[G.R. No. 132988.

July 19, 2000]

AQUILINO Q. PIMENTEL JR., petitioner, vs. Hon. ALEXANDER AGUIRRE in his capacity as Executive Secretary, Hon.
EMILIA BONCODIN in her capacity as Secretary of the Department of Budget and Management, respondents.

ROBERTO PAGDANGANAN, intervenor.

DECISION

PANGANIBAN, J.:

The Constitution vests the President with the power of supervision, not control, over local government units (LGUs).
Such power enables him to see to it that LGUs and their officials execute their tasks in accordance with law. While he
may issue advisories and seek their cooperation in solving economic difficulties, he cannot prevent them from
performing their tasks and using available resources to achieve their goals. He may not withhold or alter any
authority or power given them by the law. Thus, the withholding of a portion of internal revenue allotments legally
due them cannot be directed by administrative fiat.

The Case

Before us is an original Petition for Certiorari and Prohibition seeking (1) to annul Section 1 of Administrative Order
(AO) No. 372, insofar as it requires local government units to reduce their expenditures by 25 percent of their
authorized regular appropriations for non-personal services; and (2) to enjoin respondents from implementing
Section 4 of the Order, which withholds a portion of their internal revenue allotments.

On November 17, 1998, Roberto Pagdanganan, through Counsel Alberto C. Agra, filed a Motion for
Intervention/Motion to Admit Petition for Intervention,[1] attaching thereto his Petition in Intervention[2] joining
petitioner in the reliefs sought. At the time, intervenor was the provincial governor of Bulacan, national president of
the League of Provinces of the Philippines and chairman of the League of Leagues of Local Governments. In a
Resolution dated December 15, 1998, the Court noted said Motion and Petition.

The Facts and the Arguments

On December 27, 1997, the President of the Philippines issued AO 372. Its full text, with emphasis on the assailed
provisions, is as follows:

"ADMINISTRATIVE ORDER NO. 372

ADOPTION OF ECONOMY MEASURES IN GOVERNMENT FOR FY 1998

WHEREAS, the current economic difficulties brought about by the peso depreciation requires continued prudence in
government fiscal management to maintain economic stability and sustain the country's growth momentum;

WHEREAS, it is imperative that all government agencies adopt cash management measures to match expenditures
with available resources;

NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the Philippines, by virtue of the powers vested in
me by the Constitution, do hereby order and direct:

SECTION 1. All government departments and agencies, including state universities and colleges, government-owned
and controlled corporations and local governments units will identify and implement measures in FY 1998 that will
reduce total expenditures for the year by at least 25% of authorized regular appropriations for non-personal services
items, along the following suggested areas:

1. Continued implementation of the streamlining policy on organization and staffing by deferring action on the
following:

a. Operationalization of new agencies;

1
b. Expansion of organizational units and/or creation of positions;

c. Filling of positions; and

d. Hiring of additional/new consultants, contractual and casual personnel, regardless of funding source.

2. Suspension of the following activities:

a. Implementation of new capital/infrastructure projects, except those which have already been contracted out;

b. Acquisition of new equipment and motor vehicles;

c. All foreign travels of government personnel, except those associated with scholarships and trainings funded by
grants;

d. Attendance in conferences abroad where the cost is charged to the government except those clearly essential to
Philippine commitments in the international field as may be determined by the Cabinet;

e. Conduct of trainings/workshops/seminars, except those conducted by government training institutions and

agencies in the performance of their regular functions and those that are funded by grants;

f. Conduct of cultural and social celebrations and sports activities, except those associated with the Philippine
Centennial celebration and those involving regular competitions/events;

g. Grant of honoraria, except in cases where it constitutes the only source of compensation from government
received by the person concerned;

h. Publications, media advertisements and related items, except those required by law or those already being
undertaken on a regular basis;

i. Grant of new/additional benefits to employees, except those expressly and specifically authorized by law; and

j. Donations, contributions, grants and gifts, except those given by institutions to victims of calamities.

3. Suspension of all tax expenditure subsidies to all GOCCs and LGUs

4. Reduction in the volume of consumption of fuel, water, office supplies, electricity and other utilities

5. Deferment of projects that are encountering significant implementation problems

6. Suspension of all realignment of funds and the use of savings and reserves

SECTION 2. Agencies are given the flexibility to identify the specific sources of cost-savings, provided the 25%
minimum savings under Section 1 is complied with.

SECTION 3. A report on the estimated savings generated from these measures shall be submitted to the Office of the
President, through the Department of Budget and Management, on a quarterly basis using the attached format.

SECTION 4. Pending the assessment and evaluation by the Development Budget Coordinating Committee of the
emerging fiscal situation, the amount equivalent to 10% of the internal revenue allotment to local government units
shall be withheld.

SECTION 5. The Development Budget Coordination Committee shall conduct a monthly review of the fiscal position
of the National Government and if necessary, shall recommend to the President the imposition of additional reserves
or the lifting of previously imposed reserves.

SECTION 6. This Administrative Order shall take effect January 1, 1998 and shall remain valid for the entire year
unless otherwise lifted.

DONE in the City of Manila, this 27th day of December, in the year of our Lord, nineteen hundred and ninety-seven."

Subsequently, on December 10, 1998, President Joseph E. Estrada issued AO 43, amending Section 4 of AO 372, by
reducing to five percent (5%) the amount of internal revenue allotment (IRA) to be withheld from the LGUs.

2
Petitioner contends that the President, in issuing AO 372, was in effect exercising the power of control over LGUs.
The Constitution vests in the President, however, only the power of general supervision over LGUs, consistent with
the principle of local autonomy. Petitioner further argues that the directive to withhold ten percent (10%) of their
IRA is in contravention of Section 286 of the Local Government Code and of Section 6, Article X of the Constitution,
providing for the automatic release to each of these units its share in the national internal revenue.

The solicitor general, on behalf of the respondents, claims on the other hand that AO 372 was issued to alleviate the
"economic difficulties brought about by the peso devaluation" and constituted merely an exercise of the President's
power of supervision over LGUs. It allegedly does not violate local fiscal autonomy, because it merely directs local
governments to identify measures that will reduce their total expenditures for non-personal services by at least 25
percent. Likewise, the withholding of 10 percent of the LGUs IRA does not violate the statutory prohibition on the
imposition of any lien or holdback on their revenue shares, because such withholding is "temporary in nature
pending the assessment and evaluation by the Development Coordination Committee of the emerging fiscal
situation."

The Issues

The Petition[3] submits the following issues for the Court's resolution:

"A. Whether or not the president committed grave abuse of discretion [in] ordering all LGUS to adopt a 25% cost
reduction program in violation of the LGU[']S fiscal autonomy

"B. Whether or not the president committed grave abuse of discretion in ordering the withholding of 10% of the
LGU[']S IRA"

In sum, the main issue is whether (a) Section 1 of AO 372, insofar as it "directs" LGUs to reduce their expenditures by
25 percent; and (b) Section 4 of the same issuance, which withholds 10 percent of their internal revenue allotments,
are valid exercises of the President's power of general supervision over local governments.

Additionally, the Court deliberated on the question whether petitioner had the locus standi to bring this suit, despite
respondents' failure to raise the issue.[4] However, the intervention of Roberto Pagdanganan has rendered academic
any further discussion on this matter.

The Court's Ruling

The Petition is partly meritorious.

Main Issue:

Validity of AO 372

Insofar as LGUs Are Concerned

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

Scope of President's Power of Supervision Over LGUs

Section 4 of Article X of the Constitution confines the President's power over local governments to one of general
supervision. It reads as follows:

"Sec. 4. The President of the Philippines shall exercise general supervision over local governments. x x x"

This provision has been interpreted to exclude the power of control. In Mondano v. Silvosa,[5] the Court contrasted
the President's power of supervision over local government officials with that of his power of control over executive
officials of the national government. It was emphasized that the two terms -- supervision and control -- differed in
meaning and extent. The Court distinguished them as follows:

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"x x x In administrative law, supervision means overseeing or the power or authority of an officer to see that
subordinate officers perform their duties. If the latter fail or neglect to fulfill them, the former may take such action
or step as prescribed by law to make them perform their duties. Control, on the other hand, means the power of an
officer to alter or modify or nullify or set aside what a subordinate officer ha[s] done in the performance of his duties
and to substitute the judgment of the former for that of the latter."[6]

In Taule v. Santos,[7] we further stated that the Chief Executive wielded no more authority than that of checking
whether local governments or their officials were performing their duties as provided by the fundamental law and by
statutes. He cannot interfere with local governments, so long as they act within the scope of their authority.
"Supervisory power, when contrasted with control, is the power of mere oversight over an inferior body; it does not
include any restraining authority over such body,"[8] we said.

In a more recent case, Drilon v. Lim,[9] the difference between control and supervision was further delineated.
Officers in control lay down the rules in the performance or accomplishment of an act. If these rules are not
followed, they may, in their discretion, order the act undone or redone by their subordinates or even decide to do it
themselves. On the other hand, supervision does not cover such authority. Supervising officials merely see to it that
the rules are followed, but they themselves do not lay down such rules, nor do they have the discretion to modify or
replace them. If the rules are not observed, they may order the work done or redone, but only to conform to such
rules. They may not prescribe their own manner of execution of the act. They have no discretion on this matter
except to see to it that the rules are followed.

Under our present system of government, executive power is vested in the President.[10] The members of the
Cabinet and other executive officials are merely alter egos. As such, they are subject to the power of control of the
President, at whose will and behest they can be removed from office; or their actions and decisions changed,
suspended or reversed.[11] In contrast, the heads of political subdivisions are elected by the people. Their sovereign
powers emanate from the electorate, to whom they are directly accountable. By constitutional fiat, they are subject
to the Presidents supervision only, not control, so long as their acts are exercised within the sphere of their
legitimate powers. By the same token, the President may not withhold or alter any authority or power given them by
the Constitution and the law.

Extent of Local Autonomy

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

In Ganzon v. Court of Appeals,[13] we said that local autonomy signified "a more responsive and accountable local
government structure instituted through a system of decentralization." The grant of autonomy is intended to "break
up the monopoly of the national government over the affairs of local governments, x x x not x x x to end the relation
of partnership and interdependence between the central administration and local government units x x x."
Paradoxically, local governments are still subject to regulation, however limited, for the purpose of enhancing self-
government.[14]

Decentralization simply means the devolution of national administration, not power, to local governments. Local
officials remain accountable to the central government as the law may provide.[15] The difference between
decentralization of administration and that of power was explained in detail in Limbona v. Mangelin[16] as follows:

"Now, autonomy is either decentralization of administration or decentralization of power. There is decentralization

of administration when the central government delegates administrative powers to political subdivisions in order to
broaden the base of government power and in the process to make local governments 'more responsive and
accountable,'[17] and 'ensure their fullest development as self-reliant communities and make them more effective
partners in the pursuit of national development and social progress.'[18] At the same time, it relieves the central
government of the burden of managing local affairs and enables it to concentrate on national concerns. The
President exercises 'general supervision'[19] over them, but only to 'ensure that local affairs are administered
according to law.'[20] He has no control over their acts in the sense that he can substitute their judgments with his
own.[21]

Decentralization of power, on the other hand, involves an abdication of political power in the favor of local
government units declared to be autonomous. In that case, the autonomous government is free to chart its own
destiny and shape its future with minimum intervention from central authorities. According to a constitutional

4
author, decentralization of power amounts to 'self-immolation,' since in that event, the autonomous government
becomes accountable not to the central authorities but to its constituency."[22]

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

The Nature of AO 372

Consistent with the foregoing jurisprudential precepts, let us now look into the nature of AO 372. As its preambular
clauses declare, the Order was a "cash management measure" adopted by the government "to match expenditures
with available resources," which were presumably depleted at the time due to "economic difficulties brought about
by the peso depreciation." Because of a looming financial crisis, the President deemed it necessary to "direct all
government agencies, state universities and colleges, government-owned and controlled corporations as well as
local governments to reduce their total expenditures by at least 25 percent along suggested areas mentioned in AO
372.

Under existing law, local government units, in addition to having administrative autonomy in the exercise of their
functions, enjoy fiscal autonomy as well. Fiscal autonomy means that local governments have the power to create
their own sources of revenue in addition to their equitable share in the national taxes released by the national
government, as well as the power to allocate their resources in accordance with their own priorities. It extends to
the preparation of their budgets, and local officials in turn have to work within the constraints thereof. They are not
formulated at the national level and imposed on local governments, whether they are relevant to local needs and
resources or not. Hence, the necessity of a balancing of viewpoints and the harmonization of proposals from both
local and national officials,[24] who in any case are partners in the attainment of national goals.

Local fiscal autonomy does not however rule out any manner of national government intervention by way of
supervision, in order to ensure that local programs, fiscal and otherwise, are consistent with national goals.
Significantly, the President, by constitutional fiat, is the head of the economic and planning agency of the
government,[25] primarily responsible for formulating and implementing continuing, coordinated and integrated
social and economic policies, plans and programs[26] for the entire country. However, under the Constitution, the
formulation and the implementation of such policies and programs are subject to "consultations with the
appropriate public agencies, various private sectors, and local government units." The President cannot do so
unilaterally.

Consequently, the Local Government Code provides:[27]

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

There are therefore several requisites before the President may interfere in local fiscal matters: (1) an unmanaged
public sector deficit of the national government; (2) consultations with the presiding officers of the Senate and the
House of Representatives and the presidents of the various local leagues; and (3) the corresponding
recommendation of the secretaries of the Department of Finance, Interior and Local Government, and Budget and
Management. Furthermore, any adjustment in the allotment shall in no case be less than thirty percent (30%) of the
collection of national internal revenue taxes of the third fiscal year preceding the current one.

5
Petitioner points out that respondents failed to comply with these requisites before the issuance and the
implementation of AO 372. At the very least, they did not even try to show that the national government was
suffering from an unmanageable public sector deficit. Neither did they claim having conducted consultations with
the different leagues of local governments. Without these requisites, the President has no authority to adjust, much
less to reduce, unilaterally the LGU's internal revenue allotment.

The solicitor general insists, however, that AO 372 is merely directory and has been issued by the President
consistent with his power of supervision over local governments. It is intended only to advise all government
agencies and instrumentalities to undertake cost-reduction measures that will help maintain economic stability in
the country, which is facing economic difficulties. Besides, it does not contain any sanction in case of noncompliance.
Being merely an advisory, therefore, Section 1 of AO 372 is well within the powers of the President. Since it is not a
mandatory imposition, the directive cannot be characterized as an exercise of the power of control.

While the wordings of Section 1 of AO 372 have a rather commanding tone, and while we agree with petitioner that
the requirements of Section 284 of the Local Government Code have not been satisfied, we are prepared to accept
the solicitor general's assurance that the directive to "identify and implement measures x x x that will reduce total
expenditures x x x by at least 25% of authorized regular appropriation" is merely advisory in character, and does not
constitute a mandatory or binding order that interferes with local autonomy. The language used, while authoritative,
does not amount to a command that emanates from a boss to a subaltern.

Rather, the provision is merely an advisory to prevail upon local executives to recognize the need for fiscal restraint
in a period of economic difficulty. Indeed, all concerned would do well to heed the President's call to unity, solidarity
and teamwork to help alleviate the crisis. It is understood, however, that no legal sanction may be imposed upon
LGUs and their officials who do not follow such advice. It is in this light that we sustain the solicitor general's
contention in regard to Section 1.

Withholding a Part of LGUs' IRA

Section 4 of AO 372 cannot, however, be upheld. A basic feature of local fiscal autonomy is the automatic release of
the shares of LGUs in the national internal revenue. This is mandated by no less than the Constitution.[28] The Local
Government Code[29] specifies further that the release shall be made directly to the LGU concerned within five (5)
days after every quarter of the year and "shall not be subject to any lien or holdback that may be imposed by the
national government for whatever purpose."[30] As a rule, the term "shall" is a word of command that must be given
a compulsory meaning.[31] The provision is, therefore, imperative.

Section 4 of AO 372, however, orders the withholding, effective January 1, 1998, of 10 percent of the LGUs' IRA
"pending the assessment and evaluation by the Development Budget Coordinating Committee of the emerging fiscal
situation" in the country. Such withholding clearly contravenes the Constitution and the law. Although temporary, it
is equivalent to a holdback, which means "something held back or withheld, often temporarily."[32] Hence, the
"temporary" nature of the retention by the national government does not matter. Any retention is prohibited.

In sum, while Section 1 of AO 372 may be upheld as an advisory effected in times of national crisis, Section 4 thereof
has no color of validity at all. The latter provision effectively encroaches on the fiscal autonomy of local governments.
Concededly, the President was well-intentioned in issuing his Order to withhold the LGUs IRA, but the rule of law
requires that even the best intentions must be carried out within the parameters of the Constitution and the law.
Verily, laudable purposes must be carried out by legal methods.

Refutation of Justice Kapunan's Dissent

Mr. Justice Santiago M. Kapunan dissents from our Decision on the grounds that, allegedly, (1) the Petition is
premature; (2) AO 372 falls within the powers of the President as chief fiscal officer; and (3) the withholding of the
LGUs IRA is implied in the President's authority to adjust it in case of an unmanageable public sector deficit.

First, on prematurity. According to the Dissent, when "the conduct has not yet occurred and the challenged
construction has not yet been adopted by the agency charged with administering the administrative order, the
determination of the scope and constitutionality of the executive action in advance of its immediate adverse effect
involves too remote and abstract an inquiry for the proper exercise of judicial function."

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This is a rather novel theory -- that people should await the implementing evil to befall on them before they can
question acts that are illegal or unconstitutional. Be it remembered that the real issue here is whether the
Constitution and the law are contravened by Section 4 of AO 372, not whether they are violated by the acts
implementing it. In the unanimous en banc case Taada v. Angara,[33] this Court held that when an act of the
legislative department is seriously alleged to have infringed the Constitution, settling the controversy becomes the
duty of this Court. By the mere enactment of the questioned law or the approval of the challenged action, the
dispute is said to have ripened into a judicial controversy even without any other overt act. Indeed, even a singular
violation of the Constitution and/or the law is enough to awaken judicial duty. Said the Court:

"In seeking to nullify an act of the Philippine Senate on the ground that it contravenes the Constitution, the petition
no doubt raises a justiciable controversy. Where an action of the legislative branch is seriously alleged to have
infringed the Constitution, it becomes not only the right but in fact the duty of the judiciary to settle the dispute.
'The question thus posed is judicial rather than political. The duty (to adjudicate) remains to assure that the
supremacy of the Constitution is upheld.'[34] Once a 'controversy as to the application or interpretation of a
constitutional provision is raised before this Court x x x , it becomes a legal issue which the Court is bound by
constitutional mandate to decide.'[35]

xxxxxxxxx

"As this Court has repeatedly and firmly emphasized in many cases,[36] it will not shirk, digress from or abandon its
sacred duty and authority to uphold the Constitution in matters that involve grave abuse of discretion brought
before it in appropriate cases, committed by any officer, agency, instrumentality or department of the government."

In the same vein, the Court also held in Tatad v. Secretary of the Department of Energy:[37]

"x x x Judicial power includes not only the duty of the courts to settle actual controversies involving rights which are
legally demandable and enforceable, but also the duty to determine whether or not there has been grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of government.
The courts, as guardians of the Constitution, have the inherent authority to determine whether a statute enacted by
the legislature transcends the limit imposed by the fundamental law. Where the statute violates the Constitution, it
is not only the right but the duty of the judiciary to declare such act unconstitutional and void."

By the same token, when an act of the President, who in our constitutional scheme is a coequal of Congress, is
seriously alleged to have infringed the Constitution and the laws, as in the present case, settling the dispute becomes
the duty and the responsibility of the courts.

Besides, the issue that the Petition is premature has not been raised by the parties; hence it is deemed waived.
Considerations of due process really prevents its use against a party that has not been given sufficient notice of its
presentation, and thus has not been given the opportunity to refute it.[38]

Second, on the President's power as chief fiscal officer of the country. Justice Kapunan posits that Section 4 of AO
372 conforms with the President's role as chief fiscal officer, who allegedly "is clothed by law with certain powers to
ensure the observance of safeguards and auditing requirements, as well as the legal prerequisites in the release and
use of IRAs, taking into account the constitutional and statutory mandates."[39] He cites instances when the
President may lawfully intervene in the fiscal affairs of LGUs.

Precisely, such powers referred to in the Dissent have specifically been authorized by law and have not been
challenged as violative of the Constitution. On the other hand, Section 4 of AO 372, as explained earlier, contravenes
explicit provisions of the Local Government Code (LGC) and the Constitution. In other words, the acts alluded to in
the Dissent are indeed authorized by law; but, quite the opposite, Section 4 of AO 372 is bereft of any legal or
constitutional basis.

Third, on the President's authority to adjust the IRA of LGUs in case of an unmanageable public sector deficit. It must
be emphasized that in striking down Section 4 of AO 372, this Court is not ruling out any form of reduction in the
IRAs of LGUs. Indeed, as the President may make necessary adjustments in case of an unmanageable public sector
deficit, as stated in the main part of this Decision, and in line with Section 284 of the LGC, which Justice Kapunan
cites. He, however, merely glances over a specific requirement in the same provision -- that such reduction is subject
to consultation with the presiding officers of both Houses of Congress and, more importantly, with the presidents of
the leagues of local governments.

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Notably, Justice Kapunan recognizes the need for "interaction between the national government and the LGUs at the
planning level," in order to ensure that "local development plans x x x hew to national policies and standards." The
problem is that no such interaction or consultation was ever held prior to the issuance of AO 372. This is why the
petitioner and the intervenor (who was a provincial governor and at the same time president of the League of
Provinces of the Philippines and chairman of the League of Leagues of Local Governments) have protested and
instituted this action. Significantly, respondents do not deny the lack of consultation.

In addition, Justice Kapunan cites Section 287[40] of the LGC as impliedly authorizing the President to withhold the
IRA of an LGU, pending its compliance with certain requirements. Even a cursory reading of the provision reveals that
it is totally inapplicable to the issue at bar. It directs LGUs to appropriate in their annual budgets 20 percent of their
respective IRAs for development projects. It speaks of no positive power granted the President to priorly withhold
any amount. Not at all.

WHEREFORE, the Petition is GRANTED. Respondents and their successors are hereby permanently PROHIBITED from
implementing Administrative Order Nos. 372 and 43, respectively dated December 27, 1997 and December 10, 1998,
insofar as local government units are concerned.

SO ORDERED.

Davide, Jr., C.J., Bellosillo, Melo, Puno, Vitug, Mendoza, Quisumbing, Pardo, Buena, Gonzaga-Reyes, and De Leon, Jr.,
JJ., concur.

Kapunan, J., see dissenting opinion.

Purisima, and Ynares-Santiago, JJ., join J. Kapunan in his dissenting opinion.

DISSENTING OPINION

KAPUNAN, J.:

In striking down as unconstitutional and illegal Section 4 of Administrative Order No. 372 ("AO No. 372"), the
majority opinion posits that the President exercised power of control over the local government units ("LGU), which
he does not have, and violated the provisions of Section 6, Article X of the Constitution, which states:

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.

and Section 286(a) of the Local Government Code, which provides:

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.

The share of the LGUs in the national internal revenue taxes is defined in Section 284 of the same Local Government
Code, to wit:

SEC. 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 (35%) percent; and

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

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

8
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.

xxx

The majority opinion takes the view that the withholding of ten percent (10%) of the internal revenue allotment
("IRA") to the LGUs pending the assessment and evaluation by the Development Budget Coordinating Committee of
the emerging fiscal situation as called for in Section 4 of AO No. 372 transgresses against the above-quoted
provisions which mandate the "automatic" release of the shares of the LGUs in the national internal revenue in
consonance with local fiscal autonomy. The pertinent portions of AO No. 372 are reproduced hereunder:

ADMINISTRATIVE ORDER NO. 372

ADOPTION OF ECONOMY MEASURES IN GOVERNMENT FOR FY 1998

WHEREAS, the current economic difficulties brought about by the peso depreciation requires continued prudence in
government fiscal management to maintain economic stability and sustain the countrys growth momentum;

WHEREAS, it is imperative that all government agencies adopt cash management measures to match expenditures
with available resources; NOW THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the Philippines, by virtue
of the powers vested in me by the Constitution, do hereby order and direct:

SECTION 1. All government departments and agencies, including x x x local government units will identify and
implement measures in FY 1998 that will reduce total appropriations for non-personal services items, along the
following suggested areas:

xxx

SECTION 4. Pending the assessment and evaluation by the Development Budget Coordinating Committee of the
emerging fiscal situation the amount equivalent to 10% of the internal revenue allotment to local government units
shall be withheld.

xxx

Subsequently, on December 10, 1998, President Joseph E. Estrada issued Administrative Order No. 43 (AO No. 43),
amending Section 4 of AO No. 372, by reducing to five percent (5%) the IRA to be withheld from the LGUs, thus:

ADMINISTRATIVE ORDER NO. 43

AMENDING ADMINISTRATIVE ORDER NO. 372 DATED 27 DECEMBER 1997 ENTITLED "ADOPTION OF ECONOMY
MEASURES IN GOVERNMENT FOR FY 1998"

WHEREAS, Administrative Order No. 372 dated 27 December 1997 entitled "Adoption of Economy Measures in
Government for FY 1998" was issued to address the economic difficulties brought about by the peso devaluation in
1997;

WHEREAS, Section 4 of Administrative Order No. 372 provided that the amount equivalent to 10% of the internal
revenue allotment to local government units shall be withheld; and,

WHEREAS, there is a need to release additional funds to local government units for vital projects and expenditures.

NOW, THEREFORE, I, JOSEPH EJERCITO ESTRADA, President of the Republic of the Philippines, by virtue of the
powers vested in me by law, do hereby order the reduction of the withheld Internal Revenue Allotment (IRA) of local
government units from ten percent to five percent.

The five percent reduction in the IRA withheld for 1998 shall be released before 25 December 1998.

DONE in the City of Manila, this 10th day of December, in the year of our Lord, nineteen hundred and ninety eight.

9
With all due respect, I beg to disagree with the majority opinion.

Section 4 of AO No. 372 does not present a case ripe for adjudication. The language of Section 4 does not
conclusively show that, on its face, the constitutional provision on the automatic release of the IRA shares of the
LGUs has been violated. Section 4, as worded, expresses the idea that the withholding is merely temporary which
fact alone would not merit an outright conclusion of its unconstitutionality, especially in light of the reasonable
presumption that administrative agencies act in conformity with the law and the Constitution. Where the conduct
has not yet occurred and the challenged construction has not yet been adopted by the agency charged with
administering the administrative order, the determination of the scope and constitutionality of the executive action
in advance of its immediate adverse effect involves too remote and abstract an inquiry for the proper exercise of
judicial function. Petitioners have not shown that the alleged 5% IRA share of LGUs that was temporarily withheld
has not yet been released, or that the Department of Budget and Management (DBM) has refused and continues to
refuse its release. In view thereof, the Court should not decide as this case suggests an abstract proposition on
constitutional issues.

The President is the chief fiscal officer of the country. He is ultimately responsible for the collection and distribution
of public money:

SECTION 3. Powers and Functions. - The Department of Budget and Management shall assist the President in the
preparation of a national resources and expenditures budget, preparation, execution and control of the National
Budget, preparation and maintenance of accounting systems essential to the budgetary process, achievement of
more economy and efficiency in the management of government operations, administration of compensation and
position classification systems, assessment of organizational effectiveness and review and evaluation of legislative
proposals having budgetary or organizational implications.1

In a larger context, his role as chief fiscal officer is directed towards "the nation's efforts at economic and social
upliftment"2 for which more specific economic powers are delegated. Within statutory limits, the President can,
thus, fix "tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within the
framework of the national development program of the government,3 as he is also responsible for enlisting the
country in international economic agreements.4 More than this, to achieve "economy and efficiency in the
management of government operations," the President is empowered to create appropriation reserves,5 suspend
expenditure appropriations,6 and institute cost reduction schemes.7

As chief fiscal officer of the country, the President supervises fiscal development in the local government units and
ensures that laws are faithfully executed.8 For this reason, he can set aside tax ordinances if he finds them contrary
to the Local Government Code.9 Ordinances cannot contravene statutes and public policy as declared by the
national govemment.10 The goal of local economy is not to "end the relation of partnership and inter-dependence
between the central administration and local government units,"11 but to make local governments "more
responsive and accountable" [to] "ensure their fullest development as self-reliant communities and make them more
effective partners in the pursuit of national development and social progress."12

The interaction between the national government and the local government units is mandatory at the planning level.
Local development plans must thus hew to "national policies and standards13 as these are integrated into the
regional development plans for submission to the National Economic Development Authority. "14 Local budget plans
and goals must also be harmonized, as far as practicable, with "national development goals and strategies in order to
optimize the utilization of resources and to avoid duplication in the use of fiscal and physical resources."15

Section 4 of AO No. 372 was issued in the exercise by the President not only of his power of general supervision, but
also in conformity with his role as chief fiscal officer of the country in the discharge of which he is clothed by law with
certain powers to ensure the observance of safeguards and auditing requirements, as well as the legal prerequisites
in the release and use of IRAs, taking into account the constitutional16 and statutory17 mandates.

However, the phrase "automatic release" of the LGUs' shares does not mean that the release of the funds is
mechanical, spontaneous, self-operating or reflex. IRAs must first be determined, and the money for their payment
collected.18 In this regard, administrative documentations are also undertaken to ascertain their availability, limits
and extent. The phrase, thus, should be used in the context of the whole budgetary process and in relation to
pertinent laws relating to audit and accounting requirements. In the workings of the budget for the fiscal year,
appropriations for expenditures are supported by existing funds in the national coffers and by proposals for revenue
raising. The money, therefore, available for IRA release may not be existing but merely inchoate, or a mere

10
expectation. It is not infrequent that the Executive Department's proposals for raising revenue in the form of
proposed legislation may not be passed by the legislature. As such, the release of IRA should not mean release of
absolute amounts based merely on mathematical computations. There must be a prior determination of what exact
amount the local government units are actually entitled in light of the economic factors which affect the fiscal
situation in the country. Foremost of these is where, due to an unmanageable public sector deficit, the President
may make the necessary adjustments in the IRA of LGUs. Thus, as expressly provided in Article 284 of the Local
Government Code:

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

Under the aforecited provision, if facts reveal that the economy has sustained or will likely sustain such
"unmanageable public sector deficit," then the LGUs cannot assert absolute right of entitlement to the full amount
of forty percent (40%) share in the IRA, because the President is authorized to make an adjustment and to reduce
the amount to not less than thirty percent (30%). It is, therefore, impractical to immediately release the full amount
of the IRAs and subsequently require the local government units to return at most ten percent (10%) once the
President has ascertained that there exists an unmanageable public sector deficit.

By necessary implication, the power to make necessary adjustments (including reduction) in the IRA in case of an
unmanageable public sector deficit, includes the discretion to withhold the IRAs temporarily until such time that the
determination of the actual fiscal situation is made. The test in determining whether one power is necessarily
included in a stated authority is: "The exercise of a more absolute power necessarily includes the lesser power
especially where it is needed to make the first power effective."19 If the discretion to suspend temporarily the
release of the IRA pending such examination is withheld from the President, his authority to make the necessary IRA
adjustments brought about by the unmanageable public sector deficit would be emasculated in the midst of serious
economic crisis. In the situation conjured by the majority opinion, the money would already have been gone even
before it is determined that fiscal crisis is indeed happening.

The majority opinion overstates the requirement in Section 286 of the Local Government Code that the IRAs "shall
not be subject to any lien or holdback that may be imposed by the national government for whatever purpose" as
proof that no withholding of the release of the IRAs is allowed albeit temporary in nature.

It is worthy to note that this provision does not appear in the Constitution. Section 6, Art X of the Constitution
merely directs that LGUs "shall have a just share" in the national taxes "as determined by law" and which share shall
be automatically released to them. This means that before the LGUs share is released, there should be first a
determination, which requires a process, of what is the correct amount as dictated by existing laws. For one, the
Implementing Rules of the Local Government Code allows deductions from the IRAs, to wit:

Article 384. Automatic Release of IRA Shares of LGUs:

xxx

(c) The IRA share of LGUs shall not be subject to any lien or hold back that may be imposed by the National
Government for whatever purpose unless otherwise provided in the Code or other applicable laws and loan contract
on project agreements arising from foreign loans and international commitments, such as premium contributions of
LGUs to the Government Service Insurance System and loans contracted by LGUs under foreign-assisted projects.

Apart from the above, other mandatory deductions are made from the IRAs prior to their release, such as: (1) total
actual cost of devolution and the cost of city-funded hospitals;20 and (2) compulsory contributions21 and other
remittances.22 It follows, therefore, that the President can withhold portions of IRAs in order to set-off or
compensate legitimately incurred obligations and remittances of LGUs.

Significantly, Section 286 of the Local Government Code does not make mention of the exact amount that should be
automatically released to the LGUs. The provision does not mandate that the entire 40% share mentioned in Section
284 shall be released. It merely provides that the "share" of each LGU shall be released and which "shall not be

11
subject to any lien or holdback that may be imposed by the national government for whatever purpose." The
provision on automatic release of IRA share should, thus, be read together with Section 284, including the proviso on
adjustment or reduction of IRAs, as well as other relevant laws. It may happen that the share of the LGUs may
amount to the full forty percent (40%) or the reduced amount of thirty percent (30%) as adjusted without any law
being violated. In other words, all that Section 286 requires is the automatic release of the amount that the LGUs are
rightfully and legally entitled to, which, as the same section provides, should not be less than thirty percent (30%) of
the collection of the national revenue taxes. So that even if five percent (5%) or ten percent (10%) is either
temporarily or permanently withheld, but the minimum of thirty percent (30%) allotment for the LGUs is released
pursuant to the President's authority to make the necessary adjustment in the LGUS' share, there is still full
compliance with the requirements of the automatic release of the LGUs' share.

Finally, the majority insists that the withholding of ten percent (10%) or five percent (5%) of the IRAs could not have
been done pursuant to the power of the President to adjust or reduce such shares under Section 284 of the Local
Government Code because there was no showing of an unmanageable public sector deficit by the national
government, nor was there evidence that consultations with the presiding officers of both Houses of Congress and
the presidents of the various leagues had taken place and the corresponding recommendations of the Secretary of
Finance, Secretary of Interior and Local Government and the Budget Secretary were made.

I beg to differ. The power to determine whether there is an unmanageable public sector deficit is lodged in the
President. The President's determination, as fiscal manager of the country, of the existence of economic difficulties
which could amount to "unmanageable public sector deficit" should be accorded respect. In fact, the withholding of
the ten percent (10%) of the LGUs' share was further justified by the current economic difficulties brought about by
the peso depreciation as shown by one of the "WHEREASES" of AO No. 372.23 In the absence of any showing to the
contrary, it is presumed that the President had made prior consultations with the officials thus mentioned and had
acted upon the recommendations of the Secretaries of Finance, Interior and Local Government and Budget.24

Therefore, even assuming hypothetically that there was effectively a deduction of five percent (5%) of the LGUs'
share, which was in accordance with the President's prerogative in view of the pronouncement of the existence of an
unmanageable public sector deficit, the deduction would still be valid in the absence of any proof that the LGUs'
allotment was less than the thirty percent (30%) limit provided for in Section 284 of the Local Government Code.

In resume, the withholding of the amount equivalent to five percent (5%) of the IRA to the LGUs was temporary
pending determination by the Executive of the actual share which the LGUs are rightfully entitled to on the basis of
the applicable laws, particularly Section 284 of the Local Government Code, authorizing the President to make the
necessary adjustments in the IRA of LGUs in the event of an unmanageable public sector deficit. And assuming that
the said five percent (5%) of the IRA pertaining to the 1998 Fiscal Year has been permanently withheld, there is no
showing that the amount actually released to the LGUs that same year was less than thirty percent (30%) of the
national internal revenue taxes collected, without even considering the proper deductions allowed by law.

WHEREFORE, I vote to DISMISS the petition.

TERESITA M. YUJUICO, G.R. No. 164282

Petitioner,

Present:

- versus -

PUNO, J.,

Chairman,

12
AUSTRIA-MARTINEZ,

HON. JOSE L. ATIENZA, JR., CALLEJO, SR.,

Chairman, City School TINGA, and

Board of Manila, DR. MA. CHICO-NAZARIO, JJ.

LUISA S. QUIONES,

Co-Chairman, City School Board,

and Schools Division

Superintendent, ROGER Promulgated:

GERNALE, Member, City

School Board of Manila,

HON. MANUEL M. ZARCAL, October 12, 2005

(in substitution of ARLENE ORTIZ),

Member, City School Board

of Manila, BENJAMIN VALBUENA

(In substitution of MILES ROCES),

Member, City School Board of

Manila, LIBERTY TOLEDO, Member,

City School Board of Manila,

HON. FRANCESCA GERNALE

(In substitution of PERCIVAL FLORIENDO),

Member, City School Board of Manila,

ISABELITA SANTOS, Secretary,

City School Board of Manila,

VICENTE MACARUBBO

(In substitution of ISABELITA CHING),

Assistant Secretary, City School

Board of Manila, CITY SCHOOL BOARD OF

MANILA and JUDGE MERCEDES

POSADA-LACAP, in her capacity as

PRESIDING JUDGE OF THE REGIONAL

TRIAL COURT OF MANILA, BRANCH 15,

Respondents.

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

13
DECISION

TINGA, J.:

This is a Petition for Review on Certiorari instituted by Teresita M. Yujuico, petitioner in the case for mandamus
docketed as Civil Case No. 02-103748 before the Regional Trial Court (RTC) of Manila, Branch 15. Petitioner is
questioning the propriety of the Order[1] dated 25 June 2004, granting respondents Petition for Relief from
Judgment under Section 2, Rule 38 of the 1997 Rules of Civil Procedure.

The operative facts are not disputed.

On 8 December 1995, the City Council of Manila enacted an Ordinance[2] authorizing the City Mayor to acquire by
negotiation or expropriation certain parcels of land for utilization as a site for the Francisco Benitez Elementary
School.[3] The property chosen is located along Solis St. near Juan Luna St. in the Second District of Manila and
contains an approximate area of 3,979.10 square meters. It is covered by Transfer Certificates of Title Nos. 71541,
71548, 24423, 71544 and 71546, all in the name of petitioner. The Ordinance provides that an amount not to exceed
the fair market value of the land then prevailing in the area will be allocated out of the Special Education Fund (SEF)
of the City of Manila (City) to defray the cost of the propertys acquisition.[4]

Failing to acquire the land by negotiation, the City filed a case for eminent domain against petitioner as owner of the
property. Filed on 22 August 1996, the case was raffled to Branch 15, RTC of Manila and docketed as Civil Case No.
96-79699.[5]

On 30 June 2000, the RTC rendered a Decision[6] in the expropriation case in favor of the City. The dispositive
portion reads:

WHEREFORE, judgment is hereby rendered as follows:

1.) The lots including the improvements therein of defendant Teresita M. Yujuico, as described in the complaint,
are declared expropriated for public use;

2.) The fair market value of the lots of defendant is fixed at P18,164.80 per square meter. The fair market value of
the improvements of lots subject of this action is fixed at P 978,000.00;

3.) The plaintiff must pay defendant the sum of P72,279,555.68 (3,979.10 sq. m. x P18,164.80) representing the
value of the subject lots plus P978,000.00 representing the value of the improvements or the total amount of
P73,257,555.00 as just compensation for the whole property (including the improvements) minus the sum of
P5,363,289.00 that plaintiff deposited in Court per Order dated April 30, 1997, hence the balance of P67,894,266.00
with interest at the rate of 6% per annum from July 15, 1997 (date of possession of subject property for the purpose
of this proceedings) until the day full payment is made to defendant or deposited in Court.[7]

The judgment became final and executory, no appeal having been interposed by either party.[8]

On 6 April 2001, petitioner filed a Motion for Execution of Judgment[9] which the trial court granted. Pursuant to a
Writ of Execution[10] dated 28 June 2001, the branch sheriff served a Notice of Garnishment on the funds of the City
deposited with the Land Bank of the Philippines, YMCA Branch, Manila (Land Bank) to satisfy the judgment amount
of P67,894,226.00, with interest at 6% per annum.[11]

Invoking jurisprudence holding that public funds cannot be made subject to garnishment, the City filed a motion to
quash the Notice of Garnishment.[12] Acting on the motion, the trial court issued an Order dated 2 August 2001.

In the Order, the lower court recalled that during the hearing on the motion, the counsel for the City manifested that
the amount of P36,403,170.00 had been appropriated by the City School Board (CSB) under CSB Resolutions Nos.
613 and 623, of which P31,039,881.00 was available for release. The amount of P5,363,269.00, representing fifteen
percent (15%) of the assessed value of the property, had been deposited in court at the start of the expropriation
proceedings and subsequently received by petitioner. In line with the manifestation made by the counsel for the
City, the trial court ordered the release to petitioner of the amount of P31,039,881.00 deposited with the Land Bank,
in partial payment of the just compensation adjudged in favor of petitioner.[13]

The trial court further stated in the Order:

14
Considering that this case is on all fours with the case of the Municipality of Makati vs. Court of Appeals (190 SCRA
206), wherein it was ruled that x x x Public funds are not subject to levy and execution, the Court therefore grants
plaintiffs Motion to Quash the Notice of Garnishment and the Notice of Garnishment to the Landbank of the
Philippines issued by the Branch Sheriff of this Court is hereby ordered lifted.

There being no opposition for the release of the Thirty One Million Thirty Nine Thousand Eight Hundred Eighty One
Pesos (P31,039,881.00) deposited with the Land Bank, YMCA Branch as Special Education Fund, the Manager of the
Landbank of the Philippines, YMCA, Manila is hereby directed to release the said amount to defendant Teresita M.
Yujuico in partial payment of the just compensation adjudged by this Court in its Decision dated June 30, 2000.

Upon manifestation of the counsel for the plaintiff that it is the City School Board which has the authority to pass a
resolution allocating funds for the full satisfaction of the just compensation fixed, the said body is hereby given thirty
(30) days from receipt of this Order to pass the necessary resolution for the payments of the remaining balance due
to defendant Teresita M. Yujuico.[14]

A copy of the Order dated 2 August 2001 was served on the CSB on 3 August 2001.[15]

On 30 August 2001, petitioner submitted a manifestation before the trial court requesting that she be informed by
both the City and the CSB if a resolution had already been passed by the latter in compliance with the Order.[16]
Earlier, petitioner sent a letter to the Superintendent of City Schools of Manila to verify the CSBs compliance with the
Order.[17]

Not having been favored with a reply to her queries even after the lapse of the thirty (30)-day compliance period,
petitioner sent a letter to the CSB dated 10 September 2001, demanding compliance with the Order.[18]

As there was no action from the CSB, on 1 February 2002, petitioner filed a petition for contempt of court against
respondents Hon. Jose L. Atienza, Jr., Dr. Ma. Luisa S. Quioňes, Roger Gernale, Arlene Ortiz, Miles Roces, Percival
Floriendo, Liberty Toledo, Isabelita Santos and Isabelita Ching in their capacities as officers and members of the CSB.
[19] The case was docketed as Civil Case No. 02-102837 of the Manila RTC.[20]

Countering the petition for contempt, respondents filed a Motion to Dismiss,[21] wherein they alleged inter alia that
they never disregarded the Order as the matter had in fact been calendared and deliberated upon during the
meetings of the CSB.[22] In their subsequent Omnibus Reply,[23] respondents argued that petitioners failure to avail
of the proper recourse to enforce the final and executory judgment[24] should not be a ground to hold them in
contempt of court. Citing the case of Municipality of Makati v. Court of Appeals,[25] respondents asserted that
petitioner should have filed a petition for mandamus to force the CSB to pass the necessary resolution for immediate
payment of the balance of the just compensation awarded in her favor.[26]

According to respondents, petitioner took the Order as a writ of mandamus when in fact it was a mere order in
furtherance of the Writ of Execution.[27] This interpretation, respondents insisted, should never be allowed since
petitioner merely wanted to escape the payment of docket fees in the filing of the petition for mandamus.[28]

In an Order[29] dated 17 May 2002, the trial court denied the petition for contempt of court.

On 6 June 2002, petitioner filed a Petition for Mandamus[30] against the members of the CSB, the same respondents
in the petition for contempt of court, seeking to compel them to pass a resolution appropriating the amount
necessary to pay the balance of the just compensation awarded to petitioner in the expropriation case, Civil Case No.
96-79699. The petition was docketed as Spl. Civil Action No. 02-103748 and raffled to Branch 51 of the RTC of
Manila. [31]

Upon petitioners motion,[32] Branch 51 of the Manila RTC before which the mandamus case was pending, in an
Order[33] dated 23 August 2002, directed its consolidation with the expropriation case before Branch 15.[34]

In a Decision[35] dated 9 October 2002, the lower court (Branch 15) granted the petition for mandamus. Specifically,
it ordered respondents to immediately pass a resolution appropriating the necessary amount and the corresponding
disbursement thereof for the full and complete payment of the balance of the court-adjudged compensation still due
petitioner, ratiocinating as follows:[36]

This case is on all fours with the case of Municipality of Makati v. Court of Appeals (190 SCRA 206).

....

15
The States power of eminent domain should be exercised within the bounds of fair play and justice. In the case at
bar, considering that valuable property has been taken, the compensation to be paid fixed and the municipality is in
full possession and utilizing the property for the public purpose, for three (3) years, the Court finds that the
municipality has had more than reasonable time to pay full compensation.

The arguments of the herein respondents that passing the ordinance or the act of appropriating special educational
fund is a discretionary act that could not be compelled by mandamus should be thrown overboard. It must be
stressed that what we have here is a final and executory judgment, establishing a legal right for the petitioner to
demand fulfillment which on the other hand became an imperative duty on the part of the respondent to perform
the act required.

WHEREFORE, premises considered, the petition is GRANTED, and the respondents are hereby ordered to
immediately pass a resolution appropriating the necessary amount; and the corresponding disbursement thereof, for
the full and complete payment of the remaining balance of the court-adjudged compensation due and owing to
petitioner Teresita M. Yujuico.

SO ORDERED.[37]

Respondents filed a motion for reconsideration, which the trial court denied in an Order[38] dated 13 December
2002.

With respondents not interposing an appeal, the Decision became final and executory on 2 January 2003[39] and
eventually, the corresponding Entry of Judgment was issued on 15 January 2003.[40] The court granted petitioners
Motion for Execution[41] in an Order[42] dated 12 March 2003.

However, on 14 March 2003, respondents filed a Petition for Relief from Judgment,[43] wherein they also prayed for
a temporary restraining order (TRO) and a writ of preliminary injunction. Respondents invoked excusable negligence
as a ground for their failure to seasonably file an appeal.[44] While it denied the application for TRO in view of its
prior order granting petitioners Motion for Execution, the court granted the Petition for Relief from Judgment in an
Order[45] dated 25 June 2004. This had the effect of giving due course to respondents appeal despite the fact that
the decision of the trial court had already attained finality.

Finding the Order unacceptable, petitioner elevated it to this Court by way of a petition for certiorari under Rule 45.
In her petition, petitioner asks that the order of the lower court giving due course to respondents appeal be reversed
and set aside on a pure question of law.[46]

Before resolving the substantive issues raised by the parties, the Court will first address the procedural infirmities
ascribed by respondents to the petition at bar.

Respondents assail the correctness and propriety of the mode of appeal resorted to by petitioner.[47] According to
them, the order granting the petition for relief from judgment is an interlocutory order which cannot be made the
subject of an appeal.[48] Respondents likewise argue that petitioner failed to respect the rule on hierarchy of courts.
This Court, they aver, had consistently held that its original jurisdiction to issue a writ of certiorari is not exclusive but
is concurrent with that of the RTC and the Court of Appeals in certain cases.[49]

Respondents have correctly pointed out that an interlocutory order cannot be made subject to an appeal. However,
when viewed in context, the recitals of the petition clearly disclose and the Court is convinced that the lower court
committed grave abuse of discretion amounting to lack or excess of jurisdiction when it granted respondents petition
for relief from judgment. While this case should have been elevated to this Court not by way of a petition for review
under Rule 45 but through a special civil action for certiorari under Rule 65, in the exercise of our sound discretion
and in order to write finis to this case which has needlessly dragged on for so long, we shall treat the petition as a
special civil action for certiorari. After all, it was filed within the reglementary period for the filing of a Rule 65
petition. As we held in Salinas v. NLRC,[50] in the interest of justice, this Court has often judiciously treated petitions
erroneously captioned as petitions for review on certiorari as special civil actions for certiorari. This is in line with the
principle that the strict application of procedural technicalities should not hinder the speedy disposition of the case
on the merits.[51]

16
Accordingly, facial allegations of reversible error in the petition will be treated, as they should be, as contextual
averments of grave abuse of discretion on the part of the court a quo. Appropriately, petitioner impleaded the RTC
Presiding Judge as party-respondent in the instant petition.

Anent the alleged breach of the rule on hierarchy of courts, the doctrine is not an iron-clad dictum.[52] The rule may
be relaxed when exceptional and compelling circumstances warrant the exercise of this Courts primary jurisdiction.
[53] In this case, the judgment sought to be satisfied has long attained finality and the expropriated property has
been utilized as a school site for five (5) years now; yet, the awarded just compensation has not been fully paid.
These circumstances, in the Courts estimation, merit the relaxation of the technical rules of procedure to ensure that
substantial justice will be served.

Concerning petitioners alleged failure to implead the CSB or its new members before the trial court,[54] respondents
argue that since there are five (5) new members in the CSB any decision in the case requiring the CSB to act as a
body would prove to be legally impossible. The former members of the CSB could no longer be compelled to act
according to the orders of the Court since they no longer have the capacity to do so. On the other hand, respondents
continue, the new members cannot be directed to comply with the Courts judgment either; they have never been
impleaded in the case; thus, the Court never acquired jurisdiction over their persons.[55]

The arguments were effectively neutered in our Resolution dated 8 August 2005. There, we declared:

Considering the arguments posited by both parties, this Court is of the view that a substitution of the original
respondents by the members of the CSB who replaced them is warranted. The phrase or such time as may be
granted by the Court in Sec. 17, Rule 3 of the 1997 Rules of Civil Procedure denotes that the Court before whom the
motion for substitution is filed may grant a period longer than thirty (30) days for the purpose. In any event,
technical rules on substitution of a party should not be so narrowly construed as to prevent this Court from taking
cognizance of a case and deciding it on the merits. Moreover, petitioner did make an attempt to implead the new
members of the CSB by making the CSB itself a respondent before this Court. There is also no showing that the new
members of the CSB have deviated from the stand of their predecessors-in-interest; hence, there is a substantial
need for continuing or maintaining petitioners action against them.[56]

In the same Resolution, the Court ordered the impleading of the new CSB members Roger Gernale, Manuel M.
Zarcal, Benjamin Valbuena and Francesca Gernale as party respondentsthe last three in substitution of Arlene Ortiz,
Percival Floriendo, Miles Rocesand the new CSB Assistant Secretary Vicente Macarubbo in substitution of Isabelita
Ching.[57] Only Manuel Zarcal filed a Comment[58] dated 30 August 2005 through a new counsel, adopting in toto
the comment of his co-respondents. Hence, the other four newly impleaded party respondents are deemed to have
retained the Office of the City Legal Officer (OCLO) as their counsel and to have adopted the Comment already filed
by the OCLO in behalf of their co-respondents.

Thus, the proper substitutions of some party respondents have already taken place in this case.

The last procedural hurdle thrown petitioners way by respondents refers to the supposed failure of the petition to
comply with the requirements of Section 4, Rule 7 and Section 4, Rule 45 of the 1997 Rules of Civil Procedure[59] as
amended by Supreme Court Circular A.M. No. 00-2-10-SC.[60] Respondents claim that there was failure to include a
verified statement indicating the material dates relative to the receipt of the judgments and the filing of the
pleadings. The verification, moreover, allegedly failed to state that petitioner has read the petition[61] and that the
copies attached thereto are based on authentic records.[62] The defects of the verification allegedly render the
petition without legal effect and constitute grounds for its dismissal.

The purpose of requiring a verification is to secure an assurance that the allegations of the petition have been made
in good faith; or are true and correct, not merely speculative.[63] This requirement is simply a condition affecting the
form of pleadings and non-compliance therewith does not necessarily render it fatally defective.[64] Perusal of the
verification in question shows that there was sufficient compliance with the requirements of the Rules and the
alleged defects are not so material as to justify the dismissal of the petition.

Now, the substantial issues.

Up for determination is the tenability of the RTCs favorable action on respondents petition for relief from judgment.
This engenders a look at the grounds and defenses relied upon by respondents in support of their petition. Sections 2

17
and 3, Rule 38 of the 1997 Rules of Civil Procedure provide that a petition for relief may be granted upon a showing
that (1) through fraud, accident, mistake or excusable negligence, a party has been prevented from taking an appeal,
and (2) the party has a good and substantial cause of action or defense.

The above requisites notwithstanding, it bears stressing that relief from judgment is premised on equity. It is an act
of grace which is allowed only in exceptional cases.[65]

In this case, according to respondents they were unable to seasonably file a notice of appeal due to excusable
negligence.[66] One Ronald Silva (Silva), an employee of the OCLO, allegedly failed to forward the Order denying
respondents motion for reconsideration in Civil Case No. 02-103748 to the handling lawyers. When the order was
delivered to the OCLO on 17 December 2002,[67] Silva was the one who received it because the employee
designated to do so was out on official business.[68] Since the employees were busy preparing for the office
Christmas party that day,[69] Silva forgot all about the order. He only remembered it when the order for entry of
judgment in the case was received on 29 January 2003. By that time, however, the order dated 17 December 2002
had already been misplaced.[70]

Clearly, the situation does not present a case of excusable negligence which would warrant relief under Rule 38.
Time and again, this Court has ruled that the inability to perfect an appeal in due time by reason of failure of a
counsels clerk to notify the handling lawyer is not a pardonable oversight.[71] As held in one case:

. . . The excuse offered by respondent . . . as reason for his failure to perfect in due time his appeal from the
judgment of the Municipal Court, that counsels clerk forgot to hand him the court notice, is the most hackneyed and
habitual subterfuge employed by litigants who fail to observe the procedural requirements prescribed by the Rules
of Court. The uncritical acceptance of this kind of common-place excuses, in the face of the Supreme Courts
repeated rulings that they are neither credible nor constitutive of excusable negligence (Gaerlan v. Bernal, L-4039, 29
January 1952; Mercado v. Judge Domingo, L-19457, 17 December 1966) is certainly such whimsical exercise of
judgment as to be a grave abuse of discretion.

....

In the face of all these facts and circumstances, . . . the respondent judge revealed a simple-minded willingness to
swallow a story patently concocted to delay as much as possible the satisfaction of a judgment against respondent . .
. .This indiscriminating credulity does not conform to what is to be expected of a judicial mind.[72]

Reiterated in numerous cases is the rule that the clerks faults are attributable to the handling lawyers.[73] Thus,
excuses offered based on the formers negligence are not deemed excusable. That the admonitions issued out by this
Court were mostly directed against lawyers in law firms does not exempt respondents herein from the same
treatment. For all intents and purposes, the set-up at the OCLO is akin to that of a law firm, the only difference being
that the former serves a public entity while the latter caters to private clients. The following pronouncement in
Negros Stevedoring Co., Inc. v. Court of Appeals[74] is apropos:

The negligence committed in the case at bar cannot be considered excusable, nor is it unavoidable. Time and again,
the Court has admonished law firms to adopt a system of distributing pleadings and notices, whereby lawyers
working therein receive promptly notices and pleadings intended for them, so that they will always be informed of
the status of their cases. The Court has also often repeated that the negligence of clerks which adversely affect the
cases handled by lawyers is binding upon the latter.[75]

Without doubt, it was grave abuse of discretion for the lower court to have given due course to respondents appeal
through the grant of their petition for relief from judgment based on the flimsy ground they proferred.

Even assuming that the negligence invoked by respondents could be considered excusable, still the petition should
not have been granted. It must be borne in mind that two requisites must be satisfied before a petition under Rule
38 may be granted, the other being the existence of a good and substantial cause of action or defense.

Respondents defense consisted of their claim that the CSB has a personality separate and distinct from the City such
that it should not be made to pay for the Citys obligations.[76] However, the argument is undercut by the particular
circumstances of this case.

It is worthy of note that the records of this case clearly show that the same counsel, the OCLO, represented the City
in the expropriation case and now, all except one of the individual respondents in the case at bar. Worthy of note are

18
the following manifestations relied upon by the lower court in issuing the order on the motion to quash the Notice of
Garnishment over the funds of the City, to wit:

The Motion to Quash Notice of Garnishment was heard by this court this morning and Atty. Joseph Aquino appeared
for the plaintiff (City of Manila) and Atty. Federico Alday, for the defendant. Atty. Aquino manifested that the
amount of Thirty Six Million Four Hundred Three Thousand One Hundred Seventy Pesos (P36,403,170.00) had been
appropriated by the City School Board (CSB) under CSB Resolution Nos. 613 and 623 for this purpose.

....

Upon manifestation of the counsel for the plaintiff that it is the City School Board which has the authority to pass a
resolution allocating funds for the full satisfaction of the just compensation fixed, the said body is hereby given thirty
(30) days from receipt of this Order to pass the necessary resolution for the payments of the remaining balance due
to defendant Teresita M. Yujuico. (Emphasis supplied.)[77]

The manifestation was made by the same counsel now claiming that it is actually the City which should be made
liable for the payment of its own obligations. This, after it trotted out the CSB as the entity with authority to pass a
resolution that would satisfy the obligation it had vigorously pursued.

The above circumstances, coupled with the rule that an act performed by counsel within the scope of a general or
implied authority is regarded as an act of the client,[78] render the City and, through it, respondents in estoppel. By
estoppel is meant that an admission or representation is rendered conclusive upon the person making it and cannot
be denied or disproved as against the person relying thereon.[79] Petitioner and the courts acted in accordance with
the Citys own manifestations by running after the CSB. At this point, respondents and the OCLO can no longer turn
around and toss the obligation back to the City. After all, it was the legal counsel of both the City and respondents
who made a big production out of showing that the liability incurred by the City will be borne by the CSB.

Contrary to respondents claim, the law does not make the CSB an entity independent from the City of Manila. This is
evident from the provisions of the Local Government Code of 1991, the law providing for the creation of school
boards. It states:

TITLE IV.- LOCAL SCHOOL BOARDS

Section 98. Creation, Composition and Compensation.-

(a) There shall be established in every province, city or municipality a provincial, city, or
municipal school board, respectively.

(b) The composition of local school boards shall be as follows:

...

(2) The city school board shall be composed of the city mayor and the city superintendent of schools as co-chairmen;
the chairman of the education committee of the sangguniang panlungsod, the city treasurer, the representative of
the pederasyon ng mga sangguniang kabataan in the sangguniang panlungsod, the duly elected president of the city
federation of parents-teachers associations, the duly elected representative of the non-academic personnel of public
schools in the city, as members;

...

Section 101. Compensation and Remuneration.-

The co-chairmen and members of the provincial, city or municipal school board shall perform their duties as such
without compensation or remuneration. Members thereof who are not government officials or employees shall be
entitled to traveling expenses and allowances chargeable against the funds of the local school board concerned,
subject to existing accounting and auditing rules and regulations.[80]

The fact that the highest ranking official of a local government unit (LGU) is designated as co-chairman of the school
board negates the claim in this case that the CSB has a personality separate and distinct from the City. The other fact
that government officials in the school board do not receive any compensation or remuneration while NGO

19
representatives merely receive allowances underscores the absurdity of respondents argument all the more. Indeed,
such would not be the situation if the school board has a personality separate and distinct from the LGU.

Respondents also argue that the members of the CSB cannot be directed to decide a discretionary function in the
specific manner the court desires.[81] The question of whether the enactment of an ordinance to satisfy the
appropriation of a final money judgment rendered against an LGU may be compelled by mandamus has already been
settled in Municipality of Makati v. Court of Appeals.[82]

Nevertheless, this is not to say that private respondent and PSB are left with no legal recourse. Where a municipality
fails or refuses, without justifiable reason, to effect payment of a final money judgment rendered against it, the
claimant may avail of the remedy of mandamus in order to compel the enactment and approval of the necessary
appropriation ordinance, and the corresponding disbursement of municipal funds therefore [See Viuda De Tan Toco
v. The Municipal Council of Iloilo, supra, Baldivia v. Lota, 107 Phil 1099 (1960); Yuviengco v. Gonzales, 108 Phil 247
(1960)].[83]

Clearly, mandamus is a remedy available to a property owner when a money judgment is rendered in its favor and
against a municipality or city, as in this case.

Moreover, the very ordinance authorizing the expropriation of petitioners property categorically states that the
payment of the expropriated property will be defrayed from the SEF. To quote:

An amount not to exceed the current fair market value, prevailing in the area appraised in accordance with the
requirements of existing laws, rules and regulations, of the property to be acquired or so much thereof as may be
necessary for the purpose shall be allocated out of the Special Education Fund of the City to defray the cost of
acquisition of the above-mentioned parcels of land.[84]

The legality of the above-quoted provision is presumed. The source of the amount necessary to acquire petitioners
property having in fact been specified by the City Council of Manila, the passage of the resolution for the allocation
and disbursement thereof is indeed a ministerial duty of the CSB.

Furthermore, respondents had argued in the petition for contempt filed against them by petitioner that the latters
failure to invoke the proper remedy of mandamus should not be a ground to penalize them with contempt. In their
haste to have the contempt petition dismissed, respondents consistently contended that what petitioner should
have filed was a case for mandamus to compel passage of the corresponding resolution of the CSB if she wanted
immediate payment.[85] Having relied on these representations of respondents and having filed the action they
adverted to, petitioner cannot now be sent by respondents on another wild goose chase to obtain ultimate recovery
of what she is legally entitled to.

While this Court recognizes the power of LGU to expropriate private property for public use, it will not stand idly by
while the expropriating authority maneuvers to evade the payment of just compensation of property already in its
possession.

The notion of expropriation is hard enough to take for a private owner. He is compelled to give up his property for
the common weal. But to give it up and wait in vain for the just compensation decreed by the courts is too much to
bear. In cases like these, courts will not hesitate to step in to ensure that justice and fair play are served. As we have
already ruled:

. . . This Court will not condone petitioners blatant refusal to settle its legal obligation arising from expropriation
proceedings it had in fact initiated. It cannot be over-emphasized that within the context of the States inherent
power of eminent domain,

. . . (j)ust compensation means not only the correct determination of the amount to be paid to the owner of the land
but also the payment of 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 before actually receiving the amount necessary to cope
with his loss (Consculluela v. The Honorable Court of Appeals, G.R. No. 77765, August 15, 1988, 164 SCRA 393, 400.
See also Provincial Government of Sorsogon v. Vda. De Villaroya, G.R. No. 64037, August 27, 1987, 153 SCRA 291).
[86]

20
The decision rendering just compensation in petitioners favor was promulgated way back in the year 2000.[87] Five
years have passed, yet the award still has not been fully satisfied. Recently, in Republic v. Lim,[88] this Court made
the following pronouncement:

. . . 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, however, in cases where the government failed to pay just
compensation within five (5) years from the finality of 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. 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.[89] (Citations omitted)

Given the above ruling, the reversion of the expropriated property to the petitioner would prove not to be a remote
prospect should respondents and the City they represent insist on trudging on their intransigent course.

One final note. Respondents appeal from the Decision dated 9 October 2002 of the lower court, made possible by its
grant of their petition for relief, is before the Court of Appeals where it is docketed as CA-G.R. No. 86692.[90] The
courts Decision in this case would have obvious consequences on said appeal; hence, referral of this Decision to the
Court of Appeals is in order.

WHEREFORE, the petition is GRANTED. The Order of the trial court dated 25 June 2004, granting respondents
Petition for Relief from Judgment is REVERSED and SET ASIDE and its Decision dated 9 October 2002, ordering
respondents to immediately pass a resolution for the payment of the balance of the court-adjudged compensation
due petitioner, is REINSTATED.

Let a copy of this Decision be furnished the Court of Appeals for its information and guidance in relation to CA-G.R.
No. 86692 entitled Teresita M. Yujuico v. Hon. Jose L. Atienza, Jr., et al.

SO ORDERED.

G.R. No. 148357 June 30, 2006

ANIANO A. ALBON, Petitioner,

vs.

BAYANI F. FERNANDO, City Mayor of Marikina, ENGR. ALFONSO ESPIRITO, City Engineer of Marikina, ENGR. ANAKI
MADERAL, Assistant City Engineer of Marikina, and NATIVIDAD CABALQUINTO, City Treasurer of Marikina,
Respondents.

RESOLUTION

CORONA, J.:

May a local government unit (LGU) validly use public funds to undertake the widening, repair and improvement of
the sidewalks of a privately-owned subdivision?

This is the issue presented for the Court’s resolution in this petition for review on certiorari1 which assails the
December 22, 2000 decision2 and May 30, 2001 resolution of the Court of Appeals in CA-G.R. SP No. 56767.

In May 1999, the City of Marikina undertook a public works project to widen, clear and repair the existing
sidewalks of Marikina Greenheights Subdivision. It was undertaken by the city government pursuant to Ordinance
No. 59, s. 19933 like other infrastructure projects relating to roads, streets and sidewalks previously undertaken
by the city.

On June 14, 1999, petitioner Aniano A. Albon filed with the Regional Trial Court of Marikina, Branch 73, a
taxpayer’s suit for certiorari, prohibition and injunction with damages against respondents (who were at that time
officials of Marikina), namely, City Mayor Bayani F. Fernando, City Engineer Alfonso Espirito, Assistant City
Engineer Anaki Maderal and City Treasurer Natividad Cabalquinto. It was docketed as SCA Case No. 99-331-MK.

21
Petitioner claimed that it was unconstitutional and unlawful for respondents to use government equipment and
property, and to disburse public funds, of the City of Marikina for the grading, widening, clearing, repair and
maintenance of the existing sidewalks of Marikina Greenheights Subdivision. He alleged that the sidewalks were
private property because Marikina Greenheights Subdivision was owned by V.V. Soliven, Inc. Hence, the city
government could not use public resources on them. In undertaking the project, therefore, respondents allegedly
violated the constitutional proscription against the use of public funds for private purposes4 as well as Sections
335 and 336 of RA 71605 and the Anti-Graft and Corrupt Practices Act. Petitioner further alleged that there was no
appropriation for the project.

On June 22, 1999, the trial court denied petitioner’s application for a temporary restraining order (TRO) and writ
of preliminary injunction. The trial court reasoned that the questioned undertaking was covered by PD 1818 and
Supreme Court Circular No. 68-94 which prohibited courts from issuing a TRO or injunction in any case, dispute or
controversy involving an infrastructure project of the government.

On November 15, 1999, the trial court rendered its decision6 dismissing the petition. It ruled that the City of
Marikina was authorized to carry out the contested undertaking pursuant to its inherent police power. Invoking
this Court’s 1991 decision in White Plains Association v. Legaspi,7 the roads and sidewalks inside the Marikina
Greenheights Subdivision were deemed public property.

Petitioner sought a reconsideration of the trial court’s decision but it was denied.

Thereafter, petitioner elevated the case to the Court of Appeals via a petition for certiorari, prohibition, injunction
and damages. On December 22, 2000, the appellate court sustained the ruling of the trial court and held that
Ordinance No. 59, s. 1993, was a valid enactment. The sidewalks of Marikina Greenheights Subdivision were
public in nature and ownership thereof belonged to the City of Marikina or the Republic of the Philippines
following the 1991 White Plains Association decision. Thus, the improvement and widening of the sidewalks
pursuant to Ordinance No. 59, s. 1993 was well within the LGU’s powers. On these grounds, the petition was
dismissed.

Petitioner moved for reconsideration of the appellate court’s decision but it was denied. Undaunted, he instituted
this petition.

Like all LGUs, the City of Marikina is empowered to enact ordinances for the purposes set forth in the Local
Government Code (RA 7160). It is expressly vested with police powers delegated to LGUs under the general
welfare clause of RA 7160.8 With this power, LGUs may prescribe reasonable regulations to protect the lives,
health, and property of their constituents and maintain peace and order within their respective territorial
jurisdictions.9

Cities and municipalities also have the power to exercise such powers and discharge such functions and
responsibilities as may be necessary, appropriate or incidental to efficient and effective provisions of the basic
services and facilities, including infrastructure facilities intended primarily to service the needs of their residents
and which are financed by their own funds.10 These infrastructure facilities include municipal or city roads and
bridges and similar facilities.11

There is no question about the public nature and use of the sidewalks in the Marikina Greenheights Subdivision.
One of the "whereas clauses" of PD 121612 (which amended PD 95713) declares that open spaces,14 roads, alleys
and sidewalks in a residential subdivision are for public use and beyond the commerce of man. In conjunction
herewith, PD 957, as amended by PD 1216, mandates subdivision owners to set aside open spaces which shall be
devoted exclusively for the use of the general public.

Thus, the trial and appellate courts were correct in upholding the validity of Ordinance No. 59, s. 1993. It was
enacted in the exercise of the City of Marikina’s police powers to regulate the use of sidewalks. However, both the
trial and appellate courts erred when they invoked our 1991 decision in White Plains Association and
automatically applied it in this case.

This Court has already resolved three interrelated White Plains Association cases:15 (1) G.R. No. 5568516 resolved
in 1985; (2) G.R. No. 9552217 decided in 1991 and (3) G.R. No. 12813118 decided in 1998.

The ruling in the 1991 White Plains Association decision relied on by both the trial and appellate courts was
modified by this Court in 1998 in White Plains Association v. Court of Appeals.19 Citing Young v. City of Manila,20

22
this Court held in its 1998 decision that subdivision streets belonged to the owner until donated to the
government or until expropriated upon payment of just compensation.

The word "street," in its correct and ordinary usage, includes not only the roadway used for carriages and
vehicular traffic generally but also the portion used for pedestrian travel.21 The part of the street set aside for the
use of pedestrians is known as a sidewalk.22

Moreover, under subdivision laws,23 lots allotted by subdivision developers as road lots include roads, sidewalks,
alleys and planting strips.24 Thus, what is true for subdivision roads or streets applies to subdivision sidewalks as
well. Ownership of the sidewalks in a private subdivision belongs to the subdivision owner/developer until it is
either transferred to the government by way of donation or acquired by the government through expropriation.

Section 335 of RA 7160 is clear and specific that no public money or property shall be appropriated or applied for
private purposes. This is in consonance with the fundamental principle in local fiscal administration that local
government funds and monies shall be spent solely for public purposes.25

In Pascual v. Secretary of Public Works,26 the Court laid down the test of validity of a public expenditure: it is the
essential character of the direct object of the expenditure which must determine its validity and not the
magnitude of the interests to be affected nor the degree to which the general advantage of the community, and
thus the public welfare, may be ultimately benefited by their promotion.27 Incidental advantage to the public or
to the State resulting from the promotion of private interests and the prosperity of private enterprises or business
does not justify their aid by the use of public money.28

In Pascual, the validity of RA 920 ("An Act Appropriating Funds for Public Works") which appropriated P85,000 for
the construction, repair, extension and improvement of feeder roads within a privately-owned subdivision was
questioned. The Court held that where the land on which the projected feeder roads were to be constructed
belonged to a private person, an appropriation made by Congress for that purpose was null and void.29

In Young v. City of Manila,30 the City of Manila undertook the filling of low-lying streets of the Antipolo
Subdivision, a privately-owned subdivision. The Court ruled that as long as the private owner retained title and
ownership of the subdivision, he was under the obligation to reimburse to the city government the expenses
incurred in land-filling the streets.

Moreover, the implementing rules of PD 957, as amended by PD 1216, provide that it is the registered owner or
developer of a subdivision who has the responsibility for the maintenance, repair and improvement of road lots
and open spaces of the subdivision prior to their donation to the concerned LGU. The owner or developer shall be
deemed relieved of the responsibility of maintaining the road lots and open space only upon securing a certificate
of completion and executing a deed of donation of these road lots and open spaces to the LGU.31

Therefore, the use of LGU funds for the widening and improvement of privately-owned sidewalks is unlawful as it
directly contravenes Section 335 of RA 7160. This conclusion finds further support from the language of Section 17
of RA 7160 which mandates LGUs to efficiently and effectively provide basic services and facilities. The law speaks
of infrastructure facilities intended primarily to service the needs of the residents of the LGU and "which are
funded out of municipal funds."32 It particularly refers to "municipal roads and bridges" and "similar facilities."33

Applying the rules of ejusdem generis, the phrase "similar facilities" refers to or includes infrastructure facilities
like sidewalks owned by the LGU. Thus, RA 7160 contemplates that only the construction, improvement, repair
and maintenance of infrastructure facilities owned by the LGU may be bankrolled with local government funds.

Clearly, the question of ownership of the open spaces (including the sidewalks) in Marikina Greenheights
Subdivision is material to the determination of the validity of the challenged appropriation and disbursement
made by the City of Marikina. Similarly significant is the character of the direct object of the expenditure, that is,
the sidewalks.

Whether V.V. Soliven, Inc. has retained ownership of the open spaces and sidewalks or has already donated them
to the City of Marikina, and whether the public has full and unimpeded access to the roads and sidewalks of
Marikina Greenheights Subdivision, are factual matters. There is a need for the prior resolution of these issues
before the validity of the challenged appropriation and expenditure can be determined.

23
WHEREFORE, this case is hereby ordered REMANDED to the Regional Trial Court of Marikina City for the reception
of evidence to determine (1) whether V.V. Soliven, Inc. has retained ownership of the open spaces and sidewalks
of Marikina Greenheights Subdivision or has donated them to the City of Marikina and (2) whether the public has
full and unimpeded access to, and use of, the roads and sidewalks of the subdivision. The Marikina City Regional
Trial Court is directed to decide the case with dispatch.

SO ORDERED.

AVELINA ZAMORA, EMERITA ZAMORA-NICOL, SONNY NICOL, TERESA ZAMORA-UMALI, CLARENCE UMALI,
ROBERTO ZAMORA, ROLANDO ZAMORA, MARY ANN ZAMORA, MICHELLE ZAMORA and RODRIGO ZAMORA,
petitioners,

vs.

HEIRS of CARMEN IZQUIERDO, represented by their attorney-in-fact, ANITA F. PUNZALAN, respondents.

DECISION

SANDOVAL-GUTIERREZ, J.:

Before us is a petition for review on certiorari1 assailing the Decision2 of the Court of Appeals dated September
12, 2000 and its Resolution dated December 1, 2000 in CA-G.R. SP No. 54541, entitled "Avelina Zamora, et al.,
petitioners, versus Heirs of Carmen Izquierdo, represented by the executrix, Anita F. Punzalan, respondents."

The records show that sometime in 1973, Carmen Izquierdo and Pablo Zamora entered into a verbal stipulation
whereby the former leased to the latter one of her apartment units located at 117-B General Luna Street,
Caloocan City. They agreed on the following: the rental is P3,000.00 per month; the leased premises is only for
residence; and only a single family is allowed to occupy it.

After the death of Carmen (lessor) in 1996 her attorney-in-fact, Anita Punzalan, representing the heirs, herein
respondents, prepared a new contract of lease wherein the rental was increased from P3,000.00 to P3,600.00 per
month.3 However, petitioners refused to sign it.

In January 1997, Pablo (lessee) died. His wife, Avelina Zamora, and their children (two of whom have their own
families), herein petitioners, continued to reside in the apartment unit. However, they refused to pay the
increased rental and persisted in operating a photocopying business in the same apartment.

Meanwhile, petitioner Avelina Zamora applied with the Metropolitan Waterworks & Sewerage System (MWSS)
for a water line installation in the premises. Since a written consent from the owner is required for such
installation, she requested respondents' attorney-in-fact to issue it. However, the latter declined because
petitioners refused to pay the new rental rate and violated the restrictions on the use of the premises by using a
portion thereof for photocopying business and allowing three families to reside therein.

This prompted petitioner Avelina Zamora to file with the Office of the Punong Barangay of Barangay 16, Sona 2,
District I, Lungsod ng Caloocan, a complaint against Anita Punzalan (respondents' attorney-in-fact), docketed as
"Usaping Bgy. Blg. 1-27-97, Ukol sa: Hindi Pagbibigay ng Pahintulot sa Pagpapakabit ng Tubig."

On August 24, 1997, during the barangay conciliation proceedings, petitioner Avelina Zamora declared that she
refused to sign the new lease contract because she is not agreeable with the conditions specified therein.

The following day, Anita Punzalan sent Avelina a letter4 informing her that the lease is being terminated and
demanding that petitioners vacate the premises within 30 days from notice.

Despite several barangay conciliation sessions, the parties failed to settle their dispute amicably. Hence, the
Barangay Chairman issued a Certification to File Action dated September 14, 1997.5

Consequently, on October 2, 1997, respondents, represented by Anita Punzalan, filed with the Metropolitan Trial
Court (MTC), Branch 49, Caloocan City, a complaint for unlawful detainer and damages against petitioners,
docketed as Civil Case No. 23702.6 Forthwith, petitioners filed a motion to dismiss7 the complaint on the ground
that the controversy was not referred to the barangay for conciliation. First, they alleged that the barangay

24
Certification to File Action "is fatally defective" because it pertains to another dispute, i.e., the refusal by
respondents' attorney-in-fact to give her written consent to petitioners' request for installation of water facilities
in the premises. And, second, when the parties failed to reach an amicable settlement before the Lupong
Tagapamayapa, the Punong Barangay (as Lupon Chairman), did not constitute the Pangkat ng Tagapagkasundo
before whom mediation or arbitration proceedings should have been conducted, in violation of Section 410(b),
Chapter 7 (Katarungang Pambarangay), Title One, Book III of Republic Act No. 71608 (otherwise known as the
Local Government Code of 1991), which reads:

"SECTION 410. Procedure for Amicable Settlement.–

(a) x x x

(b) Mediation by lupon chairman – Upon receipt of the complaint, the lupon chairman9 shall, within the next
working day, summon the respondent(s), with notice to the complainant(s) for them and their witnesses to
appear before him for a mediation of their conflicting interests. If he fails in his mediation effort within fifteen (15)
days from the first meeting of the parties before him, he shall forthwith set a date for the constitution of the
pangkat in accordance with the provisions of this Chapter." (Underscoring supplied)

Respondents opposed the motion to dismiss,10 the same being prohibited under Section 19 of the 1991 Revised
Rule on Summary Procedure. They prayed that judgment be rendered as may be warranted by the facts alleged in
the complaint, pursuant to Section 611 of the same Rule.

On July 9, 1998, the MTC issued an Order12 denying petitioners' motion to dismiss and considering the case
submitted for decision in view of their failure to file their answer to the complaint.

Petitioners filed a motion for reconsideration,13 contending that a motion to dismiss the complaint on the ground
of failure to refer the complaint to the Lupon for conciliation is allowed under Section 19 of the 1991 Revised Rule
on Summary Procedure, which partly provides:

"SEC. 19. Prohibited pleadings and motions. – The following pleadings, motions, or petitions shall not be allowed
in the cases covered by this Rule:

(a) Motion to dismiss the complaint or to quash the complaint or information except on the ground of lack of
jurisdiction over the subject matter, or failure to comply with the preceding section [referring to Section 18 on
referral of the complaint to the Lupon for conciliation];

x x x."

On August 26, 1998, the MTC rendered a Judgment14 in favor of respondents and against petitioners, the
dispositive portion of which reads:

"WHEREFORE, Judgment is hereby rendered in favor of the plaintiff and against the defendants, ordering
defendants and all persons claiming right under them:

1) To vacate the leased premises located at No. 117-B General Luna Street, Caloocan City and to surrender
possession thereof to the plaintiff;

2) To pay the amount of three thousand six hundred (P3,600.00) pesos per month starting January, 1997 until the
premises being occupied by them is finally vacated and possession thereof is restored to the plaintiff;

3) To pay plaintiff the sum of five thousand (P5,000.00) pesos as and for attorney's fees; and

4) To pay the costs of this suit.

SO ORDERED."

On appeal, the Regional Trial Court (RTC), Branch 125, Caloocan City, rendered its Decision15 dated February 15,
1999 affirming the MTC Judgment. Subsequently, it denied petitioners' motion for reconsideration.16

Petitioners then filed with the Court of Appeals a petition for review, docketed as CA-G.R. SP No. 54541. On
September 12, 2000, it rendered a Decision17 affirming the RTC Decision.

25
Thereafter, petitioners filed a motion for reconsideration but was denied by the Appellate Court in its Resolution
dated December 1, 2000.18

Hence, the instant petition.

The primordial objective of Presidential Decree No. 1508 (the Katarungang Pambarangay Law), now included
under R.A. No. 7160 (the Local Government Code of 1991), is to reduce the number of court litigations and prevent
the deterioration of the quality of justice which has been brought about by the indiscriminate filing of cases in the
courts.19 To attain this objective, Section 412(a) of R.A. No. 7160 requires the parties to undergo a conciliation
process before the Lupon Chairman or the Pangkat as a precondition to filing a complaint in court, thus:

"SECTION 412. Conciliation. – (a) Pre-condition to Filing of Complaint in Court.– No complaint, petition, action, or
proceeding involving any matter within the authority of the lupon shall be filed or instituted directly in court or
any other government office for adjudication, unless there has been a confrontation between the parties before
the lupon chairman or the pangkat, and that no conciliation or settlement has been reached as certified by the
lupon or pangkat secretary and attested to by the lupon or pangkat chairman x x x." (Underscoring supplied)

In the case at bar, the Punong Barangay, as Chairman of the Lupong Tagapamayapa, conducted conciliation
proceedings to resolve the dispute between the parties herein. Contrary to petitioners' contention, the complaint
does not only allege, as a cause of action, the refusal of respondents' attorney-in-fact to give her consent to the
installation of water facilities in the premises, but also petitioners' violation of the terms of the lease, specifically
their use of a portion therein for their photocopying business and their failure to pay the increased rental. As
correctly found by the RTC:

"The records show that confrontations before the barangay chairman were held on January 26, 1997, February 9,
1997, February 23, 1997, February 28, 1997, July 27, 1997, August 3, 1997, August 10, 1997, August 17, 1997 and
August 24, 1997 wherein not only the issue of water installation was discussed but also the terms of the lease and
the proposed execution of a written contract relative thereto. It appears, however, that no settlement was
reached despite a total of nine meetings at the barangay level.

It is of no moment that the complaint was initially made by defendant-appellant Avelina Zamora because herein
plaintiff-appellee was given by the Sangguniang Barangay the authority to bring her grievance to the Court for
resolution. While it is true that the Sertifikasyon dated September 14, 1997 is entitled 'Ukol Sa Hindi Pagbibigay
Ng Pahintulot Sa Pagpapakabit Ng Tubig', this title must not prevail over the actual issues discussed in the
proceedings.

Hence, to require another confrontation at the barangay level as a sine qua non for the filing of the instant case
would not serve any useful purpose anymore since no new issues would be raised therein and the parties have
proven so many times in the past that they cannot get to settle their differences amicably."20

We cannot sustain petitioners' contention that the Lupon conciliation alone, without the proceeding before the
Pangkat ng Tagapagkasundo, contravenes the law on Katarungang Pambarangay. Section 412(a) of R.A. No. 7160,
quoted earlier, clearly provides that, as a precondition to filing a complaint in court, the parties shall go through
the conciliation process either before the Lupon Chairman (as what happened in the present case), or the Pangkat.

Moreover, in Diu vs. Court of Appeals,21 we held that "notwithstanding the mandate in Section 410(b) of R.A. No.
7160 that the Barangay Chairman shall constitute a Pangkat if he fails in his mediation efforts," the same "Section
410(b) should be construed together with Section 412(a) of the same law (quoted earlier), as well as the
circumstances obtaining in and peculiar to the case." Here, while the Pangkat was not constituted, however, the
parties met nine (9) times at the Office of the Barangay Chairman for conciliation wherein not only the issue of
water installation was discussed but also petitioners' violation of the lease contract. It is thus manifest that there
was substantial compliance with the law which does not require strict adherence thereto.22

II

We hold that petitioners' motion to dismiss the complaint for unlawful detainer is proscribed by Section 19(a) of
the 1991 Revised Rule on Summary Procedure, quoted earlier. Section 19(a) permits the filing of such pleading
only when the ground for dismissal of the complaint is anchored on lack of jurisdiction over the subject matter, or

26
failure by the complainant to refer the subject matter of his/her complaint "to the Lupon for conciliation" prior to
its filing with the court. This is clear from the provisions of Section 18 of the same Rule, which reads:

"SEC. 18. Referral to Lupon. – Cases requiring referral to the Lupon for conciliation under the provisions of
Presidential Decree No. 1508 where there is no showing of compliance with such requirement, shall be dismissed
without prejudice, and may be revived only after such requirement shall have been complied with. This provision
shall not apply to criminal cases where the accused was arrested without a warrant." (Underscoring supplied)

As discussed earlier, the case was referred to the Lupon Chairman for conciliation. Obviously, petitioners' motion
to dismiss, even if allowed, is bereft of merit.

WHEREFORE, the petition is DENIED. The assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP
No. 54541 sustaining the Decision of the RTC which upheld the MTC Judgment is AFFIRMED.

Costs against petitioners.

SO ORDERED.

G.R. No. L-23825 December 24, 1965

EMMANUEL PELAEZ, petitioner,

vs.

THE AUDITOR GENERAL, respondent.

Zulueta, Gonzales, Paculdo and Associates for petitioner.

Office of the Solicitor General for respondent.

CONCEPCION, J.:

During the period from September 4 to October 29, 1964 the President of the Philippines, purporting to act
pursuant to Section 68 of the Revised Administrative Code, issued Executive Orders Nos. 93 to 121, 124 and 126 to
129; creating thirty-three (33) municipalities enumerated in the margin.1 Soon after the date last mentioned, or
on November 10, 1964 petitioner Emmanuel Pelaez, as Vice President of the Philippines and as taxpayer,
instituted the present special civil action, for a writ of prohibition with preliminary injunction, against the Auditor
General, to restrain him, as well as his representatives and agents, from passing in audit any expenditure of public
funds in implementation of said executive orders and/or any disbursement by said municipalities.

Petitioner alleges that said executive orders are null and void, upon the ground that said Section 68 has been
impliedly repealed by Republic Act No. 2370 and constitutes an undue delegation of legislative power.
Respondent maintains the contrary view and avers that the present action is premature and that not all proper
parties — referring to the officials of the new political subdivisions in question — have been impleaded.
Subsequently, the mayors of several municipalities adversely affected by the aforementioned executive orders —
because the latter have taken away from the former the barrios composing the new political subdivisions —
intervened in the case. Moreover, Attorneys Enrique M. Fernando and Emma Quisumbing-Fernando were allowed
to and did appear as amici curiae.

The third paragraph of Section 3 of Republic Act No. 2370, reads:

Barrios shall not be created or their boundaries altered nor their names changed except under the provisions of
this Act or by Act of Congress.

Pursuant to the first two (2) paragraphs of the same Section 3:

All barrios existing at the time of the passage of this Act shall come under the provisions hereof.

Upon petition of a majority of the voters in the areas affected, a new barrio may be created or the name of an
existing one may be changed by the provincial board of the province, upon recommendation of the council of the
municipality or municipalities in which the proposed barrio is stipulated. The recommendation of the municipal

27
council shall be embodied in a resolution approved by at least two-thirds of the entire membership of the said
council: Provided, however, That no new barrio may be created if its population is less than five hundred persons.

Hence, since January 1, 1960, when Republic Act No. 2370 became effective, except barrios may "not be created or
their boundaries altered nor their names changed" by Act of Congress or of the corresponding provincial board
"upon petition of a majority of the voters in the areas affected" and the "recommendation of the council of the
municipality or municipalities in which the proposed barrio is situated." Petitioner argues, accordingly: "If the
President, under this new law, cannot even create a barrio, can he create a municipality which is composed of
several barrios, since barrios are units of municipalities?"

Respondent answers in the affirmative, upon the theory that a new municipality can be created without creating
new barrios, such as, by placing old barrios under the jurisdiction of the new municipality. This theory overlooks,
however, the main import of the petitioner's argument, which is that the statutory denial of the presidential
authority to create a new barrio implies a negation of the bigger power to create municipalities, each of which
consists of several barrios. The cogency and force of this argument is too obvious to be denied or even
questioned. Founded upon logic and experience, it cannot be offset except by a clear manifestation of the intent
of Congress to the contrary, and no such manifestation, subsequent to the passage of Republic Act No. 2379, has
been brought to our attention.

Moreover, section 68 of the Revised Administrative Code, upon which the disputed executive orders are based,
provides:

The (Governor-General) President of the Philippines may by executive order define the boundary, or boundaries,
of any province, subprovince, municipality, [township] municipal district, or other political subdivision, and
increase or diminish the territory comprised therein, may divide any province into one or more subprovinces,
separate any political division other than a province, into such portions as may be required, merge any of such
subdivisions or portions with another, name any new subdivision so created, and may change the seat of
government within any subdivision to such place therein as the public welfare may require: Provided, That the
authorization of the (Philippine Legislature) Congress of the Philippines shall first be obtained whenever the
boundary of any province or subprovince is to be defined or any province is to be divided into one or more
subprovinces. When action by the (Governor-General) President of the Philippines in accordance herewith makes
necessary a change of the territory under the jurisdiction of any administrative officer or any judicial officer, the
(Governor-General) President of the Philippines, with the recommendation and advice of the head of the
Department having executive control of such officer, shall redistrict the territory of the several officers affected
and assign such officers to the new districts so formed.

Upon the changing of the limits of political divisions in pursuance of the foregoing authority, an equitable
distribution of the funds and obligations of the divisions thereby affected shall be made in such manner as may be
recommended by the (Insular Auditor) Auditor General and approved by the (Governor-General) President of the
Philippines.

Respondent alleges that the power of the President to create municipalities under this section does not amount to
an undue delegation of legislative power, relying upon Municipality of Cardona vs. Municipality of Binañgonan (36
Phil. 547), which, he claims, has settled it. Such claim is untenable, for said case involved, not the creation of a
new municipality, but a mere transfer of territory — from an already existing municipality (Cardona) to another
municipality (Binañgonan), likewise, existing at the time of and prior to said transfer (See Gov't of the P.I. ex rel.
Municipality of Cardona vs. Municipality, of Binañgonan [34 Phil. 518, 519-5201) — in consequence of the fixing
and definition, pursuant to Act No. 1748, of the common boundaries of two municipalities.

It is obvious, however, that, whereas the power to fix such common boundary, in order to avoid or settle conflicts
of jurisdiction between adjoining municipalities, may partake of an administrative nature — involving, as it does,
the adoption of means and ways to carry into effect the law creating said municipalities — the authority to create
municipal corporations is essentially legislative in nature. In the language of other courts, it is "strictly a legislative
function" (State ex rel. Higgins vs. Aicklen, 119 S. 425, January 2, 1959) or "solely and exclusively the exercise of
legislative power" (Udall vs. Severn, May 29, 1938, 79 P. 2d 347-349). As the Supreme Court of Washington has
put it (Territory ex rel. Kelly vs. Stewart, February 13, 1890, 23 Pac. 405, 409), "municipal corporations are purely
the creatures of statutes."

28
Although1a Congress may delegate to another branch of the Government the power to fill in the details in the
execution, enforcement or administration of a law, it is essential, to forestall a violation of the principle of
separation of powers, that said law: (a) be complete in itself — it must set forth therein the policy to be executed,
carried out or implemented by the delegate2 — and (b) fix a standard — the limits of which are sufficiently
determinate or determinable — to which the delegate must conform in the performance of his functions.2a
Indeed, without a statutory declaration of policy, the delegate would in effect, make or formulate such policy,
which is the essence of every law; and, without the aforementioned standard, there would be no means to
determine, with reasonable certainty, whether the delegate has acted within or beyond the scope of his
authority.2b Hence, he could thereby arrogate upon himself the power, not only to make the law, but, also — and
this is worse — to unmake it, by adopting measures inconsistent with the end sought to be attained by the Act of
Congress, thus nullifying the principle of separation of powers and the system of checks and balances, and,
consequently, undermining the very foundation of our Republican system.

Section 68 of the Revised Administrative Code does not meet these well settled requirements for a valid
delegation of the power to fix the details in the enforcement of a law. It does not enunciate any policy to be
carried out or implemented by the President. Neither does it give a standard sufficiently precise to avoid the evil
effects above referred to. In this connection, we do not overlook the fact that, under the last clause of the first
sentence of Section 68, the President:

... may change the seat of the government within any subdivision to such place therein as the public welfare may
require.

It is apparent, however, from the language of this clause, that the phrase "as the public welfare may require"
qualified, not the clauses preceding the one just quoted, but only the place to which the seat of the government
may be transferred. This fact becomes more apparent when we consider that said Section 68 was originally
Section 1 of Act No. 1748,3 which provided that, "whenever in the judgment of the Governor-General the public
welfare requires, he may, by executive order," effect the changes enumerated therein (as in said section 68),
including the change of the seat of the government "to such place ... as the public interest requires." The opening
statement of said Section 1 of Act No. 1748 — which was not included in Section 68 of the Revised Administrative
Code — governed the time at which, or the conditions under which, the powers therein conferred could be
exercised; whereas the last part of the first sentence of said section referred exclusively to the place to which the
seat of the government was to be transferred.

At any rate, the conclusion would be the same, insofar as the case at bar is concerned, even if we assumed that
the phrase "as the public welfare may require," in said Section 68, qualifies all other clauses thereof. It is true that
in Calalang vs. Williams (70 Phil. 726) and People vs. Rosenthal (68 Phil. 328), this Court had upheld "public
welfare" and "public interest," respectively, as sufficient standards for a valid delegation of the authority to
execute the law. But, the doctrine laid down in these cases — as all judicial pronouncements — must be construed
in relation to the specific facts and issues involved therein, outside of which they do not constitute precedents and
have no binding effect.4 The law construed in the Calalang case conferred upon the Director of Public Works, with
the approval of the Secretary of Public Works and Communications, the power to issue rules and regulations to
promote safe transit upon national roads and streets. Upon the other hand, the Rosenthal case referred to the
authority of the Insular Treasurer, under Act No. 2581, to issue and cancel certificates or permits for the sale of
speculative securities. Both cases involved grants to administrative officers of powers related to the exercise of
their administrative functions, calling for the determination of questions of fact.

Such is not the nature of the powers dealt with in section 68. As above indicated, the creation of municipalities, is
not an administrative function, but one which is essentially and eminently legislative in character. The question of
whether or not "public interest" demands the exercise of such power is not one of fact. it is "purely a legislative
question "(Carolina-Virginia Coastal Highway vs. Coastal Turnpike Authority, 74 S.E. 2d. 310-313, 315-318), or a
political question (Udall vs. Severn, 79 P. 2d. 347-349). As the Supreme Court of Wisconsin has aptly characterized
it, "the question as to whether incorporation is for the best interest of the community in any case is emphatically
a question of public policy and statecraft" (In re Village of North Milwaukee, 67 N.W. 1033, 1035-1037).

For this reason, courts of justice have annulled, as constituting undue delegation of legislative powers, state laws
granting the judicial department, the power to determine whether certain territories should be annexed to a
particular municipality (Udall vs. Severn, supra, 258-359); or vesting in a Commission the right to determine the
plan and frame of government of proposed villages and what functions shall be exercised by the same, although

29
the powers and functions of the village are specifically limited by statute (In re Municipal Charters, 86 Atl. 307-
308); or conferring upon courts the authority to declare a given town or village incorporated, and designate its
metes and bounds, upon petition of a majority of the taxable inhabitants thereof, setting forth the area desired to
be included in such village (Territory ex rel Kelly vs. Stewart, 23 Pac. 405-409); or authorizing the territory of a
town, containing a given area and population, to be incorporated as a town, on certain steps being taken by the
inhabitants thereof and on certain determination by a court and subsequent vote of the inhabitants in favor
thereof, insofar as the court is allowed to determine whether the lands embraced in the petition "ought justly" to
be included in the village, and whether the interest of the inhabitants will be promoted by such incorporation, and
to enlarge and diminish the boundaries of the proposed village "as justice may require" (In re Villages of North
Milwaukee, 67 N.W. 1035-1037); or creating a Municipal Board of Control which shall determine whether or not
the laying out, construction or operation of a toll road is in the "public interest" and whether the requirements of
the law had been complied with, in which case the board shall enter an order creating a municipal corporation and
fixing the name of the same (Carolina-Virginia Coastal Highway vs. Coastal Turnpike Authority, 74 S.E. 2d. 310).

Insofar as the validity of a delegation of power by Congress to the President is concerned, the case of Schechter
Poultry Corporation vs. U.S. (79 L. Ed. 1570) is quite relevant to the one at bar. The Schechter case involved the
constitutionality of Section 3 of the National Industrial Recovery Act authorizing the President of the United States
to approve "codes of fair competition" submitted to him by one or more trade or industrial associations or
corporations which "impose no inequitable restrictions on admission to membership therein and are truly
representative," provided that such codes are not designed "to promote monopolies or to eliminate or oppress
small enterprises and will not operate to discriminate against them, and will tend to effectuate the policy" of said
Act. The Federal Supreme Court held:

To summarize and conclude upon this point: Sec. 3 of the Recovery Act is without precedent. It supplies no
standards for any trade, industry or activity. It does not undertake to prescribe rules of conduct to be applied to
particular states of fact determined by appropriate administrative procedure. Instead of prescribing rules of
conduct, it authorizes the making of codes to prescribe them. For that legislative undertaking, Sec. 3 sets up no
standards, aside from the statement of the general aims of rehabilitation, correction and expansion described in
Sec. 1. In view of the scope of that broad declaration, and of the nature of the few restrictions that are imposed,
the discretion of the President in approving or prescribing codes, and thus enacting laws for the government of
trade and industry throughout the country, is virtually unfettered. We think that the code making authority thus
conferred is an unconstitutional delegation of legislative power.

If the term "unfair competition" is so broad as to vest in the President a discretion that is "virtually unfettered."
and, consequently, tantamount to a delegation of legislative power, it is obvious that "public welfare," which has
even a broader connotation, leads to the same result. In fact, if the validity of the delegation of powers made in
Section 68 were upheld, there would no longer be any legal impediment to a statutory grant of authority to the
President to do anything which, in his opinion, may be required by public welfare or public interest. Such grant of
authority would be a virtual abdication of the powers of Congress in favor of the Executive, and would bring about
a total collapse of the democratic system established by our Constitution, which it is the special duty and privilege
of this Court to uphold.

It may not be amiss to note that the executive orders in question were issued after the legislative bills for the
creation of the municipalities involved in this case had failed to pass Congress. A better proof of the fact that the
issuance of said executive orders entails the exercise of purely legislative functions can hardly be given.

Again, Section 10 (1) of Article VII of our fundamental law ordains:

The President shall have control of all the executive departments, bureaus, or offices, exercise general supervision
over all local governments as may be provided by law, and take care that the laws be faithfully executed.

The power of control under this provision implies the right of the President to interfere in the exercise of such
discretion as may be vested by law in the officers of the executive departments, bureaus, or offices of the national
government, as well as to act in lieu of such officers. This power is denied by the Constitution to the Executive,
insofar as local governments are concerned. With respect to the latter, the fundamental law permits him to wield
no more authority than that of checking whether said local governments or the officers thereof perform their
duties as provided by statutory enactments. Hence, the President cannot interfere with local governments, so long
as the same or its officers act Within the scope of their authority. He may not enact an ordinance which the

30
municipal council has failed or refused to pass, even if it had thereby violated a duty imposed thereto by law,
although he may see to it that the corresponding provincial officials take appropriate disciplinary action therefor.
Neither may he vote, set aside or annul an ordinance passed by said council within the scope of its jurisdiction, no
matter how patently unwise it may be. He may not even suspend an elective official of a regular municipality or
take any disciplinary action against him, except on appeal from a decision of the corresponding provincial board.5

Upon the other hand if the President could create a municipality, he could, in effect, remove any of its officials, by
creating a new municipality and including therein the barrio in which the official concerned resides, for his office
would thereby become vacant.6 Thus, by merely brandishing the power to create a new municipality (if he had it),
without actually creating it, he could compel local officials to submit to his dictation, thereby, in effect, exercising
over them the power of control denied to him by the Constitution.

Then, also, the power of control of the President over executive departments, bureaus or offices implies no more
than the authority to assume directly the functions thereof or to interfere in the exercise of discretion by its
officials. Manifestly, such control does not include the authority either to abolish an executive department or
bureau, or to create a new one. As a consequence, the alleged power of the President to create municipal
corporations would necessarily connote the exercise by him of an authority even greater than that of control
which he has over the executive departments, bureaus or offices. In other words, Section 68 of the Revised
Administrative Code does not merely fail to comply with the constitutional mandate above quoted. Instead of
giving the President less power over local governments than that vested in him over the executive departments,
bureaus or offices, it reverses the process and does the exact opposite, by conferring upon him more power over
municipal corporations than that which he has over said executive departments, bureaus or offices.

In short, even if it did entail an undue delegation of legislative powers, as it certainly does, said Section 68, as part
of the Revised Administrative Code, approved on March 10, 1917, must be deemed repealed by the subsequent
adoption of the Constitution, in 1935, which is utterly incompatible and inconsistent with said statutory
enactment.7

There are only two (2) other points left for consideration, namely, respondent's claim (a) that "not all the proper
parties" — referring to the officers of the newly created municipalities — "have been impleaded in this case," and
(b) that "the present petition is premature."

As regards the first point, suffice it to say that the records do not show, and the parties do not claim, that the
officers of any of said municipalities have been appointed or elected and assumed office. At any rate, the Solicitor
General, who has appeared on behalf of respondent Auditor General, is the officer authorized by law "to act and
represent the Government of the Philippines, its offices and agents, in any official investigation, proceeding or
matter requiring the services of a lawyer" (Section 1661, Revised Administrative Code), and, in connection with
the creation of the aforementioned municipalities, which involves a political, not proprietary, function, said local
officials, if any, are mere agents or representatives of the national government. Their interest in the case at bar
has, accordingly, been, in effect, duly represented.8

With respect to the second point, respondent alleges that he has not as yet acted on any of the executive order &
in question and has not intimated how he would act in connection therewith. It is, however, a matter of common,
public knowledge, subject to judicial cognizance, that the President has, for many years, issued executive orders
creating municipal corporations and that the same have been organized and in actual operation, thus indicating,
without peradventure of doubt, that the expenditures incidental thereto have been sanctioned, approved or
passed in audit by the General Auditing Office and its officials. There is no reason to believe, therefore, that
respondent would adopt a different policy as regards the new municipalities involved in this case, in the absence
of an allegation to such effect, and none has been made by him.

WHEREFORE, the Executive Orders in question are hereby declared null and void ab initio and the respondent
permanently restrained from passing in audit any expenditure of public funds in implementation of said Executive
Orders or any disbursement by the municipalities above referred to. It is so ordered.

31