1.

[G.R. No. 93054 : December 4, 1990.]

192 SCRA 100
Cordillera Regional Assembly Member ALEXANDER P. ORDILLO, (Banaue), Ifugao
Provincial Board Member CORAZON MONTINIG, (Mayoyao), Former Vice-Mayor
MARTIN UDAN (Banaue), Municipal Councilors MARTIN GANO, (Lagawe), and
TEODORO HEWE, (Hingyon), Barangay Councilman PEDRO W. DULAG (Lamut);
Aguinaldo residents SANDY B. CHANGIWAN, and DONATO TIMAGO; Lamut resident
REY ANTONIO; Kiangan residents ORLANDO PUGUON, and REYNAND DULDULAO;
Lagawe residents TOMAS KIMAYONG, GREGORIO DANGO, GEORGE B. BAYWONG,
and VICENTE LUNAG; Hingyon residents PABLO M. DULNUAN and CONSTANCIO
GANO; Mayoyao residents PEDRO M. BAOANG, LEONARDO IGADNA, and MAXIMO
IGADNA; and Banaue residents PUMA-A CULHI, LATAYON BUTTIG, MIGUEL
PUMELBAN, ANDRES ORDILLO, FEDERICO MARIANO, SANDY BINOMNGA, GABRIEL
LIMMANG, ROMEO TONGALI, RUBEN BAHATAN, MHOMDY GABRIEL, and NADRES
GHAMANG, Petitioners, vs. THE COMMISSION ON ELECTIONS; The Honorable
FRANKLIN M. DRILON, Secretary of Justice; Hon. CATALINO MACARAIG, Executive
Secretary; The Cabinet Officer for Regional Development; Hon. GUILLERMO
CARAGUE, Secretary of Budget and Management; and Hon. ROSALINA S. CAJUCOM,
OIC, National Treasurer, Respondents.

DECISION

GUTIERREZ, JR., J.:

The question raised in this petition is whether or not the province of Ifugao, being the only
province which voted favorably for the creation of the Cordillera Autonomous Region can,
alone, legally and validly constitute such Region.
The antecedent facts that gave rise to this petition are as follows:
On January 30, 1990, the people of the provinces of Benguet, Mountain Province, Ifugao,
Abra and Kalinga-Apayao and the city of Baguio cast their votes in a plebiscite held pursuant
to Republic Act No. 6766 entitled "An Act Providing for an Organic Act for the Cordillera
Autonomous Region."
The official Commission on Elections (COMELEC) results of the plebiscite showed that the
creation of the Region was approved by a majority of 5,889 votes in only the Ifugao Province
and was overwhelmingly rejected by 148,676 votes in the rest of the provinces and city
above-mentioned.
Consequently, the COMELEC, on February 14, 1990, issued Resolution No. 2259 stating that
the Organic Act for the Region has been approved and/or ratified by majority of the votes
cast only in the province of Ifugao. On the same date, the Secretary of Justice issued a
memorandum for the President reiterating the COMELEC resolution and provided:
". . . [A]nd considering the proviso in Sec. 13(A) that only the provinces and city voting
favorably shall be included in the CAR, the province of Ifugao being the only province which
voted favorably — then, alone, legally and validly constitutes the CAR." (Rollo, p. 7)
As a result of this, on March 8, 1990, Congress enacted Republic Act No. 6861 setting the
elections in the Cordillera Autonomous Region of Ifugao on the first Monday of March 1991. : na d

Even before the issuance of the COMELEC resolution, the Executive Secretary on February 5,
1990 issued a Memorandum granting authority to wind up the affairs of the Cordillera
Executive Board and the Cordillera Regional Assembly created under Executive Order No. 220.
On March 9, 1990, the petitioner filed a petition with COMELEC to declare the non-ratification
of the Organic Act for the Region. The COMELEC merely noted said petition.
On March 30, 1990, the President issued Administrative Order No. 160 declaring among
others that the Cordillera Executive Board and Cordillera Regional Assembly and all the offices
created under Executive Order No. 220 were abolished in view of the ratification of the Organic
Act.- nad

The petitioners maintain that there can be no valid Cordillera Autonomous Region in only one
province as the Constitution and Republic Act No. 6766 require that the said Region be
composed of more than one constituent unit.
The petitioners, then, pray that the Court: (1) declare null and void COMELEC resolution No.
2259, the memorandum of the Secretary of Justice, the memorandum of the Executive
Secretary, Administrative Order No. 160, and Republic Act No. 6861 and prohibit and restrain
the respondents from implementing the same and spending public funds for the purpose and
(2) declare Executive Order No. 220 constituting the Cordillera Executive Board and the
Cordillera Regional Assembly and other offices to be still in force and effect until another
organic law for the Autonomous Region shall have been enacted by Congress and the same
is duly ratified by the voters in the constituent units. We treat the Comments of the
respondents as an answer and decide the case.
This petition is meritorious.
The sole province of Ifugao cannot validly constitute the Cordillera Autonomous Region.
It is explicit in Article X, Section 15 of the 1987 Constitution that:
"Section 15. There shall be created autonomous regions in Muslim Mindanao and in
the Cordillera consisting of provinces, cities, municipalities and geographical areas
sharing common and distinctive historical and cultural heritage, economic and social
structures, and other relevant characteristics within the framework of this Constitution
and the national sovereignty as well as territorial integrity of the Republic of the
Philippines." (Emphasis Supplied)
The keywords — provinces, cities, municipalities and geographical areas connote that "region"
is to be made up of more than one constituent unit. The term "region" used in its ordinary
sense means two or more provinces. This is supported by the fact that the thirteen (13)
regions into which the Philippines is divided for administrative purposes are groupings of
contiguous provinces. (Integrated Reorganization Plan (1972), which was made as part of the
law of the land by P.D. No. 1; P.D. No. 742) Ifugao is a province by itself. To become part of
a region, it must join other provinces, cities, municipalities, and geographical areas. It joins
other units because of their common and distinctive historical and cultural heritage, economic
and social structures and other relevant characteristics. The Constitutional requirements are
not present in this case. - nad

The well-established rule in statutory construction that the language of the Constitution, as
much as possible should be understood in the sense it has in common use and that the words
used in constitutional provisions are to be given their ordinary meaning except where technical
terms are employed, must then, be applied in this case. (See Baranda v. Gustilo, 165 SCRA
757, 770, [1988]; J.M. Tuason & Co., Inc. v. Land Tenure Administration, 31 SCRA 413, 422-
423 [1970]).
Aside from the 1987 Constitution, a reading of the provisions of Republic Act No. 6766
strengthens the petitioner's position that the Region cannot be constituted from only one
province.
Article III, Sections 1 and 2 of the Statute provide that the Cordillera Autonomous Region is
to be administered by the Cordillera government consisting of the Regional Government and
local government units. It further provides that:
"SECTION 2. The Regional Government shall exercise powers and functions necessary
for the proper governance and development of all provinces, cities, municipalities, and
barangay or ili within the Autonomous Region . . ."
From these sections, it can be gleaned that Congress never intended that a single province
may constitute the autonomous region. Otherwise, we would be faced with the absurd
situation of having two sets of officials, a set of provincial officials and another set of regional
officials exercising their executive and legislative powers over exactly the same small area.
Article V, Sections 1 and 4 of Republic Act 6766 vest the legislative power in the Cordillera
Assembly whose members shall be elected from regional assembly districts apportioned
among provinces and the cities composing the Autonomous Region. chan robles v irt ual law l ibra ry

If we follow the respondent's position, the members of such Cordillera Assembly shall then
be elected only from the province of Ifugao creating an awkward predicament of having two
legislative bodies — the Cordillera Assembly and the Sangguniang Panlalawigan — exercising
their legislative powers over the province of Ifugao. And since Ifugao is one of the smallest
provinces in the Philippines, population-wise, it would have too many government officials for
so few people. :-cralaw

Article XII, Section 10 of the law creates a Regional Planning and Development Board
composed of the Cordillera Governor, all the provincial governors and city mayors or their
representatives, two members of the Cordillera Assembly, and members representing the
private sector. The Board has a counterpart in the provincial level called the Provincial
Planning and Development Coordinator. The Board's functions (Article XII, Section 10, par.
2, Republic Act No. 6766) are almost similar to those of the Provincial Coordinator's (Title
Four, Chapter 3, Article 10, Section 220 (4), Batas Pambansa Blg. 337 — Local Government
Code). If it takes only one person in the provincial level to perform such functions while on
the other hand it takes an entire Board to perform almost the same tasks in the regional level,
it could only mean that a larger area must be covered at the regional level. The respondent's
theory of the Autonomous Region being made up of a single province must, therefore, fail.
Article XXI, Section 13 (B) (c) alloting the huge amount of Ten Million Pesos (P10,000,000.00)
to the Regional Government for its initial organizational requirements cannot be construed as
funding only a lone and small province.
These sections of Republic Act No. 6766 show that a one province Cordillera Autonomous
Region was never contemplated by the law creating it.
The province of Ifugao makes up only 11% of the total population of the areas enumerated
in Article I, Section 2 (b) of Republic Act No. 6766 which include Benguet, Mountain Province,
Abra, Kalinga-Apayao and Baguio City. It has the second smallest number of inhabitants from
among the provinces and city above mentioned. The Cordillera population is distributed in
round figures as follows: Abra, 185,000; Benguet, 486,000; Ifugao, 149,000; Kalinga-
Apayao, 214,000; Mountain Province, 116,000; and Baguio City, 183,000; Total population
of these five provinces and one city; 1,332,000 according to the 1990 Census (Manila
Standard, September 30, 1990, p. 14).
There are other provisions of Republic Act No. 6766 which are either violated or which cannot
be complied with. Section 16 of Article V calls for a Regional Commission on Appointments
with the Speaker as Chairman and are (6) members coming from different provinces and
cities in the Region. Under the respondents' view, the Commission would have a Chairman
and only one member. It would never have a quorum. Section 3 of Article VI calls for cabinet
members, as far as practicable, to come from various provinces and cities of the Region.
Section 1 of Article VII creates a system of tribal courts for the various indigenous cultural
communities of the Region. Section 9 of Article XV requires the development of a common
regional language based upon the various languages and dialects in the region which regional
language in turn is expected to enrich the national language.
The entirety of Republic Act No. 6766 creating the Cordillera Autonomous Region is infused
with provisions which rule against the sole province of Ifugao constituting the Region. :-cra law

To contemplate the situation envisioned by the respondent would not only violate the letter
and intent of the Constitution and Republic Act No. 6766 but would also be impractical and
illogical.
Our decision in Abbas, et al. v. COMELEC, (G.R. No. 89651, November 10, 1969), is not
applicable in the case at bar contrary to the view of the Secretary of Justice.
The Abbas case laid down the rate on the meaning of majority in the phrase "by majority of
the votes cast by the constituent units called for the purpose" found in the Constitution, Article
X, Section 18. It stated:
x x x
". . . [I]t is thus clear that what is required by the Constitution is simple majority of
votes approving the Organic Act in individual constituent units and not a double
majority of the votes in all constituent units put together, as well as in the individual
constituent units."
This was the pronouncement applied by the Secretary of Justice in arriving at his conclusion
stated in his Memorandum for the President that:
x x x
". . . [i]t is believed that the creation of the Cordillera Autonomous Region (CAR) as
mandated by R.A. No. 6766 became effective upon its approval by the majority of the
votes cast in the province of Ifugao. And considering the proviso in Section 13 (a) that
only the provinces and city voting favorably shall be included in the CAR, the province
of Ifugao being the only province which voted favorably — can, alone, legally and
validly constitute the CAR." (Rollo. p. 40).
The plebiscites mandated by the Constitution and Republic Act No. 6766 for the Cordillera and
Republic Act No. 6734 for the Autonomous Region in Muslim Mindanao determine — (1)
whether there shall be an autonomous region in the Cordillera and in Muslim Mindanao and
(2) which provinces and cities, among those enumerated in the two Republic Acts, shall
comprise said Autonomous Regions. (See III, Record of the Constitutional Commission, 487-
492 [1986]).
The Abbas case established the rule to follow on which provinces and cities shall comprise the
autonomous region in Muslim Mindanao which is, consequently, the same rule to follow with
regard to the autonomous region in the Cordillera. However, there is nothing in the Abbas
decision which deals with the issue on whether an autonomous region, in either Muslim
Mindanao or Cordillera could exist despite the fact that only one province or one city is to
constitute it.
chanroble s virtual law l ibra ry

Stated in another way, the issue in this case is whether the sole province of Ifugao can validly
and legally constitute the Cordillera Autonomous Region. The issue is not whether the
province of Ifugao is to be included in the Cordillera Autonomous Region. It is the first issue
which the Court answers in the instant case.
WHEREFORE, the petition is hereby GRANTED. Resolution No. 2259 of the Commission on
Elections, insofar as it upholds the creation of an autonomous region, the February 14, 1990
memorandum of the Secretary of Justice, the February 5, 1990 memorandum of the Executive
Secretary, Administrative Order No. 160, and Republic Act No. 6861 are declared null and
void while Executive Order No. 220 is declared to be still in force and effect until properly
repealed or amended.
SO ORDERED

2.

EN BANC

[G.R. NO. 152774 : May 27, 2004]

THE PROVINCE OF BATANGAS, represented by its Governor,

HERMILANDO I. MANDANAS, Petitioner, v. HON. ALBERTO G.
ROMULO, Executive Secretary and Chairman of the Oversight
Committee on Devolution; HON. EMILIA BONCODIN,
Secretary, Department of Budget and Management; HON.
 JOSE D. LINA, JR., Secretary, Department of Interior and
Local Government, Respondents.

DECISION

CALLEJO, SR., J.:

The Province of Batangas, represented by its Governor, Hermilando

I. Mandanas, filed the present Petition for Certiorari, prohibition
and mandamus under Rule 65 of the Rules of Court, as amended, to
declare as unconstitutional and void certain provisos contained in
the General Appropriations Acts (GAA) of 1999, 2000 and 2001,
insofar as they uniformly earmarked for each corresponding year
the amount of five billion pesos (P5,000,000,000.00) of the Internal
Revenue Allotment (IRA) for the Local Government Service
Equalization Fund (LGSEF) and imposed conditions for the release
thereof.

Named as respondents are Executive Secretary Alberto G. Romulo,

in his capacity as Chairman of the Oversight Committee on
Devolution, Secretary Emilia Boncodin of the Department of Budget
and Management (DBM) and Secretary Jose Lina of the Department
of Interior and Local Government (DILG).

Background

On December 7, 1998, then President Joseph Ejercito Estrada

issued Executive Order (E.O.) No. 48 entitled ESTABLISHING A
PROGRAM FOR DEVOLUTION ADJUSTMENT AND EQUALIZATION.
The program was established to facilitate the process of enhancing
the capacities of local government units (LGUs) in the discharge of
the functions and services devolved to them by the National
Government Agencies concerned pursuant to the Local Government
Code.1 The Oversight Committee (referred to as the Devolution
Committee in E.O. No. 48) constituted under Section 533(b) of
Republic Act No. 7160 (The Local Government Code of 1991) has
been tasked to formulate and issue the appropriate rules and
regulations necessary for its effective implementation.2 Further, to
address the funding shortfalls of functions and services devolved to
the LGUs and other funding requirements of the program, the
Devolution Adjustment and Equalization Fund was created.3 For
1998, the DBM was directed to set aside an amount to be
determined by the Oversight Committee based on the devolution
status appraisal surveys undertaken by the DILG.4 The initial fund
was to be sourced from the available savings of the national
government for CY 1998.5 For 1999 and the succeeding years, the
corresponding amount required to sustain the program was to be
incorporated in the annual GAA.6 The Oversight Committee has
been authorized to issue the implementing rules and regulations
governing the equitable allocation and distribution of said fund to
the LGUs.7 ςrνll

The LGSEF in the GAA of 1999

In Republic Act No. 8745, otherwise known as the GAA of 1999, the
program was renamed as the LOCAL GOVERNMENT SERVICE
EQUALIZATION FUND (LGSEF). Under said appropriations law, the
amount of P96,780,000,000 was allotted as the share of the LGUs in
the internal revenue taxes. Item No. 1, Special Provisions, Title
XXXVI A. Internal Revenue Allotment of Rep. Act No. 8745
contained the following proviso:ςηαñrοblε š νιr†υαl lαω lιb rα rÿ

... PROVIDED, That the amount of FIVE BILLION PESOS

(P5,000,000,000) shall be earmarked for the Local Government
Service Equalization Fund for the funding requirements of projects
and activities arising from the full and efficient implementation of
devolved functions and services of local government units pursuant
to R.A. No. 7160, otherwise known as the Local Government Code
of 1991: PROVIDED, FURTHER, That such amount shall be released
to the local government units subject to the implementing rules and
regulations, including such mechanisms and guidelines for the
equitable allocations and distribution of said fund among local
government units subject to the guidelines that may be prescribed
by the Oversight Committee on Devolution as constituted pursuant
to Book IV, Title III, Section 533(b) of R.A. No. 7160.The Internal
Revenue Allotment shall be released directly by the Department of
Budget and Management to the Local Government Units concerned.
On July 28, 1999, the Oversight Committee (with then Executive
Secretary Ronaldo B. Zamora as Chairman) passed Resolution Nos.
OCD-99-003, OCD-99-005 and OCD-99-006 entitled as follows: ςηαñrοblε š νιr†υαl lαω lιb rα rÿ

OCD-99-005

RESOLUTION ADOPTING THE ALLOCATION SCHEME FOR THE PhP5

BILLION CY 1999 LOCAL GOVERNMENT SERVICE EQUALIZATION
FUND (LGSEF) AND REQUESTING HIS EXCELLENCY PRESIDENT
JOSEPH EJERCITO ESTRADA TO APPROVE SAID ALLOCATION
SCHEME.

OCD-99-006

RESOLUTION ADOPTING THE ALLOCATION SCHEME FOR THE

PhP4.0 BILLION OF THE 1999 LOCAL GOVERNMENT SERVICE
EQUALIZATION FUND AND ITS CONCOMITANT GENERAL
FRAMEWORK, IMPLEMENTING GUIDELINES AND MECHANICS FOR
ITS IMPLEMENTATION AND RELEASE, AS PROMULGATED BY THE
OVERSIGHT COMMITTEE ON DEVOLUTION.

OCD-99-003

RESOLUTION REQUESTING HIS EXCELLENCY PRESIDENT JOSEPH

EJERCITO ESTRADA TO APPROVE THE REQUEST OF THE
OVERSIGHT COMMITTEE ON DEVOLUTION TO SET ASIDE TWENTY
PERCENT (20%) OF THE LOCAL GOVERNMENT SERVICE
EQUALIZATION FUND (LGSEF) FOR LOCAL AFFIRMATIVE ACTION
PROJECTS AND OTHER PRIORITY INITIATIVES FOR LGUs
INSTITUTIONAL AND CAPABILITY BUILDING IN ACCORDANCE WITH
THE IMPLEMENTING GUIDELINES AND MECHANICS AS
PROMULGATED BY THE COMMITTEE.

These OCD resolutions were approved by then President Estrada on

October 6, 1999.

Under the allocation scheme adopted pursuant to Resolution No.

OCD-99-005, the five billion pesos LGSEF was to be allocated as
follows:
ςηαñrοb lεš νι r† υαl lαω l ιb rαrÿ
1.The PhP4 Billion of the LGSEF shall be allocated in accordance
with the allocation scheme and implementing guidelines and
mechanics promulgated and adopted by the OCD. To wit: ςηαñrοbl εš νι r†υα l lαω lι brα rÿ

a.The first PhP2 Billion of the LGSEF shall be allocated in accordance

with the codal formula sharing scheme as prescribed under the
1991 Local Government Code; chanroblesvi rtua llawli bra ry

b.The second PhP2 Billion of the LGSEF shall be allocated in

accordance with a modified 1992 cost of devolution fund (CODEF)
sharing scheme, as recommended by the respective leagues of
provinces, cities and municipalities to the OCD. The modified CODEF
sharing formula is as follows: ςηαñrοblε š νιr†υαl lαω lιb rα rÿ

Province:40%

Cities:20%

Municipalities:40%

This is applied to the P2 Billion after the approved amounts granted

to individual provinces, cities and municipalities as assistance to
cover decrease in 1999 IRA share due to reduction in land area
have been taken out.

2.The remaining PhP1 Billion of the LGSEF shall be earmarked to

support local affirmative action projects and other priority initiatives
submitted by LGUs to the Oversight Committee on Devolution for
approval in accordance with its prescribed guidelines as
promulgated and adopted by the OCD.

In Resolution No. OCD-99-003, the Oversight Committee set aside

the one billion pesos or 20% of the LGSEF to support Local
Affirmative Action Projects (LAAPs) of LGUs. This remaining amount
was intended to respond to the urgent need for additional funds
assistance, otherwise not available within the parameters of other
existing fund sources. For LGUs to be eligible for funding under the
one-billion-peso portion of the LGSEF, the OCD promulgated the
following:ςηαñ rοbl εš νι r†υα l lαω lι brα rÿ
III.CRITERIA FOR ELIGIBILITY: ςηαñrοbl εš νι r†υ αl lαω lι brα rÿ

1.LGUs (province, city, municipality, or barangay), individually or by

group or multi-LGUs or leagues of LGUs, especially those belonging
to the 5th and 6th class, may access the fund to support any projects
or activities that satisfy any of the aforecited purposes. A barangay
may also access this fund directly or through their respective
municipality or city.

2.The proposed project/activity should be need-based, a local

priority, with high development impact and are congruent with the
socio-cultural, economic and development agenda of the Estrada
Administration, such as food security, poverty alleviation,
electrification, and peace and order, among others.

3.Eligible for funding under this fund are projects arising from, but
not limited to, the following areas of concern:

a.delivery of local health and sanitation services, hospital services

and other tertiary services;

b.delivery of social welfare services;

c.provision of socio-cultural services and facilities for youth and

community development;

d.provision of agricultural and on-site related research;

e.improvement of community-based forestry projects and other

local projects on environment and natural resources protection and
conservation;

f.improvement of tourism facilities and promotion of tourism;

g.peace and order and public safety;

h.construction, repair and maintenance of public works and

infrastructure, including public buildings and facilities for public use,
especially those destroyed or damaged by man-made or natural
calamities and disaster as well as facilities for water supply, flood
control and river dikes;
i.provision of local electrification facilities;

j.livelihood and food production services, facilities and equipment;

k.other projects that may be authorized by the OCD consistent with

the aforementioned objectives and guidelines; chanrob lesvi rtual lawlib rary

4.Except on extremely meritorious cases, as may be determined by

the Oversight Committee on Devolution, this portion of the LGSEF
shall not be used in expenditures for personal costs or benefits
under existing laws applicable to governments. Generally, this fund
shall cover the following objects of expenditures for programs,
projects and activities arising from the implementation of devolved
and regular functions and services:

a.acquisition/procurement of supplies and materials critical to the

full and effective implementation of devolved programs, projects
and activities;

b.repair and/or improvement of facilities;

c.repair and/or upgrading of equipment;

d.acquisition of basic equipment;

e.construction of additional or new facilities;

f.counterpart contribution to joint arrangements or collective

projects among groups of municipalities, cities and/or provinces
related to devolution and delivery of basic services.

5.To be eligible for funding, an LGU or group of LGU shall submit to

the Oversight Committee on Devolution through the Department of
Interior and Local Governments, within the prescribed schedule and
timeframe, a Letter Request for Funding Support from the
Affirmative Action Program under the LGSEF, duly signed by the
concerned LGU(s) and endorsed by cooperators and/or
beneficiaries, as well as the duly signed Resolution of Endorsement
by the respective Sanggunian(s) of the LGUs concerned. The LGU-
proponent shall also be required to submit the Project Request (PR),
using OCD Project Request Form No. 99-02, that details the
following:

(a) general description or brief of the project;

(b) objectives and justifications for undertaking the project, which

should highlight the benefits to the locality and the expected impact
to the local program/project arising from the full and efficient
implementation of social services and facilities, at the local levels;

(c) target outputs or key result areas;

(d) schedule of activities and details of requirements;

(e) total cost requirement of the project;

(f) proponents counterpart funding share, if any, and identified

source(s) of counterpart funds for the full implementation of the
project;

(g) requested amount of project cost to be covered by the LGSEF.

Further, under the guidelines formulated by the Oversight

Committee as contained in Attachment - Resolution No. OCD-99-
003, the LGUs were required to identify the projects eligible for
funding under the one-billion-peso portion of the LGSEF and submit
the project proposals thereof and other documentary requirements
to the DILG for appraisal. The project proposals that passed the
DILGs appraisal would then be submitted to the Oversight
Committee for review, evaluation and approval. Upon its approval,
the Oversight Committee would then serve notice to the DBM for
the preparation of the Special Allotment Release Order (SARO) and
Notice of Cash Allocation (NCA) to effect the release of funds to the
said LGUs.

The LGSEF in the GAA of 2000

Under Rep. Act No. 8760, otherwise known as the GAA of 2000, the
amount of P111,778,000,000 was allotted as the share of the LGUs
in the internal revenue taxes. As in the GAA of 1999, the GAA of
2000 contained a proviso earmarking five billion pesos of the IRA
for the LGSEF. This proviso, found in Item No. 1, Special Provisions,
Title XXXVII A. Internal Revenue Allotment, was similarly worded as
that contained in the GAA of 1999.

The Oversight Committee, in its Resolution No. OCD-2000-023

dated June 22, 2000, adopted the following allocation scheme
governing the five billion pesos LGSEF for 2000: ςηαñrοblε š νιr†υαl lαω lιb rαrÿ

1.The PhP3.5 Billion of the CY 2000 LGSEF shall be allocated to and

shared by the four levels of LGUs, i.e., provinces, cities,
municipalities, and barangays, using the following percentage-
sharing formula agreed upon and jointly endorsed by the various
Leagues of LGUs:

For Provinces26% or P 910,000,000

For Cities23% or 805,000,000

For Municipalities35% or 1,225,000,000

For Barangays16% or 560,000,000

Provided that the respective Leagues representing the provinces,

cities, municipalities and barangays shall draw up and adopt the
horizontal distribution/sharing schemes among the member LGUs
whereby the Leagues concerned may opt to adopt direct financial
assistance or project-based arrangement, such that the LGSEF
allocation for individual LGU shall be released directly to the LGU
concerned;

Provided further that the individual LGSEF shares to LGUs are used
in accordance with the general purposes and guidelines
promulgated by the OCD for the implementation of the LGSEF at the
local levels pursuant to Res. No. OCD-99-006 dated October 7,
1999 and pursuant to the Leagues guidelines and mechanism as
approved by the OCD;

Provided further that each of the Leagues shall submit to the OCD
for its approval their respective allocation scheme, the list of LGUs
with the corresponding LGSEF shares and the corresponding project
categories if project-based;

Provided further that upon approval by the OCD, the lists of LGUs
shall be endorsed to the DBM as the basis for the preparation of the
corresponding NCAs, SAROs, and related budget/release
documents.

2.The remaining P1,500,000,000 of the CY 2000 LGSEF shall be

earmarked to support the following initiatives and local affirmative
action projects, to be endorsed to and approved by the Oversight
Committee on Devolution in accordance with the OCD agreements,
guidelines, procedures and documentary requirements: ςηαñrοbl εš νι r†υα l lαω lι brα rÿ

On July 5, 2000, then President Estrada issued a Memorandum

authorizing then Executive Secretary Zamora and the DBM to
implement and release the 2.5 billion pesos LGSEF for 2000 in
accordance with Resolution No. OCD-2000-023.

Thereafter, the Oversight Committee, now under the administration

of President Gloria Macapagal-Arroyo, promulgated Resolution No.
OCD-2001-29 entitled ADOPTING RESOLUTION NO. OCD-2000-023
IN THE ALLOCATION, IMPLEMENTATION AND RELEASE OF THE
REMAINING P2.5 BILLION LGSEF FOR CY 2000. Under this
resolution, the amount of one billion pesos of the LGSEF was to be
released in accordance with paragraph 1 of Resolution No. OCD-
2000-23, to complete the 3.5 billion pesos allocated to the LGUs,
while the amount of 1.5 billion pesos was allocated for the LAAP.
However, out of the latter amount, P400,000,000 was to be
allocated and released as follows: P50,000,000 as financial
assistance to the LAAPs of LGUs; P275,360,227 as financial
assistance to cover the decrease in the IRA of LGUs concerned due
to reduction in land area; and P74,639,773 for the LGSEF
Capability-Building Fund.

The LGSEF in the GAA of 2001

In view of the failure of Congress to enact the general

appropriations law for 2001, the GAA of 2000 was deemed re-
enacted, together with the IRA of the LGUs therein and the proviso
earmarking five billion pesos thereof for the LGSEF.

On January 9, 2002, the Oversight Committee adopted Resolution

No. OCD-2002-001 allocating the five billion pesos LGSEF for 2001
as follows:ςηαñrοbl εš νι r†υ αl lαω l ιbrα rÿ

Modified Codal FormulaP 3.000 billion

Priority Projects 1.900 billion

Capability Building Fund .100 billion

P 5.000 billion

RESOLVED FURTHER, that the P3.0 B of the CY 2001 LGSEF which is

to be allocated according to the modified codal formula shall be
released to the four levels of LGUs, i.e., provinces, cities,
municipalities and barangays, as follows: ςηαñrοblε š νιr†υαl lαω lιb rα rÿ

LGUs PercentageAmount

Provinces25P 0.750 billion

Cities25 0.750

Municipalities35 1.050

Barangays15 0.450

100P 3.000 billion

RESOLVED FURTHER, that the P1.9 B earmarked for priority

projects shall be distributed according to the following criteria: ςηαñ rοblε š νιr†υαl lαω lιb rα rÿ

1.0For projects of the 4th, 5th and 6th class LGUs; or

2.0Projects in consonance with the Presidents State of the Nation

Address (SONA) /summit commitments.
RESOLVED FURTHER, that the remaining P100 million LGSEF
capability building fund shall be distributed in accordance with the
recommendation of the Leagues of Provinces, Cities, Municipalities
and Barangays, and approved by the OCD.

Upon receipt of a copy of the above resolution, Gov. Mandanas

wrote to the individual members of the Oversight Committee
seeking the reconsideration of Resolution No. OCD-2002-001.He
also wrote to Pres. Macapagal-Arroyo urging her to disapprove said
resolution as it violates the Constitution and the Local Government
Code of 1991.

On January 25, 2002, Pres. Macapagal-Arroyo approved Resolution

No. OCD-2002-001.

The Petitioners Case

The petitioner now comes to this Court assailing as unconstitutional

and void the provisos in the GAAs of 1999, 2000 and 2001, relating
to the LGSEF. Similarly assailed are the Oversight Committees
Resolutions Nos. OCD-99-003, OCD-99-005, OCD-99-006, OCD-
2000-023, OCD-2001-029 and OCD-2002-001 issued pursuant
thereto. The petitioner submits that the assailed provisos in the
GAAs and the OCD resolutions, insofar as they earmarked the
amount of five billion pesos of the IRA of the LGUs for 1999, 2000
and 2001 for the LGSEF and imposed conditions for the release
thereof, violate the Constitution and the Local Government Code of
1991.

Section 6, Article X of the Constitution is invoked as it mandates

that the just share of the LGUs shall be automatically released to
them. Sections 18 and 286 of the Local Government Code of 1991,
which enjoin that the just share of the LGUs shall be automatically
and directly released to them without need of further action are,
likewise, cited.

The petitioner posits that to subject the distribution and release of

the five-billion-peso portion of the IRA, classified as the LGSEF, to
compliance by the LGUs with the implementing rules and
regulations, including the mechanisms and guidelines prescribed by
the Oversight Committee, contravenes the explicit directive of the
Constitution that the LGUs share in the national taxes shall be
automatically released to them. The petitioner maintains that the
use of the word shall must be given a compulsory meaning.

To further buttress this argument, the petitioner contends that to

vest the Oversight Committee with the authority to determine the
distribution and release of the LGSEF, which is a part of the IRA of
the LGUs, is an anathema to the principle of local autonomy as
embodied in the Constitution and the Local Government Code of
1991.The petitioner cites as an example the experience in 2001
when the release of the LGSEF was long delayed because the
Oversight Committee was not able to convene that year and no
guidelines were issued therefor. Further, the possible disapproval by
the Oversight Committee of the project proposals of the LGUs would
result in the diminution of the latters share in the IRA.

Another infringement alleged to be occasioned by the assailed OCD

resolutions is the improper amendment to Section 285 of the Local
Government Code of 1991 on the percentage sharing of the IRA
among the LGUs. Said provision allocates the IRA as follows:
Provinces 23%; Cities 23%; Municipalities 34%; and Barangays
20%.8 This formula has been improperly amended or modified, with
respect to the five-billion-peso portion of the IRA allotted for the
LGSEF, by the assailed OCD resolutions as they invariably provided
for a different sharing scheme.

The modifications allegedly constitute an illegal amendment by the

executive branch of a substantive law. Moreover, the petitioner
mentions that in the Letter dated December 5, 2001 of respondent
Executive Secretary Romulo addressed to respondent Secretary
Boncodin, the former endorsed to the latter the release of funds to
certain LGUs from the LGSEF in accordance with the handwritten
instructions of President Arroyo.Thus, the LGUs are at a loss as to
how a portion of the LGSEF is actually allocated. Further, there are
still portions of the LGSEF that, to date, have not been received by
the petitioner; hence, resulting in damage and injury to the
petitioner.
The petitioner prays that the Court declare as unconstitutional and
void the assailed provisos relating to the LGSEF in the GAAs of
1999, 2000 and 2001 and the assailed OCD resolutions (Resolutions
Nos. OCD-99-003, OCD-99-005, OCD-99-006, OCD-2000-023,
OCD-2001-029 and OCD-2002-001) issued by the Oversight
Committee pursuant thereto. The petitioner, likewise, prays that the
Court direct the respondents to rectify the unlawful and illegal
distribution and releases of the LGSEF for the aforementioned years
and release the same in accordance with the sharing formula under
Section 285 of the Local Government Code of 1991. Finally, the
petitioner urges the Court to declare that the entire IRA should be
released automatically without further action by the LGUs as
required by the Constitution and the Local Government Code of
1991.

The Respondents Arguments

The respondents, through the Office of the Solicitor General, urge

the Court to dismiss the petition on procedural and substantive
grounds. On the latter, the respondents contend that the assailed
provisos in the GAAs of 1999, 2000 and 2001 and the assailed
resolutions issued by the Oversight Committee are not
constitutionally infirm. The respondents advance the view that
Section 6, Article X of the Constitution does not specify that the just
share of the LGUs shall be determined solely by the Local
Government Code of 1991. Moreover, the phrase as determined by
law in the same constitutional provision means that there exists no
limitation on the power of Congress to determine what is the just
share of the LGUs in the national taxes. In other words, Congress is
the arbiter of what should be the just share of the LGUs in the
national taxes.

The respondents further theorize that Section 285 of the Local

Government Code of 1991, which provides for the percentage
sharing of the IRA among the LGUs, was not intended to be a fixed
determination of their just share in the national taxes. Congress
may enact other laws, including appropriations laws such as the
GAAs of 1999, 2000 and 2001, providing for a different sharing
formula. Section 285 of the Local Government Code of 1991 was
merely intended to be the default share of the LGUs to do away with
the need to determine annually by law their just share. However,
the LGUs have no vested right in a permanent or fixed percentage
as Congress may increase or decrease the just share of the LGUs in
accordance with what it believes is appropriate for their operation.
There is nothing in the Constitution which prohibits Congress from
making such determination through the appropriations laws. If the
provisions of a particular statute, the GAA in this case, are within
the constitutional power of the legislature to enact, they should be
sustained whether the courts agree or not in the wisdom of their
enactment.

On procedural grounds, the respondents urge the Court to dismiss

the petition outright as the same is defective.The petition allegedly
raises factual issues which should be properly threshed out in the
lower courts, not this Court, not being a trier of facts. Specifically,
the petitioners allegation that there are portions of the LGSEF that it
has not, to date, received, thereby causing it (the petitioner) injury
and damage, is subject to proof and must be substantiated in the
proper venue, i.e., the lower courts.

Further, according to the respondents, the petition has already been

rendered moot and academic as it no longer presents a justiciable
controversy. The IRAs for the years 1999, 2000 and 2001, have
already been released and the government is now operating under
the 2003 budget. In support of this, the respondents submitted
certifications issued by officers of the DBM attesting to the release
of the allocation or shares of the petitioner in the LGSEF for 1999,
2000 and 2001. There is, therefore, nothing more to prohibit.

Finally, the petitioner allegedly has no legal standing to bring the

suit because it has not suffered any injury.In fact, the petitioners
just share has even increased. Pursuant to Section 285 of the Local
Government Code of 1991, the share of the provinces is 23%. OCD
Nos. 99-005, 99-006 and 99-003 gave the provinces 40% of P2
billion of the LGSEF.OCD Nos. 2000-023 and 2001-029 apportioned
26% of P3.5 billion to the provinces. On the other hand, OCD No.
2001-001 allocated 25% of P3 billion to the provinces. Thus, the
petitioner has not suffered any injury in the implementation of the
assailed provisos in the GAAs of 1999, 2000 and 2001 and the OCD
resolutions.

The Ruling of the Court

Procedural Issues

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

The petitioner has locus standi

to maintain the present suit

The gist of the question of standing is whether a party has alleged

such a personal stake in the outcome of the controversy as to
assure that concrete adverseness which sharpens the presentation
of issues upon which the court so largely depends for illumination of
difficult constitutional questions.9 Accordingly, it has been held that
the interest of a party assailing the constitutionality of a statute
must be direct and personal. Such party must be able to show, not
only that the law or any government act is invalid, but also that he
has sustained or is in imminent danger of sustaining some direct
injury as a result of its enforcement, and not merely that he suffers
thereby in some indefinite way. It must appear that the person
complaining has been or is about to be denied some right or
privilege to which he is lawfully entitled or that he is about to be
subjected to some burdens or penalties by reason of the statute or
act complained of.10 ςrνll

The Court holds that the petitioner possesses the requisite standing
to maintain the present suit. The petitioner, a local government
unit, seeks relief in order to protect or vindicate an interest of its
own, and of the other LGUs. This interest pertains to the LGUs share
in the national taxes or the IRA. The petitioners constitutional claim
is, in substance, that the assailed provisos in the GAAs of 1999,
2000 and 2001, and the OCD resolutions contravene Section 6,
Article X of the Constitution, mandating the automatic release to the
LGUs of their share in the national taxes. Further, the injury that
the petitioner claims to suffer is the diminution of its share in the
IRA, as provided under Section 285 of the Local Government Code
of 1991, occasioned by the implementation of the assailed
measures. These allegations are sufficient to grant the petitioner
standing to question the validity of the assailed provisos in the GAAs
of 1999, 2000 and 2001, and the OCD resolutions as the petitioner
clearly has a plain, direct and adequate interest in the manner and
distribution of the IRA among the LGUs.

The petition involves a significant

legal issue

The crux of the instant controversy is whether the assailed provisos

contained in the GAAs of 1999, 2000 and 2001, and the OCD
resolutions infringe the Constitution and the Local Government Code
of 1991. This is undoubtedly a legal question. On the other hand,
the following facts are not disputed: ςηαñ rοbl εš νι r†υα l lαω lιb rα rÿ

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

2.The promulgation of the assailed OCD resolutions providing for

the allocation schemes covering the said five billion pesos and the
implementing rules and regulations therefor; and cralawlibra ry

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

Considering that these facts, which are necessary to resolve the

legal question now before this Court, are no longer in issue, the
same need not be determined by a trial court.11 In any case, the
rule on hierarchy of courts will not prevent this Court from assuming
jurisdiction over the petition. The said rule may be relaxed when the
redress desired cannot be obtained in the appropriate courts or
where exceptional and compelling circumstances justify availment of
a remedy within and calling for the exercise of this Courts primary
jurisdiction.12 ςrνll

The crucial legal issue submitted for resolution of this Court entails
the proper legal interpretation of constitutional and statutory
provisions. Moreover, the transcendental importance of the case, as
it necessarily involves the application of the constitutional principle
on local autonomy, cannot be gainsaid. The nature of the present
controversy, therefore, warrants the relaxation by this Court of
procedural rules in order to resolve the case forthwith.

The substantive issue needs to be resolved

notwithstanding the supervening events

Granting arguendo that, as contended by the respondents, the

resolution of the case had already been overtaken by supervening
events as the IRA, including the LGSEF, for 1999, 2000 and 2001,
had already been released and the government is now operating
under a new appropriations law, still, there is compelling reason for
this Court to resolve the substantive issue raised by the instant
petition. Supervening events, whether intended or accidental,
cannot prevent the Court from rendering a decision if there is a
grave violation of the Constitution.13 Even in cases where
supervening events had made the cases moot, the Court did not
hesitate to resolve the legal or constitutional issues raised to
formulate controlling principles to guide the bench, bar and
public.14ςrνll

Another reason justifying the resolution by this Court of the

substantive issue now before it is the rule that courts will decide a
question otherwise moot and academic if it is capable of repetition,
yet evading review.15 For the GAAs in the coming years may contain
provisos similar to those now being sought to be invalidated, and
yet, the question may not be decided before another GAA is
enacted. It, thus, behooves this Court to make a categorical ruling
on the substantive issue now.
 Substantive Issue

As earlier intimated, the resolution of the substantive legal issue in

this case calls for the application of a most important constitutional
policy and principle, that of local autonomy.16 In Article II of the
Constitution, the State has expressly adopted as a policy that: ςηαñrοbl εš νι r†υα l lαω lι brα rÿ

Section 25. The State shall ensure the autonomy of local

governments.

An entire article (Article X) of the Constitution has been devoted to

guaranteeing and promoting the autonomy of LGUs. Section 2
thereof reiterates the State policy in this wise: ςηαñ rοblε š νιr†υαl lαω lιb rα rÿ

Section 2. The territorial and political subdivisions shall enjoy local

autonomy.

Consistent with the principle of local autonomy, the Constitution

confines the Presidents power over the LGUs to one of general
supervision.17 This provision has been interpreted to exclude the
power of control. The distinction between the two powers was
enunciated in Drilon v. Lim:18 ςrνll

An officer in control lays down the rules in the doing of an act. If

they are not followed, he may, in his discretion, order the act
undone or re-done by his subordinate or he may even decide to do
it himself. Supervision does not cover such authority. The
supervisor or superintendent merely sees to it that the rules are
followed, but he himself does not lay down such rules, nor does he
have the discretion to modify or replace them. If the rules are not
observed, he may order the work done or re-done but only to
conform to the prescribed rules. He may not prescribe his own
manner for doing the act. He has no judgment on this matter except
to see to it that the rules are followed.19 ςrνll

The Local Government Code of 199120 was enacted to flesh out the
mandate of the Constitution.21 The State policy on local autonomy is
amplified in Section 2 thereof: ςηαñrοblεš νι r† υαl lαω l ιb rαrÿ
Sec. 2. Declaration of Policy. (a) It is hereby declared the policy of
the State that the territorial and political subdivisions of the State
shall enjoy genuine and meaningful local autonomy to enable them
to attain their fullest development as self-reliant communities and
make them more effective partners in the attainment of national
goals. Toward this end, the State shall provide for a more
responsive and accountable local government structure instituted
through a system of decentralization whereby local government
units shall be given more powers, authority, responsibilities, and
resources. The process of decentralization shall proceed from the
National Government to the local government units.

Guided by these precepts, the Court shall now determine whether

the assailed provisos in the GAAs of 1999, 2000 and 2001,
earmarking for each corresponding year the amount of five billion
pesos of the IRA for the LGSEF and the OCD resolutions
promulgated pursuant thereto, transgress the Constitution and the
Local Government Code of 1991.

The assailed provisos in the GAAs of 1999, 2000

and 2001 and the OCD resolutions violate the

constitutional precept on local autonomy

Section 6, Article X of the Constitution reads: ςηαñrοbl εš νι r†υα l lαω lι brα rÿ

Sec. 6. Local government units shall have a just share,

as determined by law, in the national taxes which shall
be automatically released to them.

When parsed, it would be readily seen that this provision mandates

that (1) the LGUs shall have a just share in the national taxes; (2)
the just share shall be determined by law; and (3) the just share
shall be automatically released to the LGUs.

The Local Government Code of 1991, among its salient provisions,

underscores the automatic release of the LGUs just share in this
wise:ςηα ñrοb lεš ν ιr† υαl l αω lιb rαrÿ
Sec. 18. Power to Generate and Apply Resources. Local government
units shall have the power and authority to establish an
organization that shall be responsible for the efficient and effective
implementation of their development plans, program objectives and
priorities; to create their own sources of revenue and to levy taxes,
fees, and charges which shall accrue exclusively for their use and
disposition and which shall be retained by them; to have a just
share in national taxes which shall be automatically and directly
released to them without need of further action; chanroble svirtual lawlib rary

...

Sec. 286. Automatic Release of Shares. (a) The share of each local
government unit shall be released, without need of any further
action, directly to the provincial, city, municipal or barangay
treasurer, as the case may be, on a quarterly basis within five (5)
days after the end of each quarter, and which shall not be subject to
any lien or holdback that may be imposed by the national
government for whatever purpose.

(b) Nothing in this Chapter shall be understood to diminish the

share of local government units under existing laws.

Websters Third New International Dictionary defines automatic as

involuntary either wholly or to a major extent so that any activity of
the will is largely negligible; of a reflex nature; without volition;
mechanical; like or suggestive of an automaton. Further, the word
automatically is defined as in an automatic manner: without thought
or conscious intention. Being automatic, thus, connotes something
mechanical, spontaneous and perfunctory. As such, the LGUs are
not required to perform any act to receive the just share accruing to
them from the national coffers. As emphasized by the Local
Government Code of 1991, the just share of the LGUs shall be
released to them without need of further action.Construing Section
286 of the LGC, we held in Pimentel, Jr. v. Aguirre ,22 viz: ςηαñrοb lεš νι r†υ αl lαω l ιbrαrÿ

Section 4 of AO 372 cannot, however, be upheld. A basic feature of

local fiscal autonomy is the automatic release of the shares of LGUs
in the National internal revenue. This is mandated by no less than
the Constitution. The Local Government Code specifies further that
the release shall be made directly to the LGU concerned within five
(5) days after every quarter of the year and shall not be subject to
any lien or holdback that may be imposed by the national
government for whatever purpose. As a rule, the term SHALL is a
word of command that must be given a compulsory meaning. The
provision is, therefore, IMPERATIVE.

Section 4 of AO 372, however, orders the withholding, effective

January 1, 1998, of 10 percent of the LGUs IRA pending the
assessment and evaluation by the Development Budget
Coordinating Committee of the emerging fiscal situation in the
country. Such withholding clearly contravenes the Constitution and
the law. Although temporary, it is equivalent to a holdback, which
means something held back or withheld, often temporarily. Hence,
the temporary nature of the retention by the national government
does not matter. Any retention is prohibited.

In sum, while Section 1 of AO 372 may be upheld as an advisory

effected in times of national crisis, Section 4 thereof has no color of
validity at all. The latter provision effectively encroaches on the
fiscal autonomy of local governments. Concededly, the President
was well-intentioned in issuing his Order to withhold the LGUs IRA,
but the rule of law requires that even the best intentions must be
carried out within the parameters of the Constitution and the law.
Verily, laudable purposes must be carried out by legal methods.23 ςrνll

The just share of the LGUs is incorporated as the IRA in the

appropriations law or GAA enacted by Congress annually. Under the
assailed provisos in the GAAs of 1999, 2000 and 2001, a portion of
the IRA in the amount of five billion pesos was earmarked for the
LGSEF, and these provisos imposed the condition that such amount
shall be released to the local government units subject to the
implementing rules and regulations, including such mechanisms and
guidelines for the equitable allocations and distribution of said fund
among local government units subject to the guidelines that may be
prescribed by the Oversight Committee on Devolution. Pursuant
thereto, the Oversight Committee, through the assailed OCD
resolutions, apportioned the five billion pesos LGSEF such that: ςηαñrοblεš ν ιr† υαl l αω lιb rαrÿ

For 1999
P2 billion - allocated according to Sec. 285 LGC

P2 billion - Modified Sharing Formula (Provinces 40%; chanroblesv irtuallawl ib rary

Cities 20%; Municipalities 40%)

P1 billion projects (LAAP) approved by OCD.24 ςrνll

For 2000

P3.5 billion Modified Sharing Formula (Provinces 26%; chanroblesv irtuallawl ib rary

Cities 23%; Municipalities 35%; Barangays 16%);

P1.5 billion projects (LAAP) approved by the OCD.25 ςrνll

For 2001

P3 billion Modified Sharing Formula (Provinces 25%; chanroblesvi rt ualla wlibra ry

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

P1.9 billion priority projects

P100 million capability building fund.26 ςrνll

Significantly, the LGSEF could not be released to the LGUs without

the Oversight Committees prior approval.Further, with respect to
the portion of the LGSEF allocated for various projects of the LGUs
(P1 billion for 1999; P1.5 billion for 2000 and P2 billion for 2001),
the Oversight Committee, through the assailed OCD resolutions, laid
down guidelines and mechanisms that the LGUs had to comply with
before they could avail of funds from this portion of the LGSEF. The
guidelines required (a) the LGUs to identify the projects eligible for
funding based on the criteria laid down by the Oversight
Committee; (b) the LGUs to submit their project proposals to the
DILG for appraisal; (c) the project proposals that passed the
appraisal of the DILG to be submitted to the Oversight Committee
for review, evaluation and approval. It was only upon approval
thereof that the Oversight Committee would direct the DBM to
release the funds for the projects.
To the Courts mind, the entire process involving the distribution and
release of the LGSEF is constitutionally impermissible. The LGSEF is
part of the IRA or just share of the LGUs in the national taxes. To
subject its distribution and release to the vagaries of the
implementing rules and regulations, including the guidelines and
mechanisms unilaterally prescribed by the Oversight Committee
from time to time, as sanctioned by the assailed provisos in the
GAAs of 1999, 2000 and 2001 and the OCD resolutions, makes the
release not automatic, a flagrant violation of the constitutional and
statutory mandate that the just share of the LGUs shall be
automatically released to them. The LGUs are, thus, placed at the
mercy of the Oversight Committee.

Where the law, the Constitution in this case, is clear and

unambiguous, it must be taken to mean exactly what it says, and
courts have no choice but to see to it that the mandate is
obeyed.27 Moreover, as correctly posited by the petitioner, the use
of the word shall connotes a mandatory order. Its use in a statute
denotes an imperative obligation and is inconsistent with the idea of
discretion.28ςrνll

Indeed, the Oversight Committee exercising discretion, even

control, over the distribution and release of a portion of the IRA, the
LGSEF, is an anathema to and subversive of the principle of local
autonomy as embodied in the Constitution. Moreover, it finds no
statutory basis at all as the Oversight Committee was created
merely to formulate the rules and regulations for the efficient and
effective implementation of the Local Government Code of 1991 to
ensure compliance with the principles of local autonomy as defined
under the Constitution.29 In fact, its creation was placed under the
title of Transitory Provisions, signifying its ad hoc character.
According to Senator Aquilino Q. Pimentel, the principal author and
sponsor of the bill that eventually became Rep. Act No. 7160, the
Committees work was supposed to be done a year from the
approval of the Code, or on October 10, 1992.30 The Oversight
Committees authority is undoubtedly limited to the implementation
of the Local Government Code of 1991, not to supplant or subvert
the same. Neither can it exercise control over the IRA, or even a
portion thereof, of the LGUs.
That the automatic release of the IRA was precisely intended to
guarantee and promote local autonomy can be gleaned from the
discussion below between Messrs. Jose N. Nolledo and Regalado M.
Maambong, then members of the 1986 Constitutional Commission,
to wit:
ςηαñrοb lεš νι r†υ αl lαω l ιbrαrÿ

MR. MAAMBONG. Unfortunately, under Section 198 of the Local

Government Code, the existence of subprovinces is still
acknowledged by the law, but the statement of the Gentleman on
this point will have to be taken up probably by the Committee on
Legislation. A second point, Mr. Presiding Officer, is that under
Article 2, Section 10 of the 1973 Constitution, we have a provision
which states: ςηαñrοblε š νιr†υα l lαω lιb rα rÿ

The State shall guarantee and promote the autonomy of local

government units, especially the barrio, to insure their fullest
development as self-reliant communities.

This provision no longer appears in the present configuration; does

this mean that the concept of giving local autonomy to local
governments is no longer adopted as far as this Article is
concerned? chanroble svi rtualawl ib rary

MR. NOLLEDO. No. In the report of the Committee on Preamble,

National Territory, and Declaration of Principles, that concept is
included and widened upon the initiative of Commissioner
Bennagen.

MR. MAAMBONG. Thank you for that.

With regard to Section 6, sources of revenue, the creation of

sources as provided by previous law was subject to limitations as
may be provided by law, but now, we are using the term subject to
such guidelines as may be fixed by law. In Section 7, mention is
made about the unique, distinct and exclusive charges and
contributions, and in Section 8, we talk about exclusivity of local
taxes and the share in the national wealth. Incidentally, I was one
of the authors of this provision, and I am very thankful. Does this
indicate local autonomy, or was the wording of the law changed to
give more autonomy to the local government units?31 ςrνll
MR. NOLLEDO. Yes. In effect, those words indicate also
decentralization because local political units can collect taxes, fees
and charges subject merely to guidelines, as recommended by the
league of governors and city mayors, with whom I had a dialogue
for almost two hours. They told me that limitations may be
questionable in the sense that Congress may limit and in effect deny
the right later on.

MR. MAAMBONG. Also, this provision on automatic release of

national tax share points to more local autonomy. Is this the
intention?chanroblesvi rtua lawlib rary

MR. NOLLEDO. Yes, the Commissioner is perfectly right.32 ςrνll

The concept of local autonomy was explained in Ganzon v. Court of

Appeals33 in this wise: ςηα ñrοb lεš ν ιr† υαl l αω lιb rαrÿ

As the Constitution itself declares, local autonomy means a more

responsive and accountable local government structure instituted
through a system of decentralization. The Constitution, as we
observed, does nothing more than to break up the monopoly of the
national government over the affairs of local governments and as
put by political adherents, to liberate the local governments from
the imperialism of Manila. Autonomy, however, is not meant to end
the relation of partnership and interdependence between the central
administration and local government units, or otherwise, to usher in
a regime of federalism.The Charter has not taken such a radical
step. Local governments, under the Constitution, are subject to
regulation, however limited, and for no other purpose than
precisely, albeit paradoxically, to enhance self-government.

As we observed in one case, decentralization means devolution of

national administration but not power to the local levels. Thus: ςηαñrοbl εš νι r†υ αl lαω l ιbrα rÿ

Now, autonomy is either decentralization of administration or

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

Decentralization of power, on the other hand, involves an abdication

of political power in the [sic] favor of local governments [sic] units
declared to be autonomous. In that case, the autonomous
government is free to chart its own destiny and shape its future
with minimum intervention from central authorities. According to a
constitutional author, decentralization of power amounts to self-
immolation, since in that event, the autonomous government
becomes accountable not to the central authorities but to its
constituency.34 ςrνll

Local autonomy includes both administrative and fiscal autonomy.

The fairly recent case of Pimentel v. Aguirre35 is particularly
instructive. The Court declared therein that local fiscal autonomy
includes the power of the LGUs to, inter alia, allocate their resources
in accordance with their own priorities: ςηα ñrοb lεš νι r† υαl lαω l ιbrαrÿ

Under existing law, local government units, in addition to having

administrative autonomy in the exercise of their functions, enjoy
fiscal autonomy as well. Fiscal autonomy means that local
governments have the power to create their own sources of revenue
in addition to their equitable share in the national taxes released by
the national government, as well as the power to allocate their
resources in accordance with their own priorities. It extends to the
preparation of their budgets, and local officials in turn have to work
within the constraints thereof.They are not formulated at the
national level and imposed on local governments, whether they are
relevant to local needs and resources or not. ..36 ςrνll

Further, a basic feature of local fiscal autonomy is the

constitutionally mandated automatic release of the shares of LGUs
in the national internal revenue.37ςrνll
Following this ratiocination, the Court in Pimentel struck down as
unconstitutional Section 4 of Administrative Order (A.O.) No. 372
which ordered the withholding, effective January 1, 1998, of ten
percent of the LGUs IRA pending the assessment and evaluation by
the Development Budget Coordinating Committee of the emerging
fiscal situation.

In like manner, the assailed provisos in the GAAs of 1999, 2000 and
2001, and the OCD resolutions constitute a withholding of a portion
of the IRA. They put on hold the distribution and release of the five
billion pesos LGSEF and subject the same to the implementing rules
and regulations, including the guidelines and mechanisms
prescribed by the Oversight Committee from time to time. Like
Section 4 of A.O. 372, the assailed provisos in the GAAs of 1999,
2000 and 2001 and the OCD resolutions effectively encroach on the
fiscal autonomy enjoyed by the LGUs and must be struck down.
They cannot, therefore, be upheld.

The assailed provisos in the GAAs of 1999, 2000

and 2001 and the OCD resolutions cannot amend

Section 285 of the Local Government Code of 1991

Section 28438 of the Local Government Code provides that,

beginning the third year of its effectivity, the LGUs share in the
national internal revenue taxes shall be 40%. This percentage is
fixed and may not be reduced except in the event the national
government incurs an unmanageable public sector deficit" and only
upon compliance with stringent requirements set forth in the same
section:ςηαñrοblε š νιr†υαl lαω lιb rα rÿ

Sec. 284....

Provided, That in the event that the national government incurs an

unmanageable public sector deficit, the President of the Philippines
is hereby authorized, upon recommendation of Secretary of Finance,
Secretary of Interior and Local Government and Secretary of Budget
and Management, and subject to consultation with the presiding
officers of both Houses of Congress and the presidents of the liga,
to make the necessary adjustments in the internal revenue
allotment of local government units but in no case shall the
allotment be less than thirty percent (30%) of the collection of the
national internal revenue taxes of the third fiscal year preceding the
current fiscal year; Provided, further That in the first year of the
effectivity of this Code, the local government units shall, in addition
to the thirty percent (30%) internal revenue allotment which shall
include the cost of devolved functions for essential public services,
be entitled to receive the amount equivalent to the cost of devolved
personnel services.

Thus, from the above provision, the only possible exception to the
mandatory automatic release of the LGUs IRA is if the national
internal revenue collections for the current fiscal year is less than 40
percent of the collections of the preceding third fiscal year, in which
case what should be automatically released shall be a proportionate
amount of the collections for the current fiscal year. The adjustment
may even be made on a quarterly basis depending on the actual
collections of national internal revenue taxes for the quarter of the
current fiscal year. In the instant case, however, there is no
allegation that the national internal revenue tax collections for the
fiscal years 1999, 2000 and 2001 have fallen compared to the
preceding three fiscal years.

Section 285 then specifies how the IRA shall be allocated among the
LGUs: ςηαñrοblε š νιr†υαl lαω lιb rα rÿ

Sec. 285. Allocation to Local Government Units. The share of local

government units in the internal revenue allotment shall be
allocated in the following manner: ςηαñrοbl εš νι r†υα l lαω lι brαrÿ

(a) Provinces Twenty-three (23%)

(b) Cities Twenty-three percent (23%); chanroble svirtuallaw lib rary

(c) Municipalities Thirty-four (34%); and cralawlib rary

(d) Barangays Twenty percent (20%).

However, this percentage sharing is not followed with respect to the
five billion pesos LGSEF as the assailed OCD resolutions,
implementing the assailed provisos in the GAAs of 1999, 2000 and
2001, provided for a different sharing scheme. For example, for
1999, P2 billion of the LGSEF was allocated as follows: Provinces
40%; Cities 20%; Municipalities 40%.39 For 2000, P3.5 billion of the
LGSEF was allocated in this manner: Provinces 26%; Cities 23%;
Municipalities 35%; Barangays 26%.40 For 2001, P3 billion of the
LGSEF was allocated, thus: Provinces 25%; Cities 25%;
Municipalities 35%; Barangays 15%.41 ςrνll

The respondents argue that this modification is allowed since the

Constitution does not specify that the just share of the LGUs shall
only be determined by the Local Government Code of 1991.That it is
within the power of Congress to enact other laws, including the
GAAs, to increase or decrease the just share of the LGUs. This
contention is untenable. The Local Government Code of 1991 is a
substantive law. And while it is conceded that Congress may amend
any of the provisions therein, it may not do so through
appropriations laws or GAAs. Any amendment to the Local
Government Code of 1991 should be done in a separate law, not in
the appropriations law, because Congress cannot include in a
general appropriation bill matters that should be more properly
enacted in a separate legislation.42 ςrνll

A general appropriations bill is a special type of legislation, whose

content is limited to specified sums of money dedicated to a specific
purpose or a separate fiscal unit.43 Any provision therein which is
intended to amend another law is considered an inappropriate
provision. The category of inappropriate provisions includes
unconstitutional provisions and provisions which are intended to
amend other laws, because clearly these kinds of laws have no
place in an appropriations bill.44
ςrνll

Increasing or decreasing the IRA of the LGUs or modifying their

percentage sharing therein, which are fixed in the Local Government
Code of 1991, are matters of general and substantive law.To permit
Congress to undertake these amendments through the GAAs, as the
respondents contend, would be to give Congress the unbridled
authority to unduly infringe the fiscal autonomy of the LGUs, and
thus put the same in jeopardy every year. This, the Court cannot
sanction.

It is relevant to point out at this juncture that, unlike those of 1999,

2000 and 2001, the GAAs of 2002 and 2003 do not contain provisos
similar to the herein assailed provisos. In other words, the GAAs of
2002 and 2003 have not earmarked any amount of the IRA for the
LGSEF. Congress had perhaps seen fit to discontinue the practice as
it recognizes its infirmity. Nonetheless, as earlier mentioned, this
Court has deemed it necessary to make a definitive ruling on the
matter in order to prevent its recurrence in future appropriations
laws and that the principles enunciated herein would serve to guide
the bench, bar and public.

Conclusion

In closing, it is well to note that the principle of local autonomy,

while concededly expounded in greater detail in the present
Constitution, dates back to the turn of the century when President
William McKinley, in his Instructions to the Second Philippine
Commission dated April 7, 1900, ordered the new Government to
devote their attention in the first instance to the establishment of
municipal governments in which the natives of the Islands, both in
the cities and in the rural communities, shall be afforded the
opportunity to manage their own affairs to the fullest extent of
which they are capable, and subject to the least degree of
supervision and control in which a careful study of their capacities
and observation of the workings of native control show to be
consistent with the maintenance of law, order and loyalty.45 While
the 1935 Constitution had no specific article on local autonomy,
nonetheless, it limited the executive power over local governments
to general supervision. .. as may be provided by
law.46 Subsequently, the 1973 Constitution explicitly stated that
[t]he State shall guarantee and promote the autonomy of local
government units, especially the barangay to ensure their fullest
development as self-reliant communities.47 An entire article on Local
Government was incorporated therein. The present Constitution, as
earlier opined, has broadened the principle of local autonomy. The
14 sections in Article X thereof markedly increased the powers of
the local governments in order to accomplish the goal of a more
meaningful local autonomy.

Indeed, the value of local governments as institutions of democracy

is measured by the degree of autonomy that they enjoy.48 As
eloquently put by M. De Tocqueville, a distinguished French political
writer, [l]ocal assemblies of citizens constitute the strength of free
nations. Township meetings are to liberty what primary schools are
to science; they bring it within the peoples reach; they teach men
how to use and enjoy it. A nation may establish a system of free
governments but without the spirit of municipal institutions, it
cannot have the spirit of liberty.49ςrνll

Our national officials should not only comply with the constitutional
provisions on local autonomy but should also appreciate the spirit
and liberty upon which these provisions are based.50 ςrνll

WHEREFORE, the petition is GRANTED. The assailed provisos in the

General Appropriations Acts of 1999, 2000 and 2001, and the
assailed OCD Resolutions, are declared UNCONSTITUTIONAL.

SO ORDERED

3.
CONGRESSMAN HERMILANDO I. MANDANAS; MAYOR EFREN B. DIONA; MAYOR
ANTONINO A. AURELIO; KAGA WAD MARIOILAGAN;BARANGAY CHAIR PERLITO MANALO;
BARANGA Y CHAIR MEDEL MEDRANO;BARANGAY KAGA WAD CRIS RAMOS; BARANGA Y
KAGA WAD ELISA D. BALBAGO, and ATTY. JOSE MALVAR VILLEGAS, Petitioners
vs.
EXECUTIVE SECRETARY PAQUITO N. OCHOA, JR.; SECRETARY CESAR PURISIMA,
Department of Finance; SECRETARY FLORENCIO H. ABAD, Department of Budget and
Management; COMMISSIONER KIM JACINTO-HENARES, Bureau of Internal Revenue; and
NATIONAL TREASURER ROBERTO TAN, Bureau of the Treasury, Respondents

G.R. No. 208488

HONORABLE ENRIQUE T. GARCIA, JR., in his personal and official capacity as

Representative of the 2nd District of the Province of Bataan, Petitioner
vs.
HONORABLE [PAQUITO) N. OCHOA, JR., Executive Secretary; HONORABLE CESAR V.
PURISIMA, Secretary, Department of Finance; HONORABLE FLORENCIO H. ABAD, Secretary,
Department of Budget and Management; HONORABLE KIM S. JACINTO-HENARES,
Commissioner, Bureau of Internal Revenue; and HONORABLE ROZZANO RUFINO B.
BIAZON, Commissioner, Bureau of Customs, Respondents

DECISION

BERSAMIN, J.:

The petitioners hereby challenge the manner in which the just share in the national taxes of the local
government units (LGUs) has been computed.

Antecedents

One of the key features of the 1987 Constitution is its push towards decentralization of government
and local autonomy. Local autonomy has two facets, the administrative and the fiscal. Fiscal
autonomy means that local governments have the power to create their own sources of revenue in
addition to their equitable share in the national taxes released by the National Government, as well
as the power to allocate their resources in accordance with their own priorities.1 Such autonomy is as
indispensable to the viability of the policy of decentralization as the other.

Implementing the constitutional mandate for decentralization and local autonomy, Congress enacted
Republic Act No. 7160, otherwise known as the Local Government Code (LGC), in order to
guarantee the fiscal autonomy of the LGUs by specifically providing that:

SECTION 284. Allotment of Internal Revenue Taxes. - Local government units shall have a share in
the national internal revenue taxes based on the collection of the third fiscal year preceding the
current fiscal year as follows:

(a) On the first year of the effectivity of this Code, thirty percent (30%); (b) On the second year,
thirty-five percent (35%); and

(c) On the third year and thereafter, forty percent (40%).

Provided, That in the event that the National Government incurs an unmanageable public sector
deficit, the President of the Philippines is hereby authorized, upon the recommendation of Secretary
of Finance, Secretary of Interior and Local Government, and Secretary of Budget and Management,
and subject to consultation with the presiding officers of both Houses of Congress and the
presidents of the "liga", to make the necessary adjustments in the internal revenue allotment of local
government units but in no case shall the allotment be less than thirty percent (30%) of the collection
of national internal revenue taxes of the third fiscal year preceding the current fiscal year: Provided,
further, That in the first year of the effectivity of this Code, the local government units shall, in
addition to the thirty percent (30%) internal revenue allotment which shall include the cost of
devolved functions for essential public services, be entitled to receive the amount equivalent to the
cost of devolved personal services.

The share of the LGUs, heretofore known as the Internal Revenue Allotment (IRA), has been
regularly released to the LGUs. According to the implementing rules and regulations of the LGC, the
IRA is determined on the basis of the actual collections of the National Internal Revenue Taxes
(NIRTs) as certified by the Bureau of Internal Revenue (BIR).2

G.R. No. 199802 (Mandanas, et al.) is a special civil action for certiorari, prohibition
and mandamus assailing the manner the General Appropriations Act (GAA) for FY 2012 computed
the IRA for the LGUs.

Mandanas, et al. allege herein that certain collections of NIR Ts by the Bureau of Customs (BOC) -
specifically: excise taxes, value added taxes (VATs) and documentary stamp taxes (DSTs) - have
not been included in the base amounts for the computation of the IRA; that such taxes, albeit
collected by the BOC, should form part of the base from which the IRA should be computed because
they constituted NIRTs; that, consequently, the release of the additional amount of
₱60,750,000,000.00 to the LGUs as their IRA for FY 2012 should be ordered; and that for the same
reason the LGUs should also be released their unpaid IRA for FY 1992 to FY 2011, inclusive,
totaling ₱438,103,906,675.73.

In G.R. No. 208488, Congressman Enrique Garcia, Jr., the lone petitioner, seeks the writ
of mandamus to compel the respondents thereat to compute the just share of the LGUs on the basis
of all national taxes. His petition insists on a literal reading of Section 6, Article X of the 1987
Constitution. He avers that the insertion by Congress of the words internal revenue in the
phrase national taxes found in Section 284 of the LGC caused the diminution of the base for
determining the just share of the LGUs, and should be declared unconstitutional; that, moreover, the
exclusion of certain taxes and accounts pursuant to or in accordance with special laws was similarly
constitutionally untenable; that the VA Ts and excise taxes collected by the BOC should be included
in the computation of the IRA; and that the respondents should compute the IRA on the basis of all
national tax collections, and thereafter distribute any shortfall to the LGUs.

It is noted that named as common respondents were the then incumbent Executive Secretary,
Secretary of Finance, the Secretary of the Department of Budget and Management (DBM), and the
Commissioner of Internal Revenue. In addition, Mandanas, et al. impleaded the National Treasurer,
while Garcia added the Commissioner of Customs.

The cases were consolidated on October 22, 2013. 3 In the meanwhile, Congressman Garcia, Jr.
passed away. Jose Enrique Garcia III, who was subsequently elected to the same congressional
post, was substituted for Congressman Garcia, Jr. as the petitioner in G.R. No. 208488 under the
resolution promulgated on August 23, 2016.4

In response to the petitions, the several respondents, represented by the Office of the Solicitor
General (OSG), urged the dismissal of the petitions upon procedural and substantive considerations.

Anent the procedural considerations, the OSG argues that the petitions are procedurally defective
because, firstly, mandamus does not lie in order to achieve the reliefs sought because Congress
may not be compelled to appropriate the sums allegedly illegally withheld for to do so will violate the
doctrine of separation of powers; and, secondly, mandamus does not also lie to compel the DBM to
release the amounts to the LGUs because such disbursements will be contrary to the purposes
specified in the GAA; that Garcia has no clear legal right to sustain his suit for mandamus; that the
filing of Garcia's suit violates the doctrine of hierarchy of courts; and that Garcia's petition seeks
declaratory relief but the Court cannot grant such relief in the exercise of its original jurisdiction.

On the substantive considerations, the OSG avers that Article 284 of the LGC is consistent with the
mandate of Section 6, Article X of the 1987 Constitution to the effect that the LGUs shall have a just
share in the national taxes; that the determination of the just share is within the discretion of
Congress; that the limitation under the LGC of the basis for the just share in the NIRTs was within
the powers granted to Congress by the 1987 Constitution; that the LGUs have been receiving
their just share in the national taxes based on the correct base amount; that Congress has the
authority to exclude certain taxes from the base amount in computing the IRA; that there is a
distinction between the VA Ts, excise taxes and DSTs collected by the BIR, on one hand, and the
VA Ts, excise taxes and DSTs collected by the BOC, on the other, thereby warranting their different
treatment; and that Development Budget Coordination Committee (DBCC) Resolution No. 2003-02
dated September 4, 2003 has limited the base amount for the computation of the IRA to the "cash
collections based on the BIR data as reconciled with the Bureau of Treasury;" and that the collection
of such national taxes by the BOC should be excluded.

Issues

The issues for resolution are limited to the following, namely:

I.

Whether or not Mandamus is the proper vehicle to assail the constitutionality of the relevant
provisions of the GAA and the LGC;

II.

Whether or not Section 284 of the LGC is unconstitutional for being repugnant to Section 6, Article X
of the 1987 Constitution;

III.

Whether or not the existing shares given to the LGUs by virtue of the GAA is consistent with the
constitutional mandate to give LGUs a 'just share" to national taxes following Article X, Section 6 of
the 1987 Constitution;

IV.

Whether or not the petitioners are entitled to the reliefs prayed for.

Simply stated, the petitioners raise the novel question of whether or not the exclusion of certain
national taxes from the base amount for the computation of the just share of the LGUs in the national
taxes is constitutional.

Ruling of the Court

The petitions are partly meritorious.

 I
Mandamus is an improper remedy

Mandanas, et al. seek the writs of certiorari, prohibition and mandamus, while Garcia prays for the
writ of mandamus. Both groups of petitioners impugn the validity of Section 284 of the LGC.

The remedy of mandamus is defined in Section 3, Rule 65 of the Rules of Court, which provides:

Section 3. Petition for mandamus. - When any tribunal, corporation, board, officer or person
unlawfully neglects the performance of an act which the law specifically enjoins as a duty resulting
from an office, trust, or station, or unlawfully excludes another from the use and enjoyment of a right
or office to which such other is entitled, and there is no other plain, speedy and adequate remedy in
the ordinary course of law, the person aggrieved thereby may file a verified petition in the proper
court, alleging the facts with certainty and praying that judgment be rendered commanding the
respondent, immediately or at some other time to be specified by the court, to do the act required to
be done to protect the rights of the petitioner, and to pay the damages sustained by the petitioner by
reason of the wrongful acts of the respondent.

The petition shall also contain a sworn certification of non-forum shopping as provided in the third
paragraph of section 3, Rule 46.

For the writ of mandamus to issue, the petitioner must show that the act sought to be performed or
compelled is ministerial on the part of the respondent. An act is ministerial when it does not require
the exercise of judgment and the act is performed pursuant to a legal mandate. The burden of proof
is on the mandamus petitioner to show that he is entitled to the performance of a legal right, and that
the respondent has a corresponding duty to perform the act. The writ of mandamus may not issue to
compel an official to do anything that is not his duty to do, or that is his duty not to do, or to obtain for
the petitioner anything to which he is not entitled by law. 5

Considering that its determination of what constitutes the just share of the LGUs in the national taxes
under the 1987 Constitution is an entirely discretionary power, Congress cannot be compelled by
writ of mandamus to act either way. The discretion of Congress thereon, being exclusive, is not
subject to external direction; otherwise, the delicate balance underlying our system of government
may be unduly disturbed. This conclusion should at once then demand the dismissal of the Garcia
petition in G.R. No. 208488, but we do not dismiss it. Garcia has attributed the non-release of some
portions of their IRA balances to an alleged congressional indiscretion - the diminution of the base
amount for computing the LGU's just share. He has asserted that Congress altered the constitutional
base not only by limiting the base to the NIRTs instead of including therein all national taxes, but
also by excluding some national taxes and revenues that only benefitted a few LGUs to the
detriment of the rest of the LGUs.

Garcia's petition, while dubbed as a petition for mandamus, is also a petition for certiorari because it
alleges that Congress thereby committed grave abuse of discretion amounting to lack or excess of
jurisdiction. It is worth reminding that the actual nature of every action is determined by the
allegations in the body of the pleading or the complaint itself, not by the nomenclature used to
designate the same. 6 Moreover, neither should the prayer for relief be controlling; hence, the courts
may still grant the proper relief as the facts alleged in the pleadings and the evidence introduced
may warrant even without a prayer for specific remedy.7

In this regard, Garcia's allegation of the unconstitutionality of the insertion by Congress of the
words internal revenue in the phrase national taxes justifies treating his petition as one
for certiorari. It becomes our duty, then, to assume jurisdiction over his petition. In Araullo v. Aquino
III,8 the Court has emphatically opined that the Court's certiorari jurisdiction under the expanded
judicial power as stated in the second paragraph of Section 1, Article VIII of the Constitution can be
asserted:

xxxx to set right and undo any act of grave abuse of discretion amounting to lack or excess of
jurisdiction by any branch or instrumentality of the Government, the Court is not at all precluded from
making the inquiry provided the challenge was properly brought by interested or affected parties.
The Court has been thereby entrusted expressly or by necessary implication with both the duty and
the obligation of determining, in appropriate cases, the validity of any assailed legislative or
executive action. This entrustment is consistent with the republican system of checks and balances. 9

Further, observing that one of the reliefs being sought by Garcia is identical to the main relief sought
by Mandanas, et al., the Court should rightly dwell on the substantive arguments posited by Garcia
to the extent that they are relevant to the ultimate resolution of these consolidated suits.

II.
Municipal corporations and their relationship with Congress

The correct resolution and fair disposition of the issues interposed for our consideration require a
review of the basic principles underlying our system of local governments, and of the extent of the
autonomy granted to the LGUs by the 1987 Constitution.

Municipal corporations are now commonly known as local governments. They are the bodies politic
established by law partly as agencies of the State to assist in the civil governance of the country.
Their chief purpose has been to regulate and administer the local and internal affairs of the cities,
municipalities or districts. They are legal institutions formed by charters from the sovereign power,
whereby the populations within communities living within prescribed areas have formed themselves
into bodies politic and corporate, and assumed their corporate names with the right of continuous
succession and for the purposes and with the authority of subordinate self-government and
improvement and the local administration of the affairs of the State. 10

Municipal corporations, being the mere creatures of the State, are subject to the will of Congress,
their creator. Their continued existence and the grant of their powers are dependent on the
discretion of Congress. On this matter, Judge John F. Dillon of the State of Iowa in the United States
of America enunciated in Merriam v. Moody's Executors11 the rule of statutory construction that came
to be oft-mentioned as Dillon's Rule, to wit:

[A] municipal corporation possesses and can exercise the following powers and no others: First,
those granted in express words; second, those necessarily implied or necessarily incident to the
powers expressly granted; third, those absolutely essential to the declared objects and purposes of
the corporation-not simply convenient but indispensible; fourth, any fair doubt as to the existence of
a power is resolved by the courts against the corporation-against the existence of the powers. 12

The formulation of Dillon's Rule has since undergone slight modifications. Judge Dillon himself
introduced some of the modifications through his post-Merriam writings with the objective of
alleviating the original formulation's harshness. The word fairly was added to the second proviso; the
word absolutely was deleted from the third proviso; and the words reasonable and substantial were
added to the fourth proviso, thusly:

x x x second, those necessarily or fairly implied in or incident to the powers expressly granted; third,
those essential to x x x. Any fair, reasonable, doubt. 13
The modified Dillon's Rule has been followed in this jurisdiction, and has remained despite both the
1973 Constitution and the 1987 Constitution mandating autonomy for local governments. This has
been made evident in several rulings of the Court, one of which was that handed down in Magtajas
v. Pryce Properties Corporation, lnc.: 14

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.

This basic relationship between the national legislature and the local government units has
not been enfeebled by the new provisions in the Constitution strengthening the policy of
local autonomy. Without meaning to detract from that policy, we here confirm that Congress
retains control of the local government units although in significantly reduced degree now
than under our previous Constitutions. The power to create still includes the power to
destroy. The power to grant still includes the power to withhold or recall.

True, there are certain notable innovations in the Constitution, like the direct conferment on
the local government units of the power to tax, which cannot now be withdrawn by mere
statute. By and large, however, the national legislature is still the principal of the local
government units, which cannot defy its will or modify or violate it. [Bold underscoring supplied
for emphasis]

Also, in the earlier ruling in Ganzon v. Court of Appeals, 15 the Court has pointed out that the 1987
Constitution, in mandating autonomy for the LGUs, did not intend to deprive Congress of its authority
and prerogatives over the LGUs.

Nonetheless, the LGC has tempered the application of Dillon's Rule in the Philippines by providing a
norm of interpretation in favor of the LGUs in its Section 5(a), to wit:

xxxx

(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
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; [Bold underscoring supplied for
emphasis]

xxxx

III.
The extent of local autonomy in the Philippines

Regardless, there remains no question that Congress possesses and wields plenary power to
control and direct the destiny of the LGUs, subject only to the Constitution itself, for Congress, just
like any branch of the Government, should bow down to the majesty of the Constitution, which is
always supreme.

The 1987 Constitution limits Congress' control over the LGUs by ordaining in Section 25 of its Article
II that: "The State shall ensure the autonomy of local governments." The autonomy of the LGUs as
thereby ensured does not contemplate the fragmentation of the Philippines into a collection of mini-
states, 16 or the creation of imperium in imperio. 17 The grant of autonomy simply means that
Congress will allow the LGUs to perform certain functions and exercise certain powers in order not
for them to be overly dependent on the National Government subject to the limitations that the 1987
Constitution or Congress may impose. 18 Local autonomy recognizes the wholeness of the Philippine
society in its ethnolinguistic, cultural, and even religious diversities.19

The constitutional mandate to ensure local autonomy refers to decentralization.20 In its broad or
general sense, decentralization has two forms in the Philippine setting, namely: the decentralization
of power and the decentralization of administration. The decentralization of power involves the
abdication of political power in favor of the autonomous LGUs as to grant them the freedom to chart
their own destinies and to shape their futures with minimum intervention from the central
government. This amounts to self-immolation because the autonomous LGUs thereby become
accountable not to the central authorities but to their constituencies. On the other hand, the
decentralization of administration occurs when the central government delegates administrative
powers to the LGUs as the means of broadening the base of governmental powers and of making
the LGUs more responsive and accountable in the process, and thereby ensure their fullest
development as self-reliant communities and more effective partners in the pursuit of the goals of
national development and social progress. This form of decentralization further relieves the central
government of the burden of managing local affairs so that it can concentrate on national concerns.21

Two groups of LGUs enjoy decentralization in distinct ways. The decentralization of power has been
given to the regional units (namely, the Autonomous Region for Muslim Mindanao [ARMM] and the
constitutionally-mandated Cordillera Autonomous Region [CAR]). The other group of
LGUs (i.e., provinces, cities, municipalities and barangays) enjoy the decentralization of
administration.22 The distinction can be reasonably understood. The provinces, cities, municipalities
and barangays are given decentralized administration to make governance at the local levels more
directly responsive and effective. In turn, the economic, political and social developments of the
smaller political units are expected to propel social and economic growth and development. 23 In
contrast, the regional autonomy of the ARMM and the CAR aims to permit determinate groups with
common traditions and shared social-cultural characteristics to freely develop their ways of life and
heritage, to exercise their rights, and to be in charge of their own affairs through the establishment of
a special governance regime for certain member communities who choose their own authorities from
within themselves, and exercise the jurisdictional authority legally accorded to them to decide their
internal community affairs. 24
It is to be underscored, however, that the decentralization of power in favor of the regional units is
not unlimited but involves only the powers enumerated by Section 20, Article X of the 1987
Constitution and by the acts of Congress. For, with various powers being devolved to the regional
units, the grant and exercise of such powers should always be consistent with and limited by the
1987 Constitution and the national laws. 25 In other words, the powers are guardedly, not absolutely,
abdicated by the National Government.

Illustrative of the limitation is what transpired in Serna v. Commission on Elections,26 where the Court
struck down Section 19, Article VI of Republic Act No. 9054 (An Act to Strengthen and Expand the
Organic Act for the Autonomous Region in Muslim Mindanao, Amending for the Purpose Republic
Act No. 6734, entitled "An Act Providing for the Autonomous Region in Muslim Mindanao," as
Amended) insofar as the provision granted to the ARMM the power to create provinces and cities,
and consequently declared as void Muslim Mindanao Autonomy Act No. 201 creating the Province
of Shariff Kabunsuan for being contrary to Section 5, Article VI and Section 20, Article X of the 1987
Constitution, as well as Section 3 of the Ordinance appended to the 1987 Constitution. The Court
clarified therein that only Congress could create provinces and cities. This was because the creation
of provinces and cities necessarily entailed the creation of legislative districts, a power that only
Congress could exercise pursuant to Section 5, Article VI of the 1987 Constitution and Section 3 of
the Ordinance appended to the Constitution; as such, the ARMM would be thereby usurping the
power of Congress to create legislative districts and national offices.27

The 1987 Constitution has surely encouraged decentralization by mandating that a system of
decentralization be instituted through the LGC in order to enable a more responsive and accountable
local government structure.28 It has also delegated the power to tax to the LGUs by authorizing them
to create their own sources of income that would make them self-reliant.29 It further ensures that each
and every LGU will have a just share in national taxes as well in the development of the national
wealth.30

The LGC has further delineated in its Section 3 the different operative principles of decentralization
to be adhered to consistently with the constitutional policy on local autonomy, viz.:

Sec. 3. Operative Principles of Decentralization-

The formulation and implementation of policies and measures on local autonomy shall be guided by
the following operative principles:

(a) There shall be an effective allocation among the different local government units of their
respective powers, functions, responsibilities, and resources;

(b) There shall be established in every local government unit an accountable, efficient, and
dynamic organizational structure and operating mechanism that will meet the priority needs
and service requirements of its communities;

(c) Subject to civil service law, rules and regulations, local officials and employees paid
wholly or mainly from local funds shall be appointed or removed, according to merit and
fitness, by the appropriate appointing authority;

(d) The vesting of duty, responsibility, and accountability in local government units shall be
accompanied with provision for reasonably adequate resources to discharge their powers
and effectively carry out their functions: hence, they shall have the power to create and
broaden their own sources of revenue and the right to a just share in national taxes and an
 equitable share in the proceeds of the utilization and development of the national wealth
within their respective areas;

(e) Provinces with respect to component cities and municipalities, and cities and
municipalities with respect to component barangays, shall ensure that the acts of their
component units are within the scope of their prescribed powers and functions;

(f) Local government units may group themselves, consolidate or coordinate their efforts,
services, and resources commonly beneficial to them;

(g) The capabilities of local government units, especially the municipalities and barangays,
shall be enhanced by providing them with opportunities to participate actively in the
implementation of national programs and projects;

(h) There shall be a continuing mechanism to enhance local autonomy not only by legislative
enabling acts but also by administrative and organizational reforms;

(i) Local government units shall share with the national government the responsibility in the
management and maintenance of ecological balance within their territorial jurisdiction,
subject to the provisions of this Code and national policies;

(j) Effective mechanisms for ensuring the accountability of local government units to their
respective constituents shall be strengthened in order to upgrade continually the quality of
local leadership;

(k) The realization of local autonomy shall be facilitated through improved coordination of
national government policies and programs an extension of adequate technical and material
assistance to less developed and deserving local government units;

(l) The participation of the private sector in local governance, particularly in the delivery of
basic services, shall be encouraged to ensure the viability of local autonomy as an
alternative strategy for sustainable development; and

(m) The national government shall ensure that decentralization contributes to the continuing
improvement of the performance of local government units and the quality of community life.

Based on the foregoing delineation, decentralization can be considered as the decision by the
central government to empower its subordinates, whether geographically or functionally constituted,
to exercise authority in certain areas. It involves decision-making by subnational units, and is
typically a delegated power, whereby a larger government chooses to delegate authority to more
local governments.31 It is also a process, being the set of policies, electoral or constitutional reforms
that transfer responsibilities, resources or authority from the higher to the lower levels of
government.32 It is often viewed as a shift of authority towards local governments and away from the
central government, with total government authority over society and economy imagined as fixed.33

As a system of transferring authority and power from the National Government to the LGUs,
decentralization in the Philippines may be categorized into four, namely: (1) political decentralization
or devolution; (2) administrative decentralization or deconcentration; (3) fiscal decentralization; and
(4) policy or decision-making decentralization.
Political decentralization or devolution occurs when there is a transfer of powers, responsibilities,
and resources from the central government to the LOU s for the performance of certain functions. It
is a more liberal form of decentralization because there is an actual transfer of powers and
responsibilities. It aims to grant greater autonomy to the LGUs in cognizance of their right to self-
government, to make them self-reliant, and to improve their administrative and technical
capabilities.34 It is an act by which the National Government confers power and authority upon the
various LGUs to perform specific functions and responsibilities.35 It encompasses reforms to open
sub-national representation and policies to "devolve political authority or electoral capacities to sub-
national actors. "36 Section 16 to Section 19 of the LGC characterize political decentralization in the
LGC as different LGUs empowered to address the different needs of their constituents. In contrast,
devolution in favor of the regional units is more expansive because they are given the authority to
regulate a wider array of subjects, including personal, family and property relations.

Administrative decentralization or deconcentration involves the transfer of functions or the delegation

of authority and responsibility from the national office to the regional and local offices. 37 Consistent
with this concept, the LGC has created the Local School Boards,38 the Local Health Boards39 and the
Local Development Councils,40 and has transferred some of the authority from the agencies of the
National Government, like the Department of Education and the Department of Health, to such
bodies to better cope up with the needs of particular localities.

Fiscal decentralization means that the LGUs have the power to create their own sources of revenue
in addition to their just share in the national taxes released by the National Government. It includes
the power to allocate their resources in accordance with their own priorities. It thus extends to the
preparation of their budgets, so that the local officials have to work within the constraints of their
budgets. The budgets are not formulated at the national level and imposed on local governments,
without regard as to whether or not they are relevant to local needs and resources. Hence, the
necessity of a balancing of viewpoints and the harmonization of proposals from both local and
national officials, who in any case are partners in the attainment of national goals, is recognized and
addressed.41

Fiscal decentralization emanates from a specific constitutional mandate that is expressed in several
provisions of Article X (Local Government) of the 1987 Constitution, specifically: Section 5;42 Section
6;43 and Section 7.44

The constitutional authority extended to each and every LGU to create its own sources of income
and revenue has been formalized from Section 128 to Section 133 of the LGC. To implement the
LGUs' entitlement to the just share in the national taxes, Congress has enacted Section 284 to
Section 288 of the LGC. Congress has further enacted Section 289 to Section 294 of the LGC to
define the share of the LGUs in the national wealth. Indeed, the requirement for the automatic
release to the LGUs of their just share in the national taxes is but the consequence of the
constitutional mandate for fiscal decentralization. 45

For sure, fiscal decentralization does not signify the absolute freedom of the LGUs to create their
own sources of revenue and to spend their revenues unrestrictedly or upon their individual whims
and caprices. Congress has subjected the LGUs' power to tax to the guidelines set in Section 130 of
the LGC and to the limitations stated in Section 133 of the LGC. The concept of local fiscal
autonomy does not exclude any manner of intervention by the National Government in the form of
supervision if only to ensure that the local programs, fiscal and otherwise, are consistent with the
national goals.46

Lastly, policy- or decision-making decentralization exists if at least one sub-national tier of

government has exclusive authority to make decisions on at least one policy issue.47
In fine, certain limitations are and can be imposed by Congress in all the forms of decentralization,
for local autonomy, whether as to power or as to administration, is not absolute. The LGUs remain to
be the tenants of the will of Congress subject to the guarantees that the Constitution itself imposes.

IV.
Section 284 of the LGC deviates from the plain language
of Section 6 of Article X of the 1987 Constitution

Section 6, Article X the 1987 Constitution textually commands the allocation to the LGUs of a just
share in the national taxes, viz.:

Section 6. Local government units shall have a just share, as determined by law, in the national
taxes which shall be automatically released to them.

Section 6, when parsed, embodies three mandates, namely: (1) the LGUs shall have a just share in
the national taxes; (2) the just share shall be determined by law; and (3) the just share shall
be automatically released to the LGUs.48

Congress has sought to carry out the second mandate of Section 6 by enacting Section 284, Title
III (Shares of Local Government Units in the Proceeds of National Taxes), of the LGC, which is
again quoted for ready reference:

Section 284. Allotment of Internal Revenue Taxes. - Local government units shall have a share in
the national internal revenue taxes based on the collection of the third fiscal year preceding the
current fiscal year as follows:

(a) On the first year of the effectivity of this Code, thirty percent (30%);

(b) On the second year, thirty-five percent (35%); and

(c) On the third year and thereafter, forty percent (40%).

Provided, That in the event that the national government incurs an unmanageable public sector
deficit, the President of the Philippines is hereby authorized, upon the recommendation of Secretary
of Finance, Secretary of Interior and Local Government and Secretary of Budget and Management,
and subject to consultation with the presiding officers of both Houses of Congress and the
presidents of the "liga", to make the necessary adjustments in the internal. revenue allotment of local
government units but in no case shall the allotment be less than thirty percent (30%) of the collection
of national internal revenue taxes of the third fiscal year preceding the current fiscal year: Provided,
further, That in the first year of the effectivity of this Code, the local government units shall, in
addition to the thirty percent (30%) internal revenue allotment which shall include the cost of
devolved functions for essential public services, be entitled to receive the amount equivalent to the
cost of devolved personal services.

There is no issue as to what constitutes the LGUs' just share expressed in percentages of the
national taxes (i.e., 30%, 35% and 40% stipulated in subparagraphs (a), (b), and (c) of Section 284 ).
Yet, Section 6, supra, mentions national taxes as the source of the just share of the LGUs while
Section 284 ordains that the share of the LG Us be taken from national internal revenue
taxes instead.

Has not Congress thereby infringed the constitutional provision?

Garcia contends that Congress has exceeded its constitutional boundary by limiting to the NIRTs the
base from which to compute the just share of the LGUs.

We agree with Garcia's contention.

Although the power of Congress to make laws is plenary in nature, congressional lawmaking
remains subject to the limitations stated in the 1987 Constitution.49 The phrase national internal
revenue taxes engrafted in Section 284 is undoubtedly more restrictive than the term national
taxes written in Section 6. As such, Congress has actually departed from the letter of the 1987
Constitution stating that national taxes should be the base from which the just share of the LGU
comes. Such departure is impermissible. Verba legis non est recedendum (from the words of a
statute there should be no departure). 50 Equally impermissible is that Congress has also thereby
curtailed the guarantee of fiscal autonomy in favor of the LGUs under the 1987 Constitution.

Taxes are the enforced proportional contributions exacted by the State from persons and properties
pursuant to its sovereignty in order to support the Gove1nment and to defray all the public needs.
Every tax has three elements, namely: (a) it is an enforced proportional contribution from persons
and properties; (b) it is imposed by the State by virtue of its sovereignty; and (c) it is levied for the
support of the Government.51 Taxes are classified into national and local. National taxes are those
levied by the National Government, while local taxes are those levied by the LGUs.52

What the phrase national internal revenue taxes as used in Section 284 included are all the taxes
enumerated in Section 21 of the National Internal Revenue Code (NIRC), as amended by R.A. No.
8424, viz.:

Section 21. Sources of Revenue. - The following taxes, fees and charges are deemed to be national
internal revenue taxes:

(a) Income tax;

(b) Estate and donor's taxes;

(c) Value-added tax;

(d) Other percentage taxes;

(e) Excise taxes;

(f) Documentary stan1p taxes; and

(g) Such other taxes as arc or hereafter may be imposed and collected by the Bureau of
Internal Revenue.

In view of the foregoing enumeration of what are the national internal revenue taxes, Section 284
has effectively deprived the LGUs from deriving their just share from other national taxes, like the
customs duties.

Strictly speaking, customs duties are also taxes because they are exactions whose proceeds
become public funds. According to Garcia v. Executive Secretary,53 customs duties is the
nomenclature given to taxes imposed on the importation and exportation of commodities and
merchandise to or from a foreign country. Although customs duties have either or both the
generation of revenue and the regulation of economic or social activity as their moving purposes, it is
often difficult to say which of the two is the principal objective in a particular instance, for, verily,
customs duties, much like internal revenue taxes, are rarely designed to achieve only one policy
objective.54 We further note that Section 102(00) of R.A. No. 10863 (Customs Modernization and
Tariff Act) expressly includes all fees and charges imposed under the Act under the blanket term
of taxes.

It is clear from the foregoing clarification that the exclusion of other national taxes like customs
duties from the base for determining the just share of the LG Us contravened the express
constitutional edict in Section 6, Article X the 1987 Constitution.

Still, the OSG posits that Congress can manipulate, by law, the base of the allocation of the just
share in the national taxes of the LGUs.

The position of the OSG cannot be sustained. Although it has the primary discretion to determine
and fix the just share of the LGUs in the national taxes (e.g., Section 284 of the LGC), Congress
cannot disobey the express mandate of Section 6, Article X of the 1987 Constitution for the just
share of the LGUs to be derived from the national taxes. The phrase as determined by law in
Section 6 follows and qualifies the phrase just share, and cannot be construed as qualifying the
succeeding phrase in the national taxes. The intent of the people in respect of Section 6 is really that
the base for reckoning the just share of the LGUs should includes all national taxes. To read Section
6 differently as requiring that the just share of LGUs in the national taxes shall be determined by
law is tantamount to the unauthorized revision of the 1987 Constitution.

V.
Congress can validly exclude taxes that will constitute the base amount for
the computation of the IRA only if a Constitutional provision allows such exclusion

Garcia submits that even assuming that the present version of Section 284 of the LGC is
constitutionally valid, the implementation thereof has been erroneous because Section 284 does not
authorize any exclusion or deduction from the collections of the NIRTs for purposes of the
computation of the allocations to the LGUs. He further submits that the exclusion of certain NIRTs
diminishes the fiscal autonomy granted to the LGUs. He claims that the following NIRTs have been
illegally excluded from the base for determining the fair share of the LGUs in the IRA, to wit:

(1) NIRTs collected by the cities and provinces and divided exclusively among the LGUs of
the Autonomous Region for Muslim Mindanao (ARMM), the regional government and the
central government, pursuant to Section 1555 in relation to Section 9,56 Article IX of R.A. No.
9054 (An Act to Strengthen and Expand the Organic Act for the Autonomous Region in
Muslim Mindanao, amending for the purpose Republic Act No. 6734, entitled An Act
providing for an Organic Act for the Autonomous Region in Muslim Mindanao);

(2) The shares in the excise taxes on mineral products of the different LG Us, as provided in
Section 287 of the NIRC57 in relation to Section 290 of the LGC;58

(3) The shares of the relevant LGUs in the franchise taxes paid by Manila Jockey Club,
Inc.59 and Philippine Racing Club, Inc.;60

(4) The shares of various municipalities in VAT collections under R.A. No. 7643 (An Act to
Empower the Commissioner of Internal Revenue to Require the Payment of the Value Added
Tax Every Month and to Allow Local Government Units to Share in VAT Revenue, Amending
 for this Purpose Certain Sections of the National Internal Revenue Code) as embodied in
Section 283 of the NIRC;61

(5) The shares of relevant LGUs in the proceeds of the sale and conversion of former military
bases in accordance with R.A. No. 7227 (Bases Conversion and Development Act of 1992);62

(6) The shares of different LGUs in the excise taxes imposed on locally manufactured
Virginia tobacco products as provided in Section 3 of R.A. No. 7171 (An Act to Promote the
Development of the Farmers in the Virginia Tobacco Producing Provinces), and as now
provided in Section 289 of the NIRC;63

(7) The shares of different LGUs in the incremental revenues from Burley and native tobacco
products under Section 8 of R.A. No. 8240 (An Act Amending Sections 138, 140 and 142 of
the National Internal Revenue Code as Amended and for Other Purposes) and as now
provided in Section 288 of the NIRC;64 and

(8) The share of the Commission of Audit (COA) in the NIRTs as provided in Section 24p) of
P.D. No. 1445 (Government Auditing Code of the Philippines) 65 in relation to Section 284 of
the NIRC.66

Garcia insists that the foregoing taxes and revenues should have been included by Congress and,
by extension, the BIR in the base for computing the IRA on the strength of the cited provisions; that
the LGC did not authorize such exclusion; and that the continued exclusion has undermined the
fiscal autonomy guaranteed by the 1987 Constitution.

The insistence of Garcia is valid to an extent.

An examination of the above-enumerated laws confirms that the following have been excluded from
the base for reckoning the just share of the LGUs as required by Section 6, Article X of the 1987
Constitution, namely:

(a) The share of the affected LGUs in the proceeds of the sale and conversion of former military
bases in accordance with R.A. No. 7227;

(b) The share of the different LGUs in the excise taxes imposed on locally manufactured Virginia
tobacco products as provided for in Section 3, R.A. No. 7171, and as now provided in Section 289 of
the NIRC;

(c) The share of the different LGU s in incremental revenues from Burley and native tobacco
products under Section 8 of R.A. No. 8240, and as now provided for in Section 288 of the NIRC;

(d) The share of the COA in the NIRTs as provided in Section 24(3) of P.D. No. 144567 in relation to
Section 284 of the NIRC;

(e) The shares of the different LGUs in the excise taxes on mineral products, as provided in Section
287 of the NIRC in relation to Section 290 of the LGC;

(f) The NIRTs collected by the cities and provinces and divided exclusively among the LGUs of the
ARMM, the regional government and the central government, pursuant to Section 1568 in relation to
Section 9,69 Article IX of R. A. No. 9054; and
(g) The shares of the relevant LG Us in the franchise taxes paid by Manila Jockey Club, Inc., and the
Philippine Racing Club, Inc.

Anent the share of the affected LG Us in the proceeds of the sale and conversion of the former
military bases pursuant to R.A. No. 7227, the exclusion is warranted for the reason that such
proceeds do not come from a tax, fee or exaction imposed on the sale and conversion.

As to the share of the affected LGUs in the excise taxes imposed on locally manufactured Virginia
tobacco products under R.A. No. 7171 (now Section 289 of the NIRC); the share of the affected
LGUs in incremental revenues from Burley and native tobacco products under Section 8, R.A. No.
8240 (now Section 288 of the NIRC); the share of the COA in the NIRTs pursuant to Section 24(3) of
P.D. No. 1445 in relation to Section 284 of the NIRC; and the share of the host LGUs in the
franchise taxes paid by the Manila Jockey Club, Inc., and Philippine Racing Club, Inc., under Section
6 of R.A. No. 6631 and Section 8 of R:A. No. 6632, respectively, the exclusion is also justified.
Although such shares involved national taxes as defined under the NIRC, Congress had the
authority to exclude them by virtue of their being taxes imposed for special purposes. A reading of
Section 288 and Section 289 of the NIRC and Section 24(3) of P.D. No. 1445 in relation to Section
284 of the NIRC reveals that all such taxes are levied and collected for a special purpose. 70 The
same is true for the franchise taxes paid under Section 6 of R.A. No. 6631 and Section 8 of R.A. No.
6632, inasmuch as certain percentages of the franchise taxes go to different beneficiaries. The
exclusion conforms to Section 29(3), Article VI of the 1987 Constitution, which states:

Section 29. x x x

xxxx

(3) All money collected on any tax levied for a special purpose shall be treated as a special
fund and paid out for such purpose only. If the purpose for which a special fund was created has
been fulfilled or abandoned, the balance, if any, shall be transferred to the general funds of the
Government. [Bold emphasis supplied]

The exclusion of the share of the different LGUs in the excise taxes imposed on mineral products
pursuant to Section 287 of the NIRC in relation to Section 290 of the LGC is premised on a different
constitutional provision. Section 7, Article X of the 1987 Constitution allows affected LGUs to have
an equitable share in the proceeds of the utilization of the nation's national wealth "within their
respective areas," to wit:

Section 7. Local governments shall be entitled to an equitable share in the proceeds of the utilization
and development of the national wealth within their respective areas, in the manner provided by law,
including sharing the same with the inhabitants by way of direct benefits.

This constitutional provision is implemented by Section 287 of the NIRC and Section 290 of the LGC
thusly:

SEC. 287. Shares of Local Government Units in the Proceeds from the Development and Utilization
of the National Wealth. - Local Government units shall have an equitable share in the proceeds
derived from the utilization and development of the national wealth, within their respective areas,
including sharing the same with the inhabitants by way of direct benefits.

(A) Amount of Share of Local Government Units. - Local government units shall, in addition to the
internal revenue allotment, have a share of forty percent (40'Yo) of the gross collection derived by
the national government from the preceding fiscal year from excise taxes on mineral products,
royalties, and such other taxes, fees or charges, including related surcharges, interests or fines, and
from its share in any co-production, joint venture or production sharing agreement in the utilization
and development of the national wealth within their territorial jurisdiction.

(B) Share of the Local Governments from Any Government Agency or Government-owned or -
Controlled Corporation. - Local Government Units shall have a share, based on the preceding fiscal
year, from the proceeds derived by any government agency or government-owned or controlled
corporation engaged in the utilization and development of the national wealth based on the following
formula, whichever will produce a higher share for the local government unit:

(1) One percent (l %) of the gross sales or receipts of the preceding calendar year, or

(2) Forty percent (40%) of the excise taxes on mineral products, royalties, and such other taxes, fees
or charges, including related surcharges, interests or fines the government agency or government-
owned or -controlled corporations would have paid if it were not otherwise exempt. [Bold emphasis
supplied]

SEC. 290. Amount of Share of Local Government Units. - Local government units shall, in addition to
the internal revenue allotment, have a share of forty percent ( 40%) of the gross collection derived by
the national government from the preceding fiscal year from mining taxes, royalties, forestry and
fishery charges, and such other taxes, fees, or charges, including related surcharges, interests, or
fines, and from its share in any co-production, joint venture or production sharing agreement in the
utilization and development of the national wealth within their territorial jurisdiction. [Bold emphasis
supplied]

Lastly, the NIRTs collected by the provinces and cities within the ARMM whose portions are
distributed to the ARMM's provincial, city and regional governments are also properly excluded for
such taxes are intended to truly enable a sustainable and feasible autonomous region as guaranteed
by the 1987 Constitution. The mandate under Section 15 to Section 21, Article X of the 1987
Constitution is to allow the separate development of peoples with distinctive cultures and traditions in
the autonomous areas.71 The grant of autonomy to the autonomous regions includes the right of self-
determination-which in turn ensures the right of the peoples residing therein to the necessary level of
autonomy that will guarantee the support of their own cultural identities, the establishment of
priorities by their respective communities' internal decision-making processes and the management
of collective matters by themselves.72 As such, the NIRTs collected by the provinces and cities within
the ARMM will ensure local autonomy and their very existence with a continuous supply of funding
sourced from their very own areas. The ARMM will become self-reliant and dynamic consistent with
the dictates of the 1987 Constitution.

The shares of the municipalities in the VATs collected pursuant to R.A. No. 7643 should be included
in determining the base for computing the just share because such VATs are national taxes, and
nothing can validly justify their exclusion.

In recapitulation, the national taxes to be included in the base for computing the just share the LGUs
shall henceforth be, but shall not be limited to, the following:

1. The NIRTs enumerated in Section 21 of the NIRC, as amended, to be inclusive of the VA Ts,
excise taxes, and DSTs collected by the BIR and the BOC, and their deputized agents;

2. Tariff and customs duties collected by the BOC;

3. 50% of the VATs collected in the ARMM, and 30% of all other national taxes collected in the
ARMM; the remaining 50% of the VA Ts and 70% of the collections of the other national taxes in the
ARMM shall be the exclusive share of the ARMM pursuant to Section 9 and Section 15 of R.A. No.
9054;

4. 60% of the national taxes collected from the exploitation and development of the national wealth;
the remaining 40% will exclusively accrue to the host LGUs pursuant to Section 290 of the LGC;

5. 85% of the excise taxes collected from locally manufactured Virginia and other tobacco products;
the remaining 15% shall accrue to the special purpose funds pursuant created in R.A. No. 7171 and
R.A. No. 7227;

6. The entire 50% of the national taxes collected under Section 106, Section 108 and Section 116 of
the NIRC in excess of the increase in collections for the immediately preceding year; and

7. 5% of the franchise taxes in favor of the national government paid by franchise holders in
accordance with Section 6 of R.A. No. 6631 and Section 8 of R.A. No. 6632.

VI.
Entitlement to the reliefs sought

The petitioners' prayer for the payment of the arrears of the LGUs' just share on the theory that the
computation of the base amount had been unconstitutional all along cannot be granted.

It is true that with our declaration today that the IRA is not in accordance with the constitutional
determination of the just share of the LGUs in the national taxes, logic demands that the LGUs
should receive the difference between the just share they should have received had the LGC
properly reckoned such just share from all national taxes, on the one hand, and the share -
represented by the IRA- the LGUs have actually received since the effectivity of the IRA under the
LGC, on the other. This puts the National Government in arrears as to the just share of the LGUs. A
legislative or executive act declared void for being unconstitutional cannot give rise to any right or
obligation. 73

Yet, the Court has conceded in Arau/lo v. Aquino III74that:

x x x the generality of the rule makes us ponder whether rigidly applying the rule may at times
be impracticable or wasteful. Should we not recognize the need to except from the rigid
application of the rule the instances in which the void law or executive act produced an
almost irreversible result?

The need is answered by the doctrine of operative fact. The doctrine, definitely not a novel one, has
been exhaustively explained in De Agbayani v. Philippine National Bank:

The decision now on appeal reflects the orthodox view that an unconstitutional act, for that matter an
executive order or a municipal ordinance likewise suffering from that infirmity, cannot be the source
of any legal rights or duties. Nor can it justify any official act taken under it. Its repugnancy to the
fundamental law once judicially declared results in its being to all intents and purposes a mere scrap
of paper. As the new Civil Code puts it: 'When the courts declare a law to be inconsistent with the
Constitution, the former shall be void and the latter shall govern.' Administrative or executive acts,
orders and regulations shall be valid only when they are not contrary to the laws of the Constitution.
It is understandable why it should be so, the Constitution being supreme and paramount. Any
legislative or executive act contrary to its terms cannot survive.

Such a view has support in logic and possesses the merit of simplicity. It may not however
be sufficiently realistic. It does not admit of doubt that prior to the declaration of nullity such
challenged legislative or executive act must have been in force and had to be complied with.
This is so as until after the judiciary, in an appropriate case, declares its invalidity, it is
entitled to obedience and respect. Parties may have acted under it and may have changed
their positions. What could be more fitting than that in a subsequent litigation regard be had
to what has been done while such legislative or executive act was in operation and presumed
to be valid in all respects. It is now accepted as a doctrine that prior to its being nullified, its
existence as a fact must be reckoned with. This is merely to reflect awareness that precisely
because the judiciary is the governmental organ which has the final say on whether or not a
legislative or executive measure is valid, a period of time may have elapsed before it can
exercise the power of judicial review that may lead to a declaration of nullity. It would be to
deprive the law of its quality of fairness and justice then, if there be no recognition of what
had transpired prior to such adjudication.

In the language of an American Supreme Court decision: ‘The actual existence of a statute, prior to
such a determination [of unconstitutionality], is an operative fact and may have consequences which
cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect
of the subsequent ruling as to invalidity may have to be considered in various aspects, with respect
to particular relations, individual and corporate, and particular conduct, private and official.'

The doctrine of operative fact recognizes the existence of the law or executive act prior to the
determination of its unconstitutionality as an operative fact that produced consequences that cannot
always be erased, ignored or disregarded. In short, it nullifies the void law or executive act but
sustains its effects. It provides an exception to the general rule that a void or unconstitutional law
produces no effect.75 But its use must be subjected to great scrutiny and circumspection, and it
cannot be invoked to validate an unconstitutional law or executive act, but is resorted to only as a
matter of equity and fair play. 76 It applies only to cases where extraordinary circumstances exist, and
only when the extraordinary circumstances have met the stringent conditions that will permit its
application.

Conformably with the foregoing pronouncements in Araullo v. Aquino III, the effect of our declaration
through this decision of the unconstitutionality of Section 284 of the LGC and its related laws as far
as they limited the source of the just share of the LGUs to the NIRTs is prospective. It cannot be
otherwise.

VII.
Automatic release of the LGUs' just share in the National Taxes

Section 6, Article X of the 1987 Constitution commands that the just share of the LGUs in national
taxes shall be automatically released to them. The term automatic connotes something mechanical,
spontaneous and perfunctory; and, in the context of this case, the LGUs are not required to perform
any act or thing in order to receive their just share in the national taxes.77

Before anything, we must highlight that the 1987 Constitution includes several provisions that
actually deal with and authorize the automatic release of funds by the National Government.

To begin with, Section 3 of Article VIII favors the Judiciary with the automatic and regular release of
its appropriations:
Section 3. The Judiciary shall enjoy fiscal autonomy. Appropriations for the Judiciary may not be
reduced by the legislature below the amount appropriated for the previous year and, after approval,
shall be automatically and regularly released.

Then there is Section 5 of Article IX(A), which contains the common provision in favor of the
Constitutional Commissions:

Section 5. The Commission shall enjoy fiscal autonomy. Their approved annual appropriations shall
be automatically and regularly released.

Section 14 of Article XI extends to the Office of the Ombudsman a similar privilege:

Section 14. The Office of the Ombudsman shall enjoy fiscal autonomy. Its approved annual
appropriations shall be automatically and regularly released.

Section 17(4) of Article XIII replicates the privilege in favour of the Commission on Human Rights:

Section 17(4) The approved annual appropriations of the Commission shall be automatically and
regularly released.

The foregoing constitutional provisions share two aspects. The first relates to the grant of fiscal
autonomy, and the second concerns the automatic release of funds. 78 The common denominator of
the provisions is that the automatic release of the appropriated amounts is predicated on the
approval of the annual appropriations of the offices or agencies concerned.

Directly contrasting with the foregoing provisions is Section 6, Article X of the 1987 Constitution
because the latter provision forthrightly ordains that the "(l)ocal government units shall have a just
share, as determined by law, in the national taxes which shall be automatically released to
them." Section 6 does not mention of appropriation as a condition for the automatic release of the
just share to the LGUs. This is because Congress not only already determined the just
share through the LGC's fixing the percentage of the collections of the NIRTs to constitute such fair
share subject to the power of the President to adjust the same in order to manage public sector
deficits subject to limitations on the adjustments, but also explicitly authorized such just share to
be "automatically released" to the LGUs in the proportions and regularity set under Section 28579 of
the LGC without need of annual appropriation. To operationalize the automatic release without need
of appropriation, Section 286 of the LGC clearly provides that the automatic release of the just
share directly to the provincial, city, municipal or barangay treasurer, as the case may be, shall
be "without need of any further action," viz.:

Section 286. Automatic Release of Shares. - (a) The share of each local government unit shall
be released, without need of any further action; directly to the provincial, city, municipal or
barangay treasurer, as the case may be, on a quarterly basis within five (5) days after the end
of each quarter, and which shall not be subject to any lien or holdback that may be imposed
by the National Government for whatever purpose. x x x (Bold emphasis supplied)

The 1987 Constitution is forthright and unequivocal in ordering that the just share of the LGUs in the
national taxes shall be automatically released to them. With Congress having established the just
share through the LGC, it seems to be beyond debate that the inclusion of the just share of the
LGUs in the annual GAAs is unnecessary, if not superfluous. Hence, the just share of the LGUs in
the national taxes shall be released to them without need of yearly appropriation.
1. DECLARES the phrase "internal revenue" appearing in Section 284 of Republic Act No.
7160 (Local Government Code) UNCONSTITUTIONAL, and DELETES the phrase from Section
284.

Section 284, as hereby modified, shall henceforth read as follows:

Section 284. Allotment of Taxes. - Local government units shall have a share in the national taxes
based on the collection of the third fiscal year preceding the current fiscal year as follows:

(a) On the first year of the effectivity of this Code, thirty percent (30%);

(b) On the second year, thirty-five percent (35%); and

(c) On the third year and thereafter, forty percent (40%).

Provided, That in the event that the national government incurs an unmanageable public sector
deficit, the President of the Philippines is hereby authorized, upon the recommendation of Secretary
of Finance, Secretary of Interior and Local Government and Secretary of Budget and Management,
and subject to consultation with the presiding officers of both Houses of Congress and the
presidents of the "liga", to make the necessary adjustments in the allotment of local government
units but in no case shall the allotment be less than thirty percent (30%) of the collection of national
taxes of the third fiscal year preceding the current fiscal year; Provided, further, That in the first year
of the effectivity of this Code, the local government units shall, in addition to the thirty percent (30%)
allotment which shall include the cost of devolved functions for essential public services, be entitled
to receive the amount equivalent to the cost of devolved personal services.

The phrase "internal revenue" is likewise hereby DELETED from the related sections of Republic Act
No. 7160 (Local Government Code), specifically Section 285, Section 287, and Section 290, which
provisions shall henceforth read as follows:

Section 285. Allocation to Local Government Units. - The share of local government units in the
allotment shall be collected in the following manner:

(a) Provinces - Twenty-three percent (23%);

(b) Cities - Twenty-three percent (23%);

(c) Municipalities - Thirty-four percent (34%); and

(d) Barangays - Twenty percent (20%)

Provided, however, That the share of each province, city, and municipality shall be determined on
the basis of the following formula:

(a) Population -- Fifty percent (50%);

(b) Land Area-· Twenty-five percent (25%); and

(c) Equal sharing--Twenty-five percent (25%)

Provided, further. That the share of each barangay with a population of not less than one hundred
(100) inhabitants shall not be less than Eighty thousand (₱80,000.00) per annum chargeable against
the twenty percent (20%) share of the barangay from the allotment, and the balance to be allocated
on the basis of the following formula:

(a) On the first year of the effoctivity of this Code:

(1) Population - Forty percent (40%); and

(2) Equal sharing - Sixty percent (50%)

(b) On the second year:

(1) Population - Fifty percent (50%); and

(2) Equal sharing - Fifty percent (50%)

(c) On the third year and thereafter.

(1) Population - Sixty percent (60%); and

(2) Equal sharing - Forty percent (40%).

Provided, finally, That the financial requirements of barangays created by local government units
after the effectivity of this Code shall be the responsibility of the local government unit concerned.

xxxx

Sectfon 287. Local Development Projects. - Each local government unit shall appropriate in its
annual budget no less than twenty percent (20%) of its annual allotment for development projects.
Copies of the development plans of local government units shall be furnished the Department of
Interior and Local Government.

xxxx

Section 290. Amount of Share of Local Government Units. - Local government units shall, in
addition to the allotment, have a share of forty percent (40%) of the gross collection derived by the
national government from the preceding fiscal year from mining taxes, royalties, forestry and fishery
charges, and such other taxes, fees, or charges, including related surcharges, interests, or fines,
and from its share in any co-production, joint venture or production sharing agreement in the
utilization and development of the national wealth within their territorial jurisdiction.

Article 378, Article 379, Article 380, Article 382, Article 409, Article 461, and related provisions of the
Implementing Rules and Regulations of R.A. No. 7160 are hereby MODIFIED to reflect the deletion
of the phrase "internal revenue" as directed herein.

Henceforth, any mention of "Internal Revenue Allotment" or "IRA" in Republic Act No. 7160 (Local
Government Code) and its Implementing Rules and Regulations shall be understood as pertaining to
the allotment of the Local Government Units derived from the national taxes;
2. ORDERS the SECRETARY OF THE DEPARTMENT OF FINANCE; the SECRETARY OF THE
DEPARTMENT OF BUDGET AND MANAGEMENT; the COMMISSIONER OF INTERNAL
REVENUE; the COMMISSIONER OF CUSTOMS; and the NATIONAL TREASURER to
include ALL COLLECTIONS OF NATIONAL TAXES in the computation of the base of the just
share of the Local Government Units according to the ratio provided in the now-modified Section 284
of Republic Act No. 7160 (Local Government Code) except those accruing to special purpose funds
and special allotments for the utilization and development of the national wealth.

For this purpose, the collections of national taxes for inclusion in the base of the just share the Local
Government Units shall include, but shall not be limited to, the following:

(a) The national internal revenue taxes enumerated in Section 21 of the National Internal
Revenue Code, as amended, collected by the Bureau of Internal Revenue and the Bureau of
Customs;

(b) Tariff and customs duties collected by the Bureau of Customs;

(c) 50% of the value-added taxes collected in the Autonomous Region in Muslim Mindanao,
and 30% of all other national tax collected in the Autonomous Region in Muslim Mindanao.

The remaining 50% of the collections of value-added taxes and 70% of the collections of the
other national taxes in the Autonomous Region in Muslim Mindanao shall be the exclusive
share of the Autonomous Region in Muslim Mindanao pursuant to Section 9 and Section 15
of Republic Act No. 9054.

(d) 60% of the national taxes collected from the exploitation and development of the national
wealth.

The remaining 401% of the national taxes collected from the exploitation and development of
the national wealth shall exclusively accrue to the host Local Government Units pursuant to
Section 290 of Republic Act No. 7160 (Local Government Code);

(e) 85% of the excise taxes collected from locally manufactured Virginia and other tobacco
products.

The remaining 15% shall accrue to the special purpose funds created by Republic Act No.
7171 and Republic Act No. 7227;

(f) The entire 50% of the national taxes collected under Sections 106, 108 and 116 of the
NIRC as provided under Section 283 of the NIRC; and

(g) 5% of the 25% franchise taxes given to the National Government under Section 6 of
Republic Act No. 6631 and Section 8 of Republic Act No. 6632.

3. DECLARES that:

(a) The apportionment of the 25% of the franchise taxes collected from the Manila Jockey
Club and Philippine Racing Club, Inc. - that is, five percent (5%) to the National Government;
five percent (5%) to the host municipality or city; seven percent (7%) to the Philippine Charity
Sweepstakes Office; six percent (6%) to the Anti-Tuberculosis Society; and two percent (2%)
 to the White Cross pursuant to Section 6 of Republic Act No. 6631 and Section 8 of Republic
Act No. 6632 - is VALID;

(b) Section 8 and Section 12 of Republic Act No. 7227

are VALID; and, ACCORDINGLY, the proceeds from the sale of the former military bases
converted to alienable lands thereunder are EXCLUDED from the computation of the
national tax allocations of the Local Government Units; and

(c) Section 24(3) of Presidential Decree No. 1445, in relation to Section 284 of the National
Internal Revenue Code, apportioning one-half of one percent (1/2of1%) of national tax
collections as the auditing fee of the Commission on Audit is VALID;

4. DIRECTS the Bureau of Internal Revenue and the Bureau of Customs and their deputized
collecting agents to certify all national tax collections, pursuant to Article 3 78 of the Implementing
Rules and Regulations of R.A. No. 7160;

5. DISMISSES the claims of the Local Government Units for the settlement by the National
Government of arrears in the just share on the ground that this decision shall have PROSPECTIVE
APPLICATION; and

6. COMMANDS the AUTOMATIC RELEASE WITHOUT NEED OF FURTHER ACTION of the just
shares of the Local Government Units in the national taxes, through their respective provincial, city,
municipal, or barangay treasurers, as the case may be, on a quarterly basis but not beyond five (5)
days from the end of each quarter, as directed in Section 6, Article X of the 1987 Constitution and
Section 286 of Republic Act No. 7160 (Local Government Code), and operationalized by Article 383
of the Implementing Rules and Regulations of RA 7160.

Let a copy of this decision be furnished to the President of the Republic of the Philippines, the
President of the Senate, and the Speaker of the House of Representatives for their information and
guidance.

SO ORDERED.

LUCAS P. BERSAMIN

4.
 [G.R. NO. 135535 : February 14, 2005]

ZOOMZAT, INC., Petitioner, v. THE PEOPLE OF THE PHILIPPINES, ROMULO S. RODRIGUEZ, JR.,
AVELINO C. CANOSA, ROLANDO G. CHAVEZ, CEFERINO C. GARCIA, DEMOCRITO C. LAGO,
ANTONIO F. LUGOD, WAYNE T. MILITANTE, JOHNNY L. MOTOOMULL, JR., FLORENTINO S.
OCAMPO, EDUARDO L. REMEGOSO, CLEOFAS B. SALUGSUGAN, RAFAEL T. BERDELAO, and
WINFREDO T. MILITANTE, JR., Respondents.

DECISION

YNARES-SANTIAGO, J.:

Assailed in this Petition for Review on Certiorari is the Resolution1 dated June 17, 1998 of the
Sandiganbayan in Crim. Case No. 22026 approving the withdrawal of the Information charging herein
respondents, all members of the Sangguniang Panlungsod of Gingoog City, of violation of Section 3(e), R.A.
No. 3019, otherwise known as the Anti-Graft and Corrupt Practices Act, and its Resolution2 dated September
9, 1998, denying petitioner Zoomzat, Inc.'s motion for reconsideration.

The factual antecedents are as follows:

Petitioner Zoomzat, Inc. alleged that on December 20, 1991, the Sangguniang Panlungsod of Gingoog City
passed Resolution No. 2613 which resolved "to express the willingness of the City of Gingoog to allow
Zoomzat to install and operate a cable TV system." Thereupon, petitioner applied for a mayor's permit but
the same was not acted upon by the mayor's office.

Subsequently, or on April 6, 1993, respondents enacted Ordinance No. 194 which granted a franchise to
Gingoog Spacelink Cable TV, Inc. to operate a cable television for a period of ten (10) years, subject to
automatic renewal.

Hence, on July 30, 1993, petitioner filed a complaint with the Office of the Ombudsman against herein
respondents for violation of Section 3(e), R.A. No. 3019. The complaint alleged that in enacting Ordinance
No. 19, the respondents gave unwarranted benefits, advantage or preference to Spacelink, to the prejudice
of petitioner who was a prior grantee-applicant by virtue of Resolution No. 261.

On December 20, 1994, Graft Investigation Officer I Virginia Tehano-Ang, recommended the indictment of
the respondents under Section 3(e), R.A. No. 3019,5 which recommendation was affirmed on review by
Special Prosecution Officer II Rolando Ines.6

Accordingly, a criminal information for violation of Section 3(e), R.A. No. 3019, was filed against the
respondents before the Sandiganbayan. The case was docketed as Crim. Case No. 22026.

However, upon directive by the Sandiganbayan to restudy the instant case, Special Prosecution Officer II
Antonio Manzano recommended the dismissal of the case and the Information withdrawn for lack of
probable cause.7 On further investigation, Special Prosecution Officer III Victor Pascual also recommended
that the case be dismissed for insufficiency of evidence.8

Consequently, on June 17, 1998, the Sandiganbayan issued the now assailed resolution approving the
dismissal of the case and ordering the withdrawal of the Information against the respondents. On
September 9, 1998, the Sandiganbayan denied petitioner's motion for reconsideration.

Hence, the instant petition.

Petitioner assails the findings of Special Prosecutor Pascual that under Executive Order No. 205,9 it is the
National Telecommunications Commission (NTC), and not the local government unit, that has the power and
authority to allow or disallow the operation of cable television. It argues that while the NTC has the authority
to grant the franchise to operate a cable television, this power is not exclusive because under the Local
Government Code, the city council also has the power to grant permits, licenses and franchises in aid of the
local government unit's regulatory or revenue raising powers.

Petitioner also contends that the grant of exclusive franchise to Spacelink for a period of ten (10) years
subject to automatic renewal, contravenes Section 2 of Executive Order No. 205, which provides that "a
certificate of authority to operate a CATV by the Commission shall be on a non-exclusive basis and for a
period not to exceed 15 years." Thus, in awarding an exclusive franchise, the petitioner asserts that
respondents gave Spacelink undue or unwarranted advantage and preference because it stifled business
competition. It claims that, even assuming the lack of actual damage or injury, the fact remains that
respondents extended undue favor and advantage to Spacelink, which makes them liable under Section 3(e)
of R.A. No. 3019.

The petition is bereft of merit.

Respondents were charged with violation of Section 3(e), R.A. No. 3019, which states:

Section 3. Corrupt practices of public officers. 'In addition to acts or omissions of public officers already
penalized by existing law, the following shall constitute corrupt practices of any public officer and are hereby
declared to be unlawful:

(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. This provision shall
apply to officers and employees of offices or government corporations charged with the grant of licenses or
permits or other concessions. (Emphasis ours)

Thus, for one to be held liable under Section 3(e), R.A. No. 3019, he must be an officer or employee of
offices or government corporations charged with the grant of licenses or permits or other concessions.

Executive Order No. 205 clearly provides that only the NTC could grant certificates of authority to cable
television operators and issue the necessary implementing rules and regulations. Likewise, Executive Order
No. 436,10 vests with the NTC the regulation and supervision of cable television industry in the Philippines.

Our pronouncement in Batangas CATV, Inc. v. Court of Appeals,11 is pertinent:

There is no law specifically authorizing the LGUs to grant franchises to operate CATV system. Whatever
authority the LGUs had before, the same had been withdrawn when President Marcos issued P.D. No. 1512
"terminating all franchises, permits or certificates for the operation of CATV system previously granted by
local governments." Today, pursuant to Section 3 of E.O. No. 436, "only persons, associations, partnerships,
corporations or cooperatives granted a Provisional Authority or Certificate of Authority by the NTC may
install, operate and maintain a cable television system or render cable television service within a service
area."

It is clear that in the absence of constitutional or legislative authorization, municipalities have no power to
grant franchises. Consequently, the protection of the constitutional provision as to impairment of the
obligation of a contract does not extend to privileges, franchises and grants given by a municipality in
excess of its powers, or ultra vires.

It is undisputed that respondents were not employees of NTC. Instead, they were charged in their official
capacity as members of the Sangguniang Panlungsod of Gingoog City. As such, they cannot be charged with
violation of Section 3(e), R.A. No. 3019 for enacting Ordinance No. 19 which granted Spacelink a franchise
to operate a cable television.

Petitioner, however, insists that while the NTC is the licensing and regulatory body, nonetheless, the actual
operations of cable television entails other activities, which may be regulated by the local government unit
pursuant to the general welfare clause or subject to its revenue generating powers.

Again, this issue has been discussed in Batangas CATV, Inc. v. Court of Appeals,12 thus:
But, lest we be misunderstood, nothing herein should be interpreted as to strip LGUs of their general power
to prescribe regulations under the general welfare clause of the Local Government Code. It must be
emphasized that when E.O. No. 436 decrees that the "regulatory power" shall be vested "solely" in the NTC,
it pertains to the "regulatory power" over those matters, which are peculiarly within the NTC's competence'

There is no dispute that respondent Sangguniang Panlungsod, like other local legislative bodies, has been
empowered to enact ordinances and approve resolutions under the general welfare clause of B.P. Blg. 337,
the Local Government Code of 1983. That it continues to possess such power is clear under the new law,
R.A. No. 7160 (the Local Government Code of 1991).

Indeed, under the general welfare clause of the Local Government Code, the local government unit can
regulate the operation of cable television but only when it encroaches on public properties, such as the use
of public streets, rights of ways, the founding of structures, and the parceling of large regions.13 Beyond
these parameters, its acts, such as the grant of the franchise to Spacelink, would be ultra vires.

Plainly, the Sangguniang Panlungsod of Gingoog City overstepped the bounds of its authority when it
usurped the powers of the NTC with the enactment of Ordinance No. 19. Being a void legislative act,
Ordinance No. 19 did not confer any right nor vest any privilege to Spacelink. As such, petitioner could not
claim to have been prejudiced or suffered injury thereby. Incidentally, petitioner's claim of undue injury
becomes even more baseless with the finding that Spacelink did not commence to operate despite the grant
to it of a franchise under Ordinance No. 19.

In addition, petitioner could not impute manifest partiality, evident bad faith or gross inexcusable negligence
on the part of the respondents when they enacted Ordinance No. 19. A perfunctory reading of Resolution
No. 261 shows that the Sangguniang Panlungsod did not grant a franchise to it but merely expressed its
willingness to allow the petitioner to install and operate a cable television. Had respondents intended
otherwise, they would have couched the resolution in more concrete, specific and categorical terms. In
contrast, Ordinance No. 19 clearly and unequivocally granted a franchise to Spacelink, specifically stating
therein its terms and conditions. Not being a bona fide franchise holder, petitioner could not claim prior right
on the strength of Resolution No. 261.

WHEREFORE, in view of the foregoing, the petition is DENIED. The assailed Resolution of the
Sandiganbayan dated June 17, 1998, approving the withdrawal of the Information against the respondents
and the dismissal of Crim. Case No. 22026, for violation of Section 3(e), R.A. No. 3019, and the Resolution
dated September 9, 1998, denying reconsideration thereof, are AFFIRMED.

SO ORDERED

5.
G.R. No. L-24693 July 31, 1967
ERMITA-MALATE HOTEL AND MOTEL OPERATORS ASSOCIATION, INC., HOTEL DEL MAR
INC. and GO CHIU, petitioners-appellees,
vs.
THE HONORABLE CITY MAYOR OF MANILA, respondent-appellant.
VICTOR ALABANZA, intervenor-appellee.

Panganiban, Abad and Associates Law Office for respondent-appellant.

J. M. Aruego, Tenchavez and Associates for intervenor-appellee.

FERNANDO, J.:

The principal question in this appeal from a judgment of the lower court in an action for prohibition is
whether Ordinance No. 4760 of the City of Manila is violative of the due process clause. The lower
court held that it is and adjudged it "unconstitutional, and, therefore, null and void." For reasons to be
more specifically set forth, such judgment must be reversed, there being a failure of the requisite
showing to sustain an attack against its validity.

The petition for prohibition against Ordinance No. 4760 was filed on July 5, 1963 by the petitioners,
Ermita-Malate Hotel and Motel Operators Association, one of its members, Hotel del Mar Inc., and a
certain Go Chiu, who is "the president and general manager of the second petitioner" against the
respondent Mayor of the City of Manila who was sued in his capacity as such "charged with the
general power and duty to enforce ordinances of the City of Manila and to give the necessary orders
for the faithful execution and enforcement of such ordinances." (par. 1). It was alleged that the
petitioner non-stock corporation is dedicated to the promotion and protection of the interest of its
eighteen (18) members "operating hotels and motels, characterized as legitimate businesses duly
licensed by both national and city authorities, regularly paying taxes, employing and giving livelihood
to not less than 2,500 person and representing an investment of more than P3 million."1 (par. 2). It
was then alleged that on June 13, 1963, the Municipal Board of the City of Manila enacted
Ordinance No. 4760, approved on June 14, 1963 by the then Vice-Mayor Herminio Astorga, who
was at the time acting as Mayor of the City of Manila. (par. 3).

After which the alleged grievances against the ordinance were set forth in detail. There was the
assertion of its being beyond the powers of the Municipal Board of the City of Manila to enact insofar
as it would regulate motels, on the ground that in the revised charter of the City of Manila or in any
other law, no reference is made to motels; that Section 1 of the challenged ordinance is
unconstitutional and void for being unreasonable and violative of due process insofar as it would
impose P6,000.00 fee per annum for first class motels and P4,500.00 for second class motels; that
the provision in the same section which would require the owner, manager, keeper or duly
authorized representative of a hotel, motel, or lodging house to refrain from entertaining or accepting
any guest or customer or letting any room or other quarter to any person or persons without his filling
up the prescribed form in a lobby open to public view at all times and in his presence, wherein the
surname, given name and middle name, the date of birth, the address, the occupation, the sex, the
nationality, the length of stay and the number of companions in the room, if any, with the name,
relationship, age and sex would be specified, with data furnished as to his residence certificate as
well as his passport number, if any, coupled with a certification that a person signing such form has
personally filled it up and affixed his signature in the presence of such owner, manager, keeper or
duly authorized representative, with such registration forms and records kept and bound together, it
also being provided that the premises and facilities of such hotels, motels and lodging houses would
be open for inspection either by the City Mayor, or the Chief of Police, or their duly authorized
representatives is unconstitutional and void again on due process grounds, not only for being
arbitrary, unreasonable or oppressive but also for being vague, indefinite and uncertain, and likewise
for the alleged invasion of the right to privacy and the guaranty against self-incrimination; that
Section 2 of the challenged ordinance classifying motels into two classes and requiring the
maintenance of certain minimum facilities in first class motels such as a telephone in each room, a
dining room or, restaurant and laundry similarly offends against the due process clause for being
arbitrary, unreasonable and oppressive, a conclusion which applies to the portion of the ordinance
requiring second class motels to have a dining room; that the provision of Section 2 of the
challenged ordinance prohibiting a person less than 18 years old from being accepted in such
hotels, motels, lodging houses, tavern or common inn unless accompanied by parents or a lawful
guardian and making it unlawful for the owner, manager, keeper or duly authorized representative of
such establishments to lease any room or portion thereof more than twice every 24 hours, runs
counter to the due process guaranty for lack of certainty and for its unreasonable, arbitrary and
oppressive character; and that insofar as the penalty provided for in Section 4 of the challenged
ordinance for a subsequent conviction would, cause the automatic cancellation of the license of the
offended party, in effect causing the destruction of the business and loss of its investments, there is
once again a transgression of the due process clause.

There was a plea for the issuance of preliminary injunction and for a final judgment declaring the
above ordinance null and void and unenforceable. The lower court on July 6, 1963 issued a writ of
preliminary injunction ordering respondent Mayor to refrain from enforcing said Ordinance No. 4760
from and after July 8, 1963.

In the a answer filed on August 3, 1963, there was an admission of the personal circumstances
regarding the respondent Mayor and of the fact that petitioners are licensed to engage in the hotel or
motel business in the City of Manila, of the provisions of the cited Ordinance but a denial of its
alleged nullity, whether on statutory or constitutional grounds. After setting forth that the petition did
fail to state a cause of action and that the challenged ordinance bears a reasonable relation, to a
proper purpose, which is to curb immorality, a valid and proper exercise of the police power and that
only the guests or customers not before the court could complain of the alleged invasion of the right
to privacy and the guaranty against self incrimination, with the assertion that the issuance of the
preliminary injunction ex parte was contrary to law, respondent Mayor prayed for, its dissolution and
the dismissal of the petition.

Instead of evidence being offered by both parties, there was submitted a stipulation of facts dated
September 28, 1964, which reads:

1. That the petitioners Ermita-Malate Hotel and Motel Operators Association, Inc. and Hotel
del Mar Inc. are duly organized and existing under the laws of the Philippines, both with
offices in the City of Manila, while the petitioner Go Chin is the president and general
manager of Hotel del Mar Inc., and the intervenor Victor Alabanza is a resident of Baguio
City, all having the capacity to sue and be sued;

2. That the respondent Mayor is the duly elected and incumbent City Mayor and chief
executive of the City of Manila charged with the general power and duty to enforce
ordinances of the City of Manila and to give the necessary orders for the faithful execution
and enforcement of such ordinances;

3. That the petitioners are duly licensed to engage in the business of operating hotels and
motels in Malate and Ermita districts in Manila;

4. That on June 13, 1963, the Municipal Board of the City of Manila enacted Ordinance No.
4760, which was approved on June 14, 1963, by Vice-Mayor Herminio Astorga, then the
acting City Mayor of Manila, in the absence of the respondent regular City Mayor, amending
sections 661, 662, 668-a, 668-b and 669 of the compilation of the ordinances of the City of
 Manila besides inserting therein three new sections. This ordinance is similar to the one
vetoed by the respondent Mayor (Annex A) for the reasons stated in its 4th Indorsement
dated February 15, 1963 (Annex B);

5. That the explanatory note signed by then Councilor Herminio Astorga was submitted with
the proposed ordinance (now Ordinance 4760) to the Municipal Board, copy of which is
attached hereto as Annex C;

6. That the City of Manila derived in 1963 an annual income of P101,904.05 from license
fees paid by the 105 hotels and motels (including herein petitioners) operating in the City of
Manila. 1äwphï1.ñët

Thereafter came a memorandum for respondent on January 22, 1965, wherein stress was laid on
the presumption of the validity of the challenged ordinance, the burden of showing its lack of
conformity to the Constitution resting on the party who assails it, citing not only U.S. v. Salaveria, but
likewise applicable American authorities. Such a memorandum likewise refuted point by point the
arguments advanced by petitioners against its validity. Then barely two weeks later, on February 4,
1965, the memorandum for petitioners was filed reiterating in detail what was set forth in the petition,
with citations of what they considered to be applicable American authorities and praying for a
judgment declaring the challenged ordinance "null and void and unenforceable" and making
permanent the writ of preliminary injunction issued.

After referring to the motels and hotels, which are members of the petitioners association, and
referring to the alleged constitutional questions raised by the party, the lower court observed: "The
only remaining issue here being purely a question of law, the parties, with the nod of the Court,
agreed to file memoranda and thereafter, to submit the case for decision of the Court." It does
appear obvious then that without any evidence submitted by the parties, the decision passed upon
the alleged infirmity on constitutional grounds of the challenged ordinance, dismissing as is
undoubtedly right and proper the untenable objection on the alleged lack of authority of the City of
Manila to regulate motels, and came to the conclusion that "the challenged Ordinance No. 4760 of
the City of Manila, would be unconstitutional and, therefore, null and void." It made permanent the
preliminary injunction issued against respondent Mayor and his agents "to restrain him from
enforcing the ordinance in question." Hence this appeal.

As noted at the outset, the judgment must be reversed. A decent regard for constitutional doctrines
of a fundamental character ought to have admonished the lower court against such a sweeping
condemnation of the challenged ordinance. Its decision cannot be allowed to stand, consistently with
what has hitherto been the accepted standards of constitutional adjudication, in both procedural and
substantive aspects.

Primarily what calls for a reversal of such a decision is the absence of any evidence to offset the
presumption of validity that attaches to a challenged statute or ordinance. As was expressed
categorically by Justice Malcolm: "The presumption is all in favor of validity x x x . The action of the
elected representatives of the people cannot be lightly set aside. The councilors must, in the very
nature of things, be familiar with the necessities of their particular municipality and with all the facts
and circumstances which surround the subject and necessitate action. The local legislative body, by
enacting the ordinance, has in effect given notice that the regulations are essential to the well being
of the people x x x . The Judiciary should not lightly set aside legislative action when there is not a
clear invasion of personal or property rights under the guise of police regulation.2

It admits of no doubt therefore that there being a presumption of validity, the necessity for evidence
to rebut it is unavoidable, unless the statute or ordinance is void on its face which is not the case
here. The principle has been nowhere better expressed than in the leading case of O'Gorman &
Young v. Hartford Fire Insurance Co.,3 where the American Supreme Court through Justice Brandeis
tersely and succinctly summed up the matter thus: The statute here questioned deals with a subject
clearly within the scope of the police power. We are asked to declare it void on the ground that the
specific method of regulation prescribed is unreasonable and hence deprives the plaintiff of due
process of law. As underlying questions of fact may condition the constitutionality of legislation of
this character, the resumption of constitutionality must prevail in the absence of some factual
foundation of record for overthrowing the statute." No such factual foundation being laid in the
present case, the lower court deciding the matter on the pleadings and the stipulation of facts, the
presumption of validity must prevail and the judgment against the ordinance set aside.

Nor may petitioners assert with plausibility that on its face the ordinance is fatally defective as being
repugnant to the due process clause of the Constitution. The mantle of protection associated with
the due process guaranty does not cover petitioners. This particular manifestation of a police power
measure being specifically aimed to safeguard public morals is immune from such imputation of
nullity resting purely on conjecture and unsupported by anything of substance. To hold otherwise
would be to unduly restrict and narrow the scope of police power which has been properly
characterized as the most essential, insistent and the least limitable of powers,4 extending as it does
"to all the great public needs."5 It would be, to paraphrase another leading decision, to destroy the
very purpose of the state if it could be deprived or allowed itself to be deprived of its competence to
promote public health, public morals, public safety and the genera welfare.6 Negatively put, police
power is "that inherent and plenary power in the State which enables it to prohibit all that is hurt full
to the comfort, safety, and welfare of society.7

There is no question but that the challenged ordinance was precisely enacted to minimize certain
practices hurtful to public morals. The explanatory note of the Councilor Herminio Astorga included
as annex to the stipulation of facts, speaks of the alarming increase in the rate of prostitution,
adultery and fornication in Manila traceable in great part to the existence of motels, which "provide a
necessary atmosphere for clandestine entry, presence and exit" and thus become the "ideal haven
for prostitutes and thrill-seekers." The challenged ordinance then proposes to check the clandestine
harboring of transients and guests of these establishments by requiring these transients and guests
to fill up a registration form, prepared for the purpose, in a lobby open to public view at all times, and
by introducing several other amendatory provisions calculated to shatter the privacy that
characterizes the registration of transients and guests." Moreover, the increase in the licensed fees
was intended to discourage "establishments of the kind from operating for purpose other than legal"
and at the same time, to increase "the income of the city government." It would appear therefore that
the stipulation of facts, far from sustaining any attack against the validity of the ordinance, argues
eloquently for it.

It is a fact worth noting that this Court has invariably stamped with the seal of its approval,
ordinances punishing vagrancy and classifying a pimp or procurer as a vagrant;8 provide a license
tax for and regulating the maintenance or operation of public dance halls;9 prohibiting
gambling;10 prohibiting jueteng;11 and monte;12 prohibiting playing of panguingui on days other than
Sundays or legal holidays;13 prohibiting the operation of pinball machines;14 and prohibiting any
person from keeping, conducting or maintaining an opium joint or visiting a place where opium is
smoked or otherwise used,15 all of which are intended to protect public morals.

On the legislative organs of the government, whether national or local, primarily rest the exercise of
the police power, which, it cannot be too often emphasized, is the power to prescribe regulations to
promote the health, morals, peace, good order, safety and general welfare of the people. In view of
the requirements of due process, equal protection and other applicable constitutional guaranties
however, the exercise of such police power insofar as it may affect the life, liberty or property of any
person is subject to judicial inquiry. Where such exercise of police power may be considered as
either capricious, whimsical, unjust or unreasonable, a denial of due process or a violation of any
other applicable constitutional guaranty may call for correction by the courts.

We are thus led to considering the insistent, almost shrill tone, in which the objection is raised to the
question of due process.16 There is no controlling and precise definition of due process. It furnishes
though a standard to which the governmental action should conform in order that deprivation of life,
liberty or property, in each appropriate case, be valid. What then is the standard of due process
which must exist both as a procedural and a substantive requisite to free the challenged ordinance,
or any governmental action for that matter, from the imputation of legal infirmity sufficient to spell its
doom? It is responsiveness to the supremacy of reason, obedience to the dictates of justice.
Negatively put, arbitrariness is ruled out and unfairness avoided. To satisfy the due process
requirement, official action, to paraphrase Cardozo, must not outrun the bounds of reason and result
in sheer oppression. Due process is thus hostile to any official action marred by lack of
reasonableness. Correctly it has been identified as freedom from arbitrariness. It is the embodiment
of the sporting idea of fair play.17 It exacts fealty "to those strivings for justice" and judges the act of
officialdom of whatever branch "in the light of reason drawn from considerations of fairness that
reflect [democratic] traditions of legal and political thought."18 It is not a narrow or "technical
conception with fixed content unrelated to time, place and circumstances,"19 decisions based on
such a clause requiring a "close and perceptive inquiry into fundamental principles of our
society."20 Questions of due process are not to be treated narrowly or pedantically in slavery to form
or phrases.21

It would thus be an affront to reason to stigmatize an ordinance enacted precisely to meet what a
municipal lawmaking body considers an evil of rather serious proportion an arbitrary and capricious
exercise of authority. It would seem that what should be deemed unreasonable and what would
amount to an abdication of the power to govern is inaction in the face of an admitted deterioration of
the state of public morals. To be more specific, the Municipal Board of the City of Manila felt the
need for a remedial measure. It provided it with the enactment of the challenged ordinance. A strong
case must be found in the records, and, as has been set forth, none is even attempted here to attach
to an ordinance of such character the taint of nullity for an alleged failure to meet the due process
requirement. Nor does it lend any semblance even of deceptive plausibility to petitioners' indictment
of Ordinance No. 4760 on due process grounds to single out such features as the increased fees for
motels and hotels, the curtailment of the area of freedom to contract, and, in certain particulars, its
alleged vagueness.

Admittedly there was a decided increase of the annual license fees provided for by the challenged
ordinance for hotels and motels, 150% for the former and over 200% for the latter, first-class motels
being required to pay a P6,000 annual fee and second-class motels, P4,500 yearly. It has been the
settled law however, as far back as 1922 that municipal license fees could be classified into those
imposed for regulating occupations or regular enterprises, for the regulation or restriction of non-
useful occupations or enterprises and for revenue purposes only.22 As was explained more in detail
in the above Cu Unjieng case: (2) Licenses for non-useful occupations are also incidental to the
police power and the right to exact a fee may be implied from the power to license and regulate, but
in fixing amount of the license fees the municipal corporations are allowed a much wider discretion in
this class of cases than in the former, and aside from applying the well-known legal principle that
municipal ordinances must not be unreasonable, oppressive, or tyrannical, courts have, as a general
rule, declined to interfere with such discretion. The desirability of imposing restraint upon the number
of persons who might otherwise engage in non-useful enterprises is, of course, generally an
important factor in the determination of the amount of this kind of license fee. Hence license fees
clearly in the nature of privilege taxes for revenue have frequently been upheld, especially in of
licenses for the sale of liquors. In fact, in the latter cases the fees have rarely been declared
unreasonable.23
Moreover in the equally leading case of Lutz v. Araneta24 this Court affirmed the doctrine earlier
announced by the American Supreme Court that taxation may be made to implement the state's
police power. Only the other day, this Court had occasion to affirm that the broad taxing authority
conferred by the Local Autonomy Act of 1959 to cities and municipalities is sufficiently plenary to
cover a wide range of subjects with the only limitation that the tax so levied is for public purposes,
just and uniform.25

As a matter of fact, even without reference to the wide latitude enjoyed by the City of Manila in
imposing licenses for revenue, it has been explicitly held in one case that "much discretion is given
to municipal corporations in determining the amount," here the license fee of the operator of a
massage clinic, even if it were viewed purely as a police power measure.26 The discussion of this
particular matter may fitly close with this pertinent citation from another decision of significance: "It is
urged on behalf of the plaintiffs-appellees that the enforcement of the ordinance could deprive them
of their lawful occupation and means of livelihood because they can not rent stalls in the public
markets. But it appears that plaintiffs are also dealers in refrigerated or cold storage meat, the sale
of which outside the city markets under certain conditions is permitted x x x . And surely, the mere
fact, that some individuals in the community may be deprived of their present business or a
particular mode of earning a living cannot prevent the exercise of the police power. As was said in a
case, persons licensed to pursue occupations which may in the public need and interest be affected
by the exercise of the police power embark in these occupations subject to the disadvantages which
may result from the legal exercise of that power."27

Nor does the restriction on the freedom to contract, insofar as the challenged ordinance makes it
unlawful for the owner, manager, keeper or duly authorized representative of any hotel, motel,
lodging house, tavern, common inn or the like, to lease or rent room or portion thereof more than
twice every 24 hours, with a proviso that in all cases full payment shall be charged, call for a different
conclusion. Again, such a limitation cannot be viewed as a transgression against the command of
due process. It is neither unreasonable nor arbitrary. Precisely it was intended to curb the
opportunity for the immoral or illegitimate use to which such premises could be, and, according to
the explanatory note, are being devoted. How could it then be arbitrary or oppressive when there
appears a correspondence between the undeniable existence of an undesirable situation and the
legislative attempt at correction. Moreover, petitioners cannot be unaware that every regulation of
conduct amounts to curtailment of liberty which as pointed out by Justice Malcolm cannot be
absolute. Thus: "One thought which runs through all these different conceptions of liberty is plainly
apparent. It is this: 'Liberty' as understood in democracies, is not license; it is 'liberty regulated by
law.' Implied in the term is restraint by law for the good of the individual and for the greater good of
the peace and order of society and the general well-being. No man can do exactly as he pleases.
Every man must renounce unbridled license. The right of the individual is necessarily subject to
reasonable restraint by general law for the common good x x x The liberty of the citizen may be
restrained in the interest of the public health, or of the public order and safety, or otherwise within the
proper scope of the police power."28

A similar observation was made by Justice Laurel: "Public welfare, then, lies at the bottom of the
enactment of said law, and the state in order to promote the general welfare may interfere with
personal liberty, with property, and with business and occupations. Persons and property may be
subjected to all kinds of restraints and burdens, in order to secure the general comfort, health, and
prosperity of the state x x x To this fundamental aim of our Government the rights of the individual
are subordinated. Liberty is a blessing without which life is a misery, but liberty should not be made
to prevail over authority because then society will fall into anarchy. Neither should authority be made
to prevail over liberty because then the individual will fall into slavery. The citizen should achieve the
required balance of liberty and authority in his mind through education and personal discipline, so
that there may be established the resultant equilibrium, which means peace and order and
happiness for all.29
It is noteworthy that the only decision of this Court nullifying legislation because of undue deprivation
of freedom to contract, People v. Pomar,30 no longer "retains its virtuality as a living principle. The
policy of laissez faire has to some extent given way to the assumption by the government of the right
of intervention even in contractual relations affected with public interest.31 What may be stressed
sufficiently is that if the liberty involved were freedom of the mind or the person, the standard for the
validity of governmental acts is much more rigorous and exacting, but where the liberty curtailed
affects at the most rights of property, the permissible scope of regulatory measure is wider.32 How
justify then the allegation of a denial of due process?

Lastly, there is the attempt to impugn the ordinance on another due process ground by invoking the
principles of vagueness or uncertainty. It would appear from a recital in the petition itself that what
seems to be the gravamen of the alleged grievance is that the provisions are too detailed and
specific rather than vague or uncertain. Petitioners, however, point to the requirement that a guest
should give the name, relationship, age and sex of the companion or companions as indefinite and
uncertain in view of the necessity for determining whether the companion or companions referred to
are those arriving with the customer or guest at the time of the registry or entering the room With him
at about the same time or coming at any indefinite time later to join him; a proviso in one of its
sections which cast doubt as to whether the maintenance of a restaurant in a motel is dependent
upon the discretion of its owners or operators; another proviso which from their standpoint would
require a guess as to whether the "full rate of payment" to be charged for every such lease thereof
means a full day's or merely a half-day's rate. It may be asked, do these allegations suffice to render
the ordinance void on its face for alleged vagueness or uncertainty? To ask the question is to
answer it. From Connally v. General Construction Co.33 to Adderley v. Florida,34 the principle has
been consistently upheld that what makes a statute susceptible to such a charge is an enactment
either forbidding or requiring the doing of an act that men of common intelligence must necessarily
guess at its meaning and differ as to its application. Is this the situation before us? A citation from
Justice Holmes would prove illuminating: "We agree to all the generalities about not supplying
criminal laws with what they omit but there is no canon against using common sense in construing
laws as saying what they obviously mean."35

That is all then that this case presents. As it stands, with all due allowance for the arguments
pressed with such vigor and determination, the attack against the validity of the challenged
ordinance cannot be considered a success. Far from it. Respect for constitutional law principles so
uniformly held and so uninterruptedly adhered to by this Court compels a reversal of the appealed
decision.

Wherefore, the judgment of the lower court is reversed and the injunction issued lifted forthwith. With
costs

6.
WHITE LIGHT CORPORATION, TITANIUM CORPORATION and STA. MESA TOURIST &
DEVELOPMENT CORPORATION, Petitioners,
vs.
CITY OF MANILA, represented by DE CASTRO, MAYOR ALFREDO S. LIM, Respondent.
 DECISION

Tinga, J.:

With another city ordinance of Manila also principally involving the tourist district as subject, the
Court is confronted anew with the incessant clash between government power and individual liberty
in tandem with the archetypal tension between law and morality.

In City of Manila v. Laguio, Jr.,1 the Court affirmed the nullification of a city ordinance barring the
operation of motels and inns, among other establishments, within the Ermita-Malate area. The
petition at bar assails a similarly-motivated city ordinance that prohibits those same establishments
from offering short-time admission, as well as pro-rated or "wash up" rates for such abbreviated
stays. Our earlier decision tested the city ordinance against our sacred constitutional rights to liberty,
due process and equal protection of law. The same parameters apply to the present petition.

This Petition2 under Rule 45 of the Revised Rules on Civil Procedure, which seeks the reversal of
the Decision3 in C.A.-G.R. S.P. No. 33316 of the Court of Appeals, challenges the validity of Manila
City Ordinance No. 7774 entitled, "An Ordinance Prohibiting Short-Time Admission, Short-Time
Admission Rates, and Wash-Up Rate Schemes in Hotels, Motels, Inns, Lodging Houses, Pension
Houses, and Similar Establishments in the City of Manila" (the Ordinance).

I.

The facts are as follows:

On December 3, 1992, City Mayor Alfredo S. Lim (Mayor Lim) signed into law the Ordinance.4 The
Ordinance is reproduced in full, hereunder:

SECTION 1. Declaration of Policy. It is hereby the declared policy of the City Government to protect
the best interest, health and welfare, and the morality of its constituents in general and the youth in
particular.

SEC. 2. Title. This ordinance shall be known as "An Ordinance" prohibiting short time admission in
hotels, motels, lodging houses, pension houses and similar establishments in the City of Manila.

SEC. 3. Pursuant to the above policy, short-time admission and rate [sic], wash-up rate or other
similarly concocted terms, are hereby prohibited in hotels, motels, inns, lodging houses, pension
houses and similar establishments in the City of Manila.

SEC. 4. Definition of Term[s]. Short-time admission shall mean admittance and charging of room
rate for less than twelve (12) hours at any given time or the renting out of rooms more than twice a
day or any other term that may be concocted by owners or managers of said establishments but
would mean the same or would bear the same meaning.

SEC. 5. Penalty Clause. Any person or corporation who shall violate any provision of this ordinance
shall upon conviction thereof be punished by a fine of Five Thousand (₱5,000.00) Pesos or
imprisonment for a period of not exceeding one (1) year or both such fine and imprisonment at the
discretion of the court; Provided, That in case of [a] juridical person, the president, the manager, or
the persons in charge of the operation thereof shall be liable: Provided, further, That in case of
subsequent conviction for the same offense, the business license of the guilty party shall
automatically be cancelled.
SEC. 6. Repealing Clause. Any or all provisions of City ordinances not consistent with or contrary to
this measure or any portion hereof are hereby deemed repealed.

SEC. 7. Effectivity. This ordinance shall take effect immediately upon approval.

Enacted by the city Council of Manila at its regular session today, November 10, 1992.

Approved by His Honor, the Mayor on December 3, 1992.

On December 15, 1992, the Malate Tourist and Development Corporation (MTDC) filed a complaint
for declaratory relief with prayer for a writ of preliminary injunction and/or temporary restraining order
( TRO)5 with the Regional Trial Court (RTC) of Manila, Branch 9 impleading as defendant, herein
respondent City of Manila (the City) represented by Mayor Lim.6 MTDC prayed that the Ordinance,
insofar as it includes motels and inns as among its prohibited establishments, be declared invalid
and unconstitutional. MTDC claimed that as owner and operator of the Victoria Court in Malate,
Manila it was authorized by Presidential Decree (P.D.) No. 259 to admit customers on a short time
basis as well as to charge customers wash up rates for stays of only three hours.

On December 21, 1992, petitioners White Light Corporation (WLC), Titanium Corporation (TC) and
Sta. Mesa Tourist and Development Corporation (STDC) filed a motion to intervene and to admit
attached complaint-in-intervention7 on the ground that the Ordinance directly affects their business
interests as operators of drive-in-hotels and motels in Manila.8 The three companies are components
of the Anito Group of Companies which owns and operates several hotels and motels in Metro
Manila.9

On December 23, 1992, the RTC granted the motion to intervene.10 The RTC also notified the
Solicitor General of the proceedings pursuant to then Rule 64, Section 4 of the Rules of Court. On
the same date, MTDC moved to withdraw as plaintiff.11

On December 28, 1992, the RTC granted MTDC's motion to withdraw.12 The RTC issued a TRO on
January 14, 1993, directing the City to cease and desist from enforcing the Ordinance.13 The City
filed an Answer dated January 22, 1993 alleging that the Ordinance is a legitimate exercise of police
power.14

On February 8, 1993, the RTC issued a writ of preliminary injunction ordering the city to desist from
the enforcement of the Ordinance.15 A month later, on March 8, 1993, the Solicitor General filed his
Comment arguing that the Ordinance is constitutional.

During the pre-trial conference, the WLC, TC and STDC agreed to submit the case for decision
without trial as the case involved a purely legal question.16 On October 20, 1993, the RTC rendered
a decision declaring the Ordinance null and void. The dispositive portion of the decision reads:

WHEREFORE, in view of all the foregoing, [O]rdinance No. 7774 of the City of Manila is hereby
declared null and void.

Accordingly, the preliminary injunction heretofor issued is hereby made permanent.

SO ORDERED.17

The RTC noted that the ordinance "strikes at the personal liberty of the individual guaranteed and
jealously guarded by the Constitution."18 Reference was made to the provisions of the Constitution
encouraging private enterprises and the incentive to needed investment, as well as the right to
operate economic enterprises. Finally, from the observation that the illicit relationships the Ordinance
sought to dissuade could nonetheless be consummated by simply paying for a 12-hour stay, the
RTC likened the law to the ordinance annulled in Ynot v. Intermediate Appellate Court,19 where the
legitimate purpose of preventing indiscriminate slaughter of carabaos was sought to be effected
through an inter-province ban on the transport of carabaos and carabeef.

The City later filed a petition for review on certiorari with the Supreme Court.20 The petition was
docketed as G.R. No. 112471. However in a resolution dated January 26, 1994, the Court treated
the petition as a petition for certiorari and referred the petition to the Court of Appeals.21

Before the Court of Appeals, the City asserted that the Ordinance is a valid exercise of police power
pursuant to Section 458 (4)(iv) of the Local Government Code which confers on cities, among other
local government units, the power:

[To] regulate the establishment, operation and maintenance of cafes, restaurants, beerhouses,
hotels, motels, inns, pension houses, lodging houses and other similar establishments, including
tourist guides and transports.22

The Ordinance, it is argued, is also a valid exercise of the power of the City under Article III, Section
18(kk) of the Revised Manila Charter, thus:

"to enact all ordinances it may deem necessary and proper for the sanitation and safety, the
furtherance of the prosperity and the promotion of the morality, peace, good order, comfort,
convenience and general welfare of the city and its inhabitants, and such others as be necessary to
carry into effect and discharge the powers and duties conferred by this Chapter; and to fix penalties
for the violation of ordinances which shall not exceed two hundred pesos fine or six months
imprisonment, or both such fine and imprisonment for a single offense.23

Petitioners argued that the Ordinance is unconstitutional and void since it violates the right to privacy
and the freedom of movement; it is an invalid exercise of police power; and it is an unreasonable
and oppressive interference in their business.

The Court of Appeals reversed the decision of the RTC and affirmed the constitutionality of the
Ordinance.24 First, it held that the Ordinance did not violate the right to privacy or the freedom of
movement, as it only penalizes the owners or operators of establishments that admit individuals for
short time stays. Second, the virtually limitless reach of police power is only constrained by having a
lawful object obtained through a lawful method. The lawful objective of the Ordinance is satisfied
since it aims to curb immoral activities. There is a lawful method since the establishments are still
allowed to operate. Third, the adverse effect on the establishments is justified by the well-being of its
constituents in general. Finally, as held in Ermita-Malate Motel Operators Association v. City Mayor
of Manila, liberty is regulated by law.

TC, WLC and STDC come to this Court via petition for review on certiorari.25 In their petition and
Memorandum, petitioners in essence repeat the assertions they made before the Court of Appeals.
They contend that the assailed Ordinance is an invalid exercise of police power.

II.

We must address the threshold issue of petitioners’ standing. Petitioners allege that as owners of
establishments offering "wash-up" rates, their business is being unlawfully interfered with by the
Ordinance. However, petitioners also allege that the equal protection rights of their clients are also
being interfered with. Thus, the crux of the matter is whether or not these establishments have the
requisite standing to plead for protection of their patrons' equal protection rights.

Standing or locus standi is the ability of a party to demonstrate to the court sufficient connection to
and harm from the law or action challenged to support that party's participation in the case. More
importantly, the doctrine of standing is built on the principle of separation of powers,26 sparing as it
does unnecessary interference or invalidation by the judicial branch of the actions rendered by its
co-equal branches of government.

The requirement of standing is a core component of the judicial system derived directly from the
Constitution.27 The constitutional component of standing doctrine incorporates concepts which
concededly are not susceptible of precise definition.28 In this jurisdiction, the extancy of "a direct and
personal interest" presents the most obvious cause, as well as the standard test for a petitioner's
standing.29 In a similar vein, the United States Supreme Court reviewed and elaborated on the
meaning of the three constitutional standing requirements of injury, causation, and redressability
in Allen v. Wright.30

Nonetheless, the general rules on standing admit of several exceptions such as the overbreadth
doctrine, taxpayer suits, third party standing and, especially in the Philippines, the doctrine of
transcendental importance.31

For this particular set of facts, the concept of third party standing as an exception and the
overbreadth doctrine are appropriate. In Powers v. Ohio,32 the United States Supreme Court wrote
that: "We have recognized the right of litigants to bring actions on behalf of third parties, provided
three important criteria are satisfied: the litigant must have suffered an ‘injury-in-fact,’ thus giving him
or her a "sufficiently concrete interest" in the outcome of the issue in dispute; the litigant must have a
close relation to the third party; and there must exist some hindrance to the third party's ability to
protect his or her own interests."33 Herein, it is clear that the business interests of the petitioners are
likewise injured by the Ordinance. They rely on the patronage of their customers for their continued
viability which appears to be threatened by the enforcement of the Ordinance. The relative silence in
constitutional litigation of such special interest groups in our nation such as the American Civil
Liberties Union in the United States may also be construed as a hindrance for customers to bring
suit.34

American jurisprudence is replete with examples where parties-in-interest were allowed standing to
advocate or invoke the fundamental due process or equal protection claims of other persons or
classes of persons injured by state action. In Griswold v. Connecticut,35 the United States Supreme
Court held that physicians had standing to challenge a reproductive health statute that would
penalize them as accessories as well as to plead the constitutional protections available to their
patients. The Court held that:

"The rights of husband and wife, pressed here, are likely to be diluted or adversely affected unless
those rights are considered in a suit involving those who have this kind of confidential relation to
them."36

An even more analogous example may be found in Craig v. Boren,37 wherein the United States
Supreme Court held that a licensed beverage vendor has standing to raise the equal protection
claim of a male customer challenging a statutory scheme prohibiting the sale of beer to males under
the age of 21 and to females under the age of 18. The United States High Court explained that the
vendors had standing "by acting as advocates of the rights of third parties who seek access to their
market or function."38
Assuming arguendo that petitioners do not have a relationship with their patrons for the former to
assert the rights of the latter, the overbreadth doctrine comes into play. In overbreadth analysis,
challengers to government action are in effect permitted to raise the rights of third parties. Generally
applied to statutes infringing on the freedom of speech, the overbreadth doctrine applies when a
statute needlessly restrains even constitutionally guaranteed rights.39 In this case, the petitioners
claim that the Ordinance makes a sweeping intrusion into the right to liberty of their clients. We can
see that based on the allegations in the petition, the Ordinance suffers from overbreadth.

We thus recognize that the petitioners have a right to assert the constitutional rights of their clients to
patronize their establishments for a "wash-rate" time frame.

III.

To students of jurisprudence, the facts of this case will recall to mind not only the recent City of
Manila ruling, but our 1967 decision in Ermita-Malate Hotel and Motel Operations Association, Inc.,
v. Hon. City Mayor of Manila.40 Ermita-Malate concerned the City ordinance requiring patrons to fill
up a prescribed form stating personal information such as name, gender, nationality, age, address
and occupation before they could be admitted to a motel, hotel or lodging house. This earlier
ordinance was precisely enacted to minimize certain practices deemed harmful to public morals. A
purpose similar to the annulled ordinance in City of Manila which sought a blanket ban on motels,
inns and similar establishments in the Ermita-Malate area. However, the constitutionality of the
ordinance in Ermita-Malate was sustained by the Court.

The common thread that runs through those decisions and the case at bar goes beyond the
singularity of the localities covered under the respective ordinances. All three ordinances were
enacted with a view of regulating public morals including particular illicit activity in transient lodging
establishments. This could be described as the middle case, wherein there is no wholesale ban on
motels and hotels but the services offered by these establishments have been severely restricted. At
its core, this is another case about the extent to which the State can intrude into and regulate the
lives of its citizens.

The test of a valid ordinance is well established. A long line of decisions including City of Manila has
held that for an ordinance to be valid, it must not only be within the corporate powers of the local
government unit to enact and pass according to the procedure prescribed by law, it must also
conform to the following substantive requirements: (1) must not contravene the Constitution or any
statute; (2) must not be unfair or oppressive; (3) must not be partial or discriminatory; (4) must not
prohibit but may regulate trade; (5) must be general and consistent with public policy; and (6) must
not be unreasonable.41

The Ordinance prohibits two specific and distinct business practices, namely wash rate admissions
and renting out a room more than twice a day. The ban is evidently sought to be rooted in the police
power as conferred on local government units by the Local Government Code through such
implements as the general welfare clause.

A.

Police power, while incapable of an exact definition, has been purposely veiled in general terms to
underscore its comprehensiveness to meet all exigencies and provide enough room for an efficient
and flexible response as the conditions warrant.42 Police power is based upon the concept of
necessity of the State and its corresponding right to protect itself and its people.43 Police power has
been used as justification for numerous and varied actions by the State. These range from the
regulation of dance halls,44 movie theaters,45 gas stations46 and cockpits.47 The awesome scope of
police power is best demonstrated by the fact that in its hundred or so years of presence in our
nation’s legal system, its use has rarely been denied.

The apparent goal of the Ordinance is to minimize if not eliminate the use of the covered
establishments for illicit sex, prostitution, drug use and alike. These goals, by themselves, are
unimpeachable and certainly fall within the ambit of the police power of the State. Yet the desirability
of these ends do not sanctify any and all means for their achievement. Those means must align with
the Constitution, and our emerging sophisticated analysis of its guarantees to the people. The Bill of
Rights stands as a rebuke to the seductive theory of Macchiavelli, and, sometimes even, the political
majorities animated by his cynicism.

Even as we design the precedents that establish the framework for analysis of due process or equal
protection questions, the courts are naturally inhibited by a due deference to the co-equal branches
of government as they exercise their political functions. But when we are compelled to nullify
executive or legislative actions, yet another form of caution emerges. If the Court were animated by
the same passing fancies or turbulent emotions that motivate many political decisions, judicial
integrity is compromised by any perception that the judiciary is merely the third political branch of
government. We derive our respect and good standing in the annals of history by acting as judicious
and neutral arbiters of the rule of law, and there is no surer way to that end than through the
development of rigorous and sophisticated legal standards through which the courts analyze the
most fundamental and far-reaching constitutional questions of the day.

B.

The primary constitutional question that confronts us is one of due process, as guaranteed under
Section 1, Article III of the Constitution. Due process evades a precise definition.48 The purpose of
the guaranty is to prevent arbitrary governmental encroachment against the life, liberty and property
of individuals. The due process guaranty serves as a protection against arbitrary regulation or
seizure. Even corporations and partnerships are protected by the guaranty insofar as their property
is concerned.

The due process guaranty has traditionally been interpreted as imposing two related but distinct
restrictions on government, "procedural due process" and "substantive due process." Procedural due
process refers to the procedures that the government must follow before it deprives a person of life,
liberty, or property.49 Procedural due process concerns itself with government action adhering to the
established process when it makes an intrusion into the private sphere. Examples range from the
form of notice given to the level of formality of a hearing.

If due process were confined solely to its procedural aspects, there would arise absurd situation of
arbitrary government action, provided the proper formalities are followed. Substantive due process
completes the protection envisioned by the due process clause. It inquires whether the government
has sufficient justification for depriving a person of life, liberty, or property.50

The question of substantive due process, moreso than most other fields of law, has reflected
dynamism in progressive legal thought tied with the expanded acceptance of fundamental freedoms.
Police power, traditionally awesome as it may be, is now confronted with a more rigorous level of
analysis before it can be upheld. The vitality though of constitutional due process has not been
predicated on the frequency with which it has been utilized to achieve a liberal result for, after all, the
libertarian ends should sometimes yield to the prerogatives of the State. Instead, the due process
clause has acquired potency because of the sophisticated methodology that has emerged to
determine the proper metes and bounds for its application.
 C.

The general test of the validity of an ordinance on substantive due process grounds is best tested
when assessed with the evolved footnote 4 test laid down by the U.S. Supreme Court in U.S. v.
Carolene Products.51 Footnote 4 of the Carolene Products case acknowledged that the judiciary
would defer to the legislature unless there is a discrimination against a "discrete and insular" minority
or infringement of a "fundamental right."52 Consequently, two standards of judicial review were
established: strict scrutiny for laws dealing with freedom of the mind or restricting the political
process, and the rational basis standard of review for economic legislation.

A third standard, denominated as heightened or immediate scrutiny, was later adopted by the U.S.
Supreme Court for evaluating classifications based on gender53 and legitimacy.54 Immediate scrutiny
was adopted by the U.S. Supreme Court in Craig,55 after the Court declined to do so in Reed v.
Reed.56 While the test may have first been articulated in equal protection analysis, it has in the
United States since been applied in all substantive due process cases as well.

We ourselves have often applied the rational basis test mainly in analysis of equal protection
challenges.57 Using the rational basis examination, laws or ordinances are upheld if they rationally
further a legitimate governmental interest.58 Under intermediate review, governmental interest is
extensively examined and the availability of less restrictive measures is considered.59 Applying strict
scrutiny, the focus is on the presence of compelling, rather than substantial, governmental interest
and on the absence of less restrictive means for achieving that interest.

In terms of judicial review of statutes or ordinances, strict scrutiny refers to the standard for
determining the quality and the amount of governmental interest brought to justify the regulation of
fundamental freedoms.60 Strict scrutiny is used today to test the validity of laws dealing with the
regulation of speech, gender, or race as well as other fundamental rights as expansion from its
earlier applications to equal protection.61 The United States Supreme Court has expanded the scope
of strict scrutiny to protect fundamental rights such as suffrage,62 judicial access63 and interstate
travel.64

If we were to take the myopic view that an Ordinance should be analyzed strictly as to its effect only
on the petitioners at bar, then it would seem that the only restraint imposed by the law which we are
capacitated to act upon is the injury to property sustained by the petitioners, an injury that would
warrant the application of the most deferential standard – the rational basis test. Yet as earlier
stated, we recognize the capacity of the petitioners to invoke as well the constitutional rights of their
patrons – those persons who would be deprived of availing short time access or wash-up rates to
the lodging establishments in question.

Viewed cynically, one might say that the infringed rights of these customers were are trivial since
they seem shorn of political consequence. Concededly, these are not the sort of cherished rights
that, when proscribed, would impel the people to tear up their cedulas. Still, the Bill of Rights does
not shelter gravitas alone. Indeed, it is those "trivial" yet fundamental freedoms – which the people
reflexively exercise any day without the impairing awareness of their constitutional consequence –
that accurately reflect the degree of liberty enjoyed by the people. Liberty, as integrally incorporated
as a fundamental right in the Constitution, is not a Ten Commandments-style enumeration of what
may or what may not be done; but rather an atmosphere of freedom where the people do not feel
labored under a Big Brother presence as they interact with each other, their society and nature, in a
manner innately understood by them as inherent, without doing harm or injury to others.

D.
The rights at stake herein fall within the same fundamental rights to liberty which we upheld in City of
Manila v. Hon. Laguio, Jr. We expounded on that most primordial of rights, thus:

Liberty as guaranteed by the Constitution was defined by Justice Malcolm to include "the right to
exist and the right to be free from arbitrary restraint or servitude. The term cannot be dwarfed into
mere freedom from physical restraint of the person of the citizen, but is deemed to embrace the right
of man to enjoy the facilities with which he has been endowed by his Creator, subject only to such
restraint as are necessary for the common welfare."[65] In accordance with this case, the rights of the
citizen to be free to use his faculties in all lawful ways; to live and work where he will; to earn his
livelihood by any lawful calling; and to pursue any avocation are all deemed embraced in the
concept of liberty.[66]

The U.S. Supreme Court in the case of Roth v. Board of Regents, sought to clarify the meaning of
"liberty." It said:

While the Court has not attempted to define with exactness the liberty . . . guaranteed [by the Fifth
and Fourteenth Amendments], the term denotes not merely freedom from bodily restraint but also
the right of the individual to contract, to engage in any of the common occupations of life, to acquire
useful knowledge, to marry, establish a home and bring up children, to worship God according to the
dictates of his own conscience, and generally to enjoy those privileges long recognized . . . as
essential to the orderly pursuit of happiness by free men. In a Constitution for a free people, there
can be no doubt that the meaning of "liberty" must be broad indeed.67 [Citations omitted]

It cannot be denied that the primary animus behind the ordinance is the curtailment of sexual
behavior. The City asserts before this Court that the subject establishments "have gained notoriety
as venue of ‘prostitution, adultery and fornications’ in Manila since they ‘provide the necessary
atmosphere for clandestine entry, presence and exit and thus became the ‘ideal haven for
prostitutes and thrill-seekers.’"68 Whether or not this depiction of a mise-en-scene of vice is accurate,
it cannot be denied that legitimate sexual behavior among willing married or consenting single adults
which is constitutionally protected69 will be curtailed as well, as it was in the City of Manila case. Our
holding therein retains significance for our purposes:

The concept of liberty compels respect for the individual whose claim to privacy and interference
demands respect. As the case of Morfe v. Mutuc, borrowing the words of Laski, so very aptly stated:

Man is one among many, obstinately refusing reduction to unity. His separateness, his isolation, are
indefeasible; indeed, they are so fundamental that they are the basis on which his civic obligations
are built. He cannot abandon the consequences of his isolation, which are, broadly speaking, that
his experience is private, and the will built out of that experience personal to himself. If he surrenders
his will to others, he surrenders himself. If his will is set by the will of others, he ceases to be a
master of himself. I cannot believe that a man no longer a master of himself is in any real sense free.

Indeed, the right to privacy as a constitutional right was recognized in Morfe, the invasion of which
should be justified by a compelling state interest. Morfe accorded recognition to the right to privacy
independently of its identification with liberty; in itself it is fully deserving of constitutional protection.
Governmental powers should stop short of certain intrusions into the personal life of the citizen.70

We cannot discount other legitimate activities which the Ordinance would proscribe or impair. There
are very legitimate uses for a wash rate or renting the room out for more than twice a day. Entire
families are known to choose pass the time in a motel or hotel whilst the power is momentarily out in
their homes. In transit passengers who wish to wash up and rest between trips have a legitimate
purpose for abbreviated stays in motels or hotels. Indeed any person or groups of persons in need of
comfortable private spaces for a span of a few hours with purposes other than having sex or using
illegal drugs can legitimately look to staying in a motel or hotel as a convenient alternative.

E.

That the Ordinance prevents the lawful uses of a wash rate depriving patrons of a product and the
petitioners of lucrative business ties in with another constitutional requisite for the legitimacy of the
Ordinance as a police power measure. It must appear that the interests of the public generally, as
distinguished from those of a particular class, require an interference with private rights and the
means must be reasonably necessary for the accomplishment of the purpose and not unduly
oppressive of private rights.71 It must also be evident that no other alternative for the accomplishment
of the purpose less intrusive of private rights can work. More importantly, a reasonable relation must
exist between the purposes of the measure and the means employed for its accomplishment, for
even under the guise of protecting the public interest, personal rights and those pertaining to private
property will not be permitted to be arbitrarily invaded.72

Lacking a concurrence of these requisites, the police measure shall be struck down as an arbitrary
intrusion into private rights. As held in Morfe v. Mutuc, the exercise of police power is subject to
judicial review when life, liberty or property is affected.73 However, this is not in any way meant to
take it away from the vastness of State police power whose exercise enjoys the presumption of
validity.74

Similar to the Comelec resolution requiring newspapers to donate advertising space to candidates,
this Ordinance is a blunt and heavy instrument.75 The Ordinance makes no distinction between
places frequented by patrons engaged in illicit activities and patrons engaged in legitimate actions.
Thus it prevents legitimate use of places where illicit activities are rare or even unheard of. A plain
reading of section 3 of the Ordinance shows it makes no classification of places of lodging, thus
deems them all susceptible to illicit patronage and subject them without exception to the unjustified
prohibition.

The Court has professed its deep sentiment and tenderness of the Ermita-Malate area, its longtime
home,76 and it is skeptical of those who wish to depict our capital city – the Pearl of the Orient – as a
modern-day Sodom or Gomorrah for the Third World set. Those still steeped in Nick Joaquin-dreams
of the grandeur of Old Manila will have to accept that Manila like all evolving big cities, will have its
problems. Urban decay is a fact of mega cities such as Manila, and vice is a common problem
confronted by the modern metropolis wherever in the world. The solution to such perceived decay is
not to prevent legitimate businesses from offering a legitimate product. Rather, cities revive
themselves by offering incentives for new businesses to sprout up thus attracting the dynamism of
individuals that would bring a new grandeur to Manila.

The behavior which the Ordinance seeks to curtail is in fact already prohibited and could in fact be
diminished simply by applying existing laws. Less intrusive measures such as curbing the
proliferation of prostitutes and drug dealers through active police work would be more effective in
easing the situation. So would the strict enforcement of existing laws and regulations penalizing
prostitution and drug use. These measures would have minimal intrusion on the businesses of the
petitioners and other legitimate merchants. Further, it is apparent that the Ordinance can easily be
circumvented by merely paying the whole day rate without any hindrance to those engaged in illicit
activities. Moreover, drug dealers and prostitutes can in fact collect "wash rates" from their clientele
by charging their customers a portion of the rent for motel rooms and even apartments.

IV.
We reiterate that individual rights may be adversely affected only to the extent that may fairly be
required by the legitimate demands of public interest or public welfare. The State is a leviathan that
must be restrained from needlessly intruding into the lives of its citizens. However well-intentioned
the Ordinance may be, it is in effect an arbitrary and whimsical intrusion into the rights of the
establishments as well as their patrons. The Ordinance needlessly restrains the operation of the
businesses of the petitioners as well as restricting the rights of their patrons without sufficient
justification. The Ordinance rashly equates wash rates and renting out a room more than twice a day
with immorality without accommodating innocuous intentions.

The promotion of public welfare and a sense of morality among citizens deserves the full
endorsement of the judiciary provided that such measures do not trample rights this Court is sworn
to protect.77 The notion that the promotion of public morality is a function of the State is as old as
Aristotle.78 The advancement of moral relativism as a school of philosophy does not de-legitimize the
role of morality in law, even if it may foster wider debate on which particular behavior to penalize. It
is conceivable that a society with relatively little shared morality among its citizens could be
functional so long as the pursuit of sharply variant moral perspectives yields an adequate
accommodation of different interests.79

To be candid about it, the oft-quoted American maxim that "you cannot legislate morality" is
ultimately illegitimate as a matter of law, since as explained by Calabresi, that phrase is more
accurately interpreted as meaning that efforts to legislate morality will fail if they are widely at
variance with public attitudes about right and wrong.80 Our penal laws, for one, are founded on age-
old moral traditions, and as long as there are widely accepted distinctions between right and wrong,
they will remain so oriented.

Yet the continuing progression of the human story has seen not only the acceptance of the right-
wrong distinction, but also the advent of fundamental liberties as the key to the enjoyment of life to
the fullest. Our democracy is distinguished from non-free societies not with any more extensive
elaboration on our part of what is moral and immoral, but from our recognition that the individual
liberty to make the choices in our lives is innate, and protected by the State. Independent and fair-
minded judges themselves are under a moral duty to uphold the Constitution as the embodiment of
the rule of law, by reason of their expression of consent to do so when they take the oath of office,
and because they are entrusted by the people to uphold the law.81

Even as the implementation of moral norms remains an indispensable complement to governance,

that prerogative is hardly absolute, especially in the face of the norms of due process of liberty. And
while the tension may often be left to the courts to relieve, it is possible for the government to avoid
the constitutional conflict by employing more judicious, less drastic means to promote morality.

WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appeals is REVERSED, and
the Decision of the Regional Trial Court of Manila, Branch 9, is REINSTATED. Ordinance No. 7774
is hereby declared UNCONSTITUTIONAL. No pronouncement as to costs.

SO ORDERED

7.
ABRAHAM RIMANDO, Petitioner,
vs.
NAGUILIAN EMISSION TESTING CENTER, INC., represented by its President, ROSEMARIE
LLARENAS and HON. COURT OF APPEALS, Respondents.

RESOLUTION

REYES, J.:

Before us is a petition for review on certiorari1 under Rule 45 of the Rules of Court seeking to annul
and set aside Decision2 dated March 30, 2011 of the Court of Appeals (CA) in CA-G.R. SP NO.
112152.

The Facts

The present controversy stemmed from a petition for mandamus and damages filed before Branch
67 of the Regional Trial Court (RTC) of Bauang, La Union, by Naguilian Emission Testing Center,
Inc., represented by its President, Rosemarie Llarenas (respondent) against Abraham P. Rimando
(petitioner), who, at the time material to the case, was the sitting mayor of the Municipality of
Naguilian, La Union.

The petition prayed for the issuance of a writ of mandamus to compel the petitioner to issue a
business permit in favor of the respondent.

In support of its plea, the respondent claimed that its business is being conducted on a parcel of land
which formerly belonged to the national government but later on certified by the Department of
Environment and Natural Resources (DENR) as an alienable and disposable land of the public
domain. The respondent had operated its business of emission testing on the land from 2005 to
2007. On January 18, 2008, the respondent filed an application for the renewal of its business permit
and paid the corresponding fees therefor.

The petitioner, however, refused to issue a business permit unless and until the respondent
executes a contract of lease with the Municipality of Naguilian. The respondent was amenable to
signing such contract subject to some proposed revisions, which, however, were not acceptable to
the petitioner. The parties did not reach a common ground hence, the petition for mandamus.

The Ruling of the RTC

On May 26, 2009, the RTC denied the petition3 for lack of merit based on the ratiocinations that: (a)
the Municipality of Naguilian is the declared owner of the subject parcel of land by virtue of Tax
Declaration No. 002-01197; (b) under Section 6A.01 of the Revenue Code of the Municipality of
Naguilian, the municipality has the right to require the petitioner to sign a contract of lease because
its business operation is being conducted on a real property owned by the municipality; and (c) a
mayor’s duty to issue business permits is discretionary in nature which may not be enforced by a
mandamus writ. The decretal portion of the decision reads:

WHEREFORE, premises considered, the petition is DENIED for lack of merit.

SO ORDERED.4

The Ruling of the CA

Unwaivering, the respondent appealed to the CA. In its Decision5 dated March 30, 2011, the CA held
that the appeal was dismissible on the ground of mootness considering that the period for which the
business period was being sought had already lapsed. As such, any ruling on the matter would bring
no practical relief. Nonetheless, the CA proceeded to resolve the issues involved in the appeal for
academic purposes.

The CA disagreed with the RTC and found that the factual milieu of the case justifies the issuance of
a writ of mandamus. The CA reasoned that the tax declaration in the name of the municipality was
insufficient basis to require the execution of a contract of lease as a condition sine qua non for the
renewal of a business permit. The CA further observed that Sangguniang Bayan Resolution No.
2007-81, upon which the municipality anchored its imposition of rental fees, was void because it
failed to comply with the requirements of the Local Government Code and its Implementing Rules
and Regulations.

The CA held that the petitioner may not be held liable for damages since his action or inaction, for
that matter, was done in the performance of official duties that are legally protected by the
presumption of good faith. The CA likewise stressed that the civil action filed against the petitioner
had already become moot and academic upon the expiration of his term as the mayor of Naguilian,
La Union.

Despite its incessant declarations on the mootness of the case, the CA disposed of the appeal in this
wise:

WHEREFORE, the Decision dated 26 May 2009 of the Regional Trial Court, First Judicial Region,
Bauang, La Union, Branch 67, in Special Civil Action Case No. 72-BG, is hereby REVERSED and
SET ASIDE.

SO ORDERED.6

The petitioner moved for reconsideration7 questioning the pronouncement of the CA that
Sangguniang Bayan Resolution No. 2007-81 was void and arguing that a petition for mandamus is
not the proper vehicle to determine the issue on the ownership of the subject land. The motion was
denied in the CA Resolution8 dated September 30, 2011.

The petitioner is now before this Court reiterating the arguments raised in his motion for
reconsideration.

Our Ruling

We agree with the CA that the petition for mandamus has already become moot and academic
owing to the expiration of the period intended to be covered by the business permit.

An issue or a case becomes moot and academic when it ceases to present a justiciable controversy
so that a determination thereof would be without practical use and value9 or in the nature of things,
cannot be enforced.10 In such cases, there is no actual substantial relief to which the applicant would
be entitled to and which would be negated by the dismissal of the petition.11 As a rule, courts decline
jurisdiction over such case, or dismiss it on ground of mootness.12

The objective of the petition for mandamus to compel the petitioner to grant a business permit in
favor of respondent corporation for the period 2008 to 2009 has already been superseded by the
passage of time and the expiration of the petitioner’s term as mayor. Verily then, the issue as to
whether or not the petitioner, in his capacity as mayor, may be compelled by a writ of mandamus to
release the respondent’s business permit ceased to present a justiciable controversy such that any
ruling thereon would serve no practical value. Should the writ be issued, the petitioner can no longer
abide thereby; also, the effectivity date of the business permit no longer subsists.

While the CA is not precluded from proceeding to resolve the otherwise moot appeal of the
respondent, we find that the decretal portion of its decision was erroneously couched.

The CA’s conclusions on the issue of ownership over the subject land and the invalidity of
Sangguniang Bayan Resolution No. 2007-81, aside from being unsubstantiated by convincing
evidence, can no longer be practically utilized in favor of the petitioner. Thus, the overriding and
decisive factor in the final disposition of the appeal was its mootness and the CA should have
dismissed the same along with the petition for mandamus that spawned it.

More importantly, a mayor cannot be compelled by mandamus to issue a business permit since the
exercise of the same is a delegated police power hence, discretionary in nature. This was the
pronouncement of this Court in Roble Arrastre, Inc. v. Hon. Villaflor13 where a determination was
made on the nature of the power of a mayor to grant business permits under the Local Government
Code,14 viz:

Central to the resolution of the case at bar is a reading of Section 444(b)(3)(iv) of the Local
Government Code of 1991, which provides, thus:

SEC. 444. The Chief Executive: Powers, Duties, Functions and Compensation.

(b) For efficient, effective and economical governance the purpose of which is the general
welfare of the municipality and its inhabitants pursuant to Section 16 of this Code, the
municipal mayor shall:

xxxx

3) Initiate and maximize the generation of resources and revenues, and apply the same to
the implementation of development plans, program objectives and priorities as provided for
under Section 18 of this Code, particularly those resources and revenues programmed for
agro-industrial development and country-wide growth and progress, and relative thereto,
shall:

xxxx

(iv) Issue licenses and permits and suspend or revoke the same for any violation of the
conditions upon which said licenses or permits had been issued, pursuant to law or
ordinance.

As Section 444(b)(3)(iv) so states, the power of the municipal mayor to issue licenses is pursuant to
Section 16 of the Local Government Code of 1991, which declares:

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.

Section 16, known as the general welfare clause, encapsulates the delegated police power to local
governments. Local government units exercise police power through their respective legislative
1âwphi1

bodies. Evidently, the Local Government Code of 1991 is unequivocal that the municipal mayor has
the power to issue licenses and permits and suspend or revoke the same for any violation of the
conditions upon which said licenses or permits had been issued, pursuant to law or ordinance. x x x

xxxx

Section 444(b)(3)(iv) of the Local Government Code of 1991, whereby the power of the respondent
mayor to issue license and permits is circumscribed, is a manifestation of the delegated police power
of a municipal corporation. Necessarily, the exercise thereof cannot be deemed ministerial. As to the
question of whether the power is validly exercised, the matter is within the province of a writ of
certiorari, but certainly, not of mandamus.15 (Citations omitted)

Indeed, as correctly ruled by the RTC, the petition for mandamus filed by the respondent is
incompetent to compel the exercise of a mayor’s discretionary duty to issue business permits.

WHEREFORE, premises considered, the Decision dated March 30, 2011 of the Court of Appeals in
CA-G.R. SP No. 112152 is hereby SET ASIDE. The Decision dated May 26, 2009 of the Regional
Trial Court of Bauang, La Union is REINSTATED.

SO ORDERED.

8.
MUNICIPALITY OF PARAÑAQUE, Petitioner, v. V.M. REALTY CORPORATION, Respondent.

PANGANIBAN, J.:

A local government unit (LGU), like the Municipality of Parañaque, cannot authorize an expropriation
of private property through a mere resolution of its lawmaking body. The Local Government Code
expressly and clearly requires an ordinance or a local law for the purpose. A resolution that merely
expresses the sentiment or opinion of the Municipal Council will not suffice. On the other hand, the
principle of res judicata does not bar subsequent proceedings for the expropriation of the same
property when all the legal requirements for its valid exercise are complied with.

Statement of the Case

These principles are applied by this Court in resolving this petition for review on certiorari of the July
22, 1996 Decision 1 of the Court of Appeals 2 in CA GR CV No. 48048, which affirmed in toto 3 the
Regional Trial Court's August 9, 1994 Resolution. 4 The trial court dismissed the expropriation suit as
follows:
The right of the plaintiff to exercise the power of eminent domain is not disputed. However, such right
may be exercised only pursuant to an Ordinance (Sec. 19, R.A No. 7160). In the instant case, there is
no such ordinance passed by the Municipal Council of Parañaque enabling the Municipality, thru its
Chief Executive, to exercise the power of eminent domain. The complaint, therefore, states no cause
of action.

Assuming that plaintiff has a cause of action, the same is barred by a prior judgment. On September
29, 1987, the plaintiff filed a complaint for expropriation involving the same parcels of land which was
docketed as Civil Case No. 17939 of this Court (page 26, record). Said case was dismissed with
prejudice on May 18, 1988 (page 39, record). The order of dismissal was not appealed, hence, the
same became final. The plaintiff can not be allowed to pursue the present action without violating the
principle of [r]es [j]udicata. While defendant in Civil Case No. 17939 was Limpan Investment
Corporation, the doctrine of res judicata still applies because the judgment in said case (C.C. No.
17939) is conclusive between the parties and their successors-in-interest (Vda. de Buncio vs. Estate of
the late Anita de Leon). The herein defendant is the successor-in-interest of Limpan Investment
Corporation as shown by the "Deed of Assignment Exchange" executed on June 13, 1990.

WHEREFORE, defendant's motion for reconsideration is hereby granted. The order dated February 4,
1994 is vacated and set aside.

This case is hereby dismissed. No pronouncement as to costs.

SO ORDERED. 5

Factual Antecedents

Pursuant to Sangguniang Bayan Resolution No. 93-95, Series of 1993, 6 the Municipality of Parañaque
filed on September 20, 1993, a Complaint for expropriation 7 against Private Respondent V.M. Realty
Corporation over two parcels of land (Lots 2-A-2 and 2-B-1 of Subdivision Plan Psd-17917), with a
combined area of about 10,000 square meters, located at Wakas, San Dionisio, Parañaque, Metro
Manila, and covered by Torrens Certificate of Title No. 48700. Allegedly, the complaint was filed "for
the purpose of alleviating the living conditions of the underprivileged by providing homes for the
homeless through a socialized housing project." 8 Parenthetically, it was also for this stated purpose
that petitioner, pursuant to its Sangguniang Bayan Resolution No. 577, Series of 1991, 9 previously
made an offer to enter into a negotiated sale of the property with private respondent, which the latter
did not accept. 10

Finding the Complaint sufficient in form and substance, the Regional Trial Court of Makati, Branch 134,
issued an Order dated January 10, 1994, 11 giving it due course. Acting on petitioner's motion, said
court issued an Order dated February 4, 1994, 12 authorizing petitioner to take possession of the
subject property upon deposit with its clerk of court of an amount equivalent to 15 percent of its fair
market value based on its current tax declaration.

On February 21, 1994, private respondent filed its Answer containing affirmative defenses and a
counterclaim, 13 alleging in the main that (a) the complaint failed to state a cause of action because it
was filed pursuant to a resolution and not to an ordinance as required by RA 7160 (the Local
Government Code); and (b) the cause of action, if any, was barred by a prior judgment or res
judicata. On private respondent's motion, its Answer was treated as a motion to dismiss. 14 On March
24, 1991, 15 petitioner filed its opposition, stressing that the trial court's Order dated February 4, 1994
was in accord with Section 19 of RA 7160, and that the principle of res judicata was not applicable.

Thereafter, the trial court issued its August 9, 1994 Resolution 16 nullifying its February 4, 1994 Order
and dismissing the case. Petitioner's motions for reconsideration and transfer of venue were denied by
the trial court in a Resolution dated December 2, 1994. 17 Petitioner then appealed to Respondent
Court, raising the following issues:
1. Whether or not the Resolution of the Parañaque Municipal Council No. 93-95, Series of 1993 is a
substantial compliance of the statutory requirement of Section 19, R.A. 7180 [sic] in the exercise of
the power of eminent domain by the plaintiff-appellant.

2. Whether or not the complaint in this case states no cause of action.

3. Whether or not the strict adherence to the literal observance to the rule of procedure resulted in
technicality standing in the way of substantial justice.

4. Whether or not the principle of res judicata is applicable to the present case. 18

As previously mentioned, the Court of Appeals affirmed in toto the trial court's Decision. Respondent
Court, in its assailed Resolution promulgated on January 8, 1997, 19 denied petitioner's Motion for
Reconsideration for lack of merit.

Hence, this appeal. 20

The Issues

Before this Court, petitioner posits two issues, viz.:

1. A resolution duly approved by the municipal council has the same force and effect of an ordinance
and will not deprive an expropriation case of a valid cause of action.

2. The principle of res judicata as a ground for dismissal of case is not applicable when public interest
is primarily involved. 21

The Court's Ruling

The petition is not meritorious.

First Issue:

Resolution Different from an Ordinance

Petitioner contends that a resolution approved by the municipal council for the purpose of initiating an
expropriation case "substantially complies with the requirements of the law" 22 because the terms
"ordinance" and "resolution" are synonymous for "the purpose of bestowing authority [on] the local
government unit through its chief executive to initiate the expropriation proceedings in court in the
exercise of the power of eminent domain." 23 Petitioner seeks to bolster this contention
by citing Article 36, Rule VI of the Rules and Regulations Implementing the Local Government Code,
which provides. "If the LGU fails to acquire a private property for public use, purpose, or welfare
through purchase, the LGU may expropriate said property through a resolution of
the Sanggunian authorizing its chief executive to initiate expropriation proceedings." 24 (Emphasis
supplied.)

The Court disagrees. The power of eminent domain is lodged in the legislative branch of government,
which may delegate the exercise thereof to LGUs, other public entities and public utilities. 25 An LGU
may therefore exercise the power to expropriate private property only when authorized by Congress
and subject to the latter's control and restraints, imposed "through the law conferring the power or in
other legislations." 26 In this case, Section 19 of RA 7160, which delegates to LGUs the power of
eminent domain, also lays down the parameters for its exercise. It provides as follows:
Sec. 19. Eminent Domain. A local government unit may, through its chief executive and acting
pursuant to an ordinance, exercise the power of eminent domain for public use, or purpose, or welfare
for the benefit of the poor and the landless, upon payment of just compensation, pursuant to the
provisions of the Constitution and pertinent laws: Provided, however, That the power of eminent
domain may not be exercised unless a valid and definite offer has been previously made to the owner,
and such offer was not accepted: Provided, further, That the local government unit may immediately
take possession of the property upon the filing of the expropriation proceedings and upon making a
deposit with the proper court of at least fifteen percent (15%) of the fair market value of the property
based on the current tax declaration of the property to be expropriated: Provided, finally, That, the
amount to be paid for the expropriated property shall be determined by the proper court, based on
the fair market value at the time of the taking of the property. (Emphasis supplied)

Thus, the following essential requisites must concur before an LGU can exercise the power of eminent
domain:

1. An ordinance is enacted by the local legislative council authorizing the local chief executive, in
behalf of the LGU, to exercise the power of eminent domain or pursue expropriation proceedings over
a particular private property.

2. The power of eminent domain is exercised for public use, purpose or welfare, or for the benefit of
the poor and the landless.

3. There is payment of just compensation, as required under Section 9, Article III of the Constitution,
and other pertinent laws.

4. A valid and definite offer has been previously made to the owner of the property sought to be
expropriated, but said offer was not accepted. 27

In the case at bar, the local chief executive sought to exercise the power of eminent domain pursuant
to a resolution of the municipal council. Thus, there was no compliance with the first requisite that the
mayor be authorized through an ordinance. Petitioner cites Camarines Sur vs. Court of Appeals 28 to
show that a resolution may suffice to support the exercise of eminent domain by an LGU. 29 This case,
however, is not in point because the applicable law at that time was BP 337, 30 the previous Local
Government Code, which had provided that a mere resolution would enable an LGU to exercise
eminent domain. In contrast, RA 7160, 31 the present Local Government Code which was already in
force when the Complaint for expropriation was filed, explicitly required an ordinance for this purpose.

We are not convinced by petitioner's insistence that the terms "resolution" and "ordinance" are
synonymous. A municipal ordinance is different from a resolution. An ordinance is a law, but a
resolution is merely a declaration of the sentiment or opinion of a lawmaking body on a specific
matter. 32 An ordinance possesses a general and permanent character, but a resolution is temporary
in nature. Additionally, the two are enacted differently - a third reading is necessary for an ordinance,
but not for a resolution, unless decided otherwise by a majority of all the Sanggunian members. 33

If Congress intended to allow LGUs to exercise eminent domain through a mere resolution, it would
have simply adopted the language of the previous Local Government Code. But Congress did not. In a
clear divergence from the previous Local Government Code, Section 19 of RA 7160 categorically
requires that the local chief executive act pursuant to an ordinance. Indeed, "[l]egislative intent is
determined principally from the language of a statute. Where the language of a statute is clear and
unambiguous, the law is applied according to its express terms, and interpretation would be resorted
to only where a literal interpretation would be resorted to only where a literal interpretation would be
either impossible or absurd or would lead to an injustice." 34 In the instant case, there is no reason to
depart from this rule, since the law requiring an ordinance is not at all impossible, absurd, or unjust.

Moreover, the power of eminent domain necessarily involves a derogation of a fundamental or private
right of the people. 35 Accordingly, the manifest change in the legislative language - from "resolution"
under BP 337 to "ordinance" under RA 7160 - demands a strict construction. "No species of property is
held by individuals with greater tenacity, and is guarded by the Constitution and laws more
sedulously, than the right to the freehold of inhabitants. When the legislature interferes with that right
and, for greater public purposes, appropriates the land of an individual without his consent, the plain
meaning of the law should not be enlarged by doubtful interpretation." 36

Petitioner relies on Article 36, Rule VI of the Implementing Rules, which requires only a resolution to
authorize an LGU to exercise eminent domain. This is clearly misplaced, because Section 19 of RA
7160, the law itself, surely prevails over said rule which merely seeks to implement it. 37 It is
axiomatic that the clear letter of the law is controlling and cannot be amended by a mere
administrative rule issued for its implementation. Besides, what the discrepancy seems to indicate is a
mere oversight in the wording of the implementing rules, since Article 32, Rule VI thereof, also
requires that, in exercising the power of eminent domain, the chief executive of the LGU act pursuant
to an ordinance.

In this ruling, the Court does not diminish the policy embodied in Section 2, Article X of the
Constitution, which provides that "territorial and political subdivisions shall enjoy local autonomy." It
merely upholds the law as worded in RA 7160. We stress that an LGU is created by law and all its
powers and rights are sourced therefrom. It has therefore no power to amend or act beyond the
authority given and the limitations imposed on it by law. Strictly speaking, the power of eminent
domain delegated to an LGU is in reality not eminent but "inferior" domain, since it must conform to
the limits imposed by the delegation, and thus partakes only of a share in eminent domain. 38 Indeed,
"the national legislature is still the principal of the local government units, which cannot defy its will or
modify or violate it." 39

Complaint Does Not

State a Cause of Action

In its Brief filed before Respondent Court, petitioner argues that its Sangguniang Bayan passed an
ordinance on October 11, 1994 which reiterated its Resolution No. 93-35, Series of 1993, and ratified
all the acts of its mayor regarding the subject expropriation. 40

This argument is bereft of merit. In the first place, petitioner merely alleged the existence of such an
ordinance, but it did not present any certified true copy thereof. In the second place, petitioner did not
raise this point before this Court. In fact, it was mentioned by private respondent, and only in
passing. 41 In any event, this allegation does not cure the inherent defect of petitioner's Complaint for
expropriation filed on September 23, 1993. It is hornbook doctrine that

. . . in a motion to dismiss based on the ground that the complaint fails to state a cause of action, the
question submitted before the court for determination is the sufficiency of the allegations in the
complaint itself. Whether those allegations are true or not is beside the point, for their truth is
hypothetically admitted by the motion. The issue rather is: admitting them to be true, may the court
render a valid judgment in accordance with the prayer of the complaint? 42

The fact that there is no cause of action is evident from the face of the Complaint for expropriation
which was based on a mere resolution. The absence of an ordinance authorizing the same is
equivalent to lack of cause of action. Consequently, the Court of Appeals committed no reversible
error in affirming the trial court's Decision which dismissed the expropriation suit.

Second Issue:

Eminent Domain Not Barred by Res Judicata

As correctly found by the Court of Appeals 43 and the trial court, 44 all the requisites for the application
of res judicata are present in this case. There is a previous final judgment on the merits in a prior
expropriation case involving identical interests, subject matter and cause of action, which has been
rendered by a court having jurisdiction over it.

Be that as it may, the Court holds that the principle of res judicata, which finds application in generally
all cases and proceedings, 45 cannot bar the right of the State or its agent to expropriate private
property. The very nature of eminent domain, as an inherent power of the State, dictates that
the right to exercise the power be absolute and unfettered even by a prior judgment or res judicata.
The scope of eminent domain is plenary and, like police power, can "reach every form of property
which the State might need for public use." 46 "All separate interests of individuals in property are held
of the government under this tacit agreement or implied reservation. Notwithstanding the grant to
individuals, the eminent domain, the highest and most exact idea of property, remains in the
government, or in the aggregate body of the people in their sovereign capacity; and they have the
right to resume the possession of the property whenever the public interest requires it." 47 Thus, the
State or its authorized agent cannot be forever barred from exercising said right by reason alone of
previous non-compliance with any legal requirement.

While the principle of res judicata does not denigrate the right of the State to exercise eminent
domain, it does apply to specific issues decided in a previous case. For example, a final judgment
dismissing an expropriation suit on the ground that there was no prior offer precludes another suit
raising the same issue; it cannot, however, bar the State or its agent from thereafter complying with
this requirement, as prescribed by law, and subsequently exercising its power of eminent domain over
the same property. 48 By the same token, our ruling that petitioner cannot exercise its delegated
power of eminent domain through a mere resolution will not bar it from reinstituting similar
proceedings, once the said legal requirement and, for that matter, all others are properly complied
with. Parenthetically and by parity of reasoning, the same is also true of the principle of "law of the
case." In Republic vs. De Knecht, 49 the Court ruled that the power of the State or its agent to
exercise eminent domain is not diminished by the mere fact that a prior final judgment over the
property to be expropriated has become the law of the case as to the parties. The State or its
authorized agent may still subsequently exercise its right to expropriate the same property, once all
legal requirements are complied with. To rule otherwise will not only improperly diminish the power of
eminent domain, but also clearly defeat social justice.

WHEREFORE, the petition is hereby DENIED without prejudice to petitioner's proper exercise of its
power of eminent domain over subject property. Costs against petitioner.

SO ORDERED

9.
REPUBLIC OF THE PHILIPPINES, GENERAL ROMEO ZULUETA, COMMODORE EDGARDO
GALEOS, ANTONIO CABALUNA, DOROTEO MANTOS & FLORENCIO
BELOTINDOS, petitioners,
vs.
VICENTE G. LIM, respondent.

RESOLUTION

SANDOVAL-GUTIERREZ, J.:

Justice is the first virtue of social institutions.1 When the state wields its power of eminent domain,
there arises a correlative obligation on its part to pay the owner of the expropriated property a just
compensation. If it fails, there is a clear case of injustice that must be redressed. In the present case,
fifty-seven (57) years have lapsed from the time the Decision in the subject expropriation
proceedings became final, but still the Republic of the Philippines, herein petitioner, has not
compensated the owner of the property. To tolerate such prolonged inaction on its part is to
encourage distrust and resentment among our people – the very vices that corrode the ties of civility
and tempt men to act in ways they would otherwise shun.

A revisit of the pertinent facts in the instant case is imperative.

On September 5, 1938, the Republic of the Philippines (Republic) instituted a special civil action for
expropriation with the Court of First Instance (CFI) of Cebu, docketed as Civil Case No. 781,
involving Lots 932 and 939 of the Banilad Friar Land Estate, Lahug, Cebu City, for the purpose of
establishing a military reservation for the Philippine Army. Lot 932 was registered in the name of
Gervasia Denzon under Transfer Certificate of Title (TCT) No. 14921 with an area of 25,137 square
meters, while Lot 939 was in the name of Eulalia Denzon and covered by TCT No. 12560 consisting
of 13,164 square meters.

After depositing ₱9,500.00 with the Philippine National Bank, pursuant to the Order of the CFI dated
October 19, 1938, the Republic took possession of the lots. Thereafter, or on May 14, 1940, the CFI
rendered its Decision ordering the Republic to pay the Denzons the sum of ₱4,062.10 as just
compensation.

The Denzons interposed an appeal to the Court of Appeals but it was dismissed on March 11, 1948.
An entry of judgment was made on April 5, 1948.

In 1950, Jose Galeos, one of the heirs of the Denzons, filed with the National Airports Corporation a
claim for rentals for the two lots, but it "denied knowledge of the matter." Another heir, Nestor
Belocura, brought the claim to the Office of then President Carlos Garcia who wrote the Civil
Aeronautics Administration and the Secretary of National Defense to expedite action on said claim.
On September 6, 1961, Lt. Manuel Cabal rejected the claim but expressed willingness to pay the
appraised value of the lots within a reasonable time.

For failure of the Republic to pay for the lots, on September 20, 1961, the Denzons’ successors-in-
interest, Francisca Galeos-Valdehueza and Josefina Galeos-Panerio,2 filed with the same CFI an
action for recovery of possession with damages against the Republic and officers of the Armed
Forces of the Philippines in possession of the property. The case was docketed as Civil Case No. R-
7208.

In the interim or on November 9, 1961, TCT Nos. 23934 and 23935 covering Lots 932 and 939 were
issued in the names of Francisca Valdehueza and Josefina Panerio, respectively. Annotated thereon
was the phrase "subject to the priority of the National Airports Corporation to acquire said parcels of
land, Lots 932 and 939 upon previous payment of a reasonable market value."

On July 31, 1962, the CFI promulgated its Decision in favor of Valdehueza and Panerio, holding that
they are the owners and have retained their right as such over Lots 932 and 939 because of the
Republic’s failure to pay the amount of ₱4,062.10, adjudged in the expropriation proceedings.
However, in view of the annotation on their land titles, they were ordered to execute a deed of sale in
favor of the Republic. In view of "the differences in money value from 1940 up to the present," the
court adjusted the market value at ₱16,248.40, to be paid with 6% interest per annum from April 5,
1948, date of entry in the expropriation proceedings, until full payment.

After their motion for reconsideration was denied, Valdehueza and Panerio appealed from the CFI
Decision, in view of the amount in controversy, directly to this Court. The case was docketed as No.
L-21032.3 On May 19, 1966, this Court rendered its Decision affirming the CFI Decision. It held that
Valdehueza and Panerio are still the registered owners of Lots 932 and 939, there having been no
payment of just compensation by the Republic. Apparently, this Court found nothing in the records to
show that the Republic paid the owners or their successors-in-interest according to the CFI decision.
While it deposited the amount of ₱9,500,00, and said deposit was allegedly disbursed, however, the
payees could not be ascertained.

Notwithstanding the above finding, this Court still ruled that Valdehueza and Panerio are not entitled
to recover possession of the lots but may only demand the payment of their fair market value,
ratiocinating as follows:

"Appellants would contend that: (1) possession of Lots 932 and 939 should be restored to them as
owners of the same; (2) the Republic should be ordered to pay rentals for the use of said lots, plus
attorney’s fees; and (3) the court a quo in the present suit had no power to fix the value of the lots
and order the execution of the deed of sale after payment.

It is true that plaintiffs are still the registered owners of the land, there not having been a transfer of
said lots in favor of the Government. The records do not show that the Government paid the owners
or their successors-in-interest according to the 1940 CFI decision although, as stated, ₱9,500.00
was deposited by it, and said deposit had been disbursed. With the records lost, however, it cannot
be known who received the money (Exh. 14 says: ‘It is further certified that the corresponding
Vouchers and pertinent Journal and Cash Book were destroyed during the last World War, and
therefore the names of the payees concerned cannot be ascertained.’) And the Government now
admits that there is no available record showing that payment for the value of the lots in
question has been made (Stipulation of Facts, par. 9, Rec. on Appeal, p. 28).

The points in dispute are whether such payment can still be made and, if so, in what amount.
Said lots have been the subject of expropriation proceedings. By final and executory
judgment in said proceedings, they were condemned for public use, as part of an airport, and
ordered sold to the Government. In fact, the abovementioned title certificates secured by
plaintiffs over said lots contained annotations of the right of the National Airports
Corporation (now CAA) to pay for and acquire them. It follows that both by virtue of the
judgment, long final, in the expropriation suit, as well as the annotations upon their title
certificates, plaintiffs are not entitled to recover possession of their expropriated lots – which
are still devoted to the public use for which they were expropriated – but only to demand the
fair market value of the same."

Meanwhile, in 1964, Valdehueza and Panerio mortgaged Lot 932 to Vicente Lim, herein
respondent,4 as security for their loans. For their failure to pay Lim despite demand, he had the
mortgage foreclosed in 1976. Thus, TCT No. 23934 was cancelled, and in lieu thereof, TCT No.
63894 was issued in his name.

On August 20, 1992, respondent Lim filed a complaint for quieting of title with the Regional Trial
Court (RTC), Branch 10, Cebu City, against General Romeo Zulueta, as Commander of the Armed
Forces of the Philippines, Commodore Edgardo Galeos, as Commander of Naval District V of the
Philippine Navy, Antonio Cabaluna, Doroteo Mantos and Florencio Belotindos, herein petitioners.
Subsequently, he amended the complaint to implead the Republic.

On May 4, 2001, the RTC rendered a decision in favor of respondent, thus:

"WHEREFORE, judgment is hereby rendered in favor of plaintiff Vicente Lim and against all
defendants, public and private, declaring plaintiff Vicente Lim the absolute and exclusive owner
of Lot No. 932 with all the rights of an absolute owner including the right to possession. The
monetary claims in the complaint and in the counter claims contained in the answer of defendants
are ordered Dismissed.

Petitioners elevated the case to the Court of Appeals, docketed therein as CA-G.R. CV No. 72915.
In its Decision5 dated September 18, 2003, the Appellate Court sustained the RTC Decision, thus:

"Obviously, defendant-appellant Republic evaded its duty of paying what was due to the
landowners. The expropriation proceedings had already become final in the late 1940’s and
yet, up to now, or more than fifty (50) years after, the Republic had not yet paid the
compensation fixed by the court while continuously reaping benefits from the expropriated
property to the prejudice of the landowner. x x x. This is contrary to the rules of fair play
because the concept of just compensation embraces not only the correct determination of
the amount to be paid to the owners of the land, but also the payment for the land within a
reasonable time from its taking. Without prompt payment, compensation cannot be
considered "just" for the property owner is made to suffer the consequence of being
immediately deprived of his land while being made to wait for a decade or more, in this case
more than 50 years, before actually receiving the amount necessary to cope with the loss. To
allow the taking of the landowners’ properties, and in the meantime leave them empty-handed
by withholding payment of compensation while the government speculates on whether or not
it will pursue expropriation, or worse, for government to subsequently decide to abandon the
property and return it to the landowners, is undoubtedly an oppressive exercise of eminent
domain that must never be sanctioned. (Land Bank of the Philippines vs. Court of Appeals, 258
SCRA 404).

xxxxxx

An action to quiet title is a common law remedy for the removal of any cloud or doubt or uncertainty
on the title to real property. It is essential for the plaintiff or complainant to have a legal or equitable
title or interest in the real property, which is the subject matter of the action. Also the deed, claim,
encumbrance or proceeding that is being alleged as cloud on plaintiff’s title must be shown to be in
fact invalid or inoperative despite its prima facie appearance of validity or legal efficacy (Robles vs.
Court of Appeals, 328 SCRA 97). In view of the foregoing discussion, clearly, the claim of
defendant-appellant Republic constitutes a cloud, doubt or uncertainty on the title of plaintiff-
appellee Vicente Lim that can be removed by an action to quiet title.

WHEREFORE, in view of the foregoing, and finding no reversible error in the appealed May 4, 2001
Decision of Branch 9, Regional Trial Court of Cebu City, in Civil Case No. CEB-12701, the said
decision is UPHELD AND AFFIRMED. Accordingly, the appeal is DISMISSED for lack of merit."

Undaunted, petitioners, through the Office of the Solicitor General, filed with this Court a petition for
review on certiorari alleging that the Republic has remained the owner of Lot 932 as held by this
Court in Valdehueza vs. Republic.6

In our Resolution dated March 1, 2004, we denied the petition outright on the ground that the Court
of Appeals did not commit a reversible error. Petitioners filed an urgent motion for reconsideration
but we denied the same with finality in our Resolution of May 17, 2004.

On May 18, 2004, respondent filed an ex-parte motion for the issuance of an entry of judgment. We
only noted the motion in our Resolution of July 12, 2004.

On July 7, 2004, petitioners filed an urgent plea/motion for clarification, which is actually a second
motion for reconsideration. Thus, in our Resolution of September 6, 2004, we simply noted
without action the motion considering that the instant petition was already denied with finality in our
Resolution of May 17, 2004.

On October 29, 2004, petitioners filed a very urgent motion for leave to file a motion for
reconsideration of our Resolution dated September 6, 2004 (with prayer to refer the case to the En
Banc). They maintain that the Republic’s right of ownership has been settled in Valdehueza.

The basic issue for our resolution is whether the Republic has retained ownership of Lot 932 despite
its failure to pay respondent’s predecessors-in-interest the just compensation therefor pursuant to
the judgment of the CFI rendered as early as May 14, 1940.

Initially, we must rule on the procedural obstacle.

While we commend the Republic for the zeal with which it pursues the present case, we reiterate
that its urgent motion for clarification filed on July 7, 2004 is actually a second motion for
reconsideration. This motion is prohibited under Section 2, Rule 52, of the 1997 Rules of Civil
Procedure, as amended, which provides:

"Sec. 2. Second motion for reconsideration. – No second motion for reconsideration of a judgment or
final resolution by the same party shall be entertained."

Consequently, as mentioned earlier, we simply noted without action the motion since petitioners’
petition was already denied with finality.

Considering the Republic’s urgent and serious insistence that it is still the owner of Lot 932 and in
the interest of justice, we take another hard look at the controversial issue in order to determine the
veracity of petitioner’s stance.

One of the basic principles enshrined in our Constitution is that no person shall be deprived of his
private property without due process of law; and in expropriation cases, an essential element of due
process is that there must be just compensation whenever private property is taken for public
use.7 Accordingly, Section 9, Article III, of our Constitution mandates: "Private property shall not be
taken for public use without just compensation."

The Republic disregarded the foregoing provision when it failed and refused to pay respondent’s
predecessors-in-interest the just compensation for Lots 932 and 939. The length of time and the
manner with which it evaded payment demonstrate its arbitrary high-handedness and confiscatory
attitude. The final judgment in the expropriation proceedings (Civil Case No. 781) was entered
on April 5, 1948. More than half of a century has passed, yet, to this day, the landowner, now
respondent, has remained empty-handed. Undoubtedly, over 50 years of delayed payment cannot,
in any way, be viewed as fair. This is more so when such delay is accompanied by bureaucratic
hassles. Apparent from Valdehueza is the fact that respondent’s predecessors-in-interest were given
a "run around" by the Republic’s officials and agents. In 1950, despite the benefits it derived from the
use of the two lots, the National Airports Corporation denied knowledge of the claim of respondent’s
predecessors-in-interest. Even President Garcia, who sent a letter to the Civil Aeronautics
Administration and the Secretary of National Defense to expedite the payment, failed in granting
relief to them. And, on September 6, 1961, while the Chief of Staff of the Armed Forces expressed
willingness to pay the appraised value of the lots, nothing happened. lawphil .net

The Court of Appeals is correct in saying that Republic’s delay is contrary to the rules of fair play,
as "just compensation embraces not only the correct determination of the amount to be paid
to the owners of the land, but also the payment for the land within a reasonable time from its
taking. Without prompt payment, compensation cannot be considered ‘just.’" In jurisdictions
similar to ours, where an entry to the expropriated property precedes the payment of compensation,
it has been held that if the compensation is not paid in a reasonable time, the party may be treated
as a trespasser ab initio.8

Corollarily, in Provincial Government of Sorsogon vs. Vda. De Villaroya,9 similar to the present case,
this Court expressed its disgust over the government’s vexatious delay in the payment of just
compensation, thus:

"The petitioners have been waiting for more than thirty years to be paid for their land which
was taken for use as a public high school. As a matter of fair procedure, it is the duty of the
Government, whenever it takes property from private persons against their will, to supply all required
documentation and facilitate payment of just compensation. The imposition of unreasonable
requirements and vexatious delays before effecting payment is not only galling and arbitrary
but a rich source of discontent with government. There should be some kind of swift and
effective recourse against unfeeling and uncaring acts of middle or lower level bureaucrats."

We feel the same way in the instant case.

More than anything else, however, it is the obstinacy of the Republic that prompted us to dismiss its
petition outright. As early as May 19, 1966, in Valdehueza, this Court mandated the Republic to pay
respondent’s predecessors-in-interest the sum of ₱16,248.40 as "reasonable market value of the
two lots in question." Unfortunately, it did not comply and allowed several decades to pass without
obeying this Court’s mandate. Such prolonged obstinacy bespeaks of lack of respect to private rights
and to the rule of law, which we cannot countenance. It is tantamount to confiscation of private
property. While it is true that all private properties are subject to the need of government, and the
government may take them whenever the necessity or the exigency of the occasion demands,
however, the Constitution guarantees that when this governmental right of expropriation is
exercised, it shall be attended by compensation.10 From the taking of private property by the
government under the power of eminent domain, there arises an implied promise to compensate the
owner for his loss.11

Significantly, the above-mentioned provision of Section 9, Article III of the Constitution is not a grant
but a limitation of power. This limiting function is in keeping with the philosophy of the Bill of Rights
against the arbitrary exercise of governmental powers to the detriment of the individual’s rights.
Given this function, the provision should therefore be strictly interpreted against the expropriator,
the government, and liberally in favor of the property owner.12

Ironically, in opposing respondent’s claim, the Republic is invoking this Court’s Decision
in Valdehueza, a Decision it utterly defied. How could the Republic acquire ownership over Lot 932
when it has not paid its owner the just compensation, required by law, for more than 50 years? The
recognized rule is that title to the property expropriated shall pass from the owner to the expropriator
only upon full payment of the just compensation. Jurisprudence on this settled principle is
consistent both here and in other democratic jurisdictions. In Association of Small Landowners in the
Philippines, Inc. et al., vs. Secretary of Agrarian Reform,13 thus:

"Title to property which is the subject of condemnation proceedings does not vest the
condemnor until the judgment fixing just compensation is entered and paid, but the
condemnor’s title relates back to the date on which the petition under the Eminent Domain Act, or
the commissioner’s report under the Local Improvement Act, is filed.
x x x Although the right to appropriate and use land taken for a canal is complete at the time
of entry, title to the property taken remains in the owner until payment is actually
made. (Emphasis supplied.)

In Kennedy v. Indianapolis, the US Supreme Court cited several cases holding that title to property
does not pass to the condemnor until just compensation had actually been made. In fact, the
decisions appear to be uniform to this effect. As early as 1838, in Rubottom v. McLure, it was held
that ‘actual payment to the owner of the condemned property was a condition precedent to
the investment of the title to the property in the State’ albeit ‘not to the appropriation of it to
public use.’ In Rexford v. Knight, the Court of Appeals of New York said that the construction upon
the statutes was that the fee did not vest in the State until the payment of the compensation although
the authority to enter upon and appropriate the land was complete prior to the payment. Kennedy
further said that ‘both on principle and authority the rule is . . . that the right to enter on and
use the property is complete, as soon as the property is actually appropriated under the
authority of law for a public use, but that the title does not pass from the owner without his
consent, until just compensation has been made to him."

Our own Supreme Court has held in Visayan Refining Co. v. Camus and Paredes, that:

‘If the laws which we have exhibited or cited in the preceding discussion are attentively
examined it will be apparent that the method of expropriation adopted in this jurisdiction is
such as to afford absolute reassurance that no piece of land can be finally and irrevocably
taken from an unwilling owner until compensation is paid...’"(Emphasis supplied.)

Clearly, without full payment of just compensation, there can be no transfer of title from the
landowner to the expropriator. Otherwise stated, the Republic’s acquisition of ownership is
conditioned upon the full payment of just compensation within a reasonable time.14

Significantly, in Municipality of Biñan v. Garcia15 this Court ruled that the expropriation of lands
consists of two stages, to wit:

"x x x The first is concerned with the determination of the authority of the plaintiff to exercise the
power of eminent domain and the propriety of its exercise in the context of the facts involved in the
suit. It ends with an order, if not of dismissal of the action, "of condemnation declaring that the
plaintiff has a lawful right to take the property sought to be condemned, for the public use or purpose
described in the complaint, upon the payment of just compensation to be determined as of the date
of the filing of the complaint" x x x.

The second phase of the eminent domain action is concerned with the determination by the court of
"the just compensation for the property sought to be taken." This is done by the court with the
assistance of not more than three (3) commissioners. x x x.

It is only upon the completion of these two stages that expropriation is said to have been completed.
In Republic v. Salem Investment Corporation,16 we ruled that, "the process is not completed until
payment of just compensation." Thus, here, the failure of the Republic to pay respondent and his
predecessors-in-interest for a period of 57 years rendered the expropriation process incomplete.

The Republic now argues that under Valdehueza, respondent is not entitled to recover possession of
Lot 932 but only to demand payment of its fair market value. Of course, we are aware of the doctrine
that "non-payment of just compensation (in an expropriation proceedings) does not entitle the private
landowners to recover possession of the expropriated lots." This is our ruling in the recent cases
of Republic of the Philippines vs. Court of Appeals, et al.,17 and Reyes vs. National Housing
Authority.18 However, the facts of the present case do not justify its application. It bears stressing that
the Republic was ordered to pay just compensation twice, the first was in the expropriation
proceedings and the second, in Valdehueza. Fifty-seven (57) years have passed since then. We
cannot but construe the Republic’s failure to pay just compensation as a deliberate refusal
on its part. Under such circumstance, recovery of possession is in order. In several jurisdictions,
the courts held that recovery of possession may be had when property has been wrongfully taken or
is wrongfully retained by one claiming to act under the power of eminent domain19 or where a
rightful entry is made and the party condemning refuses to pay the compensation which has
been assessed or agreed upon;20 or fails or refuses to have the compensation assessed and
paid.21

The Republic also contends that where there have been constructions being used by the military, as
in this case, public interest demands that the present suit should not be sustained.

It must be emphasized that an individual cannot be deprived of his property for the public
convenience.22 In Association of Small Landowners in the Philippines, Inc. vs. Secretary of Agrarian
Reform,23 we ruled:

"One of the basic principles of the democratic system is that where the rights of the individual are
concerned, the end does not justify the means. It is not enough that there be a valid objective; it is
also necessary that the means employed to pursue it be in keeping with the Constitution. Mere
expediency will not excuse constitutional shortcuts. There is no question that not even the
strongest moral conviction or the most urgent public need, subject only to a few notable
exceptions, will excuse the bypassing of an individual's rights. It is no exaggeration to say
that a person invoking a right guaranteed under Article III of the Constitution is a majority of
one even as against the rest of the nation who would deny him that right.

The right covers the person’s life, his liberty and his property under Section 1 of Article III of
the Constitution. With regard to his property, the owner enjoys the added protection of
Section 9, which reaffirms the familiar rule that private property shall not be taken for public
use without just compensation."

The Republic’s assertion that the defense of the State will be in grave danger if we shall order the
reversion of Lot 932 to respondent is an overstatement. First, Lot 932 had ceased to operate as an
airport. What remains in the site is just the National Historical Institute’s marking stating that Lot 932
is the "former location of Lahug Airport." And second, there are only thirteen (13) structures located
on Lot 932, eight (8) of which are residence apartments of military personnel. Only two (2)
buildings are actually used as training centers. Thus, practically speaking, the reversion of Lot 932 to
respondent will only affect a handful of military personnel. It will not result to "irreparable damage" or
"damage beyond pecuniary estimation," as what the Republic vehemently claims.

We thus rule that the special circumstances prevailing in this case entitle respondent to recover
possession of the expropriated lot from the Republic. Unless this form of swift and effective relief is
granted to him, the grave injustice committed against his predecessors-in-interest, though no fault or
negligence on their part, will be perpetuated. Let this case, therefore, serve as a wake-up call to the
Republic that in the exercise of its power of eminent domain, necessarily in derogation of private
rights, it must comply with the Constitutional limitations. This Court, as the guardian of the people’s
right, will not stand still in the face of the Republic’s oppressive and confiscatory taking of private
property, as in this case.

At this point, it may be argued that respondent Vicente Lim acted in bad faith in entering into a
contract of mortgage with Valdehueza and Panerio despite the clear annotation in TCT No. 23934
that Lot 932 is "subject to the priority of the National Airports Corporation [to acquire said
parcels of land] x x x upon previous payment of a reasonable market value."

The issue of whether or not respondent acted in bad faith is immaterial considering that the Republic
did not complete the expropriation process. In short, it failed to perfect its title over Lot 932 by its
failure to pay just compensation. The issue of bad faith would have assumed relevance if the
Republic actually acquired title over Lot 932. In such a case, even if respondent’s title was registered
first, it would be the Republic’s title or right of ownership that shall be upheld. But now, assuming
that respondent was in bad faith, can such fact vest upon the Republic a better title over Lot
932? We believe not. This is because in the first place, the Republic has no title to speak of.

At any rate, assuming that respondent had indeed knowledge of the annotation, still nothing would
have prevented him from entering into a mortgage contract involving Lot 932 while the expropriation
proceeding was pending. Any person who deals with a property subject of an expropriation does so
at his own risk, taking into account the ultimate possibility of losing the property in favor of the
government. Here, the annotation merely served as a caveat that the Republic had
a preferential right to acquire Lot 932 upon its payment of a "reasonable market value." It did not
proscribe Valdehueza and Panerio from exercising their rights of ownership including their right to
mortgage or even to dispose of their property. In Republic vs. Salem Investment Corporation,24 we
recognized the owner’s absolute right over his property pending completion of the expropriation
proceeding, thus:

"It is only upon the completion of these two stages that expropriation is said to have been completed.
Moreover, it is only upon payment of just compensation that title over the property passes to the
government. Therefore, until the action for expropriation has been completed and terminated,
ownership over the property being expropriated remains with the registered owner. Consequently,
the latter can exercise all rights pertaining to an owner, including the right to dispose of his
property subject to the power of the State ultimately to acquire it through expropriation.

It bears emphasis that when Valdehueza and Panerio mortgaged Lot 932 to respondent in 1964,
they were still the owners thereof and their title had not yet passed to the petitioner Republic. In fact,
it never did. Such title or ownership was rendered conclusive when we categorically ruled
in Valdehueza that: "It is true that plaintiffs are still the registered owners of the land, there not
having been a transfer of said lots in favor of the Government."

For respondent’s part, it is reasonable to conclude that he entered into the contract of mortgage with
Valdehueza and Panerio fully aware of the extent of his right as a mortgagee. A mortgage is merely
an accessory contract intended to secure the performance of the principal obligation. One of its
characteristics is that it is inseparable from the property. It adheres to the property regardless of
who its owner may subsequently be.25 Respondent must have known that even if Lot 932 is
ultimately expropriated by the Republic, still, his right as a mortgagee is protected. In this regard,
Article 2127 of the Civil Code provides:

"Art. 2127. The mortgage extends to the natural accessions, to the improvements, growing fruits,
and the rents or income not yet received when the obligation becomes due, and to the amount of
the indemnity granted or owing to the proprietor from the insurers of the property mortgaged, or in
virtue of expropriation for public use, with the declarations, amplifications, and limitations
established by law, whether the estate remains in the possession of the mortgagor or it passes
in the hands of a third person.

In summation, while the prevailing doctrine is that "the non-payment of just compensation does not
entitle the private landowner to recover possession of the expropriated lots,26 however, in cases
where the government failed to pay just compensation within five (5)27 years from the finality of
the judgment in the expropriation proceedings, the owners concerned shall have the right to
recover possession of their property. This is in consonance with the principle that "the government
cannot keep the property and dishonor the judgment."28 To be sure, the five-year period limitation will
encourage the government to pay just compensation punctually. This is in keeping with justice and
equity. After all, it is the duty of the government, whenever it takes property from private persons
against their will, to facilitate the payment of just compensation. In Cosculluela v. Court of
Appeals,29 we defined just compensation as not only the correct determination of the amount to be
paid to the property owner but also the payment of the property within a reasonable time. Without
prompt payment, compensation cannot be considered "just."

WHEREFORE, the assailed Decision of the Court of Appeals in CA-G.R. CV No. 72915 is
AFFIRMED in toto.

The Republic’s motion for reconsideration of our Resolution dated March 1, 2004 is DENIED with
FINALITY. No further pleadings will be allowed.

Let an entry of judgment be made in this case.

SO ORDERED

10.
Home > ChanRobles Virtual Law Library > Philippine Supreme Court
Jurisprudence > 2006 Decisions > Masikip vs City of Pasig : 136349 : January
23, 2006 : J. Sandoval-Gutierrez : Second Division : Decision

S E C O N D D I V I S I O N

LOURDES DE LA PAZ G.R. No. 136349

MASIKIP,
Petitioner,
Present:

- versus - PUNO, J., Chairman,

SANDOVAL-GUTIERREZ,
 CORONA,
AZCUNA, and
THE CITY OF PASIG, HON. GARCIA, JJ.
MARIETTA A. LEGASPI, in
her capacity as Presiding
Judge of the Regional Trial Promulgated:
Court of Pasig City, Branch
165 and THE COURT OF
APPEALS, January 23, 2006
Respondents.

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

DECISION

SANDOVAL GUTIERREZ, J.:

Where the taking by the State of private property is done for

the benefit of a small community which seeks to have its own
sports and recreational facility, notwithstanding that there is
such a recreational facility only a short distance away, such
taking cannot be considered to be for public use. Its
expropriation is not valid. In this case, the Court defines what
constitutes a genuine necessity for public use.

This petition for review on certiorari assails the Decision[1] of

the Court of Appeals dated October 31, 1997 in CA-G.R. SP
No. 41860 affirming the Order[2] of the Regional Trial Court,
Branch 165, Pasig City, dated May 7, 1996 in S.C.A. No. 873.
Likewise assailed is the Resolution[3] of the same court dated
November 20, 1998 denying petitioner's Motion for
Reconsideration.

The facts of the case are:

Petitioner Lourdes Dela Paz Masikip is the registered owner of

a parcel of land with an area of 4,521 square meters located
at Pag-Asa, Caniogan, Pasig City, Metro Manila.
In a letter dated January 6, 1994, the then Municipality of
Pasig, now City of Pasig, respondent, notified petitioner of its
intention to expropriate a 1,500 square meter portion of her
property to be used for the 'sports development and
recreational activities' of the residents of Barangay Caniogan.
This was pursuant to Ordinance No. 42, Series of 1993 enacted
by the then Sangguniang Bayan of Pasig.

Again, on March 23, 1994, respondent wrote another letter to

petitioner, but this time the purpose was allegedly 'in line with
the program of the Municipal Government to provide land
opportunities to deserving poor sectors of our community.

On May 2, 1994, petitioner sent a reply to respondent stating

that the intended expropriation of her property is
unconstitutional, invalid, and oppressive, as the area of her lot
is neither sufficient nor suitable to 'provide land opportunities
to deserving poor sectors of our community.

In its letter of December 20, 1994, respondent reiterated that

the purpose of the expropriation of petitioner's property is 'to
provide sports and recreational facilities to its poor residents.

Subsequently, on February 21, 1995, respondent filed with the

trial court a complaint for expropriation, docketed as SCA No.
873. Respondent prayed that the trial court, after due notice
and hearing, issue an order for the condemnation of the
property; that commissioners be appointed for the purpose of
determining the just compensation; and that judgment be
rendered based on the report of the commissioners.

On April 25, 1995, petitioner filed a Motion to Dismiss the

complaint on the following grounds:

I
PLAINTIFF HAS NO CAUSE OF ACTION FOR
THE EXERCISE OF THE POWER OF
EMINENT DOMAIN, CONSIDERING THAT:

(A) THERE IS NO GENUINE

NECESSITY FOR THE TAKING
OF THE PROPERTY SOUGHT
TO BE EXPROPRIATED.
 (B) PLAINTIFF HAS
ARBITRARILY AND
CAPRICIOUSLY CHOSEN THE
PROPERTY SOUGHT TO BE
EXPROPRIATED.

(C) EVEN
ASSUMING ARGUENDO THAT
DEFENDANT'S PROPERTY
MAY BE EXPROPRIATED BY
PLAINTIFF, THE FAIR
MARKET VALUE OF THE
PROPERTY TO BE
EXPROPRIATED FAR
EXCEEDS SEVENTY-EIGHT
THOUSAND PESOS
(P78,000.00)

II

PLAINTIFF'S COMPLAINT IS DEFECTIVE IN

FORM AND SUBSTANCE, CONSIDERING
THAT:

(A) PLAINTIFF FAILS TO

ALLEGE WITH CERTAINTY
THE PURPOSE OF THE
EXPROPRIATION.

(B) PLAINTIFF HAS FAILED

TO COMPLY WITH THE
PREREQUISITES LAID DOWN
IN SECTION 34, RULE VI OF
THE RULES AND
REGULATIONS
IMPLEMENTING THE LOCAL
GOVERNMENT CODE; THUS,
THE INSTANT
EXPROPRIATION
PROCEEDING IS
PREMATURE.

III
 THE GRANTING OF THE EXPROPRIATION
WOULD VIOLATE SECTION 261 (V) OF THE
OMNIBUS ELECTION CODE.

IV

PLAINTIFF CANNOT TAKE POSSESSION OF

THE SUBJECT PROPERTY BY MERELY
DEPOSITING AN AMOUNT EQUAL TO
FIFTEEN PERCENT (15%) OF THE VALUE
OF THE PROPERTY BASED ON THE
CURRENT TAX DECLARATION OF THE
SUBJECT PROPERTY.[4]

On May 7, 1996, the trial court issued an Order denying the

Motion to Dismiss,[5] on the ground that there is a genuine
necessity to expropriate the property for the sports and
recreational activities of the residents of Pasig. As to the
issue of just compensation, the trial court held that the same
is to be determined in accordance with the Revised Rules of
Court.

Petitioner filed a motion for reconsideration but it was denied

by the trial court in its Order of July 31, 1996. Forthwith, it
appointed the City Assessor and City Treasurer of Pasig City
as commissioners to ascertain the just compensation. This
prompted petitioner to file with the Court of Appeals a special
civil action for certiorari, docketed as CA-G.R. SP No. 41860.
On October 31, 1997, the Appellate Court dismissed the
petition for lack of merit. Petitioner's Motion for
Reconsideration was denied in a Resolution dated November
20, 1998.

Hence, this petition anchored on the following grounds:

THE QUESTIONED DECISION DATED 31

OCTOBER 1997 (ATTACHMENT 'A')
AND RESOLUTION DATED 20 NOVEMBER
1998 (ATTACHMENT 'B') ARE CONTRARY
TO LAW, THE RULES OF COURT AND
JURISPRUDENCE CONSIDERING THAT:

I
 A. THERE IS' NO EVIDENCE
TO PROVE THAT
THERE IS GENUINE
NECESSITY FOR THE
TAKING OF THE
PETITIONER'S
PROPERTY.

B. THERE IS' NO EVIDENCE

TO PROVE THAT THE
PUBLIC USE
REQUIREMENT FOR
THE EXERCISE OF THE
POWER OF EMINENT
DOMAIN HAS BEEN
COMPLIED WITH.

C. THERE IS' NO EVIDENCE

TO PROVE THAT
RESPONDENT CITY OF
PASIG HAS COMPLIED
WITH ALL
CONDITIONS
PRECEDENT FOR THE
EXERCISE OF THE
POWER OF EMINENT
DOMAIN.

THE COURT A QUOS ORDER DATED 07

MAY 1996 AND 31 JULY 1996, WHICH
WERE AFFIRMED BY THE COURT OF
APPEALS, EFFECTIVELY AMOUNT TO THE
TAKING OF PETITIONER'S PROPERTY
WITHOUT DUE PROCESS OF LAW:

II

THE COURT OF APPEALS

GRAVELY ERRED IN
APPLYING OF RULE ON
ACTIONABLE DOCUMENTS
TO THE DOCUMENTS
ATTACHED TO RESPONDENT
CITY OF
PASIG'S COMPLAINT DATED
07 APRIL 1995 TO JUSTIFY
 THE COURT A QUO'S DENIAL
OF PETITIONER'S
RESPONSIVE PLEADING TO
THE COMPLAINT FOR
EXPROPRIATION (THE
MOTION TO DISMISS DATED
21 APRIL 1995).

III

THE COURT OF APPEALS

GRAVELY ERRED IN
APPLYING THE RULE ON
HYPOTHETICAL ADMISSION
OF FACTS ALLEGED IN A
COMPLAINT CONSIDERING
THAT THE MOTION TO
DISMISS FILED BY
PETITIONER IN THE
EXPROPRIATION CASE
BELOW WAS THE
RESPONSIVE PLEADING
REQUIRED TO BE FILED
UNDER THE THEN RULE 67
OF THE RULES OF COURT
AND NOT AN ORIDNARY
MOTION TO DISMISS UNDER
RULE 16 OF THE RULES OF
COURT.

The foregoing arguments may be synthesized into two main

issues ' one substantive and one procedural. We will first
address the procedural issue.

Petitioner filed her Motion to Dismiss the complaint for

expropriation on April 25, 1995. It was denied by the trial
court on May 7, 1996. At that time, the rule on expropriation
was governed by Section 3, Rule 67 of the Revised Rules of
Court which provides:

'SEC. 3. Defenses and objections. Within the time

specified in the summons, each defendant, in lieu
of an answer, shall present in a single motion to
dismiss or for other appropriate relief, all his
objections and defenses to the right of the
 plaintiff to take his property for the use or
purpose specified in the complaint. All such
objections and defenses not so presented are
waived. A copy of the motion shall be served on
the plaintiff's attorney of record and filed with the
court with proof of service.

The motion to dismiss contemplated in the above Rule clearly

constitutes the responsive pleading which takes the place of
an answer to the complaint for expropriation. Such motion is
the pleading that puts in issue the right of the plaintiff to
expropriate the defendant's property for the use specified in
the complaint. All that the law requires is that a copy of the
said motion be served on plaintiff's attorney of record. It is the
court that at its convenience will set the case for trial after the
filing of the said pleading.[6]

The Court of Appeals therefore erred in holding that the motion

to dismiss filed by petitioner hypothetically admitted the truth
of the facts alleged in the complaint, specifically that there is
a genuine necessity to expropriate petitioner's property for
public use. Pursuant to the above Rule, the motion is a
responsive pleading joining the issues. What the trial court
should have done was to set the case for the reception of
evidence to determine whether there is indeed a genuine
necessity for the taking of the property, instead of summarily
making a finding that the taking is for public use and
appointing commissioners to fix just compensation. This is
especially so considering that the purpose of the expropriation
was squarely challenged and put in issue by petitioner in her
motion to dismiss.

Significantly, the above Rule allowing a defendant in an

expropriation case to file a motion to dismiss in lieu of an
answer was amended by the 1997 Rules of Civil Procedure,
which took effect on July 1, 1997. Section 3, Rule 67 now
expressly mandates that any objection or defense to the
taking of the property of a defendant must be set forth in an
answer.

The fact that the Court of Appeals rendered its Decision in CA-
G.R. SP No. 41860 on October 31, after the 1997 Rules of Civil
Procedure took effect, is of no moment. It is only fair that the
Rule at the time petitioner filed her motion to dismiss should
govern. The new provision cannot be applied retroactively to
her prejudice.

We now proceed to address the substantive issue.

In the early case of US v. Toribio,[7] this Court defined the

power of eminent domain as 'the right of a government to take
and appropriate private property to public use, whenever the
public exigency requires it, which can be done only on
condition of providing a reasonable compensation therefor. It
has also been described as the power of the State or its
instrumentalities to take private property for public use and is
inseparable from sovereignty and inherent in government.[8]

The power of eminent domain is lodged in the legislative

branch of the government. It delegates the exercise thereof to
local government units, other public entities and public utility
corporations,[9] subject only to Constitutional limitations.
Local governments have no inherent power of eminent domain
and may exercise it only when expressly authorized by
statute.[10] Section 19 of the Local Government Code of 1991
(Republic Act No. 7160) prescribes the delegation by Congress
of the power of eminent domain to local government units and
lays down the parameters for its exercise, thus:

SEC. 19. Eminent Domain. ' A local government

unit may, through its chief executive and acting
pursuant to an ordinance, exercise the power of
eminent domain for public use, purpose or
welfare for the benefit of the poor and the
landless, upon payment of just compensation,
pursuant to the provisions of the Constitution and
pertinent laws: Provided, however, That, the
power of eminent domain may not be exercised
unless a valid and definite offer has been
previously made to the owner and such offer was
not accepted: Provided, further, That, the local
government unit may immediately take
possession of the property upon the filing of
expropriation proceedings and upon making a
deposit with the proper court of at least fifteen
percent (15%) of the fair market value of the
 property based on the current tax declaration of
the property to be
expropriated: Provided, finally, That, the amount
to be paid for expropriated property shall be
determined by the proper court, based on the fair
market value at the time of the taking of the
property.

Judicial review of the exercise of eminent domain is limited to

the following areas of concern: (a) the adequacy of the
compensation, (b) the necessity of the taking, and (c) the
public use character of the purpose of the taking.[11]

In this case, petitioner contends that respondent City of Pasig

failed to establish a genuine necessity which justifies the
condemnation of her property. While she does not dispute the
intended public purpose, nonetheless, she insists that there
must be a genuine necessity for the proposed use and
purposes. According to petitioner, there is already an
established sports development and recreational activity
center at Rainforest Park in Pasig City, fully operational and
being utilized by its residents, including those from Barangay
Caniogan. Respondent does not dispute this. Evidently, there
is no 'genuine necessity to justify the expropriation.

The right to take private property for public purposes

necessarily originates from 'the necessity and the taking must
be limited to such necessity. In City of Manila v. Chinese
Community of Manila,[12] we held that the very foundation
of the right to exercise eminent domain is a genuine
necessity and that necessity must be of a public
character. Moreover, the ascertainment of the necessity
must precede or accompany and not follow, the taking of the
land. In City of Manila v. Arellano Law College,[13] we ruled
that 'necessity within the rule that the particular property to
be expropriated must be necessary, does not mean an
absolute but only a reasonable or practical necessity, such as
would combine the greatest benefit to the public with the least
inconvenience and expense to the condemning party and the
property owner consistent with such benefit.

Applying this standard, we hold that respondent City of Pasig

has failed to establish that there is a genuine necessity to
expropriate petitioner's property. Our scrutiny of the records
shows that the Certification[14] issued by the Caniogan
Barangay Council dated November 20, 1994, the basis for the
passage of Ordinance No. 42 s. 1993 authorizing the
expropriation, indicates that the intended beneficiary is the
Melendres Compound Homeowners Association, a private,
non-profit organization, not the residents of Caniogan. It can
be gleaned that the members of the said Association are
desirous of having their own private playground and
recreational facility. Petitioner's lot is the nearest vacant space
available. The purpose is, therefore, not clearly and
categorically public. The necessity has not been shown,
especially considering that there exists an alternative facility
for sports development and community recreation in the area,
which is the Rainforest Park, available to all residents of Pasig
City, including those of Caniogan.

The right to own and possess property is one of the most

cherished rights of men. It is so fundamental that it has been
written into organic law of every nation where the rule of law
prevails. Unless the requisite of genuine necessity for the
expropriation of one's property is clearly established, it shall
be the duty of the courts to protect the rights of individuals to
their private property. Important as the power of eminent
domain may be, the inviolable sanctity which the Constitution
attaches to the property of the individual requires not only that
the purpose for the taking of private property be specified. The
genuine necessity for the taking, which must be of a public
character, must also be shown to exist.

WHEREFORE, the petition for review is GRANTED. The

challenged Decision and Resolution of the Court of Appeals in
CA-G.R. SP No. 41860 are REVERSED. The complaint for
expropriation filed before the trial court by respondent City of
Pasig, docketed as SCA No. 873, is ordered DISMISSED.

SO ORDERED.
11.
AMOS P. FRANCIA, JR., CECILIA P. FRANCIA, and HEIRS OF BENJAMIN P.
FRANCIA, Petitioners,
vs.
MUNICIPALITY OF MEYCAUAYAN, Respondent.

RESOLUTION

CORONA, J.:

On February 6, 2003, respondent Municipality of Meycauayan, Bulacan filed a complaint for

expropriation1 against petitioners Amos P. Francia, Jr., Cecilia P. Francia and Benjamin P.
Francia2 in the Regional Trial Court (RTC) of Malolos, Bulacan, Branch 16. Respondent needed
petitioners' 16,256 sq. m. idle property at the junction of the North Expressway, Malhacan-Iba-
Camalig main road artery and the MacArthur Highway.3 It planned to use it to establish a common
public terminal for all types of public utility vehicles with a weighing scale for heavy trucks.

In their answer,4 petitioners denied that the property sought to be expropriated was raw land. It was
in fact developed5 and there were plans for further development. For this reason, respondent’s offer
price of ₱2,333,500 (or ₱111.99 per square meter) was too low.

After trial, the RTC ruled that the expropriation was for a public purpose. The construction of a
common terminal for all public utility conveyances (serving as a two-way loading and unloading point
for commuters and goods) would improve the flow of vehicular traffic during rush hours. Moreover,
the property was the best site for the proposed terminal because of its accessibility. Thus, on
November 8, 2004, the RTC issued the following order:6

WHEREFORE, premises considered, after [respondent] has deposited with this Court the fifteen
percent (15%) of the fair market value of the property based on the current tax declaration of the
property to be expropriated, it may take immediate possession of the property upon issuance of writ
of possession that this court will issue for that purpose.

Further, the purposes of assessment and determination of the area needed that will suit the purpose
of expropriation and just compensation of the lot sought to be expropriated, the court hereby
appoints commissioners to be composed of the officer-in-charge of this court, Lerida Socorro E.
Joson and one each from [respondent] and [petitioners].

Notify all parties concerned.

SO ORDERED.7

Petitioners moved for the reconsideration of the November 8, 2004 order but the motion was denied
in an order dated January 31, 2005.

Aggrieved, petitioners filed a petition for certiorari in the Court of Appeals (CA) contending that the
RTC committed grave abuse of discretion in issuing its November 8, 2004 and January 31, 2005
orders. They claimed that the trial court issued the orders without conducting a hearing to determine
the existence of a public purpose.
On July 28, 2005, the CA rendered a decision8 partially granting the petition. Finding that petitioners
were deprived of an opportunity to controvert respondent's allegations, the appellate court nullified
the order of expropriation except with regard to the writ of possession. According to the CA, a
hearing was not necessary because once the expropriator deposited the required amount (with the
Court), the issuance of a writ of possession became ministerial.

Petitioners moved for partial reconsideration but their motion was denied. Hence, this recourse.

Petitioners essentially aver that the CA erred in upholding the RTC's orders that, in expropriation
cases, prior determination of the existence of a public purpose was not necessary for the issuance of
a writ of possession.

We deny the petition.

Section 19 of Republic Act 71609 provides:

Section 19. Eminent Domain. ― A local government unit may, through its chief executive and acting
pursuant to an ordinance, exercise the power of eminent domain for public use, or purpose, or
welfare for the benefit of the poor and the landless, upon payment of just compensation, pursuant to
the provisions of the Constitution and pertinent laws; Provided, however, That the power of eminent
domain may not be exercised unless a valid and definite offer has been previously made to the
owner, and that such offer was not accepted; Provided, further, That the local government unit
may immediately take possession of the property upon the filing of the expropriation
proceedings and upon making a deposit with the proper court of at least fifteen
percent (15%) of the fair market value of the property based on the current tax declaration of
the property to be expropriated; Provided, finally, That, the amount to be paid for the expropriated
property shall be determined by the proper court, based on the fair market value at the time of the
taking of the property. (emphasis supplied)10

Before a local government unit may enter into the possession of the property sought to be
expropriated, it must (1) file a complaint for expropriation sufficient in form and substance in the
proper court and (2) deposit with the said court at least 15% of the property's fair market value based
on its current tax declaration.11 The law does not make the determination of a public purpose a
condition precedent to the issuance of a writ of possession.12

WHEREFORE, the petition is hereby DENIED.

Costs against petitioners.

SO ORDERED

12.
G.R. No. 93654 May 6, 1992
FRANCISCO U. DACANAY, petitioner,
vs.
MAYOR MACARIO ASISTIO, JR., CITY ENGR. LUCIANO SARNE, JR. of Kalookan City, Metro
Manila, MILA PASTRANA AND/OR RODOLFO TEOFE, STALLHOLDERS AND REPRESENTING
CO-STALLHOLDERS, respondents.

David D. Advincula, Jr. for petitioner.

Juan P. Banaga for private respondents.

GRIÑO-AQUINO, J.:

May public streets or thoroughfares be leased or licensed to market stallholders by virtue of a city
ordinance or resolution of the Metro Manila Commission? This issue is posed by the petitioner, an
aggrieved Caloocan City resident who filed a special civil action of mandamus against the incumbent
city mayor and city engineer, to compel these city officials to remove the market stalls from certain
city streets which the aforementioned city officials have designated as flea markets, and the private
respondents (stallholders) to vacate the streets.

On January 5, 1979, MMC Ordinance No. 79-02 was enacted by the Metropolitan Manila
Commission, designating certain city and municipal streets, roads and open spaces as sites for flea
markets. Pursuant, thereto, the Caloocan City mayor opened up seven (7) flea markets in that city.
One of those streets was the "Heroes del '96" where the petitioner lives. Upon application of vendors
Rodolfo Teope, Mila Pastrana, Carmen Barbosa, Merle Castillo, Bienvenido Menes, Nancy Bugarin,
Jose Manuel, Crisaldo Paguirigan, Alejandro Castron, Ruben Araneta, Juanita and Rafael
Malibaran, and others, the respondents city mayor and city engineer, issued them licenses to
conduct vending activities on said street.

In 1987, Antonio Martinez, as OIC city mayor of Caloocan City, caused the demolition of the market
stalls on Heroes del '96, V. Gozon and Gonzales streets. To stop Mayor Martinez' efforts to clear the
city streets, Rodolfo Teope, Mila Pastrana and other stallowners filed an action for prohibition
against the City of Caloocan, the OIC City Mayor and the City Engineer and/or their deputies (Civil
Case No. C-12921) in the Regional Trial Court of Caloocan City, Branch 122, praying the court to
issue a writ of preliminary injunction ordering these city officials to discontinue the demolition of their
stalls during the pendency of the action.

The court issued the writ prayed for. However, on December 20, 1987, it dismissed the petition and
lifted the writ of preliminary injunction which it had earlier issued. The trial court observed that:

A perusal of Ordinance 2, series of 1979 of the Metropolitan Manila Commission will

show on the title itself that it is an ordinance ––

Authorizing and regulating the use of certain city and/or municipal

streets, roads and open spaces within Metropolitan Manila as sites
for flea market and/or vending areas, under certain terms and
conditions, subject to the approval of the Metropolitan Manila
Commission, and for other purposes

which is further amplified in Section 2 of the said ordinance, quoted hereunder:

 Sec. 2. The streets, roads and open spaces to be used as sites for flea markets
(tiangge) or vending areas; the design, measurement or specification of the
structures, equipment and apparatuses to be used or put up; the allowable distances;
the days and time allowed for the conduct of the businesses and/or activities herein
authorized; the rates or fees or charges to be imposed, levied and collected; the
kinds of merchandise, goods and commodities sold and services rendered; and other
matters and activities related to the establishment, maintenance and management
and operation of flea markets and vending areas, shall be determined and prescribed
by the mayors of the cities and municipalities in the Metropolitan Manila where the
same are located, subject to the approval of the Metropolitan Manila
Commission and consistent with the guidelines hereby prescribed.

Further, it is so provided in the guidelines under the said Ordinance No. 2 of the
MMC that —

Sec. 6. In the establishment, operation, maintenance and management of flea

markets and vending areas, the following guidelines, among others, shall be
observed:

xxx xxx xxx

(m) That the permittee shall remove the equipment, facilities and other
appurtenances used by him in the conduct of his business after the close or
termination of business hours. (Emphasis ours; pp. 15-16, Rollo.)

The trial court found that Heroes del '96, Gozon and Gonzales streets are of public dominion, hence,
outside the commerce of man:

The Heroes del '96 street, V. Gozon street and Gonzales street, being of public
dominion must, therefore, be outside of the commerce of man. Considering the
nature of the subject premises, the following jurisprudence co/principles are
applicable on the matter:

1) They cannot be alienated or leased or otherwise be the subject

matter of contracts. (Municipality of Cavite vs. Rojas, 30 Phil. 602);

2) They cannot be acquired by prescription against the state (Insular

Government vs. Aldecoa, 19 Phil. 505). Even municipalities can not
acquire them for use as communal lands against the state (City of
Manila vs. Insular Government, 10 Phil. 327);

3) They are not subject to attachment and execution (Tan Toco vs.
Municipal Council of Iloilo, 49 Phil. 52);

4) They cannot be burdened by any voluntary easement (2-II Colin &

Capitant 520) (Tolentino, Civil Code of the Phils., Vol. II, 1983 Ed. pp.
29-30).

In the aforecited case of Municipality of Cavite vs. Rojas, it was held

that properties for public use may not be leased to private individuals.
Such a lease is null and void for the reason that a municipal council
 cannot withdraw part of the plaza from public use. If possession has
already been given, the lessee must restore possession by vacating it
and the municipality must thereupon restore to him any sums it may
have collected as rent.

In the case of City of Manila vs. Gerardo Garcia, 19 SCRA 413, the
Supreme Court held:

The property being a public one, the Manila Mayors

did not have the authority to give permits, written or
oral, to the squatters, and that the permits granted are
therefore considered null and void.

This doctrine was reiterated in the case of Baguio

Citizens Action Inc. vs. The City Council, 121 SCRA
368, where it was held that:

An ordinance legalizing the occupancy by squatters of

public land is null and void.

The authority of respondent Municipality of Makati to demolish the

shanties of the petitioner's members is mandated by
P.D. 772, and Sec. 1 of Letter of Instruction No. 19 orders certain
public officials, one of whom is the Municipal Mayor to remove all
illegal constructions including buildings on and along esteros and
river banks, those along railroad tracks and those built without
permits on public or private property (Zansibarian Residents
Association vs. Mun. of Makati, 135 SCRA 235). The City Engineer is
also among those required to comply with said Letter of Instruction.

The occupation and use of private individuals of sidewalks and other

public places devoted for public use constitute both public and private
nuisances and nuisance per se, and this applies to even case
involving the use or lease of public places under permits and licenses
issued by competent authority, upon the theory that such holders
could not take advantage of their unlawful permits and license and
claim that the land in question is a part of a public street or a public
place devoted to public use, hence, beyond the commerce of man.
(Padilla, Civil Code Annotated, Vol. II, p. 59, 6th Ed., citing Umali vs.
Aquino, IC. A. Rep. 339.)

From the aforequoted jurisprudence/principles, the Court opines that defendants

have the right to demolish the subject stalls of the plaintiffs, more so when Section
185, par. 4 of Batas Pambansa Blg. 337, otherwise known as the Local Government
Code provides that the City Engineer shall:

(4) . . .

(c) Prevent the encroachment of private buildings and

fences on the streets and public places;

xxx xxx xxx

 (j) Inspect and supervise the construction, repair,
removal and safety of private buildings;

xxx xxx xxx

(k) With the previous approval of the City Mayor in

each case, order the removal of materials employed
in the construction or repair of any building or
structures made in violation of law or ordinance, and
cause buildings and structures dangerous to the
public to made secure or torn down;

xxx xxx xxx

Further, the Charter of the City of Caloocan, Republic Act No. 5502, Art. VII, Sec. 27,
par. g, 1 and m, grants the City Engineer similar powers. (Emphasis supplied; pp. 17-
20, Rollo.)

However, shortly after the decision came out, the city administration in Caloocan City changed
hands. City Mayor Macario Asistio, Jr., as successor of Mayor Martinez, did not pursue the latter's
policy of clearing and cleaning up the city streets.

Invoking the trial court's decision in Civil Case No. C-12921, Francisco U. Dacanay, a concerned
citizen, taxpayer and registered voter of Barangay 74, Zone 7, District II of Caloocan City, who
resides on Heroes del '96 Street, one of the affected streets, wrote a letter dated March 7, 1988 to
Mayor Asistio, Jr., calling his attention to the illegally-constructed stalls on Heroes del '96 Street and
asked for their demolition.

Dacanay followed up that letter with another one dated April 7, 1988 addressed to the mayor and the
city engineer, Luciano Sarne, Jr. (who replaced Engineer Arturo Samonte), inviting their attention to
the Regional Trial Court's decision in Civil Case No. 12921. There was still no response.

Dacanay sought President Corazon C. Aquino's intervention by writing her a letter on the matter. His
letter was referred to the city mayor for appropriate action. The acting Caloocan City secretary,
Asuncion Manalo, in a letter dated August 1, 1988, informed the Presidential Staff Director that the
city officials were still studying the issue of whether or not to proceed with the demolition of the
market stalls.

Dacanay filed a complaint against Mayor Asistio and Engineer Sarne (OMB-0-89-0146) in the Office
of the OMBUDSMAN. In their letter-comment dated April 3, 1989, said city officials explained that in
view of the huge number of stallholders involved, not to mention their dependents, it would be harsh
and inhuman to eject them from the area in question, for their relocation would not be an easy task.

In reply, Dacanay maintained that respondents have been derelict in the performance of their duties
and through manifest partiality constituting a violation of Section 3(e) of R.A. 3019, have caused
undue injury to the Government and given unwarranted benefits to the stallholders.

After conducting a preliminary investigation, the OMBUDSMAN rendered a final evaluation and
report on August 28, 1989, finding that the respondents' inaction is purely motivated by their
perceived moral and social responsibility toward their constituents, but "the fact remains that there is
an omission of an act which ought to be performed, in clear violation of Sections 3(e) and (f) of
Republic Act 3019." (pp. 83-84, Rollo.) The OMBUDSMAN recommended the filing of the
corresponding information in court.

As the stallholders continued to occupy Heroes del '96 Street, through the tolerance of the public
respondents, and in clear violation of the decision it Civil Case No. C-12921, Dacanay filed the
present petition for mandamus on June 19, 1990, praying that the public respondents be ordered to
enforce the final decision in Civil Case No. C-12921 which upheld the city mayor's authority to order
the demolition of market stalls on V. Gozon, Gonzales and Heroes del '96 Streets and to enforce
P.D. No. 772 and other pertinent laws.

On August 16, 1990, the public respondents, through the City Legal Officer, filed their Comment' on
the petition. The Office of the Solicitor General asked to be excused from filing a separate Comment
in behalf of the public respondents. The City Legal Officer alleged that the vending area was
transferred to Heroes del '96 Street to decongest Malonzo Street, which is comparatively a busier
thoroughfare; that the transfer was made by virtue of Barangay Resolution No. 30 s'78 dated
January 15, 1978; that while the resolution was awaiting approval by the Metropolitan Manila
Commission, the latter passed Ordinance No. 79-2, authorizing the use of certain streets and open
spaces as sites for flea markets and/or vending areas; that pursuant thereto, Acting MMC Mayor
Virgilio P. Robles issued Executive Order No. 135 dated January 10, 1979, ordering the
establishment and operation of flea markets in specified areas and created the Caloocan City Flea
Market Authority as a regulatory body; and that among the sites chosen and approved by the Metro
Manila Commission, Heroes del '96 Street has considered "most viable and progressive, lessening
unemployment in the city and servicing the residents with affordable basic necessities."

The petition for mandamus is meritorious.

There is no doubt that the disputed areas from which the private respondents' market stalls are
sought to be evicted are public streets, as found by the trial court in Civil Case No. C-12921. A public
street is property for public use hence outside the commerce of man (Arts. 420, 424, Civil Code).
Being outside the commerce of man, it may not be the subject of lease or other contract (Villanueva
et al. vs. Castañeda and Macalino, 15 SCRA 142, citing the Municipality of Cavite vs. Rojas, 30
SCRA 602; Espiritu vs. Municipal Council of Pozorrubio, 102 Phil. 869; and Muyot vs. De la Fuente,
48 O.G. 4860).

As the stallholders pay fees to the City Government for the right to occupy portions of the public
street, the City Government, contrary to law, has been leasing portions of the streets to them. Such
leases or licenses are null and void for being contrary to law. The right of the public to use the city
streets may not be bargained away through contract. The interests of a few should not prevail over
the good of the greater number in the community whose health, peace, safety, good order and
general welfare, the respondent city officials are under legal obligation to protect.

The Executive Order issued by Acting Mayor Robles authorizing the use of Heroes del '96 Street as
a vending area for stallholders who were granted licenses by the city government contravenes the
general law that reserves city streets and roads for public use. Mayor Robles' Executive Order may
not infringe upon the vested right of the public to use city streets for the purpose they were intended
to serve: i.e., as arteries of travel for vehicles and pedestrians. As early as 1989, the public
respondents bad started to look for feasible alternative sites for flea markets. They have had more
than ample time to relocate the street vendors.

WHEREFORE, it having been established that the petitioner and the general public have a legal
right to the relief demanded and that the public respondents have the corresponding duty, arising
from public office, to clear the city streets and restore them to their specific public purpose (Enriquez
vs. Bidin, 47 SCRA 183; City of Manila vs. Garcia et al., 19 SCRA, 413 citing Unson vs. Lacson, 100
Phil. 695), the respondents City Mayor and City Engineer of Caloocan City or their successors in
office are hereby ordered to immediately enforce and implement the decision in Civil Case No. C-
1292 declaring that Heroes del '96, V. Gozon, and Gonzales Streets are public streets for public use,
and they are ordered to remove or demolish, or cause to be removed or demolished, the market
stalls occupying said city streets with utmost dispatch within thirty (30)days from notice of this
decision. This decision is immediately executory.

SO ORDERED

13.
G.R. No. L-61311 September 2l, 1987

FELICIDAD VILLANUEVA, FERNANDO CAISIP, ANTONIO LIANG, FELINA MIRANDA,

RICARDO PUNO, FLORENCIO LAXA, and RENE OCAMPO, petitioners,
vs.
HON. MARIANO CASTAÑEDA, JR., Presiding Judge of the Court of First Instance of
Pampanga, Branch III, VICENTE A. MACALINO, Officer-in-Charge, Office of the Mayor, San
Fernando, Pampanga, respondents.

CRUZ, J.:

There is in the vicinity of the public market of San Fernando, Pampanga, along Mercado Street, a
strip of land measuring 12 by 77 meters on which stands a conglomeration of vendors stalls together
forming what is commonly known as a talipapa. This is the subject of the herein petition. The
petitioners claim they have a right to remain in and conduct business in this area by virtue of a
previous authorization granted to them by the municipal government. The respondents deny this and
justify the demolition of their stalls as illegal constructions on public property. At the petitioners'
behest, we have issued a temporary restraining order to preserve the status quo between the parties
pending our decision. 1 Now we shall rule on the merits.

This dispute goes back to November 7, 1961, when the municipal council of San Fernando adopted
Resolution No. 218 authorizing some 24 members of the Fernandino United Merchants and Traders
Association to construct permanent stags and sell in the above-mentioned place. 2 The action was
protested on November 10, 1961, in Civil Case No. 2040, where the Court of First Instance of
Pampanga, Branch 2, issued a writ of preliminary injunction that prevented the defendants from
constructing the said stalls until final resolution of the controversy. 3 On January 18, 1964, while this
case was pending, the municipal council of San Fernando adopted Resolution G.R. No. 29, which
declared the subject area as "the parking place and as the public plaza of the municipality, 4 thereby
impliedly revoking Resolution No. 218, series of 1961. Four years later, on November 2, 1968,
Judge Andres C. Aguilar decided the aforesaid case and held that the land occupied by the
petitioners, being public in nature, was beyond the commerce of man and therefore could not be the
subject of private occupancy. 5 The writ of preliminary injunction was made permanent. 6
The decision was apparently not enforced, for the petitioners were not evicted from the place; in fact,
according to then they and the 128 other persons were in 1971 assigned specific areas or space
allotments therein for which they paid daily fees to the municipal government. 7 The problem appears
to have festered for some more years under a presumably uneasy truce among the protagonists,
none of whom made any move, for some reason that does not appear in the record. Then, on
January 12, 1982, the Association of Concerned Citizens and Consumers of San Fernando filed a
petition for the immediate implementation of Resolution No. 29, to restore the subject property "to its
original and customary use as a public plaza. 8

Acting thereon after an investigation conducted by the municipal attorney, 9 respondent Vicente A.
Macalino, as officer-in-charge of the office of the mayor of San Fernando, issued on June 14, 1982,
a resolution requiring the municipal treasurer and the municipal engineer to demolish the stalls in the
subject place beginning July 1, 1982. 10 The reaction of the petitioners was to file a petition for prohibition with the Court of
First Instance of Pampanga, docketed as Civil Case No. 6470, on June 26, 1982. The respondent judge denied the petition on July 19,
1982, 11 and the motion for reconsideration on August 5, 1982, 12 prompting the petitioners to come to this Court on certiorari to challenge
his decision. 13

As required, respondent Macalino filed his comment 14 on the petition, and the petitioners countered with their reply. 15 In compliance with
our resolution of February 2, 1983, the petitioners submitted their memorandum 16 and respondent Macalino, for his part, asked that his
comment be considered his memorandum. 17 On July 28, 1986, the new officer-in-charge of the office of the mayor of San Fernando,
Paterno S. Guevarra, was impleaded in lieu of Virgilio Sanchez, who had himself earlier replaced the original respondent Macalino. 18

After considering the issues and the arguments raised by the parties in their respective pleadings,
we rule for the respondents. The petition must be dismissed.

There is no question that the place occupied by the petitioners and from which they are sought to be
evicted is a public plaza, as found by the trial court in Civil Case No. 2040. This finding was made
after consideration of the antecedent facts as especially established by the testimony of former San
Fernando Mayor Rodolfo Hizon, who later became governor of Pampanga, that the National
Planning Commission had reserved the area for a public plaza as early as 1951. This intention was
reiterated in 1964 through the adoption of Resolution No. 29. 19

It does not appear that the decision in this case was appealed or has been reversed. In Civil Case G.R. No. 6740, which is the subject of this
petition, the respondent judge saw no reason to disturb the finding in Civil Case No. 2040 and indeed used it as a basis for his own decision
sustaining the questioned order. 20

The basic contention of the petitioners is that the disputed area is under lease to them by virtue of
contracts they had entered into with the municipal government, first in 1961 insofar as the original
occupants were concerned, and later with them and the other petitioners by virtue of the space
allocations made in their favor in 1971 for which they saw they are paying daily fees. 21 The municipal
government has denied making such agreements. In any case, they argue, since the fees were
collected daily, the leases, assuming their validity, could be terminated at will, or any day, as the
claimed rentals indicated that the period of the leases was from day to day. 22

The parties belabor this argument needlessly.

A public plaza is beyond the commerce of man and so cannot be the subject of lease or any other
contractual undertaking. This is elementary. Indeed, this point was settled as early as in Municipality
of Cavite vs. Rojas, 23 decided in 1915, where the Court declared as null and void the lease of a
public plaza of the said municipality in favor of a private person.

Justice Torres said in that case:

 According to article 344 of the Civil Code: "Property for public use in provinces and in
towns comprises the provincial and town roads, the squares, streets, fountains, and
public waters, the promenades, and public works of general service supported by
said towns or provinces.

The said Plaza Soledad being a promenade for public use, the municipal council of
Cavite could not in 1907 withdraw or exclude from public use a portion thereof in
order to lease it for the sole benefit of the defendant Hilaria Rojas. In leasing a
portion of said plaza or public place to the defendant for private use the plaintiff
municipality exceeded its authority in the exercise of its powers by executing a
contract over a thing of which it could not dispose, nor is it empowered so to do.

The Civil Code, article 1271, prescribes that everything which is not outside the
commerce of man may be the object of a contract, and plazas and streets are
outside of this commerce, as was decided by the supreme court of Spain in its
decision of February 12, 1895, which says: "communal things that cannot be sold
because they are by their very nature outside of commerce are those for public use,
such as the plazas, streets, common lands, rivers, fountains, etc."

Therefore, it must be concluded that the contract, Exhibit C, whereby the municipality
of Cavite leased to Hilaria Rojas a portion of the Plaza Soledad is null and void and
of no force or effect, because it is contrary to the law and the thing leased cannot be
the object of a was held that the City of contract.

In Muyot vs. de la Fuente, 24 it was held that the City of Manila could not lease a portion of a public
sidewalk on Plaza Sta. Cruz, being likewise beyond the commerce of man.

Echoing Rojas, the decision said:

Appellants claim that they had obtained permit from the present of the City of Manila,
to connect booths Nos. 1 and 2, along the premises in question, and for the use of
spaces where the booths were constructed, they had paid and continued paying the
corresponding rentals. Granting this claim to be true, one should not entertain any
doubt that such permit was not legal, because the City of Manila does not have any
power or authority at all to lease a portion of a public sidewalk. The sidewalk in
question, forming part of the public plaza of Sta. Cruz, could not be a proper subject
matter of the contract, as it was not within the commerce of man (Article 1347, new
Civil Code, and article 1271, old Civil Code). Any contract entered into by the City of
Manila in connection with the sidewalk, is ipso facto null and ultra vires. (Municipality
of Cavite vs. Roxas, et a1, 30 Phil. 603.) The sidewalk in question was intended for
and was used by the public, in going from one place to another. "The streets and
public places of the city shall be kept free and clear for the use of the public, and the
sidewalks and crossings for the pedestrians, and the same shall only be used or
occupied for other purpose as provided by ordinance or regulation; ..." (Sec. 1119,
Revised Ordinances of the City of Manila.) The booths in question served as fruit
stands for their owners and often, if not always, blocked the fire passage of
pedestrians who had to take the plaza itself which used to be clogged with vehicular
traffic.

Exactly in point is Espiritu vs. Municipal Council of Pozorrubio, 25 where the Supreme Court declared:
 There is absolutely no question that the town plaza cannot be used for the
construction of market stalls, specially of residences, and that such structures
constitute a nuisance subject to abatement according to law. Town plazas are
properties of public dominion, to be devoted to public use and to be made available
to the public in general They are outside the common of man and cannot be
disposed of or even leased by the municipality to private parties.

Applying this well-settled doctrine, we rule that the petitioners had no right in the first place to occupy
the disputed premises and cannot insist in remaining there now on the strength of their alleged lease
contracts. They should have realized and accepted this earlier, considering that even before Civil
Case No. 2040 was decided, the municipalcouncil of San Fernando had already adopted Resolution
No. 29, series of 1964, declaring the area as the parking place and public plaza of the municipality.

It is the decision in Civil Case No. 2040 and the said resolution of the municipal council of San
Fernando that respondent Macalino was seeking to enforce when he ordered the demolition of the
stags constructed in the disputed area. As officer-in-charge of the office of the mayor, he had the
duty to clear the area and restore it to its intended use as a parking place and public plaza of the
municipality of San Fernando, conformably to the aforementioned orders from the court and the
council. It is, therefore, not correct to say that he had acted without authority or taken the law into his
hands in issuing his order.

Neither can it be said that he acted whimsically in exercising his authority for it has been established
that he directed the demolition of the stalls only after, upon his instructions, the municipal attorney
had conducted an investigation, to look into the complaint filed by the Association of Concerned
Citizens and Consumers of San Fernando. 26 There is evidence that the petitioners were notified of
this hearing, 27which they chose to disregard. Photographs of the disputed area, 28 which does look
congested and ugly, show that the complaint was valid and that the area really needed to be
cleared, as recommended by the municipal attorney.

The Court observes that even without such investigation and recommendation, the respondent
mayor was justified in ordering the area cleared on the strength alone of its status as a public plaza
as declared by the judicial and legislative authorities. In calling first for the investigation (which the
petitioner saw fit to boycott), he was just scrupulously paying deference to the requirements of due
process, to remove an taint of arbitrariness in the action he was caged upon to take.

Since the occupation of the place in question in 1961 by the original 24 stallholders (whose number
later ballooned to almost 200), it has deteriorated increasingly to the great prejudice of the
community in general. The proliferation of stags therein, most of them makeshift and of flammable
materials, has converted it into a veritable fire trap, which, added to the fact that it obstructs access
to and from the public market itself, has seriously endangered public safety. The filthy condition of
the talipapa, where fish and other wet items are sold, has aggravated health and sanitation
problems, besides pervading the place with a foul odor that has spread into the surrounding areas.
The entire place is unsightly, to the dismay and embarrassment of the inhabitants, who want it
converted into a showcase of the town of which they can all be proud. The vendors in
the talipapa have also spilled into the street and obstruct the flow of traffic, thereby impairing the
convenience of motorists and pedestrians alike. The regular stallholders in the public market, who
pay substantial rentals to the municipality, are deprived of a sizable volume of business from
prospective customers who are intercepted by the talipapa vendors before they can reach the
market proper. On top of all these, the people are denied the proper use of the place as a public
plaza, where they may spend their leisure in a relaxed and even beautiful environment and civic and
other communal activities of the town can be held.
The problems caused by the usurpation of the place by the petitioners are covered by the police
power as delegated to the municipality under the general welfare clause. 29 This authorizes the
municipal council "to enact such ordinances and make such regulations, not repugnant to law, as
may be necessary to carry into effect and discharge the powers and duties conferred upon it by law
and such as shall seem necessary and proper to provide for the health and safety, promote the
prosperity, improve the morals, peace, good order, comfort, and convenience of the municipality and
the inhabitants thereof, and for the protection of property therein." This authority was validly
exercised in this casethrough the adoption of Resolution No. 29, series of 1964, by the municipal
council of San Fernando.

Even assuming a valid lease of the property in dispute, the resolution could have effectively
terminated the agreement for it is settled that the police power cannot be surrendered or bargained
away through the medium of a contract. 30 In fact, every contract affecting the public interest suffers a
congenital infirmity in that it contains an implied reservation of the police power as a postulate of the
existing legal order. 31 This power can be activated at any time to change the provisions of the
contract, or even abrogate it entirely, for the promotion or protection of the general welfare. Such an
act will not militate against the impairment clause, which is subject to and limited by the paramount
police power. 32

We hold that the respondent judge did not commit grave abuse of discretion in denying the petition
for prohibition. On the contrary, he acted correctly in sustaining the right and responsibility of the
mayor to evict the petitioners from the disputed area and clear it of an the structures illegally
constructed therein.

The Court feels that it would have been far more amiable if the petitioners themselves, recognizing
their own civic duty, had at the outset desisted from their original stance and withdrawn in good
grace from the disputed area to permit its peaceful restoration as a public plaza and parking place
for the benefit of the whole municipality. They owned this little sacrifice to the community in general
which has suffered all these many years because of their intransigence. Regrettably, they have
refused to recognize that in the truly democratic society, the interests of the few should yield to those
of the greater number in deference to the principles that the welfare of the people is the supreme law
and overriding purpose. We do not see any altruism here. The traditional ties of sharing are absent
here. What we find, sad to say, is a cynical disdaining of the spirit of "bayanihan," a selfish rejection
of the cordial virtues of "pakikisama " and "pagbibigayan" which are the hallmarks of our people.

WHEREFORE, the petition is DISMISSED. The decision dated July 19, 1982, and the order-dated
August 5, 1982, are AFFIRMED. The temporary restraining order dated August 9, 1982, is LIFTED.
This decision is immediately executory. Costs against the petitioners.

SO ORDERED