrine that "(i)n the implementation and interpretation of the provisions of the Labor Code and its
implementing regulations, the workingman's welfare should be the primordial and paramount
consideration." Bearing this in mind, this Court must reiterate the dictum laid down in A.C. Ransom that
the conflict between Article 110 of the Labor Code and Article 2241 to 2245 of the Civil Code must be
resolved in favor of the former. A contrary ruling would defeat the purpose for which Article 110 was
intended; that is, for the protection of the working class, pursuant to the never-ending quest for social
justice.
DECISION
GANCAYCO, J p:
Page 10
The focus of the instant petition for certiorari is the application of Article 110 of the Labor Code. The said
article provides that workers shall enjoy first preference with regard to wages due them in cases of
bankruptcy or liquidation of an employer's business. Cdpr
The antecedent facts of the case are as follows:
Sometime in 1980 Aggregate Mining Exponents (AMEX) laid-off about seventy percent (70%) of its
employees because it was experiencing business reverses. The retained employees constituting thirty
percent (30%) of the work force however, were not paid their wages. This non-payment of salaries went
on until July 1982 when AMEX completely ceased operations and instead entered into an operating
agreement with T.M. San Andres Development Corporation whereby the latter would be leasing the
equipment and machineries of AMEX. LLjur
The unpaid employees sought redress from the Labor Arbiter 1 who, on August 27, 1986 rendered a
decision finding their claim valid and meritorious. The dispositive part of the said decision, reads:
WHEREFORE, finding the claims of complainants for payment of unpaid wages and separation pay to
be valid and meritorious, respondents Aggregate Mining Exponent and its president Luis Tirso Revilla
should, as they are hereby ordered to pay the same to said complainants in the following amounts:
Yrs. of Separation
Employees
Service
Rate
Pay
Backwages
1. Jose Agripino
P1,300.00
P5,200.00 P6,174.96
2. Bernardo Bauzon
1,900.00
8,550.00
11,712.85
3. Lucresia Bilbao
2,300.00
8,050.00
19,247.00
4. Teresita S. Cruz
12
2,700.00
16,200.00 23,485.70
5. Ma. Luisa Cabrera
1,800.00
2,700.00
6. Francis Baaclo
3,500.00
12,550.00 32,986.90
7. Guadalupe Camacho
1,300.00
3,900.00
3,227.15
8. Luz de Leon
1,300.00
3,250.00
3,110.85
9. Mike Villaverde
1,500.00
4,500.00
4,793.80
10. Nepomuceno Medina
1,200.00
3,000.00
4,287.10
11. Edgardo Mendoza
920.00
1,840.00
832.10
12. Jenifer Velez
740.00
740.00
4,287.66
13. Amelia Medina
740.00
740.00
6,822.81
14. Eduardo Espejo
970.00
1,940.00
234.10
15. Ricardo Batto
3,000.00
10,500.00 9,874.70
TOTAL P83,360.00
P136,092.03
5,004.35
in the total amount of P219,452.03. To properly effectuate the payment of the same, the necessary
arrangement should be made between respondents Annex and T.M. San Andres Development
Corp. and Philippine National Bank (PNB) on their respective role and participation herein. For
should the principal respondent be unable to satisfy these Awards, the same can be satisfied from
the proceeds or fruits of its machineries and equipment being operated by respondent T .M . San
Andres Dev. Corp. either by operating agreement with respondent Amex or thru lease of the same
from PNB.
Page 11
To obviate any further differences between complainants and their counsel to the latter's attorney's fees
which seems to be the cause of their earlier misunderstanding, as can be gleaned from the Charging Lien
filed by said counsel, respondents are, moreover, ordered to segregate and pay the same directly to said
counsel, the amount of which is to be computed pursuant to their agreement on July 14, 1983 (Annex A of
Position to Enter Attorney's Charging Lien in the Record of the Case)." 2
AMEX and its President, Tirso Revilla did not appeal from this decision. But PNB, in its capacity as
mortgagee-creditor of AMEX interposed an appeal with the respondent Commission, not being satisfied
with the outcome of the case. The appeal was primarily based or the allegation that the workers' lien
covers unpaid wages only and not the termination or severance pay which the workers likewise claimed
they were entitled to.
In a resolution 3 dated October 27, 1987, the National Labor Relations Commission affirmed the
decision appealed from. Hence the instant petition filed by the petitioner bank based on the following
grounds:
and to the exclusion of termination pay. In the instant petition however, PNB starts off with the question
of whether or not the workers' lien take precedence over any other claim considering that this Court has
ruled otherwise in Republic vs. Peralta. 5
This Court cannot allow the petitioner to alter its stance at this stage inasmuch as it is deemed to have
acquiesced in the decision of the labor arbiter concerning payment of unpaid wages. The records reveal
that the petitioner failed to question the same on appeal. Hence, it is now barred from claiming that the
workers' lien applies only to the products of their labor and not to other properties of the employer which
are encumbered by mortgage contracts or otherwise. cdrep
Notwithstanding the foregoing, an attempt on the part of the petitioner to seek relief from that portion of
the decision would still be in vain.
Article 110 of the Labor Code provides that:

"I. ARTICLE 110 OF THE LABOR CODE MUST BE READ IN RELATION TO ARTICLES 2241, 2242, 2243,
2244 AND 2245 OF THE CIVIL CODE CONCERNING THE CLASSIFICATION, CONCURRENCE AND
PREFERENCE OF CREDITS.
"II. ARTICLE 110 OF THE LABOR CODE DOES NOT PURPORT TO CREATE A LIEN IN FAVOR OF
WORKERS OR EMPLOYEES FOR UNPAID WAGES EITHER UPON ALL OF THE PROPERTIES OR
UPON ANY PARTICULAR PROPERTY OWNED BY THEIR EMPLOYER." 4
The petition is devoid of merit.
"Art. 110. Worker preference in case of bankcruptcy. In the event of bankcruptcy or liquidation of an
employer's business, his workers shall enjoy first preference as regarding their unpaid wages and other
monetary claims, any provision of law to the contrary notwithstanding. Such unpaid wages and monetary
claims, shall be paid in full before claims of the government and other creditors may be paid." 6
This Court must uphold the preference accorded to the private respondents in view of the provisions of
Article 110 of the Labor Code which are clear and which admit of no other interpretation. The phrase
"any provision of law to the contrary notwithstanding" indicates that such preference shall prevail
despite the order set forth in Articles 2241 to 2245 of the Civil Code. 6a No exceptions were provided
under the said article, henceforth, none shall be considered. Furthermore, the Labor Code was signed
into Law decades after the Civil Code took effect.
At the outset, petitioner PNB did not question the validity of the workers' claim for unpaid wages with
respect to the mortgaged properties of AMEX, provided that the same be limited to the unpaid wages,
Page 12
In Herman vs. Radio Corporation of the Philippines, 7 this Court declared that whenever two statutes of
different dates and of contrary tenor are of equal theoretical application to a particular case, the statute
of later date must prevail being a later expression of legislative will. Applying the aforecited case in the
instant petition, the Civil Code provisions cited by the petitioner must yield to Article 110 of the Labor
Code. cdphil
Moreover, Our pronouncement in A.C. Ransom Labor Union-CCLU vs. NLRC, 8 reinforces the abovementioned interpretation where this Court, speaking through Associate Justice Melencio-Herrera,
explicitly stated that "(t)he worker preference applies even if the employer's properties are encumbered
by means of a mortgage contract . . . . So that, when (the) machinery and equipment of RANSOM were
sold to Revelations Manufacturing Corporation for P2 M in 1975, the right of the 22 laborers to be paid
from the proceeds should have been recognized . . .." 9
Reliance by the petitioners on Republic vs. Peralta is without basis. The said case involved a question
of workers' preference as against the tax claims of the State. In the said case the Court held that the
State must prevail in that instance since "it has been frequently said that taxes are the very lifeblood of
government. The effective collection of taxes is a task of highest importance for the sovereign. It is
critical indeed for its own survival." 10
Nevertheless, under Article 110 of the Labor Code as amended, the unpaid wages and other monetary
claims of workers should be paid in full before the claims of the Government and other creditors. Thus
not even tax claims could have preference over the workers' claim. llcd
Consistent with the ruling of this Court in Volkschel Labor Union vs. Bureau of Labor Relations, 11 this
court adopts the doctrine that "(i)n the implementation and interpretation of the provisions of the Labor
Code and its implementing regulations, the workingman's welfare should be the primordial and
paramount consideration." 12 Bearing this in mind, this Court must reiterate the dictum laid down in A.C
. Ransom that the conflict between Article 110 of the Labor Code and Article 2241 to 2245 of the Civil
Code must be resolved in favor of the former. A contrary ruling would defeat the purpose for which
Article 110 was intended; that is, for the protection of the working class, pursuant to the never-ending
quest for social justice. cdll
Petitioner next advances the theory that "even if the worker's lien applies in the instant case, the same
should cover only unpaid wages excluding termination or severance pay." 13 To support this contention,
petitioner cites Section 7, Rule I, Book VI of the Rules and Regulations implementing the Labor Code
which provides that:
"The just causes for terminating the services of an employee shall be those provided under Article 283 of
the Code. The separation from work of an employee for a just cause does not entitle him to termination pay
provided in the Code, . . .." (Emphasis supplied.)
Based on that premise, petitioner contends that the claim for termination pay should not be enforced
against AMEX properties mortgaged to petitioner PNB because Article 110 of the Labor Code refers
only to "wages due them for services rendered during the period prior to bankcruptcy or liquidation."
14 Citing serious financial losses as the basis for the termination of the private respondents, petitioner
alleges that the employees are not entitled to the termination pay which they claim.
This contention is, again, bereft of merit.
The respondent Commission noted that "AMEX failed to adduce convincing evidence to prove that the
financial reverses were indeed serious." 15 After a careful study of the records of the case, this Court
finds no reason to alter the findings of the respondent Commission.
In Garcia vs. National Labor Relations Commission, 16 it was held that "it is essentially required that the
alleged losses in business operations must be proved." 17 This policy was adopted to obviate the
Page 13
possibility of an employer fabricating business reverses in order to ease out employees for no apparent
reason. Hence, no departure shall be made by this Court from the ruling in Philippine Commercial and
Industrial Bank vs. National Mines and Allied Workers Union (NAMAWU-MIF) 19
the above provision accord to labor." 21 In line with this policy, measures must be undertaken to ensure
that such constitutional mandate on protection to labor is not rendered meaningless by an erroneous
interpretation of the applicable laws.
Furthermore, in Peralta, this Court held that for purposes of the application of Article 110, "termination
pay is reasonably regarded as forming part of the remuneration or other money benefits accruing to
employees or workers by reason of their having previously rendered services . . .." 20 Hence,
separation pay must be considered as part of remuneration for services rendered or to be rendered.
WHEREFORE, premises considered, the petition is hereby DISMISSED for lack of merit. No costs.
SO ORDERED.
Indeed Article 110 of the Labor Code, as amended, aforecited, now provides that the workers'
preference covers not only unpaid wages but also other monetary claims.
The respondent Commission was, therefore, not in error when it awarded the termination pay claimed
by the private respondents. As far as the latter are concerned, the termination pay which they so
rightfully claim is an additional remuneration for having rendered services to their employer for a certain
period of time. Noteworthy also is the relationship between termination pay and services rendered by an
employee, that in computing the amount to be given to an employee as termination pay, the length of
service of such employee is taken into consideration such that the former must be considered as part
and parcel of wages. Under these circumstances then, this Court holds that the termination or
severance pay awarded by the respondent Commission to the private respondents is proper and should
be sustained. cdll
Lastly, it must be noted that the amount claimed by petitioner PNB for the satisfaction of the obligations
of AMEX is relatively insubstantial and is not significant enough as to drain its coffers. By contrast, that
same amount could mean subsistence or starvation for the workingman. Quoting further from Philippine
Commercial and Industrial Bank, this Court supports the equitable principle that "it is but humane and
partakes of the divine that labor, as human beings, must be treated over and above chattels,
machineries and other kinds of properties and the interests of the employer who can afford and survive
the hardships of life better than their workers. Universal sense of human justice, not to speak of our
specific social justice and protection to labor constitutional injunctions dictate the preferential lien that
Narvasa, Grio-Aquino and Medialdea, JJ ., concur.
Separate Opinions
CRUZ, J ., concurring:
I can perhaps be allowed a little immodesty in taking this occasion to point out that in Republic of the
Philippines v. Peralta, cited in the ponencia, I was the only one who held the view that the claims of the
laborers should take precedence over those of even the Government under Article 110 of the Labor
Code.
Interpreting the said provision, I submitted that it should be read according to its literal import and
obvious philosophy, to favor and protect the laborer pursuant to the social justice policy. None of my
thirteen colleagues then agreed with me.
Page 14
12.Ibid, page 48.

With the amendment of the article, evidently to correct the meaning given to it in Peralta, all doubt has
been removed as to its original intention (which I feel was quite clear even before). There is no question
now that under Article 110 of the Labor Code as reworded the claims of the laborer prevail over those of
all others, including the Government itself, in the interest of social justice. It is for me a cause for deep
elation. dctai
Footnotes
13.Page 26, Rollo.

14.Page 27, Rollo.
15.Pages 4 to 5, Resolution; page 36 to 37, Rollo.
16.153 SCRA 639 (1987), citing National Federation of Labor Union vs. Ople, 143 SCRA 124 (1986).
17.Ibid, page 651.
1.Labor Arbiter Raymundo R. Valenzuela.

2.Pages 34 to 35, Rollo.
3.Penned by Commissioner Oscar N. Abella, concurred in by Commissioners Daniel M. Lucas, Jr.
and Domingo Zapanta.
18.115 SCRA 873 (1982).

19.Ibid, page 880.
20.Supra, note 5, page 44.
21.Op cit., Note 18, pages 880 to 881.
4.Page 6, Petition; Page 28, Rollo.

5.150 SCRA 37 (1987).
||| (PNB v. Cruz, G.R. No. 80593, [December 18, 1989], 259 PHIL 696-706)
6.Republic Act 6715; See Official Gazette, Manila 6, 1989, page 15.
6a.Articles 2241 to 2245, Civil Code of the Philippines.
7.50 Phil. 490 (1927).
8.150 SCRA 498 (1987).
9.Ibid, page 507.
10.Op cit., page 51.
11.137 SCRA 42 (1985).
Page 15
CASE DIGEST
Philippine National Bank v. Cruz, et al.
G.R. No. 80593
December 18, 1989
FACTS:
Aggregate Mining Exponents (AMEX) suffered huge financial losses and was unable to pay its
remaining employees. Two years after, AMEX entered into an operation contract agreement with T.M.
San Andres Development Corporation, thus enabling the latter to acquire on lease the equipment of
AMEX. The unpaid workers filed for monetary compensation before the Labor Arbiter. The said Arbiter
awarded backwages and separation pay. AMEX did not appeal but PNB, as mortgage-creditor,
appealed and alleged that the workers should be given their unpaid wages only and not the termination
pay. The NLRC denied the appeal of PNB. Hence, this instant petition by the PNB on the grounds that
Article 110 of the Labor Code does not create lien in favor of the workers for unpaid wages upon the
properties of the employer.
EN BANC
[G.R. No. 87119. April 16, 1991.]
HON. GEMILIANO C. LOPEZ, JR., in his capacity as City Mayor of Manila, petitioner, vs.
THE CIVIL SERVICE COMMISSION, HON. DANILO R. LACUNA, in his capacity as ViceMayor and Presiding Officer of the City Council of Manila, and THE CITY COUNCIL OF
MANILA, respondents.
ISSUE:
W/N Art. 110 of the Labor Code is to be construed as not favoring the unpaid workers because of the
order of preference provided in Art. 2241 to 2245 of the Civil Code.
The City Legal Officer for petitioner.

Lacuna, Bello & Associates Law Offices for Danilo B. Lacuna.
HELD:
No. Art. 110 of the Labor Code provides for worker preference in case of bankruptcy. It specifically
states that In the event of bankruptcy of an employers business, his workers shall enjoy FIRST
preference as regards to their unpaid wages, any provision of law to the contrary not withstanding
such unpaid wages shall be paid in FULL before claims of the government and other creditors may be
paid.
LATIN MAXIM: 6a, 49
SYLLABUS
1. CONSTITUTIONAL LAW;
CIVIL SERVICE
COMMISSION;
JUDGMENTS
THEREOF
UNAPPEALABLE AND SUBJECT ONLY TO THIS COURT'S CERTIORARI JURISDICTION. As we
Page 16
held, the Civil Service Commission, under the Constitution, is the single arbiter of all contests relating to
the civil service and as such, its judgments are unappealable and subject only to this Court's certiorari
jurisdiction.
2. STATUTORY CONSTRUCTION; SPECIAL LAW PREVAILS OVER A GENERAL LAW

REGARDLESS OF THEIR DATES OF PASSAGE AND THE SPECIAL IS CONSIDERED AN
EXCEPTION TO THE GENERAL. There is no doubt that Republic Act No. 409, which provides
specifically for the organization of the Government of the City of Manila, is a special law, and whereas
Republic Act No. 5185 and Batas Blg. 337, which apply to municipal governments in general, are
general laws. As the Solicitor General points out, and we agree with him, it is a canon of statutory
construction that a special law prevails over a general law regardless of their dates of passage
and the special is to be considered as remaining an exception to the general.
3. ID.; CONFLICT BETWEEN STATUTES MUST BE AVOIDED. So also, every effort must be
exerted to avoid a conflict between statutes. If reasonable construction is possible, the laws must be
reconciled in that manner.
4. ID.; REPEALS OF LAWS BY IMPLICATION, NOT FAVORED; WHEN THERE IS A MERE

REPUGNANCY BETWEEN TWO STATUTES, THE ONE LATER IN TIME REPEALS THE OTHER.
Repeals of laws by implication moreover are not favored, and the mere repugnancy between two
statutes should be very clear to warrant the court in holding that the later in time repeals the other.
5. ID.; REPUBLIC ACT NO. 5185 (DECENTRALIZATION LAW) AND BATAS BLG. 337 (LOCAL
GOVERNMENT CODE), NOT MEANT TO DEPRIVE CITY COUNCIL OF MANILA OF ITS
APPOINTING POWER GRANTED BY REPUBLIC ACT NO. 409 (CHARTER OF THE CITY OF
MANILA). We also agree with the Civil Service Commission that the provisions of Republic Act No.
5185, giving mayors the power to appoint all officials "entirely paid out by city funds" and those of Batas
Blg. 337, empowering local executives with the authority to appoint "all officers and employees of the
city," were meant not to vest the city mayors per se with comprehensive powers but rather, to
underscore the transfer of the power of appointment over local officials and employees from the
President to the local governments and to highlight the autonomy of local governments. They were not
meant, however, to deprive the City Council of Manila for instance, its appointing power granted by
existing statute, and after all, that arrangement is sufficient to accomplish the objectives of both the
Decentralization Act and the Local Government Code, that is, to provide teeth to local autonomy.
DECISION
SARMIENTO, J p:
The only question in this petition, denominated as a "direct appeal under Article VIII, Section 5(2)(e), of
the Constitution and Section 9(3), of Batas Blg. 129," is whether the City Council of Manila still has the
power to appoint Council officers and employees under Republic Act No. 409, otherwise known as the
Charter of the City of Manila, or whether the power is now vested with the City Mayor pursuant to
Republic Act No. 5185, the Decentralization Law, and Batas Blg. 337, the Local Government Code. The
facts are as follows:
On September 13, 1988, the Vice-Mayor of Manila and Presiding Officer of the City Council of Manila,
the Hon. Danilo R. Lacuna, submitted to the Civil Service Commission, through the Regional Director of
the National Capital Region, the appointments of nineteen officers and employees in the Executive Staff
of the Office of the Presiding Officer, City Council of Manila, pursuant to the provisions of Section 15, of
said Republic Act No. 409, as amended, which reads:
SEC. 15. . . .
. . . The Board shall appoint and the Vice Mayor shall sign all appointments of the other employees of the
Board. 1
Page 17
The City Budget Officer of Manila later sought from the Personnel Bureau of the Mayor's office
"comment and/or recommendation" on whether the payroll of the newly appointed employees of the City
Council may be paid on the basis of appointments signed by the Vice-Mayor. 2 The Personnel Bureau
then forwarded the query to the City Legal Officer who, in a 3rd endorsement dated September 19,
1988, 3 rendered an opinion that the proper appointing officer is the City Mayor and not the City
Council. This opinion was transmitted by the Secretary to the City Mayor to the Commission.
On February 1, 1989, the Commission promulgated Resolution No. 89-075, and held that contrary to
the opinion of the City Legal Officer, it is the City Council to which the appointing power is vested. The
dispositive portion thereof is as follows: prLL
WHEREFORE, foregoing premises considered, the Commission resolved to rule, as it hereby rules that the
proper appointing authority of the officers and employees of the City Council of Manila is the City Council
and the signatory of individual appointments thus issued is the City Vice-Mayor of Manila. 4
As we held, the Civil Service Commission, under the Constitution, is the single arbiter of all contests
relating to the civil service and as such, its judgments are unappealable and subject only to this Court's
certiorari jurisdiction. 6
The petitioner's omission notwithstanding, we are nevertheless accepting the petition and because of
the important public interest it involves, we are considering it as a petition for certiorari under Rule 65,
considering further that it was filed within the thirty-day period. 7
As the petitioner contends, Section 15 of Republic Act No. 409 as amended has supposedly been
repealed by Republic Act No. 5185, specifically, Section 4 thereof, which we quote, in part:
xxx xxx xxx

As we stated at the outset, the issue is whether or not Section 15, supra, of the Charter of the City of
Manila has been repealed, and as a result, the City Council can no longer tender appointments to
Council positions.
As we also mentioned at the outset, this petition has been brought by way of a "direct appeal" from the
resolution of the Civil Service Commission pursuant supposedly to the Constitution and Batas Blg. 129.
In this connection, we have held that no appeal lies from the decisions of the Civil Service Commission,
and that parties aggrieved thereby may proceed to this Court alone on certiorari under Rule 65 of the
Rules of Court, within thirty days from receipt of a copy thereof, pursuant to Section 7, Article IX, of the
Constitution. We quote:
SEC. 7. Unless otherwise provided by this Constitution or by law, any decision, order, or ruling of each
Commission may be brought to the Supreme Court on certiorari by the aggrieved party within thirty days
from receipt of a copy thereof. 5
The City Assessor, City Agriculturist, City Chief of Police and City Chief of Fire Department and other heads
of offices entirely paid out of city funds and their respective assistants or deputies shall, subject to civil
service law, rules and regulations, be appointed by the City Mayor: Provided, however, That this section
shall not apply to Judges, Auditors, Fiscals, City Superintendents of Schools, Supervisors, Principals, City
Treasurers, City Health Officers and City Engineers.
xxx xxx xxx
All other employees, except teachers, paid out of provincial, city or municipal general funds, road and
bridge funds, school 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 . . . 8
Page 18
Repeals of laws by implication moreover are not favored, and the mere repugnancy between two
statutes should be very clear to warrant the court in holding that the later in time repeals the other. 11
and by Batas Blg. 337, we likewise quote:
Why a special law prevails over a general law has been put by the Court as follows:
SEC. 171. Chief Executive; Compensation, Powers, and Duties.
xxx xxx xxx

xxx xxx xxx
. . . The Legislature consider and make provision for all the circumstances of the particular case. The
Legislature having specially considered all of the facts and circumstances in the particular case in granting
a special charter, it will not be considered that the Legislature, by adopting a general law containing
provisions repugnant to the provisions of the charter, and without making any mention of its intention to
amend or modify the charter, intended to amend, repeal, or modify the special act. (Lewis vs. Cook County,
74 I11. App., 151; Philippine Railway Co. vs. Nolting, 34 Phil., 401.) 12
(2) The city mayor shall:
xxx xxx xxx
(h) Appoint, in accordance with civil service law, rules and regulations, all officers and employees of the city,
whose appointments are not otherwise provided in this Code; 9
There is no doubt that Republic Act No. 409, which provides specifically for the organization of the
Government of the City of Manila, is a special law, and whereas Republic Act No. 5185 and Batas Blg.
337, which apply to municipal governments in general, are general laws. As the Solicitor General points
out, and we agree with him, it is a canon of statutory construction that a special law prevails over a
general law regardless of their dates of passage and the special is to be considered as remaining
an exception to the general. 10
So also, every effort must be exerted to avoid a conflict between statutes. If reasonable construction is
possible, the laws must be reconciled in that manner. cdphil
In one case, we held that Republic Act No. 5185 did not divest the Mayor of Manila of his power under
the Charter of the City of Manila to approve the city budget. 13
We also agree with the Civil Service Commission that the provisions of Republic Act No. 5185, giving
mayors the power to appoint all officials "entirely paid out by city funds" 14 and those of Batas Blg. 337,
empowering local executives with the authority to appoint "all officers and employees of the city," 15
were meant not to vest the city mayors per se with comprehensive powers but rather, to underscore the
transfer of the power of appointment over local officials and employees from the President to the local
governments and to highlight the autonomy of local governments. They were not meant, however, to
deprive the City Council of Manila for instance, its appointing power granted by existing statute, and
after all, that arrangement is sufficient to accomplish the objectives of both the Decentralization Act and
the Local Government Code, that is, to provide teeth to local autonomy. cdphil
Page 19
In the light of all the foregoing, we do not find any grave abuse of discretion committed by the
respondent Commission.
9.Batas Blg. 337, sec. 171(h).

10.Butuan Sawmill, Inc. v. City of Butuan, No. L-21516, April 29, 1966, 16 SCRA 755.
11.Manila Railroad Co. v. Rafferty, 40 Phil. 224, 228 (1919).
WHEREFORE, the petition is DISMISSED. No costs.

12.Supra, 230.
13.Cabigao v. Villegas, No. L-31463, August 31, 1970, 34 SCRA 632.
SO ORDERED.
14.Rep. Act No. 5785, sec. 4, supra.
15.Batas Blg. 337, sec. 171(h), supra.
Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Gancayco, Padilla,
Bidin, Grio-Aquino, Medialdea, Regalado and Davide, Jr., JJ., concur.
Footnotes
||| (Lopez, Jr. v. CSC, G.R. No. 87119, [April 16, 1991], 273 PHIL 147-153)
1.Rep. Act No. 409, as amended by Rep. Act No. 1571, sec. 15.
2.Rollo, 17.
3.Id., 19.
4.Id., 27.
5.CONST., art. IX, sec. 7; Dario v. Mison, G.R. Nos. 81954, 81967, 82023, 83737, 85310, 85335,
86241, August 8, 1989, 176 SCRA 84. .
6.Dario v. Mison, supra.
7.The petitioners received a copy of Resolution No. 89-075 of the Civil Service Commission on
February 15, 1989 (rollo, id., 5); the petition was filed on March 2, 1989.
8.Rep. Act No. 5185, sec. 4.
Page 20
CASE DIGEST
Lopez, Jr. v. Civil Service Commission
G.R. No. 87119
April 16, 1991
FACTS:
The Vice-mayor of Manila submitted to the Civil Service Commission the appointment of 19 officers in
the Executive Staff of the Office of the Presiding Officer pursuant to the provisions of RA 409. However,
the City Budget of Manila questioned whether the payroll of the newly appointed employees may be
paid out of city funds on the basis of the appointments signed by the Vice Mayor. The City Legal Officer
then rendered an opinion that the proper appointing officer is the City Mayor and not the City Council.
ISSUE:
W/N the Charter of the City of Manila has been repealed by RA 5185 giving mayors the power to
appoint all officials entirely paid out by city funds and BP 337 empowering local executives to appoint all
officers and employees of the city.
HELD:
THIRD DIVISION
[G.R. No. 72477. October 16, 1990.]
NATIONAL POWER CORPORATION, petitioner, vs. HON. PRESIDING JUDGE, REGIONAL

TRIAL COURT, 10TH JUDICIAL REGION BRANCH XXV, CAGAYAN DE ORO CITY,
PROVINCE OF MISAMIS ORIENTAL, MUNICIPALITY OF JASAAN, MISAMIS ORIENTAL
AND BARANGAY APLAYA, JASAAN, MISAMIS ORIENTAL, respondents.
Pantaleon Z. Salcedo for respondent Barangay Aplaya.

The Provincial Attorney for respondent Misamis Oriental and Municipality of Jasaan.
No. Regardless of their date of passage, a special law (RA 409) providing specifically for the
organization of the Government of the City of Manila prevails over a general law. RA 5185 and BP 337
as general laws were not meant to deprive the City Council of Manila of its appointing power. Also, since
repeals by implication are not favored, conflict between the statutes should be very clear to favor the
assumption that the latter in time repeals the other.
DECISION
37, 38b, 50
FERNAN, C .J p:
In this Special Civil Action for Certiorari, petitioner National Power Corporation (NAPOCOR for brevity)
questions the jurisdiction of the Regional Trial Court of Cagayan de Oro City, Branch XXV to hear Civil
Case No. 9901 filed by respondents Province of Misamis Oriental and Municipality of Jasaan for the
collection of real property tax and special education fund tax from petitioner covering the years 1978 to
1984. cdasia
Page 21
The antecedent facts are as follows:
On October 10, 1984, the Province of Misamis Oriental filed a complaint 1 with the Regional Trial Court
of Cagayan de Oro City, Branch XXV against NAPOCOR for the collection of real property tax and
special education fund tax in the amounts of P11,105,008.10 and P11,104,658.10, respectively,
covering the period 1978 to 1984. Petitioner NAPOCOR then defendant therein, filed a motion to
dismiss 2 dated January 12, 1985 on the grounds that the court has no jurisdiction over the action or
suit and that it is not the proper forum for the adjudication of the case. In support of this motion
NAPOCOR cited Presidential Decree No. 242 dated July 9, 1973 which provides that disputes between
agencies of the government including government-owned or controlled corporations shall be
administratively settled or adjudicated by the Secretary of Justice.
The court through Judge Pablito C. Pielago issued an order 3 dated January 28, 1985 denying the
motion to dismiss. NAPOCOR filed a supplemental motion to dismiss 4 on February 22, 1985 citing a
resolution of the Fiscal Incentive Review Board, No. 10-85 effective January 11, 1984, restoring the tax
and duty exemption privileges of petitioner.
On March 27, 1985, NAPOCOR filed its answer to the complaint with counterclaim. Treating the same
as a second motion to dismiss and finding the affirmative defenses therein stated to be unmeritorious,
the court a quo issued an order on June 27, 1985, denying the second motion to dismiss and requiring
both parties to appear before the court for the purpose of submitting a stipulation of facts.
On July 23, 1985, Barangay Aplaya, Municipality of Jasaan, Misamis Oriental filed a complaint in
intervention 5 contending that non-payment by NAPOCOR of real property taxes would adversely affect
its interest since under the law, ten percent (10%) of the real property tax collected on properties within
its jurisdiction shall accrue to the general fund of the barangay. Thereafter, the case was set for trial
pursuant to the court's order dated August 20, 1985. 6
On October 30, 1985, petitioner NAPOCOR filed before this Court the present special civil action for
certiorari, 7 setting forth the following issues, to wit:
"1) Respondent Court acted without or in excess of jurisdiction and with grave abuse of discretion when it
issued the orders dated January 28, 1985, June 27, 1985 and August 20, 1985, denying petitioner's
motions to have Civil Case No. 9901 dismissed on the grounds of lack of jurisdiction and/or improper
venue.
"2) Petitioner is exempt from payment of real property taxes."
Relied upon by NAPOCOR in assailing the jurisdiction of the lower court and/or the venue of the action
are Sections 2 and 3 of Presidential Decree No. 242, entitled "PRESCRIBING THE PROCEDURE FOR
ADMINISTRATIVE SETTLEMENT OR ADJUDICATION OF DISPUTES, CLAIMS AND
CONTROVERSIES BETWEEN OR AMONG GOVERNMENT OFFICES, AGENCIES AND
INSTRUMENTALITIES, INCLUDING GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS,
AND FOR OTHER PURPOSES" dated on July 9, 1973. Sections 2 and 3 of this Decree provide:
Section 2. In all cases involving only questions of law, the same shall be submitted to and settled or
adjudicated by the Secretary of Justice, as Attorney General and ex officio legal adviser of all governmentowned or controlled corporations and entities, in consonance with section 83 of the Revised Administrative
Code. His ruling or determination of the question in each case shall be conclusive and binding upon all the
parties concerned. cdasia
Section 3. Cases involving mixed questions of law and of fact or only factual issues shall be submitted to
and settled or adjudicated by:
Page 22
(a) The Solicitor General, with respect to disputes or claims or controversies between or among the
departments, bureaus, offices and other agencies of the National Government;
(b) The Government Corporate Counsel, with respect to disputes or claims or controversies between or
among the government-owned or controlled corporations or entities being served by the office of the
Government Corporate Counsel; and
(c) The Secretary of Justice, with respect to all other disputes or claims or controversies which do not fall
under the categories mentioned in paragraphs (a) and (b). (Emphasis supplied)
In upholding the lower court's jurisdiction, respondent municipal corporations, on the other hand, rely on
Presidential Decree No. 464, entitled "THE REAL PROPERTY TAX CODE" enacted on July 1, 1974,
specifically Section 82 thereof which provides:
Section 82. Collection of real property tax through the courts. The delinquent real property tax shall
constitute a lawful indebtedness of the taxpayer to the province or city and collection of the tax may be
enforced by civil action in any court of competent jurisdiction. The civil action shall be filed by the Provincial
or City Fiscal within fifteen days after receipt of the statement of delinquency certified to by the provincial or
city treasurer. This remedy shall be in addition to all other remedies provided by law.
It is indeed desirable and beneficial to the Judiciary's on-going program of decongesting court dockets
that intra-governmental disputes such as this be settled administratively. Unfortunately, our
consideration of the legal provisions involved leads us to a different conclusion. In reconciling these two
conflicting provisions of P.D. 242 and P.D. 464 on the matter of jurisdiction, we are guided by the basic
rules on statutory construction. LexLib
P.D. 464 on the other hand, governs the appraisal and assessment of real property for purposes of
taxation by provinces, cities and municipalities, as well as the levy, collection and administration of real
property tax. It is a special law which deals specifically with real property taxes.
It is a basic tenet in statutory construction that between a general law and a special law, the special law
prevails. GENERALIA SPECIALIBUS NON DEROGANT. 8
Where a later special law on a particular subject is repugnant to, or inconsistent with, a prior general law
on the same subject, a partial repeal of the latter will be implied to the extent of the repugnancy or an
exception grafted upon the general law.
A special law must be intended to constitute an exception to the general law in the absence of special
circumstances forcing a contrary conclusion. 9
The conflict in the provisions on jurisdiction between P.D. 242 and P.D. 464 should be resolved in favor
of the latter law, since it is a special law and of later enactment. P.D. 242 must yield to P.D. 464 on the
matter of who or which tribunal or agency has jurisdiction over the enforcement and collection of real
property taxes. Therefore, respondent court has jurisdiction to hear and decide Civil Case No. 9901.
On the question of whether or not NAPOCOR is liable to pay real property taxes and special education
fund taxes for the years 1978 to 1984, we rule in the affirmative. LLjur
An examination of these two decrees shows that P.D. 242 is a general law which deals with
administrative settlement or adjudication of disputes, claims and controversies between or among
government offices, agencies and instrumentalities, including government-owned or controlled
corporations. The coverage is broad and sweeping, encompassing all disputes, claims and
controversies.
Page 23
Presidential Decree No. 1177, entitled "REVISING THE BUDGET PROCESS IN ORDER TO
INSTITUTIONALIZE THE BUDGETARY INNOVATIONS OF THE NEW SOCIETY" was passed on July
30, 1977. Section 23 thereof provides:
Section 23. Tax and Duty Exemptions. All units of government, including government-owned or
controlled corporations, shall pay income taxes, customs duties and other taxes and fees as are imposed
under revenue laws; provided, that organizations otherwise exempted by law from the payment of such
taxes/duties may ask for a subsidy from the General Fund in the exact amount of taxes/duties due;
provided, further, that a procedure shall be established by the Secretary of Finance and the Commissioner
of the Budget, whereby such subsidies shall automatically be considered as both revenue and expenditure
of the General Fund. (Emphasis supplied)
Petitioner alleges that what has been withdrawn is its exemption from taxes, duties, and fees which are
payable to the national government while its exemption from taxes, duties and fees payable to
government branches, agencies and instrumentalities remains unaffected. Considering that real
property taxes are payable to the local government, NAPOCOR maintains that it is exempt therefrom.
Thus, any dubiety on NAPOCOR'S liability to pay taxes, duties and fees should be considered
unequivocably resolved by the above provision.
In the case of National Power Corporation vs. The Province of Albay, et. al., 10 herein petitioner was
held liable for real property taxes to the provincial government of Albay for the period June 11, 1984 to
March 10, 1987, when it claims to have been enjoying tax exemptions under Resolutions Nos. 10-85, 186 and 17-87 of the Fiscal Incentives Review Board (FIRB). It must be noted that Resolution 10-85 was
the same resolution cited by petitioner in its supplemental motion to dismiss 11 in Civil Case No. 9901.
If the attempt (found ineffective for lack of authority in the above-cited case of NPC vs. The Province of
Albay) to restore petitioner's tax exemptions began only in 1985 with the issuance of FIRB Resolution
No. 10-85, it stands to reason that prior thereto, i.e., from 1977 when P.D. 1177 was promulgated up to
1984, petitioner did not enjoy any tax privilege as would exempt it from the payment of the taxes under
consideration. cdasia
In the same case of NPC vs. The Province of Albay, 12 this Court had occasion to state:
We find the above argument untenable. It reads into the law a distinction that is not there. It is contrary
to the clear intent of the law to withdraw from all units of government, including government-owned or
controlled corporations their exemptions from all kinds of taxes. Had it been otherwise, then the law
would have said so. Not having distinguished as to the kinds of tax exemptions withdrawn, the plain
meaning is that all tax exemptions are covered. Where the law does not distinguish, neither must we.
"Actually, the State has no reason to decry the taxation of NAPOCOR's properties, as and by way of real
property taxes. Real property taxes, after all, form part and parcel of the financing apparatus of the
Government in development and nation-building, particularly in the local government level.
Moreover, Presidential Decree No. 1931 entitled "DIRECTING THE RATIONALIZATION OF DUTY AND
TAX EXEMPTION PRIVILEGES GRANTED TO GOVERNMENT-OWNED OR CONTROLLED
CORPORATIONS AND ALL OTHER UNITS OF GOVERNMENT" which was passed on June 11, 1984,
categorically states:
xxx xxx xxx
"To all intents and purposes, real property taxes are funds taken by the State with one hand and given to
the other. In no measure can the Government be said to have lost anything."
"WHEREAS, Presidential Decree No. 1177 has already expressly repealed the grant of tax privileges to
any government-owned or controlled corporation and all other units of government." (Emphasis supplied)
Page 24
The proceeds of the real property tax are divided among the province, city or municipality where the
property subject to the tax is situated and shall be applied by the respective local government unit for its
own use and benefit. Even the barrio where the property is situated shares in the real property tax
collections. Likewise, the entire proceeds of the additional one per cent (1%) real property tax levied for
the Special Education Fund created under R.A. 5447, are divided among the province, city and
municipalities where the property is situated. cdtai
6.Rollo, pp. 72-73.

7.Rollo, pp. 2-16.
8.Lagman vs. City of Manila, G.R. No. 23305, June 30, 1966, 17 SCRA 579.
9.Baga vs. PNB, 99 Phil. 889, cited in Butuan Sawmill, Inc. vs. City of Butuan, et al., No. L-21516,
April 29, 1966, 16 SCRA 755.
WHEREFORE, the petition is DISMISSED. Petitioner having been found liable for the taxes being
collected in Civil Case No. 9901, the respondent court is hereby directed to proceed with deliberate
dispatch in hearing the case for the purpose of determining the exact liability of petitioner. No Costs.
10.G.R. No. 87479, June 4, 1990.

11.Rollo, pp. 31-33.
12.Ibid.
SO ORDERED.
Gutierrez, Jr., Bidin and Cortes, JJ., concur.
||| (National Power Corp. v. Presiding Judge, RTC, 10th Judicial Region, Br. XXV, Cagayan De Oro City,
G.R. No. 72477, [October 16, 1990], 268 PHIL 507-516)
Feliciano, J., is on leave.
Footnotes
1.Rollo, pp. 18-21.

2.Rollo, pp. 22-24.
3.Rollo, pp. 25-26; 28-30.
4.Rollo, pp. 31-33.
5.Rollo, pp. 65-66.
Page 25
HON. RICHARD J. GORDON, in his capacity as City Mayor of Olongapo, petitioner, vs.
JUDGE REGINO T. VERIDIANO II and Spouses EDUARDO and ROSALINDA YAMBAO,
respondents.
SYLLABUS
1. ADMINISTRATIVE LAW; FOOD AND DRUG ADMINISTRATION; VESTED WITH ALL DRUG
INSPECTION FUNCTIONS AND APPROVAL OF APPLICATION FOR AUTHORITY TO OPERATE OR
ESTABLISH A DRUG ESTABLISHMENT. The authorization to operate issued by the FDA is a
condition precedent to the grant of a mayor's permit to the drug store seeking to operate within the limits
of the city. This requirement is imperative. The power to determine if the opening of the drug store is
conformable to the national policy and the laws on the regulation of drug sales belongs to the FDA.
Hence, a permit issued by the mayor to a drug store not previously cleared with and licensed by the
said agency will be a nullity.
2. ID.; CHARTER OF OLONGAPO CITY; EMPOWERS CITY MAYOR TO GRANT OR REFUSE

MUNICIPAL LICENSES TO OPERATE OR PERMITS OF ALL CLASSES AND TO REVOKE THE
SAME. The petitioner traces his authority to the charter of Olongapo City, R.A. No. 4645, which inter
alia empowers the city mayor under Section 10 thereof to grant or refuse municipal licenses to operate
or permits of all classes and to revoke the same for violation of the conditions upon which they were
granted.
FIRST DIVISION
[G.R. No. L-55230. November 8, 1988.]
3. ID.; ID.; ID.; POWER TO APPROVE A LICENSE INCLUDE BY IMPLICATION, THE POWER TO
REVOKE. The power to approve a license includes by implication, even if not expressly granted, the
power to revoke it. By extension, the power to revoke is limited by the authority to grant the license,
from which it is derived in the first place. Thus, if the FDA grants a license upon its finding that the
applicant drug store has complied with the requirements of the general laws and the implementing
administrative rules and regulations, it is only for their violation that the FDA may revoke the said
Page 26
license. By the same token, having granted the permit upon his ascertainment that the conditions
thereof as applied particularly to Olongapo City have been complied with, it is only for the violation of
such conditions that the mayor may revoke the said permit.
4. ID.; FOOD AND DRUG ADMINISTRATION; ORDER OF CLOSURE OF A DRUG STORE FOR
VIOLATION OF ITS CONDITIONS; GROUND NOT AVAILABLE AS A GROUND FOR REVOCATION
OF THE MAYOR'S PERMIT OF THE SAME STORE. In the present case, the closure of the San
Sebastian Drug Store was ordered by the FDA for violation of its own conditions, which it certainly had
the primary power to enforce. By revoking the mayor's permit on the same ground for which the San
Sebastian Drug Store had already been penalized by the FDA, the mayor was in effect reversing the
decision of the latter on a matter that came under its jurisdiction. As the infraction involved the
pharmacy and drug laws which the FDA had the direct responsibility to execute, the mayor had no
authority to interpose his own findings on the matter and substitute them for the decision already made
by the FDA.
5. ID.; FACTUAL FINDINGS OF ADMINISTRATIVE AUTHORITIES, ACCORDED GREAT RESPECT.

The indefinite suspension of the mayor's permit for Olongapo City Drug Store was based on the transfer
thereof to the site of the San Sebastian Drug Store as approved by the FDA but without permission from
the petitioner. On this matter, the Court believes that the final decision rested with the mayor. The
condition violated related more to the location in Olongapo City of business establishments in general
than to the regulation of drug stores in particular. It therefore came under the petitioner's jurisdiction.
city. While conceding that the FDA possesses such power, the mayor claims he may nevertheless, in
the exercise of his own power, prevent the operation of drug stores previously permitted by the former.
There are two drug stores involved in this dispute, to wit, the San Sebastian Drug Store and the
Olongapo City Drug Store, both owned by private respondent Rosalinda Yambao. 1 They are located a
few meters from each other in the same building on Hospital Road, Olongapo City. 2 They were
covered by Mayor's Permits Nos. 1954 and 1955, respectively, issued for the year 1980, 3 and licenses
to operate issued by the FDA for the same year. 4
This case arose when on March 21, 1980, at about 5:00 o'clock in the afternoon, a joint team composed
of agents from the FDA and narcotics agents from the Philippine Constabulary conducted a "test buy" at
San Sebastian Drug Store and was sold 200 tablets of Valium, 10 mg. worth P410.00 without a doctor's
prescription. 5
A report on the operation was submitted to the petitioner, as mayor of Olongapo City, on April 9, 1980. 6
On April 17, 1980, he issued a letter summarily revoking Mayor's Permit No. 1954, effective April 18,
1980, "for rampant violation of R.A. 5921, otherwise known as the Pharmacy Law and R.A. 6425 or the
Dangerous Drugs Act of 1972." 7 Later, when the petitioner went to Singapore, Vice-Mayor Alfredo T. de
Perio, Jr. caused the posting of a signboard at the San Sebastian Drug Store announcing its permanent
closure. 8
DECISION
CRUZ, J p:
Acting on the same investigation report of the "test-buy," and after hearing, FDA Administrator Arsenio
Regala, on April 25, 1980, directed the closure of the drug store for three days and its payment of a
P100.00 fine for violation of R.A. No. 3720. He also issued a stern warning to Yambao against a
repetition of the infraction. 9 On April 29, 1980, the FDA lifted its closure order after noting that the
penalties imposed had already been discharged and allowed the drug store to resume operations. 10
The issue before the Court is the conflict between the Food and Drug Administration and the mayor of
Olongapo City over the power to grant and revoke licenses for the operation of drug stores in the said
Page 27
On April 30, 1980, Yambao, through her counsel, wrote a letter to the petitioner seeking reconsideration
of the revocation of Mayor's Permit No. 1954. 11 On May 7, 1980, having received on reply, she and her
husband filed with the Regional Trial Court of Olongapo City a complaint for mandamus and damages,
with a prayer for a writ of preliminary injunction, against the petitioner and Vice-Mayor de Perio. 12
On the same date, Yambao requested permission from the FDA to exchange the locations of the San
Sebastian Drug Store and the Olongapo City Drug Store for reasons of "business preference." 13
The request was granted. 14 But when informed to this action, the petitioner, in a letter to the private
respondent dated May 13, 1980, disapproved the transfers and suspended Mayor's Permit No. 1955 for
the Olongapo City Drug Store. 15
The Yambaos then filed on May 15, 1980, a supplemental complaint questioning the said suspension
and praying for the issuance of a preliminary writ of prohibitory injunction. 16 On the same day, the
respondent judge issued an order directing the maintenance of the status quo with respect to the
Olongapo City Drug Store pending resolution of the issues. 17
"WHEREFORE, the defendants' motion for reconsideration of the status quo order dated May 15, 1980, is
hereby DENIED and the letter of the defendant city mayor dated April 17, 1980, for the revocation of
Mayor's Permit No. 1954 for the San Sebastian Drug Store is declared null and void.
"Accordingly, a writ of preliminary prohibitory injunction is heretofore issued enjoining defendants from
doing acts directed towards the closure of the San Sebastian Drug Store and the suspension of the
Olongapo City Drug Store both situated at Hospital Road, Olongapo City. Further, the signboard posted at
San Sebastian Drug Store by the defendants is ordered removed in order that the said drug store will
resume its normal business operation.
"The hearing of the main petition for damages is set on August 14, 1980, at 1:30 o'clock in the afternoon."
The petitioner's motion for reconsideration of the above-stated order was denied in an order dated
September 4, 1980. 21 The petitioner thereupon came to this Court in this petition for certiorari and
prohibition with preliminary injunction, to challenge the aforesaid orders.
We issued a temporary restraining order against the respondent judge on October 27, 1980, 22 but
lifted it on December 10, 1980, for failure of the petitioner to file his comment on the private
respondents' motion to lift the said order and/or for issuance of a counter restraining order. 23
On May 21, 1980, the petitioner wrote the FDA requesting reconsideration of its order of April 29, 1980,
allowing resumption of the operation of the San Sebastian Drug Store. 18 The request was denied by
the FDA in its reply dated May 27, 1980. 19
First, let us compare the bases of the powers and functions respectively claimed by the FDA and the
petitioner as mayor of Olongapo City.
A motion for reconsideration of the status quo order had earlier been filed on May 1, 1980 by the
petitioner. After a joint hearing and an exchange of memoranda thereon, the respondent judge issued
an order on July 16, 1980, 20 the dispositive portion of which read as follows:
The task of drug inspection was originally lodged with the Board of Pharmaceutical Examiners pursuant
to Act 2762, as amended by Act 4162. By virtue of Executive Order No. 392 dated January 1, 1951
(mandating reorganization of various departments and agencies), this was assumed by the Department
of Health and exercised through an office in the Bureau of Health known as the Drug Inspection
Section. This section was empowered "to authorize the opening of pharmacies, drug stores and
dispensaries, and similar establishments after inspection by persons authorized by law."
Page 28
substances in violation of the Food, Drug and Cosmetic Act, and Dangerous Drugs Act of 1972, or other
laws regulating the sale or dispensation of drugs, or rules and regulations issued pursuant thereto.
The Food and Drug Administration was created under R.A. No. 3720 (otherwise known as the Food,
Drug and Cosmetic Act), approved on June 22, 1963, and vested with all drug inspection functions in
line with "the policy of the State to insure safe and good quality supply of food, drug and cosmetics, and
to regulate the production, sale and traffic of the same to protect the health of the people." Section 5 of
this Act specifically empowers it:
"(e) to issue certificates of compliance with technical requirements to serve as basis for the issuance of
license and spotcheck for compliance with regulations regarding operation of food, drug and cosmetic
manufacturers and establishments."
For a more effective exercise of this function, the Department of Health issued on March 5, 1968,
Administrative Order No. 60, series of 1968, laying down the requirements for the application to be filed
with the FDA for authorization to operate or establish a drug establishment. The order provides that
upon approval of the application, the FDA shall issue to the owner or administrator of the drug store or
similar establishment a "License to Operate" which "shall be renewed within the first 3 months of each
year upon payment of the required fees." This license contains the following reservation:
"However, should during the period of issue, a violation of any provisions of the Food, Drug and Cosmetic
Act and/or the regulations issued thereunder be committed, this License shall be subject to suspension or
revocation."
When the drug addiction problem continued to aggravate, P.D. No. 280 was promulgated on August 27,
1973, to give more teeth to the powers of the FDA, thus:
"Sec. 2. The administrative investigation shall be summary in character. The owner of the drug store shall
be given an Opportunity to be heard." (P.D. 280, emphasis supplied.)
For his part, the petitioner, traces his authority to the charter of Olongapo City, R.A. No. 4645, which
inter alia empowers the city mayor under Section 10 thereof:
"k. to grant or refuse municipal licenses to operate or permits of all classes and to revoke the same for
violation of the conditions upon which they were granted, or if acts prohibited by law or city ordinances are
being committed under protection of such licenses or in the premises in which the business for which the
same have been granted is carried on, or for any other good reason of general interest."
The charter also provides, in connection with the powers of the city health officer, that:
"Sec. 6(k). He and his representatives shall have the power to arrest violators of health laws, ordinances,
rules and regulations and to recommend the revocation or suspension of the permits of the different
establishments to the City Mayor for violation of health laws, ordinances, rules and regulations ." (Emphasis
supplied.)
An application to establish a drug store in Olongapo City must be filed with the Office of the Mayor and
must show that the applicant has complied with the existing ordinances on health and sanitation,
location or zoning, fire or building, and other local requirements. If the application is approved, the
applicant is granted what is denominated a "Mayor's Permit" providing inter alia that it "is valid only at
the place stated above and until (date), unless sooner revoked for cause." 24
"Section 1. Any provision of law to the contrary notwithstanding, the Food and Drug Administrator is hereby
authorized to order the closure, or suspend or revoke the license of any drug establishment which after
administrative investigation is found guilty of selling or dispensing drugs, medicines and other similar
Page 29
Courts of justice, when confronted with apparently conflicting statutes, should endeavor to reconcile the
same instead of declaring outright the invalidity of one as against the other. Such alacrity should be
avoided. The wise policy is for the judge to harmonize them if this is possible, bearing in mind that they
are equally the handiwork of the same legislature, and so give effect to both while at the same time also
according due respect to a coordinate department of the government. It is this policy the Court will apply
in arriving at the interpretation of the laws above-cited and the conclusions that should follow therefrom.
A study of the said laws will show that the authorization to operate issued by the FDA is a condition
precedent to the grant of a mayor's permit to the drug store seeking to operate within the limits of the
city. This requirement is imperative. The power to determine if the opening of the drug store is
conformable to the national policy and the laws on the regulation of drug sales belongs to the FDA.
Hence, a permit issued by the mayor to a drug store not previously cleared with and licensed by the
said agency will be a nullity.
This is not to say, however, that the issuance of the mayor's permit is mandatory once it is shown that
the FDA has licensed the operation of the applicant drug store. This is not a necessary consequence.
For while it may appear that the applicant has complied with the pertinent national laws and policies,
this fact alone will not signify compliance with the particular conditions laid down by the local authorities
like zoning, building, health, sanitation, and safety regulations, and other municipal ordinances enacted
under the general welfare clause. This compliance still has to be ascertained by the mayor if the permit
is to be issued by his office. Should he find that the local requirements have not been observed, the
mayor must then, in the exercise of his own authority under the charter, refuse to grant the permit
sought.
The power to approve a license includes by implication, even if not expressly granted, the power to
revoke it. By extension, the power to revoke is limited by the authority to grant the license, from which it
is derived in the first place. Thus, if the FDA grants a license upon its finding that the applicant drug
store has complied with the requirements of the general laws and the implementing administrative rules
and regulations, it is only for their violation that the FDA may revoke the said license. By the same
token, having granted the permit upon his ascertainment that the conditions thereof as applied
particularly to Olongapo City have been complied with, it is only for the violation of such conditions that
the mayor may revoke the said permit.
Conversely, the mayor may not revoke his own permit on the ground that the compliance with the
conditions laid down and found satisfactory by the FDA when it issued its license is in his own view not
acceptable. This very same principle also operates on the FDA. The FDA may not revoke its license on
the ground that the conditions laid down in the mayor's permit have been violated notwithstanding that
no such finding has been made by the mayor.
In the present case, the closure of the San Sebastian Drug Store was ordered by the FDA for violation
of its own conditions, which it certainly had the primary power to enforce. By revoking the mayor's
permit on the same ground for which the San Sebastian Drug Store had already been penalized by the
FDA, the mayor was in effect reversing the decision of the latter on a matter that came under its
jurisdiction. As the infraction involved the pharmacy and drug laws which the FDA had the direct
responsibility to execute, the mayor had no authority to interpose his own findings on the matter and
substitute them for the decision already made by the FDA.
It would have been different if the offense condoned by the FDA was a violation of, say, a city ordinance
requiring buildings to be provided with safety devices or equipment, like fire extinguishers. The city
executive may ignore such condonation and revoke the mayor's permit just the same. In this situation,
he would be acting properly because the enforcement of the city ordinance is his own prerogative. In
the present case, however, the condition allegedly violated related to a national law, not to a matter of
merely local concern, and so came under the jurisdiction of the FDA.
Settled is the rule that the factual findings of administrative authorities are accorded great respect
because of their acknowledged expertise in the fields of specialization to which they are assigned. 25
Even the courts of justice, including this Court, are concluded by such findings in the absence of a clear
showing of a grave abuse of discretion, which is not present in the case at bar. For all his experience in
the enforcement of city ordinances, the petitioner cannot claim the superior aptitudes of the FDA in the
enforcement of the pharmacy and drug addiction laws. He should therefore also be prepared, like the
courts of justice themselves, to accept its decisions on this matter.
Page 30
The petitioner magnifies the infraction committed by the San Sebastian Drug Store but the FDA
minimizes it. According to the FDA Administrator, Valium is not even a prohibited drug, which is why the
penalty imposed was only a 3-day closure of the drug store and a fine of P100.00. 26 Notably, the
criminal charges filed against the private respondent for the questioned transaction were dismissed by
the fiscal's office. 27
It is also worth noting that the San Sebastian Drug Store was penalized by the FDA only after a hearing
held on April 25, 1980, at which private respondent Yambao, assisted by her lawyer-husband, appeared
and testified. 28 By contrast, the revocation of the mayor's permit was communicated to her in a letter
29 reading simply as follows:
April 17, 1980

Rosalinda Yambao
c/o San Sebastian Drug Store
Hospital Road, Olongapo City
If only for the violation of due process which is manifest from this letter, the mayor's arbitrary action can
be annulled.
The indefinite suspension of the mayor's permit for Olongapo City Drug Store was based on the transfer
thereof to the site of the San Sebastian Drug Store as approved by the FDA but without permission from
the petitioner. On this matter, the Court believes that the final decision rested with the mayor. The
condition violated related more to the location in Olongapo City of business establishments in general
than to the regulation of drug stores in particular. It therefore came under the petitioner's jurisdiction.
The FDA would have the right to disapprove the site of the drug store only if it would impair the health or
other interests of the customers in contravention of the national laws or policies, as where the drug
store is located in an unsanitary site. But the local executive would have reason to object to the location,
even if approved by the FDA, where it does not conform to, say, a zoning ordinance intended to
promote the comfort and convenience of the city residents.
Madame:
Based on a report submitted by PC Major Virtus V. Gil, Chief 3 RFO, Dis. B, Task Force `Bagong Buhay,'
you are rampantly violating the provisions of Republic Act 5921 otherwise known as the `Pharmacy Law.'
Aside from this, there is evidence that you are dispensing regulated drugs contrary to the provisions of R.A.
6425 otherwise known as the Dangerous Drugs Act of 1972.
In view of the above, Mayor's Permit No. 1954 heretofore issued in your name for the operation of a drug
store (San Sebastian) at the Annex Building of the Fil-Am (IYC),along Hospital Road, this City, is
REVOKED effective April 18, 1980.
The reason given by the petitioner in disapproving the transfer was violation of Mayor's Permit No.
1955, which by its terms was valid only at the place stated therein. In the letter of May 13, 1980, 30 the
private respondent was clearly informed that for violation of the condition of Mayor's Permit No. 1955
granting her the privilege of operating the Olongapo City Drug Store at No. 1-B Fil-Am Bldg., Hospital
Road, the said permit was "hereby suspended." We find that reason was valid enough. The permit
clearly allowed the drug store to operate in the address given and not elsewhere. No hearing was
necessary because the transfer without the mayor's permission is not disputed and was in fact impliedly
admitted by the private respondent.
PLEASE BE GUIDED ACCORDINGLY.

Very truly yours,
(SGD.) RICHARD J. GORDON
City Mayor
If the private respondent wanted to transfer her drug store, what she should have done was to secure
the approval not only of the FDA but also, and especially, of the mayor. Merely notifying the petitioner of
the change in the location of her drug stores as allowed by the FDA was not enough. The FDA had no
Page 31
authority to revoke that particular condition of the mayor's permits indicating the sites of the two drug
stores as approved by the mayor in the light of the needs of the city. Only the mayor could.
We assume that Mayor's Permit No. 1954 could also have been validly suspended for the same reason
(as the sites of the two drug stores were exchanged without amendment of their respective permits)
were it not for the fact that such permit was revoked by the petitioner on the more serious ground of
violation of the Pharmacy Law and the Dangerous Drugs Act of 1972.
It is understood, however, that the suspension should be deemed valid only as the two drug stores have
not returned to their original sites as specified in their respective permits. Indefinite suspension will
amount to a permanent revocation, which will not be a commensurate penalty with the degree of the
violation being penalized.
The petitioner is to be commended for his zeal in the promotion of the campaign against drug addiction,
which has sapped the vigor and blighted the future of many of our people, especially the youth. The
legal presumption is that he acted in good faith and was motivated only by his concern for the residents
of Olongapo City when he directed the closure of the first drug store and the suspension of the permit of
the other drug store. It appears, though, that he may have overreacted and was for this reason properly
restrained by the respondent judge.
WHEREFORE, the challenged Orders of July 6, 1980 and September 4, 1980, ate MODIFIED in the
sense that the suspension of Mayor's Permit No. 1955 shall be considered valid but only until the San
Sebastian Drug Store and the Olongapo City Drug Store return to their original sites as specified in the
FDA licenses and the mayor's permits or until the request for transfer, if made by the private
respondents, is approved but the petitioner. The rest of the said Orders are AFFIRMED, with costs
against the petitioner.
SO ORDERED.
The Court adds that denial of the request for transfer, if properly made by the private respondents, may
not be validly denied by the judge in the absence of a clear showing that the transfer sought will
prejudice the residents of the city. As the two drug stores are only a few meters from each other, and in
the same building, there would seem to be no reason why the mere exchange of their locations should
not be permitted. Notably, the location of the two drug stores had previously been approved in Mayor's
Permit Nos. 1954 and 1955.
Narvasa, Gancayco, Grio-Aquino and Medialdea, JJ ., concur.
Footnotes
Our holding is that the petitioner acted invalidly in revoking Mayor's Permit No. 1954 after the FDA had
authorized the resumption of operations of the San Sebastian Drug Store following the enforcement of
the penalties imposed upon it. However, it was competent for the petitioner to suspend Mayor's Permit
No. 1955 for the transfer of the Olongapo City Drug Store in violation of the permit. Such suspension
should nevertheless be effective only pending the return of the drug store to its authorized original site
or the eventual approval by the mayor of the requested transfer if found to be warranted.
1.Rollo, p. 47.
2.Ibid.
3.Id.
4.Id., p. 96.
Page 32
5.Id., pp. 48, 15.
23.Id., pp. 160-162.
6.Id.
24.Id., p. 211.
7.Id., p. 23.
25.Tagum Doctors Enterprises v. Gregorio Apsay, et al., G.R. No. 81188, August 30, 1988; Antonio de
Leon v. Heirs of Gregorio Reyes, et al., l52 SCRA 584; Liangga Bay Logging Co., Inc. v.
Hon. Enage, et al., 152 SCRA 80; Packaging Products Corp. v. NLRC, 152 SCRA 210, and
the cases cited therein; Ateneo de Manila University v. CA, 145 SCRA 100.
8.Id., p. 48.
9.Id., pp. 24-26.
10.Id., p. 26.
11.Id., pp. 27-28.
12.Id., pp. 14-21.
13.Id., p. 34.
26.Rollo, p. 25.
27.Ibid., pp. 234-242.
28.Id., p. 14.
29.Id., p. 23.
30.Id., p. 36.
14.Id.
15.Id., pp. 36-37.
||| (Gordon v. Veridiano, G.R. No. L-55230, [November 8, 1988])
16.Id., pp. 29-33.

17.Id., p. 38.
18.Id., pp. 98-100.
19.Id., p. 104.
20.Id., pp. 47-54.
21.Id., p. 64.
22.Id., pp. 65-67.
Page 33
CASE DIGEST
Richard Gordon v. Regino Veridiano II
G.R. No. L-55230
Nov. 8, 1988
EN BANC
[G.R. No. L-23052. January 29, 1968.]

FACTS:
Respondent Yambao owns a San Sebastian Drugstore and an Olongapo City Drugstore. A test buy
operation at San Sebastian Drugstore, wherein agents were sold 200 tablets of Valium without a
doctors prescription, gave rise to the closure ordered by the FDA. Before such order was promulgated,
the Mayor revoked the Mayors Permits issued to San Sebastian Drugstore and subsequently, a
signboard was posted by the Vice-Mayor at the drugstore announcing its permanent closure. On May 7,
1980, FDA approved Respondents request to exchange the locations of the two drugstores (which
were 5m apart and in the same building). Upon knowledge of this, Petitioner then revoked the Mayors
Permit issued to Olongapo City Drugstore.
ISSUE:
CITY OF MANILA, petitioner, vs. GENERO M. TEOTICO and THE COURT OF APPEALS,
respondents.
City Fiscal Manuel T. Reyes for petitioner.

Sevilla, Daza & Associates for respondents.
The conflict between the FDAs and the mayors power to grant and revoke licenses for the operation of
drugstores.
SYLLABUS
RULING:
The FDA had the authority to order the closure of San Sebastian Drugstore, the Mayor however did not.
In the case of Olongapo City Drugstore however, the authority rested on the Mayor (local jurisdiction).
LATIN MAXIM:
20c, 38b
1. STATUTORY CONSTRUCTION; SPECIFIC PROVISIONS OF CIVIL CODE, THOUGH A GENERAL

LAW, PREVAIL OVER MANILA CHARTER, SPECIAL LAW. Insofar as its territorial application is
concerned, Republic Act 409 is a special law and the Civil Code is a general legislation; but as regards
the subject-matter of the provisions of sec. 4, Rep. Act 409 and Article 2189 of the Civil Code, the
former establishes a general rule regulating the liability of the City of Manila for damages or injury to
persons or property arising from the failure of city officers to enforce the provisions of said Act; while
article 2189 of the Civil Code constitutes a particular prescription making provinces, cities and
municipalities liable for damages for the death or injury suffered by any person by reason of the
defective condition of roads, streets and other public works under the control or supervision of said
municipal governments. In other words, sec. 4 of Rep. Act 409 refers to liability arising from negligence
in general regardless of the object thereof, whereas Article 2189 of the Civil Code, governs liability due
to defective streets in particular. The Civil Code is decisive herein because the present action is based
on the alleged defective condition of a road.
Page 34
2. PLEADINGS; ANSWER; ALLEGATIONS NOT SET FORTH IN ANSWER, CANNOT BE RAISED

FOR FIRST TIME ON APPEAL. The assertion that P. Burgos Avenue is a national highway for which
the City of Manila is not liable, was made for the first time in the petitioner's motion for reconsideration
of the decision of the Court of Appeals. It was not alleged in the answer. Such assertion raised a
question of fact which had not been put in issue in the trial court and cannot, therefore, be raised for the
first time on appeal much less after the rendition of the decision of the appellate court.
3. ID.; FINDINGS OF FACT OF COURT OF APPEALS, CONCLUSIVE. The determination of whether

or not P. Burgos Avenue is under the control or supervision of the City of Manila and whether the latter
is guilty of negligence in connection with the maintenance of said road is a question of fact a
question already decided by the Court of Appeals and the factual findings of said Court are not subject
to a review by the Supreme Court.
DECISION
Teotico suffered contusions on the left thigh, the left upper arm, the right leg and the upper lip, apart
from an abrasion on the right infra-patella region. These injuries and the allergic eruptions caused by
anti-tetanus injections administered to him in the hospital, required further medical treatment by a
private practitioner who charged therefor P1,400.00.
As a consequence of the foregoing occurrence, Teotico filed, with the Court of First Instance of Manila,
a complaint which was, subsequently, amended for damages against the City of Manila, its mayor,
city engineer, city health officer, city treasurer and chief of police. As stated in the decision of the trial
court, and quoted with approval by the Court of Appeals,
"At the time of the incident, plaintiff was a practicing public accountant, a businessman and a professor at
the University of the East. He held responsible positions in various business firms like the Philippine
Merchandising Co., the A. U. Valencia and Co., the Silver Swan Manufacturing Company and the Sincere
Packing Corporation. He was also associated with several civic organizations such as the Wack Wack Golf
Club, the Chamber of Commerce of the Philippines, Y's Men Club of Manila and the Knight's of Rizal. As a
result of the incident, plaintiff was prevented from engaging in his customary occupation for twenty days.
Plaintiff has lost a daily income of about P50.00 during his incapacity to work. Because of the incident, he
was subjected to humiliation and ridicule by his business associates and friends. During the period of his
treatment, plaintiff was under constant fear and anxiety for the welfare of his minor children since he was
their only support. Due to the filing of this case, plaintiff has obligated himself to pay his counsel the sum of
P2,000.00.
CONCEPCION, C.J p:
Appeal by certiorari from a decision of the Court of Appeals.

On January 27, 1958, at about 8:00 p.m., Genaro N. Teotico was at the corner of the Old Luneta and P.
Burgos Avenue, Manila, within a "loading and unloading" zone, waiting for a jeepney to take him down
town. After waiting for about five minutes, he managed to hail a jeepney that came along to a stop. As
he stepped down from the curb to board the jeepney, and took a few steps, he fell inside an uncovered
and unlighted catchbasin or manhole on P. Burgos Avenue. Due to the fall, his head hit the rim of the
manhole breaking his eyeglasses and causing broken pieces thereof to pierce his left eyelid. As blood
flowed therefrom, impairing his vision, several persons came to his assistance and pulled him out of the
manhole. One of them brought Teotico to the Philippine General Hospital, where his injuries were
treated, after which he was taken home. In addition to the lacerated wound in his left upper eyelid,
"On the other hand, the defense presented evidence, oral and documentary, to prove that the Storm Drain
Section, Office of the City Engineer of Manila, received a report of the uncovered condition of a catchbasin
at the corner of P. Burgos and Old Luneta Streets, Manila, on January 24, 1958, but the same was covered
on the same day (Exhibit 4); that again the iron cover of the same catchbasin was reported missing on
January 30, 1958, but the said cover was replaced the next day (Exhibit 5); that the Office of the City
Engineer never received any report to the effect that the catchbasin in question was not covered between
January 25 and 29, 1958; that it has always been a policy of the said office, which is charged with the duty
of installation, repair and care of storm drains in the City of Manila, that whenever a report is received from
whatever source of the loss of a catchbasin cover, the matter is immediately attended to, either by
immediately replacing the missing cover or covering the catchbasin with steel matting; that because of the
lucrative scrap iron business then prevailing, stealing of iron catchbasin covers was rampant; that the Office
of the City Engineer has filed complaints in court resulting from theft of said iron covers; that in order to
prevent such thefts, the city government has changed the position and layout of catch basins in the City by
constructing them under the sidewalk with concrete cement covers and openings on the sides of the gutter;
and that these changes had been undertaken by the city from time to time whenever funds were available."
Page 35
After appropriate proceedings the Court of First Instance of Manila rendered the aforementioned
decision sustaining the theory of the defendants and dismissing the amended complaint, without costs.
On appeal taken by plaintiff, this decision was affirmed by the Court of Appeals, except insofar as the
City of Manila is concerned, which was sentenced to pay damages in the aggregate sum of P6,750.00.
1 Hence, this appeal by the City of Manila.
The first issue raised by the latter is whether the present case is governed by Section 4 of Republic Act
No. 409 (Charter of the City of Manila) reading:
"The city shall not be liable or held for damages or injuries to persons or property arising from the failure of
the Mayor, the Municipal Board, or any other city officer, to enforce the provisions of this chapter, or any
other law or ordinance, or from negligence of said Mayor, Municipal Board, or other officers while enforcing
or attempting to enforce said provisions."
or by Article 2189 of the Civil Code of the Philippines, which provides:
"Provinces, cities and municipalities shall be liable for damages for the death of, or injuries suffered by, any
person by reason of the defective condition of roads, streets, bridges, public buildings, and other public
works under their control or supervision."
Manila maintains that the former provision should prevail over the latter, because Republic Act 409 is a
special law, intended exclusively for the City of Manila, whereas the Civil Code is a general law,
applicable to the entire Philippines.
The Court of Appeals, however, applied the Civil Code, and, we think, correctly. It is true that, insofar as
its territorial application is concerned, Republic Act No. 409 is a special law and the Civil Code a general
legislation; but, as regards the subject- matter of the provisions above quoted, Section 4 of Republic Act
409 establishes a general rule regulating the liability of the City of Manila for "damages or injury to
persons or property arising from the failure of" city officers "to enforce the provisions of" said Act "or any
other law or ordinance, or from negligence" of the city "Mayor, Municipal Board, or other officers while
enforcing or attempting to enforce said provisions." Upon the other hand, Article 2189 of the Civil Code
constitutes a particular prescription making "provinces, cities and municipalities . . . liable for damages
for the death of, or injury suffered by, any person by reason" specifically "of the defective condition
of roads, streets, bridges, public buildings, and other public works under their control or supervision." In
other words, said section 4 refers to liability arising from negligence, in general, regardless of the object
thereof, whereas Article 2189 governs liability due to "defective streets, "in particular. Since the present
action is based upon the alleged defective condition of a road, said Article 2189 is decisive thereon.
It is urged that the City of Manila cannot be held liable to Teotico for damages: 1) because the accident
involving him took place in a national highway; and 2) because the City of Manila has not been
negligent in connection therewith.
As regards the first issue, we note that it is based upon an allegation of fact not made in the answer of
the City. Moreover, Teotico alleged in his complaint, as well as in his amended complaint, that his
injuries were due to the defective condition of a street which is "under the supervision and control" of
the City. In its answer to the amended complaint, the City, in turn, alleged that "the streets
aforementioned were and have been constantly kept in good condition and regularly inspected and the
storm drains and manholes thereof covered, by the defendant City and its officers concerned" who
"have been ever vigilant and zealous in the performance of their respective functions and duties as
imposed upon them by law." Thus, the City had, in effect, admitted that P. Burgos Avenue was and is
under its control and supervision.
Moreover, the assertion to the effect that said avenue is a national highway was made, for the first time,
in its motion for reconsideration of the decision of the Court of Appeals. Such assertion raised,
therefore, a question of fact, which had not been put in issue in the trial court, and can not be set up, for
Page 36
the first time, on appeal, much less after the rendition of the decision of the appellate court, in a motion
for the reconsideration thereof.
At any rate, under Article 2189 of the Civil Code, it is not necessary for the liability therein established to
attach that the defective roads or streets belong to the province, city or municipality from which
responsibility is exacted. What said article requires is that the province, city or municipality have either
"control or supervision" over said street or road. Even if P. Burgos avenue were, therefore, a national
highway, this circumstance would not necessarily detract from its "control or supervision" by the City of
Manila, under Republic Act 409. In fact Section 18(x) thereof provides:
"SEC. 18. Legislative powers. The Municipal Board shall have the following legislative powers:
xxx xxx xxx
"(x) Subject to the provisions of existing law to provide for the laying out, construction and improvement,
and to regulate the use of streets, avenues, alleys, sidewalks, wharves, piers, parks, cemeteries, and other
public places; to provide for lighting, cleaning, and sprinkling of streets and public places; . . . to provide for
the inspection of, fix the license fees for and regulate the openings in the same for the laying of gas, water,
sewer and other pipes, the building and repair of tunnels, sewers, and drains, and all structures in and
under the same and the erecting of poles and the stringing of wires therein; to provide for and regulate
cross-walks, curbs, and gutters therein; . . . to regulate traffic and sales upon the streets and other public
places; to provide for the abatement of nuisances in the same and punish the authors or owners thereof; to
provide for the construction and maintenance, and regulate the use, of bridges, viaducts, and culverts; to
prohibit and regulate ball playing, kiteflying, hoop rolling, and other amusements which may annoy persons
using the streets and public places, or frighten horses or other animals; to regulate the speed of horses and
other animals, motor and other vehicles, cars, and locomotives within the limits of the city; to regulate the
lights used on all such vehicles, cars, and locomotives; . . . to provide for and change the location, grade,
and crossing of railroads, and compel any such railroad to raise or lower its tracks to conform to such
provisions or changes; and to require railroad companies to fence their property, or any part thereof, to
provide suitable protection against injury to persons or property, and to construct and repair ditches, drains,
sewers, and culverts along and under their tracts, so that the natural drainage of the streets and adjacent
property shall not be obstructed."
This authority has been neither withdrawn nor restricted by Republic Act No. 917 and Executive Order
No. 113, dated May 2, 1955, upon which the City relies. Said Act governs the disposition or
appropriation of the highway funds and the giving of aid to provinces, chartered cities and municipalities
in the construction of roads and streets within their respective boundaries, and Executive Order No. 113
merely implements the provisions of said Republic Act No. 917, concerning the disposition and
appropriation of the highway funds. Moreover, it provides that "the construction, maintenance and
improvement of national primary, national secondary and national aid provincial and city roads shall be
accomplished by the Highway District Engineers and Highway City Engineers under the supervision of
the Commissioner of Public Highways and shall be financed from such appropriations as may be
authorized by the Republic of the Philippines in annual or special appropriation Acts."
Then, again, the determination of whether or not P. Burgos Avenue is under the control or supervision of
the City of Manila and whether the latter is guilty of negligence, in connection with the maintenance of
said road, which were decided by the Court of Appeals in the affirmative, is one of fact, and the findings
of said Court, thereon are not subject to our review.
WHEREFORE, the decision appealed from should be as it is hereby affirmed, with costs against the
City of Manila. It is so ordered.
Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar, Sanchez, Ruiz Castro, Angeles and
Fernando, JJ., concur.
Footnotes
1.
Medical fees-P1,400.00; Lost income-P350.00; Moral damages-P3,000.000; and Attorney feesP2,000.00.
Page 37
negligence of its officers is a general law in the sense that it exempts the city from negligence of its
officers in general. There is no particular exemption but merely a general exemption. On the other hand,
Article 2189 of the Civil Code provides a particular prescription to the effect that it makes provinces,
cities, and municipalities liable for the damages caused to a certain person by reason of the
defective condition of roads, streets, bridges, public buildings, and other-public works under their control
or supervision.
CASE DIGEST
City of Manila v. Teotico
G.R. No. L-23052
22 SCRA 267
January 29, 1968
The allegation that the incident happened in a national highway was only raised for the first time in the
Citys motion for reconsideration in the Court of Appeals, hence it cannot be given due weight. At any
rate, even though it is a national highway, the law contemplates that regardless if whether or not the
road is national, provincial, city, or municipal, so long as it is under the Citys control and supervision, it
shall be responsible for damages by reason of the defective conditions thereof. In the case at bar, the
City admitted they have control and supervision over the road where Teotico fell when the City alleged
that it has been doing constant and regular inspection of the citys roads, P. Burgos included.
FACTS:
In January 1958, at about 8pm, Teotico was about to board a jeepney in P. Burgos, Manila when he fell
into an uncovered manhole, resulting injuries upon him . Thereafter he sued for damages under
Art.2189 of the Civil Code the City of Manila, the mayor, the city engineer, the city health officer, the city
treasurer, and the chief of police. The CFI Manila ruled against Teotico. Upon appeal, the CA reversed
the CFI ruling and held that the City of Manila should pay damages to Teotico.
The City of Manila assailed the decision of the CA on the ground that the charter of Manila states that it
shall not be liable for damages caused by the negligence of the city officers in enforcing the charter; that
the charter is a special law and shall prevail over the Civil Code which is a general law; and that the
accident happened in national highway.
ISSUE:
Whether the City of Manila have control or supervision over P. Burgos Ave making it responsible for the
damages suffered by Teotico.
HELD:
Yes. It is true that in case of conflict, a special law prevails over a general law; that the charter of Manila
is a special law and that the Civil Code is a general law. However, looking at the particular provisions of
each law concerned, the provision of the Manila Charter exempting it from liability caused by the
Page 38
EN BANC
On June 12, 1974, the Municipal Board of Manila enacted Ordinance No. 7522, "AN ORDINANCE
REGULATING THE OPERATION OF PUBLIC MARKETS AND PRESCRIBING FEES FOR THE
RENTALS OF STALLS AND PROVIDING PENALTIES FOR VIOLATION THEREOF AND FOR OTHER
PURPOSES." The petitioner City Mayor, Ramon D. Bagatsing, approved the ordinance on June 15,
1974.
[G.R. No. L-41631. December 17, 1976.]
HON. RAMON D. BAGATSING, as Mayor of the City of Manila; ROMAN G. GARGANTIEL,

as Secretary to the Mayor; THE MARKET ADMINISTRATOR; and THE MUNICIPAL
BOARD OF MANILA, petitioners, vs. HON. PEDRO A. RAMIREZ, in his capacity as
Presiding Judge of the Court of First Instance of Manila, Branch XXX and the
FEDERATION OF MANILA MARKET VENDORS, INC., respondents.
Santiago F . Alidio and Restituto R. Villanueva for petitioners.

Antonio H . Abad, Jr. for private respondent.
On February 17, 1975, respondent Federation of Manila Market Vendors, Inc. commenced Civil Case
96787 before the Court of First Instance of Manila, presided over by respondent Judge, seeking the
declaration of nullity of Ordinance No. 7522 for the reason that (a) the publication requirement under the
Revised Charter of the City of Manila has not been complied with; (b) the Market Committee was not
given any participation in the enactment of the ordinance, as envisioned by Republic Act 6039; (c)
Section 3 (e) of the Anti-Graft and Corrupt Practices Act has been violated; and (d) the ordinance would
violate Presidential Decree No. 7 of September 30, 1972 prescribing the collection of fees and charges
on livestock and animal products. prLL
Federico A. Blay for petitioner for intervention.
DECISION
MARTIN, J p:
The chief question to be decided in this case is what law shall govern the publication of a tax ordinance
enacted by the Municipal Board of Manila, the Revised City Charter (R.A. 409, as amended), which
requires publication of the ordinance before its enactment and after its approval, or the Local Tax Code
(P.D. No. 231), which only demands publication after approval. cd
Resolving the accompanying prayer for the issuance of a writ of preliminary injunction, respondent
Judge issued an order on March 1, 1975, denying the plea for failure of the respondent Federation of
Manila Market Vendors, Inc. to exhaust the administrative remedies outlined in the Local Tax Code.
After due hearing on the merits, respondent Judge rendered its decision on August 29, 1975, declaring
the nullity of Ordinance No. 7522 of the City of Manila on the primary ground of non-compliance with the
requirement of publication under the Revised City Charter. Respondent Judge ruled:
"There is, therefore, no question that the ordinance in question was not published at all in two daily
newspapers of general circulation in the City of Manila before its enactment. Neither was it published in the
same manner after approval, although it was posted in the legislative hall and in all city public markets and
city public libraries. There being no compliance with the mandatory requirement of publication before and
after approval, the ordinance in question is invalid and, therefore, null and void."
Page 39
Petitioners moved for reconsideration of the adverse decision, stressing that (a) only a post-publication
is required by the Local Tax Code; and (b) private respondent failed to exhaust all administrative
remedies before instituting an action in court.
On September 26, 1975, respondent Judge denied the motion.
Forthwith, petitioners brought the matter to Us through the present petition for review on certiorari.
"Within ten days after their approval, certified true copies of all provincial, city, municipal and barrio
ordinances levying or imposing taxes, fees or other charges shall be published for three consecutive days
in a newspaper or publication widely circulated within the jurisdiction of the local government, or posted in
the local legislative hall or premises and in two other conspicuous places within the territorial jurisdiction of
the local government. In either case, copies of all provincial, city, municipal and barrio ordinances shall be
furnished the treasurers of the respective component and mother units of a local government for
dissemination."
In other words, while the Revised Charter of the City of Manila requires publication before the
enactment of the ordinance and after the approval thereof in two daily newspapers of general circulation
in the city, the Local Tax Code only prescribes for publication after the approval of "ordinances levying
or imposing taxes, fees or other charges" either in a newspaper or publication widely circulated within
the jurisdiction of the local government or by posting the ordinance in the local legislative hall or
premises and in two other conspicuous places within the territorial jurisdiction of the local government.
Petitioners' compliance with the Local Tax Code rather than with the Revised Charter of the City
spawned this litigation.
We find the petition impressed with merits.
1. The nexus of the present controversy is the apparent conflict between the Revised Charter of the City
of Manila and the Local Tax Code on the manner of publishing a tax ordinance enacted by the Municipal
Board of Manila. For, while Section 17 of the Revised Charter provides:
"Each proposed ordinance shall be published in two daily newspapers of general circulation in the city, and
shall not be discussed or enacted by the Board until after the third day following such publication. . . . Each
approved ordinance . . . shall be published in two daily newspapers of general circulation in the city, within
ten days after its approval; and shall take effect and be in force on and after the twentieth day following its
publication, if no date is fixed in the ordinance."
Section 43 of the Local Tax Code directs: Cdpr
There is no question that the Revised Charter of the City of Manila is a special act since it relates only
to the City of Manila, whereas the Local Tax Code is a general law because it applies universally to all
local governments. Blackstone defines general law as a universal rule affecting the entire community
and special law as one relating to particular persons or things of a class. 1 And the rule commonly said
is that a prior special law is not ordinarily repealed by a subsequent general law. The fact that one is
special and the other general creates a presumption that the special is to be considered as remaining
an exception of the general, one as a general law of the land, the other as the law of a particular case. 2
However, the rule readily yields to a situation where the special statute refers to a subject in general,
which the general statute treats in particular. The exactly is the circumstance obtaining in the case at
bar. Section 17 of the Revised Charter of the City of Manila speaks of "ordinance" in general, i.e.,
irrespective of the nature and scope thereof, whereas, Section 43 of the Local Tax Code relates to
"ordinances levying or imposing taxes, fees or other charges" in particular. In regard, therefore, to
ordinances in general, the Revised Charter of the City of Manila is doubtless dominant, but, that
dominant force loses its continuity when it approaches the realm of "ordinances levying or imposing
taxes, fees or other charges" in particular. There, the Local Tax Code controls. Here, as always, a
general provision must give way to a particular provision. 3 Special provision governs. 4 This is
especially true where the law containing the particular provision was enacted later than the one
containing the general provision. The City Charter of Manila was promulgated on June 18, 1949 as
against the Local Tax Code which was decreed on June 1, 1973. The law-making power cannot be said
Page 40
to have intended the establishment of conflicting and hostile systems upon the same subject, or to leave
in force provisions of a prior law by which the new will of the legislating power may be thwarted and
overthrown. Such a result would render legislation a useless and idle ceremony, and subject the law to
the reproach of uncertainty and unintelligibility. 5
The case of City of Manila v. Teotico 6 is opposite. In that case, Teotico sued the City of Manila for
damages arising from the injuries he suffered when he fell inside an uncovered and unlighted
catchbasin or manhole on P. Burgos Avenue. The City of Manila denied liability on the basis of the City
Charter (R.A. 409) exempting the City of Manila from any liability for damages or injury to persons or
property arising from the failure of the city officers to enforce the provisions of the charter or any other
law or ordinance, or from negligence of the City Mayor, Municipal Board, or other officers while
enforcing or attempting to enforce the provisions of the charter or of any other law or ordinance. Upon
the other hand, Article 2189 of the Civil Code makes cities liable for damages for the death of, or injury
suffered by any persons by reason of the defective condition of roads, streets, bridges, public buildings,
and other public works under their control or supervision. On review, the Court held the Civil Code
controlling. It is true that, insofar as its territorial application is concerned, the Revised City Charter is a
special law and the subject matter of the two laws, the Revised City Charter establishes a general rule
of liability arising from negligence in general, regardless of the object thereof, whereas the Civil Code
constitutes a particular prescription for liability due to defective streets in particular. In the same manner,
the Revised Charter of the City prescribes a rule for the publication of "ordinance" in general, while the
Local Tax Code establishes a rule for the publication of "ordinance levying or imposing taxes fees or
other charges in particular. LibLex
In fact, there is no rule which prohibits the repeal even by implication of a special or specific act by a
general or broad one. 7 A charter provision may be impliedly modified or superseded by a later statute,
and where a statute is controlling, it must be read into the charter notwithstanding any particular charter
provision. 8 A subsequent general law similarly applicable to all cities prevails over any conflicting
charter provision, for the reason that a charter must not be inconsistent with the general laws and public
policy of the state. 9 A chartered city is not an independent sovereignty. The state remains supreme in
all matters not purely local. Otherwise stated, a charter must yield to the constitution and general laws
of the state, it is to have read into it that general law which governs the municipal corporation and which
the corporation cannot set aside but to which it must yield. When a city adopts a charter, it in effect
adopts as part of its charter general law of such character. 10
2. The principle of exhaustion of administrative remedies is strongly asserted by petitioners as having

been violated by private respondent in bringing a direct suit in court. This is because Section 47 of the
Local Tax Code provides that any question or issue raised against the legality of any tax ordinance, or
portion thereof, shall be referred for opinion to the city fiscal in the case of tax ordinance of a city. The
opinion of the city fiscal is appealable to the Secretary of Justice, whose decision shall be final and
executory unless contested before a competent court within thirty (30) days. But, the petition below
plainly shows that the controversy between the parties is deeply rooted in a pure question of law:
whether it is the Revised Charter of the City of Manila or the Local Tax Code that should govern the
publication of the tax ordinance. In other words, the dispute is sharply focused on the applicability of the
Revised City Charter or the Local Tax Code on the point at issue, and not on the legality of the
imposition of the tax. Exhaustion of administrative remedies before resort to judicial bodies is not an
absolute rule. It admits of exceptions. Where the question litigated upon is purely a legal one, the rule
does not apply. 11 The principle may also be disregarded when it does not provide a plain, speedy and
adequate remedy. It may and should be relaxed when its application may cause great and irreparable
damage. 12
3. It is maintained by private respondent that the subject ordinance is not a "tax ordinance," because the
imposition of rentals, permit fees, tolls and other fees is not strictly a taxing power but a revenue-raising
function, so that the procedure for publication under the Local Tax Code finds no application. The
pretense bears its own marks of fallacy. Precisely, the raising of revenues is the principal object of
taxation. Under Section 5, Article XI of the New Constitution, "Each local government unit shall have the
power to create its own sources of revenue and to levy taxes, subject to such provisions as may be
provided by law." 13 And one of those sources of revenue is what the Local Tax Code points to in
particular: "Local governments may collect fees or rentals for the occupancy or use of public markets
and premises . . ." 14 They can provide for and regulate market stands, stalls and privileges, and, also,
the sale, lease or occupancy thereof. They can license, or permit the use of, lease, sell or otherwise
dispose of stands, stalls or marketing privileges. 15
It is a feeble attempt to argue that the ordinance violates Presidential Decree No. 7, dated September
30, 1972, insofar as it affects livestock and animal products, because the said decree prescribes the
collection of other fees and charges thereon "with the exception of ante-mortem and post-mortem
inspection fees, as well as the delivery, stockyard and slaughter fees as may be authorized by the
Secretary of Agriculture and Natural Resources." 16 Clearly, even the exception clause of the decree
itself permits the collection of the proper fees for livestock. And the Local Tax Code (P.D. 231, July 1,
Page 41
1973) authorizes in its Section 31: "Local governments may collect fees for the slaughter of animals and
the use of corrals . . ."
4. The non-participation of the Market Committee in the enactment of Ordinance No. 7522 supposedly
in accordance with Republic Act No. 6039, an amendment to the City Charter of Manila, providing that
"the market committee shall formulate, recommend and adopt, subject to the ratification of the
municipal board, and approval of the mayor, policies and rules or regulation repealing or maneding
existing provisions of the market code" does not infect the ordinance with any germ of invalidity. 17 The
function of the committee is purely recommendatory as the underscored phrase suggests, its
recommendation is without binding effect on the Municipal Board and the City Mayor. Its prior
acquiescence of an intended or proposed city ordinance is not a condition sine qua non before the
Municipal Board could enact such ordinance. The native power of the Municipal Board to legislate
remains undisturbed even in the slightest degree. It can move in its own initiative and the Market
Committee cannot demur. At most, the Market Committee may serve as a legislative aide of the
Municipal Board in the enactment of city ordinances affecting the city markets or, in plain words, in the
gathering of the necessary data, studies and the collection of consensus for the proposal of ordinances
regarding city markets. Much less could it be said that Republic Act 6039 intended to delegate to the
Market Committee the adoption of regulatory measures for the operation and administration of the city
markets. Potestas delegata non delegare potest. prcd
Nor can the ordinance be stricken down as violative of Section 3(e) of the Anti-Graft and Corrupt
Practices Act because the increased rates of market stall fees as levied by the ordinance will
necessarily inure to the unwarranted benefit and advantage of the corporation. 19 We are concerned
only with the issue whether the ordinance in question is intra vires. Once determined in the affirmative,
the measure may not be invalidated because of consequences that may arise from its enforcement. 20
ACCORDINGLY, the decision of the court below is hereby reversed and set aside. Ordinance No. 7522
of the City of Manila, dated June 15, 1975, is hereby held to have been validly enacted. No. costs.
cdasia
SO ORDERED.
Castro, C .J ., Barredo, Makasiar, Antonio, Muoz Palma, Aquino and Concepcion, Jr., JJ ., concur.
Fernando, J ., concurs but qualifies his assent as to an ordinance intra vires not being open to question
"because of consequences that may arise from its enforcement."
Teehankee, J ., reserves his vote.
5. Private respondent bewails that the market stall fees imposed in the disputed ordinance are diverted
to the exclusive private use of the Asiatic Integrated Corporation since the collection of said fees had
been let by the City of Manila to the said corporation in a "Management and Operating Contract." The
assumption is of course saddled on erroneous premise. The fees collected do not go direct to the
private coffers of the corporation. Ordinance No. 7522 was not made for the corporation but for the
purpose of raising revenues for the city. That is the object it serves. The entrusting of the collection of
the fees does not destroy the public purpose of the ordinance. So long as the purpose is public, it does
not matter whether the agency through which the money is dispensed is public or private. The right to
tax depends upon the ultimate use, purpose and object for which the fund is raised. It is not dependent
on the nature or character of the person or corporation whose intermediate agency is to be used in
applying it. The people may be taxed for a public purpose, although it be under the direction of an
individual or private corporation. 18
Footnotes
1.Cooley, The Law of Taxation, Vol. 2, 4th ed.

2.Butuan Sawmill, Inc. vs. City of Butuan, L-21516, April 29, 1966, 16 SCRA 758, citing State v. Stoll,
17 Wall. 425.
3.Lichauco & Co. v. Apostol, 44 Phil. 145 (1922).
4.Crawford, Construction of Statutes, 265, citing U.S. v. Jackson, 143 Fed. 783.
Page 42
5.See Separate Opinion of Justice Johns in Lichauco, fn. 3, citing Lewis' Sutherland Statutory
Construction, at 161.
6.L-23052, January 29, 1968, 22 SCRA 270.
19.Section 3 (e); causing any undue injury to any party, including the government, or giving any
private party any unwarranted benefits, advantage or preference in the discharge of his
official administrative or judicial functions through manifest partiality evident bad faith or
gross inexcusable negligence. . . ."
7.See 73 Am Jur 2d 521.
20.Willoughby, The Constitutional Law of the United States, 668 et seq.
8.McQuillin, Municipal Corporation, Vol. 6, 3rd ed., 223.

9.See Bowyer v. Camden, 11 Atl. 137.
||| (Bagatsing v. Ramirez, G.R. No. L-41631, [December 17, 1976], 165 PHIL 909-920)
10.McQuillin, Municipal Corporation, Vol. 6, 3rd ed., 229-230.

11.Tapales v. President and Board of Regents of the U.P., L-17523, March 30, 1963, 7 SCRA 553;
C.N. Hodges v. Municipal Board of the City of Iloilo, L-18276, January 12, 1967, 19 SCRA
32-33; Aguilar v. Valencia, L-30396, July 30, 1971, 40 SCRA 214; Mendoza v. SSC, L29189, April 11, 1972, 44 SCRA 380.
12.Cipriano v. Marcelino, L-27793, February 28, 1972, 43 SCRA 291; Del Mar v. PVA, L-27299, June
27, 1973, 51 SCRA 346, citing cases.
13.See City of Bacolod v. Enriquez, L-27408, July 25, 1975, Second Division, per Fernando, J ., 65
SCRA 384-85.
CASE DIGEST
Bagatsing v Ramirez
GR No L-41631
December 17, 1976
14.Article 5, Section 30, Chapter II.

15.McQuillin, Municipal Corporations, Vol. 7, 3rd ed., 275.
FACTS:
16.P.D. 7 was amended by P.D. 45 on November 10, 1972, so as to allow local governments to
charge the ordinary fee for the issuance of certificate of ownership and one peso for the
issuance of transfer certificate for livestock.
In 1974, the Municipal Board of Manila enacted Ordinance 7522, regulating the operation of public
markets and prescribing fees for the rentals of stalls and providing penalties for violation thereof. The
Federation of Manila Market Vendors Inc. assailed the validity of the ordinance, alleging among others
the noncompliance to the publication requirement under the Revised Charter of the City of Manila. CFIManila declared the ordinance void. Thus, the present petition.
17.The market committee is composed of the market administrator as chairman, and a representative
of each of the city treasurer, the municipal board, the Chamber of Filipino Retailers, Inc. and
the Manila Market Vendors Association Inc. as members.
ISSUE:
18.Cooley, The Law of Taxation, Vol. 1, 394-95.
Page 43
What law should govern the publication of a tax ordinance, the Revised City Charter, which requires
publication of the ordinance before its enactment and after its approval, or the Local Tax Code, which
only demands publication after approval?
Is the ordinance valid?
RULING:
The Local Tax Code prevails. There is no question that the Revised Charter of the City of Manila is a
special act since it relates only to the City of Manila whereas the Local Tax Code is a general law
because it applies universally to all local governments. The fact that one is special and the other
general creates a presumption that the special is to be considered as remaining an exception of the
general, one as a general law of the land, the other as the law of a particular case. However, the rule
readily yields to a situation where the special statute refers to a subject in general, which the general
statute treats in particular. The Revised Charter of the City prescribes a rule for the publication of
ordinance in general, while the Local Tax Code establishes a rule for the publication of ordinance
levying or imposing taxes fees or other charges in particular.
The ordinance is valid.
EN BANC
[G.R. No. 111097. July 20, 1994.]
MAYOR PABLO P. MAGTAJAS & THE CITY OF CAGAYAN DE ORO, petitioners, vs. PRYCE
PROPERTIES CORPORATION, INC. & PHILIPPINE AMUSEMENT AND GAMING
CORPORATION, respondents.
Page 44
SYLLABUS
DAVIDE, JR., J., separate opinion:
1.REMEDIAL LAW; SPECIAL CIVIL ACTIONS; PRINCIPAL CAUSE OF ACTION IN CASE AT BAR
ONE FOR DECLARATORY RELIEF. It must at once be noted that private respondent Pryce
Properties Corporation (PRYCE) directly filed with the Court of Appeals its so-called petition for
prohibition, thereby invoking the said court's original jurisdiction to issue writs of prohibition under
Section 9(1) of B.P. Blg. 129. As I see it, however, the principal cause of action therein is one for
declaratory relief: to declare null and unconstitutional for, inter alia, having been enacted without or in
excess of jurisdiction, for impairing the obligation of contracts, and for being inconsistent with public
policy the challenged ordinances enacted by the Sangguniang Panlungsod of the City of Cagayan de
Oro. The intervention therein of public respondent Philippine Amusement and Gaming Corporation
(PAGCOR) further underscores the "declaratory relief" nature of the action. PAGCOR assails the
ordinances for being contrary to the non-impairment and equal protection clauses of the Constitution,
violative of the Local Government Code, and against the State's national policy declared in P.D. No.
1869. Accordingly, the Court of Appeals does not have jurisdiction over the nature of the action.
Sangguniang Panglungsod's express powers conferred by Section 458paragraph (a)subparagraphs (1)(V), (3)-(ii), and (4)-(i), (iv), and (vii), Local Government Code, and pursuant to its implied power under
Section 16 thereof. . . . . The issue that necessarily arises is whether in granting local governments
(such as the City of Cagayan de Oro) the above powers and functions, the Local Government Code
has, pro tanto, repealed P.D. No. 1869 insofar as PAGCOR'S general authority to establish and
maintain gambling casinos anywhere in the Philippines is concerned. I join the majority in holding that
the ordinances cannot repeal P.D. No. 1869.
4.CONTRAVENTION OF LAW NOT NECESSARILY A CONTRAVENTION OF THE CONSTITUTION;
ORDINANCES IN CASE AT BAR RECONCILED WITH PRESIDENTIAL DECREE NO. 1869. The
nullification by the Court of Appeals of the challenged ordinances as unconstitutional primarily because
it is in contravention to P.D. No. 1869 is unwarranted. A contravention of a law is not necessarily a
contravention of the constitution. In any case, the ordinances can still stand even if they be conceded as
offending P.D. No. 1869. They can be reconciled, which is not impossible to do. So reconciled, the
ordinances should be construed as not applying to PAGCOR.
DECISION
CRUZ, J p:
2.ID.; ID.; PROHIBITION; ESTABLISHED POLICY RELATIVE TO HIERARCHY OF COURTS NOT
OBSERVED IN FILING OF PETITION IN CASE AT BAR. Assuming arguendo that the case is one for
prohibition, then, under this Court's established policy relative to the hierarchy of courts, the petition
should have been filed with the Regional Trial Court of Cagayan de Oro City. I find no special or
compelling reason why it was not filed with the said court. I do not wish to entertain the thought that
PRYCE doubted a favorable verdict therefrom, in which case the filing of the petition with the Court of
Appeals may have been impelled by tactical considerations. A dismissal of the petition by the Court of
Appeals would have been in order pursuant to our decisions in People vs. Cuaresma (172 SCRA 415,
[1989]) and Defensor-Santiago vs. Vasquez (217 SCRA 633 1993]).
There was instant opposition when PAGCOR announced the opening of a casino in Cagayan de Oro
City. Civic organizations angrily denounced the project, The religious elements echoed and objection
and so did the women's groups and the youth. Demonstrations were led by the mayor and the city
legislators. The media trumpeted the protest, describing the casino as an affront to the welfare of the
city.
The trouble arose when in 1992, flush with its tremendous success in several cities, PAGCOR decided
3.STATUTORY CONSTRUCTION; PRESIDENTIAL DECREE NO. 1869 NOT REPEALED PRO TANTO
BY LOCAL GOVERNMENT CODE. The challenged ordinances were enacted pursuant to the
Page 45
to expand its operations to Cagayan de Oro City. To this end, it leased a portion of a building belonging
to Pryce Properties Corporation Inc., one of the herein private respondents, renovated and equipped
the same, and prepared to inaugurate its casino there during the Christmas season.
a)
Suspension of the business permit for sixty (60) days for the first offense and a fine of
P1,000.00/day
b)
Suspension of the business permit for Six (6) months for the second offense, and a fine of
P3,000.00/day
c)
Permanent revocation of the business permit and imprisonment of One (1) year, for the
third and subsequent offenses.
The reaction of the Sangguniang Panlungsod of Cagayan de Oro City was swift and hostile. On
December 7, 1992, it enacted Ordinance No. 3353 reading as follows:
ORDINANCE NO. 3353

AN ORDINANCE PROHIBITING THE ISSUANCE OF BUSINESS PERMIT AND CANCELLING EXISTING
BUSINESS PERMIT TO ANY ESTABLISHMENT FOR THE USING AND ALLOWING TO BE USED ITS
PREMISES OR PORTION THEREOF FOR THE OPERATION OF CASINO.
BE IT ORDAINED by the Sangguniang Panlungsod of the City of Cagayan de Oro, in session assembled
that:
SECTION 4. This Ordinance shall take effect ten (10) days from publication thereof.
Nor was this all. On January 4, 1993, it adopted a sterner Ordinance No. 3375-93 reading as follows:
ORDINANCE NO. 3375-93

SECTION 1. That pursuant to the policy of the city banning the operation of casino within its territorial
jurisdiction, no business permit shall be issued to any person, partnership or corporation for the operation of
casino within the city limits.
AN ORDINANCE PROHIBITING THE OPERATION OF CASINO AND PROVIDING PENALTY FOR
VIOLATION THEREFOR.
SECTION 2. That it shall be violation of existing business permit by any persons, partnership or corporation
to use its business establishment or portion thereof, or allow the use thereof by others for casino operation
and other gambling activities.
SECTION 3. PENALTIES. Any violation of such existing business permit as defined in the preceding
section shall suffer the following penalties, to wit:
WHEREAS, the City Council established a policy as early as 1990 against CASINO under its Resolution
No. 2295;
WHEREAS, on October 14, 1992, the City Council passed another Resolution No. 2673, reiterating its
policy against the establishment of CASINO;
Page 46
WHEREAS, subsequently, thereafter, it likewise passed Ordinance No. 3353, prohibiting the issuance of
Business Permit and to cancel existing Business Permit to any establishment for the using and allowing to
be used its premises or portion thereof for the operation of CASINO.
WHEREAS, under Art. 3, section 458, No. (4), sub paragraph VI of the Local Government Code of 1991
(Rep. Act 7160) and under Art. 99, No. (4), Paragraph VI of the implementing rules of the Local
Government Code, the City Council as the Legislative Body shall enact measure to suppress any activity
inimical to public morals and general welfare of the people and/or regulate or prohibit such activity
pertaining to amusement or entertainment in order to protect social and moral welfare of the community;
NOW THEREFORE,
BE IT ORDAINED by the City Council in session duly assembled that:
SECTION 1. The operation of gambling CASINO in the City of Cagayan de Oro is hereby prohibited.
SECTION 3. This Ordinance shall take effect ten (10) days after its publication in a local newspaper of
general circulation.
Pryce assailed the ordinances before the Court of Appeals, where it was joined by PAGCOR as
intervenor and supplemental petitioner. Their challenge succeeded. On March 31, 1993, the Court of
Appeals declared the ordinances invalid and issued the writ prayed for to prohibit their enforcement. 1
Reconsideration of this decision was denied on July 13, 1993. 2
Cagayan de Oro City and its mayor are now before us in this petition for review under Rule 45 of the
Rules of Court. 3 They aver that the respondent Court of Appeals erred in holding that:
1.Under existing laws, the Sangguniang Panlungsod of the City of Cagayan de Oro does not have the
power and authority to prohibit the establishment and operation of a PAGCOR gambling casino within the
City's territorial limits.
2.The phrase "gambling and other prohibited games of chance" found in Sec. 458, par. (a), sub-par. (1) - (v)
of R.A. 7160 could only mean "illegal gambling."
SECTION 2. Any violation of this Ordinance shall be subject to the following penalties:
3.The questioned Ordinances in effect annul P.D. 1869 and are therefore invalid on that point.
a) Administrative fine of P5,000.00 shall be imposed against the proprietor, partnership or

corporation undertaking the operation, conduct, maintenance of gambling CASINO in the City
and closure thereof;
b) Imprisonment of not less than six (6) months nor more than one (1) year or a fine in the
amount of P5,000.00 or both at the discretion of the court against the manager, supervisor,
and/or any person responsible in the establishment, conduct and maintenance of gambling
CASINO.
4.The questioned Ordinances are discriminatory to casino and partial to cockfighting and are therefore
invalid on that point.
5.The questioned Ordinances are not reasonable, not consonant with the general powers and purposes of
the instrumentality concerned and inconsistent with the laws or policy of the State.
Page 47
6.It had no option but to follow the ruling in the case of Basco, et al. v. PAGCOR, G.R. No. 91649, May 14,
1991, 195 SCRA 53 in disposing of the issues presented in this present case.
PAGCOR is a corporation created directly by P.D. 1869 to help centralize and regulate all games of
chance, including casinos on land and sea within the territorial jurisdiction of the Philippines. In Basco v.
Philippine Amusements and Gaming Corporation, 4 this Court sustained the constitutionality of the
decree and even cited the benefits of the entity to the national economy as the third highest revenueearner in the government, next only to the BIR and the Bureau of Customs. cdasia
Cagayan de Oro City, like other local political subdivisions, is empowered to enact ordinances for the
purposes indicated in the Local Government Code. It is expressly vested with the police power under
what is known as the General Welfare Clause now embodied in Section 16 as follows:
SEC. 16.General Welfare. Every local government unit shall exercise the powers expressly granted,
those necessarily implied therefrom, as well as powers necessary, appropriate, or incidental for its efficient
and effective governance, and those which are essential to the promotion of the general welfare. Within
their respective territorial jurisdictions, local government units shall ensure and support, among other
things, the preservation and enrichment of culture, promote health and safety, enhance the right of the
people to a balanced ecology, encourage and support the development of appropriate and self-reliant
scientific and technological capabilities, improve public morals, enhance economic prosperity and social
justice, promote full employment among their residents, maintain peace and order, and preserve the
comfort and convenience of their inhabitants.
In addition, Section 458 of the said Code specifically declares that:
SEC. 458.Powers, Duties, Functions and Compensation. (1) The Sangguniang Panlungsod, as the
legislative body of the city, shall enact ordinances, approve resolutions and appropriate funds for the
general welfare of the city and its inhabitants pursuant to Section 16 of this Code and in the proper exercise
of the corporate powers of the city as provided for under Section 22 of this Code, and shall:
(1)Approve ordinances and pass resolutions necessary for an efficient and effective city
government, and in this connection, shall:
xxx xxx xxx
(v)Enact ordinances intended to prevent, suppress and impose appropriate

penalties for habitual drunkenness in public places, vagrancy, mendicancy,
prostitution, establishment and maintenance of houses of ill repute, gambling and
other prohibited games of chance, fraudulent devices and ways to obtain money or
property, drug addiction, maintenance of drug dens, drug pushing, juvenile
delinquency, the printing, distribution or exhibition of obscene or pornographic
materials or publications, and such other activities inimical to the welfare and morals
of the inhabitants of the city;
This section also authorizes the local government units to regulate properties and businesses within
their territorial limits in the interest of the general welfare. 5
The petitioners argue that by virtue of these provisions, the Sangguniang Panlungsod may prohibit the
operation and casinos because they involve games of chance, which are detrimental to the people.
Gambling is not allowed by general law and even by the Constitution itself. The legislative power
conferred upon local government units may be exercised over all kinds of gambling and not only over
"illegal gambling" as the respondents erroneously argue. Even if the operation of casinos may have
been permitted under P.D. 1869, the government of Cagayan de Oro City has the authority to prohibit
them within its territory pursuant to the authority entrusted to it by the Local Government Code.
It is submitted that this interpretation is consonant with the policy of local autonomy as mandated in
Article II, Section 25, and Article X of the Constitution, as well as various other provisions therein
seeking to strengthen the character of the nation. In giving the local government units the power to
prevent or suppress gambling and other social problems, the Local Government Code has recognized
Page 48
the competence of such communities to determine and adopt the measures best expected to promote
the general welfare of their inhabitants in line with the policies of the State.
(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;
The petitioners also stress that when the Code expressly authorized the local government units to
prevent and suppress gambling and other prohibited games of chance, like craps, baccarat, blackjack
and roulette, it meant all forms of gambling without distinction. Ubi lex non distinguit, nec nos
distinguere debemos. 6 Otherwise, it would have expressly excluded from the scope of their power
casinos and other forms of gambling authorized by special law, as it could have easily done. The fact
that it did not do so simply means that the local government units are permitted to prohibit all kinds of
gambling within their territories, including the operation of casinos. cdlex
xxx xxx xxx
(c)The general welfare provisions in this Code shall be liberally interpreted to give more powers to local
government units in accelerating economic development and upgrading the quality of life for the people in
the community; . . . (Emphasis supplied.)
The adoption of the Local Government Code, it is pointed out, had the effect of modifying the charter of
the PAGCOR. The Code is not only a later enactment than P.D. 1869 and so is deemed to prevail in
case of inconsistencies between them. More than this, the powers of the PAGCOR under the decree
are expressly discontinued by the Code insofar as they do not conform to its philosophy and provisions,
pursuant to Par. (f) of its repealing clause reading as follows:
(f)All general and special laws, acts, city charters, decrees, executive orders, proclamations and
administrative regulations, or part or parts thereof which are inconsistent with any of the provisions of this
Code are hereby repealed or modified accordingly.
It is also maintained that assuming there is doubt regarding the effect of the Local Government Code on
P.D. 1869, the doubt must be resolved in favor of the petitioners, in accordance with the direction in the
Code calling for its liberal interpretation in favor of the local government units. Section 5 of the Code
specifically provides:
Sec. 5.Rules of Interpretation. In the interpretation of the provisions of this Code, the following rules
shall apply:
Finally, the petitioners also attack gambling as intrinsically harmful and cite various provisions of the
Constitution and several decisions of this Court expressive of the general and official disapprobation of
the vice. They invoke the State policies on the family and the proper upbringing of the youth and, as
might be expected, call attention to the old case of U.S. v. Salaveria, 7 which sustained a municipal
ordinance prohibiting the playing of panguingue. The petitioners decry the immorality of gambling. They
also impugn the wisdom of P.D. 1869 (which they describe as "a martial law instrument") in creating
PAGCOR and authorizing it to operate casinos "on land and sea within the territorial jurisdiction of the
Philippines." LexLib
This is the opportune time to stress an important point.
The morality of gambling is not a justiciable issue. Gambling is not illegal per se. While it is generally
considered inimical to the interests of the people, there is nothing in the Constitution categorically
proscribing or penalizing gambling or, for that matter, even mentioning it at all. It is left to Congress to
deal with the activity as it sees fit. In the exercise of its own discretion, the legislature may prohibit
gambling altogether or allow it without limitation or it may prohibit some forms of gambling and allow
others for whatever reasons it may consider sufficient. Thus, it has prohibited jueteng and monte but
Page 49
permits lotteries, cockfighting and horse-racing. In making such choices, Congress has consulted its
own wisdom, which this Court has no authority to review, much less reverse. Well has it been said that
courts do no sit to resolve the merits of conflicting theories. 8 That is the prerogative of the political
departments. It is settled that questions regarding the wisdom, morality, or practicibility of statutes are
not addressed to the judiciary but may be resolved only by the legislative and executive departments, to
which the function belongs in our scheme of government. That function is exclusive. Whichever way
these branches decide, they are answerable only to their own conscience and the constituents who will
ultimately judge their acts, and not to the courts of justice. cda
The only question we can and shall resolve in this petition is the validity of Ordinance No. 3355 and
Ordinance No. 3375-93 as enacted by the Sangguniang Panlungsod of Cagayan de Oro City. And we
shall do so only by the criteria laid down by law and not by our own convictions on the propriety of
gambling.
The tests of a valid ordinance are well established. A long line of decisions 9 has held to be valid, an
ordinance must conform to the following substantive requirements:
5)It must be general and consistent with public policy.
6)It must not be unreasonable.
We begin by observing that under Sec. 458 of the Local Government Code, local government units are
authorized to prevent or suppress, among others, "gambling and other prohibited games of chance."
Obviously, this provision excludes games of chance which are not prohibited but are in fact permitted by
law. The petitioners are less than accurate in claiming that the Code could have excluded such games
of chance but did not. In fact it does. The language of the section is clear and unmistakable. Under the
rule of noscitur a sociis, a word or phrase should be interpreted in relation to, or given the same
meaning of, words with which it is associated. Accordingly, we conclude that since the word "gambling"
is associated with "and other prohibited games of chance," the word should be read as referring to only
illegal gambling which, like the other prohibited games of chance, must be prevented or suppressed.
We could stop here as this interpretation should settle the problem quite conclusively. But we will not.
The vigorous efforts of the petitioners on behalf of the inhabitants of Cagayan de Oro City, and the
earnestness of their advocacy, deserve more than short shrift from this Court. LLpr
1)It must not contravene the constitution or any statute.
2)It must not be unfair or oppressive.
3)It must not be partial or discriminatory.
The apparent flaw in the ordinances in question is that they contravene P.D. 1869 and the public policy
embodied therein insofar as they prevent PAGCOR from exercising the power conferred on it to the
operate a casino in Cagayan de Oro City. The petitioners have an ingenious answer to this misgiving.
They deny that it is the ordinances that have changed P.D. 1869 for an ordinance admittedly cannot
prevail against a statute. Their theory is that the change has been made by the Local Government Code
itself, which was also enacted by the national lawmaking authority. In their view, the decree has been,
not really repealed by the Code, but merely "modified pro tanto" in the sense that PAGCOR cannot now
operate a casino over the objection of the local government unit concerned. This modification of P.D.
1869 by the Local Government Code is permissible because one law can change or repeal another law.
4)It must not prohibit but may regulate trade.
Page 50
It seems to us that the petitioner are playing with words. While insisting that the decree has only been
"modified pro tanto," they are actually arguing that it is already dead, repealed and useless for all intents
and purposes because the Code has shorn PAGCOR of all power to centralize and regulate casinos.
Strictly speaking, its operations may now be not only prohibited by the local government unit; in fact, the
prohibition is not only discretionary by mandated by Section 458 of the Code if the word "shall" as used
therein is to be given its accepted meaning. Local government units have now on choice but to prevent
and suppress gambling, which in the petitioners' view includes both legal and illegal gambling. Under
this construction, PAGCOR will have no more games of chance to regulate or centralize as they must all
be prohibited by the local government units pursuant to the mandatory duty imposed upon them by the
Code. In this situation, PAGCOR cannot continue to exist except only as a toothless tiger or a white
elephant and will no longer be able to exercise its powers as a prime source of government revenue
through the operation of casinos.
It is noteworthy that the petitioners have cited only Par. (f) of the repealing clause, conveniently
discarding the rest of the provision which painstakingly mentions the specific laws or the parts thereof
which are repealed (or modified) by the Code. Significantly, P.D. 1869 is not one of them. A reading of
the entire repealing clause, which is reproduced below, will disclose the omission:
SEC. 534.Repealing Clause.
(a) Batas Pambansa Blg. 337, otherwise known as the Local Government Code." Executive Order No. 112
(1987), and Executive Order No. 319 (1988) are hereby repealed.
(b)Presidential Decree Nos. 684, 1191, 1508 and such other decrees, orders, instructions, memoranda and
issuances related to or concerning the barangay are hereby repealed. prLL
(c)The provisions of Sections 2, 3, and 4 of Republic Act No. 1939 regarding hospital fund; Section 3, a (3)
and b (2) of Republic Act No. 5447 regarding the Special Education Fund; Presidential Decree No. 144 as
amended by Presidential Decree Nos. 559 and 1741; Presidential Decree No. 231 as amended;
Presidential Decree No. 436 as amended by Presidential Decree No. 558; and Presidential Decree Nos.
381, 436, 464, 477, 526, 632, 752, and 1136 are hereby repealed and rendered of no force and effect.
(d)Presidential Decree No. 1594 is hereby repealed insofar as it governs locally-funded projects.
(e)The following provisions are hereby repealed or amended insofar as they are inconsistent with the
provisions of this Code: Sections 2, 16, and 29 of Presidential Decree No. 704; Section 12 of Presidential
Decree No. 87, as amended; Sections 52, 53, 66, 67, 68, 69, 70, 71, 72, 73, and 74 of Presidential Decree
No. 463, as amended; and Section 16 of Presidential Decree No. 972, as amended, and
(f)All general and special laws, acts, city charters, decrees, executive orders, proclamations and
administrative regulations, or part or parts thereof which are inconsistent with any of the provisions of this
Code are hereby repealed or modified accordingly.
Furthermore, it is a familiar rule that implied repeals are not lightly presumed in the absence of a clear
and unmistakable showing of such intention. In Lichauco & Co. v. Apostol, 10 this Court explained:
The cases relating to the subject of repeal by implication all proceed on the assumption that if the act of
later date clearly reveals an intention of the part of the lawmaking power to abrogate the prior law, this
intention must be given effect; but there must always be a sufficient revelation of this intention, and it has
become an unbending rule of statutory construction that the intention to repeal a former law will not be
imputed to the Legislature when it appears that the two statutes, or provisions, with reference to which the
question arises bear to each other the relation of general to special.
There is no sufficient indication of an implied repeal of P.D. 1869. On the contrary, as the private
respondent points, out, PAGCOR is mentioned as the source of funding in two later enactments of
Congress, to wit, R.A. 7309, creating a Board of Claims under the Department of Justice for the benefit
of victims of unjust punishment or detention or of violent crimes, and R.A. 7648, providing for measures
for the solution of the power crisis. PAGCOR revenues are tapped by these two statutes. This would
show that the PAGCOR charter has not been repealed by the Local Government Code but has in fact
been improved as it were to make the entity more responsive to the fiscal problems of the government.
Page 51
It is a canon of legal hermeneutics that instead of pitting one statute against another in an inevitably
destructive confrontation, courts must exert every effort to reconcile them, remembering that both laws
deserve a becoming respect as the handiwork of a coordinate branch of the government. On the
assumption of a conflict between P.D. 1869 and the Code, the proper action is not to uphold one and
annul the other but to give effect to both by harmonizing them if possible. This is possible in the case
before us. The proper resolution of the problem at hand is to hold that under the Local Government
Code, local government units may (and indeed must) prevent and suppress all kinds of gambling within
their territories except only those allowed by statutes like P.D. 1869. The exception reserved in such
laws must be read in the Code, to make both the Code and such laws equally effective and mutually
complementary.
This approach would also affirm that there are indeed two kinds of gambling, to wit, the illegal and those
authorized by law. Legalized gambling is not a modern concept; it is probably as old as illegal gambling,
if not indeed more so. The petitioners' suggestion that the Code authorizes them to prohibit all kinds of
gambling would erase the distinction between these two forms of gambling without a clear indication
that this is the will of the legislature. Plausibly, following this theory, the City of Manila could, by mere
ordinance, prohibit the Philippine Charity Sweepstakes Office from conducting a lottery as authorized by
R.A. 1169 and B.P. 42 or stop the races at the San Lazaro Hippodrome as authorized by R.A. 309 and
R.A. 983. LexLib
In light of all the above considerations, we see no way of arriving at the conclusion urged on us by the
petitioners that the ordinances in question are valid. On the contrary, we find that the ordinances violate
P.D. 1869, which has the character and force of a statute, as well as the public policy expressed in the
decree allowing the playing of certain games of chance despite the prohibition of gambling in general.
The rationale of the requirement that the ordinances should not contravene a statute is obvious.
Municipal governments are only agents of the national government. Local councils exercise only
delegated legislative powers conferred on them by Congress as the national lawmaking body. The
delegate cannot be superior to the principal or exercise powers higher than those of the latter. It is a
heresy to suggest that the local government units can undo the acts of Congress, from which they have
derived their power in the first place, and negate by mere ordinance the mandate of the statute.
Municipal corporations owe their origin to, and derive their powers and rights wholly from the legislature. It
breathes into them the breath of life, without which they cannot exist. As it creates, so it may destroy. As it
may destroy, it may abridge and control. Unless there is some constitutional limitation on the right, the
legislature might, by a single act, and if we can suppose it capable of so great a folly and so great a wrong,
sweep from existence all of the municipal corporations in the State, and the corporation could not prevent it.
We know of no limitation on the right so far as to the corporation themselves are concerned. They are, so to
phrase it, the mere tenants at will of the legislature. 11
This basic relationship between the national legislature and the local government units has not been
enfeebled by the new provisions in the Constitution strengthening the policy of local autonomy. Without
meaning to detract from that policy, we here confirm that Congress retains control of the local
government units although in significantly reduced degree now than under our previous Constitutions.
The power to create still includes the power to destroy. The power to grant still includes the power to
withhold or recall. True, there are certain notable innovations in the Constitution, like the direct
conferment on the local government units of the power to tax, 12 which cannot now be withdrawn by
mere statute. By and large, however, the national legislature is still the principal of the local government
units, which cannot defy its will or modify or violate it.
The Court understands and admires the concern of the petitioners for the welfare of their constituents
and their apprehensions that the welfare of Cagayan de Oro City will be endangered by the opening of
the casino. We share the view that "the hope of large or easy gain, obtained without special effort, turns
the head of the workman" 13 and that "habitual gambling is a cause of laziness and ruin." 14 In People
v. Gorostiza, 15 we declared: "The social scourge of gambling must be stamped out. The laws against
gambling must be enforced to the limit." George Washington called gambling "the child of avarice, the
brother of iniquity and the father of mischief." Nevertheless, we must recognize the power of the
legislature to decide, in its own wisdom, to legalize certain forms of gambling, as was done in P.D. 1869
in impliedly affirmed in the Local Government Code. That decision can be revoked by this Court only if it
contravenes the Constitution as the touchstone of all official acts. We do not find such contravention
here.
We hold that the power of PAGCOR to centralize and regulate all games of chance, including casinos
on land and sea within the territorial jurisdiction of the Philippines, remains unimpaired. P.D. 1869 has
Page 52
not been modified by the Local Government Code, which empowers the local government units to
prevent or suppress only those forms of gambling prohibited by law. llcd
In Basco v. Philippine Amusement and Gaming Corporation (PAGCOR), 197 SCRA 52, I stated in a
separate opinion that:
Casino gambling is authorized by P.D. 1869. This decree has the status of a statute that cannot be
amended or nullified by a mere ordinance. Hence, it was not competent for the Sangguniang
Panlungsod of Cagayan de Oro City to enact Ordinance No. 3353 prohibiting the use of buildings for the
operation of a casino and Ordinance No. 3375-93 prohibiting the operation of casinos. For all their
praiseworthy motives, these ordinance are contrary to P.D. 1869 and the public policy announced
therein and are therefore ultra vires and void.
". . . I agree with the decision insofar as it holds that the prohibition, control, and regulation of the entire
activity known as gambling properly pertain to 'state policy'. It is, therefore, the political departments of
government, namely, the legislative and the executive that should decide on what government should do in
the entire area of gambling, and assume full responsibility to the people for such policy." (emphasis
supplied)
WHEREFORE, the petition is DENIED and the challenged decision of the respondent Court of Appeals
is AFFIRMED, with the costs against the petitioners. It is so ordered.
However, despite the legality of the opening and operation of a casino in Cagayan de Oro City by
respondent PAGCOR, I wish to reiterate my view that gambling in any form runs counter to the
government's own efforts to re-establish and resurrect the Filipino moral character which is generally
perceived to be in a state of continuing erosion.
Narvasa, C.J., Feliciano, Bidin, Regalado, Romero, Bellosillo, Melo, Quiason, Puno, Vitug, Kapunan
and Mendoza, JJ., concur.
It is in the light of this alarming perspective that I call upon government to carefully weigh the
advantages and disadvantages of setting up more gambling facilities in the country.
Padilla, J. and Davide, Jr., JJ., see separate opinion.
Separate Opinions
PADILLA, J.:
I concur with the majority holding that the city ordinances in question cannot modify much less repeal
PAGCOR's general authority to establish and maintain gambling casinos anywhere in the Philippines
under Presidential Decree No. 1869. LexLib
That the PAGCOR contributes greatly to the coffers of the government is not enough reason for setting
up more gambling casinos because, undoubtedly, this will not help improve, but will cause a further
deterioration in the Filipino moral character.
It is worth remembering in this regard that, 1) What is legal is not always moral and 2) the ends do no
always justify the means.
As in Basco, I can easily visualize prostitution at par with gambling. And yet, legalization of the former
will not render it any less reprehensible even if substantial revenue for the government can be realized
from it. The same is true of gambling.
Page 53
In the present case, it is my considered view that the national government (through PAGCOR) should
re-examine and re-evaluate its decision of imposing the gambling casino on the residents of Cagayan
de Oro City; for it is abundantly clear that public opinion in the city is very much against it, and again the
question must be seriously deliberated: will the prospects of revenue to be realized from the casino
outweigh the further destruction of the Filipino sense of values?
DAVIDE, JR., J .:
While I concur in part with the majority, I wish, however, to express my views on certain aspects of this
case.
I.
It must at once be noted that private respondent Pryce Properties Corporation (PRYCE) directly filed
with the Court of Appeals its so-called petition for prohibition, thereby invoking the said court's original
jurisdiction to issue writs of prohibition under Section 9(1) of B.P. Blg. 129. As I see it, however, the
principal cause of action therein is one for declaratory relief: to declare null and unconstitutional for,
inter alia, having been enacted without or in excess of jurisdiction, for impairing the obligation of
contracts, and for being inconsistent with public policy the challenged ordinances enacted by the
Sangguniang Panlungsod of the City of Cagayan de Oro. The intervention therein of public respondent
Philippine Amusement and Gaming Corporation (PAGCOR) further underscores the "declaratory relief"
nature of the action. PAGCOR assails the ordinances for being contrary to the non-impairment and
equal protection clauses of the Constitution, violative of the Local Government Code, and against the
State's national policy declared in P.D. No. 1869. Accordingly, the Court of Appeals does not have
jurisdiction over the nature of the action. Even assuming arguendo that the case is one for prohibition,
then, under this Court's established policy relative to the hierarchy of courts, the petition should have
been filed with the Regional Trial Court of Cagayan de Oro City. I find no special or compelling reason
why it was not filed with the said court. I do not wish to entertain the thought that PRYCE doubted a
favorable verdict therefrom, in which case the filing of the petition with the Court of Appeals may have
been impelled by tactical considerations. A dismissal of the petition by the Court of Appeals would have
been in order pursuant to our decisions in People vs. Cuaresma (172 SCRA 415, [1989]) and DefensorSantiago vs. Vasquez (217 SCRA 633 1993]). In Cuaresma, this Court stated:
"A last word. This court's original jurisdiction to issue writs of certiorari (as well as prohibition, mandamus,
quo warranto, habeas corpus and injunction) is not exclusive . It is shared by this Court with Regional Trial
Courts (formerly Courts of First Instance), which may issue the writ, enforceable in any part of their
respective regions. It is also shared by this court, and by the Regional Trial Court, with the Court of Appeals
(formerly, Intermediate Appellate Court), although prior to the effectivity of Batas Pambansa Bilang 129 on
August 14, 1981, the latter's competence to issue the extraordinary writs was restricted by those 'in aid of
its appellate jurisdiction.' This concurrence of jurisdiction is not, however, to be taken as according to
parties seeking any of the writs an absolute, unrestrained freedom of choice of the court to which
application therefor will be directed. There is after all a hierarchy of courts. That hierarchy is determinative
of the venue of appeals, and should also serve as a general determinant of the appropriate forum for
petitions for the extraordinary writs. A becoming regard for that judicial hierarchy most certainly indicates
that petitions for the issuance of extraordinary writs against first level ('inferior') courts should be filed with
the Regional Trial Court, and those against the latter, with the Court of Appeals. A direct invocation of the
Supreme Court's original jurisdiction to issue these writs should be allowed only when there are special and
important reasons therefore, clearly and specifically set out in the petition. This is established policy. It is a
policy that is necessary to prevent inordinate demands upon the Court's time and attention which are better
devoted to those matters within its exclusive jurisdiction, and to prevent further over-crowding of the Court's
docket. Indeed, the removal of the restriction of the jurisdiction of the Court of Appeals in this regard, supra
resulting from the deletion of the qualifying phrase, 'in aid of its appellate jurisdiction' was evidently
intended precisely to relieve this Court pro tanto of the burden of dealing with applications for extraordinary
writs which, but for the expansion of the Appellate Court's corresponding jurisdiction, would have had to be
filed with it." (citations omitted)
And in Vasquez, this Court said:
"One final observation. We discern in the proceedings in this case a propensity on the part of petitioner,
and, for that matter, the same may be said of a number of litigants who initiate recourses before us, to
disregard the hierarchy of courts in our judicial system by seeking relief directly from this Court despite the
fact that the same is available in the lower courts in the exercise of their original or concurrent jurisdiction,
or its even mandated by law to be sought therein. This practice must be stopped, not only because of the
imposition upon the previous time of this Court but also because of the inevitable and resultant delay,
intended or otherwise, in the adjudication of the case which often has to be remanded or referred to the
lower court as the proper forum under the rules of procedure, or as better equipped to resolve the issues
since this Court is not a trier of facts. We, therefore, reiterate the judicial policy that this Court will not
entertain direct resort to it unless the redress desired cannot be obtained in the appropriate courts or where
Page 54
exceptional and compelling circumstances justify availment of a remedy within and calling for the exercise
of our primary jurisdiction." LLpr
The issue that necessarily arises is whether in granting local governments (such as the City of Cagayan
de Oro) the above powers and functions, the Local Government Code has, pro tanto, repealed P.D. No.
1869 insofar as PAGCOR'S general authority to establish and maintain gambling casinos anywhere in
the Philippines is concerned. LLphil
II.
I join the majority in holding that the ordinances cannot repeal P.D. No. 1869.
The challenged ordinances are (a) Ordinance No. 3353 entitled, "An Ordinance Prohibiting the
Issuance of Business Permit and Cancelling Existing Business Permit To Any Establishment for the
Using and Allowing to be Used Its Premises or Portion Thereof for the Operation of Casino," and (b)
Ordinance No. 3375-93 entitled, "An Ordinance Prohibiting the Operation of Casino and Providing
Penalty for Violation Therefore." They were enacted to implement Resolution No. 2295 entitled,
"Resolution Declaring As a Matter of Policy to Prohibit and/or Not to Allow the Establishment of the
Gambling Casino in the City of Cagayan de Oro," which was promulgated on 19 November 1990
nearly two years before PRYCE and PAGCOR entered into a contract of lease under which the latter
leased a portion of the former's Pryce Plaza Hotel for the operation of a gambling casino which
resolution was vigorously reiterated in Resolution No. 2673 of 19 October 1992.
III.
The nullification by the Court of Appeals of the challenged ordinances as unconstitutional primarily
because it is in contravention to P.D. No. 1869 is unwarranted. A contravention of a law is not
necessarily a contravention of the constitution. In any case, the ordinances can still stand even if they
be conceded as offending P.D. No. 1869. They can be reconciled, which is not impossible to do. So
reconciled, the ordinances should be construed as not applying to PAGCOR.
The challenged ordinances were enacted pursuant to the Sangguniang Panglungsod's express powers
conferred by Section 458, paragraph (a), subparagraphs (1)-(V), (3)-(ii), and (4)-(i), (iv), and (vii), Local
Government Code, and pursuant to its implied power under Section 16 thereof (the general welfare
clause) which reads:
"SECTION 16.General Welfare. Every local government unit shall exercise the powers expressly
granted, those necessarily implied therefrom, as well as powers necessary, appropriate, or incidental for its
efficient and effective governance, and those which are essential to the promotion of the general welfare.
Within their respective territorial jurisdictions, local government units shall ensure and support, among other
things, the preservation and enrichment of culture, promote health and safety, enhance the right of the
people to a balanced ecology, encourage and support the development of appropriate and self-reliant
scientific and technological capabilities, improve public morals, enhance economic prosperity and social
justice, promote full employment amount their residents, maintain peace and order, and preserve the
comfort and convenience of their inhabitants."
IV.
From the pleadings, it is obvious that the government and the people of Cagayan de Oro City are, for
obvious reasons, strongly against the opening of the gambling casino in their city. Gambling, even if
legalized, would be inimical to the general welfare of the inhabitants of the city, or of any place for that
matter. The PAGCOR, as a government-owned corporation, must consider the valid concerns of the
people of the City of Cagayan de Oro and should not impose its will upon them in an arbitrary, if not
despotic, manner.
Footnotes
Page 55
||| (Magtajas v. Pryce Properties Corp., Inc., G.R. No. 111097, [July 20, 1994])
1.Rollo, pp. 64-94.
2.Ibid., pp. 53-62.
3.Pryce was dropped as private respondent in the resolution of the Court dated June 13, 1994.
4.197 SCRA 53.
5.Sec. 458, [2(vi-xv); [3(ii-vii)]; [4(i-ix), Local Government Code, 1991.
6.Where the law does not distinguish, neither ought we to distinguish.
7.39 Phil. 102.
8.Garcia v. Executive Secretary, 204 SCRA 516, quoting Cooley, Constitutional Limitations, 8th ed.,
379-380.
9.Tatel v. Municipality of Virac, 207 SCRA 157; Solicitor General v. Metropolitan Manila Authority, 204
SCRA 837; De la Cruz v. Paras, 123 SCRA 569; U.S. v. Abandan, 24 Phil. 165.
10.44 Phil. 138.
CASE DIGEST
Magtajas v. Pryce Properties Corp., Inc.
G.R. No. 111097
July 20, 1994
11.Clinton v. Ceder Rapids, etc. Railroad Co., 24 Iowa 455.

12.Art. X, Sec. 5, Constitution.
13.Planiol, Droit Civil, Vol. 2, No. 2210.
14.Ibid.
15.77 Phil. 88.
FACTS:
PAGCOR, created by P.D. 1896, leased a building belonging to Pryce in order to prepare to open a
casino in Cagayan de Oro City. Various civic organizations, religious elements, womens and youth
groups, and even the local officials angrily denounced the project. The Sangguniang Panlungsod swiftly
enacted two ordinances disallowing the building of the planned casino. Petitioners argue that by virtue
of the Local Government Code (LGC), the Sangguniang Panlungsod may prohibit the operation of
casinos by passing ordinances to protect the general welfare of their citizens from the harmful effects of
gambling.
Page 56
ISSUE:
W/N the two ordinances as enacted by the Sangguniang Panlungsod of Cagayan de Oro are valid.
HELD:
The two local ordinances are not valid. In Basco v. Phil. Amusements and Gaming Corp., this Court
sustained the constitutionality of the decree. Under the LGC, local government units are authorized to
prevent or suppress gambling and other prohibited games of chance. Since the world gambling
should be read as referring to only illegal gambling which, like the other prohibited games of chance,
must be prevented or suppressed. On the assumption of a conflict between P.D. 1869 and the LGC, the
proper action is not to uphold one and annul the other but to give effect to both by harmonizing them if
possible. Casino gambling is authorized by P.D. 1869. This decree has the status of a statute that
cannot be amended or nullified by a mere ordinance.
LATIN MAXIM:
5a, 9c, 11e, 28, 37, 38, 50
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.
Page 57
DECISION
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
CORONA, J p:
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 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 Municipality of 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 Sangguniang Bayan) 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
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 . . .
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
xxx xxx xxx
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 (italics supplied)
Page 58
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:
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:
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:
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.
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;
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:
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;
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;
c. That the LGU has fully implemented the devolution of personnel/functions in accordance with the
provisions of RA 7160;
2. Not exceeding the rates prescribed by the Annual General Appropriations Act;
d. That the LGU has already created mandatory positions prescribed in RA 7160; and
3. Officials/employees on detail with other offices or assigned to serve other offices or agencies
shall be paid from their parent agencies;
e. That similar allowances/additional compensation are not granted by the national government to the
officials/employees assigned to the LGU. 7
4. No one shall be allowed to collect RATA from more than one source.
Page 59
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 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 (italics ours)
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. AEITDH
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
ASSIGNMENTS OF ERROR
WHETHER OR NOT THE LOCAL GOVERNMENT CODE OF 1991 PARTICULARLY SECTION 447(a)(1)
(xi) WAS EXPRESSLY OR IMPLIEDLY REPEALED OR MODIFIED BY REPUBLIC ACT 7645 AND THE
GENERAL APPROPRIATIONS ACT OF 1993.
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:
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.
I
WHETHER OR NOT RESOLUTION NO. 101, 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
POSITION OF COA
Page 60
budget circulars must conform to, not modify or amend, the provisions of the law it seeks to implement.
11
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. Petitioner emphasizes that
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:
Page 61
5. That the subject allowance shall automatically terminate upon transfer of a judge from one local
government unit to another local government unit. (italics ours)
"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. (italics ours)" 12
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 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 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;
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
2. That payment of the above shall always be subject to the availability of local funds;
ESTABLISHED PRINCIPLES INVOLVED

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;
From the foregoing history of the power of LGUs to grant allowances to judges, the following principles
should be noted:
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
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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 unequivocally provided in Sections 447, 458 and
468 of the Local Government Code of 1991;
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:
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 continued 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.
xxx xxx xxx
(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; (italics 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
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
It is elementary in statutory construction that an administrative circular cannot supersede, abrogate,

modify or nullify a statute. A statute is superior to an 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)(1)(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
Page 63
officials or employees belonged. Furthermore, there was no other provision in RA 7645 from which a
repeal of Section 447(a)(1)(xi) of RA 7160 could be implied. In the absence, therefore, of any clear
repeal of Section 447(a)(1)(xi) of RA 7160, we cannot presume such intention on the part of the
legislature.
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):
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 generalia specialibus 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:
xxx xxx xxx
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. (italics 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 the other 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
Page 64
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 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:
xxx xxx xxx
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 of LGUs.
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. (italics 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.
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 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.
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
Page 65
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;
granted by the national government or (2) similar to the allowances granted by the national government,
violates Section 447(a)(1)(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 violative of 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
c. That the LGU has fully implemented the devolution of personnel/functions in accordance with
the provisions of RA 7160;
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.
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 judges whenever such allowances are (1) also
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
Page 66
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.
SO ORDERED. HSaCcE
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 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.
Footnotes
Davide, Jr., C .J ., Puno, Vitug, Panganiban, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez,

Carpio, Austria-Martinez, Carpio Morales, Callejo, Sr., Azcuna, and Tinga, JJ ., concur.
1.Penned by Chairman Celso D. Gagan and Commissioners Raul C. Flores and Emmanuel M.
Dalman.
2.Respondent COA erroneously considered the P944 monthly allowance as RATA from the Supreme
Court in its Comment dated October 23, 2000 and Memorandum dated June 26, 2001.
Rollo, pp. 53, 103.
3.Annex "D", Certification of the Office of the Municipal Accountant; Petition for Certiorari, p. 5.
4.Annex "E", Resolution No. 101, Series of 1991, Rollo, p. 35.
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.
5.Petition for Certiorari, p. 4.

6.Rollo, p. 38.
7.Rollo, pp. 40-42.
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.
8.Rollo, pp. 22-25.

9.Respondent COA erroneously considered the P944 monthly allowance being received by petitioner
judge from the local funds of the municipality since 1984 as RATA from the Supreme Court.
Thus, in 1993 when the municipality increased said allowance to P1,600 (an increase of
P656), COA opposed the grant of the whole P1,600 monthly allowance because the
municipality supposedly could not grant RATA to petitioner judge in addition to the RATA
already granted by the Supreme Court. See Comment dated October 23, 2000 and
Memorandum dated June 26, 2001, Rollo, pp. 53, 103.
Page 67
10.Rollo, pp. 22-25, 31-33, 36-38, 57-64.
21.A special law is one which relates to particular persons or things of a class, or to a particular
portion or section of the state only. U.S. vs. Serapio, 23 Phil. 584 [1912].
11.Rollo, pp. 10-17.

12.In Allarde vs. Commission on Audit, 218 SCRA 227 [1993], we ruled that the use of the word
"may" in LOI No. 1418 signifies that the allowance may not be demanded as a matter of
right, but is entirely dependent on the will of the municipality concerned. It should be treated
as an honorarium, an amount that is "given not as a matter of obligation but in appreciation
of services rendered, a voluntary donation in consideration for services which admit of no
compensation in money (Santiago vs. Commission on Audit, 199 SCRA 128, 130)."
22.A general law is one which affects all people of the state or all of a particular class of persons in
the state or embraces a class of subjects or places and does not omit any subject or place
naturally belonging to such class. U.S. vs. Serapio, 23 Phil. 584 [1912]; Valera vs. Tuason,
80 Phil. 823 [1948]; Villegas vs. Subido, 41 SCRA 190 [1971].
23.Villegas vs. Subido, 41 SCRA 190 [1971].
24.Araneta vs. Concepcion, 99 Phil. 709 [1956]; Sotto vs. Sotto, 43 Phil. 688 [1922].
13.The law took effect on January 1, 1992.

25.Maddumba vs. Ozaeta, 82 Phil. 345 [1948]; Lopez vs. El Hogar Filipino, 47 Phil. 249 [1925].
14.G.R. No. 125350, December 3, 2002.
15.Instead of filing a comment on behalf of respondent COA in this case, the Solicitor General filed a
manifestation supporting the position of petitioner judges. The Solicitor General argued that
(1) DBM only enjoyed the power to review and determine whether disbursement of funds
were made in accordance with the ordinance passed by a LGU while (2) the COA had no
more than auditorial visitation powers over the LGUs pursuant to Section 348 of RA 7160
which provides for the power to inspect at any time the financial accounts of LGUs.
Moreover, the Solicitor General opined that "the DBM and the respondent are only
authorized under RA 7160 to promulgate a Budget Operations Manual for LGUs, 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 pointed out that LBC 55 was not exercised under any of the
aforementioned provisions.
16.Rollo, pp. 22-25.
17.China Banking Corporation vs. Court of Appeals, 265 SCRA 327 [1996].
18.U.S. vs. Palacio, 33 Phil. 208 [1916]; Maceda vs. Macaraeg, 197 SCRA 771 [1991].
19.Manila Railroad Co. vs. Rafferty, 40 Phil. 224 [1919]; Commissioner of Internal Revenue vs. Court
of Appeals, 207 SCRA 487 [1992].
20.De Villa vs. Court of Appeals, 195 SCRA 722 [1991].
26.National agencies included in the national budget are Congress, Office of the President, Office of
the Vice-President, DA, DAR, DBM, DECS, DENR, DOF, DFA, DOH, DILG, DOJ, DOLE,
DND, DPWH, DOST, DSWD, DOT, DTI, DOTC, NEDA, Office of the Press Secretary, the
Judiciary, Constitutional Offices, Commission on Human Rights, State Universities and
Colleges and Autonomous Regions. See the GAA of 1993 as example.
27.Section 25, Article II; Section 2, Article X, 1987 Constitution.
28.The LBC No. 53 was issued by the DBM by virtue of Administrative Order No. 42 which clarified
the role of the DBM in the administration of the compensation and position classification
systems in the LGUs and mandated it, among other things, to provide guidelines for the
grant of allowances and additional forms of compensation by the LGUs. AO No. 42 was
issued by the President by virtue of his power of general supervision over the LGUs under
Section 25 of the Local Government Code of 1991.
29.Also Section 458(a)(1)(xi) and Section 468(a)(1)(xi), Local Government Code of 1991.
30.Supra note 17.
31.Section 324. Budgetary Requirements. The budgets of local government units for any fiscal
year shall comply with the following requirements:
(a) The aggregate amount appropriated shall not exceed the estimates of income;
Page 68
(b) Full provision shall be made for all statutory and contractual obligations of the local government
unit concerned: Provided, however, that the amount of appropriations for debt servicing shall
not exceed twenty percent (20%) of the regular income of the local government unit
concerned;
(d) In cases of abolition of positions and the creation of new ones resulting from the abolition of
existing positions in the career service, such abolition or creation shall be made in
accordance with pertinent provisions of this code and the civil service law, rules and
regulations;
(c) In the case of provinces, cities, and municipalities, aid to component barangays shall be provided
in amounts of not less than One thousand pesos (P1,000.00) per barangay; and
(e) Positions in the official plantilla for career positions which are occupied by incumbents holding
permanent appointments shall be covered by adequate appropriations;
(d) Five percent (5%) of the estimated revenue from regular sources shall be set aside as an annual
lump sum appropriation for unforeseen expenditures arising from the occurrence of
calamities: Provided, however, that such appropriation shall be used only in the area, or a
portion thereof, of the local government unit or other areas declared in a state of calamity by
the President.
(f) No changes in designation or nomenclature of positions resulting in a promotion or demotion in

rank or increase or decrease in compensation shall be allowed, except when the position is
actually vacant, and the filling of such positions shall be strictly made in accordance with the
civil service law, rules and regulations;
32.Section 325. General Limitations. The use of the provincial, city and municipal funds shall be
subject to the following limitations:
(a) The total appropriations, whether annual or supplemental, for personal services of a local
government unit for one (1) fiscal year shall not exceed forty-five (45%) in the case of first to
third class provinces, cities, and municipalities, and fifty-five percent (55%) in the case of
fourth class or lower, of the total annual income from regular sources realized in the next
preceding fiscal year. The appropriations for salaries, wages, representation and
transportation allowances of officials and employees of the public utilities and economic
enterprises owned, operated, and maintained by the local government unit concerned shall
not be included in the annual budget or in the computation of the maximum amount for
personal services. The appropriations for the personal services of such economic
enterprises shall be charged to their respective budgets;
(b) No official or employee shall be entitled to a salary rate higher than the maximum fixed for his
position or other positions of equivalent rank by applicable laws or rules and regulations
issued thereunder;
(g) The creation of new positions and salary increases or adjustments shall in no case be made
retroactive; and
(h) The annual appropriations for discretionary purposes of the local chief executive shall not exceed
two percent (2%) of the actual receipts derived from basic real property tax in the next
preceding calendar year. Discretionary funds shall be disbursed only for public purposes to
be supported by appropriate vouchers and subject to such guidelines as may be prescribed
by law. No amount shall be appropriated for the same purpose except as authorized under
this Section.
33.Paragraph (a) should be read in conjunction with the recent circular of the DBM, Local Budget
Circular No. 75 dated July 12, 2002 entitled Guidelines on Personal Services Limitation.
Section 5.5 thereof entitled Honoraria of National Government Personnel provides: "The
appropriation intended to be granted as honoraria and similar benefits to national
government personnel shall be classified as Maintenance and Other Operating Expenses
(MOOE) since these are not personal services costs of the local government unit."
34.Figuerres vs. Court of Appeals, 305 SCRA 206 [1999].
35.Ibid.
(c) No local fund shall be appropriated to increase or adjust salaries or wages of officials and
employees of the national government, except as may be expressly authorized by law;
||| (Leynes v. Commission on Audit, G.R. No. 143596, [December 11, 2003], 463 PHIL 557-580)
Page 69
ISSUE:
Whether or not the Municipality of Naujan validly provided allowance in addition to that given by the SC.
HELD:
CASE DIGEST
LEYNES Vs. COA
GR NO. 143596
DEC. 11, 2003
YES, RA 7160 is a special law which exclusively deals with LGUs outlining their own powers and
functions in consonance with the constitutional mandated policy of the Local autonomy. Resolution
No.101 is valid. Respondent COA erred in opposing the grant of allowance to the judges.
FACTS:
Petitioner Judge Tomas C. Leynes, presiding judge of RTC of Calapan City, Branch 40 Oriental
Mindoro. His RATA is taken from the SC and in addition he received a monthly allowance from the local
funds of the Municipality of Naujan-being the sole presiding judge. On May 7, 1993, SB approved
increasing petitioners monthly allowance. On Feb. 17, 1994 Provincial auditor issued a memorandum
to stop the payment of allowance for he is already receiving RATA from the SC.
Page 70

StatCon Chap IX-1

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THIRD DIVISION

VALENTINA A. NUEZ, FELIX A. NUEZ, FELIXITA A. NUEZ, LEONILO A. NUEZ, JR.,

The facts are not disputed:

I. . . . COMMITTED GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK AND/OR EXCESS OF

II. . . . COMMITTED GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK AND/OR EXCESS OF

xxx xxx xxx 24

This Court finds the petition impressed with merit.

SEC. 2. Modes of appeal.

xxx xxx xxx

11.Annex "I", RTC Records at 38-39.

Sandoval-Gutierrez, J., is on leave.

12.RTC Records at 1-8.

xxx xxx xxx

1.Annex "A" of the Complaint, RTC Records at 9-12.

8.RTC Records at 27.

23.RTC Records at 165-166.

38.294 SCRA 73 (1998).

40.Riviera Filipina, Inc. v. Court of Appeals, 380 SCRA 245 (2003).

28.CA Rollo at 2-25.

[G.R. No. 80593. December 18, 1989.]

PHILIPPINE NATIONAL BANK, petitioner, vs. TERESITA CRUZ, JOSE AGRIPINO,

The Chief Legal Officer for petitioner.

2. ID.; WORKER'S PREFERENCE IN CASE OF BANKRUPTCY; APPLIES EVEN IF THE

Romualdo C. Delos Santos for respondents.

1. LABOR LAW; PROVISIONS IN THE LABOR CODE AS TO WORKERS PREFERENCE AS

The antecedent facts of the case are as follows:

5. Ma. Luisa Cabrera

10. Nepomuceno Medina

11. Edgardo Mendoza

12. Jenifer Velez

13. Amelia Medina

14. Eduardo Espejo

15. Ricardo Batto

Article 110 of the Labor Code provides that:

The petition is devoid of merit.

This contention is, again, bereft of merit.

Narvasa, Grio-Aquino and Medialdea, JJ ., concur.

12.Ibid, page 48.

13.Page 26, Rollo.

1.Labor Arbiter Raymundo R. Valenzuela.

18.115 SCRA 873 (1982).

4.Page 6, Petition; Page 28, Rollo.

[G.R. No. 87119. April 16, 1991.]

The City Legal Officer for petitioner.

2. STATUTORY CONSTRUCTION; SPECIAL LAW PREVAILS OVER A GENERAL LAW

4. ID.; REPEALS OF LAWS BY IMPLICATION, NOT FAVORED; WHEN THERE IS A MERE

xxx xxx xxx

xxx xxx xxx

xxx xxx xxx

(2) The city mayor shall:

xxx xxx xxx

9.Batas Blg. 337, sec. 171(h).

WHEREFORE, the petition is DISMISSED. No costs.

[G.R. No. 72477. October 16, 1990.]

NATIONAL POWER CORPORATION, petitioner, vs. HON. PRESIDING JUDGE, REGIONAL

Pantaleon Z. Salcedo for respondent Barangay Aplaya.

The antecedent facts are as follows:

"2) Petitioner is exempt from payment of real property taxes."

xxx xxx xxx

6.Rollo, pp. 72-73.

10.G.R. No. 87479, June 4, 1990.

Gutierrez, Jr., Bidin and Cortes, JJ., concur.

Feliciano, J., is on leave.