Petitioners: en Banc

EN BANC
[G.R. No. 199802. July 3, 2018.]
CONGRESSMAN HERMILANDO I. MANDANAS; MAYOR EFREN

B. DIONA; MAYOR ANTONINO A. AURELIO; KAGAWAD MARIO
ILAGAN; BARANGAY CHAIR PERLITO MANALO; BARANGAY
CHAIR MEDEL MEDRANO; BARANGAY KAGAWAD CRIS
RAMOS; BARANGAY KAGAWAD ELISA D. BALBAGO, and
ATTY. JOSE MALVAR VILLEGAS , petitioners, vs. EXECUTIVE
SECRETARY PAQUITO N. OCHOA, JR.; SECRETARY CESAR
PURISIMA, Department of Finance; SECRETARY FLORENCIO
H. ABAD, Department of Budget and Management;
COMMISSIONER KIM JACINTO-HENARES, Bureau of Internal
Revenue; and NATIONAL TREASURER ROBERTO TAN,
Bureau of the Treasury, respondents.
[G.R. No. 208488. July 3, 2018.]
HONORABLE ENRIQUE T. GARCIA, JR., in his personal and

official capacity as Representative of the 2nd District of the
Province of Bataan, petitioner, vs. HONORABLE [PAQUITO] N.
OCHOA, JR., Executive Secretary; HONORABLE CESAR V.
PURISIMA, Secretary, Department of Finance; HONORABLE
FLORENCIO H. ABAD, Secretary, Department of Budget and
Management; HONORABLE KIM S. JACINTO-HENARES,
Commissioner, Bureau of Internal Revenue; and
HONORABLE ROZZANO RUFINO B. BIAZON, Commissioner,
Bureau of Customs, respondents.
DECISION
BERSAMIN, J : p
The petitioners hereby challenge the manner in which thejust share in

the national taxes of the local government units (LGUs) has been computed.
HTcADC
Antecedents
One of the key features of the 1987 Constitution is its push towards
decentralization of government and local autonomy. Local autonomy has two
facets, the administrative and the fiscal. Fiscal autonomy means that local
governments have the power to create their own sources of revenue in
addition to their equitable share in the national taxes released by the
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National Government, as well as the power to allocate their resources in
accordance with their own priorities. 1 Such autonomy is as indispensable to
the viability of the policy of decentralization as the other.
Implementing the constitutional mandate for decentralization and local
autonomy, Congress enacted Republic Act No. 7160, otherwise known as the
Local Government Code (LGC), in order to guarantee the fiscal autonomy of
the LGUs by specifically providing that:
SECTION 284. Allotment of Internal Revenue Taxes. — Local
government units shall have a share in the national internal revenue
taxes based on the collection of the third fiscal year preceding the
current fiscal year as follows:
(a) On the first year of the effectivity of this Code, thirty
percent (30%);
(b) On the second year, thirty-five percent (35%); and
(c) On the third year and thereafter, forty percent (40%).
Provided, That in the event that the National Government
incurs an unmanageable public sector deficit, the President of the
Philippines is hereby authorized, upon the recommendation of
Secretary of Finance, Secretary of Interior and Local Government, and
Secretary of Budget and Management, and subject to consultation
with the presiding officers of both Houses of Congress and the
presidents of the "liga," to make the necessary adjustments in the
internal revenue allotment of local government units but in no case
shall the allotment be less than thirty percent (30%) of the collection
of national internal revenue taxes of the third fiscal year preceding
the current fiscal year: Provided, further, That in the first year of the
effectivity of this Code, the local government units shall, in addition to
the thirty percent (30%) internal revenue allotment which shall
include the cost of devolved functions for essential public services, be
entitled to receive the amount equivalent to the cost of devolved
personal services.
The share of the LGUs, heretofore known as the Internal Revenue
Allotment (IRA), has been regularly released to the LGUs. According to the
implementing rules and regulations of the LGC, the IRA is determined on the
basis of the actual collections of the National Internal Revenue Taxes (NIRTs)
as certified by the Bureau of Internal Revenue (BIR). 2
G.R. No. 199802 (Mandanas, et al.) is a special civil action for
certiorari, prohibition and mandamus assailing the manner the General
Appropriations Act (GAA) for FY 2012 computed the IRA for the LGUs.
Mandanas, et al. allege herein that certain collections of NIRTs by the
Bureau of Customs (BOC) — specifically: excise taxes, value added taxes
(VATs) and documentary stamp taxes (DSTs) — have not been included in
the base amounts for the computation of the IRA; that such taxes, albeit
collected by the BOC, should form part of the base from which the IRA
should be computed because they constituted NIRTs; that, consequently, the
release of the additional amount of P60,750,000,000.00 to the LGUs as their
IRA for FY 2012 should be ordered; and that for the same reason the LGUs
should also be released their unpaid IRA for FY 1992 to FY 2011, inclusive,
totaling P438,103,906,675.73.
In G.R. No. 208488, Congressman Enrique Garcia, Jr., the lone
petitioner, seeks the writ of mandamus to compel the respondents thereat to
compute the just share of the LGUs on the basis of all national taxes. His
petition insists on a literal reading of Section 6, Article X of the 1987
Constitution. He avers that the insertion by Congress of the words internal
revenue in the phrase national taxes found in Section 284 of the LGC caused
the diminution of the base for determining the just share of the LGUs, and
should be declared unconstitutional; that, moreover, the exclusion of certain
taxes and accounts pursuant to or in accordance with special laws was
similarly constitutionally untenable; that the VATs and excise taxes collected
by the BOC should be included in the computation of the IRA; and that the
respondents should compute the IRA on the basis of all national tax
collections, and thereafter distribute any shortfall to the LGUs.
It is noted that named as common respondents were the then
incumbent Executive Secretary, Secretary of Finance, the Secretary of the
Department of Budget and Management (DBM), and the Commissioner of
Internal Revenue. In addition, Mandanas, et al. impleaded the National
Treasurer, while Garcia added the Commissioner of Customs. aScITE
The cases were consolidated on October 22, 2013. 3 In the meanwhile,

Congressman Garcia, Jr. passed away. Jose Enrique Garcia III, who was
subsequently elected to the same congressional post, was substituted for
Congressman Garcia, Jr. as the petitioner in G.R. No. 208488 under the
resolution promulgated on August 23, 2016. 4
In response to the petitions, the several respondents, represented by
the Office of the Solicitor General (OSG), urged the dismissal of the petitions
upon procedural and substantive considerations.
Anent the procedural considerations, the OSG argues that the petitions
are procedurally defective because, firstly, mandamus does not lie in order
to achieve the reliefs sought because Congress may not be compelled to
appropriate the sums allegedly illegally withheld for to do so will violate the
doctrine of separation of powers; and, secondly, mandamus does not also lie
to compel the DBM to release the amounts to the LGUs because such
disbursements will be contrary to the purposes specified in the GAA; that
Garcia has no clear legal right to sustain his suit for mandamus; that the
filing of Garcia's suit violates the doctrine of hierarchy of courts; and that
Garcia's petition seeks declaratory relief but the Court cannot grant such
relief in the exercise of its original jurisdiction.
On the substantive considerations, the OSG avers that Article 284 of
the LGC is consistent with the mandate of Section 6, Article X of the 1987
Constitution to the effect that the LGUs shall have a just share in the national
taxes; that the determination of the just share is within the discretion of
Congress; that the limitation under the LGC of the basis for the just share in
the NIRTs was within the powers granted to Congress by the 1987
Constitution; that the LGUs have been receiving their just share in the
national taxes based on the correct base amount; that Congress has the
authority to exclude certain taxes from the base amount in computing the
IRA; that there is a distinction between the VATs, excise taxes and DSTs
collected by the BIR, on one hand, and the VATs, excise taxes and DSTs
collected by the BOC, on the other, thereby warranting their different
treatment; and that Development Budget Coordination Committee (DBCC)
Resolution No. 2003-02 dated September 4, 2003 has limited the base
amount for the computation of the IRA to the "cash collections based on the
BIR data as reconciled with the Bureau of Treasury;" and that the collection
of such national taxes by the BOC should be excluded.
Issues
The issues for resolution are limited to the following, namely:

I.
Whether or not Mandamus is the proper vehicle to assail the
constitutionality of the relevant provisions of the GAA and the LGC;
II.
Whether or not Section 284 of the LGC is unconstitutional for being
repugnant to Section 6, Article X of the 1987 Constitution;
III.
Whether or not the existing shares given to the LGUs by virtue of the
GAA is consistent with the constitutional mandate to give LGUs a "just
share" to national taxes following Article X, Section 6 of the 1987
Constitution;
IV.
Whether or not the petitioners are entitled to the reliefs prayed for.
Simply stated, the petitioners raise the novel question of whether or
not the exclusion of certain national taxes from the base amount for the
computation of the just share of the LGUs in the national taxes is
constitutional.
Ruling of the Court
The petitions are partly meritorious.
Mandamus is an improper remedy
Mandanas, et al. seek the writs of certiorari, prohibition and

mandamus, while Garcia prays for the writ of mandamus. Both groups of
petitioners impugn the validity of Section 284 of the LGC.
The remedy of mandamus is defined in Section 3, Rule 65 of the Rules
of Court, which provides: HEITAD
Section 3. Petition for mandamus. — When any tribunal,

corporation, board, officer or person unlawfully neglects the
performance of an act which the law specifically enjoins as a duty
resulting from an office, trust, or station, or unlawfully excludes
another from the use and enjoyment of a right or office to which such
other is entitled, and there is no other plain, speedy and adequate
remedy in the ordinary course of law, the person aggrieved thereby
may file a verified petition in the proper court, alleging the facts with
certainty and praying that judgment be rendered commanding the
respondent, immediately or at some other time to be specified by the
court, to do the act required to be done to protect the rights of the
petitioner, and to pay the damages sustained by the petitioner by
reason of the wrongful acts of the respondent.
The petition shall also contain a sworn certification of non-forum
shopping as provided in the third paragraph of section 3, Rule 46.
For the writ of mandamus to issue, the petitioner must show that the
act sought to be performed or compelled is ministerial on the part of the
respondent. An act is ministerial when it does not require the exercise of
judgment and the act is performed pursuant to a legal mandate. The burden
of proof is on the mandamus petitioner to show that he is entitled to the
performance of a legal right, and that the respondent has a corresponding
duty to perform the act. The writ of mandamus may not issue to compel an
official to do anything that is not his duty to do, or that is his duty not to do,
or to obtain for the petitioner anything to which he is not entitled by law. 5
Considering that its determination of what constitutes the just share of
the LGUs in the national taxes under the 1987 Constitution is an entirely
discretionary power, Congress cannot be compelled by writ of mandamus to
act either way. The discretion of Congress thereon, being exclusive, is not
subject to external direction; otherwise, the delicate balance underlying our
system of government may be unduly disturbed. This conclusion should at
once then demand the dismissal of the Garcia petition in G.R. No. 208488,
but we do not dismiss it. Garcia has attributed the non-release of some
portions of their IRA balances to an alleged congressional indiscretion — the
diminution of the base amount for computing the LGU's just share. He has
asserted that Congress altered the constitutional base not only by limiting
the base to the NIRTs instead of including therein all national taxes, but also
by excluding some national taxes and revenues that only benefitted a few
LGUs to the detriment of the rest of the LGUs.
Garcia's petition, while dubbed as a petition for mandamus, is also a
petition for certiorari because it alleges that Congress thereby committed
grave abuse of discretion amounting to lack or excess of jurisdiction. It is
worth reminding that the actual nature of every action is determined by the
allegations in the body of the pleading or the complaint itself, not by the
nomenclature used to designate the same. 6 Moreover, neither should the
prayer for relief be controlling; hence, the courts may still grant the proper
relief as the facts alleged in the pleadings and the evidence introduced may
warrant even without a prayer for specific remedy. 7
In this regard, Garcia's llegation of the unconstitutionality of the

insertion by Congress of the words internal revenue in the phrase national
taxes justifies treating his petition as one for certiorari. It becomes our duty,
then, to assume jurisdiction over his petition. In Araullo v. Aquino III, 8 the
Court has emphatically opined that the Court's certiorari jurisdiction under
the expanded judicial power as stated in the second paragraph of Section 1,
Article VIII of the Constitution can be asserted:
x x x to set right and undo any act of grave abuse of discretion
amounting to lack or excess of jurisdiction by any branch or
instrumentality of the Government, the Court is not at all precluded
from making the inquiry provided the challenge was properly brought
by interested or affected parties. The Court has been thereby
entrusted expressly or by necessary implication with both the duty
and the obligation of determining, in appropriate cases, the validity of
any assailed legislative or executive action. This entrustment is
consistent with the republican system of checks and balances. 9
Further, observing that one of the reliefs being sought by Garcia is
identical to the main relief sought by Mandanas, et al., the Court should
rightly dwell on the substantive arguments posited by Garcia to the extent
that they are relevant to the ultimate resolution of these consolidated suits.
II.
Municipal corporations and

their relationship with Congress
The correct resolution and fair disposition of the issues interposed for
our consideration require a review of the basic principles underlying our
system of local governments, and of the extent of the autonomy granted to
the LGUs by the 1987 Constitution. ATICcS
Municipal corporations are now commonly known as local

governments. They are the bodies politic established by law partly as
agencies of the State to assist in the civil governance of the country. Their
chief purpose has been to regulate and administer the local and internal
affairs of the cities, municipalities or districts. They are legal institutions
formed by charters from the sovereign power, whereby the populations
within communities living within prescribed areas have formed themselves
into bodies politic and corporate, and assumed their corporate names with
the right of continuous succession and for the purposes and with the
authority of subordinate self-government and improvement and the local
administration of the affairs of the State. 10
Municipal corporations, being the mere creatures of the State, are
subject to the will of Congress, their creator. Their continued existence and
the grant of their powers are dependent on the discretion of Congress. On
this matter, Judge John F. Dillon of the State of Iowa in the United States of
America enunciated in Merriam v. Moody's Executors 11 the rule of statutory
construction that came to be oft-mentioned as Dillon's Rule, to wit:
[A] municipal corporation possesses and can exercise the
following powers and no others: First, those granted in express words;
second, those necessarily implied or necessarily incident to the
powers expressly granted; third, those absolutely essential to the
declared objects and purposes of the corporation-not simply
convenient but indispensible; fourth, any fair doubt as to the
existence of a power is resolved by the courts against the
corporation-against the existence of the powers. 12
The formulation of Dillon's Rule has since undergone slight
modifications. Judge Dillon himself introduced some of the modifications
through his post-Merriam writings with the objective of alleviating the
original formulation's harshness. The word fairly was added to the second
proviso; the word absolutely was deleted from the third proviso; and the
words reasonable and substantial were added to the fourth proviso, thusly:
x x x second, those necessarily or fairly implied in or incident to the
powers expressly granted; third, those essential to x x x. Any fair,
reasonable, doubt. 13
The modified Dillon's Rule has been followed in this jurisdiction, and
has remained despite both the 1973 Constitution and the 1987 Constitution
mandating autonomy for local governments. This has been made evident in
several rulings of the Court, one of which was that handed down in Magtajas
v. Pryce Properties Corporation, Inc.: 14
In light of all the above considerations, we see no way of
arriving at the conclusion urged on us by the petitioners that the
ordinances in question are valid. On the contrary, we find that the
ordinances violate P.D. 1869, which has the character and force of a
statute, as well as the public policy expressed in the decree allowing
the playing of certain games of chance despite the prohibition of
gambling in general.
The rationale of the requirement that the ordinances should not
contravene a statute is obvious. Municipal governments are only
agents of the national government. Local councils exercise
only delegated legislative powers conferred on them by
Congress as the national lawmaking body. The delegate
cannot be superior to the principal or exercise powers higher
than those of the latter. It is a heresy to suggest that the
local government units can undo the acts of Congress, from
which they have derived their power in the first place, and
negate by mere ordinance the mandate of the statute.
Municipal corporations owe their origin to,
and derive their powers and rights wholly from the
legislature. It breathes into them the breath of life,
without which they cannot exist. As it creates, so it
may destroy. As it may destroy, it may abridge and
control. Unless there is some constitutional
limitation on the right, the legislature might, by a
single act, and if we can suppose it capable of so
great a folly and so great a wrong, sweep from
existence all of the municipal corporations in the
State, and the corporation could not prevent it. We
know of no limitation on the right so far as to the
corporation themselves are concerned. They are,
so to phrase it, the mere tenants at will of the
legislature.
This basic relationship between the national legislature
and the local government units has not been enfeebled by the
new provisions in the Constitution strengthening the policy of
local autonomy. Without meaning to detract from that policy,
we here confirm that Congress retains control of the local
government units although in significantly reduced degree
now than under our previous Constitutions. The power to
create still includes the power to destroy. The power to grant
still includes the power to withhold or recall. True, there are
certain notable innovations in the Constitution, like the direct
conferment on the local government units of the power to
tax, which cannot now be withdrawn by mere statute. By and
large, however, the national legislature is still the principal of
the local government units, which cannot defy its will or
modify or violate it. [Bold underscoring supplied for emphasis] TIADCc
Also, in the earlier ruling in Ganzon v. Court of Appeals, 15 the Court

has pointed out that the 1987 Constitution, in mandating autonomy for the
LGUs, did not intend to deprive Congress of its authority and prerogatives
over the LGUs.
Nonetheless, the LGC has tempered the application of Dillon's Rule in
the Philippines by providing a norm of interpretation in favor of the LGUs in
its Section 5 (a), to wit:
xxx xxx xxx
(a) Any provision on a power of a local government unit shall be
liberally interpreted in its favor, and in case of doubt, any
question thereon shall be resolved in favor of devolution of
powers and of the local government unit. Any fair and
reasonable doubt as to the existence of the power shall
be interpreted in favor of the local government unit
concerned; [Bold underscoring supplied for emphasis]
xxx xxx xxx
III.
The extent of local autonomy in the Philippines
Regardless, there remains no question that Congress possesses and

wields plenary power to control and direct the destiny of the LGUs, subject
only to the Constitution itself, for Congress, just like any branch of the
Government, should bow down to the majesty of the Constitution, which is
always supreme.
The 1987 Constitution limits Congress' control over the LGUs by
ordaining in Section 25 of its Article II that: "The State shall ensure the
autonomy of local governments." The autonomy of the LGUs as thereby
ensured does not contemplate the fragmentation of the Philippines into a
collection of mini-states, 16 or the creation of imperium in imperio. 17 The
grant of autonomy simply means that Congress will allow the LGUs to
perform certain functions and exercise certain powers in order not for them
to be overly dependent on the National Government subject to the
limitations that the 1987 Constitution or Congress may impose. 18 Local
autonomy recognizes the wholeness of the Philippine society in its
ethnolinguistic, cultural, and even religious diversities. 19
The constitutional mandate to ensure local autonomy refers to
decentralization. 20 In its broad or general sense, decentralization has two
forms in the Philippine setting, namely: the decentralization of power and
the decentralization of administration. The decentralization of power
involves the abdication of political power in favor of the autonomous LGUs as
to grant them the freedom to chart their own destinies and to shape their
futures with minimum intervention from the central government. This
amounts to self-immolation because the autonomous LGUs thereby become
accountable not to the central authorities but to their constituencies. On the
other hand, the decentralization of administration occurs when the central
government delegates administrative powers to the LGUs as the means of
broadening the base of governmental powers and of making the LGUs more
responsive and accountable in the process, and thereby ensure their fullest
development as self-reliant communities and more effective partners in the
pursuit of the goals of national development and social progress. This form
of decentralization further relieves the central government of the burden of
managing local affairs so that it can concentrate on national concerns. 21 cSEDTC
Two groups of LGUs enjoy decentralization in distinct ways. The

decentralization of power has been given to the regional units (namely, the
Autonomous Region for Muslim Mindanao [ARMM] and the constitutionally-
mandated Cordillera Autonomous Region [CAR]). The other group of LGUs
(i.e., provinces, cities, municipalities and barangays) enjoy the
decentralization of administration. 22 The distinction can be reasonably
understood. The provinces, cities, municipalities and barangays are given
decentralized administration to make governance at the local levels more
directly responsive and effective. In turn, the economic, political and social
developments of the smaller political units are expected to propel social and
economic growth and development. 23 In contrast, the regional autonomy of
the ARMM and the CAR aims to permit determinate groups with common
traditions and shared social-cultural characteristics to freely develop their
ways of life and heritage, to exercise their rights, and to be in charge of their
own affairs through the establishment of a special governance regime for
certain member communities who choose their own authorities from within
themselves, and exercise the jurisdictional authority legally accorded to
them to decide their internal community affairs. 24
It is to be underscored, however, that the decentralization of power in
favor of the regional units is not unlimited but involves only the powers
enumerated by Section 20, Article X of the 1987 Constitution and by the acts
of Congress. For, with various powers being devolved to the regional units,
the grant and exercise of such powers should always be consistent with and
limited by the 1987 Constitution and the national laws. 25 In other words, the
powers are guardedly, not absolutely, abdicated by the National
Government.
Illustrative of the limitation is what transpired in Sema v. Commission
on Elections, 26 where the Court struck down Section 19, Article VI of
Republic Act No. 9054 (An Act to Strengthen and Expand the Organic Act for
the Autonomous Region in Muslim Mindanao, Amending for the Purpose
Republic Act No. 6734, entitled "An Act Providing for the Autonomous Region
in Muslim Mindanao," as Amended) insofar as the provision granted to the
ARMM the power to create provinces and cities, and consequently declared
as void Muslim Mindanao Autonomy Act No. 201 creating the Province of
Shariff Kabunsuan for being contrary to Section 5, Article VI and Section 20,
Article X of the 1987 Constitution, as well as Section 3 of the Ordinance
appended to the 1987 Constitution. The Court clarified therein that only
Congress could create provinces and cities. This was because the creation of
provinces and cities necessarily entailed the creation of legislative districts, a
power that only Congress could exercise pursuant to Section 5, Article VI of
the 1987 Constitution and Section 3 of the Ordinance appended to the
Constitution; as such, the ARMM would be thereby usurping the power of
Congress to create legislative districts and national offices. 27
The 1987 Constitution has surely encouraged decentralization by
mandating that a system of decentralization be instituted through the LGC in
order to enable a more responsive and accountable local government
structure. 28 It has also delegated the power to tax to the LGUs by
authorizing them to create their own sources of income that would make
them self-reliant. 29 It further ensures that each and every LGU will have a
just share in national taxes as well in the development of the national
wealth. 30
The LGC has further delineated in its Section 3 the different operative
principles of decentralization to be adhered to consistently with the
constitutional policy on local autonomy, viz.:
Sec. 3. Operative Principles of Decentralization. —
The formulation and implementation of policies and measures
on local autonomy shall be guided by the following operative
principles:
(a) There shall be an effective allocation among the
different local government units of their respective
powers, functions, responsibilities, and resources;
(b) There shall be established in every local
government unit an accountable, efficient, and dynamic
organizational structure and operating mechanism that
will meet the priority needs and service requirements of
its communities;
(c) Subject to civil service law, rules and regulations,
local officials and employees paid wholly or mainly from
local funds shall be appointed or removed, according to
merit and fitness, by the appropriate appointing
authority;
(d) The vesting of duty, responsibility, and
accountability in local government units shall be
accompanied with provision for reasonably adequate
resources to discharge their powers and effectively carry
out their functions: hence, they shall have the power to
create and broaden their own sources of revenue and the
right to a just share in national taxes and an equitable
share in the proceeds of the utilization and development
of the national wealth within their respective areas;
(e) Provinces with respect to component cities and
municipalities, and cities and municipalities with respect
to component barangays, shall ensure that the acts of
their component units are within the scope of their
prescribed powers and functions;
(f) Local government units may group themselves,
consolidate or coordinate their efforts, services, and
resources commonly beneficial to them;
(g) The capabilities of local government units,
especially the municipalities and barangays, shall be
enhanced by providing them with opportunities to
participate actively in the implementation of national
programs and projects;
(h) There shall be a continuing mechanism to
enhance local autonomy not only by legislative enabling
acts but also by administrative and organizational
reforms;
(i) Local government units shall share with the
national government the responsibility in the
management and maintenance of ecological balance
within their territorial jurisdiction, subject to the
provisions of this Code and national policies;
(j) Effective mechanisms for ensuring the
accountability of local government units to their
respective constituents shall be strengthened in order to
upgrade continually the quality of local leadership;
(k) The realization of local autonomy shall be
facilitated through improved coordination of national
government policies and programs an extension of
adequate technical and material assistance to less
developed and deserving local government units; SDAaTC
(l) The participation of the private sector in local

governance, particularly in the delivery of basic services,
shall be encouraged to ensure the viability of local
autonomy as an alternative strategy for sustainable
development; and
(m) The national government shall ensure that
decentralization contributes to the continuing
improvement of the performance of local government
units and the quality of community life.
Based on the foregoing delineation, decentralization can be considered
as the decision by the central government to empower its subordinates,
whether geographically or functionally constituted, to exercise authority in
certain areas. It involves decision-making by subnational units, and is
typically a delegated power, whereby a larger government chooses to
delegate authority to more local governments. 31 It is also a process, being
the set of policies, electoral or constitutional reforms that transfer
responsibilities, resources or authority from the higher to the lower levels of
government. 32 It is often viewed as a shift of authority towards local
governments and away from the central government, with total government
authority over society and economy imagined as fixed. 33
As a system of transferring authority and power from the National
Government to the LGUs, decentralization in the Philippines may be
categorized into four, namely: (1) political decentralization or devolution; (2)
administrative decentralization or deconcentration; (3) fiscal
decentralization; and (4) policy or decision-making decentralization.
Political decentralization or devolution occurs when there is a transfer
of powers, responsibilities, and resources from the central government to the
LGUs for the performance of certain functions. It is a more liberal form of
decentralization because there is an actual transfer of powers and
responsibilities. It aims to grant greater autonomy to the LGUs in cognizance
of their right to self-government, to make them self-reliant, and to improve
their administrative and technical capabilities. 34 It is an act by which the
National Government confers power and authority upon the various LGUs to
perform specific functions and responsibilities. 35 It encompasses reforms to
open sub-national representation and policies to "devolve political authority
or electoral capacities to subnational actors." 36 Section 16 to Section 19 of
the LGC characterize political decentralization in the LGC as different LGUs
empowered to address the different needs of their constituents. In contrast,
devolution in favor of the regional units is more expansive because they are
given the authority to regulate a wider array of subjects, including personal,
family and property relations.
Administrative decentralization or deconcentration involves the
transfer of functions or the delegation of authority and responsibility from
the national office to the regional and local offices. 37 Consistent with this
concept, the LGC has created the Local School Boards, 38 the Local Health
Boards 39 and the Local Development Councils, 40 and has transferred some
of the authority from the agencies of the National Government, like the
Department of Education and the Department of Health, to such bodies to
better cope up with the needs of particular localities.
Fiscal decentralization means that the LGUs have the power to create
their own sources of revenue in addition to their just share in the national
taxes released by the National Government. It includes the power to allocate
their resources in accordance with their own priorities. It thus extends to the
preparation of their budgets, so that the local officials have to work within
the constraints of their budgets. The budgets are not formulated at the
national level and imposed on local governments, without regard as to
whether or not they are relevant to local needs and resources. Hence, the
necessity of a balancing of viewpoints and the harmonization of proposals
from both local and national officials, who in any case are partners in the
attainment of national goals, is recognized and addressed. 41
Fiscal decentralization emanates from a specific constitutional
mandate that is expressed in several provisions of Article X (Local
Government) of the 1987 Constitution, specifically: Section 5; 42 Section 6;
43 and Section 7. 44
The constitutional authority extended to each and every LGU to create

its own sources of income and revenue has been formalized from Section
128 to Section 133 of the LGC. To implement the LGUs' entitlement to the
just share in the national taxes, Congress has enacted Section 284 to Section
288 of the LGC. Congress has further enacted Section 289 to Section 294 of
the LGC to define the share of the LGUs in the national wealth. Indeed, the
requirement for the automatic release to the LGUs of their just share in the
national taxes is but the consequence of the constitutional mandate for fiscal
decentralization. 45
For sure, fiscal decentralization does not signify the absolute freedom
of the LGUs to create their own sources of revenue and to spend their
revenues unrestrictedly or upon their individual whims and caprices.
Congress has subjected the LGUs' power to tax to the guidelines set in
Section 130 of the LGC and to the limitations stated in Section 133 of the
LGC. The concept of local fiscal autonomy does not exclude any manner of
intervention by the National Government in the form of supervision if only to
ensure that the local programs, fiscal and otherwise, are consistent with the
national goals. 46
Lastly, policy- or decision-making decentralization exists if at least one
sub-national tier of government has exclusive authority to make decisions on
at least one policy issue. 47
In fine, certain limitations are and can be imposed by Congress in all
the forms of decentralization, for local autonomy, whether as to power or as
to administration, is not absolute. The LGUs remain to be the tenants of the
will of Congress subject to the guarantees that the Constitution itself
imposes.
IV.
Section 284 of the LGC deviates from

the plain language of Section 6
of Article X of the 1987 Constitution

Section 6, Article X the 1987 Constitution textually commands the
allocation to the LGUs of a just share in the national taxes, viz.:
Section 6. Local government units shall have a just share, as
determined by law, in the national taxes which shall be automatically
released to them.
Section 6, when parsed, embodies three mandates, namely: (1) the
LGUs shall have a just share in the national taxes; (2) the just share shall be
determined by law; and (3) the just share shall be automatically released to
the LGUs. 48
Congress has sought to carry out the second mandate of Section 6 by
enacting Section 284, Title III (Shares of Local Government Units in the
Proceeds of National Taxes) , of the LGC, which is again quoted for ready
reference:
Section 284. Allotment of Internal Revenue Taxes. — Local
government units shall have a share in the national internal
revenue taxes based on the collection of the third fiscal year
preceding the current fiscal year as follows: acEHCD
(a) On the first year of the effectivity of this Code,

thirty percent (30%);
(c) On the third year and thereafter, forty percent
(40%).
Provided, That in the event that the national government incurs an
unmanageable public sector deficit, the President of the Philippines is
hereby authorized, upon the recommendation of Secretary of
Finance, Secretary of Interior and Local Government and Secretary of
Budget and Management, and subject to consultation with the
presiding officers of both Houses of Congress and the presidents of
the "liga," to make the necessary adjustments in the internal revenue
allotment of local government units but in no case shall the allotment
be less than thirty percent (30%) of the collection of national internal
revenue taxes of the third fiscal year preceding the current fiscal
year: Provided, further, That in the first year of the effectivity of this
Code, the local government units shall, in addition to the thirty
percent (30%) internal revenue allotment which shall include the cost
of devolved functions for essential public services, be entitled to
receive the amount equivalent to the cost of devolved personal
services.
There is no issue as to what constitutes the LGUs' just share expressed
in percentages of the national taxes ( i.e., 30%, 35% and 40% stipulated in
subparagraphs (a), (b), and (c) of Section 284). Yet, Section 6, supra,
mentions national taxes as the source of the just share of the LGUs while
Section 284 ordains that the share of the LGUs be taken from national
internal revenue taxes instead.
Has not Congress thereby infringed the constitutional provision?
Garcia contends that Congress has exceeded its constitutional
boundary by limiting to the NIRTs the base from which to compute the just
share of the LGUs.
We agree with Garcia's contention.
Although the power of Congress to make laws is plenary in nature,
congressional lawmaking remains subject to the limitations stated in the
1987 Constitution. 49 The phrase national internal revenue taxes engrafted
in Section 284 is undoubtedly more restrictive than the term national taxes
written in Section 6. As such, Congress has actually departed from the letter
of the 1987 Constitution stating that national taxes should be the base from
which the just share of the LGU comes. Such departure is impermissible.
Verba legis non est recedendum (from the words of a statute there should
be no departure). 50 Equally impermissible is that Congress has also thereby
curtailed the guarantee of fiscal autonomy in favor of the LGUs under the
1987 Constitution.
Taxes are the enforced proportional contributions exacted by the State
from persons and properties pursuant to its sovereignty in order to support
the Government and to defray all the public needs. Every tax has three
elements, namely: (a) it is an enforced proportional contribution from
persons and properties; (b) it is imposed by the State by virtue of its
sovereignty; and (c) it is levied for the support of the Government. 51 Taxes
are classified into national and local. National taxes are those levied by the
National Government, while local taxes are those levied by the LGUs. 52
What the phrase national internal revenue taxes as used in Section
284 included are all the taxes enumerated in Section 21 of the National
Internal Revenue Code (NIRC), as amended by R.A. No. 8424, viz.:
Section 21. Sources of Revenue. — The following taxes, fees
and charges are deemed to be national internal revenue taxes:
(a) Income tax;
(b) Estate and donor's taxes;
(c) Value-added tax;
(d) Other percentage taxes;
(e) Excise taxes;
(f) Documentary stamp taxes; and
(g) Such other taxes as are or hereafter may be imposed and
collected by the Bureau of Internal Revenue.
In view of the foregoing enumeration of what are the national internal
revenue taxes, Section 284 has effectively deprived the LGUs from deriving
their just share from other national taxes, like the customs duties.
Strictly speaking, customs duties are also taxes because they are
exactions whose proceeds become public funds. According to Garcia v.
Executive Secretary , 53 customs duties is the nomenclature given to taxes
imposed on the importation and exportation of commodities and
merchandise to or from a foreign country. Although customs duties have
either or both the generation of revenue and the regulation of economic or
social activity as their moving purposes, it is often difficult to say which of
the two is the principal objective in a particular instance, for, verily, customs
duties, much like internal revenue taxes, are rarely designed to achieve only
one policy objective. 54 We further note that Section 102 (oo) of R.A. No.
10863 (Customs Modernization and Tariff Act) expressly includes all fees and
charges imposed under the Act under the blanket term of taxes.
It is clear from the foregoing clarification that the exclusion of other
national taxes like customs duties from the base for determining the just
share of the LGUs contravened the express constitutional edict in Section 6,
Article X the 1987 Constitution.
Still, the OSG posits that Congress can manipulate, by law, the base of
the allocation of the just share in the national taxes of the LGUs.
The position of the OSG cannot be sustained. Although it has the
primary discretion to determine and fix the just share of the LGUs in the
national taxes ( e.g., Section 284 of the LGC), Congress cannot disobey the
express mandate of Section 6, Article X of the 1987 Constitution for the just
share of the LGUs to be derived from the national taxes. The phrase as
determined by law in Section 6 follows and qualifies the phrase just share,
and cannot be construed as qualifying the succeeding phrase in the national
taxes. The intent of the people in respect of Section 6 is really that the base
for reckoning the just share of the LGUs should includes all national taxes. To
read Section 6 differently as requiring that the just share of LGUs in the
national taxes shall be determined by law is tantamount to the unauthorized
revision of the 1987 Constitution.
V.
Congress can validly exclude taxes

that will constitute the base amount
for the computation of the IRA only if
a Constitutional provision allows such exclusion
Garcia submits that even assuming that the present version of Section
284 of the LGC is constitutionally valid, the implementation thereof has been
erroneous because Section 284 does not authorize any exclusion or
deduction from the collections of the NIRTs for purposes of the computation
of the allocations to the LGUs. He further submits that the exclusion of
certain NIRTs diminishes the fiscal autonomy granted to the LGUs. He claims
that the following NIRTs have been illegally excluded from the base for
determining the fair share of the LGUs in the IRA, to wit: SDHTEC
(1) NIRTs collected by the cities and provinces and divided

exclusively among the LGUs of the Autonomous Region for
Muslim Mindanao (ARMM), the regional government and the
central government, pursuant to Section 15 55 in relation to
Section 9, 56 Article IX of R.A. No. 9054 (An Act to Strengthen and
Expand the Organic Act for the Autonomous Region in Muslim
Mindanao, amending for the purpose Republic Act No. 6734,
entitled An Act providing for an Organic Act for the Autonomous
Region in Muslim Mindanao);
(2) The shares in the excise taxes on mineral products of the
different LGUs, as provided in Section 287 of the NIRC 57 in
relation to Section 290 of the LGC; 58
(3) The shares of the relevant LGUs in the franchise taxes paid by
Manila Jockey Club, Inc. 59 and Philippine Racing Club, Inc.; 60
(4) The shares of various municipalities in VAT collections under
R.A. No. 7643 (An Act to Empower the Commissioner of Internal
Revenue to Require the Payment of the Value Added Tax Every
Month and to Allow Local Government Units to Share in VAT
Revenue, Amending for this Purpose Certain Sections of the
National Internal Revenue Code) as embodied in Section 283 of
the NIRC; 61
(5) The shares of relevant LGUs in the proceeds of the sale and
conversion of former military bases in accordance with R.A. No.
7227 (Bases Conversion and Development Act of 1992); 62
(6) The shares of different LGUs in the excise taxes imposed on
locally manufactured Virginia tobacco products as provided in
Section 3 of R.A. No. 7171 (An Act to Promote the Development
of the Farmers in the Virginia Tobacco Producing Provinces) , and
as now provided in Section 289 of the NIRC; 63
(7) The shares of different LGUs in the incremental revenues from
Burley and native tobacco products under Section 8 of R.A. No.
8 2 4 0 (An Act Amending Sections 138, 140 and 142 of the
National Internal Revenue Code as Amended and for Other
Purposes) and as now provided in Section 288 of the NIRC; 64
and
(8) The share of the Commission on Audit (COA) in the NIRTs as
provided in Section 24(3) of P.D. No. 1445 (Government Auditing
Code of the Philippines) 65 in relation to Section 284 of the NIRC.
66
Garcia insists that the foregoing taxes and revenues should have been
included by Congress and, by extension, the BIR in the base for computing
the IRA on the strength of the cited provisions; that the LGC did not
authorize such exclusion; and that the continued exclusion has undermined
the fiscal autonomy guaranteed by the 1987 Constitution.
The insistence of Garcia is valid to an extent.
An examination of the above-enumerated laws confirms that the
following have been excluded from the base for reckoning the just share of
the LGUs as required by Section 6, Article X of the 1987 Constitution,
namely:
(a) The share of the affected LGUs in the proceeds of the sale and
conversion of former military bases in accordance with R.A. No.
7227;
(b) The share of the different LGUs in the excise taxes imposed on
locally manufactured Virginia tobacco products as provided for in
Section 3, R.A. No. 7171, and as now provided in Section 289 of
the NIRC;
(c) The share of the different LGUs in incremental revenues from
Burley and native tobacco products under Section 8 of R.A. No.
8240, and as now provided for in Section 288 of the NIRC;
(d) The share of the COA in the NIRTs as provided in Section 24(3)
of P.D. No. 1445 67 in relation to Section 284 of the NIRC;
(e) The shares of the different LGUs in the excise taxes on mineral
products, as provided in Section 287 of the NIRC in relation to
Section 290 of the LGC;
(f) The NIRTs collected by the cities and provinces and divided
exclusively among the LGUs of the ARMM, the regional
government and the central government, pursuant to Section 15
68 in relation to Section 9, 69 Article IX of R.A. No. 9054; and
(g) The shares of the relevant LGUs in the franchise taxes paid by
Manila Jockey Club, Inc., and the Philippine Racing Club, Inc.
Anent the share of the affected LGUs in the proceeds of the sale and
conversion of the former military bases pursuant to R.A. No. 7227, the
exclusion is warranted for the reason that such proceeds do not come from a
tax, fee or exaction imposed on the sale and conversion.
As to the share of the affected LGUs in the excise taxes imposed on
locally manufactured Virginia tobacco products under R.A. No. 7171 (now
Section 289 of the NIRC); the share of the affected LGUs in incremental
revenues from Burley and native tobacco products under Section 8, R.A. No.
8240 (now Section 288 of the NIRC); the share of the COA in the NIRTs
pursuant to Section 24 (3) of P.D. No. 1445 in relation to Section 284 of the
NIRC; and the share of the host LGUs in the franchise taxes paid by the
Manila Jockey Club, Inc., and Philippine Racing Club, Inc., under Section 6 of
R.A. No. 6631 and Section 8 of R.A. No. 6632, respectively, the exclusion is
also justified. Although such shares involved national taxes as defined under
the NIRC, Congress had the authority to exclude them by virtue of their
being taxes imposed for special purposes. A reading of Section 288 and
Section 289 of the NIRC and Section 24 (3) of P.D. No. 1445 in relation to
Section 284 of the NIRC reveals that all such taxes are levied and collected
for a special purpose. 70 The same is true for the franchise taxes paid under
Section 6 of R.A. No. 6631 and Section 8 of R.A. No. 6632, inasmuch as
certain percentages of the franchise taxes go to different beneficiaries. The
exclusion conforms to Section 29 (3), Article VI of the 1987 Constitution,
which states:
Section 29. xxx
xxx xxx xxx
(3) All money collected on any tax levied for a special
purpose shall be treated as a special fund and paid out for
such purpose only. If the purpose for which a special fund was
created has been fulfilled or abandoned, the balance, if any, shall be
transferred to the general funds of the Government. [Bold emphasis
supplied]
The exclusion of the share of the different LGUs in the excise taxes
imposed on mineral products pursuant to Section 287 of the NIRC in relation
to Section 290 of the LGC is premised on a different constitutional provision.
Section 7, Article X of the 1987 Constitution allows affected LGUs to have an
equitable share in the proceeds of the utilization of the nation's national
wealth "within their respective areas," to wit: AScHCD
Section 7. Local governments shall be entitled to an

equitable share in the proceeds of the utilization and development of
the national wealth within their respective areas, in the manner
provided by law, including sharing the same with the inhabitants by
way of direct benefits.
This constitutional provision is implemented by Section 287 of the NIRC and

Section 290 of the LGC thusly:
SEC. 287. Shares of Local Government Units in the Proceeds

from the Development and Utilization of the National Wealth. — Local
Government units shall have an equitable share in the proceeds
derived from the utilization and development of the national wealth,
within their respective areas, including sharing the same with the
inhabitants by way of direct benefits.
(A) Amount of Share of Local Government Units. — Local
government units shall, in addition to the internal revenue
allotment, have a share of forty percent (40%) of the gross
collection derived by the national government from the
preceding fiscal year from excise taxes on mineral products,
royalties, and such other taxes, fees or charges, including
related surcharges, interests or fines, and from its share in
any co-production, joint venture or production sharing
agreement in the utilization and development of the national
wealth within their territorial jurisdiction.
(B) Share of the Local Governments from Any Government
Agency or Government-owned or -Controlled Corporation. — Local
Government Units shall have a share, based on the preceding fiscal
year, from the proceeds derived by any government agency or
government-owned or controlled corporation engaged in the
utilization and development of the national wealth based on the
following formula, whichever will produce a higher share for the local
government unit:
(1) One percent (1%) of the gross sales or receipts of the
preceding calendar year, or
(2) Forty percent (40%) of the excise taxes on mineral
products, royalties, and such other taxes, fees or charges, including
related surcharges, interests or fines the government agency or
government-owned or -controlled corporations would have paid if it
were not otherwise exempt. [Bold emphasis supplied]
SEC. 290. Amount of Share of Local Government Units. —
Local government units shall, in addition to the internal
revenue allotment, have a share of forty percent (40%) of the
gross collection derived by the national government from the
preceding fiscal year from mining taxes, royalties, forestry
and fishery charges, and such other taxes, fees, or charges,
including related surcharges, interests, or fines, and from its share in
any co-production. joint venture or production sharing agreement in
the utilization and development of the national wealth within their
territorial jurisdiction. [Bold emphasis supplied]
Lastly, the NIRTs collected by the provinces and cities within the ARMM
whose portions are distributed to the ARMM's provincial, city and regional
governments are also properly excluded for such taxes are intended to truly
enable a sustainable and feasible autonomous region as guaranteed by the
1987 Constitution. The mandate under Section 15 to Section 21, Article X of
the 1987 Constitution is to allow the separate development of peoples with
distinctive cultures and traditions in the autonomous areas. 71 The grant of
autonomy to the autonomous regions includes the right of self-determination
— which in turn ensures the right of the peoples residing therein to the
necessary level of autonomy that will guarantee the support of their own
cultural identities, the establishment of priorities by their respective
communities' internal decision-making processes and the management of
collective matters by themselves. 72 As such, the NIRTs collected by the
provinces and cities within the ARMM will ensure local autonomy and their
very existence with a continuous supply of funding sourced from their very
own areas. The ARMM will become self-reliant and dynamic consistent with
the dictates of the 1987 Constitution.
The shares of the municipalities in the VATs collected pursuant to R.A.
No. 7643 should be included in determining the base for computing the just
share because such VATs are national taxes, and nothing can validly justify
their exclusion.
In recapitulation, the national taxes to be included in the base for
computing the just share the LGUs shall henceforth be, but shall not be
limited to, the following:
1. The NIRTs enumerated in Section 21 of the NIRC, as amended, to
be inclusive of the VATs, excise taxes, and DSTs collected by the
BIR and the BOC, and their deputized agents;
2. Tariff and customs duties collected by the BOC;
3. 50% of the VATs collected in the ARMM, and 30% of all other
national taxes collected in the ARMM; the remaining 50% of the
VATs and 70% of the collections of the other national taxes in the
ARMM shall be the exclusive share of the ARMM pursuant to
Section 9 and Section 15 of R.A. No. 9054;
4. 60% of the national taxes collected from the exploitation and
development of the national wealth; the remaining 40% will
exclusively accrue to the host LGUs pursuant to Section 290 of
the LGC;
5. 85% of the excise taxes collected from locally manufactured
Virginia and other tobacco products; the remaining 15% shall
accrue to the special purpose funds pursuant created in R.A. No.
7171 and R.A. No. 7227;
6. The entire 50% of the national taxes collected under Section
106, Section 108 and Section 116 of the NIRC in excess of the
increase in collections for the immediately preceding year; and
7. 5% of the franchise taxes in favor of the national government
paid by franchise holders in accordance with Section 6 of R.A.
No. 6631 and Section 8 of R.A. No. 6632.
VI.
Entitlement to the reliefs sought
The petitioners' prayer for the payment of the arrears of the LGUs' just
share on the theory that the computation of the base amount had been
unconstitutional all along cannot be granted.
It is true that with our declaration today that the IRA is not in
accordance with the constitutional determination of the just share of the
LGUs in the national taxes, logic demands that the LGUs should receive the
difference between the just share they should have received had the LGC
properly reckoned such just share from all national taxes, on the one hand,
and the share — represented by the IRA — the LGUs have actually received
since the effectivity of the IRA under the LGC, on the other. This puts the
National Government in arrears as to the just share of the LGUs. A legislative
or executive act declared void for being unconstitutional cannot give rise to
any right or obligation. 73
Yet, the Court has conceded in Araullo v. Aquino III 74 that:
x x x the generality of the rule makes us ponder whether
rigidly applying the rule may at times be impracticable or
wasteful. Should we not recognize the need to except from
the rigid application of the rule the instances in which the
void law or executive act produced an almost irreversible
result?
The need is answered by the doctrine of operative fact.
The doctrine, definitely not a novel one, has been exhaustively
explained in De Agbayani v. Philippine National Bank: HESIcT
The decision now on appeal reflects the orthodox

view that an unconstitutional act, for that matter an
executive order or a municipal ordinance likewise
suffering from that infirmity, cannot be the source of any
legal rights or duties. Nor can it justify any official act
taken under it. Its repugnancy to the fundamental law
once judicially declared results in its being to all intents
and purposes a mere scrap of paper. As the new Civil
Code puts it: 'When the courts declare a law to be
inconsistent with the Constitution, the former shall be
void and the latter shall govern.' Administrative or
executive acts, orders and regulations shall be valid only
when they are not contrary to the laws of the
Constitution. It is understandable why it should be so, the
Constitution being supreme and paramount. Any
legislative or executive act contrary to its terms cannot
survive.
Such a view has support in logic and
possesses the merit of simplicity. It may not
however be sufficiently realistic. It does not admit
of doubt that prior to the declaration of nullity
such challenged legislative or executive act must
have been in force and had to be complied with.
This is so as until after the judiciary, in an
appropriate case, declares its invalidity, it is
entitled to obedience and respect. Parties may
have acted under it and may have changed their
positions. What could be more fitting than that in a
subsequent litigation regard be had to what has
been done while such legislative or executive act
was in operation and presumed to be valid in all
respects. It is now accepted as a doctrine that
prior to its being nullified, its existence as a fact
must be reckoned with. This is merely to reflect
awareness that precisely because the judiciary is
the governmental organ which has the final say on
whether or not a legislative or executive measure
is valid, a period of time may have elapsed before
it can exercise the power of judicial review that
may lead to a declaration of nullity. It would be to
deprive the law of its quality of fairness and justice
then, if there be no recognition of what had
transpired prior to such adjudication.
In the language of an American Supreme Court
decision: 'The actual existence of a statute, prior to such
a determination [of unconstitutionality], is an operative
fact and may have consequences which cannot justly be
ignored. The past cannot always be erased by a new
judicial declaration. The effect of the subsequent ruling as
to invalidity may have to be considered in various
aspects, with respect to particular relations, individual
and corporate, and particular conduct, private and
official.'
The doctrine of operative fact recognizes the existence
of the law or executive act prior to the determination of its
unconstitutionality as an operative fact that produced
consequences that cannot always be erased, ignored or
disregarded. In short, it nullifies the void law or executive act
but sustains its effects. It provides an exception to the
general rule that a void or unconstitutional law produces no
effect. 75 But its use must be subjected to great scrutiny and
circumspection, and it cannot be invoked to validate an
unconstitutional law or executive act, but is resorted to only as a
matter of equity and fair play. 76 It applies only to cases where
extraordinary circumstances exist, and only when the extraordinary
circumstances have met the stringent conditions that will permit its
application.
Conformably with the foregoing pronouncements in Araullo v. Aquino
III, the effect of our declaration through this decision of the
unconstitutionality of Section 284 of the LGC and its related laws as far as
they limited the source of the just share of the LGUs to the NIRTs is
prospective. It cannot be otherwise.
VII.
Automatic release of the LGUs'

just share in the National Taxes
Section 6, Article X of the 1987 Constitution commands that the just

share of the LGUs in national taxes shall be automatically released to them.
The term automatic connotes something mechanical, spontaneous and
perfunctory; and, in the context of this case, the LGUs are not required to
perform any act or thing in order to receive their just share in the national
taxes. 77
Before anything, we must highlight that the 1987 Constitution includes
several provisions that actually deal with and authorize the automatic
release of funds by the National Government.
To begin with, Section 3 of Article VIII favors the Judiciary with the
automatic and regular release of its appropriations:
Section 3. The Judiciary shall enjoy fiscal autonomy.
Appropriations for the Judiciary may not be reduced by the legislature
below the amount appropriated for the previous year and, after
approval, shall be automatically and regularly released.
Then there is Section 5 of Article IX (A), which contains the common
provision in favor of the Constitutional Commissions:
Section 5. The Commission shall enjoy fiscal autonomy.
Their approved annual appropriations shall be automatically and
regularly released.
Section 14 of Article XI extends to the Office of the Ombudsman a
similar privilege:
Section 14. The Office of the Ombudsman shall enjoy fiscal
autonomy. Its approved annual appropriations shall be automatically
and regularly released.
Section 17 (4) of Article XIII replicates the privilege in favour of the
Commission on Human Rights:
Section 17(4). The approved annual appropriations of the
Commission shall be automatically and regularly released.
The foregoing constitutional provisions share two aspects. The first
relates to the grant of fiscal autonomy, and the second concerns the
automatic release of funds. 78 The common denominator of the provisions is
that the automatic release of the appropriated amounts is predicated on the
approval of the annual appropriations of the offices or agencies concerned.
Directly contrasting with the foregoing provisions is Section 6, Article X
of the 1987 Constitution because the latter provision forthrightly ordains that
the "(l)ocal government units shall have a just share, as determined by law,
in the national taxes which shall be automatically released to them."
Section 6 does not mention of appropriation as a condition for the automatic
release of the just share to the LGUs. This is because Congress not only
already determined the just share through the LGC's fixing the percentage of
the collections of the NIRTs to constitute such fair share subject to the power
of the President to adjust the same in order to manage public sector deficits
subject to limitations on the adjustments, but also explicitly authorized such
just share to be "automatically released" to the LGUs in the proportions and
regularity set under Section 285 79 of the LGC without need of annual
appropriation. To operationalize the automatic release without need of
appropriation, Section 286 of the LGC clearly provides that the automatic
release of the just share directly to the provincial, city, municipal or
barangay treasurer, as the case may be, shall be "without need of any
further action," viz.: caITAC
Section 286. Automatic Release of Shares. — (a) The

share of each local government unit shall be released,
without need of any further action, directly to the provincial,
city, municipal or barangay treasurer, as the case may be, on
a quarterly basis within five (5) days after the end of each
quarter, and which shall not be subject to any lien or
holdback that may be imposed by the National Government
for whatever purpose. x x x (Bold emphasis supplied)
The 1987 Constitution is forthright and unequivocal in ordering that the
just share of the LGUs in the national taxes shall be automatically released
to them. With Congress having established the just share through the LGC, it
seems to be beyond debate that the inclusion of the just share of the LGUs in
the annual GAAs is unnecessary, if not superfluous. Hence, the just share of
the LGUs in the national taxes shall be released to them without need of
yearly appropriation.
WHEREFORE, the petitions in G.R. No. 199802 and G.R. No. 208488
are PARTIALLY GRANTED, and, ACCORDINGLY, the Court:
1. DECLARES the phrase "internal revenue" appearing in Section
284 of Republic Act No. 7160 (Local Government Code)
UNCONSTITUTIONAL, and DELETES the phrase from Section 284.
Section 284, as hereby modified, shall henceforth read as follows:
Section 284. Allotment of Taxes. — Local government units
shall have a share in the national taxes based on the collection of the
third fiscal year preceding the current fiscal year as follows:
(a) On the first year of the effectivity of this Code, thirty
percent (30%);
the "liga," to make the necessary adjustments in the allotment of
local government units but in no case shall the allotment be less than
thirty percent (30%) of the collection of national taxes of the third
fiscal year preceding the current fiscal year; Provided, further, That in
the first year of the effectivity of this Code, the local government units
shall, in addition to the thirty percent (30%) allotment which shall
personal services.
The phrase "internal revenue" is likewise hereby DELETED from the
related sections of Republic Act No. 7160 (Local Government Code),
specifically Section 285, Section 287, and Section 290, which provisions shall
henceforth read as follows:
Section 285. Allocation to Local Government Units. — The
share of local government units in the allotment shall be collected in
the following manner:
(a) Provinces — Twenty-three percent (23%);
(b) Cities — Twenty-three percent (23%);
(c) Municipalities — Thirty-four percent (34%); and
(d) Barangays — Twenty percent (20%)
Provided, however, That the share of each province, city, and
municipality shall be determined on the basis of the following
formula:
(a) Population — Fifty percent (50%);
(b) Land Area — Twenty-five percent (25%); and
(c) Equal sharing — Twenty-five percent (25%)
Provided, further, That the share of each barangay with a
population of not less than one hundred (100) inhabitants shall not be
less than Eighty thousand (P80,000.00) per annum chargeable
against the twenty percent (20%) share of the barangay from the
allotment, and the balance to be allocated on the basis of the
following formula:
(a) On the first year of the effectivity of this Code:
(1) Population — Forty percent (40%); and
(2) Equal sharing — Sixty percent (60%)
(b) On the second year:
(1) Population — Fifty percent (50%); and
(2) Equal sharing — Fifty percent (50%)
(c) On the third year and thereafter:
(1) Population — Sixty percent (60%); and
(2) Equal sharing — Forty percent (40%).

Provided, finally, That the financial requirements of barangays
created by local government units after the effectivity of this Code
shall be the responsibility of the local government unit concerned.
xxx xxx xxx
Section 287. Local Development Projects. — Each local
government unit shall appropriate in its annual budget no less than
twenty percent (20%) of its annual allotment for development
projects. Copies of the development plans of local government units
shall be furnished the Department of the Interior and Local
Government.
xxx xxx xxx
Section 290. Amount of Share of Local Government Units.
— Local government units shall, in addition to the allotment, have a
share of forty percent (40%) of the gross collection derived by the
national government from the preceding fiscal year from mining
taxes, royalties, forestry and fishery charges, and such other taxes,
fees, or charges, including related surcharges, interests, or fines, and
from its share in any co-production, joint venture or production
sharing agreement in the utilization and development of the national
wealth within their territorial jurisdiction. ICHDca
Article 378, Article 379, Article 380, Article 382, Article 409, Article
461, and related provisions of the Implementing Rules and Regulations of
R.A. No. 7160 are hereby MODIFIED to reflect the deletion of the phrase
"internal revenue" as directed herein.
Henceforth, any mention of "Internal Revenue Allotment" or "IRA" in
Republic Act No. 7160 (Local Government Code) and its Implementing Rules
and Regulations shall be understood as pertaining to the allotment of the
Local Government Units derived from the national taxes;
2. ORDERS the SECRETARY OF THE DEPARTMENT OF
FINANCE; the SECRETARY OF THE DEPARTMENT OF BUDGET AND
MANAGEMENT; the COMMISSIONER OF INTERNAL REVENUE; the
COMMISSIONER OF CUSTOMS; and the NATIONAL TREASURER to
include ALL COLLECTIONS OF NATIONAL TAXES in the computation of
the base of the just share of the Local Government Units according to the
ratio provided in the now-modified Section 284 of Republic Act No. 7160
(Local Government Code) except those accruing to special purpose funds
and special allotments for the utilization and development of the national
wealth.
For this purpose, the collections of national taxes for inclusion in the
base of the just share the Local Government Units shall include, but shall not
be limited to, the following:
(a) The national internal revenue taxes enumerated in Section 21 of
the National Internal Revenue Code, as amended, collected by the Bureau of
Internal Revenue and the Bureau of Customs;
(b) Tariff and customs duties collected by the Bureau of Customs;
(c) 50% of the value-added taxes collected in the Autonomous
Region in Muslim Mindanao, and 30% of all other national tax collected in
the Autonomous Region in Muslim Mindanao.
The remaining 50% of the collections of value-added taxes and 70% of
the collections of the other national taxes in the Autonomous Region in
Muslim Mindanao shall be the exclusive share of the Autonomous Region in
Muslim Mindanao pursuant to Section 9 and Section 15 of Republic Act No.
9054.
(d) 60% of the national taxes collected from the exploitation and
development of the national wealth.
The remaining 40% of the national taxes collected from the
exploitation and development of the national wealth shall exclusively accrue
to the host Local Government Units pursuant to Section 290 of Republic Act
No. 7160 (Local Government Code);
(e) 85% of the excise taxes collected from locally manufactured
Virginia and other tobacco products.
The remaining 15% shall accrue to the special purpose funds created
by Republic Act No. 7171 and Republic Act No. 7227;
(f) The entire 50% of the national taxes collected under Sections
106, 108 and 116 of the NIRC as provided under Section 283 of the NIRC;
and
(g) 5% of the 25% franchise taxes given to the National
Government under Section 6 of Republic Act No. 6631 and Section 8 of
Republic Act No. 6632.
3. DECLARES that:
(a) The apportionment of the 25% of the franchise taxes collected
from the Manila Jockey Club and Philippine Racing Club, Inc. — that is, five
percent (5%) to the National Government; five percent (5%) to the host
municipality or city; seven percent (7%) to the Philippine Charity
Sweepstakes Office; six percent (6%) to the Anti-Tuberculosis Society; and
two percent (2%) to the White Cross pursuant to Section 6 of Republic Act
No. 6631 and Section 8 of Republic Act No. 6632 — is VALID;
(b) Section 8 and Section 12 of Republic Act No. 7227 are VALID;
a n d , ACCORDINGLY, the proceeds from the sale of the former military
bases converted to alienable lands thereunder are EXCLUDED from the
computation of the national tax allocations of the Local Government Units;
and
(c) Section 24 (3) of Presidential Decree No. 1445, in relation to
Section 284 of the National Internal Revenue Code, apportioning one-half of
one percent (1/2 of 1%) of national tax collections as the auditing fee of the
Commission on Audit is VALID;
4. DIRECTS the Bureau of Internal Revenue and the Bureau of
Customs and their deputized collecting agents to certify all national tax
collections, pursuant to Article 378 of the Implementing Rules and
Regulations of R.A. No. 7160;
5. DISMISSES the claims of the Local Government Units for the
settlement by the National Government of arrears in the just share on the
ground that this decision shall have PROSPECTIVE APPLICATION; and
6. COMMANDS the AUTOMATIC RELEASE WITHOUT NEED OF
FURTHER ACTION of the just shares of the Local Government Units in the
national taxes, through their respective provincial, city, municipal, or
barangay treasurers, as the case may be, on a quarterly basis but not
beyond five (5) days from the end of each quarter, as directed in Section 6,
Article X of the 1987 Constitution and Section 286 of Republic Act No. 7160
(Local Government Code), and operationalized by Article 383 of the
Implementing Rules and Regulations of RA 7160.
Let a copy of this decision be furnished to the President of the Republic
of the Philippines, the President of the Senate, and the Speaker of the House
of Representatives for their information and guidance.
SO ORDERED.
Carpio, Acting C.J., Leonardo-de Castro, Peralta, Del Castillo, Perlas-
Bernabe, Martires, Tijam and Gesmundo, JJ., concur.
Velasco, Jr., J., I concur. Please see Separate Opinion.
Leonen and Caguioa, JJ., dissent. See Separate Opinion.
Jardeleza, J., took no part; prior OSG action.
Reyes, Jr., J., I dissent.
Separate Opinions
VELASCO, JR., J., concurring:
Nature of the Case
In these consolidated cases before the Court, petitioners question the

manner by which budgetary appropriations are made in favor of local
government units (LGUs). At the core, petitioners seek clarification on
whether or not respondents had been gravely abusing their discretion in
excluding certain tax collections in determining the base amount for
computing the just share in the national taxes LGUs are entitled to. TCAScE
The Facts
G.R. No. 199802 for Certiorari,

Prohibition, and Mandamus, with
Prayer for Preliminary Injunction
and/or Temporary Restraining
Order
Section 284 of Republic Act No. (RA) 7160, otherwise known as the
Local Government Code (LGC), allocates 40% of national internal revenue
tax collections to LGUs. The provision pertinently reads:
Section 284. Allotment of Internal Revenue Taxes. — Local
government units shall have a share in the national internal
revenue taxes based on the collection of the third fiscal year
preceding the current fiscal year as follows:
(a) On the first year of the effectivity of this Code, thirty percent
(30%);
be less than thirty percent (30%) of the collection of national
internal revenue taxes of the third fiscal year preceding the
current fiscal year: Provided, further, That in the first year of the
effectivity of this Code, the local government units shall, in addition to
the thirty percent (30%) internal revenue allotment which shall
personal services. (emphasis added)
Petitioners, local elective government officials from the province of
Batangas, allege that the mandated base under Section 284 is not being
observed as some tax collections are allegedly being unlawfully withheld by
the national government and excluded from distribution to the LGUs.
In particular, petitioners pray that respondents include the (a) Value-
Added Tax (VAT), (b) Excise Tax, and (c) Documentary Stamp Tax (DST)
collections of the Bureau of Customs (BOC) in computing the base amount.
Through letters addressed to petitioner Hermilando I. Mandanas (Mandanas),
then congressman of the second district of Batangas, and dated September
12, 2011 1 and November 18, 2011, 2 BOC Commissioners Angelito A.
Alvarez and Rozanno Rufino B. Biazon, respectively, attested to the amount
of VAT, Excise Tax, and DST collections of the BOC from 1989-2009:
Collections in Millions Collections
Year VAT Excise Tax DST
1989 10,069 174 2,176,550.03
1990 12,854 254 2,002,011.93
1991 11,675 147 2,007,871.48
1992 13,982 296 1,992,401.92
1993 21,413 299 46,880,825.83
1994 21,293 186 179,411,238.68
1995 28,901 579 210,359,504.10
1996 35,008 1,171 41,328,214.50
1997 42,484 1,896 77,856,280.28
1997 42,484 1,896 77,856,280.28
1998 31,980 1,193 47,281,003.31
1999 36,632 1,397 81,496,945.00
2000 42,257 2,277 51,469,598.00
2001 47,247 5,691 45,393,853.25
2002 49,383 9,970 43,413,415.00
2003 52,663 11,753 89,191,480.00
2004 58,883 16,997 45,154,928.00
2005 68,813 14,599 47,440,326.00
2006 111,869 10,759 48,747,783.00
2007 129,023 13,385 48,945,260.00
2008 156,330 15,509 65,646,588.00
2009 133,907 17,917 56,068,698.00
Petitioners proffer that these monies were collected by the BOC as an
agent of the Bureau of Internal Revenue (BIR), pursuant to Section 12 of RA
8424, otherwise known as the National Internal Revenue Code (NIRC). 3 As
such, these formed part of the national internal revenue tax collections that
ought to have been shared in by all LGUs. Per petitioners' calculation, the
LGUs were deprived of their just share in the collections in the amount of
P498,854,388,154.93.
Petitioner Mandanas then began writing to various government
agencies, including the Department of Finance (DOF), Department of Budget
and Management (DBM), and the BIR, to seek support for his position that
the enumerated BOC collections be included in the distribution to LGUs. He
likewise implored then president Benigno Simeon Aquino III to include the
amount he arrived at as part of the 2012 budget.
Unfortunately, all of petitioner Mandanas' efforts were in vain and RA
10155 or the 2012 General Appropriations Act was signed into law. The
amounts he considered as arrears of the national government to the LGUs
were not recognized as valid obligations. Hence, Mandanas and his co-
petitioners lodged the instant recourse praying for the following relief:
PRAYER
WHEREFORE, PREMISES CONSIDERED, it is most respectfully
prayed of the Honorable Court that:
1. Upon filing of this petition, a temporary restraining order
be issued enjoining the Respondents from unlawfully releasing,
disbursing and/or using the amount of SIXTY BILLION AND SEVEN
HUNDRED FIFTY MILLION n (P60.75) that is included in the capital
outlays of the departments or agencies of the national government as
that sum belongs to the LGUs as a part of their internal revenue
shares based on the NIRT collections of the BOC in 2009 but, to
emphasize, has been excluded from the IRAs for the LGUs
appropriated in the 2012 GAA. cTDaEH
2. After notice & hearing, a preliminary injunction be issued.

3. And by way of judgment —
a) To set aside as unconstitutional and illegal
the misappropriation, misallocation and misuse of P60.75
billion belonging to the LGUs but which is embodied in the
new appropriations of the 2012 GAA for the use of
national government departments and/or agencies;
b) Make the preliminary injunction permanent;
c) Compel the Respondents to cause the
automatic release in of the LGUs' IRAs as provided in the
2012 GAA, including the SIXTY BILLION SEVEN HUNDRED
FIFTY MILLION (P60,750,000,000.00) PESOS from the
2009 NIRT collections of the BOC; and
d) Compel Respondents to recognize and
release the unpaid IRAs due to the LGUs from BOC
collections of NIRT from 1992 to 2011, which is placed at
FOUR HUNDRED THIRTY EIGHT BILLION, ONE HUNDRED
THREE MILLION, NINE HUNDRED SIXTY THOUSAND, SIX
HUNDRED SEVENTY FIVE PESOS AND SEVENTY-THREE
CENTAVOS (P438,103,960,675.73) which, when added to
the SIXTY BILLION SEVEN HUNDRED FIFTY MILLION
coming from 2009 collections of the BOC referred to in
letter (c) above, would total FOUR HUNDRED NINETY
EIGHT BILLION EIGHT HUNDRED FIFTY FOUR MILLION,
THREE HUNDRED EIGHTY-EIGHT THOUSAND, ONE
HUNDRED FIFTY FOUR PESOS AND NINETY-THREE
CENTAVOS (P498,854,388,154.93). This latter amount, to
repeat, is the total unreleased IRA due to the LGUs from
[1989]-2012.
Other reliefs just and equitable under the premises are likewise
prayed for.
The case was filed against erstwhile Executive Secretary Paquito N.
Ochoa, Secretary of Finance Cesar Purisima, Budget Secretary Florencio H.
Abad, Commissioner of Internal Revenue Kim Jacinto-Henares, and National
Treasurer Roberto Tan.
G.R. No. 208488 for Mandamus
Enrique T. Garcia (Garcia), then congressional representative for the

second district of Bataan, likewise filed a petition for certiorari against the
same respondents in G.R. No. 199802, except that Customs Commissioner
Rozanno Rufino B. Biazon was impleaded as party respondent instead of
National Treasurer Roberto Tan. In his petition, Garcia assails what he
perceives as the continuing failure of the national government to allocate to
the LGUs what is due them under the Constitution.
Specifically, Garcia asserts that Section 284 of RA 7160 is
constitutionally infirm since it limits the basis for the computation of the LGU
allocations only to national internal revenue taxes, contrary to the mandate
of Article X, Section 6 of the Constitution, viz.:
SECTION 6. Local government units shall have a just share, as
determined by law, in the national taxes which shall be
automatically released to them. (emphasis added)
The insertion of the phrase "internal revenue" in Section 284 of RA
7160, according to Garcia, is patently unconstitutional. As a consequence of
this infirmity, the LGUs had been receiving far less than what the
Constitution mandates. Garcia thus seeks intervention from the Court to
nullify the phrase "internal revenue" in the provision. He argues that LGUs
should share in all forms of "national taxes," not just in those enumerated
under Section 21 of the NIRC.
Moreover, Garcia contends that even assuming arguendo that the
phrase "internal revenue" under Section 284 of RA 7160 passes the test of
constitutionality, the various deductions and the exclusions therefrom find
no legal basis. On this point, Garcia directs the Court's attention to the
formula utilized in determining the total internal revenue allocation for the
LGUs from 2009-2011. He noted that the reduced tax base, from "national
taxes" to "national internal revenue taxes," was further subjected to several
deductions, namely:
1. Sections 9 and 15, Article IX of RA 9054 regarding the allocation
of internal revenue taxes collected by cities and provinces in the
Autonomous Region in Muslim Mindanao (ARMM);
2. Section 287 of the NIRC in relation to Section 2904 of RA 7160
regarding the share of LGUs in the excise tax collections on
mineral products;
3. Section 6 of RA 6631 and Section 8 of RA 6632 on the franchise
taxes from the operation of the Manila Jockey Club and Philippine
Racing Club race tracks;
4. Remittances of VAT collections under RA 7643;
5. Sections 8 and 12 of RA 7227, as amended by RA 9400,
regarding the share of affected LGUs on the sale and conversion
of former military bases;
6. RA 7171 and Section 289 of the NIRC on the share of LGUs to the
Excise Tax collections from the manufacture of Virginia tobacco
products; cSaATC
7. Section 8 of RA 8240, as now provided in Section 288 of the

NIRC, on the allocation of incremental revenues from excise
taxes;
8. The share of the Commission on Audit (COA) on the NIRT as
provided for in Section 24 (3) of Presidential Decree No. 1445 in
relation to Section 284 of the NIRC.
He additionally insists that all tax collections of the BOC were
unlawfully excluded in determining the tax base. Since Section 21 of the
NIRC expressly includes VAT and excise taxes in the enumeration of national
internal revenue taxes, all collections for these accounts, regardless of
whether it was collected by the BOC or directly by the BIR, should have been
included in the computation.
Garcia therefore prays that respondents be directed to perform the
following:
a) Compute the IRA of the LGUs on the basis of the national tax
collections, including all the tax collections of the BIR and the
BOC;
b) Desist from deduction from the national tax collections any tax,
item, or amount that is not authorized by law to be deducted for
the purpose of computing the IRA;
c) Submit a details computation of the IRA from 1995-2014 and
determine therefrom the IRA shortfall; and
d) Distribute the IRA shortfall to the LGUs.
Respondents' Comments
Speaking through the Office of the Solicitor General (OSG),

respondents reasoned out that Congress has the full and broad discretion to
determine the base and the rate the LGUs are entitled to in the national
taxes. This is based on the language of Article X, Section 6 of the
Constitution itself, which states that the just share of the LGUs in the
national taxes shall be determined by law. And in the exercise of its
prerogative, Congress limited the base for the allocation to LGUs to "national
internal revenue taxes," to the exclusion of customs duties and taxes from
foreign sources.
According to respondents, the determination of what constitutes "just
share" for the LGUs is a decision reached by the legislative in the collective
wisdom of its members. The Court should then observe judicial deference
and employ an attitude of non-interference in this case involving policy
directions in the exercise of the power of the purse. Otherwise, the Court
would be engaging in judicial legislation, forbidden under the principle of
separation of powers.
Garcia's enumeration of so-called deductions from the national internal
revenue taxes is justified, so respondents claim. They cite the basic tenet in
statutory construction that when statutes are in pari materia, or cover the
same specific or particular subject matter, or have the same purpose or
object, they should be construed together. Here, the executive branch
merely interpreted the special laws in consonance with the NIRC and the
LGC.
Under Section 283 of the NIRC, which is a later law than the LGC and a
special law specifically on the disposition of national internal revenue taxes,
collections that are already earmarked or otherwise specially disposed of by
law will not accrue to the National Treasury. The provision reads:
SEC. 283. Disposition of National Internal Revenue. —
National internal revenue collected and not applied as herein above
provided or otherwise specially disposed of by law shall accrue to the
National Treasury and shall be available for the general purposes of
the Government, with the exception of the amounts set apart by way
of allotment as provided for under Republic Act No. 7160, otherwise
known as the Local Government Code of 1991.
Respondents posit that the amounts pertaining to the enumeration that
Garcia coined as unlawful deductions are examples of those accounts that
do not accrue to the National Treasury from where the shares of the LGUs
will be carved out. The balance of the National Treasury, after deducting the
shares of the LGUs, shall be available for the general purposes of the
government.
Respondents also add that correlative to the BOC's duty to assess and
collect taxes on imported items is its duty to turn over its collections of the
National Treasury. For instance, out of every P265.00 collected by the BOC
as DST, only P15.00 is reported as BIR collection, while the remaining
P250.00 is credited to the collections of the BOC. Thus, when the BIR
determines the allocations to the LGUs on the basis of certified data on its
own collections, pursuant to Article 378 of the Implementing Rules and
Regulations of RA 7160, 5 only P15.00 of every P265.00 DST collection of the
BOC would be subject to distribution to the LGUs. There is then a distinction
between the VAT, DST, and Excise Tax collections of the BOC and the BIR,
and that not all BOC collections are reflected on the data of the BIR.
Lastly, it is argued that Mandamus does not lie to compel the exercise
of the power of the purse. A judicial writ cannot order the appropriation of
public funds since such power is an exclusive legislative prerogative that
cannot be interfered with. Likewise, to award backpay for the allegedly
withheld IRA from prior years, from 1989-2012, in the amount of
P498,854,388,154.93 as prayed for by Mandanas, will effectively dislocate
the budgets then intended for salaries, operational expenses, and
development programs in the year of 2012.
The Issues
The issues in this case can be restated in the following wise:

I. Whether or not the VAT, DST, and Excise Tax collections of the
BOC should form part of the base amount for computing the just
share of the LGUs in the national taxes.
II. Whether or not the LGUs are entitled to a just share in the tariff
and customs duties collected by the BOC.
III. Whether or not the respondents had illegally been withholding
amounts from the LGUs through the special laws enumerated in
the Garcia petition.
IV. Whether or not the LGUs may still collect from the national
government the arrears from the alleged errors in computing the
national tax allocations.
Discussion
I vote to partially grant the petitions.
The tax collections of the BOC

should be included in determining
the basis for allocation to the LGUs
a. The VAT, DST, and Excise Tax

collections of 'the BOC are National
Internal Revenue Taxes
To recall, Mandanas and his cohorts have no qualm over the
constitutionality of Section 284 of RA 7160. They merely seek to include the
VAT, DST, and Excise Tax collections of the BOC in determining the base for
the LGUs' rightful share in the national taxes. cHDAIS
I find the contention tenable.

Pertinently, Section 21 of the NIRC reads:
Section 21. Sources of Revenue. — The following taxes, fees and
charges are deemed to be national internal revenue taxes :
(a) Income tax;
(b) Estate and donor's taxes;
(c) Value-added tax;
(d) Other percentage taxes;
(e) Excise taxes;
(f) Documentary stamp taxes; and
(g) Such other taxes as are or hereafter may be imposed and
collected by the Bureau of Internal Revenue. (emphasis added)
Clear as crystal is that VAT, DSTs, and Excise Taxes are within the
enumeration of national internal revenue taxes under Section 21 of the
NIRC. When Section 284 of the LGC then declared that all LGUs shall be
entitled to 40% of the "national internal revenue taxes," collections for these
forms of taxes are necessarily included in the computation.
VAT, DSTs, and Excise Taxes do not lose their character as national
internal revenue taxes simply because they are not reported as collections of
the BIR, and neither on the ground that they are collected by the BOC. This is
so since Section 12 (A) of the NIRC is categorical that the BOC merely acts
as an agent of the BIR in collecting these taxes:
Section 12. Agents and Deputies for Collection of National
Internal Revenue Taxes. — The following are hereby constituted
agents of the Commissioner:
(a) The Commissioner of Customs and his
subordinates with respect to the collection of national
internal revenue taxes on imported goods;
xxx xxx xxx
The details of the agency relation between the BIR, as principal, and
the BOC, as agent, are explicated in the succeeding sections of the NIRC. In
concrete, Sections 107 6 and 129 7 are general provisions on the imposition
of VAT and Excise Taxes on imported goods. On the other hand, Section 131
of the NIRC specifically directs the taxpayer to pay his excise tax liabilities
on imported goods to the BOC, and Section 4.107-1 (B) of Revenue
Regulations 16-2005 provides that VAT on the imported goods should be
settled before they can be removed from customs custody, viz.:
Section 131. Payment of Excise Taxes on Importer Articles. —
(A) Persons Liable. — Excise taxes on imported articles shall be
paid by the owner or importer to the Customs Officers, conformably
with the regulations of the Department of Finance and before the
release of such articles from the customs house, or by the person who
is found in possession of articles which are exempt from excise taxes
other than those legally entitled to exemption.
xxx xxx xxx
Sec. 4.107-1. VAT on Importation of Goods. —
xxx xxx xxx
(b) Applicability and payment — The rates prescribed under
Sec. 107 (A) of the [NIRC] shall be applicable to all importations
withdrawn from customs custody.
The VAT on the importation shall be paid by the importer
prior to the release of such goods from customs custody.
(emphasis and words on brackets added)
As far as the authority of the BOC to collect DSTs is concerned, this
finds legal basis under Section 188 of the NIRC:
Section 188. Stamp Tax on Certificates. — On each certificate of
damages or otherwise, and on every certificate or document issued
by any customs officer, marine surveyor, or other person acting as
such, and on each certificate issued by a notary public, and on each
certificate of any description required by law or by rules or
regulations of a public office, or which is issued for the purpose of
giving information, or establishing proof of a fact, and not otherwise
specified herein, there shall be collected a documentary stamp tax of
Fifteen pesos (P15.00).
All these provisions strengthen Mandanas' position that the VAT, DSTs,
and Excise Taxes collected by the BOC partake the nature of national
internal revenue taxes under Section 21 of the NIRC. Though collected by the
BOC, these taxes are nevertheless impositions under the NIRC that should
be included in the base amount of the revenue allocation to the LGUs. It
matters not who collects the items of national income. Neither Article X,
Section 6 of the Constitution nor Section 284 of RA 7160 requires that the
national collections be credited to the BIR. For what is controlling is that they
accrue to the account of the National Treasury.
b. Section 284 of RA 7160 is
unconstitutional insofar as it limits
the allotment base to national internal
revenue taxes; Tariff and Customs
duties are national taxes
Anent G.R. No. 208488, I concur with the argument of petitioner Garcia
that abidance with the constitutional mandate constrains the Court to
declare the recurring phrase "internal revenue" in Section 284 of RA 7160 as
unconstitutional.
A cardinal rule in statutory construction is that where the words of a
statute are clear, plain, and free from ambiguity, it must be given its literal
meaning and applied without attempted interpretation. 8 This is what is
known as the plain-meaning rule. It is expressed in the maxim, index animi
sermo, or speech is the index of intention. Furthermore, there is the maxim
verba legis non est recedendum, or from the words of a statute there should
be no departure. 9
Here, Article X, Section 6 of the 1987 Constitution is clear and
categorical that Local Government Units (LGUs) shall have a share in the
country's national taxes. For Congress to grant them anything less would
then trench on the provision. Unfortunately, this is what Section 284 of RA
7160, as currently worded, accomplishes. ISHCcT
The contested phrase is unduly restrictive, nay unconstitutional, for it

limits the share of the LGUs to national internal revenue taxes. It effectively
excludes other forms of national taxes than those specified in Section 21 of
the NIRC. Conspicuously absent in the enumeration is the duties imposed on
internationally sourced goods under Presidential Decree No. (PD) 1464,
otherwise known as the Tariff and Customs Code of 1978, which
consolidated and codified the tariff and customs law in the Philippines. 10
There is no cogent reason to segregate the tax collections of the BOC
pursuant to the NIRC from those in implementation of other legal edicts.
Customs duties form part of the country's national taxes and should,
therefore, be included in the basis for determining the LGU's aliquot share in
the pie.
The concept of customs duties has been explicated in the case of
Garcia v. Executive Secretary, 11 viz.:
"[C]ustoms duties" is "the name given to taxes on the
importation and exportation of commodities, the tariff or tax
assessed upon merchandise imported from, or exported to, a
foreign country." The levying of customs duties on imported goods
may have in some measure the effect of protecting local industries —
where such local industries actually exist and are producing
comparable goods. Simultaneously, however, the very same
customs duties inevitably have the effect of producing
governmental revenues. Customs duties like internal revenue
taxes are rarely, if ever, designed to achieve one policy objective
only. Most commonly, customs duties, which constitute taxes in
the sense of exactions the proceeds of which become public
funds — have either or both the generation of revenue and the
regulation of economic or social activity as their moving purposes and
frequently, it is very difficult to say which, in a particular instance, is
the dominant or principal objective. In the instant case, since the
Philippines in fact produces ten (10) to fifteen percent (15%) of the
crude oil consumed here, the imposition of increased tariff rates and
a special duty on imported crude oil and imported oil products may
be seen to have some "protective" impact upon indigenous oil
production. For the effective, price of imported crude oil and oil
products is increased. At the same time, it cannot be gainsaid that
substantial revenues for the government are raised by the imposition
of such increased tariff rates or special duty. (emphasis added)
"Tariff" refers to the system or principle of imposing duties on the
importation of foreign merchandise. 12 Thus, embodied in the Tariff and
Customs Code is the list or schedule of articles on which a duty is imposed
upon their importation, with the rates at which they are taxes. Meanwhile,
clear from the above excerpt is that these customs duties are taxes levied
on imports. It is collected by the customs authorities of a country not only to
protect domestic industries from more efficient or predatory competitors
abroad, but also to raise state revenues.
All taxes are classifiable as either national or local. A tax imposition is
considered local if it is levied by an LGU pursuant to its revenue-generating
power under Article X, Section 5 of the Constitution and Section 18 of RA
7160. 13 On the other hand, national taxes, by definition, are imposed by the
national government through congressional enactment. Among these tax
measures signed into law is RA No. 10863, otherwise known as the Customs
Modernization and Tariff Act (CMTA), which was signed into law on May 30,
2016, amending PD 1464.
Significantly, while local governments were granted by the Constitution
the power to tax, such grant is circumscribed by "guidelines and limitations
as the Congress may provide." Article X, Section 5 of the 1987 Constitution
reads:
SECTION 5. Each local government unit shall have the
power to create its own sources of revenues and to levy taxes,
fees, and charges subject to such guidelines and limitations as
the Congress may provide, consistent with the basic policy of local
autonomy. Such taxes, fees, and charges shall accrue exclusively to
the local governments.
In line with this, the LGC expressly excludes from the ambit of local
taxation the imposition of tariff and customs duties. Section 133 of the LGC
pertinently provides:
Sec. 133. Common Limitations on the Taxing Powers
of Local Government Units. — Unless otherwise provided herein,
the exercise of the taxing powers of provinces, cities,
municipalities, and Barangays shall not extend to the levy of
the following:
xxx xxx xxx
(d) Customs duties, registration fees of vessels, wharfage
on wharves, tonnage dues and all other kinds of customs fees,
charges and dues except wharfage on wharves constructed and
maintained by the local government unit concerned;
(e) Taxes, fees, charges and other impositions upon
goods carried into or out of, or passing through, the
territorial jurisdictions of local governments in the guise of
charges for wharfage, tolls for bridges or otherwise, or other taxes in
any form whatever upon such goods or merchandise.
The limits on local taxation and thus the exclusion therefrom of
customs duties and tariff was recognized by the Supreme Court when it ruled
in Petron Corp. v. Tiangco 14 that:
Congress has the constitutional authority to impose
limitations on the power to tax of local government units, and
Section 133 of the LGC is one such limitation . Indeed, the
provision is the explicit statutory impediment to the enjoyment of
absolute taxing power by local government units, not to mention the
reality that such power is a delegated power.
I n Palma Development Corp. v. Municipality of Malangas, 15 the Court
more particularly said:
Section 133(e) of RA No. 7160 prohibits the imposition, in the
guise of wharfage, of fees — as well as all other taxes or charges in
any form whatsoever — on goods or merchandise. It is therefore
irrelevant if the fees imposed are actually for police surveillance on
the goods, because any other form of imposition on goods passing
through the territorial jurisdiction of the municipality is clearly
prohibited by Section 133(e).
In sum, by the principle of exclusion provided by Section 133 of the
LGC, no customs duties and/or tariffs can be considered local taxes; all
customs duties and tariffs can only be imposed by the Congress and, as
such, they can only be national taxes.
Ubi lex non distinguit nec nos distingui redebemus. When the law does
not distinguish, neither must we distinguish. 16 To reiterate, Article X,
Section 6 of the Constitution mandates that the LGUs shall share in the
national taxes, without distinction. It can even be inferred from the
deliberations of the framers that they intended Article X, Section 6 to be
mandatory, viz.: 17
MR. RODRIGO.
I am not an expert on taxation, so I just want to know. Even a
municipality levies taxes. Does the province have a share?
MR. SUAREZ.
May I state that I have the same question, so I would like to join
Commissioner Rodrigo in that inquiry.
MR. RODRIGO.
I ask so because if a municipality levies taxes, it is impossible for
the province to share in those taxes.
MR. NOLLEDO.
I am not aware of any rule that says so but I know that even the
province has also the power to levy taxes.
MR. RODRIGO.
That is correct. But is it then the purpose of this amendment that
taxes imposed by a municipality should be exclusively for that
municipality and that the province may not share at all in the
taxes? Is that the purpose of the amendment? CAacTH

MR. NOLLEDO.
I think the question should be directed to the proponent.
MR. DAVIDE.
Even under the Committee's wording, it would clearly appear
that if a municipality levies a particular tax, the province is not
entitled to a share for the reason that the province itself, as a
separate governmental unit, may collect and levy taxes for itself.
MR. NOLLEDO.
Besides, the national government shall share national
taxes with the province.
MR. RODRIGO.
But if we approve that amendment, the national government
may not share in the taxes levied by the province?
MR. DAVIDE.
The national government may impose its own national
taxes. The concept here is that the national government
must share these national taxes with the other local
government units. That is the second paragraph of the
original section 9, now section 12, beginning from lines
29-30.
MR. RODRIGO.
Do I get then that if the national government imposes
taxes, local government units share in those taxes?
MR. DAVIDE.
Yes, the local government shares in the national taxes.
MR. RODRIGO.
But if the local government imposes local taxes, the national
government may not share?
MR. DAVIDE.
That is correct because that is precisely to emphasize the local
autonomy of the unit.
MR. NOLLEDO.
That has been the practice.
For Congress to have excluded, as they continue to exclude, certain
items of national tax, such as tariff and customs duties, from the amount to
be distributed to the LGUs is then a glaring contravention of our
fundamental law. The alleged basis for the exclusion, the phrase "internal
revenue" under Section 284 of the LGC, should therefore be declared as
unconstitutional.
The school of thought adopted by the respondents is that the phrase
"as determined by law" appearing in Article X, Section 6 of the Constitution
authorizes Congress to determine the inclusions and exclusions from the
national taxes before determining the amount the LGUs would be entitled to.
Thus, it is this authority that was exercised by the legislative when it limited
the allocation of LGUs to national internal revenue taxes. Regrettably, I
cannot join respondents in their constriction of the statute.
Article X, Section 6 of the Constitution had already been interpreted in
ACORD v. Zamora (ACORD) 18 in the following manner:
Moreover, there is merit in the argument of the intervenor
Province of Batangas that, if indeed the framers intended to allow the
enactment of statutes making the release of IRA conditional instead
of automatic, then Article X, Section 6 of the Constitution would have
been worded differently. Instead of reading Local government units
shall have a just share, as determined by law, in the national taxes
which shall be automatically released to them (italics supplied), it
would have read as follows, so the Province of Batangas posits:
Local government units shall have a just share, as
[automatically] released to them as provided by law, or,
Local government units shall have a just share in the
national taxes which shall be [automatically] released to
them as provided by law, or
Local government units shall have a just share, as
automatically released to them subject to exceptions
Congress may provide.
Since, under Article X, Section 6 of the Constitution, only the
just share of local governments is qualified by the words as
determined by law, and not the release thereof, the plain
implication is that Congress is not authorized by the Constitution to
hinder or impede the automatic release of the IRA. (emphasis added)
As further held in ACORD, the provision, when parsed, mandates that
(1) the LGUs shall have a just share in the national taxes; (2) the just share
shall be determined by law; and (3) the just share shall be automatically
released to the LGUs. And guilty of reiteration, "under Article X, Section 6 of
the Constitution, only the just share of local governments is qualified
by the words as determined by law. " 19 This ruling resulted in the
nullification of appropriation items XXXVII and LIV Special Provisions 1 and 4
of the General Appropriations Act of 2000 insofar as they set a condition sine
qua non for the release of Internal Revenue Allotment to LGUs to the tune of
P10 Billion.
Similarly, we too must be conscious here of the phraseology of Article
X, Section 6 of the 1987 Constitution. As couched, the phrase "as
determined by law" follows and, therefore, qualifies "just share"; it cannot be
construed as qualifying the succeeding phrase "in the national taxes."
Hence, the ponencia is correct in ruling that the determination of what
constitutes "just share" is within the province of legislative powers. But what
Congress is only allowed to determine is the aliquot share that the LGUs are
entitled to. They are not authorized to modify the base amount of the budget
to be distributed. To insist that the proper interpretation of the provision is
that "the just share of LGUs in the national taxes shall be determined by law"
is tantamount to a revision of the Constitution and a blatant disregard to the
specific order and wording of the provision, as crafted by its framers.
Constitutional considerations on the

allocation to LGUs
The Constitution cannot be supplanted through ordinary legislative fiat.

Any limitation on the allocation of wealth to the LGUs guaranteed by the
fundamental law must likewise be embodied in the Constitution itself. Thus,
instead of looking to RA 7160 in determining the scope of the base amount
for allotment, due attention must be given to Article X, Section 7 and Article
VI, Section 29 (3) of the Constitution:
SECTION 7. Local governments shall be entitled to an equitable
share in the proceeds of the utilization and development of the
national wealth within their respective areas, in the manner provided
by law, including sharing the same with the inhabitants by way of
direct benefits.
xxx xxx xxx
SECTION 29. xxx
(3) All money collected on any tax levied for a special purpose
shall be treated as a special fund and paid out for such purpose only.
If the purpose for which a special fund was created has been fulfilled
or abandoned, the balance, if any, shall be transferred to the general
funds of the Government. IAETDc
With the foregoing in mind, we are now poised to gauge whether or not
the items identified by petitioner Garcia are in fact unlawful deductions or
exclusions from the LGUs' share in the national taxes:
1. Sections 9 and 15, Article IX of RA 9054 20 regarding the
allocation of internal revenue taxes collected by cities and
provinces in the ARMM;
Section 9 of RA 9054 provides for the sharing of government taxes
collected from LGUs in the ARMM in the following manner: 35% to the
province or city, 35% to the regional government, and 30% to the national
government. The provision likewise empowers the province and city
concerned to automatically retain its share and remit the shares of the
regional government and the national government to their respective
treasurers. Meanwhile Section 15 of RA 9054 allocates 50% of the VAT
collections from the ARMM exclusively to the region and its constituencies.
The above provisions do not violate Section 6, Article X of the
Constitution. Instead, this is a clear application of the Constitutional
provision that empowers Congress to determine the just share that LGUs are
entitled to receive. For while the taxes mentioned in Sections 9 and 15 of the
Constitution are in the nature of national taxes, the LGUs are already
receiving their just share thereon. Receiving their just share does not mean
receiving a share that is equal with everyone else's. This is evident from RA
7160 which expressly provides that the share of an LGU is dependent on its
population and land area — considerations that prevent any two LGU from
sharing equally from the pie.
To clarify, the determination of what constitutes an LGU's just share in
the national taxes is not restricted to Section 284 of RA 7160. The 40% share
under the provision merely sets the general rule. And as will later be
discussed, exceptions abound in statutes such as RA 9054.
Moreover, there is justification for allocating the lion's share in the tax
collections from the ARMM to LGUs within the region themselves, rather than
allowing all LGUs to share thereon in equal footing.
The creation of autonomous regions is in compliance with the
constitutional directive under Article X, Sections 18 and 19 21 to address the
concerned regions' continuous struggle for self-rule and self-determination.
The grant to the autonomous region of a larger share in the collections is
simply an incident to this grant of autonomy. To give meaning to their
autonomous status, their financial and political dependence on the national
government is reduced. Allocating them a larger share of the national taxes
collected from their own territory allows not only for the expeditious delivery
of basic services, but for them to be more self-sufficient and self-reliant. In a
way, it can also be considered as a special purpose fund.
Thus, there is no constitutional violation in allocating 50% of the VAT
collections from the ARMM to the LGUs within the region, leaving only 50% to
the central government and to the other LGUs. There is nothing illegal in the
ARMM's retention of 70% of the national taxes collected therein, limiting the
amount of national tax to be included in the base amount for distribution to
the LGUs to 30%.
2. Section 287 22 of the NIRC in relation to Section 290 23 of RA
7160 regarding the share of LGUs in the excise tax collections on
mineral products;
The questioned provisions grant a 40% share in the tax collections
from the exploitation and development of national wealth to the LGUs under
whose territorial jurisdiction such exploitation and development occur. Such
preferential allocation, in addition to their national tax allotment, cannot be
deemed violative of Article X, Section 6 of the Constitution for it is in
pursuance of Article X, Section 7 earlier quoted.
The exclusion of the other LGUs from sharing in the said 40% had been
justified by the Constitutional Commission in the following wise:
MR. OPLE. Madam President, the issue has to do with Section 8
on page 2 of Committee Report No. 21:
Local taxes shall belong exclusively to local governments
and they shall likewise be entitled to share in the
proceeds of the exploitation and development of the
national wealth within their respective areas.
Just to cite specific examples. In the case of timberland within
the area of jurisdiction of the Province of Quirino or the Province of
Aurora, we feel that the local governments ought to share in
whatever revenues are generated from this particular natural
resource which is also considered a national resource in a proportion
to be determined by Congress. This may mean sharing not with the
local government but with the local population. The geothermal plant
in the Macban, Makiling-Banahaw area in Laguna, the Tiwi
Geothermal Plant in Albay, there is a sense in which the people in
these areas, hosting the physical facility based on the resources
found under the ground in their area which are considered national
wealth, should participate in terms of reasonable rebates on the cost
of power that they pay. This is true of the Maria Cristina area in
Central Mindanao, for example. May I point out that in the previous
government, this has always been a very nettlesome subject of
Cabinet debates. Are the people in the locality, where God chose to
locate His bounty, not entitled to some reasonable modest sharing of
this with the national government? Why should the national
government claim all the revenues arising from them? And the usual
reply of the technocrats at that time is that there must be uniform
treatment of all citizens regardless of where God's gifts are located,
whether below the ground or above the ground. This, of course, has
led to popular disenchantment. In Albay, for example, the
government then promised a 20-percent rebate in power because of
the contributions of the Tiwi plant to the Luzon grid. Although this was
ordered, I remember that the Ministry of Finance, together with the
National Power Corporation, refused to implement it. There is a
bigger economic principle behind this, the principle of equity. If God
chose to locate the great rivers and sources of hydroelectric power in
Iligan, in Central Mindanao, for example, or in the Cordillera, why
should the national government impose fuel adjustment taxes in
order to cancel out the comparative advantage given to the people in
these localities through these resources? So, it is in that sense that
under Section 8, the local populations, if not the local governments,
should have a share of whatever national proceeds may be realized
from this natural wealth of the nation located within their
jurisdictions. 24
As can be gleaned from the discussion, the additional allocation under
Article X, Section 7 is granted by reason of equity. It is given to the host
LGUs for bearing the brunt of the exploitation of their territory, and is also a
form of incentivizing the introduction of developments in their locality. And
from the language of Article X, Section 7 itself, it is not limited to tax
collections from mineral products and mining operations, but extends to
taxes, fees or charges from all forms of exploitation and development of
national wealth. This includes the cited establishment and operation of
geothermal and hydrothermal plants in Macban, Makiling-Banahaw area in
Laguna, in Tiwi, Albay, and in Iligan City, as well as the extraction of
petroleum and natural gasses.
Respondents did not then err in setting aside 40% of the gross
collection of taxes on utilization and development of the national wealth to
the host LGU. Meanwhile, all LGUs and the national government shall share
in the remaining 60% of the tax collections, satisfying the constitutional
mandate that all LGUs shall receive their just share in the national taxes,
albeit at a lesser amount.
3. Section 6 of RA 6631 25 and Section 8 of RA 6632 26 on the
franchise taxes from the operation of the Manila Jockey Club and
Philippine Racing Club race tracks;
The cited provisions relate to the automatic allocation of a 5% share in
the 25% franchise tax — collected from 8.5% and 8.25% of the wager funds
from the operations of the Manila Jockey Club and Philippine Racing Club,
Inc., respectively — to the city or municipality where the race track is
located.
This is another example of an allocation by Congress to certain LGUs,
on top of their share in the 40% of national taxes under Section 284 of RA
7160. Similar to the situation of the LGUs in the ARMM, the host cities and
municipalities in RA 6631 and 6632 enjoy the 5% as part and parcel of their
just share in the national taxes. To reiterate, the just share of LGUs, as
determined by law, need not be uniform for all units. It is within the wisdom
of Congress to determine the extent of the shares in the national taxes that
the LGUs will be accorded.
Anent the remaining 20% of the franchise taxes, Sections 6 and 8 of RA
6631 and 6632, respectively, reveals that this had already been earmarked
for special purposes. Under the distribution, only 5% of the franchise tax
shall accrue to the national government, which will then be subject to
distribution to LGUs. The rest of the apportionments of the 25% franchise
taxes collected under RA 6631 and RA 6632 — five percent (5%) to the host
municipality, seven percent (7%) to the Philippine Charity Sweepstakes
Office, six percent (6%) to the Anti-Tuberculosis Society, and two percent
(2%) to the White Cross — are special purpose funds, which shall not be
distributed to all LGUs.
It must be noted that RA 6631 and 6632 had been amended by RA
8407 27 and 7953, 28 respectively. The Court hereby takes judicial notice of
its salient provisions, including the imposition of Documentary Stamp Taxes
at the rate of ten centavos (PhP0.10) for every peso cost of each horse
racing ticket, 29 and of the ten percent (10%) taxes on winnings and prizes.
30 These are national taxes included in the enumeration of Section 21 of the
NIRC. Thus, the LGUs shall share on the collections thereon.
4. Sharing of VAT collections under RA 7643; DcHSEa
RA 7643 amended Section 282 of the NIRC to read thusly:

SEC. 282. Disposition of national internal revenue. — x x x
xxx xxx xxx
In addition to the internal revenue allotment as provided for in the
preceding paragraph, fifty percent (50%) of the national taxes
collected under Sections 100, 102, 112, 113, and 114 of this Code in
excess of the increase in collections for the immediately preceding
year shall be distributed as follows: (a) Twenty percent (20%) shall
accrue to the city or municipality where such taxes are collected and
shall be allocated in accordance with Section 150 of Republic Act No.
7160, otherwise known as the Local Government Code of 1991; and
(b) Eighty percent (80%) shall accrue to the National Government.
Notably, the 20%-80% allocation in favor of the national government is
lesser than the 40% allocation under Section 284 of the LGC. This does not
contravene Article X, Section 6 of the Constitution, however, for it merely
sets the just share that LGUs are entitled to in the particular account. There
being a special percentage allocation for these incremental taxes,
respondents can then properly exclude them in computing the base amount
for the national tax allocations to the LGUs.
5. Sections 8 31 and 12 32 of RA 7227, as amended by RA 9400,
regarding the share of affected LGUs on the sale and conversion
of former military bases;
Section 8 of RA 7227 authorizes the President, through the Bases
Conversion Development Authority, to sell former military bases. It likewise
mandates that the LGUs of Makati, Taguig, and Pateros shall be entitled to a
2.5% share in the disposition of converted properties in Fort Bonifacio.
Meanwhile, Section 12 of RA 7227, as amended, imposes a 5%
collection on gross income to be paid by all business enterprises within the
Subic Special Economic Zone. Of the imposition, 3% shall be remitted to the
National Government. The remaining 2% shall be remitted to the SBMA but
will be distributed to the LGUs affected by the declaration of the economic
zone, namely: the City of Olongapo and the municipalities of Subic, San
Antonio, San Marcelino and Castillejos of the Province of Zambales; and the
municipalities of Morong, Hermosa and Dinalupihan of the Province of
Bataan. The distribution shall be based on population (50%), land mass
(25%), and equal sharing (25%).
Invoking Article X, Section 6 of the Constitution, petitioner Garcia
questions the provisos granting special allocations and prays that the same
be included in the pool of national taxes to be distributed to all LGUs.
The argument lacks merit.
To reiterate, Article X, Section 6 of the Constitution guarantees that
LGUs shall have a just share, as determined by law, in the national taxes.
The proceeds from the sale of converted bases and the percentage collection
from income, though governmental revenue, are not in the form of tax
collections. To be sure, businesses and enterprises in the economic zone are
tax exempt and the fees being charged the enterprises are in lieu of paying
taxes. Section 12 (C) categorically states: "x x x no national and local taxes
shall be imposed within the Subic Special Economic Zone." As non-tax items,
these revenues do not fall within the concept of national tax within the ambit
of Article X, Section 6 of the Constitution, and the LGUs cannot then
reasonably claim entitlement to a share thereon.
6. RA 7171 and Section 289 33 of the NIRC on the share of LGUs in
the Excise Tax collections from the manufacture of Virginia
tobacco products;
Petitioner next calls for the inclusion of the 15% collections on the
excise taxes from the manufacture of Virginia tobacco products in
determining the allocation base. Under Section 289 of the NIRA, the 15%
being requested currently accrues to the Virginia tobacco-producing
provinces, pro-rated based on their level of production.
This is another exercise by Congress of its authority to determine the
just share in the national taxes that LGUs are entitled to. In this case, the
tobacco producing provinces are provided incentives for their economic
contribution, and financial assistance for the tobacco farmers.
Additionally, Excise Tax collections from the manufacture of Virginia
tobacco products form part of a special fund for special purposes, within the
contemplation of Article VI, Section 29 (3) of the Constitution. In the same
way, the Court in Osmeña v. Orbos 34 held that the oil price stabilization fund
was a special fund segregated from the general fund and placed as it were
in a trust account. And in Gaston v. Republic Planters Bank, 35 We ruled that
the stabilization fees collected from sugar millers, planters, and producers
were for a special purpose: to finance the growth and development of the
sugar industry.
The special purposes, in this case, are embodied in Sections 1 and 2 of
RA 7171 in the following wise:
SECTION 1. Declaration of Policy. — It is hereby declared to be the
policy of the government to extend special support to the farmers of
the Virginia tobacco-producing provinces inasmuch as these farmers
are the nucleus of the Virginia tobacco industry which generates a
sizeable income, in terms of excise taxes from locally manufactured
Virginia-type cigarettes and customs duties on imported blending
tobacco, for the National Government. For the reason stated, it is
hereby further declared that the special support for these
provinces shall be in terms of financial assistance for
developmental projects to be implemented by the local
governments of the provinces concerned.
SECTION 2. Objective. — The special support to the Virginia
tobacco-producing provinces shall be utilized to advance the self-
reliance of the tobacco farmers through:
a. Cooperative projects that will enhance better quality of
products, increase productivity, guarantee the market
and as a whole increase farmer's income;
b. Livelihood projects particularly the development of
alternative farming systems to enhance farmers income;
c. Agro-industrial projects that will enable tobacco farmers
in the Virginia tobacco producing provinces to be involved
in the management and subsequent ownership of these
projects such as post-harvest and secondary processing
like cigarette manufacturing and by-product utilization;
and
d. Infrastructure projects such as farm-to-market roads .
(emphasis added)
The Excise Tax collections from the manufacture of Virginia tobacco
earmarked for these programs were then validly placed in an account
separate from the collections for other national tax items. The balance shall
not be transferrable to the general funds of the government, from where the
shares of the LGUs are sourced, unless the purposes for which the special
fund was created have been fulfilled or abandoned. Absent any showing that
said special purpose no longer exists, respondents committed no error in
excluding 15% of Excise Tax collections on Virginia tobacco products from
the distribution of national wealth to the LGUs.
To be sure, RA 10351 36 introduced an amendment to Section 288 of
the NIRC on the allocation of excise taxes from tobacco products, to wit:
(C) Incremental Revenues from the Excise Tax on Alcohol and
Tobacco Products. —
After deducting the allocations under Republic Act Nos. 7171
and 8240, eighty percent (80%) of the remaining balance of the
incremental revenue derived from this Act shall be allocated for the
universal health care under the National Health Insurance Program,
the attainment of the millennium development goals and health
awareness programs; and twenty percent (20%) shall be
allocated nationwide, based on political and district
subdivisions, for medical assistance and health enhancement
facilities program, the annual requirements of which shall be
determined by the Department of Health (DOH).
Thus, only 20% of the balance, after deducting the 15% of incremental
excise tax allocation to the Virginia tobacco growers, shall form part of the
base amount for determining the LGUs' share under Section 284 of the LGC,
the 80% having been specially allocated for a special purpose.
7. Section 8 of RA 8240, 37 as now provided in Section 288 of the
NIRC;
Section 288 of the NIRC, on the allocation of the incremental revenue
from excise tax collections on tobacco products, deserves the same
treatment as the earlier-discussed Excise Tax collections from the
manufacture of Virginia tobacco. The pertinent provision reads:
Section 288. Disposition of Incremental Revenues. —
xxx xxx xxx
(B) Incremental Revenues from Republic Act No. 8240. — Fifteen

percent (15%) of the incremental revenue collected from the excise
tax on tobacco products under R.A. No. 8240 shall be allocated and
divided among the provinces producing burley and native tobacco in
accordance with the volume of tobacco leaf production. The fund
shall be exclusively utilized for programs in pursuit of the
following objectives:
(1) Cooperative projects that will enhance
better quality of agricultural products and increase
income and productivity of farmers;
(2) Livelihood projects, particularly the
development of alternative farming system to
enhance farmer's income; and
(3) Agro-industrial projects that will enable
tobacco farmers to be involved in the management
and subsequent ownership of projects, such as
post-harvest and secondary processing like
cigarette manufacturing and by-product utilization.
The directive that the funds be exclusively utilized for the enumerated
programs places the provision on par with Section 289 of the NIRC, in
relation to RA 7171, as discussed in the preceding section. Both partake of
special purpose funds that cannot be disbursed for any obligation other than
those for which they are intended. Respondents then likewise correctly
excluded from the computation base this 15% incremental excise tax
collections for a special purpose account. But just like the case of the Excise
Taxes on Virginia tobacco products, 80% of the remainder will accrue to a
special purpose fund, leaving only 20% of the remainder for distribution to
the LGUs. This is in view of the amendment introduced by RA 10351.
8. The share of the Commission on Audit (COA) on the NIRT as
provided for in Section 24 (3) of Presidential Decree No. 1445 in
relation to Section 284 of the NIRC;
SCaITA
Section 284 of the NIRC reads:

Section 284. Allotment for the Commission on Audit. — One-half
of one percent (1/2 of 1%) of the collections from the national internal
revenue taxes not otherwise accruing to special accounts in the
general fund of the national government shall accrue to the
Commission on Audit as a fee for auditing services rendered
to local government units, excluding maintenance, equipment,
and other operating expenses as provided for in Section 21 of
Presidential Decree No. 898. (emphasis added)
Evidently, the provision does not diminish the base amount of national
taxes that LGUs are to share from. It merely apportions half of 1% of national
tax collections to the COA as compensation for its auditing services. This is
not an illegal exclusion, but a recognition of the COA's right to fiscal
autonomy under Article IX-A, Section 5 of the Constitution. 38 Thus, there is
no clash nor conflict between the 40% allocation to LGUs under RA 7160 and
the 1/2 of 1% allocation to COA under Section 285.
In sum, only (a) 50% of the VAT collections from the ARMM, (b) 30% of
all other national tax collections from the ARMM, (c) 60% of the national tax
collections from the exploitation and development of national wealth, (d) 5%
of the 25% franchise taxes from the 8.5% and 8.25% of the total wager
funds of the Manila Jockey Club and Philippine Racing Club, Inc., and (e) 20%
of the 85% of the incremental revenue from excise taxes on Virginia, burley
and native tobacco products shall be included in the computation of the
base amount of the 40% allotment. The remainders are allocated to
beneficiary LGUs determined by law as part of their just share in the national
taxes. Other special purpose funds shall likewise be excluded.
Further, incremental taxes shall be disposed of in consonance with
Section 282 of the NIRC, as amended. The sales proceeds from the
disposition of former military bases pursuant to RA 7227, on the other hand,
are excluded since these are non-tax items to which LGUs are not
constitutionally entitled to a share. There is also no impropriety in allocating
1/2 of 1% of tax collections to the COA as compensation for auditing fees.
The 40% share of the LGUs in the
national taxes must be released upon
proper appropriation; the allocation
cannot be reduced without first
amending Section 284 of the LGC
Pursuant to Article VI, Section 29 of the Constitution, "No money shall

be paid out of the Treasury except in pursuance of an appropriation made by
law." This highlights the requirement of an appropriation law, the annual
General Appropriations Act (GAA), despite the "automatic release" clause
under Article X, Section 6, and places LGUs on par with Constitutional
Commissions and agencies that are granted fiscal autonomy.
Guilty of reiteration, Article X, Section 6 of the Constitution declared
that the LGUs are entitled to their just share in the national taxes, without
distinction as to the type of national tax being collected. Thus, while
Congress has the exclusive power of the purse, it cannot validly exclude
from its appropriation to the LGUs the national tax collections of the BOC
that are remitted to the national coffers. Otherwise stated, the base for
national tax allotments is not limited to national internal revenue taxes
under Section 21 of the NIRC, as amended, collected by the BIR, but also
includes the Tariff and Customs Duties collected by the BOC, including the
VAT, Excise Taxes and DST collected thereon.
The national government could have misconstrued the application of
Section 6, Article X of the Constitution in not giving to the LGUs what is due
the latter. True, Congress may enact statutes to set what constitutes the just
share of the LGUs, so long as the LGUs remain to share in all national taxes.
But lest it be forgotten, the percentage allocation to the LGUs need not be
uniform across all forms of national taxes. Thus, while Section 284 of RA
7160 establishes a 40% share of the LGUs in the national taxes, this is only
the general rule that is subject to exceptions, as explicated in the preceding
discussion.
Absent any law amending Section 284 of the LGC, the 40% general
allotment to the LGUs can only be reduced under the following circumstance:
x x x That in the event that the national government incurs an
be less than thirty percent (30%) x x x
The yearly enactment of a general appropriations law cannot be
deemed as the amendatory statutes that would permit Congress to lower,
disregard, and circumvent the 40% threshold. For though an appropriation
act is a piece of legislature, it cannot modify Section 284 of the LGC, which is
a substantive law, by simply appropriating to the LGUs an amount lower than
40%. The appropriation of a lower amount should not be understood as the
creation of an exception to Section 284 of the LGC, but should be considered
as an inappropriate provision.
Article VI, Section 25 (2) of the Constitution 39 deems a provision
inappropriate if it does not relate specifically to some particular item of
appropriation. The concept, however, was expanded in PHILCONSA v.
Enriquez, 40 wherein the Court taught that "included in the category of
'inappropriate provisions' are unconstitutional provisions and provisions
which are intended to amend other laws, because clearly these kind of laws
have no place in an appropriations bill." Thus Congress cannot introduce
arbitrary figures as the budgetary allocation to the LGUs in the guise of
amending the 40% threshold in Section 284 of the LGC.
To hold otherwise would bestow Congress unbridled license to enact in
the GAA any manner of allocation to the LGUs that it wants, rendering
illusory the 40% statutory percentage under Section 284. It would allow for
no fixed expectation on the part of the LGUs as to the share they will receive,
for it could range from .01-100%, depending on either the whim or wisdom
of Congress. Under this setup, Congress might dangle the modification of the
percentage share as a stick or carrot before the LGUs for the latter to toe the
line. In turn, this would provide basis to fear that LGUs would be beholden to
Congress by increasing or decreasing allocations as a form of discipline.
This would run contrary to the constitutional provision on local
autonomy, and the spirit of the LGC. Perhaps the reason there is clamor for
federalism is precisely because the allocations to LGUs had not been
sufficient to finance basic services to local communities, which predicament
might be addressed by broadening the allocation base up to what the
Constitution provides. Therefore, the Court should uphold the lofty idea
behind the LGC — that of empowering the LGUs and making them self-reliant
by ensuring that they receive what is due them, amounting to 40% of
national tax collections.
The computation of the 40% allocation base shall be based on the
collections from the third fiscal year preceding the current fiscal year, as
certified by the BIR and the BOC to the DBM as remittances to the National
Treasury. The DBM shall then use said amount certified by the BIR and the
BOC in determining the base amount which shall be incorporated in the
budget proposal for submission to Congress. Upon enactment of the
appropriations act, the national tax allotment the LGUs are entitled to shall
be automatically released to them by the DBM within 5 days after the end of
each quarter, in accordance with Section 286 of RA 7160. 41
The Operative Fact Doctrine
prevents the LGUs from collecting
the arrears sought after; the
Court's ruling herein can only be
prospectively applied
Notwithstanding the postulation that the phrase "internal revenue" in

Section 284 of the LGC and, consequently, its embodiment in the
appropriation laws are unconstitutional, it is respectfully submitted that the
prayer for the award of arrears should nevertheless be denied.
Article 7 of the Civil Code states that "When the courts declared a law
to be inconsistent with the Constitution, the former shall be void and the
latter shall govern." The provision sets the general rule that an
unconstitutional law is void and therefore produces no rights, imposes no
duties and affords no protection. 42
However, the doctrine of operative fact is a recognized exception.
Under the doctrine, the law is declared as unconstitutional but the effects of
the unconstitutional law, prior to its declaration of nullity, may be left
undisturbed as a matter of equity and fair play. 43 The Court acknowledges
that an unconstitutional law may have consequences which cannot always
be ignored and that the past cannot always be erased by a new judicial
declaration. 44 The doctrine is applicable when a declaration of
unconstitutionality will impose an undue burden on those who have relied on
the invalid law. 45
In this case, the proposed nullification of the phrase "internal revenue"
in Section 284 of RA 7160 would have served as the basis for the recovery of
the LGUs' just share in the tariff and customs duties collected by the BOC
that were illegally withheld from 1991-2012. However, this entitlement to a
share in the tariff collections would have been further compounded by the
LGU's alleged P500-billion share, more or less, in the VAT, Excise Tax, and
DST collections of the BOC. These arrears would be too cumbersome for the
government to shoulder, which only had a budget of P1.8 Trillion in 2012. 46
Thus, while petitioners request that the LGU's can still recover the arrears of
the national, it is submitted that this is no longer feasible. This would prove
too much for the government's strained budget to meet, unless paid out on
installment or in a staggered basis.
The operative fact doctrine allows for the prospective application of the
outcome of this case and justifies the denial of petitioners' claim for arrears.
As held in Commissioner of Internal Revenue v. San Roque Power
Corporation 47 that:
x x x for the operative fact doctrine to apply, there must be a
"legislative or executive measure," meaning a law or executive
issuance, that is invalidated by the court. From the passage of such
law or promulgation of such executive issuance until its invalidation
by the court, the effects of the law or executive issuance, when
relied upon by the public in good faith, may have to be
recognized as valid. (emphasis added)
This was echoed in Araullo v. Aquino (Araullo) 48 wherein the Court
held that the operative fact doctrine can be applied to government
programs, activities, and projects that can no longer be undone, and whose
beneficiaries relied in good faith on the validity of the disbursement
acceleration program (DAP). In that case, the Court also agreed to extend to
the proponents and implementors of the DAP the benefit of the doctrine of
operative fact because they had nothing to do at all with the adoption of the
invalid acts and practices. To quote:
As a general rule, the nullification of an unconstitutional law or
act carries with it the illegality of its effects. However, in cases where
nullification of the effects will result in inequity and injustice, the
operative fact doctrine may apply. In so ruling, the Court has
essentially recognized the impact on the beneficiaries and the country
as a whole if its ruling would pave the way for the nullification of the
P144.378 Billions worth of infrastructure projects, social and
economic services funded through the DAP. Bearing in mind the
disastrous impact of nullifying these projects by virtue alone of the
invalidation of certain acts and practices under the DAP, the Court has
upheld the efficacy of such DAP-funded projects by applying the
operative fact doctrine. For this reason, we cannot sustain the Motion
for Partial Reconsideration of the petitioners in G.R. No. 209442.
Taking our cue from Araullo, it is then beyond quibbling that no
amount of bad faith can be attributed to the respondents herein. They
merely followed established practice in government, which in turn was
based on the plain reading of how Section 284 of the LGC. As couched, the
provision seemingly allowed limiting the share of the LGUs to the national
internal revenue taxes under Section 21 of the NIRC.
Moreover, it is imprecise to state that respondents illegally withheld
monies from the LGUs. For the monies that should have been shared with
the LGUs were nevertheless disbursed via the pertinent appropriation laws.
Applying the presumption of regularity accorded to government officials, it
may be presumed that the amount of P498,854,388,154.93 being claimed
was utilized to finance government projects just the same, and ended up
redounding not to the benefit of a particular LGU, but to the public-at-large.
No badge of bad faith therefore obtained in the actuations of respondents.
Consequently, the operative fact doctrine can properly be applied. aTHCSE
Increased national tax allotments

may cure economic imbalance
As a final word, it cannot be gainsaid that this ruling of the Court

granting a bigger piece of the national taxes to the LGUs will undoubtedly be
an effective strategy and positive approach in addressing the sad plight of
poor or underdeveloped LGUs that yearn to loosen the ostensible grip of
imperial Manila over its supposed co-equals, imperium in imperio.
This ruling is timely since we are now in the midst of amending or
revising the 1987 Constitution, with the avowed goal to "address the
economic imbalance" through "transfer or sharing of the powers and
resources of the government." 49 Encapsulated in the proposed Constitution
is the "bayanihan federalism" anchored on the principles of "working
together" and "cooperative competition or coopetition." 50 Our own brand of
federalism may just work given its presidential-federal form of government
that is "uniquely Filipino" that is tailor-fit to the Filipino nation. The well-
crafted proposal will undergo exhaustive scrutiny and intense debate both in
and out of the halls of Congress. Whatever may be the outcome of the
debates and the decision of Congress and the Filipino people will hopefully
be for the betterment of the country.
In the meantime, we must continue to explore readily available means
to address the imbalance suffered by the LGUs. Indeed, there is sufficient
room in our Constitution to expand the authority of the LGUs, there being no
constitutional proscription against further devolving powers and
decentralizing governance in their favor. On the contrary, this is what our
laws prescribe. Article X, Section 3 of the Constitution state:
Section 3. The Congress shall enact a local government
code which shall provide for a more responsive and accountable local
government structure instituted through a system of decentralization
with effective mechanisms of recall, initiative, and referendum,
allocate among the different local government units their
powers, responsibilities, and resources, and provide for the
qualifications, election, appointment and removal, term, salaries,
powers and functions and duties of local officials, and all other
matters relating to the organization and operation of the
local units.
By constitutional fiat, Congress has within its arsenal ample mandate
to enact laws to grant and allocate among the different LGUs more powers,
responsibilities and resources through the amendment of RA 7160 or the
Local Government Code of 1991. And increasing the wealth and resources of
the component LGUs is but one of the veritable measures to concretize the
concept of local autonomy under Article X of the 1987 Constitution possibly
without resorting to radical changes in our political frameworks.
If it is the sincere goal of the national government to provide ample
financial resources to the LGUs, then it can consider amending Section 284
of RA 7160 and even increase the national tax allotment (formerly IRA) to
more than 40% of national taxes. Scrutiny should be made, however, of the
percentage by which the national tax allotment is being distributed to
among the different LGUs. For instance, Congress may consider balancing
Section 285 of RA 7160 by adjusting the 23% share of the 145 cities vis-à-vis
the percentage allocation of 1,478 municipalities now pegged at 34%. There
are currently too few cities taking up too much share. This notwithstanding
that cities, unlike many of the underperforming municipalities, are more
progressive and financially viable because of the higher taxes they collect
from people and business activities in their respective territories.
Congress may also decentralize and devolve more powers and duties
to the LGUs or deregulate some activities or processes to entitle said LGUs
more elbow room to successfully attain their programs and projects in
harmony with national development programs. It has the supremacy in the
enactment of laws that will define any aspect of organization and operation
of the LGUs to make it more efficient and financially stable with special focus
on the amplification of the taxing powers of said government units. Ergo, if
Congress is so minded to reinforce the powers of the LGUs, it can, within the
confines of the present Constitution, transfer or share any power of the
national government to said local governments.
Moreover, Article VII, Section 17 of the Constitution makes the
President the Chief of the Executive branch of Government, thus:
Section 17. The President shall have control of all the executive
departments, bureaus and offices. He shall ensure that laws be
faithfully executed.
In the same token, Section 1, Chapter III of the Administrative Code of
1987 provides that the executive power shall be vested in the President of
the Philippines. The President is the head of the executive branch of
government having full control of all executive departments, bureaus and
offices. 51 Part and parcel of the President's ordinance power is the issuance
of executive or administrative that tend to decentralize or devolve certain
powers and functions belonging to the executive departments, bureaus, and
offices to the LGUs, unless otherwise provided by law.
The President may also order the DBM to review and evaluate the
current formula for computation of the national tax allotment. At present,
DBM relies mainly on two (2) factors in determining the allotments of
provinces, municipalities and cities — 50% percent based on population,
25% for land area and 25% for equal sharing. For barangays, it is 60% based
on population and 40% for equal sharing. A view has been advanced that the
shares of a province, city or municipality should be based on the
classification of LGUs under Executive Order No. 249 dated July 25, 1987
determined from the average annual income of the LGU and not mainly on
population and land area which are not accurate factors. It was put forward
that the shares of LGUs in the NTA shall be in inverse proportion to their
classification. A bigger share shall be granted to the 6th class municipality
and a lower share to a 1st class municipality. At present, Senate Bill No.
2664 is pending which intends to rationalize the income classification of
LGUs. We leave it to Congress or the President to resolve this issue, hopefully
for a fairer sharing scheme that fully benefit the poor and disadvantaged
provinces and municipalities.
Lastly, the President has the power of general supervision over local
governments under Article X, Section 4 of the Constitution, viz.:
Section 4. The President of the Philippines shall exercise
general supervision over local governments. Provinces with
respect to component cities and municipalities, and cities and
municipalities with respect to component barangays, shall ensure
that the acts of their component units are within the scope of their
prescribed powers and functions. (emphasis added)
He can, therefore, support, guide, or even hand-hold the LGUs that are
financially distressed or politically ineffective via the regional and provincial
officials of the executive departments or bureaus. In short, the President can
transfer or share executive powers through decentralization or devolution
without need of a fresh mandate under a new constitution.
From the foregoing, the perceived ills brought about by a unitary
system of government may after all be readily remediable through
congressional and executive interventions through the concepts of
decentralization and devolution of powers to the LGUs. In the meantime that
the leaders of the public and private sectors are busy dissecting and
analyzing the proposed Bayanihan Federalism or, more importantly,
resolving the issue of whether a charter amendment is indeed necessary, it
may be prudent to consider whether the government can make do of its
present powers and mandate to attain the goal of bringing progress to our
poor and depressed local government units. After all, the present
constitution may be ample enough to straighten out the "economic
imbalance" and does not require fixing.
I, therefore, vote to PARTIALLY GRANT the instant petitions. In
particular, I concur with the following dispositions:
1. The phrase "internal revenue" appearing in Section 284 of RA
7160 is declared UNCONSTITUTIONAL and is hereby DELETED.
a. The Section 284, as modified, shall read as follows:
Section 284. Allotment of Internal Revenue
Taxes. — Local government units shall have a share
in the national internal revenue taxes based on the
collection of the third fiscal year preceding the
current fiscal year as follows:
(a) On the first year of the effectivity of this
Code, thirty percent (30%);
(b) On the second year, thirty-five percent
(35%); and
(c) On the third year and thereafter, forty
percent (40%).
Provided, That in the event that the national
government incurs an unmanageable public sector
deficit, the President of the Philippines is hereby
authorized, upon the recommendation of Secretary
of Finance, Secretary of Interior and Local
Government and Secretary of Budget and
Management, and subject to consultation with the
presiding officers of both Houses of Congress and
the presidents of the "liga," to make the necessary
adjustments in the internal revenue allotment of
local government units but in no case shall the
allotment be less than thirty percent (30%) of the
collection of national internal revenue taxes of the
third fiscal year preceding the current fiscal year:
Provided, further, That in the first year of the
effectivity of this Code, the local government units
shall, in addition to the thirty percent (30%) internal
revenue allotment which shall include the cost of
devolved functions for essential public services, be
entitled to receive the amount equivalent to the
cost of devolved personal services. cAaDHT

b. The phrase "internal revenue" shall likewise be DELETED
from the related sections of RA 7160, particularly Sections
285, 287, and 290, which shall now read:
Section 285. Allocation to Local Government
Units. — The share of local government units in the
internal revenue allotment shall be collected in the
following manner:
(a) Provinces — Twenty-three percent
(23%);
(c) Municipalities — Thirty-four percent
(34%); and
Provided, however, That the share of each province,
city, and municipality shall be determined on the
basis of the following formula:
(b) Land Area — Twenty-five percent
(25%); and
(c) Equal sharing — Twenty-five percent
(25%)
Provided, further, That the share of each barangay
with a population of not less than one hundred
(100) inhabitants shall not be less than Eighty
thousand (P80,000.00) per annum chargeable
against the twenty percent (20%) share of the
barangay from the internal revenue allotment, and
the balance to be allocated on the basis of the
following formula:
Provided, finally, That the financial requirements of
barangays created by local government units after
the effectivity of this Code shall be the
responsibility of the local government unit
concerned.
xxx xxx xxx
Section 287. Local Development Projects. —
Each local government unit shall appropriate in its
annual budget no less than twenty percent (20%) of
its annual internal revenue allotment for
development projects. Copies of the development
plans of local government units shall be furnished
the Department of the Interior and Local
Government.
xxx xxx xxx
Section 290. Amount of Share of Local
Government Units. — Local government units shall,
in addition to the internal revenue allotment, have
a share of forty percent (40%) of the gross
collection derived by the national government from
the preceding fiscal year from mining taxes,
royalties, forestry and fishery charges, and such
other taxes, fees, or charges, including related
surcharges, interests, or fines, and from its share in
any co-production, joint venture or production
sharing agreement in the utilization and
development of the national wealth within their
territorial jurisdiction.
c. Articles 378, 379, 380, 382, 409, 461, and other related
provisions in the Implementing Rules and Regulations of RA
7160 are hereby likewise MODIFIED to reflect deletion of
the phrase "internal revenue."
d. Henceforth, any mention of "IRA" in RA 7160 and its
Implementing Rules and Regulations shall hereinafter be
understood as pertaining to the national tax allotment of a
local government unit;
2. Respondents are hereby DIRECTED to include all forms of
national tax collections, other than those accruing to special
purpose funds and special allotments for the utilization and
development of national wealth, in the subsequent computations
for the base amount of just share the Local Government Units are
entitled to. The base for national tax allotments shall include, but
shall not be limited to:
a. National Internal Revenue Taxes under Section 21 of the
National Internal Revenue Code, as amended, collected by
the Bureau of Internal Revenue and its deputized agents,
including Value-Added Taxes, Excise Taxes, and
Documentary Stamp Taxes collected by the Bureau of
Customs;
b. Tariff and Customs Duties collected by the Bureau of
Customs;
c. Fifty percent (50%) of the Value-Added Tax collections from
the Autonomous Region in Muslim Mindanao (ARMM), and
thirty percent (30%) of all other national tax collections
from the ARMM.
The remaining fifty percent (50%) of the Value-Added Taxes
and seventy (70%) of the other national taxes collected in
the ARMM shall be the exclusive share of the region
pursuant to Sections 9 and 15 of RA 9054;
d. Sixty percent (60%) of the national tax collections from the
exploitation and development of national wealth.
The remaining forty (40%) will validly exclusively accrue to
the host Local Government Unit pursuant to Section 290 of
RA 7160;
e. Five percent (5%) of the twenty-five percent (25%)
franchise taxes collected from eight and a half percent
(8.5%) and eight and one fourth percent (8.25%) of the total
wager funds of the Manila Jockey Club and Philippine Racing
Club, Inc. pursuant to Sections 6 and 8 of RA 6631 and
6632, respectively.
The remaining twenty percent (20%) shall be divided as
follows (5%) to the host municipality, seven percent (7%) to
the Philippine Charity Sweepstakes Office, six percent (6%)
to the Anti-Tuberculosis Society, and two percent (2%) to
the White Cross;
f. Twenty percent (20%) of the eighty-five (85%) of the Excise
Tax collections from Virginia, burley, and native tobacco
products.
The first fifteen percent (15%) shall accrue to the tobacco
producing units pursuant to RA No. 7171 and 8240. Eighty
percent (80%) of the remainder shall be segregated as
special purpose funds under RA 10351;
3. In addition, the Court further DECLARES that:
a. The apportionment of incremental taxes — twenty percent
(20%) to the city or municipality where the tax is collected
and eighty percent (80%) to the national government of
fifty percent (50%) of incremental tax collections — under
Section 282 of the National Internal Revenue Code, as
amended by Republic Act No. 7643, is VALID and shall be
observed;
b. Sections 8 and 12 of RA 7227 are hereby declared VALID.
The proceeds from the sale of military bases converted to
alienable lands thereunder are EXCLUDED from the
computation of the national tax allocations of the Local
Government Units since these are sales proceeds, not tax
collections;
c. The one-half of one percent (1/2%) of national tax
collections as the auditing fee of the Commission on Audit
under Section 24 (3) of Presidential Decree No. 1445 shall
not be deducted prior to the computation of the forty
percent (40%) share of the Local Government Units in the
national taxes; and
d. Other special purpose funds are likewise EXCLUDED from
the computation of the national tax allotment base.
4. The Bureau of Internal Revenue and Bureau of Customs are
hereby ORDERED to certify to the Department of Budget and
Management all their collections and remittances of National
Taxes;
5. The Court's formula in this case for determining the base amount
for computing the share of the Local Government Units shall have
PROSPECTIVE APPLICATION from finality of this decision in
view of the operative fact doctrine. Thus, petitioners' claims of
arrears from the national government for the unlawful exclusions
from the base amount are hereby DENIED. HCaDIS
6. Finally, once the General Appropriations Act for the succeeding

year is enacted, the national tax allotments of the Local
Government Units shall AUTOMATICALLY and DIRECTLY be
released, without need of any further action, to the provincial,
city, municipal, or barangay treasurer, as the case may be, on a
quarterly basis but not beyond five (5) days after the end of each
quarter. The Department of Budget and Management is hereby
ORDERED to strictly comply with Article X, Section 6 of the
Constitution and Section 286 of the Local Government Code,
operationalized by Article 383 of the Implementing Rules and
Regulations of RA 7160.
LEONEN, J., dissenting:
I dissent.
The Constitution only requires that the local government units should
have a "just share" in the national taxes. "Just share, as determined by law" 1
does not refer only to a percentage, but likewise a determination by
Congress and the President as to which national taxes, as well as the
percentage of such classes of national taxes, will be shared with local
governments. The phrase "national taxes" is broad to give Congress a lot of
leeway in determining what portion or what sources within the national taxes
should be "just share."
We should be aware that Congress consists of both the Senate and the
House of Representatives. The House of Representatives meantime also
includes district representatives. We should assume that in the passage of
the Local Government Code and the General Appropriations Act, both Senate
and the House are fully aware of the needs of the local government units
and the limitations of the budget.
On the other hand, the President, who is sensitive to the political needs
of local governments, likewise, would seek the balance between
expenditures and revenues.
What petitioners seek is to short-circuit the process. They will to
empower us, unelected magistrates, to substitute our political judgment
disguised as a decision of this Court.
The provisions of the Constitution may be reasonably read to defer to
the actions of the political branches. Their interpretation is neither absurd
nor odious.
We should stay our hand.
Mandamus will not lie to achieve the reliefs sought by the parties.
G.R. No. 199802 (Mandanas' Petition) is a petition for certiorari,
prohibition, and mandamus to set aside the allocation or appropriation of
some P60,750,000,000.00 under Republic Act No. 10155 or the General
Appropriations Act of 2012, which supposedly should form part of the 40%
internal revenue allotment of the local government units. Petitioners contend
that the General Appropriations Act of 2012 is unconstitutional, in so far as it
misallocates some P60,750,000,000.00 that represents a part of the local
government units' internal revenue allotment coming from the national
internal revenue taxes specifically the value-added taxes, excise taxes, and
documentary stamp taxes collected by the Bureau of Customs. 2
Thus, petitioners seek to enjoin respondents from releasing the
P60,750,000,000.00 of the P1,816,000,000,000.00 appropriations provided
under the General Appropriations Act of 2012. They submit that the
P60,750,000,000.00 should be deducted from the capital outlay of each
national department or agency to the extent of their respective pro-rated
share. 3
Petitioners further seek to compel respondents to cause the automatic
release of the local government units' internal revenue allotments for 2012,
including the amount of P60,750,000,000.00; and to pay the local
government units their past unpaid internal revenue allotments from Bureau
of Customs' collections of national internal revenue taxes from 1989 to 2009.
4
On the other hand, G.R. No. 208488 (Garcia's Petition) seeks to declare
as unconstitutional Section 284 of Republic Act No. 7160 or the Local
Government Code of 1991, in limiting the basis for the computation of the
local government units' internal revenue allotment to national internal
revenue taxes instead of national taxes as ordained in the Constitution. 5
This Petition also seeks a writ of mandamus to command respondents
to fully and faithfully perform their duties to give the local government units
their just share in the national taxes. Petitioner contends that the exclusion
of the following special taxes and special accounts from the basis of the
internal revenue allotment is unlawful:

a. Autonomous Region of Muslim Mindanao, RA No. 9054;
b. Share of LGUs in mining taxes, RA No. 7160;
c. Share of LGUs in franchise taxes, RA No. 6631, RA No. 6632;
d. VAT of various municipalities, RA No. 7643;
e. ECOZONE, RA No. 7227;
f. Excise tax on Locally Manufactured Virginia Tobacco, RA No.
7171;
g. Incremental Revenue from Burley and Native Tobacco, RA No.
8240;
h. COA share, PD 1445. 6
Similar to Mandanas' Petition, Garcia argues that the value-added tax
and excise taxes collected by the Bureau of Customs should be included in
the scope of national internal revenue taxes.
Specifically, petitioner asks that respondents be commanded to:
(a) Compute the internal revenue allotment of the local government
units on the basis of the national tax collections including tax
collections of the Bureau of Customs, without any deductions;
(b) Submit a detailed computation of the local government units'
internal revenue allotments from 1995 to 2014; and
(c) Distribute the internal revenue allotment shortfall to the local
government units. 7
In sum, both Petitions ultimately seek a writ of mandamus from this
Court to compel the Executive Department to disburse amounts, which
allegedly were illegally excluded from the local government units' Internal
Revenue Allotments for 2012 and previous years, specifically from 1992 to
2011.
Under Rule 65, Section 3 of the Rules of Civil Procedure, a petition for
mandamus may be filed "[w]hen any tribunal, corporation, board, officer or
person unlawfully neglects the performance of an act which the law
specifically enjoins as a duty resulting from an office, trust, or station." It
may also be filed "[w]hen any tribunal, corporation, board, officer or person .
. . unlawfully excludes another from the use and enjoyment of a right or
office to which such other is entitled."
"Through a writ of mandamus, the courts 'compel the performance of a
clear legal duty or a ministerial duty imposed by law upon the defendant or
respondent' by operation of his or her office, trust, or station."8 It is
necessary for petitioner to show both the legal basis for the duty, and the
defendant's or respondent's failure to perform the duty. 9 "It is equally
necessary that the respondent have the power to perform the act concerning
which the application for mandamus is made." 10
There was no unlawful neglect on the part of public respondents,
particularly the Commissioner of Internal Revenue, in the computation of the
internal revenue allotment. Moreover, the act being requested of them is not
their ministerial duty; hence, mandamus does not lie and the Petitions must
be dismissed.
Respondents' computation of the internal revenue allotment was not
without legal justification.
Republic Act No. 7160, Section 284 provides that the local government
units shall have a forty percent (40%) share in the national internal revenue
taxes based on the collections of the third fiscal year preceding the current
fiscal year. Article 378 of Administrative Order No. 270 or the Rules and
Regulations Implementing the Local Government Code of 1991 (Local
Government Code Implementing Rules) mandates that "[t]he total annual
internal revenue allotments . . . due the [local government units] shall be
determined on the basis of collections from national internal revenue taxes
actually realized as certified by the [Bureau of Internal Revenue]." Consistent
with this Rule, it was reiterated in Development Budget Coordination
Committee Resolution No. 2003-02 dated September 4, 2003 that the
national internal revenue collections as defined in Republic Act No. 7160
shall refer to "cash collections based on the [Bureau of Internal Revenue]
data as reconciled with the [Bureau of Treasury]."AHCETa
Pursuant to the foregoing Article 378 of the Local Government Code

Implementing Rules and Development Budget Coordination Committee
Resolution, the Bureau of Internal Revenue computed the internal revenue
allotment on the bases of its actual collections of national internal revenue
taxes. The value-added tax, excise taxes, and a portion of the documentary
stamp taxes collected by the Bureau of Customs on imported goods were not
included in the computation because "these collections of the [Bureau of
Customs] are remitted directly to the [Bureau of Treasury]" 11 and, as
explained by then Commissioner Jacinto-Henares, "are recognized by the
Bureau of Treasury as the collection performance of the Bureau of Customs."
12
Furthermore, the exclusions of certain special taxes from the revenue

base for the internal revenue allotment were made pursuant to special laws
— Presidential Decree No. 1445 and Republic Act Nos. 6631, 6632, 7160,
7171, 7227, 7643, and 8240 — all of which enjoy the presumption of
constitutionality and validity.
It is basic that laws and implementing rules are presumed to be valid
unless and until the courts declare the contrary in clear and unequivocal
terms. 13 Thus, respondents must be deemed to have conducted themselves
in good faith and with regularity when they acted pursuant to the Local
Government Code and its Implementing Rules, the Development Budget
Coordination Committee Resolution, and special laws.
At any rate, the issue on the alleged "unlawful neglect" of respondents
was settled when Congress adopted and approved their internal revenue
allotment computation in the General Appropriations Act of 2012.
Mandamus will also not lie to enjoin respondents to withhold the
P60,750,000,000.00 appropriations in the General Appropriations Act of
2012 for capital outlays of national agencies and release the same to the
local government units as internal revenue allotment.
Congress alone, as the "appropriating and funding department of the
Government," 14 can authorize the expenditure of public funds through its
power to appropriate. Article VI, Section 29 (1) of the Constitution is clear
that the expenditure of public funds must be pursuant to an appropriation
made by law. Inherent in Congress' power of appropriation is the power to
specify not just the amount that may be spent but also the purpose for which
it may be spent. 15
While the disbursement of public funds lies within the mandate of the
Executive, it is subject to the limitations on the amount and purpose
determined by Congress. Book VI, Chapter 5, Section 32 of Executive Order
No. 292 directs that "[a]ll moneys appropriated for functions, activities,
projects and programs shall be available solely for the specific purposes for
which these are appropriated." It is the ministerial duty of the Department of
Budget and Management to desist from disbursing public funds without the
corresponding appropriation from Congress. Thus, the Department of Budget
and Management has no power to set aside fund for purposes outside of
those mentioned in the appropriations law. The proper remedy of the
petitioners is to apply to Congress for the enactment of a special
appropriation law; but it is still discretionary on the part of Congress to
appropriate or not.
Thus, on procedural standpoint alone, the Petitions must be dismissed.
II
On the substantive issue, I hold the view that: cHaCAS
1) Section 284 16 of the Local Government Code, limiting the base

for the computation of internal revenue allotment to national
internal revenue taxes is a proper exercise of the legislative
discretion accorded by the Constitution 17 to determine the "just
share" of the local government units;
2) The exclusion of certain revenues — value-added tax, excise tax,
and documentary stamp taxes collected by the Bureau of
Customs — from the base for the computation for the internal
revenue allotment, which was approved in the General
Appropriations Act of 2012, is not unconstitutional; and
3) The deductions to the Bureau of Internal Revenue's collections
made pursuant to special laws were proper.
III
We assess the validity of the internal revenue allotment of the local

government units in light of Article X, Section 6 of the 1987 Constitution,
which provides:
Section 6. Local government units shall have a just share, as
determined by law, in the national taxes which shall be automatically
released to them.
"Just share" does not refer only to a percentage, but it can also refer to
a determination as to which national taxes, as well as the percentage of such
classes of national taxes, will be shared with local governments. There are
no constitutional restrictions on how the share of the local governments
should be determined other than the requirement that it be "just." The "just
share" is to be determined "by law," a term which covers both the
Constitution and statutes. Thus, the Congress and the President are
expressly authorized to determine the "just share" of the local government
units.
According to the ponencia, mandamus will not lie because "the
determination of what constitutes the just share of the local government
units in the national taxes under the 1987 Constitution is an entirely
discretionary power" 18 and the discretion of Congress is not subject to
external direction. Yet the disposition on the substantive issues, in essence,
supplants legislative discretion and relegates it to one that is merely
ministerial.
The percentages 30% in the first year, 35% in the second year, and
40% in the third year, and onwards were fixed in Section 284 of the Local
Government Code on the basis of what Congress determined as the revenue
base, i.e., national internal revenue taxes. Thus, we cannot simply declare
the phrase "internal revenue" as unconstitutional and strike it from Section
284 of the Local Government Code, because this would effectively change
Congress' determination of the just share of the local government units. By
broadening the base for the computation of the 40% share to national taxes
instead of to national internal revenue taxes, we would, in effect, increase
the local government units' share to an amount more than what Congress
has determined and intended.
The limitation provided in Article X, Section 6 of the 1987 Constitution
should be reasonably construed so as not to unduly hamper the full exercise
by the Legislative Department of its powers. Under the Constitution, it is
Congress' exclusive power and duty to authorize the budget for the coming
fiscal year. "Implicit in the power to authorize a budget for government is the
necessary function of evaluating the past year's spending performance as
well as the determination of future goals for the economy." 19 For sure, this
Court has, in the past, acknowledged the awesome power of Congress to
control appropriations.
In Guingona, Jr. v. Carague , 20 petitioners therein urged that Congress
could not give debt service the highest priority in the General Appropriations
Act of 1990 because under Article XIV, Section 5 (5) of the Constitution, it
should be education that is entitled to the highest funding. Rejecting therein
petitioners' argument, this Court held:
While it is true that under Section 5(5), Article XIV of
the Constitution Congress is mandated to "assign the highest
budgetary priority to education" in order to "insure that teaching
will attract and retain its rightful share of the best available talents
through adequate remuneration and other means of job satisfaction
and fulfillment," it does not thereby follow that the hands of
Congress are so hamstrung as to deprive it the power to
respond to the imperatives of the national interest and for
the attainment of other state policies or objectives.
As aptly observed by respondents, since 1985, the budget for
education has tripled to upgrade and improve the facility of the public
school system. The compensation of teachers has been doubled. The
amount of P29,740,611,000.00 set aside for the Department of
Education, Culture and Sports under the General Appropriations Act
(R.A. No. 6831), is the highest budgetary allocation among all
department budgets. This is a clear compliance with the aforesaid
constitutional mandate according highest priority to education.
Having faithfully complied therewith, Congress is
certainly not without any power, guided only by its good
judgment, to provide an appropriation, that can reasonably
service our enormous debt, the greater portion of which was
inherited from the previous administration. It is not only a
matter of honor and to protect the credit standing of the country.
More especially, the very survival of our economy is at stake. Thus, if
in the process Congress appropriated an amount for debt
service bigger than the share allocated to education, the
Court finds and so holds that said appropriation cannot be
thereby assailed as unconstitutional. 21 (Emphasis supplied)
Appropriation is not a judicial function. We do not have the power of
the purse and rightly so. The power to appropriate public funds for the
maintenance of the government and other public needs distinctively belongs
to Congress. Behind the Constitutional mandate that "[n]o money shall be
paid out of the Treasury except in pursuance of an appropriation made by
law" 22 lies the principle that the people's money may be spent only with
their consent. That consent is to be expressed either in the Constitution
itself or in valid acts of the legislature as the direct representative of the
people.
Every appropriation is a political act. Allocation of funds for programs,
projects, and activities are very closely related to political decisions. The
budget translates the programs of the government into monetary terms. It is
intended as a guide for Congress to follow not only in fixing the amounts of
appropriation but also in determining the specific governmental activities for
which public funds should be spent.
The Constitution requires that all appropriation bills should originate
from the House of Representatives. 23 Since the House of Representatives,
through the district Representatives, is closer to the people and has more
interaction with the local government that is within their districts than the
Senate, it is expected to be more sensitive to and aware of the local needs
and problems, 24 and thus, have the privilege of taking the initiative in the
disposal of the people's money. The Senate, on the other hand, may propose
amendments to the House bill. 25
The appropriation bill passed by Congress is submitted to the President
for his or her approval. 26 The Constitution grants the President the power to
veto any particular item or items in the appropriation bill, without affecting
the other items to which he or she does not object. 27 This function enables
the President to remove any item of appropriation, which in his or her
opinion, is wasteful 28 or unnecessary.
Considering the entire process, from budget preparation to legislation,
we can presume that the Executive and Congress have prudently
determined the level of expenditures that would be covered by the
anticipated revenues for the government on the basis of historical
performance and projections of economic conditions for the incoming year.
The determination of just share contemplated under Article X, Section 6 of
the 1987 Constitution is part of this process. Their interpretation or
determination is not absurd and well within the text of the Constitution. We
should exercise deference to the interpretation of Congress and of the
President of what constitutes the "just share" of the local government units.
IV
The general appropriations law, like any other law, is a product of

deliberations in the legislative body. Congress' role in the budgetary process
29 and the procedure for the enactment of the appropriations law has been
described in detail as follows:
T h e Budget Legislation Phase covers the period
commencing from the time Congress receives the President's Budget,
which is inclusive of the [National Expenditure Program] and the
[Budget of Expenditures and Sources of Financing], up to the
President's approval of the GAA. This phase is also known as the
Budget Authorization Phase, and involves the significant participation
of the Legislative through its deliberations.
Initially, the President's Budget is assigned to the House of
Representatives' Appropriations Committee on First Reading. The
Appropriations Committee and its various Sub-Committees schedule
and conduct budget hearings to examine the PAPs of the
departments and agencies. Thereafter, the House of Representatives
drafts the General Appropriations Bill (GAB).
The GAB is sponsored, presented and defended by the House of
Representatives' Appropriations Committee and Sub-Committees in
plenary session. As with other laws, the GAB is approved on Third
Reading before the House of Representatives' version is transmitted
to the Senate. DACcIH
After transmission, the Senate conducts its own committee

hearings on the GAB. To expedite proceedings, the Senate may
conduct its committee hearings simultaneously with the House of
Representatives' deliberations. The Senate's Finance Committee and
its Sub-Committees may submit the proposed amendments to the
GAB to the plenary of the Senate only after the House of
Representatives has formally transmitted its version to the Senate.
The Senate version of the GAB is likewise approved on Third Reading.
The House of Representatives and the Senate then constitute a
panel each to sit in the Bicameral Conference Committee for the
purpose of discussing and harmonizing the conflicting provisions of
their versions of the GAB. The "harmonized" version of the GAB is
next presented to the President for approval. The President reviews
the GAB, and prepares the Veto Message where budget items are
subjected to direct veto, or are identified for conditional
implementation.
If, by the end of any fiscal year, the Congress shall have failed
to pass the GAB for the ensuing fiscal year, the GAA for the preceding
fiscal year shall be deemed re-enacted and shall remain in force and
effect until the GAB is passed by the Congress. 30 (Emphasis in the
original, citations omitted)
The general appropriations law is a special law pertaining specifically to
appropriations of money from the public treasury. The "just share" of the
local government units is incorporated as the internal revenue allotment in
the general appropriations law. By the very essence of how the general
appropriations law is enacted, particularly for this case the General
Appropriations Act of 2012, it can be presumed that Congress has
purposefully, deliberately, and precisely approved the revenue base,
including the exclusions, for the internal revenue allotment.
A basic rule in statutory construction is that as between a specific and
general law, the former must prevail since it reveals the legislative intent
more clearly than a general law does. 31 The specific law should be deemed
an exception to the general law. 32
The appropriations law is a special law, which specifically outlines the
share in the national fund of all branches of the government, including the
local government units. On the other hand, the National Internal Revenue
Code is a general law on taxation, generally applicable to all persons. Being
a specific law on appropriations, the General Appropriations Act should be
considered an exception to the National Internal Revenue Code definition of
national internal revenue taxes insofar as the internal revenue allotments of
the local government units are concerned. The General Appropriations Act of
2012 is the clear and specific expression of the legislative will — that the
local government units' internal revenue allotment is 40% of national
internal revenue taxes excluding tax collections of the Bureau of Customs —
and must be given effect. That this was the obvious intent can also be
gleaned from Congress' adoption and approval of internal revenue
allotments using the same revenue base in the General Appropriations Act
from 1992 to 2011.
The ruling in Province of Batangas v. Romulo 33 that a General
Appropriations Act cannot amend substantive law must be read in its
context.
In that case, the General Appropriations Acts of 1999, 2000, and 2001
contained provisos earmarking for each corresponding year the amount of
P5,000,000,000.00 of the local government units' internal revenue allotment
for the Local Government Service Equalization Fund and imposing the
condition that "such amount shall be released to the local government units
subject to the implementing rules and regulations, including such
mechanisms and guidelines for the equitable allocations and distribution of
said fund among the local government units subject to the guidelines that
may be prescribed by the Oversight Committee on Devolution." This Court
struck down the provisos in the General Appropriations Acts of 1999, 2000,
and 2001 as unconstitutional, and the Oversight Committee on Devolution
resolutions promulgated pursuant to these provisos. This Court held that to
subject the distribution and release of the Local Government Service
Equalization Fund, a portion of the internal revenue allotment, to the rules
and guidelines prescribed by the Oversight Committee on Devolution makes
the release not automatic, a flagrant violation of the constitutional and
statutory mandate that the "just share" of the local government units "shall
be automatically released to them."
This Court further found that the allocation of the shares of the
different local government units in the internal revenue allotment as
provided in Section 285 34 of the Local Government Code was not followed,
as the resolutions of the Oversight Committee on Devolution prescribed
different sharing schemes of the Local Government Service Equalization
Fund. This Court held that the percentage sharing of the local government
units fixed in the Local Government Code are matters of substantive law,
which could not be modified through appropriations laws or General
Appropriations Acts. This Court explained that Congress cannot include in a
general appropriation bill matters that should be more properly enacted in a
separate legislation.
Province of Batangas cited in turn this Court's ruling in Philippine
Constitution Association (PHILCONSA) v. Enriquez , 35 which defined what
were considered inappropriate provisions in appropriation laws:
As the Constitution is explicit that the provision which Congress
can include in an appropriations bill must "relate specifically to some
particular appropriation therein" and "be limited in its operation to
the appropriation to which it relates," it follows that any provision
which does not relate to any particular item, or which extends in its
operation beyond an item of appropriation, is considered "an
inappropriate provision" which can be vetoed separately from an
item. Also to be included in the category of "inappropriate provisions"
are unconstitutional provisions and provisions which are intended to
amend other laws, because clearly these kind[s] of laws have no
place in an appropriations bill. These are matters of general
legislation more appropriately dealt with in separate enactments.
The doctrine of "inappropriate provision" was well elucidated in
Henry v. Edwards, . . ., thus:
Just as the President may not use his item-veto to
usurp constitutional powers conferred on the legislature,
neither can the legislature deprive the Governor of the
constitutional powers conferred on him as chief executive
officer of the state by including in a general appropriation
bill matters more properly enacted in separate legislation.
The Governor's constitutional power to veto bills of
general legislation . . . cannot be abridged by the careful
placement of such measures in a general appropriation
bill, thereby forcing the Governor to choose between
approving unacceptable substantive legislation or vetoing
'items' of expenditures essential to the operation of
government. The legislature cannot by location of a bill
give it immunity from executive veto. Nor can it
circumvent the Governor's veto power over substantive
legislation by artfully drafting general law measures so
that they appear to be true conditions or limitations on an
item of appropriation. . . . We are no more willing to allow
the legislature to use its appropriation power to infringe
on the Governor's constitutional right to veto matters of
substantive legislation than we are to allow the Governor
to encroach on the constitutional powers of the
legislature. In order to avoid this result, we hold that,
when the legislature inserts inappropriate provisions in a
general appropriation bill, such provisions must be
treated as 'items' for purposes of the Governor's item
veto power over general appropriation bills. 36 (Emphasis
in the original)
In PHILCONSA, this Court upheld the President's veto of the proviso in
the Special Provision of the item on debt service requiring that "any
payment in excess of the amount herein appropriated shall be subject to the
approval of the President of the Philippines with the concurrence of the
Congress of the Philippines." 37 This Court held that the proviso was an
inappropriate provision because it referred to funds other than the
P86,323,438,000.00 appropriated for debt service in the General
Appropriations Act of 1991.
Province of Batangas referred to a provision in the General
Appropriations Act, which was clearly shown to contravene the Constitution,
while PHILCONSA referred to an inappropriate provision, i.e., a provision that
was clearly extraneous to any definite item of appropriation in the General
Appropriations Act, which incidentally constituted an implied amendment of
another law.
What is involved here is the internal revenue allotment of the local
government units in the Government Appropriations Act of 2012, the
determination of which was, under the Constitution, left to the sole
prerogative of the legislature. Congress has full discretion to determine the
"just share" of the local government units, in which authority necessarily
includes the power to fix the revenue base, or to define what are included in
this base, and the rate for the computation of the internal revenue allotment.
Absent any clear and unequivocal breach of the Constitution, this Court
should proceed with restraint when a legislative act is challenged in
deference to a co-equal branch of the Government. 38 "If a particular statute
is within the constitutional powers of the Legislature to enact, it should be
sustained whether the courts agree or not in the wisdom of its enactment."
39
V
The ponencia further elaborates "automatic release" in Section 286 of

the Local Government Code as "without need for a yearly appropriation."
This is contrary to the Constitution. A statute cannot amend the
Constitutional requirement. HSCATc
Section 286 of the Local Government Code states:

Section 286. Automatic Release of Shares. — (a) The share of
each local government unit shall be released, without need of any
further action, directly to the provincial, city, municipal or barangay
treasurer, as the case may be, on a quarterly basis within five (5)
days after the end of each quarter, and which shall not be subject to
any lien or holdback that may be imposed by the National
Government for whatever purpose.
Appropriation and release refer to two (2) different actions. "An
appropriation is the setting apart by law of a certain sum from the public
revenue for a specified purpose." 40 It is the Congressional authorization
required by the Constitution for spending. 41 Release, on the other hand, has
to do with the actual disbursement or spending of funds. "Appropriations
have been considered 'released' if there has already been an allotment or
authorization to incur obligations and disbursement authority." 42 This is a
function pertaining to the Executive Department, particularly the
Department of Budget and Management, in the execution phase of the
budgetary process. 43
Article VI, Section 29 (1) of the Constitution is explicit that:
Section 29. (1) No money shall be paid out of the Treasury except
in pursuance of an appropriation made by law.
In other words, before money can be taken out of the Government
Treasury for any purpose, there must first be an appropriation made by law
for that specific purpose. Neither of the fiscal officers or any other official of
the Government is authorized to order the expenditure of unappropriated
funds. Any other course would give to these officials a dangerous discretion.
This Court has pronounced that to be valid, an appropriation must be
specific, both in amount and purpose. 44 In Nazareth v. Villar, 45 this Court
held that even if there is a law authorizing the grant of Magna Carta benefits
for science and technology personnel, the funding for these benefits must be
"purposefully, deliberately, and precisely" appropriated for by Congress in a
general appropriation law:
Article VI, Section 29 (1) of the 1987 Constitution firmly declares that:
"No money shall be paid out of the Treasury except in pursuance of
an appropriation made by law." This constitutional edict requires that
the GAA be purposeful, deliberate, and precise in its provisions and
stipulations. As such, the requirement under Section 20 of R.A. No.
8439 that the amounts needed to fund the Magna Carta benefits
were to be appropriated by the GAA only meant that such funding
must be purposefully, deliberately, and precisely included in the GAA.
The funding for the Magna Carta benefits would not materialize as a
matter of course simply by fiat of R.A. No. 8439, but must initially be
proposed by the officials of the DOST as the concerned agency for
submission to and consideration by Congress. That process is what
complies with the constitutional edict. R.A. No. 8439 alone could not
fund the payment of the benefits because the GAA did not mirror
every provision of law that referred to it as the source of funding. It is
worthy to note that the DOST itself acknowledged the absolute need
for the appropriation in the GAA. Otherwise, Secretary Uriarte, Jr.
would not have needed to request the OP for the express authority to
use the savings to pay the Magna Carta benefits. 46 (Citation
omitted)
All government expenditures must be integrated in the general
appropriations law. This is revealed by a closer look into the entire
government budgetary and appropriation process.
The first phase in the process is the budget preparation. The Executive
prepares a National Budget that is reflective of national objectives,
strategies, and plans for the following fiscal year. Under Executive Order No.
292 of the Administrative Code of 1987, the national budget is to be
"formulated within the context of a regionalized government structure and of
the totality of revenues and other receipts, expenditures and borrowings of
all levels of government and of government-owned or controlled
corporations." 47
The budget may include the following:
(1) A budget message setting forth in brief the government's
budgetary thrusts for the budget year, including their impact on
development goals, monetary and fiscal objectives, and
generally on the implications of the revenue, expenditure and
debt proposals; and
(2) Summary financial statements setting forth:
(a) Estimated expenditures and proposed appropriations
necessary for the support of the Government for the
ensuing fiscal year, including those financed from
operating revenues and from domestic and foreign
borrowings;
(b) Estimated receipts during the ensuing fiscal year under
laws existing at the time the budget is transmitted and
under the revenue proposals, if any, forming part of the
year's financing program;
(c) Actual appropriations, expenditures, and receipts during
the last completed fiscal year;
(d) Estimated expenditures and receipts and actual or
proposed appropriations during the fiscal year in progress;
(e) Statements of the condition of the National Treasury at
the end of the last completed fiscal year, the estimated
condition of the Treasury at the end of the fiscal year in
progress and the estimated condition of the Treasury at the
end of the ensuing fiscal year, taking into account the
adoption of financial proposals contained in the budget and
showing, at the same time, the unencumbered and
unobligated cash resources;
(f) Essential facts regarding the bonded and other long-term
obligations and indebtedness of the Government, both
domestic and foreign, including identification of recipients
of loan proceeds; and
(g) Such other financial statements and data as are deemed
necessary or desirable in order to make known in
reasonable detail the financial condition of the
government. 48
The President, in accordance with Article VII, Section 22 of the
Constitution, submits the budget of expenditures and sources of financing,
which is also called the National Expenditure Plan, to Congress as the basis
of the general appropriation bill, 49 which will be discussed, debated on, and
voted upon by Congress. Also included in the budget submission are the
proposed expenditure levels of the Legislative and Judicial Branches, and of
Constitutional bodies. 50
All appropriation proposals must be included in the budget preparation
process. 51 Congress then "deliberates or acts on the budget proposals . . .
in the exercise of its own judgment and wisdom [and] formulates an
appropriation act." 52 The Constitution states that "Congress may not
increase the appropriations recommended by the President for the operation
of the Government as specified in the budget." 53 Furthermore, "all
expenditures for (1) personnel retirement premiums, government service
insurance, and other similar fixed expenditures, (2) principal and interest on
public debt, (3) national government guarantees of obligations which are
drawn upon, are automatically appropriated." 54
Parenthetically, the General Appropriations Act of 2012 includes the
budgets for entities enjoying fiscal autonomy, 55 and for debt service that is
automatically appropriated, under the following titles:
1. Title XXIX, the Judiciary;
2. Title XXX, Civil Service Commission;
3. Title XXXI, Commission on Audit;
4. Title XXXII, Commission on Elections;
5. Title XXXIII, Office of the Ombudsman;
6. Annex A, Automatic Appropriations, which include the interest
payments for debt service and the internal revenue allotment of
the local government units; and
7. Annex B, Debt Service — Principal Amortizations. 56
"Automatic appropriation" is not the same as "automatic release" of
appropriations. As stated earlier, the power to appropriate belongs to
Congress, while the responsibility of releasing appropriations belongs to the
Department of Budget and Management. 57
Items of expenditure that are automatically appropriated, like debt
service, are approved at its annual levels or on a lump sum by Congress
upon due deliberations, without necessarily going into the details for
implementation by the Executive. 58 However, just because an expenditure
is automatically appropriated does not mean that it is no longer included in
the general appropriations law. IDTSEH
On the other hand, the "automatic release" of approved annual

appropriations requires the full release 59 of appropriations without any
condition. 60 Thus, "no report, no release" policies cannot be enforced
against institutions with fiscal autonomy. Neither can a "shortfall in
revenues" be considered as valid justification to withhold the release of
approved appropriations. 61
With regard to the local government units, the automatic release of
internal revenue allotments under Article X, Section 6 of the Constitution
binds both the Legislative and Executive departments. 62 In ACORD, Inc. v.
Zamora, 63 the [General Appropriations Act 2000] of placed
P10,000,000,000.00 of the [internal revenue allotment] under
"unprogrammed funds." This Court, citing Province of Batangas and Pimentel
v. Aguirre , 64 ruled that such withholding of the internal revenue allotment
contingent upon whether revenue collections could meet the revenue targets
originally submitted by the President contravened the constitutional
mandate on automatic release.
The automatic release of the local government units' shares is a basic
feature of local fiscal autonomy. Nonetheless, as clarified in Pimentel:
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. 65 (Citation omitted)
The release of the local government units' share without an
appropriation, as what the ponencia proposes, substantially amends the
Constitution. It also gives local governments a level of fiscal autonomy not
enjoyed even by constitutional bodies like the Supreme Court, the
Constitutional Commissions, and the Ombudsman. It bypasses Congress as
mandated by the Constitution.
"Without appropriation" also substantially alters the relationship of the
President to local governments, effectively diminishing, if not removing,
supervision as mandated by the Constitution.
ACCORDINGLY, I vote to DISMISS the Petitions.
CAGUIOA, J., dissenting:
Every statute has in its favor the presumption of constitutionality. This

presumption rests on the doctrine of separation of powers, which enjoins the
three branches of government to encroach upon the duties and powers of
another. 1 It is based on the respect that the judicial branch accords to the
legislature, which is presumed to have passed every law with careful
scrutiny to ensure that it is in accord with the Constitution. 2 Thus, before a
law is declared unconstitutional, there must be a clear and unequivocal
showing that what the Constitution prohibits, the statute permits. 3 In other
words, laws shall not be declared invalid unless the conflict with the
Constitution is clear beyond reasonable doubt. 4 To doubt is to sustain the
constitutionality of the assailed statute. 5
In the present case, doubt exists as to whether Section 284 of the
Local Government Code (LGC) directly contravenes Section 6, Article X of
the 1987 Constitution because the latter is susceptible of two
interpretations.
Section 6, Article X of the 1987 Constitution states:
SECTION 6. Local government units shall have a just share,
as determined by law, in the national taxes which shall be
automatically released to them.
I n Province of Batangas v. Romulo, 6 the Court explained that the
foregoing provision mandates that (1) the local government units (LGUs)
shall have a "just share" in the national taxes; (2) the "just share" shall be
determined by law; and (3) the "just share" shall be automatically released
to the LGUs.
The issue now before this Court is what constitutes a "just share."
The ponencia offers a restrictive interpretation of the term "just share"
as referring only to a percentage or fractional value of the entire pie of
national taxes. This necessarily results in finding Section 284 of the LGC too
restrictive as it limits the pie to internal revenue taxes only. Thus, the
ponencia finds the words "internal revenue" in Section 284 of the LGC
constitutionally infirm and deems the same as not written.
Justice Leonen, on the other hand, provides a liberal interpretation.
According to him the term "just share" may refer to the classes of national
taxes as well as to the percentages of such classes, since other than the
term "just," no other restrictions on how the share of the LGUs should be
determined are provided by the Constitution. He posits that the Constitution
left the sole discretion to Congress in determining the "just share" of the
LGUs, which authority necessarily includes the power to fix the revenue base
(i.e., only a portion of "national taxes") and the rate for the computation of
the allotment to the LGUs.
It is a settled rule in the construction of laws, that "[i]f there is doubt or
uncertainty as to the meaning of the legislature, if the words or provisions of
the statute are obscure, or if the enactment is fairly susceptible of two or
more constructions, that interpretation will be adopted which will avoid the
effect of unconstitutionality, even though it may be necessary, for this
purpose, to disregard the more usual or apparent import of the language
employed." 7
I find the foregoing rule applicable even to the construction of the
Constitution. Thus, as between the ponencia's restrictive approach and
Justice Leonen's liberal approach, I submit that the latter should be upheld.
The Court's ruling in Remman Enterprises, Inc. v. Professional Regulatory
Board of Real Estate Service, 8 lends credence:
Indeed, "all presumptions are indulged in favor of
constitutionality; one who attacks a statute, alleging
unconstitutionality must prove its invalidity beyond a reasonable
doubt; that a law may work hardship does not render it
unconstitutional; that if any reasonable basis may be conceived
which supports the statute, it will be upheld, and the
challenger must negate all possible bases; that the courts are
not concerned with the wisdom, justice, policy, or expediency of a
statute; and that a liberal interpretation of the constitution in
favor of the constitutionality of legislation should be
adopted." 9
Moreover, I join the position of Justice Leonen that the Constitution
gave Congress the absolute authority and discretion to determine the LGUs'
"just share" — which include both the classes of national taxes and the
percentages thereof. The exercise of this plenary power vested upon
Congress, through the latter's enactment of laws, including the LGC, the
National Internal Revenue Code and the general appropriations act, is
beyond the Court's judicial review as this pertains to policy and wisdom of
the legislature.
I echo Justice Leonen's statement that appropriation is not a judicial
function. Congress, which holds the power of the purse, is in the best
position to determine the "just share" of the LGUs based on their needs and
circumstances. Courts cannot provide a new formula for the Internal
Revenue Allotments (IRA) or substitute its own determination of what "just
share" should be, absent a clear showing that the assailed act of Congress
(i.e., Section 284 of the LGC) is prohibited by the fundamental law. To do so
would be to tread the dangerous grounds of judicial legislation and violate
the deeply rooted doctrine of separation of powers.
Finally, even assuming that Section 284 of the LGC is constitutionally
infirm, I agree with the ponencia's position that the operative fact doctrine
should apply to this case. The doctrine nullifies the effects of an
unconstitutional law or an executive act by recognizing that the existence of
a statute prior to a determination of unconstitutionality is an operative fact
and may have consequences that cannot always be ignored. It applies when
a declaration of unconstitutionality will impose an undue burden on those
who have relied on the invalid law. 10 In Araullo v. Aquino III, 11 the doctrine
was held to apply to recognize the positive results of the implementation of
the unconstitutional law or executive issuance to the economic welfare of
the country. Not to apply the doctrine of operative fact would result in most
undesirable wastefulness and would be enormously burdensome for the
Government. 12
In the same vein, petitioners cannot claim deficiency IRA from previous
fiscal years as these funds may have already been used for government
projects, the undoing of which would not only be physically impossible but
also impractical and burdensome for the Government. SICDAa
Verily, considering that the decisions of this Court can only be applied
prospectively, I find the Court's computation of "just share" of no practical
value to petitioners and other LGUs; because while LGUs, in accordance with
the Court's ruling, are now entitled to share directly from national taxes,
Congress, as they may see fit, can simply enact a law lowering the
percentage shares of LGUs equivalent to the amount initially granted to
them. In fine, and in all practicality, this case is much ado over nothing.
For the foregoing reasons, I vote to DISMISS the Petitions.
REYES, JR., J., dissenting:
At the root of the controversy is the basis for computing the share of
Local Government Units (LGUs) in the national taxes. The petitioners in
these cases argue that certain national taxes were excluded from the
amount upon which the Internal Revenue Allotment (IRA) was based, in
violation of the constitutional mandate under Section 6, Article X of the 1987
Constitution. 1
T h e ponencia agreed with the petitioners and declared the term
"internal revenue" in Sections 284 and 285 of the Local Government Code
(LGC) 2 of 1991 as constitutionally infirm. I respectfully dissent from the
majority Decision for unduly encroaching on the plenary power of Congress
to determine the just share of LGUs in the national taxes.
As exhaustively discussed in the majority Decision, the 1987
Constitution emphasized the thrust towards local autonomy and
decentralization of administration. 3 The Constitution also devised ways of
expanding the financial resources of LGUs, in order to enhance their ability
to operate and function. 4 LGUs were granted broad taxing powers, 5 an
national wealth, 6 and a just share in the national taxes. 7
Yet, despite the recognition to decentralize the administration for a
more efficient delivery of services, the powers and authorities granted to
LGUs remain constitutionally restrained through one branch of the
government — Congress. This is apparent from the following provisions of
the 1987 Constitution:
Article X
Local Government
General Provisions
xxx xxx xxx
SECTION 3. The Congress shall enact a local
government code which shall provide for a more responsive and
accountable local government structure instituted through a system
of decentralization with effective mechanisms of recall, initiative, and
referendum, allocate among the different local government
units their powers, responsibilities, and resources, and provide
for the qualifications, election, appointment and removal, term,
salaries, powers and functions and duties of local officials, and all
other matters relating to the organization and operation of the local
units.
xxx xxx xxx
SECTION 5. Each local government unit shall have the
power to create its own sources of revenues and to levy taxes, fees,
and charges subject to such guidelines and limitations as the
Congress may provide, consistent with the basic policy of local
autonomy. Such taxes, fees, and charges shall accrue exclusively to
the local governments.
SECTION 6. Local government units shall have a just share,
as determined by law , in the national taxes which shall be
SECTION 7. Local governments shall be entitled to an
way of direct benefits. (Emphasis and underscoring Ours)
In line with the mandate to enact a local government code, Congress
passed Republic Act (R.A.) No. 7160, otherwise known as the LGC of 1991, to
serve as the general framework for LGUs. The LGC of 1991 laid down the
general powers and attributes of LGUs, the qualifications and election of
local officials, the power of LGUs to legislate and create their own sources of
revenue, the scope of their taxing powers, and the allocated share of LGUs in
the national taxes, among other things.
Under Section 6 of the LGC of 1991, Congress also retained the power
to create, divide, merge or abolish a province, city, municipality, or any
other political subdivision. 8 Thus, LGUs have no inherent powers, and they
only derive their existence and authorities from an enabling law from
Congress. The power of Congress, in turn, is checked by the relevant
provisions of the Constitution. The Court, in Lina, Jr. v. Paño , 9 discussed this
principle as follows:
Nothing in the present constitutional provision enhancing local
autonomy dictates a different conclusion.
The basic relationship between the national
legislature and the local government units has not been
enfeebled by the new provisions in the Constitution
strengthening the policy of local autonomy. Without
meaning to detract from that policy, we here confirm that
Congress retains control of the local government units
although in significantly reduced degree now than under
our previous Constitutions. The power to create still
includes the power to destroy. The power to grant still
includes the power to withhold or recall. True, there are
certain notable innovations in the Constitution, like the
direct conferment on the local government units of the
power to tax (citing Art. X, Sec. 5, Constitution), which
cannot now be withdrawn by mere statute. By and
large, however, the national legislature is still the
principal of the local government units, which
cannot defy its will or modify or violate it. 10
(Emphasis Ours)
While the discussion in Lina relates specifically to the legislative power
of LGUs, the Court has applied the same principle with respect to the other
powers conferred by Congress. 11 In other words, despite the shift
towards local autonomy, the National Government, through
Congress, retains control over LGUs — albeit, in a lesser degree.
With respect to the share of LGUs in the national taxes, Section 6,
Article X of the 1987 Constitution limits the power of Congress in three (3)
ways: (a) the share of LGUs must be just; (b) the just share in the national
taxes must be determined by law; and (c) the share must be automatically
released to the LGU. 12 The Constitution, however, does not prescribe the
exact percentage share of LGUs in the national taxes. It left Congress with
the authority to determine how much of the national taxes are the LGUs'
rightly entitled to receive.
Concomitant with this authority is the mandate granted to Congress to
allocate these resources among the LGUs, in a local government code. 13
Accordingly, in Section 284 of the LGC of 1991, Congress established the IRA
providing LGUs with a 40% share in "the national internal revenue taxes
based on the collection of the third fiscal year preceding the current fiscal
year." 14 This percentage share may not be changed, unless the National
Government incurs an unmanageable public-sector deficit. The National
Government may not also lower the IRA to less than 30% of the national
internal revenue taxes collected on the third fiscal year preceding the
current fiscal year. 15 The LGC of 1991 further requires the quarterly release
of the IRA, within five (5) days after the end of each quarter, without any lien
or holdback imposed by the national government for whatever purpose. 16
In this case, the petitioners notably do not assail the
percentage share (i.e., 40%) of LGUs in the national taxes. They
instead challenge the base amount of the IRA from which the 40% is taken,
arguing that all "national taxes" and not only "national internal revenue
taxes" should be included in the computation of the IRA. The majority
Decision agreed with this argument.
Again, I respectfully disagree.
The plain text of Section 6, Article X of the 1987 Constitution requires
Congress to provide LGUs with a just share in the national taxes, which
should be automatically released to them. Nowhere in this provision
does the Constitution specify the taxes that should be included in
the just share of LGUs. Neither does the Constitution mandate the
inclusion of all national taxes in the computation of the IRA or in
any other share granted to LGUs.
The IRA is only one of several other block grants of funds from the
national government to the local government. It was established in the LGC
of 1991 not only because of Section 6, Article X of the 1987 Constitution but
also pursuant to Section 3 of the same article mandating Congress to
"allocate among the different local government units their x x x resources x x
x." Clearly, Section 6, Article X of the 1987 Constitution is not solely
implemented through the IRA of LGUs. Congress, in several other statutes
other than the LGC of 1991, grant certain LGUs an additional share in some
— not all — national taxes, viz.:
(a) R.A. No. 7171, 17 which grants 15% of the excise taxes
on locally manufactured Virginia type cigarettes to provinces
producing Virginia tobacco;
(b) R.A. No. 8240, 18 which grants 15% of the incremental
revenue collected from the excise tax on tobacco products to
provinces producing burley and native tobacco;
(c) R.A. Nos. 7922 , 19 and 7227, 20 as amended by R.A.
No. 9400, which grants a portion of the gross income tax paid by
business enterprises within the Economic Zones to specified LGUs;
(d) R.A. No. 7643, 21 which grants certain LGUs an
additional 20% share in 50% of the national taxes collected under
Sections 100, 102, 112, 113, and 114 of the National Internal
Revenue Code, in excess of the increase in collections for the
immediately preceding year; and
(e) R.A. Nos. 7953 22 and 8407, 23 granting LGUs where
the racetrack is located a 5% share in the value-added tax 24 paid by
the Manila Jockey Club, Inc. and the Philippine Racing Club, Inc.
Under the foregoing laws, Congress did not include the entirety of the
national taxes in the computation of the LGUs' share. Thus, inasmuch as
Congress has the authority to determine the exact percentage
share of the LGUs, Congress may likewise determine the basis of
this share and include some or all of the national taxes for a given
period of time. This is consistent with the plenary power vested by the
Constitution to the legislature, to determine by law, the just share of LGUs in
the national taxes. This plenary power is subject only to the limitations found
in the Constitution, 25 which, as previously discussed, includes providing for
a just share that is automatically released to the LGUs.
Furthermore, aside from the express grant of discretion under Sections
3 and 6, Article X of the 1987 Constitution, Congress possesses the
power of the purse. Pursuant to this power, Congress must make an
appropriation measure every time money is paid out of the National
Treasury. 26 In these appropriation bills, Congress may not include a
provision that does not specifically relate to an appropriation. 27
Since the IRA involves an intergovernmental transfer of public funds
from the National Treasury to the LGUs, Congress necessarily makes an
appropriation for these funds in favor of the LGUs. 28 However, Congress
cannot introduce amendments or changes to the LGUs' share in the
appropriation bill, especially with respect to the 40% share fixed in Section
284 of the LGC of 1991. Congress may only increase or decrease this
percentage in a separate law for this purpose. 29
Verily, there are several parameters in determining whether Congress
acted within its authority in granting the just share of LGUs in the national
taxes. First, the General Appropriations Act (GAA) should not modify the
percentage share in the national internal revenue taxes prescribed in
Section 284 of the LGC of 1991. 30 Second , there must be no direct or
indirect lien on the release of the IRA, which must be automatically released
to the LGUs. 31 And, third, the LGU share must be just. 32 Outside of these
parameters, the Court cannot examine the constitutionality of Sections 284
and 285 of the LGC of 1991, and the IRA appropriation in the GAA.
It bears noting at this point that the IRA forms part of the national
government's major current operating expenditure. 33 By increasing the base
of the IRA, the national budget for other government expenditures such as
debt servicing, economic and public services, and national defense, is
necessarily reduced. This is effectively an adjustment of the national budget
— a function solely vested in Congress and outside the authority of this
Court.
Ultimately, the determination of Congress as to the base
amount for the computation of the IRA is a policy question of policy
best left to its wisdom. 34 This is an issue that must be examined through
the legislative process where inquiries may be made beyond the information
available to Congress, and studies on its overall impact may be thoroughly
conducted. Again, the Court must not intrude into "areas committed to other
branches of government." 35 Matters of appropriation and budget are areas
firmly devoted to Congress by no less than the Constitution itself, and
accordingly, the Court may neither bind the hands of Congress nor
supplant its wisdom.
For these reasons, the Court should have limited its review on whether
Congress exceeded the boundaries of its authority under the Constitution. In
declaring the term "internal revenue" in Section 284 of the LGC of 1991 as
unconstitutional, the Court in effect dictated the manner by which Congress
should exercise their discretion beyond the limitations prescribed in the
Constitution. The majority Decision's determination as to what should be
included in the LGUs' just share in the national taxes is an encroachment on
the legislative power of Congress.
In light of the foregoing, I vote to dismiss the petitions.
Footnotes
1. Pimentel, Jr. v. Aguirre, G.R. No. 132988, July 19, 2000, 336 SCRA 201, 218.
2. Article 378, Administrative Order No. 270, Series of 1992.
3. Rollo (G.R. No. 208488), p. 50.
4. Id. at 310.
5. In the Matter of: Save the Supreme Court Judicial Independence and Fiscal
Autonomy Movement v. Abolition of Judiciary Development Fund (JDF) and
Reduction of Fiscal Autonomy, UDK-15143, January 21, 2015, 746 SCRA 352,
371, citing Uy Kiao Eng v. Lee , G.R. No. 176831, January 15, 2010, 610 SCRA
211, 217.
6. Ruby Shelter Builders and Realty Development Corporation v. Formaran, III, G.R.
No. 175914, February 10, 2009.
7. Evangelista v. Santiago , G.R. No. 157447, April 29, 2005, 457 SCRA 744, 762.
8. G.R. No. 209287, July 1, 2014, 728 SCRA 1.

9. Id. at 75.
10. Black's Law Dictionary, 6th ed., Nolan, J., & Nolan-Haley, J., West Group, St.
Paul, Minnesota, 1990, p. 1017.
11. 25 Iowa 163 (1868).

12. Id. at 170.
13. 1 J. Dillon, Municipal Corporations, § 89 (3rd Ed. 1881). See Dean, K.D., The
Dillon Rule — a Limit on Local Government Powers, Missouri Law Review, Vol.
41, Issue 4, Fall 1976, p. 547.
14. G.R. No. 111097, July 20, 1994, 234 SCRA 255, 272-273, citing The City of
Clinton v. The Cedar Rapids and Missouri River Railroad Company, 24 Iowa
(1868): 455 at 475.
15. G.R. No. 93252, August 5, 1991, 200 SCRA 271, 281.
16. Id. at 281.
17. Land Transportation Office v. City of Butuan, G.R. No. 131512, January 20,
2000, 322 SCRA 805, 808.
18. See Ganzon v. Court of Appeals , note 15.
19. Disomangcop v. Datumanong, G.R. No. 149848, November 25, 2004, 444 SCRA
203, 227.
20. Basco v. Philippine Amusement and Gaming Corporation , G.R. No. 91649, May
14, 1991, 197 SCRA 52, 65.
21. Limbona v. Mangelin , G.R. No. 80391, February 28, 1989, 170 SCRA 786, 795.
22. In Cordillera Board Coalition v. Commission on Audit, G.R. No. 79956, January
29, 1990, 181 SCRA 495, 506, the Court observed that: "It must be clarified
that the constitutional guarantee of local autonomy in the Constitution [Art.
X, sec. 2] refers to the administrative autonomy of local government units or,
cast in more technical language, the decentralization of government
authority [Villegas v. Subido, G.R. No. L-31004, January 8, 1971, 37 SCRA 1].
Local autonomy is not unique to the 1987 Constitution, it being guaranteed
also under the 1973 Constitution [Art. II, sec. 10]. And while there was no
express guarantee under the 1935 Constitution, the Congress enacted the
Local Autonomy Act (R.A. No. 2264) and the Decentralization Act (R.A. No.
5185), which ushered the irreversible march towards further enlargement of
local autonomy in the country [Villegas v. Subido, supra.]
On the other hand, the creation of autonomous regions in Muslim Mindanao
and the Cordilleras, which is peculiar to the 1987 Constitution, contemplates
the grant of political autonomy and not just administrative autonomy to
these regions. Thus, the provision in the Constitution for an autonomous
regional government with a basic structure consisting of an executive
department and a legislative assembly and special courts with personal,
family and property law jurisdiction in each of the autonomous regions [Art.
X. sec. 18]."
23. Pimentel v. Aguirre , supra note 1, at 217.
24. Disomangcop v. Datumanong, supra note 19, at 231.
25. Section 20, Article X of the 1987 Constitution states:
Section 20. Within its territorial jurisdiction and subject to the provisions
of this Constitution and national laws, the organic act of autonomous
regions shall provide for legislative powers over:
(1) Administrative organization;

(2) Creation of sources of revenues;
(3) Ancestral domain and natural resources;
(4) Personal, family, and property relations;
(5) Regional urban and rural planning development;
(6) Economic, social, and tourism development;
(7) Educational policies;

(8) Preservation and development of the cultural heritage; and
(9) Such other matters as may be authorized by law for the promotion of the
general welfare of the people of the region.
26. G.R. No. 177597, July 16, 2008, 558 SCRA 700, 743-744.
27. Id. at 730-732.

28. See Article X, Section 3.
29. Id., Section 5.
30. Id., Section 5 and Section 6.
32. Does Decentralization Improve Perceptions of Accountability? Attitudinal
Evidence from Colombia. Escobar-Lemmon, M. & Ross, A. Midwest Political
Science Association, American Journal of Political Science, Vol. 58, No. 1
(January 2014), p. 176 accessed at
http://www.jstor.org/stable/10.1017/s0022381612000667 last October 4,
2017.
33. Comparative Federalism and Decentralization: On Meaning and Measurement.
Rodden, J. Comparative Politics, Ph.D. Programs in Political Science, City
University of New York. Comparative politics, Vol. 36, No. 4 (July 2004), p.
482. Accessed at http://www.jstor.org/stable/4150172 last October 6, 2017.
35. Section 17, LGC.

36. Does Decentralization Improve Perceptions of Accountability? Attitudinal
Evidence from Colombia. Escobar-Lemmon, M. & Ross, A. Midwest Political
Science Association, American Journal of Political Science, Vol. 58, No. 1
(January 2014), p. 176 accessed at
http://www.jstor.org/stable/10.1017/s0022381612000667 last October 4,
2017.

41. Pimentel, Jr. v. Aguirre, supra note 1, at 218.
42. Section 5. Each local government unit shall have the power to create its own
sources of revenues and to levy taxes, fees, and charges subject to such
guidelines and limitations as the Congress may provide, consistent with the
basic policy of local autonomy. Such taxes, fees, and charges shall accrue
exclusively to the local governments.
43. Section 6. Local government units shall have a just share, as determined by
law, in the national taxes which shall be automatically released to them.
44. Section 7. Local governments shall be entitled to an equitable share in the
proceeds of the utilization and development of the national wealth within
their respective areas, in the manner provided by law, including sharing the
same with the inhabitants by way of direct benefits.
45. Province of Batangas v. Romulo, G.R. No. 152774, May 27, 2004, 429 SCRA
736, 760.
46. Pimentel, Jr. v. Aguirre, supra note 1.
47. Decentralization and Intrastate Struggles: Chechnya, Punjab, and Quebec.
Bakke, K. Cambridge University Press, New York, 2015, p. 12.
48. Province of Batangas v. Romulo, supra note 45.
49. See Marcos v. Manglapus , G.R. No. 88211, September 15, 1989, 177 SCRA 668,
689.
50. Chavez v. Judicial and Bar Council, G.R. No. 202242, July 17, 2012, 676 SCRA
579, 598.
51. Republic v. COCOFED, G.R. Nos. 147062-64, December 14, 2001, 372 SCRA
462, 482.
52. Aban, Law of Basic Taxation in the Philippines, Revised Ed. 2001, p. 27.
53. G.R. No. 101273, July 3, 1992, 211 SCRA 219, 227.
54. Id.
55. SECTION 15. Collection and Sharing of Internal Revenue Taxes. — The share
of the central government or national government of all current
year collections of internal revenue taxes, within the area of
autonomy shall, for a period of five (5) years be allotted for the
Regional Government in the Annual Appropriations Act.
The Bureau of Internal Revenue (BIR) or the duly authorized treasurer of the
city or municipality concerned, as the case may be, shall continue to collect
such taxes and remit the share to the Regional Autonomous Government and
the central government or national government through duly accredited
depository bank within thirty (30) days from the end of each quarter of the
current year;
Fifty percent (50%) of the share of the central government or
national government of the yearly incremental revenue from tax
collections under Sections 106 (value-added tax on sales of goods or
properties), 108 (value-added tax on sale of services and use or
lease of properties) and 116 (tax on persons exempt from value-
added tax) of the National Internal Revenue Code (NIRC) shall be
shared by the Regional Government and the local government units
within the area of autonomy as follows:
(a) twenty percent (20%) shall accrue to the city or municipality where such
taxes are collected; and
(b) eighty percent (80%) shall accrue to the Regional Government.
In all cases, the Regional Government shall remit to the local government
units their respective shares within sixty (60) days from the end of each
quarter of the current taxable year. The provinces, cities, municipalities, and
barangay within the area of autonomy shall continue to receive their
respective shares in the Internal Revenue Allotment (IRA), as provided for in
Section 284 of Republic Act No. 7160, the Local Government Code of 1991.
The five-year (5) period herein abovementioned may be extended upon
mutual agreement of the central government or national government and the
Regional Government.
56. Section 9. Sharing of Internal Revenue, Natural Resources Taxes, Fees and
Charges. — The collections of a province or city from national internal
revenue taxes, fees and charges, and taxes imposed on natural resources,
shall be distributed as follows:
(a) Thirty-five percent (35%) to the province or city ;
(b) Thirty-five percent (35%) to the regional government ; and
(c)Thirty percent (30%) to the central government or national
government.
The share of the province shall be apportioned as follows: forty-five percent
(45%) to the province, thirty-five percent (35%) to the municipality and
twenty percent (20%) to the barangay.
The share of the city shall be distributed as follows: fifty percent (50%) to the
city and fifty percent (50%) to the barangay concerned.
The province or city concerned shall automatically retain its share
and remit the shares of the Regional Government and the central
government or national government to their respective treasurers
who shall, after deducting the share of the Regional Government as
mentioned in paragraphs (b) and (c) of this Section, remit the
balance to the national government within the first five (5) days of
every month after the collections were made.
The remittance of the shares of the provinces, cities, municipalities, and
barangay in the internal revenue taxes, fees, and charges and the taxes,
fees, and charges on the use, development, and operation of natural
resources within the autonomous region shall be governed by law enacted by
the Regional Assembly.
The remittances of the share of the central government or national
government of the internal revenue taxes, fees, and charges and on the
taxes, fees, and charges on the use, development, and operation of the
natural resources within the autonomous region shall be governed by the
rules and regulations promulgated by the Department of Finance of the
central government or national government.
Officials who fail to remit the shares of the central government or national
government, the Regional Government and the local government units
concerned in the taxes, fees, and charges mentioned above may be
suspended or removed from office by order of the Secretary of Finance in
cases involving the share of the central government or national government
or by the Regional Governor in cases involving the share of the Regional
Government and by the proper local government executive in cases
involving the share of local government. [Bold emphasis supplied]
57. SEC. 287. Shares of Local Government Units in the Proceeds from the
Development and Utilization of the National Wealth. — Local Government
units shall have an equitable share in the proceeds derived from the
utilization and development of the national wealth, within their respective
areas, including sharing the same with the inhabitants by way of direct
benefits.
(A) Amount of Share of Local Government Units. — Local government units
shall, in addition to the internal revenue allotment, have a share of
forty percent (40%) of the gross collection derived by the national
government from the preceding fiscal year from excise taxes on
mineral products, royalties, and such other taxes, fees or charges,
including related surcharges, interests or fines, and from its share
in any co-production, joint venture or production sharing agreement
in the utilization and development of the national wealth within
their territorial jurisdiction.
(B) Share of the Local Governments from Any Government Agency or
Government-owned or -Controlled Corporation. — Local Government Units
shall have a share, based on the preceding fiscal year, from the proceeds
derived by any government agency or government-owned or controlled
corporation engaged in the utilization and development of the national
wealth based on the following formula, whichever will produce a higher share
for the local government unit:
(1) One percent (1%) of the gross sales or receipts of the preceding calendar
year, or
(2) Forty percent (40%) of the excise taxes on mineral products, royalties,
and such other taxes, fees or charges, including related surcharges, interests
or fines the government agency or government-owned or -controlled
corporations would have paid if it were not otherwise exempt.
(C) Allocation of Shares. — The share in the preceding Section shall be
distributed in the following manner:
(1) Where the natural resources are located in the province:
(a) Province — twenty percent (20%)

(b) Component city/municipality — forty-five percent (45%); and
(c) Barangay — thirty-five percent (35%)
Provided, however, That where the natural resources are located in two (2) or
more provinces, or in two (2) or more component cities or municipalities or in
two (2) or more barangays, their respective shares shall be computed on the
basis of: (1) Population — seventy percent (70%); and (2) Land area — thirty
percent (30%).
(2) Where the natural resources are located in a highly urbanized or
independent component city:
(a) City — sixty-five percent (65%); and

(b) Barangay — thirty-five percent (35%)
Provided, however, That where the natural resources are located in two (2) or
more cities, the allocation of shares shall be based on the formula on
population and land area as specified in subsection (C) (1) hereof. [Bold
emphasis supplied]
58. SEC. 290. Amount of Share of Local Government Units. — Local government
units shall, in addition to the internal revenue allotment, have a share of
government from the preceding fiscal year from mining taxes,
royalties, forestry and fishery charges, and such other taxes, fees,
or charges, including related surcharges, interests, or fines, and from its
share in any co-production, joint venture or production sharing agreement in
the utilization and development of the national wealth within their territorial
jurisdiction. (Bold emphasis supplied)
59. Section 6 of R.A. No. 6631 (An Act granting Manila Jockey Club, Inc. a Franchise
to Construct, Operate and Maintain a Race Track for Horse Racing in the City
of Manila or in the Province of Bulacan) states:
Section 6. In consideration of the franchise and rights herein granted to the
Manila Jockey Club, Inc., the grantee shall pay into the national Treasury a
franchise tax equal to twenty-five per centum (25%) of its gross earnings
from the horse races authorized to be held under this franchise which is
equivalent to the eight and one-half per centum (8 1/2%) of the total wager
funds or gross receipts on the sale of betting tickets during the racing day as
mentioned in Section four hereof, allotted as follows: a) National
Government, five per centum (5%); b) the city or municipality where the
race track is located, five per centum (5%); c) Philippine Charity
Sweepstakes Office, seven per centum (7%); d) Philippine Anti-Tuberculosis
Society, six per centum (6%); and e) White Cross, two per centum (2%). The
said tax shall be paid monthly and shall be in lieu of any and all taxes, except
the income tax of any kind, nature and description levied, established or
collected by any authority whether barrio, municipality, city, provincial or
national, now or in the future, on its properties, whether real or personal, and
profits, from which taxes the grantee is hereby expressly excepted. (Bold
emphasis supplied)
60. Section 8 of Republic Act 6632 (An Act granting the Philippine Racing Club, Inc.,
a franchise to operate and maintain a race track for Horse Racing in the
Province of Rizal) provides:
Section 8. In consideration of the franchise and rights herein granted to the
Philippine Racing Club, Inc., the grantee shall pay into the National Treasury
a franchise tax equal to twenty-five per centum (25%) of its gross earnings
equivalent to the eight and one fourth per centum (8 1/4%) of the total
wager funds or gross receipts on the sale of betting tickets during the racing
day as mentioned in Section six hereof, allotted as follows: a) National
Government, five per centum (5%); the Municipality of Makati, five per
centum (5%); b) Philippine Charity Sweepstakes Office, seven per centum
(7%); c) Philippine Anti-Tuberculosis Society, six per centum (6%); and d)
White Cross, two per centum (2%), The said tax shall be paid monthly and
shall be in lieu of any and all taxes, except the income tax, of any kind,
nature and description levied, established or collected by any authority
whether barrio, municipality, city, provincial or national, on its properties,
whether real or personal, from which taxes the grantee is hereby expressly
exempted. (Bold emphasis supplied)
61. Disposition of National Internal Revenue. — National Internal revenue collected

and not applied as herein above provided or otherwise specially disposed of
by law shall accrue to the National Treasury and shall be available for the
general purposes of the Government, with the exception of the amounts set
apart by way of allotment as provided for under Republic Act No. 7160,
otherwise known as the Local Government Code of 1991.
In addition to the internal revenue allotment as provided for in the preceding
paragraph, fifty percent (50%) of the national taxes collected under
Sections 106, 108 and 116 of this Code in excess of the increase in
collections for the immediately preceding year shall be distributed
as follows:
(a) Twenty percent (20%) shall accrue to the city or municipality
where such taxes are collected and shall be allocated in accordance
with Section 150 of Republic Act No. 7160, otherwise known as the
Local Government Code of 1991; and

(b)Eighty percent (80%) shall accrue to the National Government. (Bold
emphasis supplied)
62. R.A. No. 7227 (Bases Conversion and Development Act of 1992) states:
Section 8. Funding Scheme. — x x x
The President is hereby authorized to sell the above lands, in whole or in
part, which are hereby declared alienable and disposable pursuant to the
provisions of existing laws and regulations governing sales of government
properties: Provided, That no sale or disposition of such lands will be
undertaken until a development plan embodying projects for conversion shall
be approved by the President in accordance with paragraph (b), Section 4, of
this Act. However, six (6) months after approval of this Act, the President
shall authorize the Conversion Authority to dispose of certain areas in Fort
Bonifacio and Villamor as the latter so determines. The Conversion Authority
shall provide the President a report on any such disposition or plan for
disposition within one (1) month from such disposition or preparation of such
plan. The proceeds from any sale, after deducting all expenses related to the
sale, of portions of Metro Manila military camps as authorized under this Act,
shall be used for the following purposes with their corresponding percent
shares of proceeds:
(1) Thirty-two and five-tenths percent (35.5%) — To finance the transfer of
the AFP military camps and the construction of new camps, the self-reliance
and modernization program of the AFP, the concessional and long-term
housing loan assistance and livelihood assistance to AFP officers and enlisted
men and their families, and the rehabilitation and expansion of the AFP's
medical facilities;
(2) Fifty percent (50%) — To finance the conversion and the commercial uses
of the Clark and Subic military reservations and their extensions;
(3) Five Percent (5%) — To finance the concessional and long-term housing
loan assistance for the homeless of Metro Manila, Olongapo City, Angeles
City and other affected municipalities contiguous to the base areas as
mandated herein; and
(4) The balance shall accrue and be remitted to the National Treasury to be
appropriated thereafter by Congress for the sole purpose of financing
programs and projects vital for the economic upliftment of the Filipino
people.
Provided, That, in the case of Fort Bonifacio, two and five tenths
percent (2.5%) of the proceeds thereof in equal shares shall each go
to the Municipalities of Makati, Taguig and Pateros: Provided,
further, That in no case shall farmers affected be denied due
compensation.
With respect to the military reservations and their extensions, the President
upon recommendation of the Conversion Authority or the Subic Authority
when it concerns the Subic Special Economic Zone shall likewise be
authorized to sell or dispose those portions of lands which the Conversion
Authority or the Subic Authority may find essential for the development of
their projects. (Bold emphasis supplied)

Section 12. Subic Special Economic Zone. — Subject to the concurrence by
resolution of the sangguniang panlungsod of the City of Olongapo and the
sangguniang bayan of the Municipalities of Subic, Morong and Hermosa,
there is hereby created a Special Economic and Free-port Zone consisting of
the City of Olongapo and the Municipality of Subic, Province of Zambales, the
lands occupied by the Subic Naval Base and its contiguous extensions as
embraced, covered, and defined by the 1947 Military Bases Agreement
between the Philippines and the United States of America as amended, and
within the territorial jurisdiction of the Municipalities of Morong and Hermosa,
Province of Bataan, hereinafter referred to as the Subic Special Economic
Zone whose metes and bounds shall be delineated in a proclamation to be
issued by the President of the Philippines. Within thirty (30) days after the
approval of this Act, each local government unit shall submit its resolution of
concurrence to join the Subic Special Economic Zone to the office of the
President. Thereafter, the President of the Philippines shall issue a
proclamation defining the metes and bounds of the Zone as provided herein.
The abovementioned zone shall be subject to the following policies:
xxx xxx xxx
(c) The provisions of existing laws, rules and regulations to the contrary
notwithstanding, no taxes, local and national, shall be imposed within the
Subic Special Economic Zone. In lieu of paying taxes, three percent (3%) of
the gross income earned by all businesses and enterprises within the Subic
Special Economic Zone shall be remitted to the National Government, one
percent (1%) each to the local government units affected by the
declaration of the zone in proportion to their population area, and
other factors. In addition, there is hereby established a development fund
of one percent (1%) of the gross income earned by all businesses and
enterprises within the Subic Special Economic Zone to be utilized for the
development of municipalities outside the City of Olongapo and the
Municipality of Subic, and other municipalities contiguous to the base areas.
In case of conflict between national and local laws with respect to tax
exemption privileges in the Subic Special Economic Zone, the same shall be
resolved in favor of the latter; (Bold emphasis supplied)
xxx xxx xxx
63. The NIRC provides in Section 289 as follows:

Section 289. Special Financial Support to Beneficiary Provinces
Producing Virginia Tobacco. — The financial support given by the
National Government for the beneficiary provinces shall be
constituted and collected from the proceeds of fifteen percent (15%)
of the excise taxes on locally manufactured Virginia-type of
cigarettes.
The funds allotted shall be divided among the beneficiary provinces
pro-rata according to the volume of Virginia tobacco production .
Provinces producing Virginia tobacco shall be the beneficiary provinces under
Republic Act No. 7171. Provided, however, that to qualify as beneficiary
under R.A. No. 7171, a province must have an average annual production of
Virginia leaf tobacco in an amount not less than one million kilos: Provided,
further, that the Department of Budget and Management (DBM) shall each
year determine the beneficiary provinces and their computed share of the
funds under R.A. No. 7171, referring to the National Tobacco Administration
(NTA) records of tobacco acceptances, at the tobacco trading centers for the
immediate past year.
The Secretary of Budget and Management is hereby directed to
retain annually the said funds equivalent to fifteen percent (15%) of
excise taxes on locally manufactured Virginia-type cigarettes to be
remitted to the beneficiary provinces qualified under R.A. No. 7171.
The provisions of existing laws to the contrary notwithstanding, the
fifteen percent (15%) share from government revenues mentioned
in R.A. No. 7171 and due to the Virginia tobacco-producing
provinces shall be directly remitted to the provinces concerned.
Provided, That this Section shall be implemented in accordance with the
guidelines of Memorandum Circular No. 61-A dated November 28, 1993,
which amended Memorandum Circular No. 61, entitled 'Prescribing
Guidelines for Implementing Republic Act No. 7171,' dated January 1, 1992.
Provided, further, That in addition to the local government units mentioned in
the above circular, the concerned officials in the province shall be consulted
as regards the identification of projects to be financed. [Bold emphasis
supplied]
64. Section 288. Disposition of Incremental Revenues. —
xxx xxx xxx
(B) Incremental Revenues from Republic Act No. 8240. — Fifteen

percent (15%) of the incremental revenue collected from the excise
tax on tobacco products under R.A. No. 8240 shall be allocated and
divided among the provinces producing burley and native tobacco in
accordance with the volume of tobacco leaf production. The fund shall
be exclusively utilized for programs to promote economically viable
alternatives for tobacco farmers and workers such as:
(1) Programs that will provide inputs, training, and other support for tobacco
farmers who shift to production of agricultural products other than tobacco
including, but not limited to, high-value crops, spices, rice, corn, sugarcane,
coconut, livestock and fisheries;
(2) Programs that will provide financial support for tobacco farmers who are
displaced or who cease to produce tobacco;
(3) Cooperative programs to assist tobacco farmers in planting alternative
crops or implementing other livelihood projects;
(4) Livelihood programs and project that will promote, enhance, and develop
the tourism potential of tobacco-growing provinces;
(5) Infrastructure projects such as farm to market roads, schools, hospitals,
and rural health facilities; and
(6) Agro-industrial projects that will enable tobacco farmers to be involved in
the management and subsequent ownership of projects, such as post-harvest
and secondary processing like cigarette manufacturing and by-product
utilization.
The Department of Budget and Management, in consultation with the
Department of Agriculture, shall issue rules and regulations governing the
allocation and disbursement of this fund, not later than one hundred eighty
(180) days from the effectivity of this Act. [Bold emphasis supplied]
65. Section 24. Appropriations and funding. —
xxx xxx xxx
3. A maximum of one-half of one per-centum (1/2 of 1%) of the collections

from national internal revenue taxes not otherwise accruing to Special Funds
or Special Accounts in the General Fund of the National Government, upon
authority from the Minister (Secretary) of Finance, shall be deducted from
such collections and shall be remitted to the National Treasury to cover the
cost of auditing services rendered to local government units.
66. SEC. 284. Allotment for the Commission on Audit. — One-half of one
percent (1/2 of 1%) of the collections from the national internal revenue
taxes not otherwise accruing to special accounts in the general fund of the
national government shall accrue to the Commission on Audit as a fee for
auditing services rendered to local government units, excluding
maintenance, equipment, and other operating expenses as provided for in
Section 21 of Presidential Decree No. 898.
The Secretary of Finance is hereby authorized to deduct from the monthly
internal revenue tax collections an amount equivalent to the percentage as
herein fixed, and to remit the same directly to the Commission on Audit
under such rules and regulations as may be promulgated by the Secretary of
Finance and the Chairman of the Commission on Audit.
67. Section 24. Appropriations and funding. —
xxx xxx xxx
3. A maximum of one-half of one per-centum (1/2 of 1%) of the collections

from national internal revenue taxes not otherwise accruing to Special Funds
or Special Accounts in the General Fund of the National Government, upon
authority from the Minister (Secretary) of Finance, shall be deducted from
such collections and shall be remitted to the National Treasury to cover the
cost of auditing services rendered to local government units.
68. SECTION 15. Collection and Sharing of Internal Revenue Taxes. — The share
of the central government or national government of all current
year collections of internal revenue taxes, within the area of
autonomy shall, for a period of five (5) years be allotted for the
Regional Government in the Annual Appropriations Act.

The Bureau of Internal Revenue (BIR) or the duly authorized treasurer of the
city or municipality concerned, as the case may be, shall continue to collect
such taxes and remit the share to the Regional Autonomous Government and
the central government or national government through duly accredited
depository bank within thirty (30) days from the end of each quarter of the
current year;
Fifty percent (50%) of the share of the central government or
national government of the yearly incremental revenue from tax
collections under Sections 106 (value-added tax on sales of goods or
properties), 108 (value-added tax on sale of services and use or
lease of properties) and 116 (tax on persons exempt from value-
added tax) of the National Internal Revenue Code (NIRC) shall be
shared by the Regional Government and the local government units
within the area of autonomy as follows:
(a) twenty percent (20%) shall accrue to the city or municipality where such
taxes are collected; and
(b) eighty percent (80%) shall accrue to the Regional Government.
In all cases, the Regional Government shall remit to the local government
units their respective shares within sixty (60) days from the end of each
quarter of the current taxable year. The provinces, cities, municipalities, and
barangay within the area of autonomy shall continue to receive their
respective shares in the Internal Revenue Allotment (IRA), as provided for in
Section 284 of Republic Act No. 7160, the Local Government Code of 1991.
The five-year (5) period herein abovementioned may be extended upon
mutual agreement of the central government or national government and the
Regional Government.
(a) Thirty-five percent (35%) to the province or city ;
(b) Thirty-five percent (35%) to the regional government ; and
(c)Thirty percent (30%) to the central government or national
government.
The share of the province shall be apportioned as follows: forty-five percent
(45%) to the province, thirty-five percent (35%) to the municipality and
twenty percent (20%) to the barangay.
The share of the city shall be distributed as follows: fifty percent (50%) to the
city and fifty percent (50%) to the barangay concerned.
The province or city concerned shall automatically retain its share
and remit the shares of the Regional Government and the central
government or national government to their respective treasurers
who shall, after deducting the share of the Regional Government as
mentioned in paragraphs (b) and (c) of this Section, remit the
balance to the national government within the first five (5) days of
every month after the collections were made.
The remittance of the shares of the provinces, cities, municipalities, and
barangay in the internal revenue taxes, fees, and charges and the taxes,
fees, and charges on the use, development, and operation of natural
resources within the autonomous region shall be governed by law enacted by
the Regional Assembly.
The remittances of the share of the central government or national
government of the internal revenue taxes, fees, and charges and on the
taxes, fees, and charges on the use, development, and operation of the
natural resources within the autonomous region shall be governed by the
rules and regulations promulgated by the Department of Finance of the
central government or national government.
Officials who fail to remit the shares of the central government or national
government, the Regional Government and the local government units
concerned in the taxes, fees, and charges mentioned above may be
suspended or removed from office by order of the Secretary of Finance in
cases involving the share of the central government or national government
or by the Regional Governor in cases involving the share of the Regional
Government and by the proper local government executive in cases
involving the share of local government. [Emphasis Supplied]
70. Section 288 of the NIRC (formerly Section 8 of R.A. No. 8240) imposed an
excise tax on tobacco products, a percentage of which is to be allocated and
divided among the provinces producing Burley and native tobacco in
accordance with the volume of tobacco production. Such share received
would then be allocated by the recipient LGUs for the benefit of the farmers
and workers, through any of the programs set by the law.
Section 289 of the NIRC gives the concerned LGUs a share in the excise taxes
imposed on locally manufactured Virginia tobacco products. The LGUs consist
of the provinces and their subdivisions producing Virginia tobacco. This share
is considered by Congress as the National Government's financial support to
the beneficiary LGUs producing Virginia tobacco.
The share of the COA from the NIRT is an aliquot part of the NIRTs, and
serves the special purpose of defraying the cost of auditing services rendered
to the LGUs.
72. Id. at 230.
73. Commissioner of Internal Revenue v. San Roque Power Corporation, G.R. Nos.
187485, 196113 and 197156, October 8, 2013, 707 SCRA 66, 77.
74. Supra note 8.

75. Id., citing Yap v. Thenamaris Ship's Management, G.R. No. 179532, May 30
2011, 649 SCRA 369, 381.
76. Id., citing League of Cities Philippines v. COMELEC, G.R. No. 176951, August 24,
2010, 628 SCRA 819, 833.
77. See Province of Batangas v. Romulo, supra note 45.
78. Commission on Human Rights Employees' Association (CHREA) v. Commission
on Human Rights, G.R. No. 155336, July 21, 2006, 496 SCRA 226, 315-316.
79. Section 285. Allocation to Local Government Units. — The share of local
government units in the internal revenue allotment shall be collected in the
following manner:

Provided, however, That the share of each province, city, and municipality
shall be determined on the basis of the following formula:
(b) Land Area — Twenty-five percent (25%); and
(c) Equal sharing — Twenty-five percent (25%)

Provided, further, That the share of each barangay with a population of not
less than one hundred (100) inhabitants shall not be less than Eighty
thousand (P80,000.00) per annum chargeable against the twenty percent
(20%) share of the barangay from the internal revenue allotment, and the
balance to be allocated on the basis of the following formula:
Provided, finally, That the financial requirements of barangays created by
local government units after the effectivity of this Code shall be the
responsibility of the local government unit concerned.
VELASCO, JR., J. concurring:
1. Rollo , p. 46.
2. Id. at 48.
3. Now amended by Republic Act No. 10963 or the Tax Reform for Acceleration and
Inclusion Law.
4. Section 290. Amount of Share of Local Government Units. — Local government
government from the preceding fiscal year from mining taxes, royalties,
forestry and fishery charges, and such other taxes, fees, or charges,
including related surcharges, interests, or fines, and from its share in any co-
production, joint venture or production sharing agreement in the utilization
and development of the national wealth within their territorial jurisdiction.
5. Article 378. Allotment of Internal Revenue Taxes. — The total annual internal
revenue allotments (IRAs) due the LGUs shall be determined on the basis of
collections from national internal revenue taxes actually realized as certified
by the BIR during the third fiscal year preceding the current fiscal year: x x x
6. Section 107. Value-Added Tax on Importation of Goods. —
(A) In General. — There shall be levied, assessed and collected on every
importation of goods a value-added tax equivalent to ten percent (10%)
based on the total value used by the Bureau of Customs in determining tariff
and customs duties plus customs duties, excise taxes, if any, and other
charges, such tax to be paid by the importer prior to the release of such
goods from customs custody: Provided, That where the customs duties are
determined on the basis of the quantity or volume of the goods, the value-
added tax shall be based on the landed cost plus excise taxes, if any.
xxx xxx xxx
7. Section 129. Goods subject to Excise Taxes. — Excise taxes apply to goods
manufactured or produced in the Philippines for domestic sales or
consumption or for any other disposition and to things imported. The excise
tax imposed herein shall be in addition to the value-added tax imposed
under Title IV.
xxx xxx xxx
8. Bolos v. Bolos, G.R. No. 186400, October 20, 2010.

9. Id.
10. See also RA 8752 or the Anti-Dumping Act of 1999, which provides the rules for
"Anti-Dumping Duties"; RA 8800, or the "Safeguard Measures Act," which
provides the rules on Safeguard Duties, RA 8751 on Countervailing Duty.
11. G.R. No. 101273, July 3, 1992.
12. <https://thelawdictionary.org/tariff/> last accessed May 16, 2018.
13. Sec. 18. Power to Generate and Apply Resources. — Local government units
shall have the power and authority to establish an organization that shall be
responsible for the efficient and effective implementation of their
development plans, program objectives and priorities; to create their own
sources of revenue and to levy taxes, fees, and charges which shall accrue
exclusively for their use and disposition and which shall be retained by them;
to have a just share in national taxes which shall be automatically and
directly released to them without need of further action.
14. 574 Phil. 620, 639 (2008); See also Palma Development Corp. v. Municipality of
Malangas, 459 Phil. 1042 (2003); Batangas City v. Pilipinas Shell Petroleum
Corp., G.R. No. 187631, July 8, 2015; First Philippine Industrial Corp. v. Court
of Appeals, 360 Phil. 852 (1998); City of Davao v. Regional Trial Court, 504
Phil. 543 (2005); Manila International Airport Authority v. Court of Appeals,
528 Phil. 181 (2006); Philippine Fisheries Development Authority v. Central
Board of Assessment Appeals , 653 Phil. 328 (2010).
15. 459 Phil. 1042 (2003).
16. Amores v. HRET, G.R. No. 189600, June 29, 2010.
17. Record of the Constitutional Commission, Vol. III, pp. 478-479.
18. G.R. No. 144256, June 8, 2005.
19. Id.
(a) Thirty-five percent (35%) to the province or city;
(b) Thirty-five percent (35%) to the regional government; and
(c) Thirty percent (30%) to the central government or national government.
xxx xxx xxx
SECTION 15. Collection and Sharing of Internal Revenue Taxes. —
xxx xxx xxx
Fifty percent (50%) of the share of the central government or national

government of the yearly incremental revenue from tax collections under
sections 106 (value-added tax on sales of goods or properties), 108 (value-
added tax on sale of services and use or lease of properties) and 116 (tax on
persons exempt from value-added tax) of the National Internal Revenue
Code (NIRC) shall be shared by the Regional Government and the local
government units within the area of autonomy as follows:
xxx xxx xxx
21. Section 18. The Congress shall enact an organic act for each autonomous
region with the assistance and participation of the regional consultative
commission composed of representatives appointed by the President from a
list of nominees from multisectoral bodies. The organic act shall define the
basic structure of government for the region consisting of the executive
department and legislative assembly, both of which shall be elective and
representative of the constituent political units. The organic acts shall
likewise provide for special courts with personal, family, and property law
jurisdiction consistent with the provisions of thus Constitution and national
laws.
The creation of the autonomous region shall be effective when approved by
majority of the votes cast by the constituent units in a plebiscite called for
the purpose, provided that only provinces, cities, and geographic areas
voting favorably in such plebiscite shall be included in the autonomous
region.
Section 19. The first Congress elected under this Constitution shall, within
eighteen months from the time of organization of both Houses, pass the
organic acts for the autonomous regions in Muslim Mindanao and the
Cordilleras.
22. SEC. 287. Shares of Local Government Units in the Proceeds from the
Development and Utilization of the National Wealth. — Local
Government units shall have an equitable share in the proceeds derived from
the utilization and development of the national wealth, within their
respective areas, including sharing the same with the inhabitants by way of
direct benefits.
(A) Amount of Share of Local Government Units. — Local government units
shall, in addition to the internal revenue allotment, have a share of forty
percent (40%) of the gross collection derived by the national government
from the preceding fiscal year from excise taxes on mineral products,
royalties, and such other taxes, fees or charges, including related
surcharges, interests or fines, and from its share in any co-production, joint
venture or production sharing agreement in the utilization and development
of the national wealth within their territorial jurisdiction.
(B) Share of the Local Governments from Any Government Agency or
Government-owned or -Controlled Corporation. — Local Government Units
shall have a share, based on the preceding fiscal year, from the proceeds
derived by any government agency or government-owned or controlled
corporation engaged in the utilization and development of the national
wealth based on the following formula, whichever will produce a higher share
for the local government unit:
(1) One percent (1%) of the gross sales or receipts of the preceding calendar
year, or
(2) Forty percent (40%) of the excise taxes on mineral products, royalties,
and such other taxes, fees or charges, including related surcharges, interests
or fines the government agency or government-owned or -controlled
corporations would have paid if it were not otherwise exempt.
23. Section 290. Amount of Share of Local Government Units. — Local
government units shall, in addition to the internal revenue allotment, have a
share of forty percent (40%) of the gross collection derived by the national
24. Record of the Constitutional Committee. Vol. 3, p. 178.
25. SECTION 6. In consideration of the franchise and rights herein granted to the
Manila Jockey Club, Inc., the grantee shall pay into the National Treasury a
franchise tax equal to twenty-five per centum (25%) of its gross earnings
equivalent to the eight and one-half per centum (8 1/2%) of the total wager
funds or gross receipts on the sale of betting tickets during the racing day as
mentioned in Section four hereof, allotted as follows: a) National
Government, five per centum (5%); b) the city or municipality where the race
track is located, five per centum (5%); c) Philippine Charity Sweepstakes
Office, seven per centum (7%); d) Philippine Anti-Tuberculosis Society, six
per centum (6%); and e) White Cross, two per centum (2%). The said tax
shall be paid monthly and shall be in lieu of any and all taxes, except the
income tax of any kind, nature and description levied, established or
collected by any authority whether barrio, municipality, city, provincial or
national, now or in the future, on its properties, whether real or personal, and
profits, from which taxes the grantee is hereby expressly excepted.
26. SECTION 8. In consideration of the franchise and rights herein granted to the
Philippine Racing Club, Inc., the grantee shall pay into the National Treasury
a franchise tax equal to twenty-five per centum (25%) of its gross earnings
equivalent to the eight and one fourth per centum (8 1/4%) of the total
wager funds or gross receipts on the sale of betting tickets during the racing
day as mentioned in Section six hereof, allotted as follows: a) National
Government, five per centum (5%); the Municipality of Makati, five per
centum (5%); b) Philippine Charity Sweepstakes Office, seven per centum
(7%); c) Philippine Anti-Tuberculosis Society, six per centum (6%); and d)
White Cross, two per centum (2%). The said tax shall be paid monthly and
shall be in lieu of any and all taxes, except the income tax, of any kind,
nature and description levied, established or collected by any authority
whether barrio, municipality, city, provincial or national, on its properties,
whether real or personal, from which taxes the grantee is hereby expressly
exempted.
27. AN ACT AMENDING REPUBLIC ACT NUMBERED SIXTY-SIX HUNDRED THIRTY-ONE
ENTITLED "AN ACT GRANTING MANILA JOCKEY CLUB, INC., A FRANCHISE TO
CONSTRUCT, OPERATE AND MAINTAIN A RACETRACK FOR HORSE RACING IN
THE CITY OF MANILA OR ANY PLACE WITHIN THE PROVINCES OF BULACAN,
CAVITE OR RIZAL" AND EXTENDING THE SAID FRANCHISE BY TWENTY-FIVE
YEARS (25) FROM THE EXPIRATION OF THE TERM THEREOF.
28. AN ACT AMENDING REPUBLIC ACT NUMBERED SIXTY-SIX HUNDRED THIRTY-
TWO ENTITLED 'AN ACT GRANTING THE PHILIPPINE RACING CLUB, INC., A
FRANCHISE TO OPERATE AND MAINTAIN A RACE TRACK FOR HORSE RACING
IN THE PROVINCE OF RIZAL,' AND EXTENDING THE SAID FRANCHISE BY
TWENTY-FIVE YEARS FROM THE EXPIRATION OF THE TERM THEREOF.
29. Section 8 of RA 7953, and Section 11 of RA 8407.
30. Section 10 of RA 7953, and Section 13 of RA 8407.
31. Section 8. Funding Scheme:
The President is hereby authorized to sell the above lands, in whole or in
part, which are hereby declared alienable and disposable pursuant to the
provisions of existing laws and regulations governing sales of government
properties x x x The proceeds from any sale, after deducting all expenses
related to the sale, of portions of Metro Manila military camps as authorized
under this Act, shall be used for the following purposes with their
corresponding percent shares of proceeds:
(1) Thirty-two and five-tenths percent (32.5%) To finance the transfer of the
AFP military camps and the construction of new camps, the self-reliance and
modernization program of the AFP, the concessional and long-term housing
loan assistance and livelihood assistance to AFP officers and enlisted men
and their families, and the rehabilitation and expansion of the AFP's medical
facilities;
(2) Fifty percent (50%) To finance the conversion and the commercial uses of
the Clark and Subic military reservations and their extensions;
(3) Five Percent (5%) To finance the concessional and long-term housing loan
assistance for the homeless of Metro Manila, Olongapo City, Angeles City and
other affected municipalities contiguous to the base areas as mandated
herein; and
(4) The balance shall accrue and be remitted to the National Treasury to be
appropriated thereafter by Congress for the sole purpose of financing
programs and projects vital for the economic upliftment of the Filipino
people.
Provided That in the case of Fort Bonifacio, two and five tenths percent
(2.5%) of the proceeds thereof in equal shares shall each go to the
Municipalities of Makati, Taguig, and Pateros: Provided further That in no
case shall farmers affected be denied due compensation.
xxx xxx xxx
32. Section 12. Subic Special Economic Zone. x x x
xxx xxx xxx
"(c) The provision of existing laws, rules and regulations to the contrary
notwithstanding, no national and local taxes shall be imposed within the
Subic Special Economic Zone. In lieu of said taxes, a five percent (5%) tax on
gross income earned shall be paid by all business enterprises within the
Subic Special Economic Zone and shall be remitted as follows: three percent
(3%) to the National Government, and two percent (2%) to the Subic Bay
Metropolitan Authority (SBMA) for distribution to the local government units
affected by the declaration of and contiguous to the zone, namely: the City of
Olongapo and the municipalities of Subic, San Antonio, San Marcelino and
Castillejos of the Province of Zambales, and the municipalities of Morong,
Hermosa and Dinalupihan of the Province of Bataan, on the basis of
population (50%), land mass (25%), and equal sharing (25%).
33. Section 289. Special Financial Support to Beneficiary Provinces Producing
Virginia Tobacco. — The financial support given by the National Government
for the beneficiary provinces shall be constituted and collected from the
proceeds of fifteen percent (15%) of the excise taxes on locally
manufactured Virginia-type of cigarettes.
The funds allotted shall be divided among the beneficiary provinces pro-rata
according to the volume of Virginia tobacco production.
xxx xxx xxx
The Secretary of Budget and Management is hereby directed to retain

annually the said funds equivalent to fifteen percent (15%) of excise taxes on
locally manufactured Virginia type cigarettes to be remitted to the
beneficiary provinces qualified under R.A. No. 7171.
The provision of existing laws to the contrary notwithstanding, the fifteen
percent (15%) share from government revenues mentioned in R.A. No. 7171
and due to the Virginia tobacco-producing provinces shall be directly
remitted to the provinces concerned.
xxx xxx xxx
34. G.R. No. 99886, March 31, 1993.

35. G.R. No. L-77194, March 15, 1988.
36. AN ACT RESTRUCTURING THE EXCISE TAX ON ALCOHOL AND TOBACCO
PRODUCTS BY AMENDING SECTIONS 141, 142, 143, 144, 145, 8, 131 AND
288 OF REPUBLIC ACT NO. 8424, OTHERWISE KNOWN AS THE NATIONAL
INTERNAL REVENUE CODE OF 1997, AS AMENDED BY REPUBLIC ACT NO.
9334, AND FOR OTHER PURPOSES.
37. SEC. 8. Fifteen percent (15%) of the incremental revenue collected from the
excise tax on tobacco products under this Act shall be allocated and divided
among the provinces producing burley and native tobacco in accordance
with the volume of tobacco leaf production. The fund shall be exclusively
utilized for programs in pursuit of the following objectives:
(a) Cooperative projects that will enhance better quality of agricultural
products and increase income and productivity of farmers;
(b) Livelihood projects particularly the development of alternative farming
system to enhance farmer's income;
(c) Agro-industrial projects that will enable tobacco farmers to be involved in
the management and subsequent ownership of projects such as post-harvest
and secondary processing like cigarette manufacturing and by-product
utilization.
The Department of Budget and Management in consultation with the
Oversight Committee created hereunder shall issue the corresponding rules
and regulations governing the allocation and disbursement of this fund.
38. SECTION 5. The Commission shall enjoy fiscal autonomy. Their approved
annual appropriations shall be automatically and regularly released.
39. Section 25.

xxx xxx xxx
(2) No provision or enactment shall be embraced in the general

appropriations bill unless it relates specifically to some particular
appropriation therein. Any such provision or enactment shall be limited in its
operation to the appropriation to which it relates.
40. G.R. No. 113105, August 19, 1994.
41. Section 286. Automatic Release of Shares. —
(a) The share of each local government unit shall be released, without need
of any further action, directly to the provincial, city, municipal or barangay
treasurer, as the case may be, on a quarterly basis within five (5) days after
the end of each quarter, and which shall not be subject to any lien or
holdback that may be imposed by the national government for whatever
purpose.
(b) Nothing in this Chapter shall be understood to diminish the share of local
government units under existing laws.
42. G.R. No. 79732, November 8, 1993.
43. League of Cities of the Philippines v. Commission on Elections, G.R. No.
176951, August 24, 2010.
44. Planters Products, Inc. v. Fertiphil Corporation , G.R. No. 166006, 14 March
2008.
45. League of Cities of the Philippines v. Commission on Elections, G.R. No.
176951, August 24, 2010.
46. See Republic Act No. 10155.

47. G.R. No. 187485, October 8, 2013.
48. G.R. No. 209287, February 3, 2015.
49. Ding Generoso, April 19, 2018, PTV news — AB.
50. Id.
51. Section 17 of Article VII of the 1987 Constitution and Section 1, Chapter 1, Title
1, Book III of the Administrative Code.
LEONEN, J., dissenting:
1. CONST., art. X, sec. 6.
2. Rollo (G.R. No. 199802), pp. 4-5.
3. Id. at 24.
4. Id. at 24-25.
5. Rollo (G.R. No. 208488), p. 15.
6. Id. at 11.
7. Id. at 15-16.
8. Bagumbayan-VNP Movement, Inc. v. Commission on Elections , G.R. No. 222731
(Resolution), March 8, 2016 <http://sc.judiciary.gov.ph/pdf/web/viewer.html?
file=/jurisprudence/2016/march2016/222731.pdf> 10 [Per J. Leonen, En
Banc].
9. Id.
10. Alzate v. Aldana, 118 Phil. 220, 225 (1963) [Per J. Barrera, En Banc].
11. Rollo (G.R. No. 199802), p. 198, Memorandum of Respondents.
12. Id. at 217-218, Memorandum of Petitioner.

13. See Abakada Guro Party List v. Purisima , 584 Phil. 246 (2008) [J. Corona, En
Banc].
14. Dissenting Opinion of J. Padilla in Gonzales v. Macaraig, Jr., 269 Phil. 472, 516
(1990) [Per J. Melencio-Herrera, En Banc].
15. See Verceles, Jr. v. Commission on Audit , G.R. No. 211553, September 13,
2016 <http://sc.judiciary.gov.ph/pdf/web/viewer.html?
file=/jurisprudence/2016/september2016/211553.pdf> [Per J. Brion, En
Banc]; Atitiw v. Zamora, 508 Phil. 321 (2005) [Per J. Tinga, En Banc].
16. LOCAL GOVT. CODE, sec. 284 provides:

Section 284. Allotment of Internal Revenue Taxes. — Local government units
shall have a share in the national internal revenue taxes based on the
collection of the third fiscal year preceding the current fiscal year as follows:
(a) on the first year of the effectivity of this Code, thirty percent (30%);
(b) on the second year, thirty-five percent (35%); and
(c) on the third year and thereafter, forty percent (40%).
unmanageable public sector deficit, the President of the Philippines is hereby
authorized, upon the recommendation of Secretary of Finance, Secretary of
Interior and Local Government, and Secretary of Budget and Management,
and subject to consultation with the presiding officers of both Houses of
Congress and the presidents of the "liga," to make the necessary
adjustments in the internal revenue allotment of local government units but
in no case shall the allotment be less than thirty percent (30%) of the
collection of national internal revenue taxes of the third fiscal year preceding
the current fiscal year: Provided, further, That in the first year of the
effectivity of this Code, the local government units shall, in addition to the
thirty percent (30%) internal revenue allotment which shall include the cost
of devolved functions for essential public services, be entitled to receive the
amount equivalent to the cost of devolved personal services.
17. CONST., art. X, sec. 6 states:
Section 6. Local government units shall have a just share, as determined by
law, in the national taxes which shall be automatically released to them.
18. Ponencia , p. 6.
19. Separate Concurring Opinion of J. Leonen in Belgica v. Ochoa, 721 Phil. 416,
686 (2013) [Per J. Perlas-Bernabe, En Banc].
20. 273 Phil. 443 (1991) [Per J. Gancayco, En Banc].
21. Id. at 451.

22. CONST., art. VI, sec. 29 (1).
23. CONST., art. VI, sec. 24.
24. See Tolentino v. Secretary of Finance, 305 Phil. 686 (1994) [Per J. Mendoza, En
Banc].
25. CONST., art. VI, sec. 24.

26. CONST., art. VI, sec. 27 (1).
27. CONST., art. VI, sec. 27 (2).
28. Concurring Opinion of J. Carpio, Belgica v. Ochoa, 721 Phil. 416, 613-654 (2013)
[Per J. Perlas-Bernabe, En Banc].
29. The budgetary process was described as consisting of four phases: (1) Budget
Preparation; (2) Budget Legislation; (3) Budget Execution; and (4)
Accountability. Congress enters the picture in the second phase.
30. Araullo v. Aquino III, 737 Phil. 457, 547-549 (2014) [Per J. Bersamin, En Banc].
31. See Vinzons-Chato v. Fortune Tobacco Corp. , 552 Phil. 101 (2007) [Per J.
Ynares-Santiago, Third Division]; De Jesus v. People, 205 Phil. 663 (1983)
[Per J. Escolin, En Banc].
32. See Lopez, Jr. v. Civil Service Commission, 273 Phil. 147 (1991) [Per J.
Sarmiento, En Banc].
33. 473 Phil. 806 (2004) [Per J. Callejo, Sr., En Banc].

34. LOCAL GOVT. CODE, sec. 285 states:
Section 285. Allocation to Local Government Units. — The share of local
government units in the internal revenue allotment shall be allocated in the
following manner:
(d) Barangays — Twenty percent (20%).
35. 305 Phil. 546 (1994) [Per J. Quiason, En Banc].

36. Id. at 577-578.
37. Id. at 573.
38. See Lawyers against Monopoly and Poverty v. Secretary of Budget and
Management, 686 Phil. 357 (2012) [Per J. Mendoza, En Banc]; Estrada v.
Sandiganbayan, 421 Phil. 290 (2001) [Per J. Bellosillo, En Banc].

39. Tujanlañgit, et al. v. Peñaranda, et al., 37 Phil. 155, 160 (1917) [Per J. Johnson,
First Division].
40. Bengzon v. Secretary of Justice, 62 Phil. 912, 916 (1936) [Per J. Malcolm, En
Banc].
41. Araullo v. Aquino III, 737 Phil. 457, 571 (2014) [Per J. Bersamin, En Banc] citing
Gonzales v. Raquiza, 259 Phil. 736 (1989) [Per C.J. Fernan, Third Division].
42. Id.
43. Id.
44. Dela Cruz v. Ochoa, Jr., G.R. No. 219683, January 23, 2018
<http://sc.judiciary.gov.ph/pdf/web/viewer.html?
file=/jurisprudence/2018/january2018/219683.pdf> [Per J. Bersamin, En
Banc] citing Goh v. Bayron, 748 Phil. 282 (2014) [Per J. Carpio, En Banc].
45. 702 Phil. 319 (2013) [Per J. Bersamin, En Banc].

46. Id. at 338-339.
47. ADM. CODE, Book VI, chap. 2, sec. 3.
49. CONST., art. VII, sec. 22.
52. Lawyers against Monopoly and Poverty v. Secretary of Budget and
Management, 686 Phil. 357, 375 (2012) [Per J. Mendoza, En Banc].
53. CONST., art. VI, sec. 25 (1).
55. See Commission on Human Rights Employees' Association v. Commission on
Human Rights, 528 Phil. 658, 678 (2006) [Per J. Chico-Nazario, Special
Second Division]. "Fiscal Autonomy shall mean independence or freedom
regarding financial matters from outside control and is characterized by self
direction or self determination. . . . [it] means more than just the automatic
and regular release of approved appropriation, and also encompasses,
among other things: (1) budget preparation and implementation; (2)
flexibility in fund utilization of approved appropriations; and (3) use of
savings and disposition of receipts."
56. For 2012 GAA, please look at SUM2012 (Summary of FY 2012 New
Appropriations) folder. The Annexes to the 2012 New Appropriations consist
of (1) Automatic Appropriations, which included the interest payments for
debt service; and (2) Debt Service — Principal Amortization. Please refer to
the AA and DSPA folders for the details of the automatic appropriations and
debt service appropriations, respectively. The yearly GAAs can be accessed
from the Department of Budget and Management website under DBM
Publications.
57. See Civil Service Commission v. Department of Budget and Management, 517
Phil. 440 (2006) [Per J. Carpio Morales, En Banc].
58. See Guingona, Jr. v. Carague, 273 Phil. 443 (1991) [Per J. Gancayco, En Banc].
59. Civil Service Commission v. Department of Budget and Management, 517 Phil.
440 (2006) [Per J. Carpio Morales, En Banc].
60. Civil Service Commission v. Department of Budget and Management, 502 Phil.
372 (2005) [Per J. Carpio Morales, En Banc].
61. Id.
62. ACORD, Inc. v. Zamora, 498 Phil. 615 (2005) [Per J. Carpio Morales, En Banc].
63. 498 Phil. 615 (2005) [Per J. Carpio Morales, En Banc].
64. 391 Phil. 84 (2000) [Per J. Panganiban, En Banc].
65. Id. at 102.
CAGUIOA, J., dissenting:
1. See Cawaling, Jr. v. Commission on Elections, 420 Phil. 524, 530 (2001).
2. See id.; see also Estrada v. Sandiganbayan, 421 Phil. 290 (2001).
3. Garcia v. Commission on Elections , 297 Phil. 1034, 1047 (1993).
4. Rama v. Moises , G.R. No. 197146, August 8, 2017.
5. See Garcia v. Commission on Elections , supra note 3, at 1047.
6. 473 Phil. 806, 830 (2004).

7. In re Guariña, 24 Phil. 37, 47 (1913).
8. 726 Phil. 104 (2014).
9. Id. at 126. Emphasis supplied.
10. Film Development Council of the Phils. v. Colon Heritage Realty Corp., 760 Phil.
519, 552-553 (2015), citing Yap v. Thenamaris Ship's Management, 664 Phil.
614, 627 (2011).
11. 737 Phil. 457 (2014).
12. Id. at 624-625.
REYES, JR., J., dissenting:

1. Decision, pp. 2-5.
2. Republic Act No. 7160, Approved on October 10, 1991.
3. 1987 CONSTITUTION, Article X, Section 2.
4. Sen. Alvarez v. Hon. Guingona, Jr., 322 Phil. 774, 783 (1996); See also R.A. No.
7160, Section 3 (d).
6. Id. at Article X, Section 7.
7. Id. at Article X, Section 6.
8. See 1987 CONSTITUTION, Article X, Sections 10-12; See also R.A. No. 7160,
Section 9.
9. 416 Phil. 438 (2001).
10. Id. at 448, citing Mayor Magtajas v. Pryce Properties Corp., Inc., 304 Phil. 428,
446 (1994).
11. See Basco, et al. v. Philippine Amusement and Gaming Corp. , 274 Phil. 323,
340-341 (1991); See also Batangas CATV, Inc. v. CA, 482 Phil. 544, 599-560
(2004).
12. See Gov. Mandanas v. Hon. Romulo , 473 Phil. 806, 830 (2004).
14. R.A. No. 7160, Section 284; See also Administrative Order No. 270 (Prescribing
the Implementing Rules and Regulations of the Local Government Code of
1991), Rule XXXII, Part I, Article 378.
15. Id.
16. R.A. No. 7160, Section 286 (a).
17. AN ACT TO PROMOTE THE DEVELOPMENT OF THE FARMER IN THE VIRGINIA
TOBACCO PRODUCING PROVINCES. Approved on January 9, 1992.
18. AN ACT AMENDING SECTIONS 138, 140, & 142 OF THE NATIONAL INTERNAL,
REVENUE CODE, AS AMENDED, AND FOR OTHER PURPOSES. Approved on
January 1, 1997.
19. AN ACT ESTABLISHING A SPECIAL ECONOMIC ZONE AND FREE PORT
MUNICIPALITY OF SANTA ANA AND THE NEIGHBORING ISLANDS IN THE
MUNICIPALITY OF APARRI, PROVINCE OF CAGAYAN, PROVIDING FUNDS
THEREFOR, AND FOR OTHER PURPOSES. Approved on February 14, 1995.
20. AN ACT ACCELERATING THE CONVERSION OF MILITARY RESERVATIONS INTO
OTHER PRODUCTIVE USES, CREATING THE BASES CONVERSION AND
DEVELOPMENT AUTHORITY FOR THIS PURPOSE, PROVIDING FUNDS
THEREFOR AND FOR OTHER PURPOSES. Approved on March 13, 1992.
21. AN ACT TO EMPOWER THE COMMISSIONER OF INTERNAL REVENUE TO REQUIRE
THE PAYMENT OF THE VALUE-ADDED TAX EVERY MONTH AND TO ALLOW
LOCAL, GOVERNMENT UNITS TO SHARE IN VAT REVENUE, AMENDING FOR
THIS PURPOSE CERTAIN SECTIONS OF THE NATIONAL INTERNAL REVENUE
CODE. Approved on December 28, 1992.
22. AN ACT AMENDING REPUBLIC ACT NUMBERED 6632, ENTITLED 'AN ACT
GRANTING THE PHILIPPINE RACING CLUB, INC., A FRANCHISE TO OPERATE
AND MAINTAIN A RACE TRACK FOR HORSE RACING IN THE PROVINCE OF
RIZAL,' AND EXTENDING THE SAID FRANCHISE BY TWENTY-FIVE YEARS FROM
THE EXPIRATION OF THE TERM THEREOF. Approved on March 30, 1995.
23. AN ACT AMENDING REPUBLIC ACT NUMBERED 6631, ENTITLED 'AN ACT
GRANTING MANILA JOCKEY CLUB, INC., A FRANCHISE TO CONSTRUCT,
OPERATE AND MAINTAIN A RACETRACK FOR HORSE RACING IN THE CITY OF
MANILA OR ANY PLACE WITHIN THE PROVINCES OF BULACAN, CAVITE OR
RIZAL' AND EXTENDING THE SAID FRANCHISE BY TWENTY-FIVE (25) YEARS
FROM THE EXPIRATION OF THE TERM THEREOF. Approved on November 23,
1997.
24. R.A. No. 7716, as amended by R.A. No. 8241.
25. Vera v. Avelino, 77 Phil. 192, 212 (1946).
26. 1987 CONSTITUTION, Article VI, Section 29 (1).
27. Id. at Article VI, Section 25 (2).
28. Id. at Article VI, Section 29 (1).
29. Gov. Mandanas v. Hon. Romulo , supra note 12, at 839.
30. Id. at 832.
31. Pimentel, Jr. v. Aguirre, G.R. No. 132988, July 19, 2000.
32. Gov. Mandanas v. Hon. Romulo , supra note 12.
33. Department of Budget and Management, Expenditure Categories and their

Economic Importance, <https://www.dbm.gov.ph/wp-
content/uploads/2012/03/PGB-B4.pdf> accessed last July 2, 2018.
34. See Mayor Magtajas v. Pryce Properties Corp., Inc., supra note 10, at 447, in
which the Court held that:
"This basic relationship between the national legislature and the local
government units has not been enfeebled by the new provisions in the
Constitution strengthening the policy of local autonomy. Without meaning to
detract from that policy, we here confirm that Congress retains control of the
local government units although in significantly reduced degree now than
under our previous Constitutions. The power to create still includes the
power to destroy. The power to grant still includes the power to
withhold or recall. True, there are certain notable innovations in the
Constitution, like the direct conferment on the local government units of the
power to tax, which cannot now be withdrawn by mere statute. By and large,
however, the national legislature is still the principal of the local government
units, which cannot defy its will or modify or violate it." (Emphasis Ours)
35. Francisco, Jr., et al. v. Toll Regulatory Board, et al., 648 Phil. 54, 84-85 (2010).
n Note from the Publisher: Copied verbatim from the official document.
Discrepancy between amount in words and in figures.

THIRD DIVISION
[G.R. No. 179492. June 5, 2013.]
REPUBLIC OF THE PHILIPPINES, represented by ABUSAMA

M. ALID, Officer-in-Charge, DEPARTMENT OF AGRICULTURE-
REGIONAL FIELD UNIT XII (DA-RFU XII), petitioner, vs.
ABDULWAHAB A. BAYAO, OSMEÑA I. MONTAÑER, RAKMA B.
BUISAN, HELEN M. ALVARES, NEILA P. LIMBA, ELIZABETH B.
PUSTA, ANNA MAE A. SIDENO, UDTOG B. TABONG, JOHN S.
KAMENZA, DELIA R. SUBALDO, DAYANG W. MACMOD,
FLORENCE S. TAYUAN, in their own behalf and in behalf of
the other officials and employees of DA-RFU XII ,
respondents.
DECISION
LEONEN, J : p
Before us is a Petition for Review on Certiorari filed under Rule 45. This
Petition prays for the reversal and setting aside of the Court of Appeals' (1)
Resolution dated March 21, 2007 that dismissed the Petition for Certiorari
under Rule 65 filed by petitioner for failure to resort to a Motion for
Reconsideration of the assailed trial court Order dated October 9, 2006 and (2)
Resolution dated August 16, 2007 denying petitioner's Motion for
Reconsideration.
Petitioner Department of Agriculture-Regional Field Unit XII (DA-RFU XII) is

a government office mandated to implement the laws, policies, plans,
programs, rules, and regulations of the Department of Agriculture in its regional
area, while respondents are officials and employees of DA-RFU XII. 1
On March 30, 2004, Executive Order (E.O.) No. 304 was passed
designating Koronadal City as the regional center and seat of SOCCSKSARGEN
Region. 2 It provides that all departments, bureaus, and offices of the national
government in the SOCCSKSARGEN Region shall transfer their regional seat of
operations to Koronadal City. 3
In an April 1, 2005 Memorandum, the Department of Agriculture (DA)

Undersecretary for Operations Edmund J. Sana directed Officer-in-Charge (OIC)
and Regional Executive Director of DA-RFU XII Abusama M. Alid as follows: ACcaET
In compliance with Executive Order No. 304 of which Section 2 states

"Transfer of Regional Offices . All departments, bureaus and offices of
the National Government on the SOCCSKSARGEN Region shall
transfer their regional seat of operations to Koronadal City," you are
hereby directed to immediately effect the transfer of the
administrative, finance and operations base of RFU XII from Cotabato
City to Koronadal City. On the interim, part of the staff can
temporarily hold office at either or both the ATI building in Tantangan
and Tupi Seed Farm, but the main office shall be within Koronadal
City.
The action plan for transfer should be submitted to my office not later
than 6 April 2005 so that appropriate funding can be processed
soonest. Further, execution of the plan should commence by 16 April
2005 or earlier so that concerned personnel can benefit from the
summer break to make personal arrangements for the transfer of
their work base.
For strict compliance. 4
In a Memorandum dated April 22, 2005 addressed to DA Secretary Arthur

Yap, private respondents opposed the implementation of the April 1, 2005
Memorandum. 5
They alleged that in 2004, former President Gloria Macapagal-Arroyo

made a pronouncement during one of her visits in Cotabato City that the
regional seat of Region 12 shall remain in Cotabato City. 6 Only three
departments were not covered by the suspension of E.O. No. 304, namely, the
Department of Trade and Industry (DTI), Department of Tourism (DOT), and
Department of Labor and Employment (DOLE). 7
Respondents alleged further in their Memorandum to the DA Secretary
that on March 7, 2005, they appealed to the Secretary of Agriculture that the
implementation of E.O. No. 304 be held in abeyance. A copy of the Petition was
attached to the Memorandum. It cited reasons such as the huge costs the
physical transfer will entail and the plight of employees who have already
settled and established their homes in Cotabato City. 8 ICESTA
On March 8, 2005, their Petition was endorsed by Department of

Agriculture Employees Association-12 (DAEAS-12) President Osmeña I. Motañer
to then President Macapagal-Arroyo, and on April 12, 2005, this was referred to
DA Secretary Yap for his information and appropriate action. 9 Respondents
justified their appeal saying that a building was constructed in Cotabato City
that can accommodate the whole staff of DA-RFU XII. On the other hand, there
is no building yet in Koronadal City where rent is very expensive. 10 Moreover, if
the regional office remains in Cotabato City, the government need not spend
over P7,200,000.00 as dislocation pay as well as other expenses for equipment
hauling and construction. 11 Finally, respondents alleged that the proposed
third floor of the ATI Building in Tantangan has a sub-standard foundation and
will not be issued a certificate of occupancy by the City Engineering Office of
Koronadal City as per information from an auditor. 12
On May 17, 2005, OIC Abusama M. Alid held a meeting and ordered the
transfer of the regional office to ATI Building in Tantangan and Tupi Seed Farm
in Tupi, both located in South Cotabato and Uptown, Koronadal City, to be
carried out on May 21, 2005. 13
This prompted respondents to file on May 18, 2005 a Complaint for
Injunction with Prayer for Issuance of Writ of Preliminary Injunction and/or
Temporary Restraining Order with the Regional Trial Court, Branch 14 of
Cotabato City. 14
By Order dated October 9, 2006, the trial court granted respondents'
Prayer for a Writ of Preliminary Injunction. 15
In a petition dated December 17, 2006, 16 petitioner went to the Court of
Appeals via Rule 65 on the ground that the assailed Order of the trial court is
contrary to the pronouncement of this Court in DENR v. DENR Region 12
Employees.
Through the March 21, 2007 Resolution, the Court of Appeals dismissed
the Petition for Certiorari for failure of petitioner to resort to a Motion for
Reconsideration of the assailed trial court Order. 17
Hence, the present Petition under Rule 45. CDHaET
Petitioner argues that (1) this case falls under the exceptions for filing a
Motion for Reconsideration prior to filing a Petition under Rule 65; (2) the trial
court Order enjoining the transfer is contrary to DENR v. DENR Region 12
Employees 18 that upheld the separation of powers between the executive and
judiciary on the wisdom of transfer of regional offices; (3) the trial court
interfered into this wisdom of the executive in the management of its affairs;
and (4) the trial court disregarded basic rules on amendment and revocation of
administrative issuances and the propriety of injunction as a remedy. 19
In their Comment, respondents counter that a Petition via Rule 45 is not

the proper remedy to assail the disputed Resolutions. 20 They allege that the
assailed Court of Appeals Resolution dismissing the Petition for Certiorari for
failure of the petitioners to file a Motion for Reconsideration is not a "final order
or resolution" contemplated by Rule 45. 21 It is not an adjudication on the
merits. 22 In fact, the Court of Appeals did not even attempt to resolve the
propriety of the issuance of the assailed trial court Order. 23 In any case,
respondents argue that petitioner's failure to file a Motion for Reconsideration is
fatal. They contend that this is a condition sine qua non for a Petition under
Rule 65, and none of the exceptions are present in this case. 24
Based on both parties' contentions, the issues involved in this case may
be summarized as follows:
I. Whether a Petition via Rule 45 is the proper remedy to assail

the disputed Resolutions
II. Whether the present case falls within the exceptions on the
requisite for filing a Motion for Reconsideration prior to filing
a Petition for Certiorari under Rule 65
III. Whether petitioner can raise other issues not addressed in

the assailed Resolutions
IV. Whether the issuance by the RTC of a preliminary injunction

against the transfer of the DA Regional Office to Koronadal
City violates the separation of powers between the executive
department and the judiciary as to the wisdom behind the
transfer
First, we discuss the procedural issues. SCaIcA
Respondents contend that a Petition via Rule 45 is not the proper remedy
to assail the disputed Resolutions. 25 They allege that the assailed Court of
Appeals Resolution dismissing the Petition for Certiorari for failure of the
petitioners to file a Motion for Reconsideration is not a "final order or
resolution" contemplated by Rule 45. 26
On the other hand, petitioner argues that if the assailed Resolutions are
not elevated via Rule 45, they would attain finality and consequently, the trial
court Order dated October 9, 2006 would become unassailable as well. 27
A dismissal by the Court of Appeals of a Petition via Rule 65 for failure to

file a Motion for Reconsideration may be assailed via Rule 45.
Unlike a Petition via Rule 45 that is a continuation of the appellate

process over the original case, a special civil action for certiorari under Rule 65
is an original or independent action. 28 Consequently, the March 21, 2007
Resolution of the Court of Appeals dismissing the Petition via Rule 65 as well as
its August 16, 2007 Resolution denying reconsideration are the final
Resolutions contemplated under Rule 45. As correctly pointed out by petitioner,
these Resolutions would attain finality if these are not elevated on appeal via
Rule 45. As a result, the trial court Order dated October 9, 2006 would also
become unassailable. 29
Respondents also argue that petitioner's failure to file a Motion for
Reconsideration of the assailed Regional Trial Court Order dated October 9,
2006 is fatal. 30 They contend that the reasons raised by petitioner do not
justify dispensing with the prerequisite of filing a Motion for Reconsideration. 31
For its part, petitioner argues that its Petition for Certiorari filed before the
Court of Appeals falls under the exceptions to the necessity of filing a Motion
for Reconsideration. 32 In its Petition with the Court of Appeals, petitioners
explained its reasons for no longer filing a Motion for Reconsideration of the
assailed order in that (a) the questions to be raised in the motion have already
been duly raised and passed upon by the lower court 33 and (b) there is urgent
necessity for the resolution of the questions or issues raised. 34 Petitioners
allege that the trial court presiding judge was not acting on the disposition of
the case with dispatch and that any further delay would unduly prejudice the
interests of the government in pursuing its economic development strategies in
the region. 35
The settled rule is that a Motion for Reconsideration is a condition sine
qua non for the filing of a Petition for Certiorari. 36 Its purpose is to grant an
opportunity for the court to correct any actual or perceived error attributed to it
by re-examination of the legal and factual circumstances of the case. 37 EDHTAI

This rule admits well-defined exceptions as follows:
Concededly, the settled rule is that a motion for reconsideration is a
condition sine qua non for the filing of a petition for certiorari. Its
purpose is to grant an opportunity for the court to correct any actual
or perceived error attributed to it by the re-examination of the legal
and factual circumstances of the case. The rule is, however,
circumscribed by well-defined exceptions, such as (a) where the order
is a patent nullity, as where the court a quo has no jurisdiction; (b)
where the questions raised in the certiorari proceedings have
been duly raised and passed upon by the lower court, or are
the same as those raised and passed upon in the lower court;
(c) where there is an urgent necessity for the resolution of the
question and any further delay would prejudice the interests of the
Government or of the petitioner or the subject matter of the action is
perishable; (d) where, under the circumstances, a motion for
reconsideration would be useless; (e) where petitioner was deprived
of due process and there is extreme urgency for relief; (f) where, in a
criminal case, relief from an order of arrest is urgent and the granting
of such relief by the trial court is improbable; (g) where the
proceedings in the lower court are a nullity for lack of due process; (h)
where the proceeding were ex parte or in which the petitioner had no
opportunity to object; and (i) where the issue raised is one purely of
law or where public interest is involved. 38 (Emphasis provided)
The second exception is present in this case.

In Siok Ping Tang v. Subic Bay Distribution, Inc., 39 this Court found that
the non-filing of a Motion for Reconsideration in the case was not fatal since the
questions raised in the certiorari proceedings have already been duly raised
and passed upon by the lower court, viz.:
Respondent explained their omission of filing a motion for
reconsideration before resorting to a petition for certiorari based on
exceptions (b), (c) and (i). The CA brushed aside the filing of the
motion for reconsideration based on the ground that the questions
raised in the certiorari proceedings have been duly raised and passed
upon by the lower court, or are the same as those raised and passed
upon in the lower court. We agree. aHSAIT
Respondent had filed its position paper in the RTC stating the reasons
why the injunction prayed for by petitioner should not be granted.
However, the RTC granted the injunction. Respondent filed a petition
for certiorari with the CA and presented the same arguments which
were already passed upon by the RTC. The RTC already had the
opportunity to consider and rule on the question of the propriety or
impropriety of the issuance of the injunction. We found no reversible
error committed by the CA for relaxing the rule since respondent's
case falls within the exceptions. 40
Similarly, the various issues raised in the Petition with the Court of
Appeals have already been raised by petitioner on several occasions through
its pleadings with the trial court. The lower court, therefore, passed upon them
prior to its issuance of its Order dated October 9, 2006. Specifically, the table
below summarizes the issues and arguments raised by petitioner before the
trial court vis a vis those raised in the Petition for Certiorari filed with the Court
of Appeals:
TRIAL COURT COURT OF
APPEALS
Motion to Dismiss
41
Memorandum 42 Manifestation and Petition for
Reply 43 Certiorari 44
dated June 27,
dated September 1, dated September 5, dated December 17,
2005
2006 2006 2006
The instant
The Honorable To reiterate, the Respondent judge
complaint
Supreme Court had filed by plaintiffs for Supreme Court has committed grave
already ruled that
injunction is an held in the abuse of discretion
the
propriety or wisdomindirect way of applicable case of to lack or excess
of the transfer of preventing the DENR v. DENR of jurisdiction
government
transfer of the Region 12 when he enjoined
agencies
or offices from regional seat of DA- Employees (409 petitioner from
Cotabato City to RFU XII which has SCRA 359 [2003]) transferring DA-
Koronadal, South been upheld by the that respondent RFU XII from
Cotabato is beyond Supreme Court in DENR employees Cotabato City to
judicial inquiry. 45 DENR v. DENR cannot, by means South Cotabato
Region 12
of an injunction, and Koronadal
Employees
(409 SCRA 359 force the DENR XII City. The assailed
[2003]). If this Regional Offices to order of the lower
Honorable Court remain in Cotabato court enjoining
cannot
City, as the exercise petitioner from
countermand
the Supreme
of the authority to transferring the
Court's
ruling directly, it transfer the same is seat of the DA-
cannot do so executive in nature." RFU XII office to
indirectly. 46 The Supreme Court Koronadal City in
further stated in said South Cotabato is
case that "the contrary to the
judiciary cannot pronouncement of
inquire into the the Supreme Court
wisdom or in DENR v. DENR
expediency of the Region 12
acts of the executive Employees (409
or the legislative SCRA 359
department." 47 [2003]). 48
Corollary to the
above,
the Order dated
May
31, 2005 of this
Honorable Court
enjoining
defendants
from transferring
the
seat of the DA-RFU
XII office to
Koronadal
City in South
Cotabato
is contrary to the
above
pronouncement
of the Supreme
Court.
Perforce, the Order
must be set aside
accordingly. 49
The allegation Executive orders

Respondent judge
under are
amended, modified
Paragraph 4 of the acted arbitrarily,
or
Complaint that her revoked by whimsically and in a
subsequent ones. very bias[ed]
Excellency,
The manner
President Gloria alleged public when he concluded
pronouncement of
Macapagal-Arroyo that the President of
the
President
only made a public the Republic has
suspending
pronouncement the implementation
suspended the
that of
the effect of E.O. Executive Order No. implementation of
304 is contrary to
No. 304 is Executive Order No.
the
suspended is
ordinance power of 304. 52
hearsay
and contrary to the the President as
procedure on the provided under the
repeal, amendment Administrative Code
or modification of of 1987. 51
rules and
regulations. 50
By the nature of Respondent judge
their appointment
committed grave
as
Regional Officials abuse of discretion
and Employees, when he concluded
plaintiffs can be that the transfer of
reassigned DA-RFU XII to
anywhere
within Region XII in Koronadal City will
the exigency of the affect seriously the
service. 53 studies of
respondents'
children
and that there will
be
no buildings to
house respondents.
54
The allegation of If the plight and

possible injury to conditions of the
plaintiffs and their families of the
families as a DENR employees
consequence of the are worth
planned transfer of considering, like the
the regional seat of dislocation of
DA-RFU XII to schooling of their
Koronadal City had children, which
been ruled upon by without doubt has
the Supreme Court
more adverse impact
in
DENR v. DENR than the supposed
Region 12
absence of
Employees
(409 SCRA 359 allowances for the
[2003]) to be
transfer, the
beyond
judicial inquiry Supreme Court
because it involves should have granted
concerns that are the injunction
more on the
prayed for by said
propriety
or wisdom of the DENR employees.
transfer rather than
on its legality. 55 Apparently, the
Supreme Court did not
find it compelling to
grant the injunction
over and above the
wisdom of the
transfer. 56
The families of the

employees can still
stay in Cotabato
City
in as much as they
have established
residences in the
area.
It must be
emphasized
that the employees
derive salaries and
benefits from their
government work,
from which they
support their
families.
The movement of
employees thus
would
not cause much
financial dislocation
as long as the
employees received
their salaries
and benefits. 57
The Honorable Respondent judge
Court must further committed grave
realize that the abuse of discretion
employees are being when he concluded
paid their salaries. In that the transfer of
the given order of DA-RFU XII would
things, such salaries stretch out the
are enough to meager salaries of
respondents and
provide for their
that
basic necessities. it would cause them
The Regional Office economic
can simply provide strangulation. 59
for transportation to
effectuate the
minimum required
for the transfer to
Koronadal City and
expect the
employees to live on
their salaries. Any
allowances due and
owing the employees
connected with the
transfer can be given
to them later as back
payments. This is
not to forget that the
Regional Office has
provided temporary
housing for said
employees to
alleviate any
inconvenience that
they may suffer. 58
There is absolutely The issues on the Respondent judge
no technical alleged illegal committed grave
realignment of
malversation in the abuse of discretion
funds,
realignment of unauthorized when he ordered the
budgetary
issuance of issuance of a writ of
allocation
memorandum and
for the intended preliminary
the
transfer of DA-RFU alleged unjust injunction based on
transfer of
XII to Koronadal the absence of
employees
City. 60 of DA-RFU XII are appropriation for the
acts that are transfer to
executive in nature Koronadal City in
. . . . 61 the amount of
P9,250,000.00. 62
. . . the funds
needed
for the transfer can
be
sourced and met by
the
DA from sources
such as the
discretionary
administrative fund
of the Office of the
Secretary.
Respondent's
computation of the
amount required for
the transfer in the
amount of
P9,222,000.00 is
bloated or
exaggerated. 63
Respondents who
Respondent judge
are
accountable officers committed grave
cannot be coerced
abuse of discretion
to
transfer funds that
when he concluded
are
deemed illegal or that respondents
improper. Hence, no would suffer
personal liability or irreparable damage
irreparable injury if the transfer of DA-
would be caused RFU XII from
upon them. On the Cotabato City to
other hand, the rest
Koronadal City is
of
respondents who
not enjoined. 65
are
ordinary employees
would not suffer any
irreparable injury.
This is due to the
fact
that they have no
privity to the
alleged
illegal transfer of
funds. 64
Thus, the present case falls under the second exception in that a Motion
for Reconsideration need not be filed where questions raised in the certiorari
proceedings are the same as those raised and passed upon in the lower court.
HSEcTC
In any case, this Court disregards the presence of procedural flaws when
there is necessity to address the issues because of the demands of public
interest, including the need for stability in the public service and the serious
implications the case may cause on the effective administration of the
executive department. 66
The instant Petition involves the effective administration of the executive
department and would similarly warrant relaxation of procedural rules if need
be. Specifically, the fourth clause of E.O. No. 304 states as follows: "WHEREAS,
the political and socio-economic conditions in SOCCSKSARGEN Region point to
the need for designating the regional center and seat of the region to improve
government operations and services." 67
Respondents' final contention is that the disputed Resolutions issued by
the Court of Appeals dwell solely on the indispensability of the filing of a Motion
for Reconsideration with the trial court before filing a Petition via Rule 65; thus,
the other grounds in the present Petition need not be addressed. 68
Considering that the Petition has overcome the procedural issues as

discussed above, we can now proceed to discuss the substantive issues raised
by petitioner.
Petitioner argues that the assailed Order of the trial court enjoining it
from transferring the seat of the DA-RFU XII Regional Office to Koronadal City is
contrary to this Court's pronouncement in DENR v. DENR Region 12 Employees
upholding the separation of powers of the executive department and the
judiciary when it comes to the wisdom of transfer of regional offices. 69
This Court has held that while the power to merge administrative regions
is not provided for expressly in the Constitution, it is a power which has
traditionally been lodged with the President to facilitate the exercise of the
power of general supervision over local governments. 70 This power of
supervision is found in the Constitution 71 as well as in the Local Government
Code of 1991, as follows:
Section 25. National Supervision over Local Government
Units. —
(a) Consistent with the basic policy on local
autonomy, the President shall exercise general
supervision over local government units to ensure that
their acts are within the scope of their prescribed powers
and functions.TaHDAS
The President shall exercise supervisory authority directly

over provinces, highly urbanized cities, and independent
component cities; through the province with respect to
component cities and municipalities; and through the city
and municipality with respect to barangays. 72
In Chiongbian v. Orbos, we held further that the power of the President to

reorganize administrative regions carries with it the power to determine the
regional center. 73
The case of DENR v. DENR Region 12 Employees is in point. This Court

held that the DENR Secretary can reorganize validly the DENR by ordering the
transfer of the DENR XII Regional Offices from Cotabato City to Koronadal,
South Cotabato. 74 We also found as follows:
It may be true that the transfer of the offices may not be timely
considering that: (1) there are no buildings yet to house the regional
offices in Koronadal, (2) the transfer falls on the month of Ramadan,
(3) the children of the affected employees are already enrolled in
schools in Cotabato City, (4) the Regional Development Council was
not consulted, and (5) the Sangguniang Panglungsod, through a
resolution, requested the DENR Secretary to reconsider the orders.
However, these concern issues addressed to the wisdom of the
transfer rather than to its legality. It is basic in our form of
government that the judiciary cannot inquire into the wisdom
or expediency of the acts of the executive or the legislative
department, for each department is supreme and independent of the
others, and each is devoid of authority not only to encroach upon the
powers or field of action assigned to any of the other department, but
also to inquire into or pass upon the advisability or wisdom of the acts
performed, measures taken or decisions made by the other
departments. 75 (Emphasis provided)
The transfer of the regional center of the SOCCSKSARGEN region to

Koronadal City is an executive function. AIHaCc
Similar to DENR v. DENR Region 12 Employees, the issues in the present

case are addressed to the wisdom of the transfer rather than to its legality.
Some of these concerns are the lack of a proper and suitable building in
Koronadal to house the DA regional office, the inconvenience of the transfer
considering that the children of respondent-employees are already enrolled in
Cotabato City schools, and other similar reasons.
The judiciary cannot inquire into the wisdom or expediency of the acts of
the executive. 76 When the trial court issued its October 9, 2006 Order granting
preliminary injunction on the transfer of the regional center to Koronadal City
when such transfer was mandated by E.O. No. 304, the lower court did
precisely that.
The principle of separation of powers ordains that each of the three great
government branches has exclusive cognizance of and is supreme in concerns
falling within its own constitutionally allocated sphere. 77 The judiciary as
Justice Laurel emphatically asserted "will neither direct nor restrain executive
[or legislative] action . . . ." 78
Finally, a verbal pronouncement to the effect that E.O. No. 304 is

suspended should not have been given weight. An executive order is valid
when it is not contrary to the law or Constitution. 79
WHEREFORE, the Petition is GRANTED. The Resolutions of the Court of
Appeals dated March 21, 2007 and August 16, 2007 in CA-G.R. SP No. 01457-
MIN, as well as the Decision dated October 9, 2006 of the Regional Trial Court,
Branch 14 of Cotabato City are REVERSED and SET ASIDE.
SO ORDERED.
Velasco, Jr., Peralta, Abad and Mendoza, JJ., concur.
Footnotes
1.Rollo , pp. 15-16.
2.Id. at 85.
3.Id.
4.Id. at 86.
5.Id. at 88.
6.Id.
7.Id. at 92.
8.Id.
9.Id. at 88.
10.Id. at 89.
11.Id.
12.Id. at 90.
13.Id. at 17.
14.Id. at 189.
15.Id. at 18.
16.Id. at 182.
17.Id. at 43-46.
18.DENR v. DENR Region 12 Employees , 456 Phil. 635 (2003).
19.Rollo , p. 359.
20.Id. at 316.
21.Id. at 317.
22.Id. at 317-318.
23.Id. at 318.
24.Id. at 318-321.
25.Id. at 316.
26.Id. at 317.
27.Id. at 330.
28.De Mendez v. Court of Appeals, et al., G.R. No. 174937, June 13, 2012, 672
SCRA 200, 207 citing Chua v. Santos, 483 Phil. 392, 400 (2004); G.R. No.
132467, October 18, 2004, 440 SCRA 365, 373.
29.Rollo , p. 330.
30.Id. at 318.
31.Id. at 386.
32.Id. at 360.
33.Id. at 169. See also p. 360.
34.Id. See also p. 362.

35.Id. See also p. 362.
36.Commissioner of Internal Revenue v. Court of Tax Appeals, G.R. No. 190680,

September 13, 2012; Medado v. Heirs of Consing, G.R. No. 186720, February
8, 2012, 665 SCRA 534, 548 citing Pineda v. Court of Appeals, G.R. No.
181643, November 17, 2010, 635 SCRA 274, 281-282.
37.Commissioner of Internal Revenue v. Court of Tax Appeals, supra.
38.Siok Ping Tang v. Subic Bay Distribution, Inc., G.R. No. 162575, December 15,
2010, 638 SCRA 457, 469-470. See also Republic v. Pantranco North Express,
et al. , G.R. No. 178593, February 15, 2012, 666 SCRA 199, 205-206. See also
Domdom v. Sandiganbayan, G.R. Nos. 182382-83, February 24, 2010, 613
SCRA 528, 532-533 citing Tan v. Court of Appeals, 341 Phil. 570, 576-578
(1997).
39.Siok Ping Tang v. Subic Bay Distribution, Inc., supra.

40.Id. at 470-471.
41.Rollo , pp. 98-114.
42.Id. at 132-154.
43.Id. at 160-166.
44.Id. at 167-184.
45.Id. at 99.
46.Id. at 136.
47.Id. at 161.
48.Id. at 173.
49.Id. at 138.
50.Id. at 108.
51.Id. at 144-145.
52.Id. at 174.
53.Id. at 104.
54.Id. at 176.
55.Id. at 149.
56.Id. at 163.
57.Id. at 144.
58.Id. at 163.
59.Id. at 177.
60.Id. at 106-107.
61.Id. at 140.
62.Id. at 178.
63.Id. at 143.
64.Id. at 142-143.
65.Id. at 181.
66.DENR v. DENR Region 12 Employees, supra note 18, at 643. Similarly, this
involves an Order by the trial court to cease and desist the transfer of DENR
XII regional office from Cotabato City to Koronadal. In this case, although no
appeal was made within the reglementary period to appeal, the Court found
that "departure from the general rule that the extraordinary writ of certiorari
cannot be a substitute for the lost remedy of appeal is justified because the
execution of the assailed decision would amount to an oppressive exercise of
judicial authority."
67.Executive Order No. 304 (2004).

68.Rollo , p. 389.
69.Id. at 362-363.
70.Abbas v. COMELEC, 258-A Phil. 870, 884 (1989).
71.CONSTITUTION, Art. X, Sec. 4.

Sec. 4. The President of the Philippines shall exercise general supervision over
local governments. Provinces with respect to component cities and
municipalities, and cities and municipalities with respect to component
barangays, shall ensure that the acts of their component units are within the
scope of their prescribed powers and functions.
72.Republic Act No. 7160 (1991), Chap. III, Art. I, Sec. 25.
73.Chiongbian v. Orbos, 315 Phil. 251, 269 (1995).

74.DENR v. DENR Region 12 Employees, supra at 645-646.
75.Id.
76.DENR v. DENR Region 12 Employees, supra at 648.

77.Santiago v. Guingona , 359 Phil. 276, 284 (1998).
78.Tan, et al. v. Macapagal, 150 Phil. 778, 784 (1972) citing Planas v. Gil, 67 Phil.
62, 73 (1939).
79.CIVIL CODE, Art. 7.
"Laws are repealed only by subsequent ones, and their violation or non-
observance shall not be excused by disuse, or custom or practice to the
contrary.
When the courts declare a law to be inconsistent with the Constitution, the
former shall be void and the latter shall govern.
Administrative or executive acts, orders and regulations shall be valid only when
they are not contrary to the laws of the Constitution."

THIRD DIVISION
[G.R. No. 183137. April 10, 2013.]
PELIZLOY REALTY CORPORATION, represented herein by its

President, GREGORY K. LOY, petitioner, vs. THE PROVINCE OF
BENGUET, respondent.
DECISION
LEONEN, J : p
The principal issue in this case is the scope of authority of a province to

impose an amusement tax.
This is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court praying that the December 10, 2007 decision of the Regional Trial
Court, Branch 62, La Trinidad, Benguet in Civil Case No. 06-CV-2232 be
reversed and set aside and a new one issued in which: (1) respondent
Province of Benguet is declared as having no authority to levy amusement
taxes on admission fees for resorts, swimming pools, bath houses, hot
springs, tourist spots, and other places for recreation; (2) Section 59, Article
X of the Benguet Provincial Revenue Code of 2005 is declared null and void;
and (3) the respondent Province of Benguet is permanently enjoined from
enforcing Section 59, Article X of the Benguet Provincial Revenue Code of
2005.
Petitioner Pelizloy Realty Corporation ("Pelizloy") owns Palm Grove
Resort, which is designed for recreation and which has facilities like
swimming pools, a spa and function halls. It is located at Asin, Angalisan,
Municipality of Tuba, Province of Benguet.
On December 8, 2005, the Provincial Board of the Province of Benguet
approved Provincial Tax Ordinance No. 05-107, otherwise known as the
Benguet Revenue Code of 2005 ("Tax Ordinance"). Section 59, Article X of
the Tax Ordinance levied a ten percent (10%) amusement tax on gross
receipts from admissions to "resorts, swimming pools, bath houses, hot
springs and tourist spots." Specifically, it provides the following: IcTCHD
Article Ten: Amusement Tax on Admission

Section 59. Imposition of Tax . — There is hereby levied a tax
to be collected from the proprietors, lessees, or operators of theaters,
cinemas, concert halls, circuses, cockpits, dancing halls, dancing
schools, night or day clubs, and other places of amusement at the rate
of thirty percent (30%) of the gross receipts from admission fees; and
A tax of ten percent (10%) of gross receipts from admission fees

for boxing, resorts, swimming pools, bath houses, hot springs,
and tourist spots is likewise levied. [Emphasis and underscoring
supplied]
Section 162 of the Tax Ordinance provided that the Tax Ordinance shall
take effect on January 1, 2006.
It was Pelizloy's position that the Tax Ordinance's imposition of a 10%
amusement tax on gross receipts from admission fees for resorts, swimming
pools, bath houses, hot springs, and tourist spots is an ultra vires act on the
part of the Province of Benguet. Thus, it filed an appeal/petition before the
Secretary of Justice on January 27, 2006.
The appeal/petition was filed within the thirty (30)-day period from the
effectivity of a tax ordinance allowed by Section 187 of Republic Act No.
7160, otherwise known as the Local Government Code (LGC). 1 The
appeal/petition was docketed as MSO-OSJ Case No. 03-2006.
Under Section 187 of the LGC, the Secretary of Justice has sixty (60)
days from receipt of the appeal to render a decision. After the lapse of
which, the aggrieved party may file appropriate proceedings with a court of
competent jurisdiction.
Treating the Secretary of Justice's failure to decide on its
appeal/petition within the sixty (60) days provided by Section 187 of the LGC
as an implied denial of such appeal/petition, Pelizloy filed a Petition for
Declaratory Relief and Injunction before the Regional Trial Court, Branch 62,
La Trinidad, Benguet. The petition was docketed as Civil Case No. 06-CV-
2232.
Pelizloy argued that Section 59, Article X of the Tax Ordinance imposed
a percentage tax in violation of the limitation on the taxing powers of local
government units (LGUs) under Section 133 (i) of the LGC. Thus, it was null
and void ab initio. Section 133 (i) of the LGC provides: SEIacA
Section 133. Common Limitations on the Taxing Powers of

Local Government Units. — Unless otherwise provided herein, the
exercise of the taxing powers of provinces, cities, municipalities, and
barangays shall not extend to the levy of the following:
xxx xxx xxx
(i) Percentage or value-added tax (VAT) on sales,
barters or exchanges or similar transactions on goods or
services except as otherwise provided herein.
The Province of Benguet assailed the Petition for Declaratory Relief and
Injunction as an improper remedy. It alleged that once a tax liability has
attached, the only remedy of a taxpayer is to pay the tax and to sue for
recovery after exhausting administrative remedies. 2
On substantive grounds, the Province of Benguet argued that the
phrase 'other places of amusement' in Section 140 (a) of the LGC 3
encompasses resorts, swimming pools, bath houses, hot springs, and tourist
spots since "Article 220 (b) (sic)" of the LGC defines "amusement" as
"pleasurable diversion and entertainment . . . synonymous to relaxation,
avocation, pastime, or fun." 4 However, the Province of Benguet erroneously
cited Section 220 (b) of the LGC. Section 220 of the LGC refers to valuation
of real property for real estate tax purposes. Section 131 (b) of the LGC, the
provision which actually defines "amusement", states:
Section 131. Definition of Terms . — When used in this Title,
the term:
xxx xxx xxx
(b)" Amusement" is a pleasurable diversion and

entertainment. It is synonymous to relaxation, avocation,
pastime, or fun.
On December 10, 2007, the RTC rendered the assailed Decision

dismissing the Petition for Declaratory Relief and Injunction for lack of merit.
Procedurally, the RTC ruled that Declaratory Relief was a proper
remedy. On the validity of Section 59, Article X of the Tax Ordinance, the
RTC noted that, while Section 59, Article X imposes a percentage tax,
Section 133 (i) of the LGC itself allowed for exceptions. It noted that what the
LGC prohibits is not the imposition by LGUs of percentage taxes in general
but the "imposition and levy of percentage tax on sales, barters, etc., on
goods and services only." 5 It further gave credence to the Province of
Benguet's assertion that resorts, swimming pools, bath houses, hot springs,
and tourist spots are encompassed by the phrase 'other places of
amusement' in Section 140 of the LGC. AcSIDE
On May 21, 2008, the RTC denied Pelizloy's Motion for Reconsideration.
Aggrieved, Pelizloy filed the present petition on June 10, 2008 on pure
questions of law. It assailed the legality of Section 59, Article X of the Tax
Ordinance as being a (supposedly) prohibited percentage tax per Section
133 (i) of the LGC.
In its Comment, the Province of Benguet, erroneously citing Section 40
of the LGC, argued that Section 59, Article X of the Tax Ordinance does not
levy a percentage tax "because the imposition is not based on the total
gross receipts of services of the petitioner but solely and actually limited on
thegross receipts of the admission fees collected." 6 In addition, it argued
that provinces can validly impose amusement taxes on resorts, swimming
pools, bath houses, hot springs, and tourist spots, these being 'amusement
places'.
For resolution in this petition are the following issues:
1. Whether or not Section 59, Article X of Provincial Tax
Ordinance No. 05-107, otherwise known as the Benguet
Revenue Code of 2005, levies a percentage tax.
2. Whether or not provinces are authorized to impose

amusement taxes on admission fees to resorts, swimming
pools, bath houses, hot springs, and tourist spots for being
"amusement places" under the Local Government Code.
The power to tax "is an attribute of sovereignty," 7 and as such,
inheres in the State. Such, however, is not true for provinces, cities,
municipalities and barangays as they are not the sovereign; 8 rather, they
are mere "territorial and political subdivisions of the Republic of the
Philippines". 9
The rule governing the taxing power of provinces, cities, municipalities
and barangays is summarized in Icard v. City Council of Baguio: 10
It is settled that a municipal corporation unlike a sovereign state
is clothed with no inherent power of taxation. The charter or statute
must plainly show an intent to confer that power or the municipality,
cannot assume it. And the power when granted is to be construed in
strictissimi juris. Any doubt or ambiguity arising out of the term used in
granting that power must be resolved against the municipality.
Inferences, implications, deductions — all these — have no place in the
interpretation of the taxing power of a municipal corporation. 11
[Underscoring supplied] EDATSI
Therefore, the power of a province to tax is limited to the extent that

such power is delegated to it either by the Constitution or by statute. Section
5, Article X of the 1987 Constitution is clear on this point:
Section 5. Each local government unit shall have the power to
create its own sources of revenues and to levy taxes, fees and charges
subject to such guidelines and limitations as the Congress may provide,
consistent with the basic policy of local autonomy. Such taxes, fees,
and charges shall accrue exclusively to the local governments.
[Underscoring supplied]
Per Section 5, Article X of the 1987 Constitution, "the power to tax is

no longer vested exclusively on Congress; local legislative bodies are now
given direct authority to levy taxes, fees and other charges." 12
Nevertheless, such authority is "subject to such guidelines and limitations as
the Congress may provide". 13
In conformity with Section 3, Article X of the 1987 Constitution, 14
Congress enacted Republic Act No. 7160, otherwise known as the Local
Government Code of 1991. Book II of the LGC governs local taxation and
fiscal matters.
Relevant provisions of Book II of the LGC establish the parameters of
the taxing powers of LGUS found below.
First, Section 130 provides for the following fundamental principles
governing the taxing powers of LGUs:
1. Taxation shall be uniform in each LGU.
2. Taxes, fees, charges and other impositions shall:

a. be equitable and based as far as practicable on the
taxpayer's ability to pay;
b. be levied and collected only for public purposes;
c. not be unjust, excessive, oppressive, or confiscatory;

d. not be contrary to law, public policy, national economic
policy, or in the restraint of trade.
3. The collection of local taxes, fees, charges and other

impositions shall in no case be let to any private person. IHCESD
4. The revenue collected pursuant to the provisions of the LGC

shall inure solely to the benefit of, and be subject to the
disposition by, the LGU levying the tax, fee, charge or other
imposition unless otherwise specifically provided by the LGC.
5. Each LGU shall, as far as practicable, evolve a progressive
system of taxation.
Second, Section 133 provides for the common limitations on the taxing
powers of LGUs. Specifically, Section 133 (i) prohibits the levy by LGUs of
percentage or value-added tax (VAT) on sales, barters or exchanges or
similar transactions on goods or services except as otherwise provided by
the LGC.
As it is Pelizloy's contention that Section 59, Article X of the Tax
Ordinance levies a prohibited percentage tax, it is crucial to understand first
the concept of a percentage tax.
In Commissioner of Internal Revenue v. Citytrust Investment Phils.,
Inc. , 15 the Supreme Court defined percentage tax as a "tax measured by a
certain percentage of the gross selling price or gross value in money of
goods sold, bartered or imported; or of the gross receipts or earnings
derived by any person engaged in the sale of services." Also, Republic Act
No. 8424, otherwise known as the National Internal Revenue Code (NIRC), in
Section 125, Title V, 16 lists amusement taxes as among the (other)
percentage taxes which are levied regardless of whether or not a taxpayer is
already liable to pay value-added tax (VAT). IcTEaC
Amusement taxes are fixed at a certain percentage of the gross

receipts incurred by certain specified establishments.
Thus, applying the definition in CIR v. Citytrust and drawing from the
treatment of amusement taxes by the NIRC, amusement taxes are
percentage taxes as correctly argued by Pelizloy.
However, provinces are not barred from levying amusement taxes
even if amusement taxes are a form of percentage taxes. Section 133 (i) of
the LGC prohibits the levy of percentage taxes "except as otherwise
provided" by the LGC.
Section 140 of the LGC provides:
SECTION 140. Amusement Tax. — (a) The province may levy
an amusement tax to be collected from the proprietors, lessees, or
operators of theaters, cinemas, concert halls, circuses, boxing stadia,
and other places of amusement at a rate of not more than thirty
percent (30%) of the gross receipts from admission fees.
(b) In the case of theaters of cinemas, the tax shall first be
deducted and withheld by their proprietors, lessees, or operators and
paid to the provincial treasurer before the gross receipts are divided
between said proprietors, lessees, or operators and the distributors of
the cinematographic films.
(c) The holding of operas, concerts, dramas, recitals, painting

and art exhibitions, flower shows, musical programs, literary and
oratorical presentations, except pop, rock, or similar concerts shall be
exempt from the payment of the tax herein imposed.
(d) The Sangguniang Panlalawigan may prescribe the time,

manner, terms and conditions for the payment of tax. In case of fraud
or failure to pay the tax, the Sangguniang Panlalawigan may impose
such surcharges, interests and penalties.
(e) The proceeds from the amusement tax shall be shared

equally by the province and the municipality where such amusement
places are located. [Underscoring supplied] ASaTCE
Evidently, Section 140 of the LGC carves a clear exception to the

general rule in Section 133 (i). Section 140 expressly allows for the
imposition by provinces of amusement taxes on "the proprietors, lessees, or
operators of theaters, cinemas, concert halls, circuses, boxing stadia, and
other places of amusement."
However, resorts, swimming pools, bath houses, hot springs, and
tourist spots are not among those places expressly mentioned by Section
140 of the LGC as being subject to amusement taxes. Thus, the
determination of whether amusement taxes may be levied on admissions to
resorts, swimming pools, bath houses, hot springs, and tourist spots hinges
on whether the phrase 'other places of amusement' encompasses resorts,
swimming pools, bath houses, hot springs, and tourist spots.
Under the principle of ejusdem generis, "where a general word or
phrase follows an enumeration of particular and specific words of the same
class or where the latter follow the former, the general word or phrase is to
be construed to include, or to be restricted to persons, things or cases akin
to, resembling, or of the same kind or class as those specifically mentioned."
17
The purpose and rationale of the principle was explained by the Court
in National Power Corporation v. Angas 18 as follows:
The purpose of the rule on ejusdem generis is to give effect to
both the particular and general words, by treating the particular words
as indicating the class and the general words as including all that is
embraced in said class, although not specifically named by the
particular words. This is justified on the ground that if the lawmaking
body intended the general terms to be used in their unrestricted sense,
it would have not made an enumeration of particular subjects but
would have used only general terms. [2 Sutherland, Statutory
Construction, 3rd ed., pp. 395-400]. 19
In Philippine Basketball Association v. Court of Appeals, 20 the Supreme

Court had an opportunity to interpret a starkly similar provision or the
counterpart provision of Section 140 of the LGC in the Local Tax Code then
in effect. Petitioner Philippine Basketball Association (PBA) contended that it
was subject to the imposition by LGUs of amusement taxes (as opposed to
amusement taxes imposed by the national government). In support of its
contentions, it cited Section 13 of Presidential Decree No. 231, otherwise
known as the Local Tax Code of 1973, (which is analogous to Section 140 of
the LGC) providing the following: STaCIA
Section 13. Amusement tax on admission . — The province shall

impose a tax on admission to be collected from the proprietors,
lessees, or operators of theaters, cinematographs, concert halls,
circuses and other places of amusement . . . .
Applying the principle of ejusdem generis, the Supreme Court rejected

PBA's assertions and noted that:
[I]n determining the meaning of the phrase 'other places of
amusement', one must refer to the prior enumeration of theaters,
cinematographs, concert halls and circuses with artistic expression as
their common characteristic. Professional basketball games do not
fall under the same category as theaters, cinematographs, concert
halls and circuses as the latter basically belong to artistic forms of
entertainment while the former caters to sports and gaming. 21
[Underscoring supplied]
However, even as the phrase 'other places of amusement' was already

clarified in Philippine Basketball Association, Section 140 of the LGC adds to
the enumeration of 'places of amusement' which may properly be subject to
amusement tax. Section 140 specifically mentions 'boxing stadia' in addition
to "theaters, cinematographs, concert halls [and] circuses" which were
already mentioned in PD No. 231. Also, 'artistic expression' as a
characteristic does not pertain to 'boxing stadia'.
In the present case, the Court need not embark on a laborious effort at
statutory construction. Section 131 (c) of the LGC already provides a clear
definition of 'amusement places':
Section 131. Definition of Terms . — When used in this Title,
the term:
xxx xxx xxx
(c)" Amusement Places" include theaters, cinemas,
concert halls, circuses and other places of amusement
where one seeks admission to entertain oneself by seeing
or viewing the show or performances [Underscoring
supplied].
Indeed, theaters, cinemas, concert halls, circuses, and boxing stadia

are bound by a common typifying characteristic in that they are all venues
primarily for the staging of spectacles or the holding of public shows,
exhibitions, performances, and other events meant to be viewed by an
audience. Accordingly, 'other places of amusement' must be interpreted in
light of the typifying characteristic of being venues "where one seeks
admission to entertain oneself by seeing or viewing the show or
performances" or being venues primarily used to stage spectacles or hold
public shows, exhibitions, performances, and other events meant to be
viewed by an audience. HIaSDc
As defined in The New Oxford American Dictionary, 22 'show' means "a

spectacle or display of something, typically an impressive one"; 23 while
'performance' means "an act of staging or presenting a play, a concert, or
other form of entertainment." 24 As such, the ordinary definitions of the
words 'show' and 'performance' denote not only visual engagement (i.e., the
seeing or viewing of things) but also active doing (e.g., displaying, staging or
presenting) such that actions are manifested to, and (correspondingly)
perceived by an audience.
Considering these, it is clear that resorts, swimming pools, bath
houses, hot springs and tourist spots cannot be considered venues primarily
"where one seeks admission to entertain oneself by seeing or viewing the
show or performances". While it is true that they may be venues where
people are visually engaged, they are not primarily venues for their
proprietors or operators to actively display, stage or present shows and/or
performances.
Thus, resorts, swimming pools, bath houses, hot springs and tourist
spots do not belong to the same category or class as theaters, cinemas,
concert halls, circuses, and boxing stadia. It follows that they cannot be
considered as among the 'other places of amusement' contemplated by
Section 140 of the LGC and which may properly be subject to amusement
taxes.
At this juncture, it is helpful to recall this Court's pronouncements in
Icard:
[T]he power [to tax] when granted [to a province] is to be construed
in strictissimi juris. Any doubt or ambiguity arising out of the term
used in granting that power must be resolved against the [province].
Inferences, implications, deductions — all these — have no place in
the interpretation of the taxing power of a [province]. 25
In this case, the definition of 'amusement places' in Section 131 (c) of

the LGC is a clear basis for determining what constitutes the 'other places of
amusement' which may properly be subject to amusement tax impositions
by provinces. There is no reason for going beyond such basis. To do
otherwise would be to countenance an arbitrary interpretation/application of
a tax law and to inflict an injustice on unassuming taxpayers. cCaEDA
The previous pronouncements notwithstanding, it will be noted that it

is only the second paragraph of Section 59, Article X of the Tax Ordinance
which imposes amusement taxes on "resorts, swimming pools, bath houses,
hot springs, and tourist spots". The first paragraph of Section 59, Article X of
the Tax Ordinance refers to "theaters, cinemas, concert halls, circuses,
cockpits, dancing halls, dancing schools, night or day clubs, and other places
of amusement". In any case, the issues raised by Pelizloy are pertinent only
with respect to the second paragraph of Section 59, Article X of the Tax
Ordinance. Thus, there is no reason to invalidate the first paragraph of
Section 59, Article X of the Tax Ordinance. Any declaration as to the Province
of Benguet's lack of authority to levy amusement taxes must be limited to
admission fees to resorts, swimming pools, bath houses, hot springs and
tourist spots.
Moreover, the second paragraph of Section 59, Article X of the Tax
Ordinance is not limited to resorts, swimming pools, bath houses, hot
springs, and tourist spots but also covers admission fees for boxing. As
Section 140 of the LGC allows for the imposition of amusement taxes on
gross receipts from admission fees to boxing stadia, Section 59, Article X of
the Tax Ordinance must be sustained with respect to admission fees from
boxing stadia.
WHEREFORE, the petition for review on certiorari i s GRANTED. The
second paragraph of Section 59, Article X of the Benguet Provincial Revenue
Code of 2005, in so far as it imposes amusement taxes on admission fees to
resorts, swimming pools, bath houses, hot springs and tourist spots, is
declared null and void. Respondent Province of Benguet is permanently
enjoined from enforcing the second paragraph of Section 59, Article X of the
Benguet Provincial Revenue Code of 2005 with respect to resorts, swimming
pools, bath houses, hot springs and tourist spots.
SO ORDERED.
Velasco, Jr., Peralta, Abad and Mendoza, JJ., concur.
Footnotes
1.Section 187. Procedure for Approval and Effectivity of Tax Ordinances and
Revenue Measures; Mandatory Public Hearings. — The procedure for
approval of local tax ordinances and revenue measures shall be in
accordance with the provisions of this Code: Provided, That public hearings
shall be conducted for the purpose prior to the enactment thereof: Provided,
further, That any question on the constitutionality or legality of tax
ordinances or revenue measures may be raised on appeal within thirty (30)
days from the effectivity thereof to the Secretary of Justice who shall render
a decision within sixty (60) days from the date of receipt of the appeal:
Provided, however, That such appeal shall not have the effect of suspending
the effectivity of the ordinance and the accrual and payment of the tax, fee,
or charge levied therein: Provided, finally, That within thirty (30) days after
receipt of the decision or the lapse of the sixty-day period without the
Secretary of Justice acting upon the appeal, the aggrieved party may file
appropriate proceedings with a court of competent jurisdiction.
2.Rollo , p. 91.
3.Section 140. Amusement Tax. — (a) The province may levy an amusement
tax to be collected from the proprietors, lessees, or operators of theaters,
cinemas, concert halls, circuses, boxing stadia, and other places of
amusement at a rate of not more than thirty percent (30%) of the gross
receipts from admission fees.
4.Rollo , p. 92.
5.Id. at 101.
6.Id. at 123.
7.Reyes v. Almanzor , 273 Phil. 558, 564 (1991).
8.Icard v. City Council of Baguio, 83 Phil. 870, 873 (1949) and City of Iloilo v.
Villanueva, 105 Phil. 337 (1959).
10.Supra note 8.
11.Id., citing Cu Unjieng vs. Patstone, 42 Phil. 818, 830 (1922); Pacific Commercial
Co. vs. Romualdez, 49 Phil. 917, 924 (1927); Batangas Transportation Co. vs.
Provincial Treasurer of Batangas, 52 Phil. 190, 196 (1928); Baldwin vs. Coty
Council, 53 Ala., p. 437; State vs. Smith, 31 Lowa, p. 493; 38 Am Jur pp. 68,
72-73.
12.National Power Corporation v. City of Cabanatuan, 449 Phil. 233, 248 (2003),
citing Mactan Cebu International Airport Authority vs. Marcos, G.R. No.
120082, September 11, 1996, 261 SCRA 667, 680, citing Cruz, Isagani A.,
CONSTITUTIONAL LAW (1991) at 84.
14.Section 3. The Congress shall enact a local government code which shall
provide for a more responsive and accountable local government structure
instituted through a system of decentralization with effective mechanisms of
recall, initiative, and referendum, allocate among the different local
government units their powers, responsibilities, and resources, and provide
for the qualifications, election, appointment and removal, term, salaries,
powers and functions and duties of local officials, and all other matters
relating to the organization and operation of the local units.
15.534 Phil. 517, 536 (2006), citing Commissioner of Internal Revenue v. Solidbank
Corporation, G.R. No. 148191, November 25, 2003.
16.TITLE V
OTHER PERCENTAGE TAXES
xxx xxx xxx
SECTION 125. Amusement Taxes. — There shall be collected from the

proprietor, lessee or operator of cockpits, cabarets, night or day clubs,
boxing exhibitions, professional basketball games, Jai-Alai and racetracks, a
tax equivalent to:
(a) Eighteen percent (18%) in the case of cockpits;
(b) Eighteen percent (18%) in the case of cabarets, night or day clubs;
(c) Ten percent (10%) in the case of boxing exhibitions: Provided, however,
That boxing exhibitions wherein World or Oriental Championships in any
division is at stake shall be exempt from amusement tax: Provided, further,
That at least one of the contenders for World or Oriental Championship is a
citizen of the Philippines and said exhibitions are promoted by a citizen/s of
the Philippines or by a corporation or association at least sixty percent (60%)
of the capital of which is owned by such citizens;
(d) Fifteen percent (15%) in the case of professional basketball games as
envisioned in Presidential Decree No. 871: Provided, however, That the tax
herein shall be in lieu of all other percentage taxes of whatever nature and
description; and
(e) Thirty percent (30%) in the case of Jai-Alai and racetracks of their gross
receipts, irrespective, of whether or not any amount is charged for
admission.
For the purpose of the amusement tax, the term "gross receipts" embraces all
the receipts of the proprietor, lessee or operator of the amusement place.
Said gross receipts also include income from television, radio and motion
picture rights, if any. A person or entity or association conducting any activity
subject to the tax herein imposed shall be similarly liable for said tax with
respect to such portion of the receipts derived by him or it.
The taxes imposed herein shall be payable at the end of each quarter and it shall
be the duty of the proprietor, lessee or operator concerned, as well as any
party liable, within twenty (20) days after the end of each quarter, to make a
true and complete return of the amount of the gross receipts derived during
the preceding quarter and pay the tax due thereon.
17.Miranda v. Abaya , 370 Phil. 642, 658, citing Vera v. Cuevas, G.R. Nos. L-33693-
94, May 31, 1979, 90 SCRA 379.
18.G.R. Nos. 60225-26, May 8, 1992, 208 SCRA 542 (1992).
19.Id. at 547.
20.392 Phil. 133, 141 (2000).
21.Id. at 366.
22.THE NEW OXFORD AMERICAN DICTIONARY (2nd ed., 2005).
23.Id. at 1571.
24.Id. at 1264.
25.Supra note 8.

EN BANC
[G.R. No. 187298. July 3, 2012.]
JAMAR M. KULAYAN, TEMOGEN S. TULAWIE, HJI. MOH.

YUSOP ISMI, JULHAJAN AWADI, and SPO1 SATTAL H.
JADJULI, petitioners, vs. GOV. ABDUSAKUR M. TAN, in his
capacity as Governor of Sulu; GEN. JUANCHO SABAN, COL.
EUGENIO CLEMEN PN, P/SUPT. JULASIRIM KASIM and
P/SUPT. BIENVENIDO G. LATAG, in their capacity as officers
of the Phil. Marines and Phil. National Police,
respectively,respondents.
DECISION
SERENO, J : p
On 15 January 2009, three members from the International Committee

of the Red Cross (ICRC) were kidnapped in the vicinity of the Provincial
Capitol in Patikul, Sulu. 1 Andreas Notter, a Swiss national and head of the
ICRC in Zamboanga City, Eugenio Vagni, an Italian national and ICRC
delegate, and Marie Jean Lacaba, a Filipino engineer, were purportedly
inspecting a water and sanitation project for the Sulu Provincial Jail when
inspecting a water and sanitation project for the Sulu Provincial Jail when
they were seized by three armed men who were later confirmed to be
members of the Abu Sayyaf Group (ASG). 2 The leader of the alleged
kidnappers was identified as Raden Abu, a former guard at the Sulu
Provincial Jail. News reports linked Abu to Albader Parad, one of the known
leaders of the Abu Sayyaf.
On 21 January 2009, a task force was created by the ICRC and the
Philippine National Police (PNP), which then organized a parallel local group
known as the Local Crisis Committee. 3 The local group, later renamed Sulu
Crisis Management Committee, convened under the leadership of
respondent Abdusakur Mahail Tan, the Provincial Governor of Sulu. Its armed
forces component was headed by respondents General Juancho Saban, and
his deputy, Colonel Eugenio Clemen. The PNP component was headed by
respondent Police Superintendent Bienvenido G. Latag, the Police Deputy
Director for Operations of the Autonomous Region of Muslim Mindanao
(ARMM). 4
Governor Tan organized the Civilian Emergency Force (CEF), a group of
armed male civilians coming from different municipalities, who were
redeployed to surrounding areas of Patikul. 5 The organization of the CEF
was embodied in a "Memorandum of Understanding" 6 entered into between
three parties: the provincial government of Sulu, represented by Governor
Tan; the Armed Forces of the Philippines, represented by Gen. Saban; and
the Philippine National Police, represented by P/SUPT. Latag. The Whereas
clauses of the Memorandum alluded to the extraordinary situation in Sulu,
and the willingness of civilian supporters of the municipal mayors to offer
their services in order that "the early and safe rescue of the hostages may
be achieved." 7 CIScaA
This Memorandum, which was labeled 'secret' on its all pages, also
outlined the responsibilities of each of the party signatories, as follows:
Responsibilities of the Provincial Government:
1) The Provincial Government shall source the funds and logistics

needed for the activation of the CEF;
2) The Provincial Government shall identify the Local Government

Units which shall participate in the operations and to propose
them for the approval of the parties to this agreement;
3) The Provincial Government shall ensure that there will be no
unilateral action(s) by the CEF without the knowledge and
approval by both parties.
Responsibilities of AFP/PNP/TF ICRC (Task Force ICRC):
1) The AFP/PNP shall remain the authority as prescribed by law in

military operations and law enforcement;
2) The AFP/PNP shall ensure the orderly deployment of the CEF in
the performance of their assigned task(s);
3) The AFP/PNP shall ensure the safe movements of the CEF in

identified areas of operation(s);
4) The AFP/PNP shall provide the necessary support and/or

assistance as called for in the course of operation(s)/movements
of the CEF. 8
Meanwhile, Ronaldo Puno, then Secretary of the Department of the

Interior and Local Government, announced to the media that government
troops had cornered some one hundred and twenty (120) Abu Sayyaf
members along with the three (3) hostages. 9 However, the ASG made
contact with the authorities and demanded that the military pull its troops
back from the jungle area. 10 The government troops yielded and went back
to their barracks; the Philippine Marines withdrew to their camp, while police
and civilian forces pulled back from the terrorists' stronghold by ten (10) to
fifteen (15) kilometers. Threatening that one of the hostages will be
beheaded, the ASG further demanded the evacuation of the military camps
and bases in the different barangays in Jolo. 11 The authorities were given no
later than 2:00 o'clock in the afternoon of 31 March 2009 to comply. 12 CSTEHI
On 31 March 2009, Governor Tan issued Proclamation No. 1, Series of

2009 (Proclamation 1-09), declaring a state of emergency in the province of
Sulu. 13 It cited the kidnapping incident as a ground for the said declaration,
describing it as a terrorist act pursuant to the Human Security Act (R.A.
9372). It also invoked Section 465 of the Local Government Code of 1991
(R.A. 7160), which bestows on the Provincial Governor the power to carry out
emergency measures during man-made and natural disasters and
calamities, and to call upon the appropriate national law enforcement
agencies to suppress disorder and lawless violence.
In the same Proclamation, respondent Tan called upon the PNP and the
CEF to set up checkpoints and chokepoints, conduct general search and
seizures including arrests, and other actions necessary to ensure public
safety. The pertinent portion of the proclamation states:
NOW, THEREFORE, BY VIRTUE OF THE POWERS VESTED IN ME BY
LAW, I, ABDUSAKUR MAHAIL TAN, GOVERNOR OF THE PROVINCE OF
SULU, DO HEREBY DECLARE A STATE OF EMERGENCY IN THE
PROVINCE OF SULU, AND CALL ON THE PHILIPPINE NATIONAL POLICE
WITH THE ASSISTANCE OF THE ARMED FORCES OF THE PHILIPPINES
AND THE CIVILIAN EMERGENCY FORCE TO IMPLEMENT THE
FOLLOWING:
1. The setting-up of checkpoints and chokepoints in the province;

2. The imposition of curfew for the entire province subject to such
Guidelines as may be issued by proper authorities;
3. The conduct of General Search and Seizure including arrests in

the pursuit of the kidnappers and their supporters; and
4. To conduct such other actions or police operations as may be

necessary to ensure public safety.
DONE AT THE PROVINCIAL CAPITOL, PROVINCE OF SULU THIS

31ST DAY OF MARCH 2009.
Sgd. Abdusakur M. Tan
Governor. 14
On 1 April 2009, SPO1 Sattal Jadjuli was instructed by his superior to

report to respondent P/SUPT. Julasirim Kasim. 15 Upon arriving at the police
station, he was booked, and interviewed about his relationship to Musin,
Jaiton, and Julamin, who were all his deceased relatives. Upon admitting that
he was indeed related to the three, he was detained. After a few hours,
former Punong Barangay Juljahan Awadi, Hadji Hadjirul Bambra, Abdugajir
Hadjirul, as well as PO2 Marcial Hajan, SPO3 Muhilmi Ismula, Punong
Barangay Alano Mohammad and jeepney driver Abduhadi Sabdani, were also
arrested. 16 The affidavit 17 of the apprehending officer alleged that they
were suspected ASG supporters and were being arrested under Proclamation
1-09. The following day, 2 April 2009, the hostage Mary Jane Lacaba was
released by the ASG. ATESCc
On 4 April 2009, the office of Governor Tan distributed to civic

organizations, copies of the "Guidelines for the Implementation of
Proclamation No. 1, Series of 2009 Declaring a State of Emergency in the
Province of Sulu." 18 These Guidelines suspended all Permits to Carry
Firearms Outside of Residence (PTCFORs) issued by the Chief of the PNP, and
allowed civilians to seek exemption from the gun ban only by applying to the
Office of the Governor and obtaining the appropriate identification cards. The
said guidelines also allowed general searches and seizures in designated
checkpoints and chokepoints.
On 16 April 2009, Jamar M. Kulayan, Temogen S. Tulawie, Hadji
Mohammad Yusop Ismi, Ahajan Awadi, and SPO1 Sattal H. Jadjuli, residents
of Patikul, Sulu, filed the present Petition for Certiorari and Prohibition, 19
claiming that Proclamation 1-09 was issued with grave abuse of discretion
amounting to lack or excess of jurisdiction, as it threatened fundamental
freedoms guaranteed under Article III of the 1987 Constitution.
Petitioners contend that Proclamation No. 1 and its Implementing
Guidelines were issued ultra vires, and thus null and void, for violating
Sections 1 and 18, Article VII of the Constitution, which grants the President
sole authority to exercise emergency powers and calling-out powers as the
chief executive of the Republic and commander-in-chief of the armed forces.
20 Additionally, petitioners claim that the Provincial Governor is not
authorized by any law to create civilian armed forces under his command,
nor regulate and limit the issuances of PTCFORs to his own private army.
In his Comment, Governor Tan contended that petitioners violated the
doctrine on hierarchy of courts when they filed the instant petition directly in
the court of last resort, even if both the Court of Appeals (CA) and the
Regional Trial Courts (RTC) possessed concurrent jurisdiction with the
Supreme Court under Rule 65. 21 This is the only procedural defense raised
by respondent Tan. Respondents Gen. Juancho Saban, Col. Eugenio Clemen,
P/SUPT. Julasirim Kasim, and P/SUPT. Bienvenido Latag did not file their
respective Comments.
On the substantive issues, respondents deny that Proclamation 1-09
was issued ultra vires, as Governor Tan allegedly acted pursuant to Sections
16 and 465 of the Local Government Code, which empowers the Provincial
Governor to carry out emergency measures during calamities and disasters,
and to call upon the appropriate national law enforcement agencies to
suppress disorder, riot, lawless violence, rebellion or sedition. 22
Furthermore, the Sangguniang Panlalawigan of Sulu authorized the
declaration of a state of emergency as evidenced by Resolution No. 4, Series
of 2009 issued on 31 March 2009 during its regular session. 23
The threshold issue in the present case is whether or not Section 465,
in relation to Section 16, of the Local Government Code authorizes the
respondent governor to declare a state of emergency, and exercise the
powers enumerated under Proclamation 1-09, specifically the conduct of
general searches and seizures. Subsumed herein is the secondary question
of whether or not the provincial governor is similarly clothed with authority
to convene the CEF under the said provisions. SETAcC
We grant the petition.

I. Transcendental public
importance warrants a relaxation of
the Doctrine of Hierarchy of Courts
We first dispose of respondents' invocation of the doctrine of hierarchy
of courts which allegedly prevents judicial review by this Court in the present
case, citing for this specific purpose, Montes v. Court of Appeals and Purok
Bagong Silang Association, Inc. v. Yuipco . 24 Simply put, the doctrine
provides that where the issuance of an extraordinary writ is also within the
competence of the CA or the RTC, it is in either of these courts and not in the
Supreme Court, that the specific action for the issuance of such writ must be
sought unless special and important laws are clearly and specifically set forth
in the petition. The reason for this is that this Court is a court of last resort
and must so remain if it is to perform the functions assigned to it by the
Constitution and immemorial tradition. It cannot be burdened with deciding
cases in the first instance. 25
The said rule, however, is not without exception. In Chavez v. PEA-
Amari, 26 the Court stated:
PEA and AMARI claim petitioner ignored the judicial hierarchy by
seeking relief directly from the Court. The principle of hierarchy of
courts applies generally to cases involving factual questions. As it is
not a trier of facts, the Court cannot entertain cases involving factual
issues. The instant case, however, raises constitutional questions of
transcendental importance to the public. The Court can resolve this
case without determining any factual issue related to the case. Also,
the instant case is a petition for mandamus which falls under the
original jurisdiction of the Court under Section 5, Article VIII of the
Constitution. We resolve to exercise primary jurisdiction over the
instant case. 27
The instant case stems from a petition for certiorari and prohibition,
over which the Supreme Court possesses original jurisdiction. 28 More
crucially, this case involves acts of a public official which pertain to
restrictive custody, and is thus impressed with transcendental public
importance that would warrant the relaxation of the general rule. The Court
would be remiss in its constitutional duties were it to dismiss the present
petition solely due to claims of judicial hierarchy. IHCDAS
I n David v. Macapagal-Arroyo, 29 the Court highlighted the

transcendental public importance involved in cases that concern restrictive
custody, because judicial review in these cases serves as "a manifestation of
the crucial defense of civilians 'in police power' cases due to the diminution
of their basic liberties under the guise of a state of emergency." 30
Otherwise, the importance of the high tribunal as the court of last resort
would be put to naught, considering the nature of "emergency" cases,
wherein the proclamations and issuances are inherently short-lived. In finally
disposing of the claim that the issue had become moot and academic, the
Court also cited transcendental public importance as an exception, stating:
Sa kabila ng pagiging akademiko na lamang ng mga isyu tungkol
sa mahigpit na pangangalaga (restrictive custody) at pagmonitor ng
galaw (monitoring of movements) ng nagpepetisyon, dedesisyunan
namin ito (a) dahil sa nangingibabaw na interes ng madla na
nakapaloob dito, (b) dahil sa posibilidad na maaaring maulit ang
pangyayari at (c) dahil kailangang maturuan ang kapulisan tungkol
dito.
The moot and academic principle is not a magical formula that
can automatically dissuade the courts in resolving a case. Courts will
decide cases, otherwise moot and academic, if: first, there is a grave
violation of the Constitution; second, the exceptional character of the
situation and the paramount public interest is involved; third, when
[the] constitutional issue raised requires formulation of controlling
principles to guide the bench, the bar, and the public; and fourth, the
case is capable of repetition yet evading review.
. . . There is no question that the issues being raised

affect the public interest, involving as they do the people's
basic rights to freedom of expression, of assembly and of the
press. Moreover, the Court has the duty to formulate guiding
and controlling constitutional precepts, doctrines or rules. It
has the symbolic function of educating the bench and the bar,
and in the present petitions, the military and the police, on the
extent of the protection given by constitutional guarantees.
And lastly, respondents contested actions are capable of
repetition. Certainly, the petitions are subject to judicial
review.
Evidently, the triple reasons We advanced at the start of
Our ruling are justified under the foregoing exceptions. Every
bad, unusual incident where police officers figure in generates
public interest and people watch what will be done or not done
to them. Lack of disciplinary steps taken against them erode
public confidence in the police institution. As petitioners
themselves assert, the restrictive custody of policemen under
investigation is an existing practice, hence, the issue is bound
to crop up every now and then. The matter is capable of
repetition or susceptible of recurrence. It better be resolved
now for the education and guidance of all concerned. 31
(Emphasis supplied) aESIDH
Hence, the instant petition is given due course, impressed as it is with

transcendental public importance.
II. Only the President is vested
with calling-out powers, as the
commander-in-chief of the Republic
i. One executive, one
commander-in-chief
As early as Villena v. Secretary of Interior, 32 it has already been
established that there is one repository of executive powers, and that is the
President of the Republic. This means that when Section 1, Article VII of the
Constitution speaks of executive power, it is granted to the President and no
one else. 33 As emphasized by Justice Jose P. Laurel, in his ponencia in
Villena:
With reference to the Executive Department of the government,
there is one purpose which is crystal-clear and is readily visible without
the projection of judicial searchlight, and that is the establishment of a
single, not plural, Executive. The first section of Article VII of the
Constitution, dealing with the Executive Department, begins with the
enunciation of the principle that "The executive power shall be vested
in a President of the Philippines." This means that the President of the
Philippines is the Executive of the Government of the Philippines, and
no other. 34
Corollarily, it is only the President, as Executive, who is authorized to

exercise emergency powers as provided under Section 23, Article VI, of the
Constitution, as well as what became known as the calling-out powers under
Section 7, Article VII thereof.
ii. The exceptional
characterof
Commander-in-Chief
powers dictate that they
are exercised by one
president
Springing from the well-entrenched constitutional precept of One
President is the notion that there are certain acts which, by their very
nature, may only be performed by the president as the Head of the State.
One of these acts or prerogatives is the bundle of Commander-in-Chief
powers to which the "calling-out" powers constitutes a portion. The
President's Emergency Powers, on the other hand, is balanced only by the
legislative act of Congress, as embodied in the second paragraph of Section
23, Article 6 of the Constitution: aIETCA
Article 6, Sec. 23(2).In times of war or other national emergency,

the Congress may, by law, authorize the President, for a limited period
and subject to such restrictions as it may prescribe, to exercise powers
necessary and proper to carry out a declared national policy. Unless
sooner withdrawn by resolution of the Congress, such powers shall
cease upon the next adjournment thereof. 35
Article 7, Sec 18.The President shall be the Commander-in-Chief
of all armed forces of the Philippines and whenever it becomes
necessary, he may call out such armed forces to prevent or suppress
lawless violence, invasion or rebellion. In case of invasion or rebellion,
when the public safety requires it, he may, for a period not exceeding
sixty days, suspend the privilege of the writ of habeas corpus or place
the Philippines or any part thereof under martial law. Within forty-eight
hours from the proclamation of martial law or the suspension of the
privilege of the writ of habeas corpus, the President shall submit a
report in person or in writing to the Congress. The Congress, voting
jointly, by a vote of at least a majority of all its Members in regular or
special session, may revoke such proclamation or suspension, which
revocation shall not be set aside by the President. Upon the initiative of
the President, the Congress may, in the same manner, extend such
proclamation or suspension for a period to be determined by the
Congress, if the invasion or rebellion shall persist and public safety
requires it.
The Congress, if not in session, shall, within twenty-four hours
following such proclamation or suspension, convene in accordance with
its rules without need of a call. 36
The power to declare a state of martial law is subject to the Supreme

Court's authority to review the factual basis thereof. 37 By constitutional fiat,
the calling-out powers, which is of lesser gravity than the power to declare
martial law, is bestowed upon the President alone. As noted in Villena, "
(t)here are certain constitutional powers and prerogatives of the Chief
Executive of the Nation which must be exercised by him in person and no
amount of approval or ratification will validate the exercise of any of those
powers by any other person. Such, for instance, is his power to suspend the
writ of habeas corpus and proclaim martial law . . . .38
Indeed, while the President is still a civilian, Article II, Section 3 39 of
the Constitution mandates that civilian authority is, at all times, supreme
over the military, making the civilian president the nation's supreme military
leader. The net effect of Article II, Section 3, when read with Article VII,
Section 18, is that a civilian President is the ceremonial, legal and
administrative head of the armed forces. The Constitution does not require
that the President must be possessed of military training and talents, but as
Commander-in-Chief, he has the power to direct military operations and to
determine military strategy. Normally, he would be expected to delegate the
actual command of the armed forces to military experts; but the ultimate
power is his. 40 As Commander-in-Chief, he is authorized to direct the
movements of the naval and military forces placed by law at his command,
and to employ them in the manner he may deem most effectual. 41 caSEAH
In the case of Integrated Bar of the Philippines v. Zamora, 42 the Court

had occasion to rule that the calling-out powers belong solely to the
President as commander-in-chief:
When the President calls the armed forces to prevent or
suppress lawless violence, invasion or rebellion, he necessarily
exercises a discretionary power solely vested in his wisdom.
This is clear from the intent of the framers and from the text of the
Constitution itself. The Court, thus, cannot be called upon to overrule
the President's wisdom or substitute its own. However, this does not
prevent an examination of whether such power was exercised within
permissible constitutional limits or whether it was exercised in a
manner constituting grave abuse of discretion. In view of the
constitutional intent to give the President full discretionary power to
determine the necessity of calling out the armed forces, it is incumbent
upon the petitioner to show that the President's decision is totally
bereft of factual basis.
There is a clear textual commitment under the
Constitution to bestow on the President full discretionary
power to call out the armed forces and to determine the
necessity for the exercise of such power. 43 (Emphasis supplied)
Under the foregoing provisions, Congress may revoke such

proclamation or suspension and the Court may review the sufficiency of the
factual basis thereof. However, there is no such equivalent provision dealing
with the revocation or review of the President's action to call out the armed
forces. The distinction places the calling out power in a different category
from the power to declare martial law and the power to suspend the
privilege of the writ of habeas corpus, otherwise, the framers of the
Constitution would have simply lumped together the three powers and
provided for their revocation and review without any qualification. 44
That the power to call upon the armed forces is discretionary on the
president is clear from the deliberation of the Constitutional Commission:
FR. BERNAS.
It will not make any difference. I may add that there is a
graduated power of the President as Commander-in-
Chief. First, he can call out such Armed Forces as may be
necessary to suppress lawless violence; then he can
suspend the privilege of the writ of habeas corpus , then
he can impose martial law. This is a graduated sequence.
When he judges that it is necessary to impose martial law or
suspend the privilege of the writ of habeas corpus, his judgment
is subject to review. We are making it subject to review by the
Supreme Court and subject to concurrence by the National
Assembly. But when he exercises this lesser power of calling on
the Armed Forces, when he says it is necessary, it is my opinion
that his judgment cannot be reviewed by anybody. IDAESH
xxx xxx xxx

MR. REGALADO.
That does not require any concurrence by the legislature nor is it
subject to judicial review.
The reason for the difference in the treatment of the
aforementioned powers highlights the intent to grant the
President the widest leeway and broadest discretion in using the
power to call out because it is considered as the lesser and more
benign power compared to the power to suspend the privilege of
the writ of habeas corpus and the power to impose martial law,
both of which involve the curtailment and suppression of certain
basic civil rights and individual freedoms, and thus necessitating
safeguards by Congress and review by this Court.
. . . Thus, it is the unclouded intent of the Constitution to
vest upon the President, as Commander-in-Chief of the
Armed Forces, full discretion to call forth the military
when in his judgment it is necessary to do so in order to
prevent or suppress lawless violence, invasion or
rebellion. 45 (Emphasis Supplied)
In the more recent case of Constantino, Jr. v. Cuisia , 46 the Court

characterized these powers as exclusive to the President, precisely because
they are of exceptional import:
These distinctions hold true to this day as they remain embodied
in our fundamental law. There are certain presidential powers which
arise out of exceptional circumstances, and if exercised, would involve
the suspension of fundamental freedoms, or at least call for the
supersedence of executive prerogatives over those exercised by co-
equal branches of government. The declaration of martial law, the
suspension of the writ of habeas corpus, and the exercise of the
pardoning power, notwithstanding the judicial determination of guilt of
the accused, all fall within this special class that demands the
exclusive exercise by the President of the constitutionally vested
power. The list is by no means exclusive, but there must be a showing
that the executive power in question is of similar gravitas and
exceptional import. 47
In addition to being the commander-in-chief of the armed forces, the

President also acts as the leader of the country's police forces, under the
mandate of Section 17, Article VII of the Constitution, which provides that,
"The President shall have control of all the executive departments, bureaus,
and offices. He shall ensure that the laws be faithfully executed." During the
deliberations of the Constitutional Commission on the framing of this
provision, Fr. Bernas defended the retention of the word "control,"
employing the same rationale of singularity of the office of the president, as
the only Executive under the presidential form of government. 48 IDSaTE
Regarding the country's police force, Section 6, Article XVI of the

Constitution states that: "The State shall establish and maintain one police
force, which shall be national in scope and civilian in character, to be
administered and controlled by a national police commission. The authority
of local executives over the police units in their jurisdiction shall be provided
by law." 49
A local chief executive, such as the provincial governor, exercises
operational supervision over the police, 50 and may exercise control only in
day-to-day operations, viz.:
Mr. Natividad:
By experience, it is not advisable to provide either in our
Constitution or by law full control of the police by the
local chief executive and local executives, the mayors. By
our experience, this has spawned warlordism, bossism
and sanctuaries for vices and abuses. If the national
government does not have a mechanism to supervise these
1,500 legally, technically separate police forces, plus 61 city
police forces, fragmented police system, we will have a lot of
difficulty in presenting a modern professional police force. So
that a certain amount of supervision and control will have
to be exercised by the national government.
For example, if a local government, a town cannot handle
its peace and order problems or police problems, such as
riots, conflagrations or organized crime, the national
government may come in, especially if requested by the
local executives. Under that situation, if they come in
under such an extraordinary situation, they will be in
control. But if the day-to-day business of police investigation of
crime, crime prevention, activities, traffic control, is all lodged in
the mayors, and if they are in complete operational control of the
day-to-day business of police service, what the national
government would control would be the administrative aspect.
xxx xxx xxx
Mr. de los Reyes:

so the operational control on a day-to-day basis, meaning, the
usual duties being performed by the ordinary policemen, will be
under the supervision of the local executives?
Mr. Natividad:
Yes, Madam President. CSIcHA
xxx xxx xxx

Mr. de los Reyes:
But in exceptional cases, even the operational control can
be taken over by the National Police Commission?
Mr. Natividad:
If the situation is beyond the capacity of the local

governments. 51 (Emphases supplied)
Furthermore according to the framers, it is still the President who is

authorized to exercise supervision and control over the police, through the
National Police Commission:
Mr. Rodrigo:
Just a few questions. The President of the Philippines is the
Commander-in-Chief of all the armed forces.
Mr. Natividad:
Yes, Madam President.
Mr. Rodrigo:
Since the national police is not integrated with the armed forces,
I do not suppose they come under the Commander-in-Chief
powers of the President of the Philippines.
Mr. Natividad:
They do, Madam President. By law, they are under the
supervision and control of the President of the Philippines.
Mr. Rodrigo:
Yes, but the President is not the Commander-in-Chief of the

national police.

Mr. Natividad:
He is the President.
Mr. Rodrigo:
Yes, the Executive. But they do not come under that specific
provision that the President is the Commander-in-Chief of all the
armed forces.
Mr. Natividad:
No, not under the Commander-in-Chief provision.
Mr. Rodrigo:
There are two other powers of the President. The President has
control over ministries, bureaus and offices, and supervision over
local governments. Under which does the police fall, under
control or under supervision?
Mr. Natividad:
Both, Madam President. IcTCHD
Mr. Rodrigo:
Control and supervision.
Mr. Natividad:
Yes, in fact, the National Police Commission is under the Office of
the President. 52
In the discussions of the Constitutional Commission regarding

the above provision it is clear that the framers never intended for
local chief executives to exercise unbridled control over the police
in emergency situations. This is without prejudice to their authority over
police units in their jurisdiction as provided by law, and their prerogative to
seek assistance from the police in day to day situations, as contemplated by
the Constitutional Commission. But as a civilian agency of the government,
the police, through the NAPOLCOM, properly comes within, and is subject to,
the exercise by the President of the power of executive control. 53
iii. The provincial governor
does not possess the
same calling-out powers
as the President
Given the foregoing, respondent provincial governor is not
endowed with the power to call upon the armed forces at his own
bidding. In issuing the assailed proclamation, Governor Tan
exceeded his authority when he declared a state of emergency and
called upon the Armed Forces, the police, and his own Civilian
Emergency Force. The calling-out powers contemplated under the
Constitution is exclusive to the President. An exercise by another
official, even if he is the local chief executive, is ultra vires, and may not be
justified by the invocation of Section 465 of the Local Government Code, as
will be discussed subsequently.
Respondents, however, justify this stance by stating that nowhere in
the seminal case of David v. Arroyo, which dealt squarely with the issue of
the declaration of a state of emergency, does it limit the said authority to
the President alone. Respondents contend that the ruling in David expressly
limits the authority to declare a national emergency, a condition which
covers the entire country, and does not include emergency situations in local
government units. 54 This claim is belied by the clear intent of the framers
that in all situations involving threats to security, such as lawless violence,
invasion or rebellion, even in localized areas, it is still the President who
possesses the sole authority to exercise calling-out powers. As reflected in
the Journal of the Constitutional Commission: aIDHET
Thereafter, Mr. Padilla proposed on line 29 to insert the phrase

OR PUBLIC DISORDER in lieu of "invasion or rebellion." Mr. Sumulong
stated that the committee could not accept the amendment because
under the first section of Section 15, the President may call out and
make use of the armed forces to prevent or suppress not only lawless
violence but even invasion or rebellion without declaring martial law.
He observed that by deleting "invasion or rebellion" and substituting
PUBLIC DISORDER, the President would have to declare martial law
before he can make use of the armed forces to prevent or suppress
lawless invasion or rebellion.
Mr. Padilla, in reply thereto, stated that the first sentence

contemplates a lighter situation where there is some lawless
violence in a small portion of the country or public disorder in
another at which times, the armed forces can be called to
prevent or suppress these incidents. He noted that the
Commander-in-Chief can do so in a minor degree but he can
also exercise such powers should the situation worsen. The
words "invasion or rebellion" to be eliminated on line 14 are covered by
the following sentence which provides for "invasion or rebellion." He
maintained that the proposed amendment does not mean that under
such circumstances, the President cannot call on the armed forces to
prevent or suppress the same. 55 (Emphasis supplied)
III. Section 465 of the Local

Government Code cannot be invoked
to justify the powers enumerated
under Proclamation 1-09
Respondent governor characterized the kidnapping of the three ICRC
workers as a terroristic act, and used this incident to justify the exercise of
the powers enumerated under Proclamation 1-09. 56 He invokes Section 465,
in relation to Section 16, of the Local Government Code, which purportedly
allows the governor to carry out emergency measures and call upon the
appropriate national law enforcement agencies for assistance. But a closer
look at the said proclamation shows that there is no provision in the Local
Government Code nor in any law on which the broad and unwarranted
powers granted to the Governor may be based.
Petitioners cite the implementation of "General Search and Seizure
including arrests in the pursuit of the kidnappers and their supporters," 57 as
being violative of the constitutional proscription on general search warrants
and general seizures. Petitioners rightly assert that this alone would be
sufficient to render the proclamation void, as general searches and seizures
are proscribed, for being violative of the rights enshrined in the Bill of Rights,
particularly: cIEHAC
The right of the people to be secure in their persons, houses,

papers, and effects against unreasonable searches and seizures of
whatever nature and for any purpose shall be inviolable, and no search
warrant or warrant of arrest shall issue except upon probable cause to
be determined personally by the judge after examination under oath or
affirmation of the complainant and the witnesses he may produce, and
particularly describing the place to be searched and the persons or
things to be seized. 58
In fact, respondent governor has arrogated unto himself powers

exceeding even the martial law powers of the President, because as the
Constitution itself declares, "A state of martial law does not suspend the
operation of the Constitution, nor supplant the functioning of the civil courts
or legislative assemblies, nor authorize the conferment of the jurisdiction on
military courts and agencies over civilians where civil courts are able to
function, nor automatically suspend the privilege of the writ." 59
We find, and so hold, that there is nothing in the Local Government
Code which justifies the acts sanctioned under the said Proclamation. Not
even Section 465 of the said Code, in relation to Section 16, which states:
Section 465. The Chief Executive: Powers, Duties,
Functions, and Compensation. —
xxx xxx xxx
(b) For efficient, effective and economical governance the

purpose of which is the general welfare of the province and its
inhabitants pursuant to Section 16 of this Code, the provincial governor
shall:
(1) Exercise general supervision and control over all

programs, projects, services, and activities of the provincial
government, and in this connection, shall:
xxx xxx xxx
(vii) Carry out such emergency measures as

may be necessary during and in the aftermath of
man-made and natural disasters and calamities; DAHaTc
(2) Enforce all laws and ordinances relative to the

governance of the province and the exercise of the appropriate
corporate powers provided for under Section 22 of this Code,
implement all approved policies, programs, projects, services and
activities of the province and, in addition to the foregoing, shall:

xxx xxx xxx
(vi) Call upon the appropriate national law

enforcement agencies to suppress disorder, riot,
lawless violence, rebellion or sedition or to
apprehend violators of the law when public interest
so requires and the police forces of the component
city or municipality where the disorder or violation is
happening are inadequate to cope with the situation
or the violators.
Section 16. General Welfare. — Every local government unit

shall exercise the powers expressly granted, those necessarily implied
therefrom, as well as powers necessary, appropriate, or incidental for
its efficient and effective governance, and those which are essential to
the promotion of the general welfare. Within their respective territorial
jurisdictions, local government units shall ensure and support, among
other things, the preservation and enrichment of culture, promote
health and safety, enhance the right of the people to a balanced
ecology, encourage and support the development of appropriate and
self-reliant scientific and technological capabilities, improve public
morals, enhance economic prosperity and social justice, promote full
employment among their residents, maintain peace and order, and
preserve the comfort and convenience of their inhabitants. (Emphases
supplied)
Respondents cannot rely on paragraph 1, subparagraph (vii) of Article

465 above, as the said provision expressly refers to calamities and disasters,
whether man-made or natural. The governor, as local chief executive of the
province, is certainly empowered to enact and implement emergency
measures during these occurrences. But the kidnapping incident in the case
at bar cannot be considered as a calamity or a disaster. Respondents cannot
find any legal mooring under this provision to justify their actions.
Paragraph 2, subparagraph (vi) of the same provision is equally
inapplicable for two reasons. First, the Armed Forces of the Philippines does
not fall under the category of a "national law enforcement agency," to which
the National Police Commission (NAPOLCOM) and its departments belong. Its
mandate is to uphold the sovereignty of the Philippines, support the
Constitution, and defend the Republic against all enemies, foreign and
domestic. Its aim is also to secure the integrity of the national territory. 60
Second, there was no evidence or even an allegation on record that the local
police forces were inadequate to cope with the situation or apprehend the
violators. If they were inadequate, the recourse of the provincial governor
was to ask the assistance of the Secretary of Interior and Local Government,
or such other authorized officials, for the assistance of national law
enforcement agencies. ADEaHT
The Local Government Code does not involve the diminution of central
powers inherently vested in the National Government, especially not the
prerogatives solely granted by the Constitution to the President in matters of
security and defense.

The intent behind the powers granted to local government units is
fiscal, economic, and administrative in nature. The Code is concerned only
with powers that would make the delivery of basic services more effective to
the constituents, 61 and should not be unduly stretched to confer calling-out
powers on local executives.
In the sponsorship remarks for Republic Act 7160, it was stated that
the devolution of powers is a step towards the autonomy of local
government units (LGUs), and is actually an experiment whose success
heavily relies on the power of taxation of the LGUs. The underpinnings of the
Code can be found in Section 5, Article II of the 1973 Constitution, which
allowed LGUs to create their own sources of revenue. 62 During the
interpellation made by Mr. Tirol addressed to Mr. de Pedro, the latter
emphasized that "Decentralization is an administrative concept and the
process of shifting and delegating power from a central point to subordinate
levels to promote independence, responsibility, and quicker decision-making.
. . . (I)t does not involve any transfer of final authority from the
national to field levels, nor diminution of central office powers and
responsibilities. Certain government agencies, including the police
force, are exempted from the decentralization process because
their functions are not inherent in local government units." 63
IV. Provincial governor is not
authorized to convene CEF
Pursuant to the national policy to establish one police force, the
organization of private citizen armies is proscribed. Section 24 of Article XVIII
of the Constitution mandates that:
Private armies and other armed groups not recognized by duly
constituted authority shall be dismantled. All paramilitary forces
including Civilian Home Defense Forces (CHDF) not consistent with the
citizen armed force established in this Constitution, shall be dissolved
or, where appropriate, converted into the regular force.
Additionally, Section 21 of Article XI states that, "The preservation of

peace and order within the regions shall be the responsibility of the local
police agencies which shall be organized, maintained, supervised, and
utilized in accordance with applicable laws. The defense and security of the
regions shall be the responsibility of the National Government."
Taken in conjunction with each other, it becomes clear that the
Constitution does not authorize the organization of private armed groups
similar to the CEF convened by the respondent Governor. The framers of the
Constitution were themselves wary of armed citizens' groups, as shown in
the following proceedings: SaAcHE
MR. GARCIA:
I think it is very clear that the problem we have here is a

paramilitary force operating under the cloak, under the
mantle of legality is creating a lot of problems precisely
by being able to operate as an independent private army
for many regional warlords. And at the same time, this I
think has been the thrust, the intent of many of the
discussions and objections to the paramilitary units and
the armed groups.
MR. PADILLA:
My proposal covers two parts: the private armies of political

warlords and other armed forces not recognized by constituted
authority which shall be dismantled and dissolved. In my trips to
the provinces, I heard of many abuses committed by the CHDF
(Civilian Home Defense Forces), specially in Escalante, Negros
Occidental. But I do not know whether a particular CHDF is
approved or authorized by competent authority. If it is not
authorized, then the CHDF will have to be dismantled. If some
CHDFs, say in other provinces, are authorized by constituted
authority, by the Armed Forces of the Philippines, through the
Chief of Staff or the Minister of National Defense, if they are
recognized and authorized, then they will not be dismantled. But
I cannot give a categorical answer to any specific CHDF unit, only
the principle that if they are armed forces which are not
authorized, then they should be dismantled. 64 (Emphasis
supplied)
Thus, with the discussions in the Constitutional Commission as guide,

the creation of the Civilian Emergency Force (CEF) in the present case, is
also invalid.
WHEREFORE, the instant petition is GRANTED. Judgment is rendered
commanding respondents to desist from further proceedings in
implementing Proclamation No. 1 n , Series of 2009, and its Implementing
Guidelines. The said proclamation and guidelines are hereby declared NULL
and VOID for having been issued in grave abuse of discretion, amounting to
lack or excess of jurisdiction.
SO ORDERED.
Carpio, Velasco, Jr., Leonardo-de Castro, Brion, Peralta, Del Castillo,
Villarama, Jr., Perez, Mendoza, Reyes and Perlas-Bernabe, JJ., concur.
Bersamin and Abad, JJ., are on leave.
Footnotes
1.Petition for Certiorari and Prohibition, rollo, p. 8.

2."Red cross won't return to Sulu yet," 27 October 2010, 5:44:00, by Jerome Aning,
at http://www.inquirer.net/specialfeatures/redcrossabduction/view.php?
db=1&article=20101027-299979. Last visited 11 September 2011.
3.Supra note 1.
4.Rollo , p. 9.
5."State of emergency in Sulu; attack looms," The Philippine Star, updated 1 April
2009, 12:00, by Roel Pareño and James Mananghaya, at
http://www.philstar.com/Article.aspx?articleid=454055. Last visited 11
September 2011.
6.Rollo , pp. 242-244.
7.Id. at 242.
8.Memorandum of Understanding, p. 2 of 3; rollo, p. 243.
9.Supra note 5.
10.Petition for Certiorari and Prohibition, rollo, p. 9.
11.Supra note 5.
12.Supra note 10.

13.Petition for Certiorari and Prohibition, rollo, pp. 9-10.
14.Id.
15.Id. at 8-9.
16.Id. at 9.
17.Affidavit of the Apprehending Officer, attached as Annex B to respondents'

Comment, id. at 245.
18.Attached as Annex B to Petition, id. at 69-73.
19.Id. at 3-66.
20.Id. at 14.
21.Id. at 118.
22.Comment, pp. 7-10; id. at 123-126.

23.Attached as Annex A to the Comment, id. at 247-249.
24.Respectively, G.R. No. 143797, 4 May 2006, 489 SCRA 432, and G.R. No.
135092, 4 May 2006, 489 SCRA 382.
25.Montes v. CA, supra note 24.
26.433 Phil. 506 (2002).
27.Id. at 524.
28.In relation to Sections 1 and 2, Rule 65 of the Revised Rules of Court, par. 2,
Sec. 4 thereof states: "The petition shall be filed in the Supreme Court or, if it
relates to the acts or omissions of a lower court or of a corporation, board,
officer or person, in the Regional Trial Court exercising jurisdiction over the
territorial area as defined by the Supreme Court. It may also be filed in the
Court of Appeals whether or not the same is in aid of its appellate
jurisdiction, or in the Sandiganbayan if it is in aid of its appellate jurisdiction.
If it involves the acts or omissions of a quasi-judicial agency, and unless
otherwise provided by law or these rules, the petition shall be filed in and
cognizable only by the Court of Appeals."
29.G.R. Nos. 171396, 171409, 171485, 171483, 171400, 171489 & 171424, 3 May
2006, 489 SCRA 160.
30.Id. at 214.
31.As cited and applied in Manalo v. Calderon , G.R. No. 178920, 15 October 2007,
536 SCRA 290, 304.
32.67 Phil. 451 (1939).

33.Fr. Joaquin Bernas, S.J., The 1987 Philippine Constitution A Comprehensive
Reviewer, (2006), p. 290.
34.Supra note 32, at 464.
35.1987 CONSTITUTION.
36.Id.
37.1987 CONSTITUTION, Art. VII, Sec. 18 (2).

38.Supra note 32.
39.The provisions reads: "Civilian authority is, at all times, supreme over the
military. The Armed Forces of the Philippines is the protector of the people
and the State. Its goal is to secure the sovereignty of the State and the
integrity of the national territory."
41.Id., citing Fleming v. Page, 9 How 603, 615 U.S. (1850).

42.392 Phil. 618.
43.Id. at 640.
44.Supra note 33, at 314-315.
45.Record of the Constitutional Commission, 29 July 1986, Tuesday, Vol. 2, p. 409.
46.G.R. No. 106064, 13 October 2005, 472 SCRA 505.

47.Id. at 534.
48.Journal of the Constitutional Commission, 29 July 1986, Tuesday, Vol. 1, p. 488.

49.1987 CONSTITUTION, Art. VXI, Sec. 6.
50.Carpio v. Executive Secretary, G.R. No. 96409, 14 February 1992, 206 SCRA
290.
51.Record of the Constitutional Commission, 1 October 1986, Wednesday, pp. 293-

294.
52.Id. at 296.
53.Supra note 50.

54.Comment, rollo, p. 128.
55.Journal of the Constitutional Commission, 30 July 1986, Wednesday, Vol. 1, p.

513.
56.Proclamation No. 01, Series of 2009, attached to the Comment as Annex A,
rollo, p. 67.
57.Id. at 68.
58.1987 CONSTITUTION, Art. III, Sec. 2.
59.1987 CONSTITUTION, Art. XVII, Sec. 18 (4).
60.1987 Constitution, Art. II, Sec. 3.

61.Journal and Record of the House of Representatives Proceedings and Debates,
Fourth Regular Session 1990-1991, Vol. 1 (July 23-September 3, 1990),
prepared by the Publication and Editorial Division under the supervision of
Hon. Quirino D. Abad Santos, Jr., Secretary, House of Representatives,
Proceedings of 14 August, 1990, Tuesday.
62.Id., Proceedings of 25 July 1990, Wednesday.
63.Id.
64.Supra note 45, p. 386.

n Note from the Publisher: Written as “Proclamation No. I” in the original
document.

EN BANC
[G.R. No. 195770. July 17, 2012.]
AQUILINO Q. PIMENTEL, JR., SERGIO TADEO and NELSON

ALCANTARA, petitioners, vs. EXECUTIVE SECRETARY PAQUITO
N. OCHOA and SECRETARY CORAZON JULIANO-SOLIMAN OF
THE DEPARTMENT OF SOCIAL WELFARE and DEVELOPMENT
(DSWD), respondents.
DECISION
PERLAS-BERNABE, J : p
The Case
For the Court's consideration in this Petition for Certiorari and Prohibition
is the constitutionality of certain provisions of Republic Act No. 10147 or the
General Appropriations Act [GAA] of 2011 1 which provides a P21 Billion budget
allocation for the Conditional Cash Transfer Program (CCTP) headed by the
Department of Social Welfare & Development (DSWD). Petitioners seek to
enjoin respondents Executive Secretary Paquito N. Ochoa and DSWD Secretary
Corazon Juliano-Soliman from implementing the said program on the ground
that it amounts to a "recentralization" of government functions that have
already been devolved from the national government to the local government
units.
The Facts
In 2007, the DSWD embarked on a poverty reduction strategy with the
poorest of the poor as target beneficiaries. 2 Dubbed "Ahon Pamilyang Pilipino,"
it was pre-pilot tested in the municipalities of Sibagat and Esperanza in Agusan
del Sur; the municipalities of Lopez Jaena and Bonifacio in Misamis Occidental,
the Caraga Region; and the cities of Pasay and Caloocan 3 upon the release of
the amount of P50 Million Pesos under a Special Allotment Release Order
(SARO) issued by the Department of Budget and Management. 4
On July 16, 2008, the DSWD issued Administrative Order No. 16, series of
2008 (A.O. No. 16, s. 2008), 5 setting the implementing guidelines for the
project renamed "Pantawid Pamilyang Pilipino Program" (4Ps), upon the
following stated objectives, to wit:
1. To improve preventive health care of pregnant women and
young children
2. To increase enrollment/attendance of children at elementary
level
3. To reduce incidence of child labor

4. To raise consumption of poor households on nutrient dense foods
5. To encourage parents to invest in their children's (and their own)

future cAIDEa
6. To encourage parent's participation in the growth and

development of young children, as well as involvement in the
community. 6
This government intervention scheme, also conveniently referred to as

CCTP, "provides cash grant to extreme poor households to allow the members
of the families to meet certain human development goals." 7 Eligible
households that are selected from priority target areas consisting of the poorest
provinces classified by the National Statistical Coordination Board (NCSB) 8 are
granted a health assistance of P500.00/month, or P6,000.00/year, and an
educational assistance of P300.00/month for 10 months, or a total of
P3,000.00/year, for each child but up to a maximum of three children per
family. 9 Thus, after an assessment on the appropriate assistance package, a
household beneficiary could receive from the government an annual subsidy for
its basic needs up to an amount of P15,000.00, under the following
conditionalities:
a) Pregnant women must get pre natal care starting from the
1st trimester, child birth is attended by skilled/trained professional, get
post natal care thereafter
b) Parents/guardians must attend family planning

sessions/mother's class, Parent Effectiveness Service and others
c) Children 0-5 years of age get regular preventive health

check-ups and vaccines
d) Children 3-5 years old must attend day care program/pre-

school
e) Children 6-14 years of age are enrolled in schools and

attend at least 85% of the time 10 EICScD
Under A.O. No. 16, s. 2008, the DSWD also institutionalized a coordinated
inter-agency network among the Department of Education (DepEd),
Department of Health (DOH), Department of Interior and Local Government
(DILG), the National Anti-Poverty Commission (NAPC) and the local government
units (LGUs), identifying specific roles and functions in order to ensure effective
and efficient implementation of the CCTP. As the DSWD takes on the role of
lead implementing agency that must "oversee and coordinate the
implementation, monitoring and evaluation of the program," the concerned LGU
as partner agency is particularly tasked to —
a. Ensure availability of the supply side on health and
education in the target areas.
b. Provide necessary technical assistance for Program

implementation
c. Coordinate the implementation/operationalization of

sectoral activities at the City/Municipal level to better execute Program
objectives and functions
d. Coordinate with various concerned government agencies
at the local level, sectoral representatives and NGO to ensure effective
Program implementation
e. Prepare reports on issues and concerns regarding Program

implementation and submit to the Regional Advisory Committee, and
f. Hold monthly committee meetings 11
A Memorandum of Agreement (MOA) 12 executed by the DSWD with each

participating LGU outlines in detail the obligation of both parties during the
intended five-year implementation of the CCTP.
Congress, for its part, sought to ensure the success of the CCTP by
providing it with funding under the GAA of 2008 in the amount of Two Hundred
Ninety-Eight Million Five Hundred Fifty Thousand Pesos (P298,550,000.00). This
budget allocation increased tremendously to P5 Billion Pesos in 2009, with the
amount doubling to P10 Billion Pesos in 2010. But the biggest allotment given
to the CCTP was in the GAA of 2011 at Twenty One Billion One Hundred Ninety-
Four Million One Hundred Seventeen Thousand Pesos (P21,194,117,000.00). 13
cDEHIC
Petitioner Aquilino Pimentel, Jr., a former Senator, joined by Sergio Tadeo,

incumbent President of the Association of Barangay Captains of Cabanatuan
City, Nueva Ecija, and Nelson Alcantara, incumbent Barangay Captain of
Barangay Sta. Monica, Quezon City, challenges before the Court the
disbursement of public funds and the implementation of the CCTP which are
alleged to have encroached into the local autonomy of the LGUs.
The Issue
THE P21 BILLION CCTP BUDGET ALLOCATION UNDER THE
DSWD IN THE GAA FY 2011 VIOLATES ART. II, SEC. 25 & ART. X,
SEC. 3 OF THE 1987 CONSTITUTION IN RELATION TO SEC. 17 OF
THE LOCAL GOVERNMENT CODE OF 1991 BY PROVIDING FOR
THE RECENTRALIZATION OF THE NATIONAL GOVERNMENT IN
THE DELIVERY OF BASIC SERVICES ALREADY DEVOLVED TO THE
LGUS.
Petitioners admit that the wisdom of adopting the CCTP as a poverty

reduction strategy for the Philippines is with the legislature. They take
exception, however, to the manner by which it is being implemented, that is,
primarily through a national agency like DSWD instead of the LGUs to which the
responsibility and functions of delivering social welfare, agriculture and health
care services have been devolved pursuant to Section 17 of Republic Act No.
7160, also known as the Local Government Code of 1991, in relation to Section
25, Article II & Section 3, Article X of the 1987 Constitution.
Petitioners assert that giving the DSWD full control over the identification
of beneficiaries and the manner by which services are to be delivered or
conditionalities are to be complied with, instead of allocating the P21 Billion
CCTP Budget directly to the LGUs that would have enhanced its delivery of
basic services, results in the "recentralization" of basic government functions,
which is contrary to the precepts of local autonomy and the avowed policy of
decentralization.
Our Ruling
The Constitution declares it a policy of the State to ensure the autonomy

of local governments 14 and even devotes a full article on the subject of local
governance 15 which includes the following pertinent provisions:
Section 3. The Congress shall enact a local government code
which shall provide for a more responsive and accountable local
government structure instituted through a system of decentralization
with effective mechanisms of recall, initiative, and referendum, allocate
among the different local government units their powers,
responsibilities, and resources, and provide for the qualifications,
election, appointment and removal, term, salaries, powers and
functions and duties of local officials, and all other matters relating to
the organization and operation of the local units. ASETHC
xxx xxx xxx

Section 14. The President shall provide for regional
development councils or other similar bodies composed of local
government officials, regional heads of departments and other
government offices, and representatives from non-governmental
organizations within the regions for purposes of administrative
decentralization to strengthen the autonomy of the units therein and to
accelerate the economic and social growth and development of the
units in the region. (Underscoring supplied)
In order to fully secure to the LGUs the genuine and meaningful autonomy
that would develop them into self-reliant communities and effective partners in
the attainment of national goals, 16 Section 17 of the Local Government Code
vested upon the LGUs the duties and functions pertaining to the delivery of
basic services and facilities, as follows:
SECTION 17. Basic Services and Facilities. —
(a) Local government units shall endeavor to be self-reliant
and shall continue exercising the powers and discharging the duties
and functions currently vested upon them. They shall also discharge
the functions and responsibilities of national agencies and offices
devolved to them pursuant to this Code. Local government units shall
likewise exercise such other powers and discharge such other functions
and responsibilities as are necessary, appropriate, or incidental to
efficient and effective provision of the basic services and facilities
enumerated herein.
(b) Such basic services and facilities include, but are not
limited to, . . . .
While the aforementioned provision charges the LGUs to take on the

functions and responsibilities that have already been devolved upon them from
the national agencies on the aspect of providing for basic services and facilities
in their respective jurisdictions, paragraph (c) of the same provision provides a
categorical exception of cases involving nationally-funded projects, facilities,
programs and services, thus: DTAHSI
(c) Notwithstanding the provisions of subsection (b) hereof,

public works and infrastructure projects and other facilities, programs
and services funded by the National Government under the annual
General Appropriations Act, other special laws, pertinent executive
orders, and those wholly or partially funded from foreign sources, are
not covered under this Section, except in those cases where the local
government unit concerned is duly designated as the implementing
agency for such projects, facilities, programs and services.
(Underscoring supplied)
The essence of this express reservation of power by the national

government is that, unless an LGU is particularly designated as the
implementing agency, it has no power over a program for which funding has
been provided by the national government under the annual general
appropriations act, even if the program involves the delivery of basic services
within the jurisdiction of the LGU.
The Court held in Ganzon v. Court of Appeals 17 that while it is through a
system of decentralization that the State shall promote a more responsive and
accountable local government structure, the concept of local autonomy does
not imply the conversion of local government units into "mini-states." 18 We
explained that, with local autonomy, the Constitution did nothing more than "to
break up the monopoly of the national government over the affairs of the local
government" and, thus, did not intend to sever "the relation of partnership and
interdependence between the central administration and local government
units." 19 In Pimentel v. Aguirre, 20 the Court defined the extent of the local
government's autonomy in terms of its partnership with the national
government in the pursuit of common national goals, referring to such key
concepts as integration and coordination. Thus: DaHISE
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.
Certainly, to yield unreserved power of governance to the local

government unit as to preclude any and all involvement by the national
government in programs implemented in the local level would be to shift the
tide of monopolistic power to the other extreme, which would amount to a
decentralization of power explicated in Limbona v. Mangelin 21 as beyond our
constitutional concept of autonomy, thus:
Now, autonomy is either decentralization of administration or
decentralization of power. There is decentralization of administration
when the central government delegates administrative powers to
political subdivisions in order to broaden the base of government
power and in the process to make local governments 'more responsive
and accountable' and 'ensure their fullest development as self-reliant
communities and make them more effective partners in the pursuit of
national development and social progress.' At the same time, it
relieves the central government of the burden of managing local affairs
and enables it to concentrate on national concerns. The President
exercises 'general supervision' over them, but only to 'ensure that local
affairs are administered according to law.' He has no control over their
acts in the sense that he can substitute their judgments with his own.
Decentralization of power, on the other hand, involves an

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

matter of providing basic facilities and services cannot be implied as the Local
Government Code itself weighs against it. The national government is, thus, not
precluded from taking a direct hand in the formulation and implementation of
national development programs especially where it is implemented locally in
coordination with the LGUs concerned.
Every law has in its favor the presumption of constitutionality, and to
justify its nullification, there must be a clear and unequivocal breach of the
Constitution, not a doubtful and argumentative one. 23 Petitioners have failed to
discharge the burden of proving the invalidity of the provisions under the GAA
of 2011. The allocation of a P21 billion budget for an intervention program
formulated by the national government itself but implemented in partnership
with the local government units to achieve the common national goal
development and social progress can by no means be an encroachment upon
the autonomy of local governments.
WHEREFORE, premises considered, the petition is hereby DISMISSED.
HDATSI
SO ORDERED.
Carpio, Velasco, Jr., Leonardo-de Castro, Peralta, Bersamin, Del Castillo,
Abad, Villarama, Jr., Perez, Mendoza, Sereno and Reyes, JJ., concur.
Brion, J., is on sick leave.

Footnotes
1.Annex "A", Petition, rollo, pp. 30-36.

2.Annex "4", Comment, rollo, p. 107.
3.Id. at 108.
4.Annexes "5" and "6", Comment, pp. 114 and 115.
5.Annex "B", Petition, rollo, pp. 37-51.
6.Item 3, Goal and Objectives, A.O. No. 16, s. 2008, rollo, p. 39.
7.Id.
8.Item 4, Implementing Procedures, id. at 41.
9.Id. at 44.
10.Id. at 43.
11.Item V, Institutional Arrangements, id. at 50.
12.Annex "C", Petition, rollo, pp. 52-54.
13.Annex "A", id. at 30-36.
14.Section 25, Article II, 1987 Philippine Constitution.
15.Article X, id.
16.Section 2, The Local Government Code of 1991.
17.G.R. Nos. 93252 and 95245, August 5, 1991, 200 SCRA 271.
18.Id. at 281.
19.Id. at 286.
20.G.R. No. 132988, July 19, 2000, 336 SCRA 201, 217.
21.G.R. No. 80391, February 28, 1989, 170 SCRA 786.
22.Id. at 794-795.
23.Lacson v. Executive Secretary, G.R. No. 128096, January 20, 1999, 301 SCRA
298, 311.

EN BANC
[G.R. No. 195390. December 10, 2014.]
GOV. LUIS RAYMUND F. VILLAFUERTE, JR., and the

PROVINCE OF CAMARINES SUR, petitioners, vs. HON. JESSE M.
ROBREDO, in his capacity as Secretary of the Department
of the Interior and Local Government, respondent.
DECISION
REYES, J : p
This is a petition for certiorari and prohibition 1 under Rule 65 of the 1997
Revised Rules of Court filed by former Governor Luis Raymund F. Villafuerte, Jr.
(Villafuerte) and the Province of Camarines Sur (petitioners), seeking to annul
and set aside the following issuances of the late Honorable Jesse M. Robredo
(respondent), in his capacity as then Secretary of the Department of the
Interior and Local Government (DILG), to wit:
(a) Memorandum Circular (MC) No. 2010-83 dated August 31,
2010, pertaining to the full disclosure of local budget and
finances, and bids and public offerings; 2
(b) MC No. 2010-138 dated December 2, 2010, pertaining to the
use of the 20% component of the annual internal revenue
allotment shares; 3 and
(c) MC No. 2011-08 dated January 13, 2011, pertaining to the

strict adherence to Section 90 of Republic Act (R.A.) No.
10147 or the General Appropriations Act of 2011. 4
The petitioners seek the nullification of the foregoing issuances on the
ground of unconstitutionality and for having been issued with grave abuse of
discretion amounting to lack or excess of jurisdiction. TCaADS
The Facts
In 1995, the Commission on Audit (COA) conducted an examination and
audit on the manner the local government units (LGUs) utilized their Internal
Revenue Allotment (IRA) for the calendar years 1993-1994. The examination
yielded an official report, showing that a substantial portion of the 20%
development fund of some LGUs was not actually utilized for development
projects but was diverted to expenses properly chargeable against the
Maintenance and Other Operating Expenses (MOOE), in stark violation of
Section 287 of R.A. No. 7160, otherwise known as the Local Government Code
of 1991 (LGC). Thus, on December 14, 1995, the DILG issued MC No. 95-216, 5
enumerating the policies and guidelines on the utilization of the development
fund component of the IRA. It likewise carried a reminder to LGUs of the strict
mandate to ensure that public funds, like the 20% development fund, "shall be
spent judiciously and only for the very purpose or purposes for which such
funds are intended." 6
On September 20, 2005, then DILG Secretary Angelo T. Reyes and

Department of Budget and Management Secretary Romulo L. Neri issued Joint
MC No. 1, series of 2005, 7 pertaining to the guidelines on the appropriation and
utilization of the 20% of the IRA for development projects, which aims to
enhance accountability of the LGUs in undertaking development projects. The
said memorandum circular underscored that the 20% of the IRA intended for
development projects should be utilized for social development, economic
development and environmental management. 8
On August 31, 2010, the respondent, in his capacity as DILG Secretary,

issued the assailed MC No. 2010-83, 9 entitled "Full Disclosure of Local Budget
and Finances, and Bids and Public Offerings," which aims to promote good
governance through enhanced transparency and accountability of LGUs. The
pertinent portion of the issuance reads: EHSADc
Legal and Administrative Authority

Section 352 of the Local Government Code of 1991 requires the
posting within 30 days from the end of each fiscal year in at least three
(3) publicly accessible and conspicuous places in the local government
unit a summary of all revenues collected and funds received including
the appropriations and disbursements of such funds during the
preceding fiscal year.
On the other hand, Republic Act No. 9184, known as the

Government Procurement Reform Act, calls for the posting of the
Invitation to Bid, Notice of Award, Notice to Proceed and Approved
Contract in the procuring entity's premises, in newspapers of general
circulation, the Philippine Government Electronic Procurement System
(PhilGEPS) and the website of the procuring entity.
The declared policy of the State to promote good local

governance also calls for the posting of budgets, expenditures,
contracts and loans, and procurement plans of local government units
in conspicuous places within public buildings in the locality, in the web,
and in print media of community or general circulation.
Furthermore, the President, in his first State of the Nation
Address, directed all government agencies and entities to bring to an
end luxurious spending and misappropriation of public funds and to
expunge mendacious and erroneous projects, and adhere to the zero-
based approach budgetary principle.
Responsibility of the Local Chief Executive
All Provincial Governors, City Mayors and Municipal Mayors, are

directed to faithfully comply with the abovecited [sic] provisions of
laws, and existing national policy, by posting in conspicuous places
within public buildings in the locality, or in print media of community or
general circulation, and in their websites, the following: DAcSIC
1. CY 2010 Annual Budget, information detail to the level of

particulars of personal services, maintenance and other
operating expenses and capital outlay per individual offices
(Source Document — Local Budget Preparation Form No. 3,
titled, Program Appropriation and Obligation by Object of
Expenditure, limited to PS, MOOE and CO. For sample form,
please visit www.naga.gov.ph);
2. Quarterly Statement of Cash Flows, information detail to the
level of particulars of cash flows from operating activities
(e.g., cash inflows, total cash inflows, total cash outflows),
cash flows from investing activities (e.g., cash outflows),
net increase in cash and cash at the beginning of the
period (Source Document — Statement of Cash Flows
Form);
3. CY 2009 Statement of Receipts and Expenditures, information
detail to the level of particulars of beginning cash balance,
receipts or income on local sources (e.g., tax revenue, non-
tax revenue), external sources, and receipts from loans
and borrowings, surplus of prior years, expenditures on
general services, economic services, social services and
debt services, and total expenditures (Source Document —
Local Budget Preparation Form No. 2, titled, Statement of
Receipts and Expenditures); AHSEaD
4. CY 2010 Trust Fund (PDAF) Utilization, information detail to the

level of particulars of object expenditures (Source
Document — Local Budget Preparation Form No. 3, titled,
Program Appropriation and Obligation by Object of
Expenditure, limited to PDAF Utilization);
5. CY 2010 Special Education Fund Utilization , information detail
to the level of particulars of object expenditures (Source
Document — Local Budget Preparation Form No. 3, titled,
Program Appropriation and Obligation by Object of
Expenditure, limited to Special Education Fund);
6. CY 2010 20% Component of the IRA Utilization, information
detail to the level of particulars of objects of expenditure on
social development, economic development and
environmental management (Source Document — Local
Budget Preparation Form No. 3, titled, Program
Appropriation and Obligation by Object of Expenditure,
limited to 20% Component of the Internal Revenue
Allotment);
7. CY 2010 Gender and Development Fund Utilization,
information detail to the level of particulars of object
expenditures (Source Document — Local Budget
Preparation Form No. 3, titled, Program Appropriation and
Obligation by Object of Expenditure, limited to Gender and
Development Fund); HaIESC

8. CY 2010 Statement of Debt Service, information detail to the
level of name of creditor, purpose of loan, date contracted,
term, principal amount, previous payment made on the
principal and interest, amount due for the budget year and
balance of the principal (Source Document — Local Budget
Preparation Form No. 6, titled, Statement of Debt Service);
9. CY 2010 Annual Procurement Plan or Procurement List,
information detail to the level of name of project, individual
item or article and specification or description of goods and
services, procurement method, procuring office or fund
source, unit price or estimated cost or approved budget for
the contract and procurement schedule (Source Document
— LGU Form No. 02, Makati City. For sample form, please
visit www.makati.gov.ph.) [;]
10. Items to Bid, information detail to the level of individual
Invitation to Bid, containing information as prescribed in
Section 21.1 of Republic Act No. 9184, or The Government
Procurement Reform Act, to be updated quarterly (Source
Document — Invitation to Apply for Eligibility and to Bid, as
prescribed in Section 21.1 of R.A. No. 9184. For sample
form, please visit www.naga.gov.ph);
11. Bid Results on Civil Works, and Goods and Services,
information detail to the level of project reference number,
name and location of project, name (company and
proprietor) and address of winning bidder, bid amount,
approved budget for the contract, bidding date, and
contract duration, to be updated quarterly (Source
Document — Infrastructure Projects/Goods and Services
Bid-Out (2010), Naga City. For sample form, please visit
www.naga.gov.ph); and aTADCE
12. Abstract of Bids as Calculated, information detail to the level

of project name, location, implementing office, approved
budget for the contract, quantity and items subject for
bidding, and bids of competing bidders, to be updated
quarterly (Source Document — Standard Form No. SF-
GOOD-40, Revised May 24, 2004, Naga City. For sample
form, please visit www.naga.gov.ph).
The foregoing circular also states that non-compliance will be meted
sanctions in accordance with pertinent laws, rules and regulations. 10
On December 2, 2010, the respondent issued MC No. 2010-138, 11
reiterating that 20% component of the IRA shall be utilized for desirable social,
economic and environmental outcomes essential to the attainment of the
constitutional objective of a quality of life for all. It also listed the following
enumeration of expenses for which the fund must not be utilized, viz.:
1. Administrative expenses such as cash gifts, bonuses, food
allowance, medical assistance, uniforms, supplies, meetings,
communication, water and light, petroleum products, and the
like;
2. Salaries, wages or overtime pay;
3. Travelling expenses, whether domestic or foreign;
4. Registration or participation fees in training, seminars, conferences
or conventions;
5. Construction, repair or refinishing of administrative offices; aHICDc
6. Purchase of administrative office furniture, fixtures, equipment or

appliances; and
7. Purchase, maintenance or repair of motor vehicles or motorcycles,

except ambulances. 12
On January 13, 2011, the respondent issued MC No. 2011-08, 13 directing

for the strict adherence to Section 90 of R.A. No. 10147 or the General
Appropriations Act of 2011. The pertinent portion of the issuance reads as
follows:
Legal and Administrative Authority
• Section 90 of Republic Act No. 10147 (General
Appropriations Act) FY 2011 re "Use and Disbursement of
Internal Revenue Allotment of LGUs", [sic] stipulates: The amount
appropriated for the LGU's share in the Internal Revenue Allotment
shall be used in accordance with Sections 17 (g) and 287 of R.A. No.
7160. The annual budgets of LGUs shall be prepared in accordance
with the forms, procedures, and schedules prescribed by the
Department of Budget and Management and those jointly issued with
the Commission on Audit. Strict compliance with Sections 288 and 354
of R.A. No. 7160 and DILG Memorandum Circular No. 2010-83, entitled
"Full Disclosure of Local Budget and Finances, and Bids and Public
offering" is hereby mandated; PROVIDED, That in addition to the
publication or posting requirement under Section 352 of R.A. No. 7160
in three (3) publicly accessible and conspicuous places in the local
government unit, the LGUs shall also post the detailed information on
the use and disbursement, and status of programs and projects in the
LGUS websites. Failure to comply with these requirements shall subject
the responsible officials to disciplinary actions in accordance with
existing laws. . . . 14 EIcSTD
xxx xxx xxx

Sanctions
Non-compliance with the foregoing shall be dealt with in
accordance with pertinent laws, rules and regulations. In particular,
attention is invited to the provision of the Local Government Code of
1991, quoted as follows:
Section 60. Grounds for Disciplinary Actions. — An elective
local official may be disciplined, suspended, or removed from
office on: (c) Dishonesty, oppression, misconduct in office, gross
negligence, or dereliction of duty. . . . 15 (Emphasis and
underscoring in the original)

On February 21, 2011, Villafuerte, then Governor of Camarines Sur, joined
by the Provincial Government of Camarines Sur, filed the instant petition for
certiorari, seeking to nullify the assailed issuances of the respondent for being
unconstitutional and having been issued with grave abuse of discretion.
On June 2, 2011, the respondent filed his Comment on the petition. 16

Then, on June 22, 2011, the petitioners filed their Reply (With Urgent Prayer for
the Issuance of a Writ of Preliminary Injunction and/or Temporary Restraining
Order). 17 In the Resolution 18 dated October 11, 2011, the Court gave due
course to the petition and directed the parties to file their respective
memorandum. In compliance therewith, the respondent and the petitioners
filed their Memorandum on January 19, 2012 19 and on February 8, 2012 20
respectively.
The petitioners raised the following issues:
Issues
I
THE HON. SECRETARY OF THE INTERIOR AND LOCAL GOVERNMENT
COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION WIN HE ISSUED THE ASSAILED
MEMORANDUM CIRCULARS IN VIOLATION OF THE PRINCIPLES OF
LOCAL AUTONOMY AND FISCAL AUTONOMY ENSHRINED IN THE 1987
CONSTITUTION AND THE LOCAL GOVERNMENT CODE OF 1991[.] ACTISE
II
THE HON. SECRETARY OF THE INTERIOR AND LOCAL GOVERNMENT
COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION WHEN HE INVALIDLY ASSUMED LEGISLATIVE
POWERS IN PROMULGATING THE ASSAILED MEMORANDUM CIRCULARS
WHICH WENT BEYOND THE CLEAR AND MANIFEST INTENT OF THE 1987
CONSTITUTION AND THE LOCAL GOVERNMENT CODE OF 19921
Ruling of the Court

The present petition revolves around the main issue: Whether or not the
assailed memorandum circulars violate the principles of local and fiscal
autonomy enshrined in the Constitution and the LGC.
The present petition is ripe for
judicial review.
At the outset, the respondent is questioning the propriety of the exercise
of the Court's power of judicial review over the instant case. He argues that the
petition is premature since there is yet any actual controversy that is ripe for
judicial determination. He points out the lack of allegation in the petition that
the assailed issuances had been fully implemented and that the petitioners had
already exhausted administrative remedies under Section 25 of the Revised
Administrative Code before filing the same in court. 22
It is well-settled that the Court's exercise of the power of judicial review
requires the concurrence of the following elements: (1) there must be an actual
case or controversy calling for the exercise of judicial power; (2) the person
challenging the act must have the standing to question the validity of the
subject act or issuance; otherwise stated, he must have a personal and
substantial interest in the case such that he has sustained, or will sustain,
direct injury as a result of its enforcement; (3) the question of constitutionality
must be raised at the earliest opportunity; and (4) the issue of constitutionality
must be the very lis mota of the case. 23 ITAaCc
The respondent claims that there is yet any actual case or controversy
that calls for the exercise of judicial review. He contends that the mere
expectation of an administrative sanction does not give rise to a justiciable
controversy especially, in this case, that the petitioners have yet to exhaust
administrative remedies available. 24
The Court disagrees.

I n La Bugal-B'laan Tribal Association, Inc. v. Ramos , 25 the Court
characterized an actual case or controversy, viz.:
An actual case or controversy means an existing case or
controversy that is appropriate or ripe for determination, not
conjectural or anticipatory, lest the decision of the court would amount
to an advisory opinion. The power does not extend to hypothetical
questions since any attempt at abstraction could only lead to dialectics
and barren legal questions and to sterile conclusions unrelated to
actualities. 26 (Citations omitted)
The existence of an actual controversy in the instant case cannot be

overemphasized. At the time of filing of the instant petition, the respondent had
already implemented the assailed memorandum circulars. In fact, on May 26,
2011, Villafuerte received Audit Observation Memorandum (AOM) No. 2011-009
dated May 10, 2011 27 from the Office of the Provincial Auditor of Camarines
Sur, requiring him to comment on the observation of the audit team, which
states:
The Province failed to post the transactions and documents
required under Department of the Interior and Local Government
(DILG) Memorandum Circular No. 2010-83, thereby violating the
mandate of full disclosure of Local Budget and Finances, and Bids and
Public Offering. EADCHS
xxx xxx xxx

The local officials concerned are reminded of the sanctions
mentioned in the circular which is quoted hereunder, thus:
"Noncompliance with the foregoing shall be dealt with in
accordance with pertinent laws, rules and regulations. In particular,
attention is invited to the provision of Local Government Code of 1991,
quoted as follows:
Section 60. Grounds for Disciplinary Actions — An elective
local official may be disciplined, suspended or removed from
office on: (c) Dishonesty, oppression, misconduct in office, gross
negligence or dereliction of duty." 28
The issuance of AOM No. 2011-009 to Villafuerte is a clear indication that
the assailed issuances of the respondent are already in the full course of
implementation. The audit memorandum specifically mentioned of Villafuerte's
alleged non-compliance with MC No. 2010-83 regarding the posting
requirements stated in the circular and reiterated the sanctions that may be
imposed for the omission. The fact that Villafuerte is being required to
comment on the contents of AOM No. 2011-009 signifies that the process of
investigation for his alleged violation has already begun. Ultimately, the
investigation is expected to end in a resolution on whether a violation has
indeed been committed, together with the appropriate sanctions that come
with it. Clearly, Villafuerte's apprehension is real and well-founded as he stands
to be sanctioned for non-compliance with the issuances.
There is likewise no merit in the respondent's claim that the petitioners'
failure to exhaust administrative remedies warrants the dismissal of the
petition. It bears emphasizing that the assailed issuances were issued pursuant
to the rule-making or quasi-legislative power of the DILG. This pertains to "the
power to make rules and regulations which results in delegated legislation that
is within the confines of the granting statute." 29 Not to be confused with the
quasi-legislative or rule-making power of an administrative agency is its quasi-
judicial or administrative adjudicatory power. This is the power to hear and
determine questions of fact to which the legislative policy is to apply and to
decide in accordance with the standards laid down by the law itself in enforcing
and administering the same law. 30 In challenging the validity of an
administrative issuance carried out pursuant to the agency's rule-making
power, the doctrine of exhaustion of administrative remedies does not stand as
a bar in promptly resorting to the filing of a case in court. This was made clear
by the Court in Smart Communications, Inc. (SMART) v. National
Telecommunications Commission (NTC), 31 where it was ruled, thus: STcAIa
In questioning the validity or constitutionality of a rule or

regulation issued by an administrative agency, a party need not
exhaust administrative remedies before going to court. This principle
applies only where the act of the administrative agency concerned was
performed pursuant to its quasi-judicial function, and not when the
assailed act pertained to its rule-making or quasi-legislative power. . . .
. 32
Considering the foregoing clarification, there is thus no bar for the Court
to resolve the substantive issues raised in the petition.
The assailed memorandum
circulars do not transgress the local
and fiscal autonomy granted to
LGUs.
The petitioners argue that the assailed issuances of the respondent

interfere with the local and fiscal autonomy of LGUs embodied in the
Constitution and the LGC. In particular, they claim that MC No. 2010-138
transgressed these constitutionally-protected liberties when it restricted the
meaning of "development" and enumerated activities which the local
government must finance from the 20% development fund component of the
IRA and provided sanctions for local authorities who shall use the said
component of the fund for the excluded purposes stated therein. 33 They argue
that the respondent cannot substitute his own discretion with that of the local
legislative council in enacting its annual budget and specifying the
development projects that the 20% component of its IRA should fund. 34
The argument fails to persuade.

The Constitution has expressly adopted the policy of ensuring the
autonomy of LGUs. 35 To highlight its significance, the entire Article X of the
Constitution was devoted to laying down the bedrock upon which this policy is
anchored.
It is also pursuant to the mandate of the Constitution of enhancing local

autonomy that the LGC was enacted. Section 2 thereof was a reiteration of the
state policy. It reads, thus: DSCIEa
Sec. 2. Declaration of Policy . — (a) It is hereby declared the

policy of the State that the territorial and political subdivisions of the
State shall enjoy genuine and meaningful local autonomy to enable
them to attain their fullest development as self-reliant communities
and make them more effective partners in the attainment of national
goals. Toward this end, the State shall provide for a more responsive
and accountable local government structure instituted through a
system of decentralization whereby local government units shall be
given more powers, authority, responsibilities, and resources. The
process of decentralization shall proceed from the national government
to the local government units.
Verily, local autonomy means a more responsive and accountable local

government structure instituted through a system of decentralization. 36 In
Limbona v. Mangelin, 37 the Court elaborated on the concept of
decentralization, thus:
[A]utonomy is either decentralization of administration or
power and in the process to make local governments "more responsive
and accountable," and "ensure their fullest development as self-reliant
national development and social progress." At the same time, it
relieves the central government of the burden of managing local affairs
and enables it to concentrate on national concerns. . . . .
abdication of political power in the favor of local governments [sic]
units declared to be autonomous. In that case, the autonomous
government is free to chart its own destiny and shape its future with
minimum intervention from central authorities. . . . . 38 (Citations
omitted) CIHAED
To safeguard the state policy on local autonomy, the Constitution confines

the power of the President over LGUs to mere supervision. 39 "The President
exercises 'general supervision' over them, but only to 'ensure that local affairs
are administered according to law.' He has no control over their acts in the
sense that he can substitute their judgments with his own." 40 Thus, Section 4,
Article X of the Constitution, states:
Section 4. The President of the Philippines shall exercise general
supervision over local governments. Provinces with respect to
component cities and municipalities, and cities and municipalities with
respect to component barangays, shall ensure that the acts of their
component units are within the scope of their prescribed powers and
functions.
In Province of Negros Occidental v. Commissioners, Commission on Audit,

41 the Court distinguished general supervision from executive control in the
following manner:
The President's power of general supervision means the power of
a superior officer to see to it that subordinates perform their functions
according to law. This is distinguished from the President's power of
control which is the power to alter or modify or set aside what a
subordinate officer had done in the performance of his duties and to
substitute the judgment of the President over that of the subordinate
officer. The power of control gives the President the power to revise or
reverse the acts or decisions of a subordinate officer involving the
exercise of discretion. 42 (Citations omitted)
It is the petitioners' contention that the respondent went beyond the

confines of his supervisory powers, as alter ego of the President, when he
issued MC No. 2010-138. They argue that the mandatory nature of the circular,
with the threat of imposition of sanctions for non-compliance, evinces a clear
desire to exercise control over LGUs. 43 DHEACI
The Court, however, perceives otherwise.

A reading of MC No. 2010-138 shows that it is a mere reiteration of an
existing provision in the LGC. It was plainly intended to remind LGUs to
faithfully observe the directive stated in Section 287 of the LGC to utilize the
20% portion of the IRA for development projects. It was, at best, an advisory to
LGUs to examine themselves if they have been complying with the law. It must
be recalled that the assailed circular was issued in response to the report of the
COA that a substantial portion of the 20% development fund of some LGUs was
not actually utilized for development projects but was diverted to expenses
more properly categorized as MOOE, in violation of Section 287 of the LGC. This
intention was highlighted in the very first paragraph of MC No. 2010-138, which
reads:
Section 287 of the Local Government Code mandates every local
government to appropriate in its annual budget no less than 20% of its
annual revenue allotment for development projects. In common
understanding, development means the realization of desirable social,
economic and environmental outcomes essential in the attainment of
the constitutional objective of a desired quality of life for all. 44
(Underscoring in the original)
That the term development was characterized as the "realization of

desirable social, economic and environmental outcome" does not operate as a
restriction of the term so as to exclude some other activities that may bring
about the same result. The definition was a plain characterization of the
concept of development as it is commonly understood. The statement of a
general definition was only necessary to illustrate among LGUs the nature of
expenses that are properly chargeable against the development fund
component of the IRA. It is expected to guide them and aid them in rethinking
their ways so that they may be able to rectify lapses in judgment, should there
be any, or it may simply stand as a reaffirmation of an already proper
administration of expenses. CAcIES
The same clarification may be said of the enumeration of expenses in MC

No. 2010-138. To begin with, it is erroneous to call them exclusions because
such a term signifies compulsory disallowance of a particular item or activity.
This is not the contemplation of the enumeration. Again, it is helpful to retrace
the very reason for the issuance of the assailed circular for a better
understanding. The petitioners should be reminded that the issuance of MC No.
2010-138 was brought about by the report of the COA that the development
fund was not being utilized accordingly. To curb the alleged misuse of the
development fund, the respondent deemed it proper to remind LGUs of the
nature and purpose of the provision for the IRA through MC No. 2010-138. To
illustrate his point, he included the contested enumeration of the items for
which the development fund must generally not be used. The enumerated
items comprised the expenses which the COA perceived to have been
improperly earmarked or charged against the development fund based on the
audit it conducted.
Contrary to the petitioners' posturing, however, the enumeration was not
meant to restrict the discretion of the LGUs in the utilization of their funds. It
was meant to enlighten LGUs as to the nature of the development fund by
delineating it from other types of expenses. It was incorporated in the assailed
circular in order to guide them in the proper disposition of the IRA and avert
further misuse of the fund by citing current practices which seemed to be
incompatible with the purpose of the fund. Even then, LGUs remain at liberty to
map out their respective development plans solely on the basis of their own
judgment and utilize their IRAs accordingly, with the only restriction that 20%
thereof be expended for development projects. They may even spend their
IRAs for some of the enumerated items should they partake of indirect costs of
undertaking development projects. In such case, however, the concerned LGU
must ascertain that applicable rules and regulations on budgetary allocation
have been observed lest it be inviting an administrative probe. AScHCD
The petitioners likewise misread the issuance by claiming that the

provision of sanctions therein is a clear indication of the President's
interference in the fiscal autonomy of LGUs. The relevant portion of the assailed
issuance reads, thus:
All local authorities are further reminded that utilizing the 20%
component of the Internal Revenue Allotment, whether willfully or
through negligence, for any purpose beyond those expressly
prescribed by law or public policy shall be subject to the sanctions
provided under the Local Government Code and under such other
applicable laws. 45
Significantly, the issuance itself did not provide for sanctions. It did not
particularly establish a new set of acts or omissions which are deemed
violations and provide the corresponding penalties therefor. It simply stated a
reminder to LGUs that there are existing rules to consider in the disbursement
of the 20% development fund and that non-compliance therewith may render
them liable to sanctions which are provided in the LGC and other applicable
laws. Nonetheless, this warning for possible imposition of sanctions did not
alter the advisory nature of the issuance.
At any rate, LGUs must be reminded that the local autonomy granted to
them does not completely severe them from the national government or turn
them into impenetrable states. Autonomy does not make local governments
sovereign within the state. 46 In Ganzon v. Court of Appeals, 47 the Court
reiterated: HSTAcI
Autonomy, however, is not meant to end the relation of

partnership and interdependence between the central administration
and local government units, or otherwise, to usher in a regime of
federalism. The Charter has not taken such a radical step. Local
governments, under the Constitution, are subject to regulation,
however limited, and for no other purpose than precisely, albeit
paradoxically, to enhance self-government. 48
Thus, notwithstanding the local fiscal autonomy being enjoyed by LGUs,

they are still under the supervision of the President and maybe held
accountable for malfeasance or violations of existing laws. "Supervision is not
incompatible with discipline. And the power to discipline and ensure that the
laws be faithfully executed must be construed to authorize the President to
order an investigation of the act or conduct of local officials when in his opinion
the good of the public service so requires." 49
Clearly then, the President's power of supervision is not antithetical to

investigation and imposition of sanctions. In Hon. Joson v. Exec. Sec. Torres , 50
the Court pointed out, thus:
"Independently of any statutory provision authorizing the
President to conduct an investigation of the nature involved in this
proceeding, and in view of the nature and character of the executive
authority with which the President of the Philippines is invested, the
constitutional grant to him of power to exercise general supervision
over all local governments and to take care that the laws be faithfully
executed must be construed to authorize him to order an investigation
of the act or conduct of the petitioner herein. Supervision is not a
meaningless thing. It is an active power. It is certainly not without
limitation, but it at least implies authority to inquire into facts and
conditions in order to render the power real and effective. . . . ." 51
(Emphasis ours and italics in the original) aCcHEI
As in MC No. 2010-138, the Court finds nothing in two other questioned

issuances of the respondent, i.e., MC Nos. 2010-83 and 2011-08, that can be
construed as infringing on the fiscal autonomy of LGUs. The petitioners claim
that the requirement to post other documents in the mentioned issuances went
beyond the letter and spirit of Section 352 of the LGC and R.A. No. 9184,
otherwise known as the Government Procurement Reform Act, by requiring that
budgets, expenditures, contracts and loans, and procurement plans of LGUs be
publicly posted as well. 52
Pertinently, Section 352 of the LGC reads:

Section 352. Posting of the Summary of Income and
Expenditures. — Local treasurers, accountants, budget officers, and
other accountable officers shall, within thirty (30) days from the end of
the fiscal year, post in at least three (3) publicly accessible and
conspicuous places in the local government unit a summary of all
revenues collected and funds received including the appropriations and
disbursements of such funds during the preceding fiscal year.
R.A. No. 9184, on the other hand, requires the posting of the invitation to
bid, notice of award, notice to proceed, and approved contract in the procuring
entity's premises, in newspapers of general circulation, and the website of the
procuring entity. 53
It is well to remember that fiscal autonomy does not leave LGUs with
unbridled discretion in the disbursement of public funds. They remain
accountable to their constituency. For, public office was created for the benefit
of the people and not the person who holds office.
The Court strongly enunciated in ABAKADA GURO Party List (formerly
AASJS), et al. v. Hon. Purisima, et al., 54 thus: acHITE
Public office is a public trust. It must be discharged by its holder

not for his own personal gain but for the benefit of the public for whom
he holds it in trust. By demanding accountability and service with
responsibility, integrity, loyalty, efficiency, patriotism and justice, all
government officials and employees have the duty to be responsive to
the needs of the people they are called upon to serve. 55
Thus, the Constitution strongly summoned the State to adopt and

implement a policy of full disclosure of all transactions involving public interest
and provide the people with the right to access public information. 56 Section
352 of the LGC is a response to this call for transparency. It is a mechanism of
transparency and accountability of local government officials and is in fact
incorporated under Chapter IV of the LGC which deals with "Expenditures,
Disbursements, Accounting and Accountability."

In the same manner, R.A. No. 9184 established a system of transparency
in the procurement process and in the implementation of procurement
contracts in government agencies. 57 It is the public monitoring of the
procurement process and the implementation of awarded contracts with the
end in view of guaranteeing that these contracts are awarded pursuant to the
provisions of the law and its implementing rules and regulations, and that all
these contracts are performed strictly according to specifications. 58
The assailed issuances of the respondent, MC Nos. 2010-83 and 2011-08,

are but implementation of this avowed policy of the State to make public
officials accountable to the people. They are amalgamations of existing laws,
rules and regulations designed to give teeth to the constitutional mandate of
transparency and accountability. EHTIDA
A scrutiny of the contents of the mentioned issuances shows that they do

not, in any manner, violate the fiscal autonomy of LGUs. To be clear, "[f]iscal
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." 59
It is inconceivable, however, how the publication of budgets,

expenditures, contracts and loans and procurement plans of LGUs required in
the assailed issuances could have infringed on the local fiscal autonomy of
LGUs. Firstly, the issuances do not interfere with the discretion of the LGUs in
the specification of their priority projects and the allocation of their budgets.
The posting requirements are mere transparency measures which do not at all
hurt the manner by which LGUs decide the utilization and allocation of their
funds.
Secondly, it appears that even Section 352 of the LGC that is being
invoked by the petitioners does not exclude the requirement for the posting of
the additional documents stated in MC Nos. 2010-83 and 2011-08. Apparently,
the mentioned provision requires the publication of "a summary of revenues
collected and funds received, including the appropriations and disbursements
of such funds." The additional requirement for the posting of budgets,
expenditures, contracts and loans, and procurement plans are well-within the
contemplation of Section 352 of the LGC considering they are documents
necessary for an accurate presentation of a summary of appropriations and
disbursements that an LGU is required to publish. DaEcTC
Finally, the Court believes that the supervisory powers of the President
are broad enough to embrace the power to require the publication of certain
documents as a mechanism of transparency. In Pimentel, Jr. v. Hon. Aguirre, 60
the Court reminded that local fiscal autonomy does not 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. The
President, by constitutional fiat, is the head of the economic and planning
agency of the government, primarily responsible for formulating and
implementing continuing, coordinated and integrated social and economic
policies, plans and programs for the entire country. 61
Moreover, the Constitution, which was drafted after long years of
dictatorship and abuse of power, is now replete with numerous provisions
directing the adoption of measures to uphold transparency and accountability
in government, with a view of protecting the nation from repeating its atrocious
past. In particular, the Constitution commands the strict adherence to full
disclosure of information on all matters relating to official transactions and
those involving public interest. Pertinently, Section 28, Article II and Section 7,
Article III of the Constitution, provide:
Article II
Declaration of Principles and State Policies Principles
Section 28. Subject to reasonable conditions prescribed by law,

the State adopts and implements a policy of full public disclosure of all
its transactions involving public interest.
Article III
Bill of Rights
Section 7. The right of the people to information on matters of

public concern shall be recognized. Access to official records, and to
documents and papers pertaining to official acts, transactions, or
decisions, as well as to government research data used as basis for
policy development, shall be afforded the citizen, subject to such
limitations as may be provided by law. DTAESI
In the instant case, the assailed issuances were issued pursuant to the
policy of promoting good governance through transparency, accountability and
participation. The action of the respondent is certainly within the constitutional
bounds of his power as alter ego of the President.
It is needless to say that the power to govern is a delegated authority
from the people who hailed the public official to office through the democratic
process of election. His stay in office remains a privilege which may be
withdrawn by the people should he betray his oath of office. Thus, he must not
frown upon accountability checks which aim to show how well he is performing
his delegated power. For, it is through these mechanisms of transparency and
accountability that he is able to prove to his constituency that he is worthy of
the continued privilege.
WHEREFORE, in view of the foregoing considerations, the petition is
DISMISSED for lack of merit.
SO ORDERED.
Sereno, C.J., Carpio, Velasco, Jr., Leonardo-de Castro, Peralta, Del Castillo,
Villarama, Jr., Mendoza, Perlas-Bernabe and Leonen, JJ., concur.

Brion, * J., is on leave.
Bersamin, ** Perez ** and Jardeleza, ** JJ., are on official leave.
Footnotes
* On leave.
** On official leave.
1. Rollo , pp. 3-30.
2. Id. at 48-51.
3. Id. at 31-32.
4. Id. at 33-47.
5. Id. at 123-127.
6. Id. at 123.
7. Id. at 128-130.
8. Id. at 129-130.
9. Id. at 48-51.
10. Id. at 51.
11. Id. at 31-32.

12. Id. at 31.
13. Id. at 33-47.

14. Id. at 33.
15. Id. at 36.
16. Id. at 76-119.

17. Id. at 136-150.
18. Court en banc Resolution in G.R. No. 195390 entitled Gov. Luis Raymund F.
Villafuerte, Jr. and The Province of Camarines Sur v. Hon. Jesse M. Robredo,
in his capacity as Secretary of the Department of the Interior and Local
Government; id. at 155-156.
19. Id. at 209-258.
20. Id. at 162-197.

21. Id. at 15.
22. Id. at 228-231.

23. Senate of the Philippines v. Exec. Sec. Ermita, 522 Phil. 1, 27 (2006).
24. Rollo , p. 231.

25. 465 Phil. 860 (2004).
26. Id. at 889-890.

27. Rollo , pp. 151-152.
28. Id.
29. Smart Communications, Inc. v. National Telecommunications Commission, 456

Phil. 145, 155-156 (2003).
30. Id. at 156.
31. 456 Phil. 145 (2003).

32. Id. at 157.
33. Rollo , pp. 175-176.
34. Id. at 178.

35. Article II, Section 25.
36. Ganzon v. Court of Appeals , G.R. No. 93252, August 5, 1991, 200 SCRA 271,
286 (1991).
37. 252 Phil. 813 (1989).
38. Id. at 825.

40. Supra note 37, at 825.
41. G.R. No. 182574, September 28, 2010, 631 SCRA 431.
42. Id. at 441-442.
43. Rollo , p. 177.

44. Id. at 31.
45. Id. at 32.
46. Basco, et al. v Philippine Amusements and Gaming Corp., 274 Phil. 323, 341
(1991).
47. G.R. No. 93252, August 5, 1991, 200 SCRA 271.
48. Id. at 286.

49. Hon. Joson v. Exec. Sec. Torres, 352 Phil. 888, 913-914 (1998).
50. 352 Phil. 888 (1998).
51. Id. at 914, citing Planas v. Gil, 67 Phil. 62, 77-78 (1939).
52. Rollo , p. 184.
53. Id.
54. 584 Phil. 246 (2008).
55. Id. at 267.
56. Article II, Section 28, and Article III, Section 7.
57. Section 3 (a).

58. Section 3 (e).
59. Pimentel, Jr. v. Hon. Aguirre, 391 Phil. 84, 102-103 (2000).
60. 391 Phil. 84 (2000).

61. Id. at 103.

EN BANC
[G.R. No. 175368. April 11, 2013.]
LEAGUE OF PROVINCES OF THE PHILIPPINES, petitioner, vs.

DEPARTMENT OF ENVIRONMENT and NATURAL RESOURCES
and HON. ANGELO T. REYES, in his capacity as Secretary of
DENR, respondents.
DECISION
PERALTA, J : p
This is a petition for certiorari, prohibition and mandamus, 1 praying

that this Court order the following: (1) declare as unconstitutional Section 17
(b) (3) (iii) of Republic Act (R.A.) No. 7160, otherwise known as The Local
Government Code of 1991 and Section 24 of Republic Act (R.A.) No. 7076,
otherwise known as the People's Small-Scale Mining Act of 1991; (2) prohibit
and bar respondents from exercising control over provinces; and (3) declare
as illegal the respondent Secretary of the Department of Energy and Natural
Resources' (DENR) nullification, voiding and cancellation of the Small-Scale
Mining permits issued by the Provincial Governor of Bulacan.
The facts are as follows:
On March 28, 1996, Golden Falcon Mineral Exploration Corporation
(Golden Falcon) filed with the DENR Mines and Geosciences Bureau Regional
Office No. III (MGB R-III) an Application for Financial and Technical Assistance
Agreement (FTAA) covering an area of 61,136 hectares situated in the
Municipalities of San Miguel, San Ildefonso, Norzagaray and San Jose del
Monte, Bulacan. 2
On April 29, 1998, the MGB R-III issued an Order denying Golden
Falcon's Application for Financial and Technical Assistance Agreement for
failure to secure area clearances from the Forest Management Sector and
Lands Management Sector of the DENR Regional Office No. III. 3
On November 11, 1998, Golden Falcon filed an appeal with the DENR
Mines and Geosciences Bureau Central Office (MGB-Central Office), and
sought reconsideration of the Order dated April 29, 1998. 4
On February 10, 2004, while Golden Falcon's appeal was pending,
Eduardo D. Mercado, Benedicto S. Cruz, Gerardo R. Cruz and Liberato
Sembrano filed with the Provincial Environment and Natural Resources Office
(PENRO) of Bulacan their respective Applications for Quarry Permit (AQP),
which covered the same area subject of Golden Falcon's Application for
Financial and Technical Assistance Agreement. 5 CAaSED
On July 16, 2004, the MGB-Central Office issued an Order denying

Golden Falcon's appeal and affirming the MGB R-III's Order dated April 29,
1998.
On September 13, 2004, Atlantic Mines and Trading Corporation
(AMTC) filed with the PENRO of Bulacan an Application for Exploration Permit
(AEP) covering 5,281 hectares of the area covered by Golden Falcon's
Application for Financial and Technical Assistance Agreement. 6
On October 19, 2004, DENR-MGB Director Horacio C. Ramos, in
response to MGB R-III Director Arnulfo V Cabantog's memorandum query
dated September 8, 2004, categorically stated that the MGB-Central Office's
Order dated July 16, 2004 became final on August 11, 2004, fifteen (15) days
after Golden Falcon received the said Order, per the Certification dated
October 8, 2004 issued by the Postmaster II of the Philippine Postal
Corporation of Cainta, Rizal. 7
Through letters dated May 5 and May 10, 2005, AMTC notified the
PENRO of Bulacan and the MGB R-III Director, respectively, that the subject
Applications for Quarry Permit fell within its (AMTC's) existing valid and prior
Application for Exploration Permit, and the former area of Golden Falcon was
open to mining location only on August 11, 2004 per the Memorandum dated
October 19, 2004 of the MGB Director, Central Office. 8
On June 24, 2005, Ricardo Medina, Jr., PENRO of Bulacan, indorsed
AMTC's letter to the Provincial Legal Officer, Atty. Eugenio F. Resurreccion,
for his legal opinion on which date of denial of Golden Falcon's
application/appeal — April 29, 1998 or July 16, 2004 — is to be considered in
the deliberation of the Provincial Mining Regulatory Board (PMRB) for the
purpose of determining when the land subject of the Applications for Quarry
Permit could be considered open for application.
On June 28, 2005, Provincial Legal Officer Eugenio Resurreccion issued
a legal opinion stating that the Order dated July 16, 2004 of the MGB-Central
Office was a mere reaffirmation of the Order dated April 29, 1998 of the MGB
R-III; hence, the Order dated April 29, 1998 should be the reckoning period
of the denial of the application of Golden Falcon.EACTSH
On July 22, 2005, AMTC filed with the PMRB of Bulacan a formal protest
against the aforesaid Applications for Quarry Permit on the ground that the
subject area was already covered by its Application for Exploration Permit. 9
On August 8, 2005, MGB R-III Director Cabantog, who was the
concurrent Chairman of the PMRB, endorsed to the Provincial Governor of
Bulacan, Governor Josefina M. dela Cruz, the aforesaid Applications for
Quarry Permit that had apparently been converted to Applications for Small-
Scale Mining Permit of Eduardo D. Mercado, Benedicto S. Cruz, Gerardo R.
Cruz and Lucila S. Valdez (formerly Liberato Sembrano). 10
On August 9, 2005, the PENRO of Bulacan issued four memoranda
recommending to Governor Dela Cruz the approval of the aforesaid
Applications for Small-Scale Mining Permit. 11
On August 10, 2005, Governor Dela Cruz issued the corresponding
Small-Scale Mining Permits in favor of Eduardo D. Mercado, Benedicto S.
Cruz, Gerardo R. Cruz and Lucila S. Valdez. 12
Subsequently, AMTC appealed to respondent DENR Secretary the grant
of the aforesaid Small-Scale Mining Permits, arguing that: (1) The PMRB of
Bulacan erred in giving due course to the Applications for Small-Scale Mining
Permit without first resolving its formal protest; (2) The areas covered by the
Small-Scale Mining Permits fall within the area covered by AMTC's valid prior
Application for Exploration Permit; (3) The Applications for Quarry Permit
were illegally converted to Applications for Small-Scale Mining Permit; (4)
DENR-MGB Director Horacio C. Ramos' ruling that the subject areas became
open for mining location only on August 11, 2004 was controlling; (5) The
Small-Scale Mining Permits were null and void because they covered areas
that were never declared People's Small-Scale Mining Program sites as
mandated by Section 4 of the People's Small-Scale Mining Act of 1991; and
(6) Iron ore is not considered as one of the quarry resources, as defined by
Section 43 of the Philippine Mining Act of 1995, which could be subjects of
an Application for Quarry Permit. 13 aTHCSE
On August 8, 2006, respondent DENR Secretary rendered a Decision14

in favor of AMTC. The DENR Secretary agreed with MGB Director Horacio C.
Ramos that the area was open to mining location only on August 11, 2004,
fifteen (15) days after the receipt by Golden Falcon on July 27, 2004 of a
copy of the MGB-Central Office's Order dated July 16, 2004, which Order
denied Golden Falcon's appeal. According to the DENR Secretary, the filing
by Golden Falcon of the letter-appeal suspended the finality of the Order of
denial issued on April 29, 1998 by the Regional Director until the resolution
of the appeal on July 16, 2004 by the MGB-Central Office. He stated that the
Applications for Quarry Permit were filed on February 10, 2004 when the
area was still closed to mining location; hence, the Small-Scale Mining
Permits granted by the PMRB and the Governor were null and void. On the
other hand, the DENR Secretary declared that AMTC filed its Application for
Exploration Permit when the area was already open to other mining
applicants; thus, AMTC's Application for Exploration Permit was valid.
Moreover, the DENR Secretary held that the questioned Small-Scale Mining
Permits were issued in violation of Section 4 of R.A. No. 7076 and beyond
the authority of the Provincial Governor pursuant to Section 43 of R.A. No.
7942, because the area was never proclaimed to be under the People's
Small-Scale Mining Program. Further, the DENR Secretary stated that iron
ore mineral is not considered among the quarry resources.
The dispositive portion of the DENR Secretary's Decision reads:
WHEREFORE, the Application for Exploration Permit, AEP-III-02-
04 of Atlantic Mines and Trading Corp. is declared valid and may now
be given due course. The Small-Scale Mining Permits, SSMP-B-002-05
of Gerardo Cruz, SSMP-B-003-05 of Eduardo D. Mercado, SSMP-B-004-
05 of Benedicto S. Cruz and SSMP-B-005-05 of Lucila S. Valdez are
declared NULL AND VOID. Consequently, the said permits are hereby
CANCELLED. 15
Hence, petitioner League of Provinces filed this petition.

Petitioner is a duly organized league of local governments incorporated
under R.A. No. 7160. Petitioner declares that it is composed of 81 provincial
governments, including the Province of Bulacan. It states that this is not an
action of one province alone, but the collective action of all provinces
through the League, as a favorable ruling will not only benefit one province,
but all provinces and all local governments. cHaDIA
Petitioner raises these issues:

I
WHETHER OR NOT SECTION 17(B)(3)(III) OF THE, 1991 LOCAL

GOVERNMENT CODE AND SECTION 24 OF THE PEOPLE'S SMALL-
SCALE MINING ACT OF 1991 ARE UNCONSTITUTIONAL FOR
PROVIDING FOR EXECUTIVE CONTROL AND INFRINGING UPON THE
LOCAL AUTONOMY OF PROVINCES.
II
WHETHER OR NOT THE ACT OF RESPONDENT [DENR] IN NULLIFYING,
VOIDING AND CANCELLING THE SMALL-SCALE MINING PERMITS
AMOUNTS TO EXECUTIVE CONTROL, NOT MERELY SUPERVISION AND
USURPS THE DEVOLVED POWERS OF ALL PROVINCES. 16
To start, the Court finds that petitioner has legal standing to file this
petition because it is tasked under Section 504 of the Local Government
Code of 1991 to promote local autonomy at the provincial level; 17 adopt
measures for the promotion of the welfare of all provinces and its officials
and employees; 18 and exercise such other powers and perform such other
duties and functions as the league may prescribe for the welfare of the
provinces. 19
Before this Court determines the validity of an act of a co-equal and
coordinate branch of the Government, it bears emphasis that ingrained in
our jurisprudence is the time-honored principle that a statute is presumed to
be valid. 20 This presumption is rooted in the doctrine of separation of
powers which enjoins upon the three coordinate departments of the
Government a becoming courtesy for each other's acts. 21 This Court,
however, may declare a law, or portions thereof, unconstitutional where a
petitioner has shown a clear and unequivocal breach of the Constitution, 22
leaving no doubt or hesitation in the mind of the Court. 23 aSADIC
In this case, petitioner admits that respondent DENR Secretary had the
authority to nullify the Small-Scale Mining Permits issued by the Provincial
Governor of Bulacan, as the DENR Secretary has control over the PMRB, and
the implementation of the Small-Scale Mining Program is subject to control
by respondent DENR.
Control of the DENR/DENR Secretary over small-scale mining in the
provinces is granted by three statutes: (1) R.A. No. 7160 or The Local
Government Code of 1991 ; (2) R.A. No. 7076 or the People's Small Scale
Mining Act of 1991; and (3) R.A. No. 7942, otherwise known as the Philippine
Mining Act of 1995. 24 The pertinent provisions of law sought to be declared
as unconstitutional by petitioner are as follows:

R.A. No. 7160 (The Local Government Code of 1991)
SEC. 17. Basic Services and Facilities . — (a) Local
government units shall endeavor to be self-reliant and shall continue
exercising the powers and discharging the duties and functions
currently vested upon them. They shall also discharge the functions
and responsibilities of national agencies and offices devolved to them
pursuant to this Code. Local government units shall likewise
exercise such other powers and discharge such other functions
and responsibilities as are necessary, appropriate, or
incidental to efficient and effective provision of the basic
services and facilities enumerated herein.
(b) Such basic services and facilities include , but are
not limited to, the following:
xxx xxx xxx
(3) For a Province:

xxx xxx xxx
(iii)Pursuant to national policies and subject to

supervision, control and review of the DENR, enforcementof
forestry laws limited to community-based forestry projects, pollution
control law, small-scale mining law, and other laws on the protection
of the environment; and mini-hydro electric projects for local purposes;
. . . 25
R.A. No. 7076 (People's Small-Scale Mining Act of 1991) CHIEDS
Sec. 24. Provincial/City Mining Regulatory Board. —

There is hereby created under the direct supervision and control
of the Secretary a provincial/city mining regulatory board, herein
called the Board, which shall be the implementing agency of the
Department, and shall exercise the following powers and functions,
subject to review by the Secretary :
(a) Declare and segregate existing gold-rush areas for small-
scale mining;
(b) Reserve future gold and other mining areas for small-
scale mining;
(c) Award contracts to small-scale miners;
(d) Formulate and implement rules and regulations related to
small-scale mining;
(e) Settle disputes, conflicts or litigations over conflicting
claims within a people's small-scale mining area, an area
that is declared a small-mining; and
(f) Perform such other functions as may be necessary to

achieve the goals and objectives of this Act. 26
Petitioner contends that the aforecited laws and DENR Administrative

Order No. 96-40 (the Implementing Rules and Regulations of the Philippine
Mining Act of 1995) did not explicitly confer upon respondents DENR and the
DENR Secretary the power to reverse, abrogate, nullify, void, or cancel the
permits issued by the Provincial Governor or small-scale mining contracts
entered into by the PMRB. The statutes are also silent as to the power of
respondent DENR Secretary to substitute his own judgment over that of the
Provincial Governor and the PMRB.
Moreover, petitioner contends that Section 17 (b) (3) (iii) of the Local
Government Code of 1991 and Section 24 of R.A. No. 7076, which confer
upon respondents DENR and the DENR Secretary the power of control are
unconstitutional, as the Constitution states that the President (and Executive
Departments and her alter-egos) has the power of supervision only, not
control, over acts of the local government units, and grants the local
government units autonomy, thus: AcSCaI
The 1987 Constitution:

Article X, Section 4. The President of the Philippines
shall exercise general supervision over local governments.
Provinces with respect to component cities and municipalities, and
cities and municipalities with respect to component barangays, shall
ensure that the acts of their component units are within the scope of
their prescribed powers and functions. 27
Petitioner contends that the policy in the above-cited constitutional provision

is mirrored in the Local Government Code, which states:
SEC. 25. National Supervision over Local Government Units.
— (a) Consistent with the basic policy on local autonomy, the
President shall exercise general supervision over local
government units to ensure that their acts are within the
scope of their prescribed powers and functions.
The President shall exercise supervisory authority directly over
provinces, highly urbanized cities, and independent component cities;
through the province with respect to component cities and
municipalities; and through the city and municipality with respect to
barangays. 28
Petitioner contends that the foregoing provisions of the Constitution
and the Local Government Code of 1991 show that the relationship between
the President and the Provinces or respondent DENR, as the alter ego of the
President, and the Province of Bulacan is one of executive supervision, not
one of executive control. The term "control" has been defined as the power
of an officer to alter or modify or set aside what a subordinate officer had
done in the performance of his/her duties and to substitute the judgment of
the former for the latter, while the term "supervision" is the power of a
superior officer to see to it that lower officers perform their function in
accordance with law. 29
Petitioner argues that respondent DENR Secretary went beyond mere
executive supervision and exercised control when he nullified the small-scale
mining permits granted by the Provincial Governor of Bulacan, as the former
substituted the judgment of the latter. CDAHIT
Petitioner asserts that what is involved here is a devolved power.

Under the Local Government Code of 1991, the power to regulate small-
scale mining has been devolved to all provinces. In the exercise of devolved
powers, departmental approval is not necessary. 30
Petitioner contends that if the provisions in Section 24 of R.A. No. 7076
and Section 17 (b) (3) (iii) of the Local Government Code of 1991 granting
the power of control to the DENR/DENR Secretary are not nullified, nothing
would stop the DENR Secretary from nullifying, voiding and canceling the
small-scale mining permits that have been issued by a Provincial Governor.
Petitioner submits that the statutory grant of power of control to
respondents is unconstitutional, as the Constitution only allows supervision
over local governments and proscribes control by the executive
departments.
In its Comment, respondents, represented by the Office of the Solicitor
General, stated that contrary to the assertion of petitioner, the power to
implement the small-scale mining law is expressly limited in Section 17 (b)
(3) (iii) of the Local Government Code, which provides that it must be carried
out "pursuant to national policies and subject to supervision, control and
review of the DENR." Moreover, the fact that the power to implement the
small-scale mining law has not been fully devolved to provinces is further
amplified by Section 4 of the People's Small-Scale Mining Act of 1991, which
provides, among others, that the People's Small-Scale Mining Program shall
be implemented by the DENR Secretary.
The petition lacks merit.
Paragraph 1 of Section 2, Article XII (National Economy and Patrimony)
of the Constitution 31 provides that "[t]he exploration, development and
utilization of natural resources shall be under the full control and supervision
of the State."
Moreover, paragraph 3 of Section 2, Article XII of the Constitution
provides that "[t]he Congress may, by law, allow small-scale utilization of
natural resources by Filipino citizens . . . ."
Pursuant to Section 2, Article XII of the Constitution, R.A. No. 7076 or
the People's Small-Scale Mining Act of 1991, was enacted, establishing
under Section 4 thereof a People's Small-Scale Mining Program to be
implemented by the DENR Secretary in coordination with other concerned
government agencies. STHAID
The People's Small-Scale Mining Act of 1991 defines "small-scale

mining" as "refer[ring] to mining activities, which rely heavily on manual
labor using simple implement and methods and do not use explosives or
heavy mining equipment." 32
It should be pointed out that the Administrative Code of 198733
provides that the DENR is, subject to law and higher authority, in charge of
carrying out the State's constitutional mandate, under Section 2, Article XII
of the Constitution, to control and supervise the exploration, development,
utilization and conservation of the country's natural resources. Hence, the
enforcement of small-scale mining law in the provinces is made subject to
the supervision, control and review of the DENR under the Local Government
Code of 1991, while the People's Small-Scale Mining Act of 1991 provides
that the People's Small-Scale Mining Program is to be implemented by the
DENR Secretary in coordination with other concerned local government
agencies.
Indeed, Section 4, Article X (Local Government) of the Constitution
states that "[t]he President of the Philippines shall exercise general
supervision over local governments," and Section 25 of the Local
Government Code reiterates the same. General supervision by the President
means no more than seeing to it that laws are faithfully executed or that
subordinate officers act within the law. 34
The Court has clarified that the constitutional guarantee of local
autonomy in the Constitution [Art. X, Sec. 2] refers to the administrative
autonomy of local government units or, cast in more technical language, the
decentralization of government authority. 35 It does not make local
governments sovereign within the State. 36 Administrative autonomy may
involve devolution of powers, but subject to limitations like following national
policies or standards, 37 and those provided by the Local Government Code,
as the structuring of local governments and the allocation of powers,
responsibilities, and resources among the different local government units
and local officials have been placed by the Constitution in the hands of
Congress 38 under Section 3, Article X of the Constitution. aDIHCT
Section 3, Article X of the Constitution mandated Congress to "enact a

local government code which shall provide for a more responsive
and accountable local government structure instituted through a
system of decentralization with effective mechanisms of recall, initiative,
and referendum, allocate among the different local government units
their powers, responsibilities, and resources, and provide for the
qualifications, election, appointment and removal, term, salaries, powers
and functions and duties of local officials, and all other matters
relating to the organization and operation of the local units."
In connection with the enforcement of the small-scale mining law in the
province, Section 17 of the Local Government Code provides:
SEC. 17. Basic Services and Facilities . — (a) Local
pursuant to this Code. Local government units shall likewise
exercise such other powers and discharge such other functions
and responsibilities as are necessary, appropriate, or
incidental to efficient and effective provision of the basic
services and facilities enumerated herein.

(b) Such basic services and facilities include, but
are not limited to, the following:
xxx xxx xxx
(3) For a Province:
xxx xxx xxx
(iii)Pursuant to national policies and

subject to supervision, control and review of
the DENR, enforcement of forestry laws limited
to community-based forestry projects, pollution
control law, small-scale mining law, and other
laws on the protection of the environment; and
mini-hydro electric projects for local purposes; 39
TDcAIH
Clearly, the Local Government Code did not fully devolve the
enforcement of the small-scale mining law to the provincial government, as
its enforcement is subject to the supervision, control and review of the
DENR, which is in charge, subject to law and higher authority, of carrying out
the State's constitutional mandate to control and supervise the exploration,
development, utilization of the country's natural resources. 40
Section 17 (b) (3) (iii) of the Local Government Code of 1991 is in
harmony with R.A. No. 7076 or the People's Small-Scale Mining Act of 1991,
41 which established a People's Small-Scale Mining Program to be
implemented by the Secretary of the DENR, thus:
Sec. 2. Declaration of Policy . — It is hereby declared of
the State to promote, develop, protect and rationalize viable small-
scale mining activities in order to generate more employment
opportunities and provide an equitable sharing of the nation's wealth
and natural resources, giving due regard to existing rights as herein
provided.
xxx xxx xxx
Sec. 4. People's Small-Scale Mining Program. — For the
purpose of carrying out the declared policy provided in Section 2
hereof, there is hereby established a People's Small-Scale
Mining Program to be implemented by the Secretary of the
Department of Environment and Natural Resources, hereinafter
called the Department, in coordination with other concerned
government agencies, designed to achieve an orderly, systematic
and rational scheme for the small-scale development and utilization of
mineral resources in certain mineral areas in order to address the
social, economic, technical, and environmental problems connected
with small-scale mining activities.
xxx xxx xxx

There is hereby created under the direct supervision and control
of the Secretary a provincial/city mining regulatory board, herein
called the Board, which shall be the implementing agency of the
Department, and shall exercise the following powers and functions,
subject to review by the Secretary :
(a) Declare and segregate existing gold-rush areas for small-

scale mining;
(b) Reserve future gold and other mining areas for small-
scale mining;
(c) Award contracts to small-scale miners;

(d) Formulate and implement rules and regulations related to
small-scale mining; IDATCE

that is declared a small-mining; and
(f) Perform such other functions as may be necessary to
achieve the goals and objectives of this Act. 42
DENR Administrative Order No. 34, series of 1992, containing the Rules
and Regulations to implement R.A. No. 7076, provides:
SEC. 21. Administrative Supervision over the People's
Small-Scale Mining Program. — The following DENR officials shall
exercise the following supervisory functions in the implementation of
the Program:
21.1DENR Secretary — direct supervision and control over
the program and activities of the small-scale miners
within the people's small-scale mining area;
21.2 Director — the Director shall:
a. Recommend the depth or length of the tunnel or adit

taking into account the: (1) size of membership and
capitalization of the cooperative; (2) size of
mineralized areas; (3) quantity of mineral deposits;
(4) safety of miners; and (5) environmental impact
and other considerations;
b. Determine the right of small-scale miners to existing
facilities in consultation with the operator,
claimowner, landowner or lessor of an affected area
upon declaration of a small-scale mining area;
c. Recommend to the Secretary the withdrawal of the
status of the people's small-scale mining area when it
can no longer be feasibly operated on a small-scale
basis; and DaCEIc
d. See to it that the small-scale mining contractors

abide by small-scale mines safety rules and
regulations.
xxx xxx xxx

SEC. 22. Provincial/City Mining Regulatory Board. —
The Provincial/City Mining Regulatory Board created under R.A. 7076
shall exercise the following powers and functions, subject to review
by the Secretary:
22.1 Declares and segregates existing gold rush area for
small-scale mining;
22.2 Reserves for the future, mineralized areas/mineral lands
for people's small-scale mining;
22.3 Awards contracts to small-scale miners' cooperative;
22.4 Formulates and implements rules and regulations
related to R.A. 7076;
22.5 Settles disputes, conflicts or litigations over conflicting
claims within ninety (90) days upon filing of protests or
complaints; Provided, That any aggrieved party may appeal
within five (5) days from the Board's decision to the
Secretary for final resolution otherwise the same is
considered final and executory; and
22.6 Performs such other functions as may be necessary to
achieve the goals and objectives of R.A. 7076.
SEC. 6. Declaration of People's Small-Scale Mining
Areas. — The Board created under R.A. 7076 shall have the authority
to declare and set aside People's Small-Scale Mining Areas in sites
onshore suitable for small-scale mining operations subject to review
by the DENR Secretary thru the Director. 43 AEDcIH
DENR Administrative Order No. 23, otherwise known as the

Implementing Rules and Regulations of R.A. No. 7942, otherwise known as
the Philippine Mining Act of 1995, adopted on August 15, 1995, provides
under Section 123 44 thereof that small-scale mining applications should be
filed with the PMRB 45 and the corresponding permits shall be issued by the
Provincial Governor, except small-scale mining applications within the
mineral reservations.
Thereafter, DENR Administrative Order No. 96-40, otherwise known as
the Revised Implementing Rules and Regulations of R.A. No. 7942, otherwise
known as the Philippine Mining Act of 1995, adopted on December 19, 1996,
provides that applications for Small-Scale Mining Permits shall be filed with
the Provincial Governor/City Mayor through the concerned Provincial/City
Mining Regulatory Board for areas outside the Mineral Reservations and with
the Director though the Bureau for areas within the Mineral Reservations. 46
Moreover, it provides that Local Government Units shall, in coordination with
the Bureau/Regional Office(s) and subject to valid and existing mining rights,
"approve applications for small-scale mining, sand and gravel, quarry . . .
and gravel permits not exceeding five (5) hectares." 47
Petitioner contends that the Local Government Code of 1991, R.A. No.
7076, DENR Administrative Order Nos. 95-23 and 96-40 granted the DENR
Secretary the broad statutory power of control, but did not confer upon the
respondents DENR and DENR Secretary the power to reverse, abrogate,
nullify, void, cancel the permits issued by the Provincial Governor or small-
scale mining contracts entered into by the Board.
The contention does not persuade.
The settlement of disputes over conflicting claims in small-scale mining
is provided for in Section 24 of R.A. No. 7076, thus:
There is hereby created under the direct supervision and control of the
Secretary a provincial/city mining regulatory board, herein called the
Board, which shall be the implementing agency of the Department, and
shall exercise the following powers and functions, subject to review by
the Secretary: acAIES
xxx xxx xxx

that is declared a small mining area; . . .
Section 24, paragraph (e) of R.A. No. 7076 cited above is reflected in
Section 22, paragraph 22.5 of the Implementing Rules and Regulations of
R.A. No. 7076, to wit:
SEC. 22. Provincial/City Mining Regulatory Board. — The
Provincial/City Mining Regulatory Board created under R.A. No. 7076
shall exercise the following powers and functions, subject to review by
the Secretary:
xxx xxx xxx
22.5 Settles disputes, conflicts or litigations over

conflicting claims within ninety (90) days upon filing of protests
or complaints; Provided, That any aggrieved party may appeal
within five (5) days from the Board's decision to the Secretary for
final resolution otherwise the same is considered final and
executory; . . .
In this case, in accordance with Section 22, paragraph 22.5 of the

Implementing Rules and Regulations of R.A. No. 7076, the AMTC filed on July
22, 2005 with the PMRB of Bulacan a formal protest against the Applications
for Quarry Permits of Eduardo Mercado, Benedicto Cruz, Liberato Sembrano
(replaced by Lucila Valdez) and Gerardo Cruz on the ground that the subject
area was already covered by its Application for Exploration Permit. 48
However, on August 8, 2005, the PMRB issued Resolution Nos. 05-8, 05-9,
05-10 and 05-11, resolving to submit to the Provincial Governor of Bulacan
the Applications for Small-Scale Mining Permits of Eduardo Mercado,
Benedicto Cruz, Lucila Valdez and Gerardo Cruz for the granting/issuance of
the said permits. 49 On August 10, 2005, the Provincial Governor of Bulacan
issued the Small-Scale Mining Permits to Eduardo Mercado, Benedicto Cruz,
Lucila Valdez and Gerardo Cruz based on the legal opinion of the Provincial
Legal Officer and the Resolutions of the PMRB of Bulacan.
Hence, AMTC filed an appeal with respondent DENR Secretary,
appealing from Letter-Resolution No. 05-1317 and Resolution Nos. 05-08, 05-
09, 05-10 and 05-11, all dated August 8, 2005, of the PMRB of Bulacan,
which resolutions gave due course and granted, on August 10, 2005, Small-
Scale Mining Permits to Eduardo D. Mercado, Benedicto S. Cruz, Lucila
Valdez and Gerardo Cruz involving parcels of mineral land situated at
Camachin, Doña Remedios Trinidad, Bulacan. cSHIaA
The PMRB of Bulacan filed its Answer, stating that it is an

administrative body, created under R.A. No. 7076, which cannot be equated
with the court wherein a full-blown hearing could be conducted, but it is
enough that the parties were given the opportunity to present evidence. It
asserted that the questioned resolutions it issued were in accordance with
the mining laws and that the Small-Scale Mining Permits granted were
registered ahead of AMTC's Application for Exploration Permit. Further, the
Board stated that the Governor of Bulacan had the power to approve the
Small-Scale Mining Permits under R.A. No. 7160.
The DENR Secretary found the appeal meritorious, and resolved these
pivotal issues: (1) when is the subject mining area open for mining location
by other applicants; and (2) who among the applicants have valid
applications. The pertinent portion of the decision of the DENR Secretary
reads:
We agree with the ruling of the MGB Director that the area is
[open only] to mining location on August 11, 2004, fifteen (15) days
after the receipt by Golden Falcon on July 27, 2004 of a copy of the
subject Order of July 16, 2004. The filing by Golden Falcon of the letter-
appeal suspended the finality of the Order of Denial issued on April 29,
1998 by the Regional Director until the Resolution thereof on July 16,
2004.
Although the subject AQPs/SSMPs were processed in accordance
with the procedures of the PMRB, however, the AQPs were filed on
February 10, 2004 when the area is still closed to mining location.
Consequently, the SSMPs granted by the PMRB and the Governor are
null and void making thereby AEP No. III-02-04 of the AMTC valid, it
having been filed when the area is already open to other mining
applicants.
Records also show that the AQPs were converted into SSMPs.
These are two (2) different applications. The questioned SSMPs were
issued in violation of Section 4 of RA 7076 and beyond the authority of
the Provincial Governor pursuant to Section 43 of RA 7942 because the
area was never proclaimed as "People's Small-Scale Mining Program."
Moreover, iron ore mineral is not considered among the quarry
resources. ECAaTS
xxx xxx xxx

WHEREFORE, the Application for Exploration Permit, AEP-III-02-
04 of Atlantic Mines and Trading Corp. is declared valid and may now
be given due course. The Small-Scale Mining Permits, SSMP-B-002-05
of Gerardo Cruz, SSMP-B-003-05 of Eduardo D. Mercado, SSMP-B-004-
05 of Benedicto S. Cruz and SSMP-B-005-05 of Lucila S. Valdez are
declared NULL AND VOID. Consequently, the said permits are hereby
CANCELLED. 50
The Court finds that the decision of the DENR Secretary was rendered
in accordance with the power of review granted to the DENR Secretary in the
resolution of disputes, which is provided for in Section 24 of R.A. No. 7076 51
and Section 22 of its Implementing Rules and Regulations. 52 It is noted that
although AMTC filed a protest with the PMRB regarding its superior and prior
Application for Exploration Permit over the Applications for Quarry Permit,
which were converted to Small-Scale Mining Permits, the PMRB did not
resolve the same, but issued Resolution Nos. 05-08 to 05-11 on August 8,
2005, resolving to submit to the Provincial Governor of Bulacan the
Applications for Small-Scale Mining Permits of Eduardo Mercado, Benedicto
Cruz, Lucila Valdez and Gerardo Cruz for the granting of the said permits.
After the Provincial Governor of Bulacan issued the Small-Scale Mining
Permits on August 10, 2005, AMTC appealed the Resolutions of the PMRB
giving due course to the granting of the Small-Scale Mining Permits by the
Provincial Governor.
Hence, the decision of the DENR Secretary, declaring that the
Application for Exploration Permit of AMTC was valid and may be given due
course, and canceling the Small-Scale Mining Permits issued by the
Provincial Governor, emanated from the power of review granted to the
DENR Secretary under R.A. No. 7076 and its Implementing Rules and
Regulations. The DENR Secretary's power to review and, therefore, decide,
in this case, the issue on the validity of the issuance of the Small-Scale
Mining Permits by the Provincial Governor as recommended by the PMRB, is
a quasi judicial function, which involves the determination of what the law is,
and what the legal rights of the contending parties are, with respect to the
matter in controversy and, on the basis thereof and the facts obtaining, the
adjudication of their respective rights. 53 The DENR Secretary exercises
quasi-judicial function under R.A. No. 7076 and its Implementing Rules and
Regulations to the extent necessary in settling disputes, conflicts or
litigations over conflicting claims. This quasi-judicial function of the DENR
Secretary can neither be equated with "substitution of judgment" of the
Provincial Governor in issuing Small-Scale Mining Permits nor "control" over
the said act of the Provincial Governor as it is a determination of the rights
of AMTC over conflicting claims based on the law.
In determining whether Section 17 (b) (3) (iii) of the Local Government
Code of 1991 and Section 24 of R.A. No. 7076 are unconstitutional, the Court
has been guided by Beltran v. The Secretary of Health , 54 which held: DCcSHE
The fundamental criterion is that all reasonable doubts should be

resolved in favor of the constitutionality of a statute. Every law has in
its favor the presumption of constitutionality. For a law to be nullified, it
must be shown that there is a clear and unequivocal breach of the
Constitution. The ground for nullity must be clear and beyond
reasonable doubt. Those who petition this Court to declare a law, or
parts thereof, unconstitutional must clearly establish the basis therefor.
Otherwise, the petition must fail. 55
In this case, the Court finds that the grounds raised by petitioner to
challenge the constitutionality of Section 17 (b) (3) (iii) of the Local
Government Code of 1991 and Section 24 of R.A. No. 7076 failed to
overcome the constitutionality of the said provisions of law.
WHEREFORE, the petition is DISMISSED for lack of merit.
No costs.
SO ORDERED.
Carpio, Velasco, Jr., Leonardo-de Castro, Brion, Bersamin, Del Castillo,
Abad, Villarama, Jr., Perez, Mendoza, Reyes and Perlas-Bernabe, JJ., concur.
Sereno, C.J., see concurring opinion.
Leonen, J., see separate concurring opinion.
Separate Opinions
SERENO, C.J., concurring:
I concur in the result. However, there appears to be a need to address

the issue of whether petitioner League of Provinces of the Philippines has
legal standing to assail the constitutionality of the subject laws.
Petitioner is a duly organized league of local governments incorporated
under Republic Act No. 7610, otherwise known as the Local Government
Code. It claims that it is composed of 81 local governments, including the
province of Bulacan. It further claims that the instant case is a collective
action of all provinces — in that, a favorable ruling will not only benefit the
province of Bulacan, but also all the other provinces and local governments.
The ponencia upheld petitioner's legal standing to file this petition
because the latter is tasked, under Section 504 of the Local Government
Code, to promote local autonomy at the provincial level, adopt measures for
the promotion of the welfare of all provinces and its officials and employees,
and exercise such other powers and perform such duties and functions as
the league may prescribe for the welfare of the provinces.
I concur that the League has legal standing to assail the
constitutionality of the subject laws. DcTAIH
A divergent position had been advanced by Justice Marvic M.V.F.

Leonen. He says that, "[i]n case of a citizen's suit, the 'interest of the
person assailing the constitutionality of a statute must be direct and
personal. He must be able to show, not only that the law is invalid, but also
that he has sustained or is in immediate danger of sustaining some direct
injury as a result of its enforcement, and not merely that hesuffers
thereby in some indefinite way . ' " 1 He further claims that, "[A]s an
organization that represents all provinces, it did not suffer an actual injury
or an injury in fact, resulting from the implementation of the subject
provisions." 2 He, therefore, concludes that the League has no standing to
assail the constitutionality of the subject laws.
A public action is a suit brought to vindicate a right belonging to the
public qua public. Based on present jurisprudence, except in cases involving
issues of transcendental importance, 3 it can only be brought by the proper
representative of the public — one who has standing. Generally, the one who
has standing is the one who suffered or immediately stands to suffer actual
injury or injury in fact. 4 Injury in fact means damage that is distinct from
those suffered by the public. 5 This is different from legal injury or injury in
law, which results from a violation of a right belonging to a person. 6
The divergent position appears to confuse the general requirement for
standing with standing in citizens' suits. The latter normally presupposes
that there is no one who suffered injury in fact. Therefore, any citizen is
allowed to bring the suit to vindicate the public's right. Instructive are the
pronouncements of this Court in the seminal case of Severino v. Governor-
General: 7
It is true, as we have stated, that the right which he seeks, to
enforce is not greater or different from that of any other
qualified elector in the municipality of Silay. It is also true that the
injury which he would suffer in case he fails to obtain the relief
sought would not be greater or different from that of the other
electors; but he is seeking to enforce a public right as
distinguished from a private right. The real party in interest is
the public, or the qualified electors of the town of Silay. Each elector
has the same right and would suffer the same injury. Each elector
stands on the same basis with reference to maintaining a petition to
determine whether or not the relief sought by the relator should be
granted. ITaESD
xxx xxx xxx
We are therefore of the opinion that the weight of authority

supports the proposition that the relator is a proper party to
proceedings of this character when a public right is sought to
be enforced. If the general rule in America were otherwise, we think
that it would not be applicable to the case at bar for the reason "that it
is always dangerous to apply a general rule to a particular case without
keeping in mind the reason for the rule, because, if under the particular
circumstances the reason for the rule does not exist, the rule itself is
not applicable and reliance upon the rule may well lead to error."
No reason exists in the case at bar for applying the general rule
insisted upon by counsel for the respondent. The circumstances which
surround this case are different from those in the United States,
inasmuch as if the relator is not a proper party to these
proceedings no other person could be, as we have seen that it is
not the duty of the law officer of the Government to appear and
represent the people in cases of this character. (Emphasis supplied)
Also, the divergent position appears to confuse public actions with

class suits (a species of private action) when it stated that "[p]rovinces do
not have a common or general interest on matters related to mining that the
League of Provinces can represent." Under Section 12 of Rule 3 of the Rules
of Court, "common or general interest" is a requirement in class suits. It is
not a requirement for standing in public actions.
Finally, the divergent position also appears to confuse the general
requirement for standing and standing in citizens' suits, with organizational
or associational standing. The latter does not require an association to suffer
injury in fact. The question is whether such organization can bring a suit on
behalf of its members who have suffered the injury in fact. In short, can the
representatives of the public be themselves represented in a suit.
In this jurisdiction, we have acknowledged the standing of associations
to sue on behalf of their members. In Executive Secretary v. Court of
Appeals, 8 we held that: TCcSDE
The modern view is that an association has standing to complain

of injuries to its members. This view fuses the legal identity of an
association with that of its members. An association has standing to file
suit for its workers despite its lack of direct interest if its members are
affected by the action. An organization has standing to assert the
concerns of its constituents.
Thus, based on jurisprudence, the League has legal standing to

question the constitutionality of the subject laws, not only in behalf of the
province of Bulacan, but also its other members.
Apart from jurisprudence, the League is also vested with statutory
standing. The League of Provinces' primary purpose is clear from the
provisions of the Local Government Code, viz.:
SEC. 502. Purpose of Organization. — There shall be an
organization of all provinces to be known as the League of Provinces
f o r the primary purpose of ventilating, articulating and
crystallizing issues affecting provincial and metropolitan
political subdivision government administration, and securing,
through proper and legal means, solutions thereto. For this
purpose, the Metropolitan Manila Area and any metropolitan political
subdivision shall be considered as separate provincial units of the
league. (Emphasis supplied)
This purpose is further amplified by the grant to it of certain powers,

functions and duties, which are, viz.:
SEC. 504. Powers, Functions and Duties of the League of Provinces. —
The league of provinces shall:
(a) Assist the national government in the formulation and

implementation of the policies, programs and projects affecting
provinces as a whole;
(b) Promote local autonomy at the provincial level;
(c) Adopt measures for the promotion of the welfare of all

provinces and its officials and employees;
(d) Encourage peoples participation in local government
administration in order to promote united and concerted action for
the attainment of countrywide development goals; IHEaAc
(e) Supplement the efforts of the national government in creating

opportunities for gainful employment within the province;
(f) Give priority to programs designed for the total development of
the provinces in consonance with the policies, programs and projects
of the national government;
(g) Serve as a forum for crystallizing and expressing ideas,

seeking the necessary assistance of the national government
and providing the private sector avenues for cooperation in
the promotion of the welfare of the provinces; and
(h) Exercise such other powers and perform such other

duties and functions as the league may prescribe for the
welfare of the provinces and metropolitan political
subdivisions. 9 (Emphasis supplied)
In League of Cities of the Philippines v. COMELEC, 10 this Court upheld

the League of Cities' standing of the basis of Section 499 of the Local
Government Code which tasks it with the "primary purpose of ventilating,
articulating and crystallizing issues affecting city government administration
and securing, through proper and legal means, solutions thereto."
Other instances of statutory standing can be found in: (1) the
Constitution, which allows any citizen to challenge "the sufficiency of the
factual basis of the proclamation of martial law or the suspension of the
privilege of the writ or the extension thereof;" 11 (2) the Administrative Code
wherein "[a]ny party aggrieved or adversely affected by an agency decision
may seek judicial review;" 12 (3) the Civil Code which provides that "[i]f a
civil action is brought by reason of the maintenance of a public nuisance,
such action shall be commenced by the city or municipal mayor," 13 and (4)
the Rules of Procedure in Environmental Cases by which "[a]ny Filipino
citizen in representation of others, including minors or generations yet
unborn, may file an action to enforce rights or obligations under
environmental laws." 14 AIHDcC
All told, to adopt the divergent position will destabilize jurisprudence

and is tantamount to ignoring the clear mandate of law.
LEONEN, J., concurring:
I concur in the result.

This is a case of overlapping claims, which involve the application of
the Mining Act, and the Small-Scale Mining Act. It is specific to the facts of
this case, which are:
The Mines and Geosciences Bureau, Regional Office No. III (MGB R-III)
denied Golden Falcon Mineral Exploration Corporation's (Golden Falcon)
application for Financial and Technical Assistance Agreement (FTAA) on April
29, 1998 for failure to secure the required clearances. 1
Golden Falcon appealed the denial with the Mines and Geosciences
Bureau — Central Office (Central Office). 2 The appeal was denied only on
July 16, 2004 or six years after Golden Falcon appealed. 3
On February 10, 2004, pending Golden Falcon's appeal to the Central
Office, certain persons filed with the Provincial Environment and Natural
Resources Office (PENRO) of Bulacan their applications for quarry permit
covering the same area subject of Golden Falcon's FTAA application. 4
On September 13, 2004, after the Central Office denied Golden
Falcon's appeal, Atlantic Mines and Trading Corporation (AMTC) filed an
application for exploration permit covering the same subject area with the
PENRO of Bulacan. 5
Confusion of rights resulted from the overlapping applications of AMTC
and the persons applying for quarry permits. The main question was when
did the subject area become open for small scale mining applications. At
that time, the provincial government did not question whether it had
concurrent or more superior jurisdiction vis-a-vis the national government. DIETcH
It was upon query by MGB R-III Director Arnulfo Cabantog that DENR-
MGB Director Horacio Ramos stated that the denial of Golden Falcon's
application became final fifteen days after the denial of its appeal to the
Central Office or on August 11, 2004. 6 Hence, the area of Golden Falcon's
application became open to permit applications only on that date.
After the MGB Director issued the statement, however, the Provincial
Legal Officer of Bulacan, Atty. Eugenio F. Ressureccion issued a legal opinion
on the issue, stating that the subject area became open for new applications
on the date of the first denial on April 29, 1998. 7
On the basis of the Provincial Legal Officer's opinion, Director Cabantog
of MGB R-III endorsed the applications for quarry permit, now converted to
applications for small-scale mining permit, to the Governor of Bulacan. 8
Later on, the Governor issued the small-scale mining permits. 9
Upon appeal by the AMTC, the DENR Secretary declared as null the
small-scale mining permits issued by the Governor on the ground that they
have been issued in violation of Section 4 of R.A. No. 7076 and beyond the
authority of the Governor. 10 According to the DENR Secretary, the area was
never proclaimed to be under the small-scale mining program. 11 Iron ores
also cannot be considered as a quarry resource. 12
The question in this case is whether or not the provincial governor had
the power to issue the subject permits.
The fact that the application for small-scale mining permit was initially
filed as applications for quarry permits is not contested.
Quarry permits, however, may only be issued "on privately-owned
lands and/or public lands for building and construction materials such as
marble, basalt, andesite, conglomerate, tuff, adobe, granite, gabbro,
serpentine, inset filling materials, clay for ceramic tiles and building bricks,
pumice, perlite and other similar materials . . ." 13 It may not be issued on ".
. . resources that contain metals or metallic constituents and/or other
valuable materials in economic quantities." 14 aSADIC
Not only do iron ores fall outside the classification of any of the
enumerated materials in Section 43 of the Mining Act, but iron is also a
metal. It may not be classified as a quarry resource, hence, the provincial
governor had no authority to issue the quarry permits in the first place.
Probably realizing this error, the applications for quarry permit were
converted to applications for small-scale mining permit.
Even so, the issuance of the small-scale mining permit was still beyond
the authority of the provincial governor. Small-scale mining areas must first
be declared and set aside as such before they can be made subject of small-
scale mining rights. 15 The applications for small-scale mining permit, in this
case, involved covered areas, which were never declared as people's small-
scale mining areas. This is enough reason to deny an application for small-
scale mining permit. Permits issued in disregard of this fact are void for
having been issued beyond the authority of the issuing officer.
Therefore, there was no issue of local autonomy. The provincial
governor did not have the competence to issue the questioned permits.
Neither does the League of Provinces have any standing to raise the
present constitutional issue.
Locus standi is defined as "a right of appearance in a court of justice
on a given question." 16 The fundamental question is "whether a party
alleges such personal stake in the outcome of the controversy as to assure
that concrete adverseness which sharpens the presentation of issues upon
which the court depends for illumination of difficult constitutional questions."
17
In case of a citizens' suit, the "interest of the person assailing the

constitutionality of a statute must be direct and personal. He must be able to
show, not only that the law is invalid, but also that he has sustained or is in
immediate danger of sustaining some direct injury as a result of its
enforcement, and not merely that he suffers thereby in some indefinite
way." 18 In the case of Telecommunications and Broadcast Attorneys of the
Philippines, Inc. and GMA Network, Inc. v. COMELEC , we said that a citizen
who raises a constitutional question may only do so if s/he could show: (1)
that s/he had personally suffered some actual or threatened injury; (2)
that the actual or threatened injury was a result of an allegedly illegal
conduct of the government; (3) that the injury is traceable to the challenged
action; and (4) that the injury is likely to be redressed by a favorable action.
19 IHCSTE
The Petitioner League of Provinces' status as an organization of all

provinces duty-bound to promote local autonomy 20 and adopt measures for
the promotion of the welfare of provinces 21 does not clothe it with standing
to question the constitutionality of the Section 17 (b) (iii) of the Local
Government Code and Section 24 of Rep. Act No. 7076 or the Small-Scale
Mining Act.
As an organization that represents all provinces, it did not suffer an
actual injury or an injury in fact, resulting from the implementation of the
subject provisions. It cannot be said either that the provinces that Petitioner
represents suffered the same injury when the Central Office nullified the
permits issued by the Governor of Bulacan.
Provinces do not have a common or general interest on matters
related to mining that the League of Provinces can represent. Each province
has a particular interest to protect and claims to pursue that are separate
and distinct from the others. Therefore, each is unique as to its reasons for
raising issues to the Court. The League of Provinces cannot represent all
provinces on mining-related issues. The perceived wrong suffered by the
Province of Bulacan when the Central Office allegedly exercised control does
not necessarily constitute a wrong suffered by the other provinces.
Furthermore, the Constitution provides for two types of local
governance other than the national government: 1) The territorial and
political subdivisions composed of provinces, cities, municipalities and
barangays; and 2) autonomous regions. 22 The division of Article X of the
Constitution distinguishes between their creation and relationship with the
national government.
The creation of autonomous regions takes into consideration the
"historical and cultural heritage, economic and social structures, and other
relevant characteristics" 23 which its constituent geographical areas share in
common. These factors are not considered in the creation of territorial and
political subdivisions.
Autonomous regions are not only created by an act of the Congress.
The Constitution also provides for a plebiscite requirement before the
organic act that creates an autonomous region becomes effective. 24 This
constitutes the creation of autonomous regions a direct act of the people. It
means that the basic structure of an autonomous region, consisting of the
executive department and legislative assembly, its special courts, and the
provisions on its powers may not be easily amended or superseded by a
simple act of the Congress. HTCaAD
Moreover, autonomous regions have powers, e.g., over their

administrative organization, sources of revenues, ancestral domain, natural
resources, personal, family and property relations, regional planning
development, economic, social and tourism development, educational
policies, cultural heritage and other matters. 25
On the other hand, the creation of territorial and political subdivisions
is subject to the local government code enacted by the Congress without a
plebiscite requirement. 26 While this does not disallow the inclusion of
provisions requiring plebiscites in the creation of provinces, cities, and
municipalities, the local government code may be amended or superseded
by another legislative act that removes such requirement. Their government
structure, powers, and responsibilities, therefore, are always subject to
amendment by legislative acts.
The territorial and political subdivisions and autonomous regions are
granted autonomy under the Constitution. 27 The constitutional distinctions
between them imply a clear distinction between the kinds of autonomy that
they exercise.
The oft-cited case of Limbona v. Mangelin 28 penned by Justice
Sarmiento distinguishes between two types of autonomy:
. . . autonomy is either decentralization of administration or
power and in the process to make local governments 'more responsive
and accountable,' and 'ensure their fullest development as self-reliant
national development and social progress'. . .

abdication of political power in the favor of local governments units
declared to be autonomous. In that case, the autonomous government
is free to chart its own destiny and shape its future with minimum
intervention from central authorities. According to a constitutional
author, decentralization of power amounts to "self-immolation," since
in that event, the autonomous government becomes accountable not
to the central authorities but to its constituency.
HDacIT
xxx xxx xxx
An autonomous government that enjoys autonomy of the latter

category [CONST. (1987), art. X sec. 15.] is subject alone to the decree
of the organic act creating it and accepted principles on the effects and
limits of "autonomy." On the other hand, an autonomous government
of the former class is, as we noted, under the supervision of the
national government acting through the President (and the Department
of Local Government). . .
I agree that autonomy, as phrased in Section 2 of Article X of the

Constitution, which pertains to provinces, cities, municipalities and
barangays, refers only to administrative autonomy.
In granting autonomy, the national government does not totally
relinquish its powers. 29 The grant of autonomy does not make territorial and
political subdivisions sovereign within the state or an "imperium in imperio".
30 The aggrupation of local government units and the creation of regional
development councils in Sections 13 and 14 of Article X of the Constitution
do not contemplate grant of discretion to create larger units with a
recognized distinct political power that is parallel to the state. It merely
facilitates coordination and exchange among them, still, for the purpose of
administration.
Territorial and political subdivisions are only allowed to take care of
their local affairs so that governance will be more responsive and effective
to their unique needs. 31 The Congress still retains control over the extent of
powers or autonomy granted to them.
Therefore, when the national government invalidates an act of a
territorial or political subdivision in the exercise of a power that is
constitutionally and statutorily lodged to it, the territorial or political
subdivision cannot complain that its autonomy is being violated. This is
especially so when the extent of its autonomy under the Constitution or law
does not include power or control over the matter, to the exclusion of the
national government.
However, I do not agree that Limbona v. Mangelin correctly categorized
the kind of autonomy that autonomous regions enjoy.
In that case, the court tried to determine the extent of self-government
of autonomous governments organized under Presidential Decree No. 1618
on July 25, 1979. This is prior to the autonomous regions contemplated in the
1987 Constitution. TASCEc
Autonomous regions are granted more powers and less intervention

from the national government than territorial and political subdivisions. They
are, thus, in a more asymmetrical relationship with the national government
as compared to other local governments or any regional formation. 32 The
Constitution grants them legislative powers over some matters, e.g., natural
resources, personal, family and property relations, economic and tourism
development, educational policies, that are usually under the control of the
national government. However, they are still subject to the supervision of
the President. Their establishment is still subject to the framework of the
Constitution, particularly, sections 15 to 21 of Article X, national sovereignty
and territorial integrity of the Republic of the Philippines.
The exact contours of the relationship of the autonomous government
and the national government are defined by legislation such as Republic Act
No. 9054 or the Organic Act for the Autonomous Region in Muslim Mindanao.
This is not at issue here and our pronouncements should not cover the
provinces that may be within that autonomous region.
Considering the foregoing, I vote to DISMISS the petition.
Footnotes
1.Under Rule 65 of the Rules of Court.

2.DENR Decision, rollo, pp. 53, 54.
3.Rollo , p. 54.
4.Id.
5.Id.
6.Id.
7.Id. at 55.
8.Id.
9.Comment of Respondents, id. at 74.

10.Annex "B," id. at 25.
11.Annexes "D" to "D-3," id. at 30-33.

12.Annexes "E" to "E-3," id. at 34-49.
13.Decision of the DENR Secretary, id. at 56.
14.Rollo , p. 53.
15.Id. at 58-59. (Emphasis in the original.)
16.Id. at 8-9.
17.R.A. No. 7160, Section 504 (b).

18.R.A. No. 7160, Section 504 (c).
19.R.A. No. 7160, Section 504 (h).
20.Coconut Oil Refiners Association, Inc. v Torres , G.R. No. 132527, July 29, 2005,
465 SCRA 47, 62; 503 Phil. 43, 53 (2005).
21.Id. at 62-63; id.

22.Id. at 63; id. at 54.
23.Id.; id.
24.Sec. 42. Small-Scale Mining. — Small-scale mining shall continue to be

governed by Republic Act No. 7076 and other pertinent laws.
25.Emphasis supplied.
29.Citing National Liga Ng Mga Barangay v. Paredes , G.R. Nos. 130775 and
131939, September 27, 2004, 439 SCRA 130; 482 Phil. 331 (2004).
30.Citing Tano v. Socrates , G.R. No. 110249, August 21, 1997, 278 SCRA 154; 343
Phil. 670 (1997).
31.The Constitution, Article XII, Section 2. — All lands of the public domain, waters,
minerals, coal, petroleum, and other mineral oils, all forces of potential
energy, fisheries, forests or timber, wildlife, flora and fauna, and other
natural resources are owned by the State. With the exception of agricultural
lands, all other natural resources shall not be alienated. The exploration,
development, and utilization of natural resources shall be under the
full control and supervision of the State. The State may directly
undertake such activities, or it may enter into co-production, joint venture, or
production-sharing agreements with Filipino citizens, or corporations or
associations at least sixty per centum of whose capital is owned by such
citizens. Such agreements may be for a period not exceeding twenty-five
years, renewable for not more than twenty-five years, and under such terms
and conditions as may be provided by law. In cases of water rights for
irrigation, water supply fisheries, or industrial uses other than the
development of water power, beneficial use may be the measure and limit of
the grant.
xxx xxx xxx
The Congress may, by law, allow small-scale utilization of natural
resources by Filipino citizens, as well as cooperative fish farming, with
priority to subsistence fishermen and fish-workers in rivers, lakes, bays, and
lagoons. (Emphases supplied.)
32.R.A. No. 7076, Sec. 2.
33.The Administrative Code of 1987, Title XIV, Chapter 1:

SEC. 1. Declaration of Policy. — (1) The State shall ensure, for the benefit
of the Filipino people, the full exploration and development as well as the
judicious disposition, utilization, management, renewal and conservation of
the country's forest, mineral, land, waters, fisheries, wildlife, off-shore areas
and other natural resources, consistent with the necessity of maintaining a
sound ecological balance and protecting and enhancing the quality of the
environment and the objective of making the exploration, development and
utilization of such natural resources equitably accessible to the different
segments of the present as well as future generations.
xxx xxx xxx

SEC. 2. Mandate. — (1) The Department of Environment and
Natural Resources shall be primarily responsible for the
implementation of the foregoing policy.
(2) It shall, subject to law and higher authority, be in charge of
carrying out the State's constitutional mandate to control and
supervise the exploration, development, utilization and
conservation of the country's natural resources. (Emphasis supplied)
34.Fr. Joaquin G. Bernas, S.J., The Constitution of the Philippines A Commentary,
Vol. II, Â© 1988, p. 379, citing III RECORD 451-452.
35.Cordillera Board Coalition v. Commission on Audit , G.R. No. 79956, January 29,
1990, 181 SCRA 495.
36.Basco v. Philippine Amusements and Gaming Corporation , G.R. No. 91649, May
14, 1991, 197 SCRA 52.
37.Jose N. Nolledo, The Local Government Code of 1991 Annotated, 2004 edition,
p. 10.
38.Fr. Joaquin G. Bernas, S.J., The Constitution of the Philippines A Commentary,
Vol. II, Â© 1988, supra note 34, at 377.
39.Emphases supplied.
40.The Administrative Code of 1987, Title XIV (Environment and Natural

Resources), Chapter 1, Section 2 (2).
41.R.A. No. 7076 was approved on June 27, 1991 and took effect on July 19, 1991.

44.DENR Administrative Order No. 95-23, n SEC. 123. General Provisions. — Small-
scale mining applications shall be filed with, processed and evaluated by the
Provincial/City Mining Regulatory Board concerned and the corresponding
permits to be issued by the Provincial/City Mayor concerned except small-
scale mining applications within the mineral reservations which shall be filed,
processed and evaluated by the Bureau and the corresponding permit to be
issued by the Director.
. . . [T]he implementing rules and regulations of R.A. No. 7076, insofar as they
are not inconsistent with the provisions of these implementing rules and
regulations, shall continue to govern small-scale mining operations.
(Emphasis supplied.)
45.SEC. 23.Composition of the Provincial/City Mining Regulatory Board. — The
Board shall be composed of the following:
23.1 Representative from the DENR Regional Office concerned —
Chairman;
23.2 Governor or City Mayor or their duly authorized representative —

Member;
23.3 One (1) Small-Scale mining representative — Member or as per
Section 24.3 hereof;
23.4 One (1) Large-Scale mining representative — Member;
23.5 One (1) representative from a nongovernment organization —
Member; and
23.6 Staff support to the Board to be provided by the Department.

46.DENR Administrative Order No. 96-40, Chapter IX, Section 103.
47.DENR Administrative Order No. 96-40, Chapter 1, Section 8.
48.Decision of the DENR Secretary, rollo, pp. 2-3.

49.Annexes "C" to "C-3," id. at 26-29.
50.Rollo , pp. 57-58. (Emphasis supplied)
51.Sec. 24. Provincial/City Mining Regulatory Board. — There is hereby
created under the direct supervision and control of the Secretary a
provincial/city mining regulatory board, herein called the Board, which shall
be the implementing agency of the Department, and shall exercise the
following powers and functions, subject to review by the Secretary :
xxx xxx xxx
(e) Settle disputes, conflicts or litigations over conflicting claims within a

people's small-scale mining area, an area that is declared a small-mining
area; and . . . (Emphasis supplied.)
52.SEC. 22. Provincial/City Mining Regulatory Board. — The
Provincial/City Mining Regulatory Board created under R.A. No. 7076 shall
exercise the following powers and functions, subject to review by the
Secretary:
xxx xxx xxx
22.5 Settles disputes, conflicts or litigations over conflicting claims within

ninety (90) days upon filing of protests or complaints; Provided, That any
aggrieved party may appeal within five (5) days from the Board's decision to
the Secretary for final resolution otherwise the same is considered final and
executory; . . .
53.Doran v. Luczon, Jr., G.R. No. 151344, September 26, 2006, 503 SCRA 106.
54.G.R. Nos. 133640, 133661, and 139147, November 25, 2005, 476 SCRA 168.
55.Beltran v. Secretary of Health, supra, at 199-200.
SERENO, C.J., concurring:

3.David v. Arroyo , G.R. Nos. 171396, 171409, 171485, 171483, 171400, 171489,
171424, 03 May 2006 citing Araneta v. Dinglasan , 84 Phil. 368 (1949);
Aquino v. Comelec , G.R. No. L-No. 40004, 31 January 1975, 62 SCRA 275;
Chavez v. Public Estates Authority, G.R. No. 133250, 09 July 2002, 384 SCRA
152; Bagong Alyansang Makabayan v. Zamora, G.R. Nos. 138570, 138572,
138587, 138680, 138698, 10 October 2000, 342 SCRA 449; Lim v. Executive
Secretary, G.R. No. 151445, 11 April 2002, 380 SCRA 739.
4.Association of Data Processing Service Organizations, Inc. v. Camp , 397 U.S. 150
(1970).
5.Dissenting Opinion, J. Puno, Kilosbayan, Inc. v. Guingona, Jr. , G.R. No. 113375, 05
May 1994.
6.BPI Express Card Corp. v. Court of Appeals , G.R. No. 120639, 25 September
1998.
7.16 Phil. 366 (1910).
8.G.R. No. 131719, 25 May 2004. See also Kilusang Mayo Uno Labor Center v.
Garcia, G.R. No. 115381, 23 December 1994; Holy Spirit Homeowners
Association v. Defensor, G.R. No. 163980, 03 August 2006.
9.Local Government Code.
10.G.R. No. 176951, 18 November 2008.
11.Sec. 18, Article VII, 1987 Constitution.
12.Sec. 25 (2), Chapter 4, Book VII.

13.Article 701.
14.Section 5, A.M. No. 19-6-8-SC.
1.Rollo , p. 54.
2.Id.
3.Id.
4.Id.
5.Id.
6.Id. at 55.
7.Id.
8.Id. at 55-56.
9.Id. at 56.
10.Id. at 58.
11.Id.
12.Id.
13.Republic Act No. 7492, Sec. 43; See also Sec. 3 (at). Mining Act.
14.Republic Act No. 7492, Sec. 3 (at).
15.Republic Act No. 7076, Sec. 5. Small-Scale Mining Act.
16.David v. Macapagal-Arroyo , 489 SCRA 160, 216 (2006) citing Black's Law
Dictionary, 6th Ed. p. 941(1991).
17.Galicto v. Aquino III , G.R. No. 193978, February 28, 2012, 667 SCRA 150, 170.
18.Kilosbayan v. Morato , G.R. No. 118910, November 16, 1995, 250 SCRA 130,
142, citing Valmonte v. PCSO , G.R. No. 78716, September 22, 1987.
19.G.R. No. 132922, April 21, 1998, 289 SCRA 337 (This case was cited by Justice
Mendoza in his separate opinion in Integrated Bar of the Philippines v. Hon.
Ronaldo B. Zamora, et al. [G.R. No. 141284, August 15, 2000, 336 SCRA 81]
wherein he referred to actual or threatened injury as "injury in fact" of an
actual or imminent nature. Expounding, he said that "[t]he 'injury in fact' test
requires more than injury to a cognizable interest. It requires that the party
seeking review be himself among those injured.").
20.Republic Act No. 7160, Sec. 504 (b).
21.Republic Act No. 7160, Sec. 504 (c).
22.CONSTITUTION, Article X, Sec. 1.


27.CONSTITUTION, Art. X, Sec. 2 and Sec. 15.
28.Limbona v. Mangelin , G.R. No. 80391, February 28, 1989, 170 SCRA 786.
29.See Pimentel, Jr. v. Aguirre , G.R. No. 132988, July 19, 2000, 336 SCRA 201 for
discussion on the extent of local autonomy.
30.Basco, et al., v. PAGCOR, G.R. No. 91649, May 14, 1991, 197 SCRA 52.
31.Supra note 29.
32.CONSTITUTION, Art. X, Sec. 14 provides: "The President shall provide for
regional development councils or other similar bodies composed of local
government officials, regional heads of departments and other government
offices, and representatives from non-governmental organizations within the
regions for purposes of administrative decentralization to strengthen the
autonomy of the units therein and to accelerate the economic and social
growth and development of the units in the region."
n Note from the Publisher: Written as "DENR Administrative Order No. 95-936" in
the original document.

EN BANC
[G.R. No. 182574. September 28, 2010.]
THE PROVINCE OF NEGROS OCCIDENTAL, represented by its

Governor ISIDRO P. ZAYCO , petitioner, vs. THE
COMMISSIONERS, COMMISSION ON AUDIT; THE DIRECTOR,
CLUSTER IV-VISAYAS; THE REGIONAL CLUSTER DIRECTORS;
and THE PROVINCIAL AUDITOR, NEGROS OCCIDENTAL ,
respondents.
DECISION
CARPIO, J : p
The Case
Before the Court is a petition for certiorari 1 assailing Decision No.
2006-044 2 dated 14 July 2006 and Decision No. 2008-010 3 dated 30 January
2008 of the Commission on Audit (COA) disallowing premium payment for
the hospitalization and health care insurance benefits of 1,949 officials and
employees of the Province of Negros Occidental.
The Facts
On 21 December 1994, the Sangguniang Panlalawigan of Negros
Occidental passed Resolution No. 720-A 4 allocating P4,000,000 of its
retained earnings for the hospitalization and health care insurance benefits
of 1,949 officials and employees of the province. After a public bidding, the
Committee on Awards granted the insurance coverage to Philam Care Health
System Incorporated (Philam Care).
Petitioner Province of Negros Occidental, represented by its then
Governor Rafael L. Coscolluela, and Philam Care entered into a Group Health
Care Agreement involving a total payment of P3,760,000 representing the
insurance premiums of its officials and employees. The total premium
amount was paid on 25 January 1996.
On 23 January 1997, after a post-audit investigation, the Provincial
Auditor issued Notice of Suspension No. 97-001-101 5 suspending the
premium payment because of lack of approval from the Office of the
President (OP) as provided under Administrative Order No. 103 6 (AO 103)
dated 14 January 1994. The Provincial Auditor explained that the premium
payment for health care benefits violated Republic Act No. 6758 (RA 6758), 7
otherwise known as the Salary Standardization Law. cTECIA
Petitioner complied with the directive post-facto and sent a letter-

request dated 12 January 1999 to the OP. In a Memorandum dated 26
January 1999, 8 then President Joseph E. Estrada directed the COA to lift the
suspension but only in the amount of P100,000. The Provincial Auditor
ignored the directive of the President and instead issued Notice of
Disallowance No. 99-005-101(96) 9 dated 10 September 1999 stating similar
grounds as mentioned in Notice of Suspension No. 97-001-101.
Petitioner appealed the disallowance to the COA. In a Decision dated
14 July 2006, the COA affirmed the Provincial Auditor's Notice of
Disallowance dated 10 September 1999. 10 The COA ruled that under AO
103, no government entity, including a local government unit, is exempt
from securing prior approval from the President granting additional benefits
to its personnel. This is in conformity with the policy of standardization of
compensation laid down in RA 6758. The COA added that Section 468 (a) (1)
(viii) 11 of Republic Act No. 7160 (RA 7160) or the Local Government Code of
1991 relied upon by petitioner does not stand on its own but has to be
harmonized with Section 12 12 of RA 6758.
Further, the COA stated that the insurance benefits from Philam Care, a
private insurance company, was a duplication of the benefits provided to
employees under the Medicare program which is mandated by law. Being
merely a creation of a local legislative body, the provincial health care
program should not contravene but instead be consistent with national laws
enacted by Congress from where local legislative bodies draw their authority.
The COA held the following persons liable: (1) all the 1,949 officials and
employees of the province who benefited from the hospitalization and health
care insurance benefits with regard to their proportionate shares; (2) former
Governor Rafael L. Coscolluela, being the person who signed the contract on
behalf of petitioner as well as the person who approved the disbursement
voucher; and (3) the Sangguniang Panlalawigan members who passed
Resolution No. 720-A. The COA did not hold Philam Care and Provincial
Accountant Merly P. Fortu liable for the disallowed disbursement. The COA
explained that it was unjust to require Philam Care to refund the amount
received for services it had duly rendered since insurance law prohibits the
refund of premiums after risks had already attached to the policy contract.
As for the Provincial Accountant, the COA declared that the Sangguniang
Panlalawigan resolution was sufficient basis for the accountant to sign the
disbursement voucher since there were adequate funds available for the
purpose. However, being one of the officials who benefited from the subject
disallowance, the inclusion of the accountant's name in the persons liable
was proper with regard to her proportionate share of the premium.
The dispositive portion of the COA's 14 July 2006 decision states:
WHEREFORE, premises considered, and finding no substantial
ground or cogent reason to disturb the subject disallowance, the
instant appeal is hereby denied for lack of merit. Accordingly, Notice of
Disallowance No. 99-005-101(96) dated 10 September 1999 in the total
amount of P3,760,000.00 representing the hospitalization and
insurance benefits of the officials and employees of the Province of
Negros Occidental is hereby AFFIRMED and the refund thereof is
hereby ordered. IcTCHD
The Cluster Director, Cluster IV-Visayas, COA Regional Office No.

VII, Cebu City shall ensure the proper implementation of this decision.
13
Petitioner filed a Motion for Reconsideration dated 23 October 2006

which the COA denied in a Resolution dated 30 January 2008.
Hence, the instant petition.
The Issue
The main issue is whether COA committed grave abuse of discretion in
affirming the disallowance of P3,760,000 for premium paid for the
hospitalization and health care insurance benefits granted by the Province of
Negros Occidental to its 1,949 officials and employees.
The Court's Ruling
Petitioner insists that the payment of the insurance premium for the
health benefits of its officers and employees was not unlawful and improper
since it was paid from an allocation of its retained earnings pursuant to a
valid appropriation ordinance. Petitioner states that such enactment was a
clear exercise of its express powers under the principle of local fiscal
autonomy which includes the power of Local Government Units (LGUs) to
allocate their resources in accordance with their own priorities. Petitioner
adds that while it is true that LGUs are only agents of the national
government and local autonomy simply means decentralization, it is equally
true that an LGU has fiscal control over its own revenues derived solely from
its own tax base.
Respondents, on the other hand, maintain that although LGUs are
afforded local fiscal autonomy, LGUs are still bound by RA 6758 and their
actions are subject to the scrutiny of the Department of Budget and
Management (DBM) and applicable auditing rules and regulations enforced
by the COA. Respondents add that the grant of additional compensation, like
the hospitalization and health care insurance benefits in the present case,
must have prior Presidential approval to conform with the state policy on
salary standardization for government workers.
AO 103 took effect on 14 January 1994 or eleven months before the
Sangguniang Panlalawigan of the Province of Negros Occidental passed
Resolution No. 720-A. The main purpose of AO 103 is to prevent
discontentment, dissatisfaction and demoralization among government
personnel, national or local, who do not receive, or who receive less,
productivity incentive benefits or other forms of allowances or benefits. This
is clear in the Whereas Clauses of AO 103 which state:
WHEREAS, the faithful implementation of statutes, including the
Administrative Code of 1987 and all laws governing all forms of
additional compensation and personnel benefits is a Constitutional
prerogative vested in the President of the Philippines under Section 17,
Article VII of the 1987 Constitution;
WHEREAS, the Constitutional prerogative includes the
determination of the rates, the timing and schedule of payment, and
final authority to commit limited resources of government for the
payment of personal incentives, cash awards, productivity bonus, and
other forms of additional compensation and fringe benefits; aCSTDc
WHEREAS, the unilateral and uncoordinated grant of

productivity incentive benefits in the past gave rise to
discontentment, dissatisfaction and demoralization among
government personnel who have received less or have not
received at all such benefits;
NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic
of the Philippines, by virtue of the powers vested in me by law and in
order to forestall further demoralization of government
personnel do hereby direct: . . . (Emphasis supplied)
Sections 1 and 2 of AO 103 state:

SECTION 1. All agencies of the National Government
including government-owned and/or -controlled corporations
and government financial institutions, and local government
units, are hereby authorized to grant productivity incentive benefit in
the maximum amount of TWO THOUSAND PESOS (P2,000.00) each to
their permanent and full-time temporary and casual employees,
including contractual personnel with employment in the nature of a
regular employee, who have rendered at least one (1) year of service
in the Government as of December 31, 1993.
SECTION 2. All heads of government offices/agencies,
including government owned and/or controlled corporations, as
well as their respective governing boards are hereby enjoined
and prohibited from authorizing/granting Productivity Incentive
Benefits or any and all forms of allowances/benefits without prior
approval and authorization via Administrative Order by the Office of
the President. Henceforth, anyone found violating any of the mandates
in this Order, including all officials/agency found to have taken part
thereof, shall be accordingly and severely dealt with in accordance
with the applicable provisions of existing administrative and penal
laws.
Consequently, all administrative authorizations to grant any form
of allowances/benefits and all forms of additional compensation usually
paid outside of the prescribed basic salary under R.A. 6758, the Salary
Standardization Law, that are inconsistent with the legislated policy on
the matter or are not covered by any legislative action are hereby
revoked. (Emphasis supplied)
It is clear from Section 1 of AO 103 that the President authorized all

agencies of the national government as well as LGUs to grant the maximum
amount of P2,000 productivity incentive benefit to each employee who has
rendered at least one year of service as of 31 December 1993. In Section 2,
the President enjoined all heads of government offices and agencies from
granting productivity incentive benefits or any and all similar forms of
allowances and benefits without the President's prior approval.
In the present case, petitioner, through an approved Sangguniang
Panlalawigan resolution, granted and released the disbursement for the
hospitalization and health care insurance benefits of the province's officials
and employees without any prior approval from the President. The COA
disallowed the premium payment for such benefits since petitioner
disregarded AO 103 and RA 6758.
We disagree with the COA. From a close reading of the provisions of AO
103, petitioner did not violate the rule of prior approval from the President
since Section 2 states that the prohibition applies only to "government
offices/agencies, including government-owned and/or controlled
corporations, as well as their respective governing boards." Nowhere is it
indicated in Section 2 that the prohibition also applies to LGUs. The
requirement then of prior approval from the President under AO 103 is
applicable only to departments, bureaus, offices and government-owned and
controlled corporations under the Executive branch. In other words, AO 103
must be observed by government offices under the President's control as
mandated by Section 17, Article VII of the Constitution which states: DSAacC
Section 17. The President shall have control of all executive

departments, bureaus and offices. He shall ensure that the laws be
faithfully executed. (Emphasis supplied)
Being an LGU, petitioner is merely under the President's general

supervision pursuant to Section 4, Article X of the Constitution:
Sec. 4. The President of the Philippines shall exercise
general supervision over local governments. Provinces with
respect to component cities and municipalities, and cities and
municipalities with respect to component barangays shall ensure that
the acts of their component units are within the scope of their
prescribed powers and functions. (Emphasis supplied)
The President's power of general supervision means the power of a

superior officer to see to it that subordinates perform their functions
according to law. 14 This is distinguished from the President's power of
control which is the power to alter or modify or set aside what a subordinate
officer had done in the performance of his duties and to substitute the
judgment of the President over that of the subordinate officer. 15 The power
of control gives the President the power to revise or reverse the acts or
decisions of a subordinate officer involving the exercise of discretion. 16
Since LGUs are subject only to the power of general supervision of the
President, the President's authority is limited to seeing to it that rules are
followed and laws are faithfully executed. The President may only point out
that rules have not been followed but the President cannot lay down the
rules, neither does he have the discretion to modify or replace the rules.
Thus, the grant of additional compensation like hospitalization and health
care insurance benefits in the present case does not need the approval of
the President to be valid.
Also, while it is true that LGUs are still bound by RA 6758, the COA did
not clearly establish that the medical care benefits given by the government
at the time under Presidential Decree No. 1519 17 were sufficient to cover
the needs of government employees especially those employed by LGUs.
Petitioner correctly relied on the Civil Service Commission's (CSC)
Memorandum Circular No. 33 (CSC MC No. 33), series of 1997, issued on 22
December 1997 which provided the policy framework for working conditions
at the workplace. In this circular, the CSC pursuant to CSC Resolution No. 97-
4684 dated 18 December 1997 took note of the inadequate policy on basic
health and safety conditions of work experienced by government personnel.
Thus, under CSC MC No. 33, all government offices including LGUs were
directed to provide a health program for government employees which
included hospitalization services and annual mental, medical-physical
examinations.
Later, CSC MC No. 33 was further reiterated in Administrative Order
No. 402 18 (AO 402) which took effect on 2 June 1998. Sections 1, 2, and 4 of
AO 402 state:
Section 1. Establishment of the Annual Medical Check-up
Program. — An annual medical check-up for government of officials
and employees is hereby authorized to be established starting this
year, in the meantime that this benefit is not yet integrated under the
National Health Insurance Program being administered by the
Philippine Health Insurance Corporation (PHIC).
EIASDT
Section 2. Coverage. — . . . Local Government Units are also

encouraged to establish a similar program for their personnel.
Section 4. Funding. — . . . Local Government Units, which may

establish a similar medical program for their personnel, shall utilize
local funds for the purpose. (Emphasis supplied)
The CSC, through CSC MC No. 33, as well as the President, through AO
402, recognized the deficiency of the state of health care and medical
services implemented at the time. Republic Act No. 7875 19 or the National
Health Insurance Act of 1995 instituting a National Health Insurance Program
(NHIP) for all Filipinos was only approved on 14 February 1995 or about two
months after petitioner's Sangguniang Panlalawigan passed Resolution No.
720-A. Even with the establishment of the NHIP, AO 402 was still issued
three years later addressing a primary concern that basic health services
under the NHIP either are still inadequate or have not reached geographic
areas like that of petitioner.
Thus, consistent with the state policy of local autonomy as guaranteed
by the 1987 Constitution, under Section 25, Article II 20 and Section 2, Article
X, 21 and the Local Government Code of 1991, 22 we declare that the grant
and release of the hospitalization and health care insurance benefits given to
petitioner's officials and employees were validly enacted through an
ordinance passed by petitioner's Sangguniang Panlalawigan.
In sum, since petitioner's grant and release of the questioned
disbursement without the President's approval did not violate the President's
directive in AO 103, the COA then gravely abused its discretion in applying
AO 103 to disallow the premium payment for the hospitalization and health
care insurance benefits of petitioner's officials and employees.
WHEREFORE, we GRANT the petition. We REVERSE AND SET ASIDE
Decision No. 2006-044 dated 14 July 2006 and Decision No. 2008-010 dated
30 January 2008 of the Commission on Audit.
SO ORDERED.
Corona, C.J., Carpio Morales, Velasco, Jr., Nachura, Leonardo-de Castro,
Brion, Peralta, Bersamin, Del Castillo, Abad, Villarama, Jr., Perez, Mendoza
and Sereno, JJ., concur.
Footnotes
1. Under Rule 65 of the 1997 Revised Rules of Civil Procedure.
2. Rollo, pp. 24-31. Penned by Chairman Guillermo N. Carague with Commissioners

Reynaldo A. Villar and Juanito G. Espino, Jr., concurring.
3. Id. at 32-38.
4. Id. at 49-50.
5. Id. at 39.
6. Authorizing the Grant of CY 1993 Productivity Incentive Benefits to Government
Personnel and Prohibiting Payments of Similar Benefits in Future Years
Unless Duly Authorized by the President.
7. An Act Prescribing a Revised Compensation and Position Classification System in
the Government and for Other Purposes. This Act took effect on 1 July 1989.
8. Rollo, p. 67.
9. Id. at 68.
10. Id. at 24-31. Decided by Chairman Guillermo N. Carague, Commissioner
Reynaldo A. Villar and Commissioner Juanito G. Espino, Jr.
11. SECTION 468. Powers, Duties, Functions and Compensation. — (a) The
sangguniang panlalawigan, as the legislative body of the province, shall
enact ordinances, approve resolutions and appropriate funds for the general
welfare of the province and its inhabitants pursuant to Section 16 of this
Code and in the proper exercise of the corporate powers of the province as
provided for under Section 22 of this Code, and shall:
(1) Approve ordinances and pass resolutions necessary for an efficient and
effective provincial government and, in this connection, shall:
xxx xxx xxx
(viii) Determine the positions and salaries, wages, allowances and other
emoluments and benefits of officials and employees paid wholly or mainly
from provincial funds and provide for expenditures necessary for the proper
conduct of programs, projects, services, and activities of the provincial
government . . . .
12. Section 12. Consolidation of Allowances and Compensation. — All allowances,
except for representation and transportation allowances; clothing and
laundry allowances; subsistence allowance of marine officers and crew on
board government vessels and hospital personnel; hazard pay; allowances of
foreign service personnel stationed abroad; and such other additional
compensation not otherwise specified herein as may be determined by the
DBM, shall be deemed included in the standardized salary rates herein
prescribed. Such other additional compensation, whether in cash or in kind,
being received by incumbents only as of July 1, 1989 not integrated into the
standardized salary rates shall continue to be authorized.
Existing additional compensation of any national government official or
employee paid from local funds of a local government unit shall be absorbed
into the basic salary of said official or employee and shall be paid by the
National Government.
13. Rollo, p. 31.

14. De Villa v. City of Bacolod, G.R. No. 80744, 20 September 1990, 189 SCRA 736.
15. Bito-Onon v. Judge Yap Fernandez, 403 Phil. 693 (2001).
16. Rufino v. Endriga, G.R. No. 139554, 21 July 2006, 496 SCRA 13, citing Mondano
v. Silvosa, 97 Phil. 143 (1955).
17. Revised Philippine Medical Care Act which was approved on 11 June 1978. This
Act revised Republic Act No. 6111 or the Philippine Medical Care Act of 1969
which took effect on 4 August 1969.
18. Establishment of a Medical Check-up Program for Government Personnel.
19. An Act Instituting a National Health Insurance Program for All Filipinos and
Establishing the Philippine Health Insurance Corporation for the Purpose.
20. Section 25. The State shall ensure the autonomy of local governments.
21. Section 2. The territorial and political subdivisions shall enjoy local autonomy.
22. Supra note 11.

EN BANC
[G.R. No. 204429. February 18, 2014.]
SMART COMMUNICATIONS, INC. , petitioner, vs.

MUNICIPALITY OF MALVAR, BATANGAS, respondent.
DECISION
CARPIO, J : p
The Case
This petition for review 1 challenges the 26 June 2012 Decision 2 and 13
November 2012 Resolution 3 of the Court of Tax Appeals (CTA) En Banc. The
CTA En Banc affirmed the 17 December 2010 Decision 4 and 7 April 2011
Resolution 5 of the CTA First Division, which in turn affirmed the 2 December
2008 Decision 6 and 21 May 2009 Order 7 of the Regional Trial Court of
Tanauan City, Batangas, Branch 6. The trial court declared void the assessment
imposed by respondent Municipality of Malvar, Batangas against petitioner
Smart Communications, Inc. for its telecommunications tower for 2001 to July
2003 and directed respondent to assess petitioner only for the period starting 1
October 2003.
The Facts
Petitioner Smart Communications, Inc. (Smart) is a domestic corporation

engaged in the business of providing telecommunications services to the
general public while respondent Municipality of Malvar, Batangas (Municipality)
is a local government unit created by law.
In the course of its business, Smart constructed a telecommunications

tower within the territorial jurisdiction of the Municipality. The construction of
the tower was for the purpose of receiving and transmitting cellular
communications within the covered area.
On 30 July 2003, the Municipality passed Ordinance No. 18, series of
2003, entitled "An Ordinance Regulating the Establishment of Special Projects."
On 24 August 2004, Smart received from the Permit and Licensing

Division of the Office of the Mayor of the Municipality an assessment letter with
a schedule of payment for the total amount of P389,950.00 for Smart's
telecommunications tower. The letter reads as follows: DHcEAa
This is to formally submit to your good office your schedule of

payments in the Municipal Treasury of the Local Government Unit of
Malvar, province of Batangas which corresponds to the tower of your
company built in the premises of the municipality, to wit:
TOTAL PROJECT COST: PHP11,000,000.00

For the Year 2001-2003
50% of 1% of the total project
Php55,000.00
cost
Add: 45% surcharge 24,750.00
––––––––––––––––
Php79,750.00
Multiply by 3 yrs. (2001,
Php239,250.00
2002, 2003)
For the year 2004
1% of the total project cost Php110,000.00
37% surcharge 40,700.00
––––––––––––––––
Php150,700.00
––––––––––––––
TOTAL Php389,950.00
============
Hoping that you will give this matter your preferential attention. 8
Due to the alleged arrears in the payment of the assessment, the

Municipality also caused the posting of a closure notice on the
telecommunications tower.
On 9 September 2004, Smart filed a protest, claiming lack of due process
in the issuance of the assessment and closure notice. In the same protest,
Smart challenged the validity of Ordinance No. 18 on which the assessment
was based.
In a letter dated 28 September 2004, the Municipality denied Smart's
protest.
On 17 November 2004, Smart filed with Regional Trial Court of Tanauan
City, Batangas, Branch 6, an "Appeal/Petition" assailing the validity of
Ordinance No. 18. The case was docketed as SP Civil Case No. 04-11-1920.
On 2 December 2008, the trial court rendered a Decision partly granting
Smart's Appeal/Petition. The trial court confined its resolution of the case to the
validity of the assessment, and did not rule on the legality of Ordinance No. 18.
The trial court held that the assessment covering the period from 2001 to July
2003 was void since Ordinance No. 18 was approved only on 30 July 2003.
However, the trial court declared valid the assessment starting 1 October 2003,
citing Article 4 of the Civil Code of the Philippines, 9 in relation to the provisions
of Ordinance No. 18 and Section 166 of Republic Act No. 7160 or the Local
Government Code of 1991 (LGC). 10 The dispositive portion of the trial court's
Decision reads: SAHIDc
WHEREFORE, in light of the foregoing, the Petition is partly

GRANTED. The assessment dated August 24, 2004 against petitioner is
hereby declared null and void insofar as the assessment made from
year 2001 to July 2003 and respondent is hereby prohibited from
assessing and collecting, from petitioner, fees during the said period
and the Municipal Government of Malvar, Batangas is directed to
assess Smart Communications, Inc. only for the period starting October
1, 2003.
No costs.
SO ORDERED. 11
The trial court denied the motion for reconsideration in its Order of 21
May 2009.
On 8 July 2009, Smart filed a petition for review with the CTA First
Division, docketed as CTA AC No. 58.
On 17 December 2010, the CTA First Division denied the petition for
review. The dispositive portion of the decision reads:
WHEREFORE, the Petition for Review is hereby DENIED, for lack
of merit. Accordingly, the assailed Decision dated December 2, 2008
and the Order dated May 21, 2009 of Branch 6 of the Regional Trial
Court of Tanauan City, Batangas in SP. Civil Case No. 04-11-1920
entitled "Smart Communications, Inc. vs. Municipality of Malvar,
Batangas" are AFFIRMED.
SO ORDERED. 12
On 7 April 2011, the CTA First Division issued a Resolution denying the
motion for reconsideration.
Smart filed a petition for review with the CTA En Banc, which affirmed the
CTA First Division's decision and resolution. The dispositive portion of the CTA
En Banc's 26 June 2012 decision reads:
WHEREFORE, premises considered, the present Petition for
Review is hereby DISMISSED for lack of merit.
Accordingly, the assailed Decision dated December 17, 2010 and
Resolution dated April 7, 2011 are hereby AFFIRMED.
SO ORDERED. 13 CEASaT
The CTA En Banc denied the motion for reconsideration.

Hence, this petition.
The Ruling of the CTA En Banc
The CTA En Banc dismissed the petition on the ground of lack of

jurisdiction. The CTA En Banc declared that it is a court of special jurisdiction
and as such, it can take cognizance only of such matters as are clearly within
its jurisdiction. Citing Section 7 (a), paragraph 3, of Republic Act No. 9282, the
CTA En Banc held that the CTA has exclusive appellate jurisdiction to review on
appeal, decisions, orders or resolutions of the Regional Trial Courts in local tax
cases originally resolved by them in the exercise of their original or appellate
jurisdiction. However, the same provision does not confer on the CTA
jurisdiction to resolve cases where the constitutionality of a law or rule is
challenged.
The Issues
The petition raises the following arguments:

1. The [CTA En Banc Decision and Resolution] should be reversed
and set aside for being contrary to law and jurisprudence considering
that the CTA En Banc should have exercised its jurisdiction and
declared the Ordinance as illegal.

that the doctrine of exhaustion of administrative remedies does not
apply in [this case]. TEAaDC

that the respondent has no authority to impose the so-called "fees" on
the basis of the void ordinance. 14
The Ruling of the Court
The Court denies the petition.
On whether the CTA has jurisdiction over the present case

Smart contends that the CTA erred in dismissing the case for lack of
jurisdiction. Smart maintains that the CTA has jurisdiction over the present case
considering the "unique" factual circumstances involved.
The CTA refuses to take cognizance of this case since it challenges the
constitutionality of Ordinance No. 18, which is outside the province of the CTA.
Jurisdiction is conferred by law. Republic Act No. 1125, as amended by
Republic Act No. 9282, created the Court of Tax Appeals. Section 7, paragraph
(a), sub-paragraph (3) 15 of the law vests the CTA with the exclusive appellate
jurisdiction over "decisions, orders or resolutions of the Regional Trial Courts in
local tax cases originally decided or resolved by them in the exercise of their
original or appellate jurisdiction." HDIATS
The question now is whether the trial court resolved a local tax case in
order to fall within the ambit of the CTA's appellate jurisdiction. This question,
in turn, depends ultimately on whether the fees imposed under Ordinance No.
18 are in fact taxes.
Smart argues that the "fees" in Ordinance No. 18 are actually taxes since
they are not regulatory, but revenue-raising. Citing Philippine Airlines, Inc. v.
Edu, 16 Smart contends that the designation of "fees" in Ordinance No. 18 is not
controlling.
The Court finds that the fees imposed under Ordinance No. 18 are not
taxes.
Section 5, Article X of the 1987 Constitution provides that "[e]ach local

government unit shall have the power to create its own sources of revenues
and to levy taxes, fees, and charges subject to such guidelines and limitations
as the Congress may provide, consistent with the basic policy of local
autonomy. Such taxes, fees, and charges shall accrue exclusively to the local
government."
Consistent with this constitutional mandate, the LGC grants the taxing
powers to each local government unit. Specifically, Section 142 of the LGC
grants municipalities the power to levy taxes, fees, and charges not otherwise
levied by provinces. Section 143 of the LGC provides for the scale of taxes on
business that may be imposed by municipalities 17 while Section 147 18 of the
same law provides for the fees and charges that may be imposed by
municipalities on business and occupation.
The LGC defines the term "charges" as referring to pecuniary liability, as

rents or fees against persons or property, while the term "fee" means "a charge
fixed by law or ordinance for the regulation or inspection of a business or
activity." 19
In this case, the Municipality issued Ordinance No. 18, which is entitled
"An Ordinance Regulating the Establishment of Special Projects," to regulate
the "placing, stringing, attaching, installing, repair and construction of all gas
mains, electric, telegraph and telephone wires, conduits, meters and other
apparatus, and provide for the correction, condemnation or removal of the
same when found to be dangerous, defective or otherwise hazardous to the
welfare of the inhabitant[s]." 20 It was also envisioned to address the foreseen
"environmental depredation" to be brought about by these "special projects" to
the Municipality. 21 Pursuant to these objectives, the Municipality imposed fees
on various structures, which included telecommunications towers. cSTCDA
As clearly stated in its whereas clauses, the primary purpose of Ordinance

No. 18 is to regulate the "placing, stringing, attaching, installing, repair and
construction of all gas mains, electric, telegraph and telephone wires, conduits,
meters and other apparatus" listed therein, which included Smart's
telecommunications tower. Clearly, the purpose of the assailed Ordinance is to
regulate the enumerated activities particularly related to the construction and
maintenance of various structures. The fees in Ordinance No. 18 are not
impositions on the building or structure itself; rather, they are impositions on
the activity subject of government regulation, such as the installation and
construction of the structures. 22
Since the main purpose of Ordinance No. 18 is to regulate certain

construction activities of the identified special projects, which included "cell
sites" or telecommunications towers, the fees imposed in Ordinance No. 18 are
primarily regulatory in nature, and not primarily revenue-raising. While
the fees may contribute to the revenues of the Municipality, this effect is
merely incidental. Thus, the fees imposed in Ordinance No. 18 are not taxes.
In Progressive Development Corporation v. Quezon City, 23 the Court
declared that "if the generating of revenue is the primary purpose and
regulation is merely incidental, the imposition is a tax; but if regulation is the
primary purpose, the fact that incidentally revenue is also obtained does not
make the imposition a tax."
In Victorias Milling Co., Inc. v. Municipality of Victorias, 24 the Court

reiterated that the purpose and effect of the imposition determine whether it is
a tax or a fee, and that the lack of any standards for such imposition gives the
presumption that the same is a tax.
We accordingly say that the designation given by the municipal
authorities does not decide whether the imposition is properly a license
tax or a license fee. The determining factors are the purpose and effect
of the imposition as may be apparent from the provisions of the
ordinance. Thus, "[w]hen no police inspection, supervision, or
regulation is provided, nor any standard set for the applicant to
establish, or that he agrees to attain or maintain, but any and all
persons engaged in the business designated, without qualification or
hindrance, may come, and a license on payment of the stipulated sum
will issue, to do business, subject to no prescribed rule of conduct and
under no guardian eye, but according to the unrestrained judgment or
fancy of the applicant and licensee, the presumption is strong that the
power of taxation, and not the police power, is being exercised."
Contrary to Smart's contention, Ordinance No. 18 expressly provides for

the standards which Smart must satisfy prior to the issuance of the specified
permits, clearly indicating that the fees are regulatory in nature. These
requirements are as follows: SaDICE
SECTION 5. Requirements and Procedures in Securing

Preliminary Development Permit. —
The following documents shall be submitted to the SB Secretary
in triplicate:
a) zoning clearance
b) Vicinity Map
c) Site Plan
d) Evidence of ownership
e) Certificate true copy of NTC Provisional Authority in case of
Cellsites, telephone or telegraph line, ERB in case of gasoline station,
power plant, and other concerned national agencies
f) Conversion order from DAR is located within agricultural zone.
g) Radiation Protection Evaluation.

h) Written consent from subdivision association or the residence
of the area concerned if the special projects is located within the
residential zone.
i) Barangay Council Resolution endorsing the special projects.

SECTION 6. Requirement for Final Development Permit. — Upon
the expiration of 180 days and the proponents of special projects
shall apply for final [development permit] and they are require[d] to
submit the following:
a) evaluation from the committee where the Vice Mayor refers

the special project
b) Certification that all local fees have been paid.
Considering that the fees in Ordinance No. 18 are not in the nature of
local taxes, and Smart is questioning the constitutionality of the ordinance, the
CTA correctly dismissed the petition for lack of jurisdiction. Likewise, S ection
187 of the LGC, 25 which outlines the procedure for questioning the
constitutionality of a tax ordinance, is inapplicable, rendering unnecessary the
resolution of the issue on non-exhaustion of administrative remedies. EcAISC
On whether the imposition of the fees in Ordinance No. 18 is ultra vires

Smart argues that the Municipality exceeded its power to impose taxes
and fees as provided in Book II, Title One, Chapter 2, Article II of the LGC. Smart
maintains that the mayor's permit fees in Ordinance No. 18 (equivalent to 1%
of the project cost) are not among those expressly enumerated in the LGC.
As discussed, the fees in Ordinance No. 18 are not taxes. Logically, the
imposition does not appear in the enumeration of taxes under Section 143 of
the LGC.
Moreover, even if the fees do not appear in Section 143 or any other
provision in the LGC, the Municipality is empowered to impose taxes, fees and
charges, not specifically enumerated in the LGC or taxed under the Tax Code or
other applicable law. Section 186 of the LGC, granting local government units
wide latitude in imposing fees, expressly provides: TDcCIS
Section 186. Power to Levy Other Taxes, Fees or Charges. —

Local government units may exercise the power to levy taxes, fees or
charges on any base or subject not otherwise specifically enumerated
herein or taxed under the provisions of the National Internal Revenue
Code, as amended, or other applicable laws: Provided, That the taxes,
fees, or charges shall not be unjust, excessive, oppressive,
confiscatory or contrary to declared national policy: Provided, further;
That the ordinance levying such taxes, fees or charges shall not be
enacted without any prior public hearing conducted for the purpose.
Smart further argues that the Municipality is encroaching on the

regulatory powers of the National Telecommunications Commission (NTC).
Smart cites Section 5 (g) of Republic Act No. 7925 which provides that the
National Telecommunications Commission (NTC), in the exercise of its
regulatory powers, shall impose such fees and charges as may be necessary to
cover reasonable costs and expenses for the regulation and supervision of the
operations of telecommunications entities. Thus, Smart alleges that the
regulation of telecommunications entities and all aspects of its operations is
specifically lodged by law on the NTC.
To repeat, Ordinance No. 18 aims to regulate the "placing, stringing,
attaching, installing, repair and construction of all gas mains, electric, telegraph
and telephone wires, conduits, meters and other apparatus" within the
Municipality. The fees are not imposed to regulate the administrative, technical,
financial, or marketing operations of telecommunications entities, such as
Smart's; rather, to regulate the installation and maintenance of physical
structures — Smart's cell sites or telecommunications tower. The regulation of
the installation and maintenance of such physical structures is an exercise of
the police power of the Municipality. Clearly, the Municipality does not encroach
on NTC's regulatory powers. DcCASI
The Court likewise rejects Smart's contention that the power to fix the
fees for the issuance of development permits and locational clearances is
exercised by the Housing and Land Use Regulatory Board (HLURB). Suffice it to
state that the HLURB itself recognizes the local government units' power to
collect fees related to land use and development. Significantly, the HLURB
issued locational guidelines governing telecommunications infrastructure.
Guideline No. VI relates to the collection of locational clearance fees either by
the HLURB or the concerned local government unit, to wit:
VI.Fees
The Housing and Land Use Regulatory Board in the performance of its
functions shall collect the locational clearance fee based on the
revised schedule of fees under the special use project as per
Resolution No. 622, series of 1998 or by the concerned LGUs subject
to EO 72. 26 DCcIaE
On whether Ordinance No. 18 is valid and constitutional

Smart contends that Ordinance No. 18 violates Sections 130 (b) (3)27 and
186 of the LGC since the fees are unjust, excessive, oppressive and
confiscatory. Aside from this bare allegation, Smart did not present any
evidence substantiating its claims. In Victorias Milling Co., Inc. v. Municipality of
Victorias, 28 the Court rejected the argument that the fees imposed by
respondent therein are excessive for lack of evidence supporting such claim, to
wit:
An ordinance carries with it the presumption of validity. The
question of reasonableness though is open to judicial inquiry. Much
should be left thus to the discretion of municipal authorities. Courts will
go slow in writing off an ordinance as unreasonable unless the amount
is so excessive as to be prohibitive, arbitrary, unreasonable,
oppressive, or confiscatory. A rule which has gained acceptance is that
factors relevant to such an inquiry are the municipal conditions as a
whole and the nature of the business made subject to imposition.
Plaintiff, has however not sufficiently proven that, taking these
factors together, the license taxes are unreasonable. The presumption
of validity subsists. For, plaintiff has limited itself to insisting that the
amounts levied exceed the cost of regulation and the municipality has
adequate funds for the alleged purposes as evidenced by the
municipality's cash surplus for the fiscal year ending 1956.
On the constitutionality issue, Smart merely pleaded for the declaration of

unconstitutionality of Ordinance No. 18 in the Prayer of the Petition, without
any argument or evidence to support its plea. Nowhere in the body of the
Petition was this issue specifically raised and discussed. Significantly, Smart
failed to cite any constitutional provision allegedly violated by respondent when
it issued Ordinance No. 18.
Settled is the rule that every law, in this case an ordinance, is presumed
valid. To strike down a law as unconstitutional, Smart has the burden to prove a
clear and unequivocal breach of the Constitution, which Smart miserably failed
to do. In Lawyers Against Monopoly and Poverty (LAMP) v. Secretary of Budget
and Management, 29 the Court held, thus:
To justify the nullification of the law or its implementation, there
must be a clear and unequivocal, not a doubtful, breach of the
Constitution. In case of doubt in the sufficiency of proof establishing
unconstitutionality, the Court must sustain legislation because "to
invalidate [a law] based on . . . baseless supposition is an affront to the
wisdom not only of the legislature that passed it but also of the
executive which approved it." This presumption of constitutionality can
be overcome only by the clearest showing that there was indeed an
infraction of the Constitution, and only when such a conclusion is
reached by the required majority may the Court pronounce, in the
discharge of the duty it cannot escape, that the challenged act must be
struck down. IAaCST
WHEREFORE, the Court DENIES the petition.

SO ORDERED.
Sereno, C.J., Velasco, Jr., Leonardo-de Castro, Peralta, Bersamin, Del

Castillo, Abad, Villarama, Jr., Perez, Mendoza, Reyes, Perlas-Bernabe and
Leonen, JJ., concur.
Brion, J., is on leave.
Footnotes
1.Under Rule 45 of the Rules of Court. Rollo, pp. 3-45.
2.Id. at 51-63. Penned by Associate Justice Olga Palanca-Enriquez, concurred in by
Presiding Justice Ernesto D. Acosta, Associate Justices Juanito C. Castañeda,
Jr., Lovell R. Bautista, Erlinda P. Uy, Caesar A. Casanova, Esperanza R. Fabon-
Victorino, Cielito N. Mindaro-Grulla, and Amelia R. Cotangco-Manalastas.
3.Id. at 64-66. Penned by Associate Justice Olga Palanca-Enriquez, concurred in by
Presiding Justice Ernesto D. Acosta, Associate Justices Juanito C. Castañeda,
Jr., Lovell R. Bautista, Erlinda P. Uy, Caesar A. Casanova, Esperanza R. Fabon-
Victorino, Cielito N. Mindaro-Grulla, and Amelia R. Cotangco-Manalastas.
4.Id. at 111-137. Penned by Associate Justice Esperanza R. Fabon-Victorino,
concurred in by Presiding Justice Ernesto D. Acosta and Erlinda P. Uy.
5.Id. at 138-140. Penned by Associate Justice Esperanza R. Fabon-Victorino,
concurred in by Presiding Justice Ernesto D. Acosta and Erlinda P. Uy.
6.Id. at 248-252. Penned by Judge Arcadio I. Manigbas.
7.Id. at 271-272.
8.Id. at 164.
9.Article 4. Laws shall have no retroactive effect, unless the contrary is provided.
10.SECTION 166. Accrual of Tax. — Unless otherwise provided in this Code, all local
taxes, fees, and charges shall accrue on the first (1st) day of January of each
year. However, new taxes, fees or charges, or changes in the rates thereof,
shall accrue on the first (1st) day of the quarter next following the effectivity
of the ordinance imposing such new levies or rates.
11.Rollo , p. 252.
12.Id. at 136.
13.Id. at 62.
14.Id. at 20-21.
15.Sec. 7. Jurisdiction. — The CTA shall exercise:

a. Exclusive appellate jurisdiction to review by appeal, as herein provided:
xxx xxx xxx
3. Decisions, orders or resolutions of the Regional Trial Courts in local tax cases
originally decided or resolved by them in the exercise of their original or
appellate jurisdiction;
xxx xxx xxx
16.247 Phil. 283 (1988).
17.Section 143. Tax on Business. — The municipality may impose taxes on the
following businesses:
(a) On manufacturers, assemblers, repackers, processors, brewers, distillers,
rectifiers, and compounders of liquors, distilled spirits, and wines or
manufacturers of any article of commerce of whatever kind or nature, in
accordance with the following schedule:
xxx xxx xxx

(b) On wholesalers, distributors, or dealers in any article of commerce of
whatever kind or nature in accordance with the following schedule:
xxx xxx xxx
(c) On exporters, and on manufacturers, millers, producers, wholesalers,
distributors, dealers or retailers of essential commodities enumerated
hereunder at a rate not exceeding one-half (1/2) of the rates prescribed
under subsection (a), (b) and (d) of this Section:
(1) Rice and corn;
(2) Wheat or cassava flour, meat, dairy products, locally manufactured,

processed or preserved food, sugar, salt and other agricultural, marine, and
fresh water products, whether in their original state or not;
(3) Cooking oil and cooking gas;
(4) Laundry soap, detergents, and medicine;
(5) Agricultural implements, equipment and post-harvest facilities, fertilizers,
pesticides, insecticides, herbicides and other farm inputs;
(6) Poultry feeds and other animal feeds;
(7) School supplies; and
(8) Cement.
(d) On retailers.
xxx xxx xxx
Provided, however, That barangays shall have the exclusive power to levy taxes,
as provided under Section 152 hereof, on gross sales or receipts of the
preceding calendar year of Fifty thousand pesos (P50,000.00) or less, in the
case of cities, and Thirty thousand pesos (P30,000.00) or less, in the case of
municipalities.
(e) On contractors and other independent contractors, in accordance with the
following schedule:
xxx xxx xxx

(f) On banks and other financial institutions, at a rate not exceeding fifty percent
(50%) of one percent (1%) on the gross receipts of the preceding calendar
year derived from interest, commissions and discounts from lending
activities, income from financial leasing, dividends, rentals on property and
profit from exchange or sale of property, insurance premium.
g) On peddlers engaged in the sale of any merchandise or article of commerce, at
a rate not exceeding Fifty pesos (P50.00) per peddler annually.
(h) On any business, not otherwise specified in the preceding paragraphs, which
the sanggunian concerned may deem proper to tax: Provided, That on any
business subject to the excise, value-added or percentage tax under the
National Internal Revenue Code, as amended, the rate of tax shall not
exceed two percent (2%) of gross sales or receipts of the preceding calendar
year.
The sanggunian concerned may prescribe a schedule of graduated tax rates but
in no case to exceed the rates prescribed herein.
18.Section 147. Fees and Charges. — The municipality may impose and collect
such reasonable fees and charges on business and occupation and, except as
reserved to the province in Section 139 of this Code, on the practice of any
profession or calling, commensurate with the cost of regulation, inspection
and licensing before any person may engage in such business or occupation,
or practice such profession or calling.
19.Section 131. Definition of Terms. — When used in this Title, the term:
xxx xxx xxx

(g) "Charges" refers to pecuniary liability, as rents or fees against persons or
property;
xxx xxx xxx

(l) "Fee" means a charge fixed by law or ordinance for the regulation or
inspection of a business or activity;
xxx xxx xxx

20.Rollo , p. 165.
21.Id.
22.See Angeles University Foundation v. City of Angeles, G.R. No. 189999, 27 June
2012, 675 SCRA 359, 373.
23.254 Phil. 635, 643 (1989). See also City of Iloilo v. Villanueva, 105 Phil. 337
(1959).
24.134 Phil. 180, 189-190 (1968).
25.Section 187. Procedure for Approval and Effectivity of Tax Ordinances and
Revenue Measures; Mandatory Public Hearings. — The procedure for
approval of local tax ordinances and revenue measures shall be in
accordance with the provisions of this Code: Provided, That public hearings
shall be conducted for the purpose prior to the enactment thereof: Provided,
further, That any question on the constitutionality or legality of tax
ordinances or revenue measures may be raised on appeal within thirty (30)
days from the effectivity thereof to the Secretary of Justice who shall render
a decision within sixty (60) days from the date of receipt of the appeal:
Provided, however, That such appeal shall not have the effect of suspending
the effectivity of the ordinance and the accrual and payment of the tax, fee,
or charge levied therein: Provided, finally, That within thirty (30) days after
receipt of the decision or the lapse of the sixty-day period without the
Secretary of Justice acting upon the appeal, the aggrieved party may file
appropriate proceedings with a court of competent jurisdiction.
26.http://hlurb.gov.ph/wp-content/uploads/laws-issuances/policies/CellSite.pdf (last
visited on 4 February 2014).
27.SECTION 130. Fundamental Principles. — The following fundamental principles
shall govern the exercise of the taxing and other revenue-raising powers of
local government units:
xxx xxx xxx

(b) Taxes, fees, charges and other impositions shall:
xxx xxx xxx

(3) not be unjust, excessive, oppressive, or confiscatory;
29.G.R. No. 164987, 24 April 2012, 670 SCRA 373, 386-387.

EN BANC
[G.R. No. 199439. April 22, 2014.]
CITY OF GENERAL SANTOS, represented by its Mayor, HON.

DARLENE MAGNOLIA R. ANTONINO-CUSTODIO, petitioner, vs.
COMMISSION ON AUDIT, respondent.
DECISION
LEONEN, J : p
In order to be able to deliver more effective and efficient services, the law
allows local government units the power to reorganize. In doing so, they should
be given leeway to entice their employees to avail of severance benefits that
the local government can afford. However, local government units may not
provide such when it amounts to a supplementary retirement benefit scheme.
In this special civil action for certiorari, 1 the city of General Santos asks
us to find grave abuse of discretion on the part of the Commission on Audit
(COA). On January 20, 2011, respondent Commission on Audit affirmed the
findings of its Legal Services Sector in its Opinion No. 2010-021 declaring
Ordinance No. 08, series of 2009, as illegal. This was reiterated in respondent
Commission's resolution denying the motion for reconsideration dated October
17, 2011. 2
Ordinance No. 08, series of 2009, was enacted by the city of General
Santos on August 13, 2009. It is entitled An Ordinance Establishing the GenSan
Scheme on Early Retirement for Valued Employees Security (GenSan SERVES). 3
It is important to view this ordinance in its proper context. STaCIA
Then mayor of General Santos City, Pedro B. Acharon, Jr., issued

Executive Order No. 40, series of 2008, creating management teams pursuant
to its organization development program. This was patterned after Executive
Order No. 366 dated October 4, 2004 entitled Directing a Strategic Review of
the Operations and Organizations of the Executive Branch and Providing
Options and Incentives for Government Employees who may be Affected by the
Rationalization of the Functions and Agencies of the Executive Branch and its
implementing rules and regulations. 4
Mayor Pedro B. Acharon, Jr. declared the city's byword of "Total Quality
Service" in his state of the city address in 2005. This was followed by the
conduct of a process and practice review for each department, section, and unit
of the local government. The product was an organization development
masterplan adopted as Executive Order No. 13, series of 2009. 5 This was
followed by Resolution No. 004, series of 2009, requesting for the mayor's
support for GenSan SERVES, an early retirement program to be proposed to the
Sangguniang Panlungsod.
Consequently, Ordinance No. 08, Series of 2009, was passed together

with its implementing rules and regulat"to entice those employees who
were unproductive due to health reasons to avail of the incentives
being offered therein by way of early retirement package." 6
This contextual background in the passing of Ordinance No. 08, series of
2009, was not contested by respondent Commission on Audit.
The ordinance, as amended, provides that qualified employees below

sixty (60) years of age but not less than fifty (50) years and sickly employees
below fifty (50) years of age but not less than forty (40) years may avail of the
incentives under the program. 7 In other words, the ordinance "provides for
separation benefits for sickly employees who have not yet reached retirement
age." 8 Section 5 of the ordinance states:
Section 5. GenSan SERVES Program Incentives on Top of
Government Service Insurance System (GSIS) and PAG-IBIG Benefits.
— Any personnel qualified and approved to receive the incentives of
this program shall be entitled to whatever retirement benefits the
GSIS or PAG-IBIG is granting to a retiring government employee.
Moreover, an eligible employee shall receive an early retirement

incentive provided under this program at the rate of one and one-half
(1 1/2) months of the employee's latest basic salary for every year of
service in the City Government. 9
Also, the ordinance provides:

Section 6. GenSan SERVES Post-Retirement Incentives. — Upon
availment of early retirement, a qualified employee shall enjoy the
following in addition to the above incentives:
(a) Cash gift of Fifty Thousand Pesos (P50,000.00) for the sickly
employees;
(b) Lifetime free medical consultation at General Santos City
Hospital;
(c) Annual aid in the maximum amount of Five Thousand Pesos
(P5,000.00), if admitted at General Santos City Hospital; and
(d) 14 karat gold ring as a token. 10
As provided, payment would be made in two tranches: 50% paid in

January 2010 and the remainder in July 2010. 11 Petitioner city alleged that out
of its 1,361 regular employees, 50 employees applied, from which 39
employees qualified to avail of the incentives provided by the ordinance. 12 The
first tranche of benefits was released in January 2010. 13
In a letter dated February 10, 2010, the city's audit team leader, through
its supervising auditor, sent a query on the legality of the ordinance to
respondent Commission on Audit's director for Regional Office No. XII, Cotabato
City. 14 cDCEHa

In his second indorsement dated March 15, 2010, respondent
Commission's regional director agreed that the grant lacked legal basis and
was contrary to the Government Service Insurance System (GSIS) Act. He
forwarded the matter to respondent Commission's Office of General Counsel,
Legal Services Sector, for a more authoritative opinion. 15
The Office of General Counsel issued COA-LSS Opinion No. 2010-021 on
March 25, 2010. The opinion explained that Ordinance No. 08, series of 2009,
partakes of a supplementary retirement benefit plan. In its view, Section 28,
paragraph (b) of Commonwealth Act No. 186, as amended, prohibits
government agencies from establishing supplementary retirement or pension
plans from the time the Government Service Insurance System charter took
effect while those plans already existing when the charter was enacted were
declared abolished. 16
The opinion discussed that this prohibition was reiterated in Conte v.
Commission on Audit. 17 Laraño v. Commission on Audit, 18 on the other hand,
ruled that an early retirement program should be by virtue of a valid
reorganization pursuant to law in order to be valid. The opinion concludes as
follows:
In fine, since Ordinance No. 08 is in the nature of an ERP [Early
Retirement Program] of the City Government of General Santos, a law
authorizing the same is a requisite for its validity. In the absence,
however, of such law, the nullity of Ordinance No. 08 becomes a
necessary consequence.
It is hoped that the foregoing sufficiently answers the instant
query. 19
Petitioner city, through then mayor, Pedro B. Acharon, Jr., filed a letter-
reconsideration dated June 7, 2010. They followed through with two letters
addressed to respondent Commission's chairman dated July 26, 2010 and
October 6, 2010, respectively, for the reconsideration of COA-LSS Opinion No.
2010-021. 20
Respondent Commission on Audit treated these letters as an appeal. On
January 20, 2011, it rendered its decision denying the appeal and affirming
COA-LSS Opinion No. 2010-021. 21 It also denied reconsideration by resolution
dated October 17, 2011. 22 The dispositive portion of its decision reads:
WHEREFORE, premises considered, the instant appeal is hereby
DENIED for lack of merit and COA-LSS Opinion No. 2010-021 dated
March 25, 2010 of the OGC, this Commission is hereby AFFIRMED.
Accordingly, the ATL of General Santos City is hereby directed to issue
a Notice of Disallowance on the illegal disbursements made under the
Gen[S]san SERVES. 23
Respondent Commission on Audit agreed that Ordinance No. 08, series of

2009, partakes of the nature of a supplementary retirement benefit plan
proscribed by Section 28, paragraph (b) of Commonwealth Act No. 186 as
amended. It also cited Conte v. Commission on Audit 24 and Laraño v.
Commission on Audit. 25 ISDCaT
In its opinion, respondent Commission on Audit observed that GenSan

SERVES was not based on a law passed by Congress but on ordinances and
resolutions passed and approved by the Sangguniang Panlungsod and
Executive Orders by the city mayor. 26 Moreover, nowhere in Section 76 of
Republic Act No. 7160, otherwise known as the Local Government Code, does it
provide a specific power for local government units to establish an early
retirement program.
Mayor Acharon, Jr. submitted that other local government units such as
Cebu in 2005 and 2008 have adopted their own early retirement programs. The
resolutions of the Sangguniang Panlungsod of Cebu invoked Republic Act No.
6683 dated December 2, 1988, which provided for early retirement and
voluntary separation. The questioned decision mentioned that respondent
Commission on Audit would look into this program supposedly adopted by
Cebu. 27 Assuming Cebu's invocation of Republic Act No. 6683 was proper,
respondent Commission on Audit explained that this has already been
amended by Republic Act No. 8291, otherwise known as the GSIS Act of 1997.
Moreover, Section 9 of Republic Act No. 6683 28 provides for limited
application. 29
The present petition raises this sole issue:
WHETHER RESPONDENT COMMISSION ON AUDIT COMMITTED GRAVE
ABUSE OF DISCRETION WHEN IT CONSIDERED ORDINANCE NO. 08,
SERIES OF 2009, IN THE NATURE OF AN EARLY RETIREMENT
PROGRAM REQUIRING A LAW AUTHORIZING IT FOR ITS VALIDITY
I
This court has consistently held that findings of administrative agencies
are generally respected, unless found to have been tainted with unfairness that
amounted to grave abuse of discretion:
It is the general policy of the Court to sustain the decisions of
administrative authorities, especially one which is constitutionally-
created not only on the basis of the doctrine of separation of powers
but also for their presumed expertise in the laws they are entrusted to
enforce. Findings of administrative agencies are accorded not only
respect but also finality when the decision and order are not tainted
with unfairness or arbitrariness that would amount to grave abuse of
discretion. It is only when the COA has acted without or in excess of
jurisdiction, or with grave abuse of discretion amounting to lack or
excess of jurisdiction, that this Court entertains a petition questioning
its rulings. There is grave abuse of discretion when there is an
evasion of a positive duty or a virtual refusal to perform a duty
enjoined by law or to act in contemplation of law as when the
judgment rendered is not based on law and evidence but on caprice,
whim and despotism. 30 (Emphasis supplied, citations omitted)
We have ruled that "not every error in the proceedings, or every

erroneous conclusion of law or fact, constitutes grave abuse of discretion." 31
Grave abuse of discretion has been defined as follows:
By grave abuse of discretion is meant such capricious and
whimsical exercise of judgment as is equivalent to lack of jurisdiction.
Mere abuse of discretion is not enough. It must be grave abuse of
discretion as when the power is exercised in an arbitrary or despotic
manner by reason of passion or personal hostility, and must be so
patent and so gross as to amount to an evasion of a positive duty or to
a virtual refusal to perform the duty enjoined or to act at all in
contemplation of law. . . . . 32
In Yap v. Commission on Audit , 33 this court explained that the

Commission on Audit has the duty to make its own assessment of the merits of
the disallowance and need not be limited to a review of the grounds relied upon
by the auditor of the agency concerned: DHSaCA
. . . we rule that, in resolving cases brought before it on appeal,

respondent COA is not required to limit its review only to the grounds
relied upon by a government agency's auditor with respect to
disallowing certain disbursements of public funds. In consonance with
its general audit power, respondent COA is not merely legally
permitted, but is also duty-bound to make its own assessment of the
merits of the disallowed disbursement and not simply restrict itself to
reviewing the validity of the ground relied upon by the auditor of the
government agency concerned. To hold otherwise would render COA's
vital constitutional power unduly limited and thereby useless and
ineffective. 34
Moreover, Article IX-A, Section 7 of the Constitution provides that "unless

otherwise provided by this Constitution or by law, any decision, order, or ruling
of each Commission may be brought to the Supreme Court on certiorari by the
aggrieved party within thirty days from receipt of a copy thereof." Rule 64,
Section 2 of the Revised Rules of Civil Procedure also provides that "a judgment
or final order or resolution of the Commission on Elections and the Commission
on Audit may be brought by the aggrieved party to the Supreme Court on
certiorari under Rule 65, except as hereinafter provided."
Thus, we proceed to determine whether respondent Commission on Audit
acted with grave abuse of discretion in affirming the opinion of its Legal
Services Sector and finding that the entire Ordinance No. 08, series of 2009,
partakes of the nature of a proscribed supplementary retirement benefit plan.
II
According to petitioner city, GenSan SERVES does not provide for

supplementary retirement benefits, and Conte does not apply. 35 SDEHCc
Petitioner city explains that unlike the facts in Conte, Ordinance No. 08,
series of 2009, was designed to entice employees who are unproductive due to
health reasons to avail of the incentives by way of an early retirement package.
In essence, the incentives are severance pay. Those who have reached
retirement age are disqualified. 36

Petitioner city adds that GenSan SERVES is a one-time offer. It is available
only to qualified employees who applied within two months from the
ordinance's effectivity. In fact, out of its 1,361 regular employees, 50
employees applied. Out of all that applied, only 39 employees qualified to avail
of the incentives provided by the ordinance. 37
These incentives are independent and distinct from the Government
Service Insurance System retirement package. 38
Section 5 of Ordinance No. 08, series of 2009, was amended by Ordinance
No. 11, series of 2009, "to exclude those GSIS and PAG-IBIG benefits the
payment[s] of which are passed on [to] the employer." 39 This was to remove
any doubt as to its coverage and applicability and to ensure that no employee
will be paid twice. 40 The amended provision reads:
Section 5. Gen[S]an SERVES Program Incentives on Top of
Government Service Insurance System (GSIS) and PAG-IBIG Benefits.
— Any personnel qualified and approved to receive the incentives of
this program shall be entitled to whatever retirement benefits the
GSIS or PAG-IBIG is granting to a retiring government employee,
except those benefits the payment of which are passed on to
the employer. In which case, the benefits granted under this
ordinance shall only be considered as one of the options available to
a retiring city employee.
Moreover, an eligible employee shall receive an early retirement

incentive provided under this program at the rate of one and one-half
(1 1/2) months of the employee's latest basic salary for every year of
service in the City Government. (Emphasis supplied)
According to petitioner city, GenSan SERVES is an initial step pursuant to

its organization development masterplan, 41 which began with the city mayor's
issuance of Executive Order No. 40, series of 2008, creating change
management teams. 42
Petitioner city cites Sections 16 and 76 of the Local Government Code as

its authority to reorganize. It argues that these provisions necessarily imply the
authority of petitioner city to provide retirement benefits, separation pay, and
other incentives to those affected by the reorganization. 43
Petitioner city also cites Republic Act No. 6656, otherwise known as An
Act to Protect the Security of Tenure of Civil Service Officers and Employees in
the Implementation of Government Reorganization . 44 According to petitioner
city, this not only requires good faith in the implementation of reorganization
but mandates the payment of appropriate separation pay, retirement, and
other benefits under existing laws within 90 days from effectivity date of
separation. 45
Even President Gloria Macapagal-Arroyo issued Executive Order No. 184
entitled Directing the Reorganization and Streamlining of the National
Development Company on March 10, 2003. In Section 4, it provides for a
separation package anchored on Republic Act No. 6656. 46 Petitioner city
submits that if the President can reorganize in the absence of any law
authorizing her to do so and provide compensation based on Republic Act No.
6656, with more reason that a local government unit can reorganize as its
power to reorganize is expressly provided in the Local Government Code. 47
Respondent Commission on Audit counters that it correctly found
Ordinance No. 08, series of 2009, as invalid in the absence of a law passed by
Congress specifically authorizing the enactment of an ordinance granting an
early retirement scheme. 48 DTAaCE
Respondent Commission on Audit contends that Sections 16 and 76 of the

Local Government Code do not confer authority upon any local government unit
to create a separate or supplementary retirement benefit plan. 49 As for
Republic Act No. 6656, this contemplates situations where a government
position has been abolished, or rendered redundant, or a need to merge, divide
or consolidate positions for lawful causes allowed by the Civil Service Law
exists. 50
According to respondent Commission on Audit, petitioner city failed to
demonstrate arbitrariness on its part as it merely observed the proscription
under Section 28, paragraph (b) of Commonwealth Act No. 186 when it found
the ordinance a nullity. 51
We agree with respondent Commission on Audit but only insofar as

Section 5 of the ordinance is concerned. We declare Section 6 on post-
retirement incentives as valid.
III
The constitutional mandate for local autonomy supports petitioner city's

issuance of Executive Order No. 40, series of 2008, creating change
management teams 52 as an initial step for its organization development
masterplan.
Local autonomy also grants local governments the power to streamline
and reorganize. This power is inferred from Section 76 of the Local Government
Code on organizational structure and staffing pattern, and Section 16 otherwise
known as the general welfare clause:
Section 76. Organizational Structure and Staffing Pattern. —
Every local government unit shall design and implement its own
organizational structure and staffing pattern taking into consideration
its service requirements and financial capability, subject to the
minimum standards and guidelines prescribed by the Civil Service
Commission.
shall exercise the powers expressly granted, those necessarily
implied therefrom, as well as powers necessary, appropriate, or
incidental for its efficient and effective governance, and those which
are essential to the promotion of the general welfare. Within their
respective territorial jurisdictions, local government units shall ensure
and support, among other things, the preservation and enrichment of
culture, promote health and safety, enhance the right of the people to
a balanced ecology, encourage and support the development of
appropriate and self-reliant scientific and technological capabilities,
improve public morals, enhance economic prosperity and social
justice, promote full employment among their residents, maintain
peace and order, and preserve the comfort and convenience of their
inhabitants.
Section 5, paragraph (a) of the Local Government Code states that "any
provision on a power of a local government unit shall be liberally interpreted in
its favor, and in case of doubt, any question thereon shall be resolved in favor
or devolution of powers . . . ."
Section 5, paragraph (c) also provides that "the general welfare provisions
in this Code shall be liberally interpreted to give more powers to local
government units in accelerating economic development and upgrading the
quality of life for the people in the community." These rules of interpretation
emphasize the policy of local autonomy and the devolution of powers to the
local government units.
Designing and implementing a local government unit's own

"organizational structure and staffing pattern" also implies the power to revise
and reorganize. Without such power, local governments will lose the ability to
adjust to the needs of its constituents. Effective and efficient governmental
services especially at the local government level require rational and deliberate
changes planned and executed in good faith from time to time. SaCIAE
This was implied in Province of Negros Occidental v. Commissioners,

Commission on Audit. 53 In that case, this court declared as valid the ordinance
passed by the province granting and releasing hospitalization and health care
insurance benefits to its officials and employees. This court held that Section 2
of Administrative Order No. 103 54 requiring the President's prior approval
before the grant of any allowance or benefit is applicable only to offices under
the executive branch. 55 Section 2 does not mention local government units,
thus, the prohibition does not apply to them. 56 This court then referred to the
policy of local autonomy as follows:
Thus, consistent with the state policy of local autonomy as
guaranteed by the 1987 Constitution, under Section 25, Article II and
Section 2, Article X, and the Local Government Code of 1991, we
declare that the grant and release of the hospitalization and health
care insurance benefits given to petitioner's officials and employees
were validly enacted through an ordinance passed by petitioner's
Sangguniang Panlalawigan. 57
Local autonomy allows an interpretation of Sections 76 and 16 as granting
petitioner city the authority to create its organization development program.
Petitioner city's vision in 2005 of "Total Quality Service" for "the
improvement of the quality of services delivered by the city to the delight of its
internal and external customers" 58 is a matter within its discretion. It then
conducted a process and practice review for each and every unit within the city,
resulting in the formulation of an organization development masterplan
adopted as Executive Order No. 13, series of 2009. 59
Resolution No. 004, series of 2009, was later passed requesting for the
mayor's support for GenSan SERVES. The third preambular clause states that in
order "to transform the bureaucracy into [an] effective and result[s]-oriented
structure, redounding to improved governance, there is a need to entice
employees aged 50-59 years old, to retire earlier than [age] 65 for them to
enjoy their retirement while they are still healthy." 60 Consequently, Ordinance
No. 08, series of 2009, was passed creating the GenSan SERVES program.
In Betoy v. The Board of Directors, NAPOCOR, 61 this court explained that
a streamlining of organization for a more efficient system must pass the test of
good faith in order to be valid:
A reorganization involves the reduction of personnel,
consolidation of offices, or abolition thereof by reason of economy or
redundancy of functions. 62 It could result in the loss of one's position
through removal or abolition of an office. However, for a
reorganization for the purpose of economy or to make the
bureaucracy more efficient to be valid, it must pass the test of
good faith; otherwise, it is void ab initio. 63 (Emphasis supplied)
There are indicia of bad faith, none of which are present in this case.
Republic Act No. 6656 invoked by petitioner city as authority for the
creation of GenSan SERVES, for example, enumerates situations considered as
bad faith when employees are removed as a result of any reorganization:
SECTION 2. No officer or employee in the career service
shall be removed except for a valid cause and after due notice and
hearing. A valid cause for removal exists when, pursuant to a
bona fide reorganization, a position has been abolished or
rendered redundant or there is a need to merge, divide, or
consolidate positions in order to meet the exigencies of the
service, or other lawful causes allowed by the Civil Service Law.
The existence of any or some of the following circumstances
may be considered as evidence of bad faith in the removals
made as a result of reorganization, giving rise to a claim for
reinstatement or reappointment by an aggrieved party:
a) Where there is a significant increase in the number of positions
in the new staffing pattern of the department or agency
concerned;
b) Where an office is abolished and another performing
substantially the same functions in created;ADSIaT
c) Where incumbents are replaced by those less qualified in terms

of status of appointment, performance and merit;
d) Where there is a reclassification of offices in the department or
agency concerned and the reclassified offices perform
substantially the same functions as the original offices; and
e) Where the removal violates the order of separation provided in
Section 3 hereof. (Emphasis supplied)
None of these badges of bad faith exist in this case.

Petitioner city followed the order of priority under Section 4 of its
ordinance. 64 It required applicants to undergo medical examination with the
local hospital and considered the hospital chief's recommendations. 65
Unfortunately, these allegations showing good faith is not enough to
declare the program created by petitioner city as a reorganization that justifies
the creation of a retirement benefit plan:
Petitioner city alleged that the positions occupied by those who qualified
for GenSan SERVES remained vacant, and it would neither hire replacements
nor promote employees earlier than June 30, 2011. 66 This means the positions
left by those who availed of the program will eventually be filled up by others.
Their positions were not abolished or merged with other positions for
streamlining in the service.
IV
The assailed decision by respondent Commission on Audit was anchored

on Section 28, paragraph (b) of Commonwealth Act No. 186, otherwise known
as the Government Service Insurance Act, 67 as amended by Republic Act No.
4968. 68 This proscribes all supplementary retirement or pension plans for
government employees: acHCSD
(b) Hereafter no insurance or retirement plan for officers or

employees shall be created by any employer. All supplementary
retirement or pension plans heretofore in force in any government
office, agency, or instrumentality or corporation owned and controlled
by the government, are hereby declared inoperative or abolished:
Provided, That the rights of those who are already eligible to retire
thereunder shall not be affected.
Jurisprudence has discussed the nature and purpose of retirement

benefits and pension plans as follows:
Retirement benefits are, after all, a form of reward for an
employee's loyalty and service to the employer, and are intended to
help the employee enjoy the remaining years of his life, lessening the
burden of worrying about his financial support or upkeep. On the
other hand, a pension partakes of the nature of "retained wages" of
the retiree for a dual purpose: to entice competent people to enter
the government service, and to permit them to retire from the service
with relative security, not only for those who have retained their
vigor, but more so for those who have been incapacitated by illness
or accident. 69 (Emphasis supplied)
I n Conte v. Commission on Audit, 70 this court discussed the purpose

behind the proscription found in Section 28, paragraph (b), as amended. It was
to address the need to prevent the proliferation of inequitous plans:
. . . Sec. 28 (b) as amended by RA 4968 in no uncertain terms
bars the creation of any insurance or retirement plan — other than the
GSIS — for government officers and employees, in order to prevent the
undue and inequitous proliferation of such plans. . . . . To ignore this
and rule otherwise would be tantamount to permitting every other
government office or agency to put up its own supplementary
retirement benefit plan under the guise of such "financial assistance."
71
Section 2 of the ordinance, as amended, defined "applicants" as referring

to "qualified employees below sixty (60) years of age but not less than fifty (50)
years and sickly employees below fifty (50) years of age but not less than forty
(40) years old from the effectivity of this Ordinance and shall have rendered
service in the City government for at least 15 years."
This means that even employees other than those who are unproductive
due to health reasons may apply under the ordinance. Albeit last in priority,
they may still qualify to avail of the incentives pursuant to Section 4, paragraph
(d), as amended:
Section 4. Prioritization. — The following applicants shall be
prioritized in availing the program:
a) First — Employees below sixty (60) years of age but not less
than fifty (50) years who are determined by the Chief of General
Santos City Hospital to be qualified to avail of the program;
b) Second — Employees below sixty (60) years of age but not less
than fifty (50) years who are under continuous medication as
determined by the Chief of General Santos City Hospital;
c) Third — Employees below fifty (50) years of age but not less
than forty (40) years who are determined by the Chief of General
Santos City Hospital to be physically or mentally incapacitated to
further continue rendering service with the City Government and
recommended to avail of the program; and
d) Fourth — Employees below sixty (60) years of age but not less
than fifty (50) years who are desirous to avail of the program.
Moreover, Section 3 of the ordinance, as amended, enumerates those

who are covered by the program and may thus apply under the ordinance:
Section 3. Coverage. — GenSan SERVES program covers the
following employees of the City Government:
(a) personnel occupying permanent positions;

(b) those who are below sixty (60) years of age but not less than
fifty (50) years on the date of application;
(c) those who are below fifty (50) years of age but not less than
forty (40) years on the date of application but confirmed by the
Chief of General Santos City Hospital to be sickly and
recommended to avail early retirement; and
(d) those who must have served the City Government of General
Santos a minimum of fifteen (15) continuous years.

Under paragraph (d), employees should have served for a minimum of 15
years to qualify. This requirement is consistent with the definition of a
retirement plan as a form of reward for an employee's loyalty and service to
the employer. Moreover, pension plans as defined permit employees to retire
with relative security, especially for those who have been incapacitated by
illness. 72 DaESIC
Section 5 states that "an eligible employee shall receive an early

retirement incentive provided under this program at the rate of 1 1/2 months of
the employee's latest basic salary for every year of service in the City
Government." This may be more than the amount of annuity provided in
Section 11, paragraph (a) of Commonwealth Act No. 186 as amended, 73
considering that an applicant must have rendered at least 15 years of service in
the city government to qualify. 74
Section 5 refers to an "early retirement incentive," the amount of which is

pegged on the beneficiary's years of service in the city government. The
ordinance provides that only those who have rendered service to the city
government for at least 15 years may apply. 75 Consequently, this provision
falls under the definition of a retirement benefit. Applying the definition in
Conte, it is a form of reward for an employee's loyalty and service to the city
government, and it is intended to help the employee enjoy the remaining years
of his or her life by lessening his or her financial worries.
V
In any case, those who availed of the GenSan SERVES were separated
from the service. Those who are separated from the service, whether
compulsorily for lawful cause, 76 or voluntarily when incentivized to retire early
for streamlining purposes, 77 should consequently be entitled to a form of
separation or severance pay.
Petitioner city invoked Republic Act No. 6656, which provides that
employees separated from the service as a result of any reorganization shall be
entitled to separation pay, retirement, and other benefits:
Section 9. All officers and employees who are found by the Civil
Service Commission to have been separated in violation of the
provisions of this Act, shall be ordered reinstated or reappointed as
the case may be without loss of seniority and shall be entitled to full
pay for the period of separation. Unless also separated for cause,
all officers and employees, who have been separated
pursuant to reorganization shall, if entitled thereto, be paid
the appropriate separation pay and retirement and other
benefits under existing laws within ninety (90) days from the
date of the effectivity of their separation or from the date of
the receipt of the resolution of their appeals as the case may
be: Provided, That application for clearance has been filed
and no action thereon has been made by the corresponding
department or agency. Those who are not entitled to said benefits
shall be paid a separation gratuity in the amount equivalent to one
(1) month salary for every year of service. Such separation pay and
retirement benefits shall have priority of payment out of the savings
of the department or agency concerned. (Emphasis supplied)
Separation or severance pay has been defined as "an allowance usually

based on length of service that is payable to an employee on severance . . ., or
as compensation due an employee upon the severance of his employment
status with the employer." 78
Section 6 of the ordinance on post-retirement incentives provides for

benefits that are not computed based on years of service. They are lump sum
amounts and healthcare benefits:
Section 6. GenSan SERVES Post-Retirement Incentives. — Upon
availment of early retirement, a qualified employee shall enjoy the
following in addition to the above incentives:
(e) Cash gift of Fifty Thousand Pesos (P50,000.00) for the sickly
employees;
(f) Lifetime free medical consultation at General Santos City
Hospital;
(g) Annual aid in the maximum amount of Five Thousand Pesos
(P5,000.00), if admitted at General Santos City Hospital; and
(h) 14 karat gold ring as token.
The text of the ordinance indicates its purpose of encouraging employees,

especially those who are unproductive due to health reasons, to avail of the
program even before they reach the compulsory retirement age. Section 6
provides for a form of severance pay to those who availed of GenSan SERVES,
which was executed in good faith.
We should not be misled by the use of the term "retirement" in Section 6
in determining the nature of the benefits it provides. Labels are not
determinative of substantive content. It is the purpose behind these incentives,
as read from the text of the ordinance and as inferred from the effect of the
ordinance as applied, which must govern. DcITHE
The purpose of Section 6 is also different from the benefits proscribed in

Conte v. Commission on Audit, 79 and the nature of its benefits must be taken
in the context of its rationale. The benefits provided in Section 6 serve its
purpose of inducing petitioner city's employees, who are unproductive due to
health reasons, to retire early. Respondent Commission on Audit's observation
that the benefit provided is broader than that provided in Conte v. Commission
on Audit fails to take this rationale into consideration. Furthermore, the benefits
under GenSan SERVES were only given to a select few — the sickly and
unproductive due to health reasons. Certainly, this negates the position that the
benefits provide for supplementary retirement benefits that augment existing
retirement laws.
I n Conte v. Commission on Audit 80 cited by respondent Commission on

Audit, this court held that the "financial assistance" option for the difference of
benefits under Republic Act No. 660 and Republic Act No. 1616 violated Section
28, paragraph (b) as amended. Social Security System (SSS) Resolution No. 56
subject of that case provides in part:
NOW, THEREFORE, BE IT RESOLVED, That all the SSS employees
who are simultaneously qualified for compulsory retirement at age 65
or for optional retirement at a lower age be encouraged to avail for
themselves the life annuity under R.A. 660, as amended; . . . . 81
The fifth preambular clause of Resolution No. 56 also states that "it is the
policy of the Social Security Commission to promote and to protect the interest
of all SSS employees, with a view to providing for their well-being during both
their working and retirement years." 82 The financial assistance provides
benefits to a l l Social Security System employees who are retirable under
existing laws and who are qualified to apply. It is available to all present and
future Social Security System employees upon reaching retirement age. 83
Without doubt, this financial assistance of Conte augments the retirement
benefits provided under existing laws, in violation of Section 28, paragraph (b),
as amended.
On the other hand, Section 3 of Ordinance No. 08, series of 2009 limits its
coverage. Only qualified employees below sixty (60) years of age but not less
than fifty (50) years and sickly employees below fifty (50) years of age but not
less than forty (40) years from the effectivity of the ordinance, with at least 15
years of service, are considered. Out of 1,361 regular employees of petitioner
city, only 50 employees applied, from which only 39 employees qualified to
avail of the ordinance benefits. 84 Petitioner city alleged that there was one
more applicant who was supposed to qualify, but she had died of acute renal
failure secondary to diabetes nephropathy before her application was acted
upon. 85
Furthermore, unlike in Conte, Ordinance No. 08, series of 2009, was a
one-time limited offer. 86 The availment period was only within two months
from the ordinance's effectivity. 87
In any case, petitioner city is authorized by the Local Government Code to

approve ordinances to provide for the care of the sick:
SECTION 458. Powers, Duties, Functions and Compensation. —
(a) The Sangguniang Panlungsod, as the legislative body of the city,
shall enact ordinances, approve resolutions and appropriate funds for
the general welfare of the city and its inhabitants pursuant to section
16 of this Code and in the proper exercise of the corporate powers of
the city as provided for under section 22 of this Code, and shall:
xxx xxx xxx

(5) Approve ordinances which shall ensure the efficient and
effective delivery of the basic services and facilities as provided for
under Section 17 of this Code, and in addition to said services and
facilities, shall:
xxx xxx xxx

(xiv)Provide for the care of disabled persons, paupers, the aged,
the sick , persons of unsound mind, abandoned minors, juvenile
delinquents, drug dependents, abused children and other needy and
disadvantaged persons, particularly children and youth below
eighteen (18) years of age; and, subject to availability of funds,
establish and provide for the operation of centers and facilities for
said needy and disadvantaged persons[.] (Emphasis supplied)
This is also consistent with the constitutional mandate for a

comprehensive approach to health development, with priority for the needs of
the sick:
ARTICLE XIII
Social Justice and Human Rights
HEALTH
Section 11. The State shall adopt an integrated and
comprehensive approach to health development which shall
endeavor to make essential goods, health and other social services
available to all the people at affordable cost. There shall be priority
for the needs of the underprivileged, sick, elderly, disabled, women,
and children. The State shall endeavor to provide free medical care to
paupers.
Thus, the cash gift for the sickly employees, lifetime free medical
consultation in petitioner city's hospital, and other similar benefits under
Section 6 of the ordinance are valid.
The proscription under Section 28, paragraph (b) of Commonwealth Act
No. 186, as amended, does not apply to Section 6 of the ordinance.
Consequently, the Commission on Audit acted with grave abuse of discretion
when it declared the entire ordinance void and of no effect.
WHEREFORE, the petition is PARTIALLY GRANTED . The assailed
Commission on Audit decision dated January 20, 2011 and resolution dated
October 17, 2011 are AFFIRMED with MODIFICATION insofar as Section 6 of
Ordinance No. 08, series of 2009, as amended by Ordinance No. 11, series of
2009, is declared as VALID. SCETHa
SO ORDERED.
Sereno, C.J., Carpio, Velasco, Jr., Leonardo-de Castro, Brion, Peralta,
Bersamin, Del Castillo, Abad, Villarama, Jr., Perez, Mendoza, Reyes and Perlas-
Bernabe, JJ., concur.
Footnotes
1.This special civil action for certiorari was filed pursuant to Rule 64 in relation to
Rule 65 of the 1997 Rules of Court.
2.Rollo , p. 20.

3.Id. at 4, petition.
4.Id. at 184, petitioner's memorandum.
5.Id., petitioner's memorandum.

7.See Ordinance No. 8 attached as Annex K of the petition. Ordinance No. 8, Sec. 2,
par. (a), as amended, defines "Applicants." Rollo , p. 64.
8.Rollo , p. 183, petitioner's memorandum.

9.Id. at 65-66. The first paragraph of Section 5 has been amended by Ordinance
No. 11, series of 2009, as follows:
Section 5. GenSan SERVES Program Incentives on Top of Government Service

Insurance System (GSIS) and PAG-IBIG Benefits. — Any personnel qualified
and approved to receive the incentives of this program shall be entitled to
whatever retirement benefits the GSIS or PAG-IBIG is granting to a retiring
government employee, except those benefits the payment of which
are passed on to the employer. In which case, the benefits granted
under this ordinance shall only be considered as one of the options
available to a retiring city employee.
10.Id. at 66, Ordinance No. 8, Sec. 6.
11.Id., Ordinance No. 8, Sec. 10.

13.Id. at 8, petition.
14.Id. at 34, COA decision.

15.Id., COA decision.
16.Id. at 24-25, COA-LSS opinion.
17.332 Phil. 20 (1996) [Per J. Panganiban, En Banc].

18.565 Phil. 271 (2007) [Per C.J. Puno, En Banc].
19.Rollo , p. 25, COA-LSS opinion.

20.Id. at 185-186, petitioner's memorandum.
21.Id. at 33-39. A copy of the COA decision is attached as Annex E of the petition.
22.Id. at 51-53. A copy of the COA resolution is attached as Annex G of the petition.

25.565 Phil. 271 (2007) [Per C.J. Puno, En Banc].
27.Id. at 37-38, COA decision.

28.Sec. 9. Period of Applicability and Effectivity of the Incentive Benefits. —
Applications for early retirement and voluntary separation benefits hereunder
shall be entertained only if filed within a period of two (2) months from the
issuance of the rules and regulations for the implementation of this Act
pursuant to Section 13 hereof. The oldest employees who are the most
senior in the service will be given priority in the payment of benefits.
30.Veloso v. Commission on Audit , G.R. No. 193677, September 6, 2011, 656 SCRA
767, 777 [Per J. Peralta, En Banc], citing Yap v. Commission on Audit , G.R.
No. 158562, April 23, 2010, 619 SCRA 154, 174 [Per J. Leonardo-de Castro,
En Banc]. See also Villanueva v. Commission on Audit, 493 Phil. 887 (2005)
[Per J. Chico-Nazario, En Banc].
31.Dimapilis-Baldoz v. Commission on Audit , G.R. No. 199114, July 16, 2013, 701
SCRA 318, 335 [Per J. Perlas-Bernabe, En Banc], citing Tavera-Luna, Inc. v.
Nable, 67 Phil. 340, 344 (1939) [Per J. Laurel, En Banc].
32.Development Bank of the Philippines v. Commission on Audit, 530 Phil. 271, 278
[Per J. Puno, En Banc], citing Tañada v. Angara, 338 Phil. 546, 604 (1997)
[Per J. Panganiban, En Banc].
33.G.R. No. 158562, April 23, 2010, 619 SCRA 154 [Per J. Leonardo-de Castro, En
Banc].
34.Id. at 169.


38.Id. at 187-188, petitioner's memorandum.
39.A copy of Ordinance No. 11 is attached as Annex M of the petition, rollo, pp. 73-
76; Petitioner's memorandum, rollo, p. 192.
40.Rollo , p. 18, petition.

41.Id. at 7, petition; rollo, pp. 184-185, petitioner's memorandum.
42.A copy of Executive Order No. 40, series of 2008, is attached as Annex H of the
petition, rollo, pp. 54-57.
43.Rollo , pp. 189-190, petitioner's memorandum.
44.This was approved on June 10, 1988.


48.Id. at 168, respondent's memorandum.

52.A copy of Executive Order No. 40, series of 2008, is attached as Annex H of the
petition, rollo, pp. 54-57.
53.G.R. No. 182574, September 28, 2010, 631 SCRA 431 [Per J. Carpio, En Banc].
54.Section 2. All heads of government offices/agencies, including government
owned and/or controlled corporations, as well as their respective governing
boards are hereby enjoined and prohibited from authorizing/granting
Productivity Incentive Benefits or any and all forms of allowances/benefits
without prior approval and authorization via Administrative Order by the
Office of the President. Henceforth, anyone found violating any of the
mandates in this order, including all officials/agency found to have taken part
thereof, shall be accordingly and severely dealt with in accordance with the
applicable provisions of existing administrative and penal laws.
Consequently, all administrative authorizations to grant any form of

allowances/benefits and all forms of additional compensation usually paid
outside of the prescribed basic salary under R.A. 6758, the Salary
Standardization Law, that are inconsistent with the legislated policy on the
matter or are not covered by any legislative action are hereby revoked.
55.Province of Negros Occidental v. Commissioners, Commission on Audit, G.R. No.

182574, September 28, 2010, 631 SCRA 431, 441 [Per J. Carpio, En Banc].
56.Id. at 441.
57.Id. at 444.
60.Id. at 63, Resolution No. 004, series of 2009.

61.G.R. Nos. 156556-57, October 4, 2011, 658 SCRA 420 [Per J. Peralta, En Banc].
62.Id. at 439, citing Canonizado v. Aguirre , 380 Phil. 280, 296 (2000) [Per J.
Gonzaga-Reyes, En Banc].
63.Id., citing Dario v. Mison, 257 Phil. 84 (1989) [Per J. Sarmiento, En Banc]; Vide:
Dytiapco v. Civil Service Commission , G.R. No. 92136, July 3, 1992, 211 SCRA
88 [Per J. Nocon, En Banc]; Domingo v. Development Bank of the Philippines,
G.R. No. 93355, April 7, 1992, 207 SCRA 766 [Per J. Regalado, En Banc]; and
Pari-an v. Civil Service Commission, 279 Phil. 835 (1991) [Per Griño-Aquino,
En Banc].

67.The Government Service Insurance Act was approved on November 14, 1936.
68.Republic Act No. 4968 was approved on June 17, 1967.

69.See GSIS v. De Leon, G.R. No. 186560, November 17, 2010, 635 SCRA 321, 334
[Per J. Nachura, Second Division], citing Conte v. Commission on Audit, 332
Phil. 20, 34-35 (1996) [Per J. Panganiban, En Banc].
70.Conte v. Commission on Audit , 332 Phil. 20 (1996) [Per J. Panganiban, En Banc].
71.Id. at 35.
72.Id.
73.Sec. 11, par. (a). Amount of annuity. — Upon retirement after faithful and
satisfactory service a member shall be automatically entitled to a life annuity
guaranteed for at least five years and thereafter as long as he lives. The
amount of the monthly annuity at the age of fifty-seven years shall be thirty
pesos, plus for each year of service after the sixteenth of June, nineteen
hundred and fifty-one, two per centum of the average monthly salary
received by him during the last three years of service, plus for each year of
service rendered prior to the sixteenth of June, nineteen hundred and fifty-
one, one and two-tenths per centum of said average monthly salary:
Provided, That this amount shall be adjusted actuarially if retirement be at an
age other than fifty-seven years: Provided, further, That the maximum
amount of monthly annuity at age fifty-seven shall not in any case exceed
three-fourths of said average monthly salary: And provided, finally, That
retirement benefit shall be paid not earlier than one year after the approval
of this Act. In lieu of this annuity, he may prior to his retirement elect one of
the following equivalent benefits:
(1) Monthly annuity during his lifetime;

(2) Monthly annuity during the joint-lives of the employee and his or her spouse
guaranteed for at least five years, which annuity, however, shall, upon the
death of either and after the five-year guaranteed period, be reduced to one-
half and be paid to the survivor;
(3) For those who are at least sixty-three years of age, lump-sum payment of
present value of annuity for first five years, and for those who are at least
sixty but below sixty-three years of age, lump-sum payment of the present
value of the annuity for the first three years, with the balance of the five-year
guaranteed annuity payable in lump sum upon reaching sixty-three years of
age, and annuity after the guaranteed period to be paid monthly: Provided,
That said lump-sum payment of annuity may be made to a retired employee
only if the premiums paid by and for him are sufficient to cover said payment
or payments: Provided, further, That it shall be compulsory for an employer
to pay on the date of retirement in preference to all other obligations, except
salaries and wages of its employees, its share of at least the premiums
required to permit an employee to enjoy this option;
(4) Such other benefits as may be approved by the System. (Emphasis supplied)
74.See Sec. 2, par. (a) of Ordinance No. 08, series of 2009, which defines
"Applicants." Rollo , pp. 64-65.
75.Ordinance No. 08, series of 2009, Sec. 2, par. (a).

76.See Republic Act No. 6656. Section 9 provides as follows:
Section 9. All officers and employees who are found by the Civil Service
Commission to have been separated in violation of the provisions of this Act,
shall be ordered reinstated or reappointed as the case may be without loss of
seniority and shall be entitled to full pay for the period of separation. Unless
also separated for cause, all officers and employees, who have been
separated pursuant to reorganization shall, if entitled thereto, be
paid the appropriate separation pay and retirement and other
benefits under existing laws within ninety (90) days from the date
of the effectivity of their separation or from the date of the receipt
of the resolution of their appeals as the case may be: Provided, That
application for clearance has been filed and no action thereon has
been made by the corresponding department or agency. Those who
are not entitled to said benefits shall be paid a separation gratuity in the
amount equivalent to one (1) month salary for every year of service. Such
separation pay and retirement benefits shall have priority of payment out of
the savings of the department or agency concerned. (Emphasis supplied)
77.See GSIS v. Commission on Audit, G.R. No. 162372, October 19, 2011 [Per J.
Leonardo-de Castro, En Banc], available at the Supreme Court website:
<http://sc.judiciary.gov.ph/jurisprudence/2011/october2011/162372.htm>.
This court made a distinction between plans that augment retirement
benefits under existing laws and early retirement incentives plans. The latter
may be adopted for government employees if authorized by a law that
streamlines the organization and encourages employees to retire early.
78.See E. Razon, Inc. v. Secretary of DOLE, G.R. No. 85867, May 13, 1993, 222
SCRA 1, 7 [Per J. Melo, Third Division], citing Marcopper Mining Corporation v.
NLRC, G.R. No. 83207, August 5, 1991, 200 SCRA 167 [Per J. Cruz, First
Division].
80.Id.
81.Id. at 28.
82.Id.

84.Id. at 185 and 191, petitioner's memorandum.

86.Id. at 66, Ordinance No. 08, series of 2009, Sec. 8.
Section 8. Availment of GenSan Serves. — The Gensan Serves shall be a one-

time offer only.
87.Id., Ordinance No. 08, series of 2009, Sec. 7.
Section 7. Availment Period. — The GenSan SERVES shall be offered to and may
be availed of by qualified applicants starting from the effectivity of this
Ordinance and within a period of two (2) months from its effectivity. All
applications filed to the Human Resource Management and Development
Office beyond the aforesaid period shall not be honored and be denied due
course.

EN BANC
[G.R. No. 209185. February 25, 2014.]
MARC DOUGLAS IV C. CAGAS, petitioner, vs. COMMISSION ON

ELECTIONS, represented by its CHAIRMAN, ATTY. SIXTO
BRILLANTES, JR., and the PROVINCIAL ELECTION OFFICER
OF DAVAO DEL SUR, represented by ATTY. MA. FEBES
BARLAAN, respondents.
RESOLUTION
CARPIO, J : p
On 26 November 2013, we issued a Resolution directing petitioner Marc

Douglas IV C. Cagas (Cagas) to explain why he should not be cited in contempt
of court for the letter 1 he sent to Court Administrator Jose Midas Marquez
(Court Administrator Marquez). 2
Cagas, this time assisted by Atty. Raquel V. Aspiras-Sanchez of Aspiras

and Aspiras Law Offices, and without indicating the date of his receipt of our
Resolution, posted his Compliance on 9 January 2014.
The contents of Cagas' Compliance are reproduced below:

COMPLIANCE
Petitioner MARC DOUGLAS IV C. CAGAS , by himself and with
the assistance of the undersigned counsel by way of special
appearance, in compliance with the show-cause order embodied in the
Honorable Court's resolution dated November 16, 2013, respectfully
states:
1. The aforesaid resolution directs [Cagas] to show cause

why he should not be held in contempt of court for innuendoes against
the Honorable Court en banc contained in a letter he wrote to Atty.
Jose Midas Marquez, presently the Court Administrator of the Supreme
Court. TSIaAc
2. With all due respect, the letter was a personal

communication made by [Cagas] to a friend — thus the use of the
words "pards" and "pare" — and was not meant nor intended to be an
official communication to Atty. Marquez in his capacity as Court
Administrator of the Honorable Court.
3. Be that as it may, [Cagas] sincerely apologizes to the

Court en banc and to all its members for the unfortunate language
used in the letter, in particular in its first paragraph.
4. With deep regret, [Cagas] admits that the said first

paragraph expressed his emotional exasperation at the time the letter
was written. [Cagas] got carried away by his passion and desire to
improve the lot of his home province and its people, and for this he is
truly sorry and takes full responsibility.
5. In mitigation, [Cagas] respectfully submits that he did not

mean nor intend the letter to be an affront or a sign of disrespect to the
Honorable Court. Far from being that, the letter, in its entirety, actually
shows [Cagas'] belief in the fairness of the court and its members.
[Cagas] may have expressed himself poorly, but in the second
paragraph of the letter, he communicates his continuing faith in the
Court's capacity to act on the truth, hence his request for Atty.
Marquez to show the DVDs to the justices "para malaman nila ang
totoo."
6. Once again, [Cagas] sincerely apologizes for whatever
innuendoes against the Court his rather emotional, but personal, letter
to Atty. Marquez may have communicated. [Cagas] is truly sorry for
that, and begs the leniency and liberality of the Honorable Court. He
means the Court and its members no disrespect, and continues to hold
them in the highest esteem and regard.
PRAYER
WHEREFORE, it is respectfully prayed that [Cagas'] apologies be

accepted and that the foregoing be considered as satisfactory
compliance with the Honorable Court's show cause order in its
November 26, 2013 resolution.
Petitioner prays for other just and equitable relief.
Respectfully submitted. Pasig City for Manila.

January 9, 2014.
[Signed]
MARC DOUGLAS IV C. CAGAS
By and for himself as Petitioner
Balintawak Street, Digos City
Assisted by:
ASPIRAS & ASPIRAS LAW OFFICES

By Special Appearance
1009 Prestige Tower, Emerald Avenue
Ortigas Center, 1605 Pasig City
[Signed]
RAQUEL V. ASPIRAS-SANCHEZ
ATTORNEY's ROLL NO. 39281
MCLE NO. IV — 0018383/April 23, 2013
IBP No. 950691/01.06.2014/Pasig City
PTR No. 9844998/01.09.2014/Pasig City
We find Cagas' explanation in his Compliance unsatisfactory. Although he

proffers his apologies and regrets to the Court, we find that his explanation is
less than candid. SDIaCT

To exculpate himself from liability, Cagas states that his emotional
outburst was contained in a personal letter addressed to a friend, who happens
to be Court Administrator Marquez. However, Cagas cannot raise the defense of
privacy of communication, especially after his admission that he requested
Court Administrator Marquez to show the DVDs to the members of this Court.
Cagas had to admit this since in his letter to Court Administrator Marquez he
actually asked the latter thus: ". . . ipapanood mo please sa mga A. Justices
para malaman nila ang totoo." In any event, messages addressed to the
members of the Court, regardless of media or even of intermediary, in
connection with the performance of their judicial functions become part of the
judicial record and are a matter of concern for the entire Court. 3
The fact that said letters are not technically considered pleadings,
nor the fact that they were submitted after the main petition had
been finally resolved does not detract from the gravity of contempt
committed. The constitutional right of freedom of speech or right to
privacy cannot be used as a shield for contemptuous acts against the
Court. 4
Cagas clearly wanted to exploit his seeming friendly ties with Court
Administrator Marquez and have pards utilize his official connections. Instead of
filing a pleading, Cagas sent a package containing the letter and DVDs to Court
Administrator Marquez's office address, with the intent of having the contents
of the DVDs viewed by the members of this Court. Cagas impressed upon Court
Administrator Marquez their friendship, which is underscored by the use of
pards and pare. Cagas also attempted to sway the members of this Court
through the intercession of his friend who, to his imagined convenience, is an
official of the Judiciary.
The Court does not countenance this kind of behavior. Indeed, Cagas'
exploitation of Court Administrator Marquez's position is deplorable and is a
prime example of an attitude that blatantly disregards Court processes. Despite
Cagas' claim that his letter to Court Administrator Marquez was merely
personal, and not official, communication, his admission that he requested
Court Administrator Marquez to show the DVDs to the justices via special de
abot, is also an admission that he tried to take advantage of Court
Administrator Marquez's position to gain access to the members of this Court
outside of the regular Court processes. Court Administrator Marquez,
meanwhile, had the duty to properly indorse to the appropriate office all
communication relating to the Court. 5
We also remind Cagas that this Court's decisions, though assigned to be
written by one Justice, are always collegial. This Court was unanimous 6 in its
Decision to dismiss Cagas' Petition for Prohibition for lack of merit. Apart from
his emotional exasperation, Cagas offered no further explanation for his
statement about the "level of deceitfulness" of the ponente and that the
decision can "poison the minds of law students." He then points to his
"continuing faith in the Court's capacity to act on the truth," hence his
admission that he requested Court Administrator Marquez to distribute the
DVDs to the members of this Court.
The making of contemptuous statements directed against the Court is an
abuse of the right to free speech 7 and degrades the administration of justice.
Hence, the defamatory statements in the letter impaired public confidence in
the integrity of the judiciary and not just of the ponente alone.
Generally, criticism of a court's rulings or decisions is not
improper, and may not be restricted after a case has been finally
disposed of and has ceased to be pending. So long as critics confine
their criticisms to facts and base them on the decisions of the court,
they commit no contempt no matter how severe the criticism may be;
but when they pass beyond that line and charge that judicial conduct
was influenced by improper, corrupt, or selfish motives, or that such
conduct was affected by political prejudice or interest, the tendency is
to create distrust and destroy the confidence of the people in their
courts.
Moreover, it has been held that criticism of courts after a case is

finally disposed of, does not constitute contempt and, to this effect, a
case may be said to be pending so long as there is still something for
the court to do therein. But criticism should be distinguished from
insult. A criticism after a case has been disposed of can no longer
influence the court, and on that ground it does not constitute
contempt. On the other hand, an insult hurled to the court, even after a
case is decided, can under no circumstance be justified. Mere criticism
or comment on the correctness or wrongness, soundness or
unsoundness of the decision of the court in a pending case made in
good faith may be tolerated; but to hurl the false charge that the
Supreme Court has been committing deliberately so many blunders
and injustices would tend necessarily to undermine the confidence of
the people in the honesty and integrity of its members, and
consequently to lower or degrade the administration of justice, and it
constitutes contempt. 8 CcAIDa
We appreciate that Cagas takes "full responsibility" for his "emotional, but
personal" message to Court Administrator Marquez.
For his exploitation of Court Administrator Marquez's position and for his
defamatory statements against the Court in general and to the ponente in
particular in his letter to Court Administrator Marquez, we hold Cagas guilty of
indirect contempt of court under Section 3 (c) and (d), Rule 71 of the 1997
Rules of Civil Procedure as amended, thus:
Section 3. Indirect contempt to be punished after charge and
hearing. — After a charge in writing has been filed, and an opportunity
given to the respondent to comment thereon within such period as
may be fixed by the court and to be heard by himself or counsel, a
person guilty of any of the following acts may be punished for indirect
contempt;
xxx xxx xxx

(c) Any abuse of or any unlawful interference with the
processes or proceedings of a court not constituting direct contempt
under Section 1 of this Rule;
(d) Any improper conduct tending, directly or indirectly, to
impede, obstruct, or degnade the administration of justice;
xxx xxx xxx
WHEREFORE, considering the circumstances of the present case, Marc

Douglas IV C. Cagas is declared GUILTY of indirect contempt of court. He is
fined P10,000.00 for each offense, for a total of P20,000.00, and warned that a
repetition of similar acts will warrant a more severe penalty.
SO ORDERED.
Sereno, C.J., Velasco, Jr., Leonardo-de Castro, Peralta, Bersamin, Del Castillo,
Abad, Villarama, Jr., Perez, Mendoza, Reyes, Perlas-Bernabe and Leonen, JJ.,
concur.
Brion, J., is on leave.
Footnotes
1.For reference, Cagas' letter to Court Administrator Marquez reads:
Atty. Jose Midas Marquez

SC Building, P. Faura St., Manila
Kumusta ka Pards , the recent SC decision in Cagas vs. COMELEC did not surprise
me.
What struck me was the level of deceitfulness of whoever wrote the decision. It
can poison the minds of law students.
Pare may padala ako na dvds parang awa mo na sa taga Davao del Sur at sa
sambayanan, ipapanood mo please sa mga A. Justices para malaman nila
ang totoo.
God never sleeps. God rewards the faithful.
Salamat Pards.
(signed) Marc Cagas
2.The envelope containing the letter was addressed to Atty. Jose Midas Marquez,
Philippine Supreme Court Spokesperson. Atty. Marquez's official designation
is Court Administrator. Atty. Theodore O. Te is Assistant Court Administrator
and Chief of the Public Information Office.
3.See In the Matter of Proceedings for Disciplinary Action against Atty. Wenceslao
Laureta, etc., 232 Phil. 353 (1987).
4.Id. at 388.
5.See Supreme Court Circular No. 30-91, Guidelines on the Functions of the Office
of the Court Administrator, 30 September 1991.
III. Matters Attended to by the Court Administrator

B. Public Assistance and Information
The Office of the Court Administrator shall attend to all matters of public
assistance and information, requests for expeditious action on pending cases
in the lower courts, indorsements from other government agencies and other
matters which do not involve administrative or judicial adjudications,
including queries on status of cases in the lower courts and on such other
matters relative to pertinent circulars, memoranda, or administrative orders
of the Supreme Court.
6.The voting was 13-0, with Associate Justices Mariano C. Del Castillo and Jose P.
Perez on official leave.
7.Roxas v. De Zuzuarregui, Jr., 554 Phil. 323 (2007).
8.People v. Godoy , 312 Phil. 977, 1018-1019 (1995).

EN BANC
[G.R. No. 199752. February 17, 2015.]
LUCENA D. DEMAALA , petitioner, vs. COMMISSION ON AUDIT,

represented by its Chairperson Commissioner MA. GRACIA
M. PULIDO TAN, respondent.
DECISION
LEONEN, J : p
Through this Petition for Certiorari, Lucena D. Demaala (Demaala) prays

that the September 22, 2008 Decision (Decision No. 2008-087) 1 and the
November 16, 2011 Resolution (Decision No. 2011-083) 2 of the Commission on
Audit be reversed and set aside.
The Commission on Audit's Decision No. 2008-087 3 denied Demaala's

appeal and affirmed with modification Local Decision No. 2006-056 4 dated April
19, 2006 of the Commission on Audit's Legal and Adjudication Office (LAO). LAO
Local Decision No. 2006-056, in turn, affirmed Notice of Charge (NC) No. 2004-
04-101. 5 NC No. 2004-04-101 was dated August 30, 2004 and issued by
Rodolfo C. Sy (Regional Cluster Director Sy), Regional Cluster Director of the
Legal Adjudication Sector, Commission on Audit Regional Office No. IV, Quezon
City.
The Commission on Audit's Decision No. 2011-083 denied the Motion for
Reconsideration filed by Demaala. 6
I
The Sangguniang Panlalawigan of Palawan enacted Provincial Ordinance

No. 332-A, Series of 1995, entitled "An Ordinance Approving and Adopting the
Code Governing the Revision of Assessments, Classification and Valuation of
Real Properties in the Province of Palawan" (Ordinance). 7 Chapter 5, Section 48
of the Ordinance provides for an additional levy on real property tax for the
special education fund at the rate of one-half percent or 0.5% as follows:
Section 48. Additional Levy on Real Property Tax for
Special Education Fund. — There is hereby levied an annual tax at
the rate of one-half percent (1/2%) of the assessed value property tax.
The proceeds thereof shall exclusively accrue to the Special Education
Fund (SEF). 8
In conformity with Section 48 of the Ordinance, the Municipality of Narra,

Palawan, with Demaala as mayor, collected from owners of real properties
located within its territory an annual tax as special education fund at the rate
of 0.5% of the assessed value of the property subject to tax. This collection was
effected through the municipal treasurer. 9
On post-audit, Audit Team Leader Juanito A. Nostratis issued Audit
Observation Memorandum (AOM) No. 03-005 dated August 7, 2003 in which he
noted supposed deficiencies in the special education fund collected by the
Municipality of Narra. 10 He questioned the levy of the special education fund at
the rate of only 0.5% rather than at 1%, the rate stated in Section 235 11 of
Republic Act No. 7160, otherwise known as the Local Government Code of 1991
(Local Government Code). 12
After evaluating AOM No. 03-005, Regional Cluster Director Sy issued NC
No. 2004-04-101 dated August 30, 2004 13 in the amount of P1,125,416.56. He
held Demaala, the municipal treasurer of Narra, and all special education fund
payors liable for the deficiency in special education fund collections.
This Notice of Charge reads:
NC No. 2004-04-101
Date: August 30, 2004
NOTICE OF CHARGE
The Municipal Mayor

Narra, Palawan
Attention: Municipal Accountant
We have reviewed and evaluated Audit Observation

Memorandum (AOM) No. 03-005 dated August 7, 2003 and noted the
following deficiencies:
Reference AMOUNT FACTS AND/OR

No. Date PAYOR CHARGED Persons LIABLE REASONS FOR
CHARGE
The additional levy

1,125,416.56 Lucena D. Demaala
for
SEF should be one
- Municipal Mayor
per
cent (1%) instead
Please see attached - for allowing the
of
schedule reduced rate of 0.5% as provided in
additional real RA 5447 dated
September 25,
property taxes
1968
Municipal Treasurer
- for collecting
understated
taxes
1,125,416.56 All payors
==========
Charge not appealed within six (6) months as prescribed under

Sections 49, 50 and 51 of PD No. 1445 shall become final and
executory. STECDc

RODOLFY C. SY (sgd.)
Regional Cluster Director 14
The Municipality of Narra, through Demaala, filed the Motion for

Reconsideration 15 dated December 2, 2004. It stressed that the collection of
the special education fund at the rate of 0.5% was merely in accordance with
the Ordinance. On March 9, 2005, Regional Cluster Director Sy issued an
Indorsement denying this Motion for Reconsideration. 16
Following this, the Municipality of Narra, through Demaala, filed an appeal
17 with the Commission on Audit's Legal and Adjudication Office. In Local
Decision No. 2006-056 18 dated April 19, 2006, this appeal was denied.
The Municipality of Narra, through Demaala, then filed a Petition for
Review 19 with the Commission on Audit.
In Decision No. 2008-087 20 dated September 22, 2008, the Commission
on Audit ruled against Demaala and affirmed LAO Local Decision No. 2006-056
with the modification that former Palawan Vice Governor Joel T. Reyes and the
other members of the Sangguniang Panlalawigan of Palawan who enacted the
Ordinance 21 were held jointly and severally liable with Demaala, the municipal
treasurer of Narra, and the special education fund payors. 22
The dispositive portion of this Decision reads:
WHEREFORE, premises considered, the instant appeal is hereby
DENIED for lack of merit. Accordingly, LAO Local Decision No. 2006-
056 is AFFIRMED with modification, to include Former Vice-Governor
and Presiding Officer Joel T. Reyes, Chairman Pro-Tempore Rosalino R.
Acosta, Majority Floor Leader Ernesto A. Llacuna, Asst. Majority Floor
Leader Antonio C. Alvarez, Asst. Minority Floor Leader Haide B.
Barroma, Hon. Leoncio N. Ola, Hon. Ramon A. Zabala, Hon. Belen B.
Abordo, Hon. Valentin A. Baaco, Hon. Claro Ordinario, Hon. Derrick R.
Pablico, Hon. Laine C. Abogado and Hon. Joel B. Bitongon among the
persons liable in the Notice of Charge. They shall be jointly and
severally liable with Mayor Lucena D. Demaala, together with the
Municipal Treasurer and all the payors of the under-collected real
property tax in the total amount of P1,125,416.56.
The Audit Team Leader is directed to issue a Supplemental
Notice of Charge to include the members of the Sangguniang
Panlalawigan as among the persons liable. 23
Thereafter, Demaala, who was no logger the mayor of the Municipality of

Narra, filed a Motion for Reconsideration. 24 Former Vice Governor Joel T. Reyes
and the other members of the Sangguniang Panlalawigan of Palawan who were
held liable under Decision No. 2008-087 filed a separate Motion for
Reconsideration. 25 The Commission on Audit's Decision No. 2011-083 26 dated
November 16, 2011 affirmed its September 22, 2008 Decision.
Demaala then filed with this court the present Petition for Certiorari. 27
Respondent Commission on Audit, through the Office of the Solicitor

General, filed its Comment 28 on April 20, 2012. Petitioner Demaala filed her
Reply 29 on September 6, 2012. Thereafter, the parties filed their respective
Memoranda. 30
II
For resolution in this case are the following issues:

First, whether respondent committed grave abuse of discretion amounting
to lack or excess of jurisdiction in holding that there was a deficiency in the
Municipality of Narra's collection of the additional levy for the special education
fund. Subsumed in this issue is the matter of whether a municipality within the
Metropolitan Manila Area, a city, or a province may have an additional levy on
real property for the special education fund at the rate of less than 1%.
Second, assuming that respondent correctly held that there was a

deficiency, whether respondent committed grave abuse of discretion
amounting to lack or excess or jurisdiction in holding petitioner personally liable
for the deficiency.
We find for petitioner.
Setting the rate of the additional levy for the special education fund at
less than 1% is within the taxing power of local government units. It is
consistent with the guiding constitutional principle of local autonomy.
III
The power to tax is an attribute of sovereignty. It is inherent in the state.
Provinces, cities, municipalities, and barangays are mere territorial and political
subdivisions of the state. They act only as part of the sovereign. Thus, they do
not have the inherent power to tax. 31 Their power to tax must be prescribed by
law. TaCEHA
Consistent with the view that the power to tax does not inhere in local
government units, this court has held that a reserved temperament must be
adhered to in construing the extent of a local government unit's power to tax.
As explained in Icard v. City Council of Baguio: 32
It is settled that a municipal corporation unlike a sovereign state
is clothed with no inherent power of taxation. The charter or statute
must plainly show an intent to confer that power or the municipality,
cannot assume it. And the power when granted is to be construed in
strictissimi juris. Any doubt or ambiguity arising out of the term used in
granting that power must be resolved against the municipality.
Inferences, implications, deductions — all these — have no place in the
interpretation of the taxing power of a municipal corporation. 33
(Emphasis supplied)
Article X, Section 5 of the 1987 Constitution is the basis of the taxing

power of local government units:
Section 5. Each local government unit shall have the power to
create its own sources of revenues and to levy taxes, fees and charges
subject to such guidelines and limitations as the Congress may provide,
consistent with the basic policy of local autonomy. Such taxes, fees,
and charges shall accrue exclusively to the local governments.
(Emphasis supplied)
The taxing power granted by constitutional fiat to local government units

exists in the wider context to "ensure the autonomy of local governments." 34
As Article II, Section 25 of the 1987 Constitution unequivocally provides:
Section 25. The State shall ensure the autonomy of local
governments.
Article II, Section 25 is complemented by Article X, Section 2:

Section 2. The territorial and political subdivisions shall enjoy
local autonomy.
The 1935 Constitution was entirely silent on local autonomy, albeit

making a distinction between executive departments, bureaus, and offices on
the one hand, and local governments on the other. It provided that the
President had control over the former but merely "exercise[d] general
supervision" 35 over the latter. Article VII, Section 10 (1) of the 1935
Constitution provided:
SEC. 10. (1) 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.ICcaST
Similarly, the 1935 Constitution was silent on the taxing power of local
government units.
The 1973 Constitution provided for local autonomy. Article II, Section 10
of the 1973 Constitution read:
SEC. 10. The State shall guarantee and promote the autonomy of
local government units, especially the [barangays], to ensure their
fullest development as self-reliant communities.
Any trend in the 1973 Constitution towards greater autonomy for local
government units "was aborted in 1972 when Ferdinand Marcos placed the
entire country under martial law [thereby] stunt[ing] the development of local
governments by centralizing the government in Manila." 36 While local
autonomy was provided for in the 1973 Constitution, its existence was confined
to principle and theory. Practice neutered all of Article XI of the 1973
Constitution (on local government), including Section 5 which provided for the
taxing power of local government units. Article XI, Section 5 reads:
SEC. 5. Each local government unit shall have the power to create its
own sources of revenue and to levy taxes, subject to such
limitations as may be provided by law.
Article X, Section 5 of the 1987 Constitution is more emphatic in

empowering local government units in the matter of taxation compared with
Article XI, Section 5 of the 1973 Constitution. In addition to stating that local
government units have the power to tax (subject to Congressional guidelines
and limitations), Article X, Section 5 of the 1987 Constitution adds the phrase
"consistent with the basic policy of local autonomy." Further, it is definite with
the use of funds generated by local government units through the exercise of
their taxing powers, providing that "[s]uch taxes, fees, and charges shall accrue
exclusively to the local governments." 37
Apart from administrative autonomy, an equally vital facet of local

governance under the 1987 Constitution is fiscal autonomy. In Pimentel v.
Aguirre: 38
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, who in any case are partners in the attainment of
national goals. 39
IV
The taxing powers of local government units must be read in relation to

their power to effect their basic autonomy.
Consistent with the 1987 Constitution's declared preference, the taxing

powers of local government units must be resolved in favor of their local fiscal
autonomy. In City Government of San Pablo v. Reyes: 40
The power to tax is primarily vested in Congress. However, in our
jurisdiction, it may be exercised by local legislative bodies, no longer
merely by virtue of a valid delegation as before, but pursuant to direct
authority conferred by Section 5, Article X of the Constitution. Thus
Article X, Section 5 of the Constitution reads:
Sec. 5 — Each Local Government unit shall have the power

to create its own sources of revenue and to levy taxes, fees and
charges subject to such guidelines and limitations as the
Congress may provide, consistent with the basic policy of local
autonomy. Such taxes, fees and charges shall accrue exclusively
to the Local Governments.
The important legal effect of Section 5 is that henceforth, in

interpreting statutory provision on municipal fiscal powers, doubts will
have to be resolved in favor of municipal corporations. 41 (Emphasis
supplied)
Similarly, in San Juan v. Civil Service Commission, 42 this court stated:

We have to obey the clear mandate on local autonomy. Where a
law is capable of two interpretations, one in favor of centralized power
in Malacañang and the other beneficial to local autonomy, the scales
must be weighed in favor of autonomy. 43
The Local Government Code was enacted pursuant to the specific

mandate of Article X, Section 3 of the 1987 Constitution 44 and its requirements
of decentralization. Its provisions, including those on local taxation, must be
read in light of the jurisprudentially settled preference for local autonomy.
V
The limits on the level of additional levy for the special education fund
under Section 235 of the Local Government Code should be read as granting
fiscal flexibility to local government units. ACcTDS
Book II of the Local Government Code governs local taxation and fiscal
matters. Title II of Book II governs real property taxation.
Section 235 of the Local Government Code allows provinces and cities, as
well as municipalities in Metro Manila, to collect, on top of the basic annual real
property tax, an additional levy which shall exclusively accrue to the special
education fund:
Section 235. Additional Levy on Real Property for the Special
Education Fund. — A province or city, or a municipality within the
Metropolitan Manila Area, may levy and collect an annual tax of one
percent (1%) on the assessed value of real property which shall be in
addition to the basic real property tax. The proceeds thereof shall
exclusively accrue to the Special Education Fund (SEF). (Emphasis
supplied)
The special education fund is not an original creation of the Local

Government Code. It was initially devised by Republic Act No. 5447. 45 The rate
of 1% is also not a detail that is original to the Local Government Code. As
discussed in Commission on Audit v. Province of Cebu: 46
The Special Education Fund was created by virtue of R.A. No.
5447, which is [a]n act creating a special education fund to be
constituted from the proceeds of an additional real property tax and a
certain portion of the taxes on Virginia-type cigarettes and duties on
imported leaf tobacco, defining the activities to be financed, creating
school boards for the purpose, and appropriating funds therefrom,
which took effect on January 1, 1969. Pursuant thereto, P.D. No. 464,
also known as the Real Property Tax Code of the Philippines, imposed
an annual tax of 1% on real property which shall accrue to the SEF. 47
(Citations omitted)
The operative phrase in Section 235's grant to municipalities in Metro

Manila, cities, and provinces of the power to impose an additional levy for the
special education fund is prefixed with "may," thus, " may levy and collect an
annual tax of one percent (1%)."
In Buklod nang Magbubukid sa Lupaing Ramos, Inc. v. E.M. Ramos and
Sons, Inc. 48 the meaning of "may" was discussed as follows:
Where the provision reads "may," this word shows that it is not
mandatory but discretionary. It is an auxiliary verb indicating liberty,
opportunity, permission and possibility. The use of the word "may" in a
statute denotes that it is directory in nature and generally permissive
only. 49 SEcTHA
Respondent concedes that Section 235's grant to municipalities in Metro

Manila, to cities, and to provinces of the power to impose an additional levy for
the special education fund makes its collection optional. It is not mandatory
that the levy be imposed and collected. The controversy which the Commission
on Audit created is not whether these local government units have discretion to
collect but whether they have discretion on the rate at which they are to
collect.
It is respondent's position that the option granted to a local government

unit is limited to the matter of whether it shall actually collect, and that the rate
at which it shall collect (should it choose to do so) is fixed by Section 235. In
contrast, it is petitioner's contention that the option given to a local government
unit extends not only to the matter of whether to collect but also to the rate at
which collection is to be made.
We sustain the position of petitioner.
Section 235's permissive language is unqualified. Moreover, there is no
limiting qualifier to the articulated rate of 1% which unequivocally indicates
that any and all special education fund collections must be at such rate.
At most, there is a seeming ambiguity in Section 235. Consistent with
what has earlier been discussed however, any such ambiguity must be read in
favor of local fiscal autonomy. As in San Juan v. Civil Service Commission, 50 the
scales must weigh in favor of the local government unit.
Fiscal autonomy entails "the power to create . . . own sources of
revenue." 51 In turn, this power necessarily entails enabling local government
units with the capacity to create revenue sources in accordance with the
realities and contingencies present in their specific contexts. The power to
create must mean the local government units' power to create what is most
appropriate and optimal for them; otherwise, they would be mere automatons
that are turned on and off to perform prearranged operations.
Devolving power but denying its necessary incidents and accessories is
tantamount to not devolving power at all. A local government unit with a more
affluent constituency may thus realize that it can levy taxes at rates greater
than those which local government units with more austere constituencies can
collect. For the latter, collecting taxes at prohibitive rates may be
counterproductive. High tax rates can be a disincentive for doing business,
rendering it unattractive to commerce and thereby stunting, rather than
facilitating, their development. In this sense, insisting on uniformity would be a
disservice to certain local government units and would ultimately undermine
the aims of local autonomy and decentralization.
VI
Of course, fiscal autonomy entails "working within the constraints." 52 To
echo the language of Article X, Section 5 of the 1987 Constitution, this is to say
that the taxing power of local government units is "subject to such guidelines
and limitations as the Congress may provide." 53 It is the 1% as a constraint on
which the respondent Commission on Audit is insisting.
There are, in this case, three (3) considerations that illumine our task of
interpretation: (1) the text of Section 235, which, to reiterate, is cast in
permissive language; (2) the seminal purpose of fiscal autonomy; and (3) the
jurisprudentially established preference for weighing the scales in favor of
autonomy of local government units. We find it to be in keeping with
harmonizing these considerations to conclude that Section 235's specified rate
of 1% is a maximum rate rather than an immutable edict. Accordingly, it was
well within the power of the Sangguniang Panlalawigan of Palawan to enact an
ordinance providing for additional levy on real property tax for the special
education fund at the rate of 0.5% rather than at 1%.
VII
It was an error amounting to grave abuse of discretion for respondent to

hold petitioner personally liable for the supposed deficiency.
Having established the propriety of imposing an additional levy for the

special education fund at the rate of 0.5%, it follows that there was nothing
erroneous in the Municipality of Narra's having acted pursuant to Section 48 of
the Ordinance. It could thus not be faulted for collecting from owners of real
properties located within its territory an annual tax as special education fund at
the rate of 0.5% of the assessed value subject to tax of the property. Likewise,
it follows that it was an error for respondent to hold petitioner personally liable
for the supposed deficiency in collections.
Even if a contrary ruling were to be had on the propriety of collecting at a
rate less than 1%, it would still not follow that petitioner is personally liable for
deficiencies.
In its Memorandum, respondent cited the 1996 case of Salalima v.
Guingona 54 as a precedent for finding local officials liable for violations that
have to do with the special education fund.
Moreover, in Decision No. 2008-087, respondent asserted that there was
"no cogent reason to exclude [petitioner] from liability since her participation
as one of the local officials who implemented the collection of the reduced levy
rate. . . led to the loss on reduction [sic] of government income." 55 It added
that, "[c]orollary thereto, the government can also go against the officials who
are responsible for the passage of [the Ordinance]," 56 i.e., the members of the
Sangguniang Panlalawigan of the Province of Palawan.
Respondent's reliance on Salalima and on petitioner's having been
incidentally the mayor of Narra, Palawan when supposedly deficient collections
were undertaken is misguided.
Per respondent's own summation of Salalima, in that case, this court:
held that the governor, vice-governor and members of the
Sangguniang Panlalawigan are collectively responsible with other
provincial officials in the administration of fiscal and financial
transactions of the province pursuant to Sections 304 and 305 of RA
7160 for denying the other beneficiaries of their share of the
SEF. These local officials cannot claim ignorance of the law as to the
sharing scheme of the real property tax and the SEF as the same is
clearly provided in RA 7160. 57 (Emphasis supplied)
Salalima involved several administrative Complaints filed before the Office

of the President against the elective officials of the Province of Albay. One of
these — OP Case No. 5470 — was a Complaint for malversation, and
"consistent [and] habitual violation of pars. (c) and (d) of Section 60 of [the
Local Government Code]" 58 which was filed by Tiwi, Albay Mayor Naomi Corral
against Albay Governor Romeo Salalima, Vice-Governor Danilo Azaña, and
other Sangguniang Panlalawigan members.
This Complaint was precipitated by the refusal of the provincial officials of
Albay to make available to the Municipality of Tiwi, Albay its share in the
collections of the special education fund. This was contrary to Section 272 of
the Local Government Code 59 which requires equal sharing between provincial
and municipal school boards. Specifically, it was found that the Sangguniang
Panlalawigan passed Ordinance No. 09-92, which declared as forfeited in favor
of the Province of Albay (and to the exclusion of the municipalities in Albay) all
payments made by the National Power Corporation to the former pursuant to a
memorandum of agreement through which the National Power Corporation
settled its real property tax obligations.
As regards the personal liability of the respondents in that case, the Office
of the President was quoted to have anchored on the following disquisition its
imposition of the penalty of suspension on the respondent provincial officials:
AaDSTH
It cannot be denied that the Sangguniang Panlalawigan has

control over the Province's 'purse' as it may approve or not resolutions
or ordinances generating revenue or imposing taxes as well as
appropriating and authorizing the disbursement of funds to meet
operational requirements or for the prosecution of projects.
Being entrusted with such responsibility, the provincial governor,
vice-governor and the members of the Sangguniang Panlalawigan,
must always be guided by the so-called 'fundamental' principles
enunciated under the Local Government Code[.] . . .
All the respondents could not claim ignorance of the law
especially with respect to the provisions of P.D. No. 464 that lay down
the sharing scheme among local government units concerned and the
national government, for both the basic real property tax and
additional tax pertaining to the Special Education Fund. Nor can they
claim that the Province could validly forfeit the P40,724,471.74 paid by
NPC considering that the Province is only entitled to a portion thereof
and that the balance was merely being held in trust for the other
beneficiaries.
As a public officer, respondent Azaña (and the other respondents
as well) has a duty to protect the interests not only of the Province but
also of the municipalities of Tiwi and Daraga and even the national
government. When the passage of an illegal or unlawful ordinance by
the Sangguniang Panlalawigan is imminent, the presiding officer has a
duty to act accordingly, but actively opposing the same by temporarily
relinquishing his chair and participating in the deliberations. If his
colleagues insist on its passage, he should make known his opposition
thereto by placing the same on record. No evidence of any sort was
shown in this regard by respondent Azaña.
Clearly, all the respondents have, whether by act or omission,
denied the other beneficiaries of their rightful shares in the tax
delinquency payments made by the NPC and caused the illegal
forfeiture, appropriation and disbursement of funds not belonging to
the Province, through the passage and approval of Ordinance No. 09-92
and Resolution Nos. 178-92 and 204-92.
The foregoing factual setting shows a wanton disregard of law on
the part of the respondents tantamount to abuse of authority.
Moreover, the illegal disbursements made can qualify as technical
malversation. 60
It is evident that the circumstances in Salalima are not analogous to the

circumstances pertinent to petitioner.
W h i l e Salalima involved the mishandling of proceeds which was

"tantamount to abuse of authority" and which "can qualify as technical
malversation," this case involves the collection of the additional levy for the
special education fund at a rate which, at the time of the collection, was
pursuant to an ordinance that was yet to be invalidated.
Likewise, Salalima involved the liability of the provincial officials who were
themselves the authors of an invalid ordinance. In this case, the Municipality of
Narra — as subordinate to the Province of Palawan — merely enforced a
provincial ordinance. Respondent, in its own Memorandum, acknowledged that
it was not even petitioner but the municipal treasurer who actually effected the
collection at a supposedly erroneous rate. 61
Also, Salalima entailed the imposition of the administrative penalty of
suspension. In this case, respondent is not concerned with the imposition of
administrative penalties but insists that petitioner must herself (jointly and
severally with the other persons named) pay for the deficiency in collections.
We find it improper to hold petitioner personally liable for the uncollected

amount on account of the sheer happenstance that she was the mayor of
Narra, Palawan, when the Ordinance was enforced.
VIII
The actions of the officials of the Municipality of Narra are consistent with
the rule that ordinances are presumed valid. In finding liability, respondent
suggests that officers of the Municipality should not comply with an ordinance
duly passed by the Sangguniang Panlalawigan.
It is true that petitioner, as the local chief executive, was charged with
fidelity to our laws. However, it would be grossly unfair to sustain respondent's
position. It implacably dwells on supposed non-compliance with Section 235 but
turns a blind eye on the context which precipitated the collection made by the
Municipality of Narra at the reduced rate of 0.5%.
The mayor's actions were done pursuant to an ordinance which, at the
time of the collection, was yet to be invalidated.
It is basic that laws and local ordinances are "presumed to be valid unless
and until the courts declare the contrary in clear and unequivocal terms." 62
Thus, the concerned officials of the Municipality of Narra, Palawan must be
deemed to have conducted themselves in good faith and with regularity when
they acted pursuant to Chapter 5, Section 48 of Provincial Ordinance No. 332-A,
Series of 1995, and collected the additional levy for the special education fund
at the rate of 0.5%. Accordingly, it was improper for respondent to attribute
personal liability to petitioner and to require her to personally answer to the
deficiency in special education fund collections. IEAHca
WHEREFORE, the Petition is GRANTED. Decision No. 2008-087 dated

September 22, 2008 and Decision No. 2011-083 dated November 16, 2011 of
respondent Commission on Audit are ANNULLED and SET ASIDE.
SO ORDERED.
Sereno, C.J., Carpio, Velasco, Jr., Leonardo-de Castro, Peralta, Bersamin,

Del Castillo, Villarama, Jr., Perez, Mendoza, Reyes and Perlas-Bernabe, JJ.,
concur.
Brion, * J., is on leave.

**
Jardeleza, J., is on official leave.
Footnotes
* On leave.
** On official leave.
1. Rollo , pp. 25-31.

2. Id. at 19-24.
3. Id. at 25-31.
4. Id. at 48-51.
5. Id. at 32.
6. Id. at 19-24.

7. Id. at 72.
8. Id. at 72 and 199.
9. Id. at 214.
10. Id. at 199.
11. Section 235. Additional Levy on Real Property for the Special Education Fund
(SEF). — A province or city, or a municipality within the Metropolitan Manila
Area, may levy and collect an annual tax of one percent (1%) on the
assessed value of real property which shall be in addition to the basic real
property tax. The proceeds thereof shall exclusively accrue to the Special
Education Fund. (SEF).
12. Rollo , pp. 199 and 214.
13. Id. at 32.

14. Id.
15. Id. at 33-38. Denominated "Appeal" by the Municipality of Narra.

16. Id. at 5 and 49.
17. Id. at 41-45.
18. Id. at 48-51.

19. Id. at 52-61.
20. Id. at 25-30.

21. The other members of the Sangguniang Panlalawigan of Palawan are Rosalino
R. Acosta, Ernesto A. Llacuna, Antonio C. Alvarez, Haide B. Barroma, Leoncio
N. Ola, Ramon A. Zabala, Belen B. Abordo, Valentin A. Baaco, Claro Ordinario,
Derrick R. Pablico, Lanie C. Abogado, and Joel B. Bitongon.
22. Rollo , p. 30.

23. Id. at 30.
24. Id. at 64-67.

25. Id. at 68-80.
26. Id. at 19-24.
27. Id. at 3-16.

28. Id. at 134-147.
29. Id. at 185-187.

30. Id. at 197-209 and 213-223.
31. Pelizloy Realty Corporation v. Province of Benguet, G.R. No. 183137, April 10,
2013, 695 SCRA 491, 500 [Per J. Leonen, Third Division], citing Reyes v.
Almanzor, 273 Phil. 558, 564 (1991) [Per J. Paras, En Banc]; Icard v. City
Council of Baguio, 83 Phil. 870, 873 (1949) [Per J. Reyes, En Banc]; City of
Iloilo v. Villanueva, 105 Phil. 337 (1959) [Per J. Bautista Angelo, En Banc];
and CONST. (1987), art. X, sec. 1.
32. 83 Phil. 870, 873 (1949) [Per J. Reyes, En Banc].

33. Id., citing Cu Unjieng vs. Patstone, 42 Phil. 818, 830 (1922) [Per J. Ostrand, En
Banc]; Pacific Commercial Co. v. Romualdez, 49 Phil. 917, 924 (1927) [Per J.
Malcolm, En Banc]; Batangas Transportation Co. v. Provincial Treasurer of
Batangas, 52 Phil. 190, 196 (1928) [Per J. Villamor, En Banc]; Baldwin v. Coty
Council, 53 Ala., p. 437; State v. Smith, 31 Lowa, p. 493; 38 Am Jur pp. 68,
72-73.
34. CONST. (1987), art. II, sec. 25.
35. CONST. (1935), art. VII, sec. 10, par. (1).

36. DANTE B. GATMAYTAN, LOCAL GOVERNMENT LAW AND JURISPRUDENCE, 3
(2014).
37. CONST. (1987), art. X, sec. 5.

38. 391 Phil. 84 (2000) [Per J. Panganiban, En Banc].
39. Id. at 102-103, citing San Juan v. Civil Service Commission, G.R. No. 92299,
April 19, 1991, 196 SCRA 69, 79 [Per J. Gutierrez, Jr., En Banc].
40. 364 Phil. 842 (1999) [Per J. Gonzaga-Reyes, Third Division].
41. Id. at 856-857, citing ISAGANI A. CRUZ, CONSTITUTIONAL LAW, 84 (1991) and
JOAQUIN G. BERNAS, THE CONSTITUTION OF THE REPUBLIC OF THE
PHILIPPINES, 381 (1st ed., 1988).
42. 273 Phil. 271 (1991) [Per J. Gutierrez, Jr., En Banc].
43. Id. at 279.
44. Section 3. The Congress shall enact a local government code which shall
provide for a more responsive and accountable local government structure
instituted through a system of decentralization with effective mechanisms of
recall, initiative, and referendum, allocate among the different local
government units their powers, responsibilities, and resources, and provide
for the qualifications, election, appointment and removal, term, salaries,
powers and functions and duties of local officials, and all other matters
relating to the organization and operation of the local units.
45. Rep. Act No. 5447 (1968), An Act Creating a Special Education Fund to be
Constituted from the Proceeds of an Additional Real Property Tax and a
Certain Portion of the Taxes on Virginia-type Cigarettes and Duties on
Imported Leaf Tobacco, Defining the Activities to be Financed, Creating
School Boards for the Purpose, and Appropriating Funds Therefrom.
46. 422 Phil. 519 (2001) [Per J. Ynares-Santiago, En Banc].
47. Id. at 524-525.
48. G.R. No. 131481 and 131624, March 16, 2011, 645 SCRA 401 [Per J. Leonardo-
De Castro, First Division].
49. Id. at 437, citing Caltex (Philippines), Inc. v. Court of Appeals, G.R. No. 97753,
August 10, 1992, 212 SCRA 448, 463 [Per J. Regalado, Second Division].
50. 273 Phil. 271 (1991) [Per J. Gutierrez, Jr., En Banc].
51. Pimentel v. Aguirre , 391 Phil. 84, 102-103 (2000) [Per J. Panganiban, En Banc].
52. Id.
53. CONST. (1987), art. X, sec. 5.
54. 326 Phil. 847 (1996) [Per J. Davide, En Banc].

55. Rollo , p. 29.
56. Id.
57. Id. at 222-A.

58. Section 60. Grounds for Disciplinary Actions. — An elective local official may be
disciplined, suspended, or removed from office on any of the following
grounds:
xxx xxx xxx

(c) Dishonesty, oppression, misconduct in office, gross negligence, or dereliction of
duty;
(d) Commission of any offense involving moral turpitude or an offense punishable

by at least prision mayor[.]
59. Section 272. Application of Proceeds of the Additional One Percent SEF Tax . —
The proceeds from the additional one percent (1%) tax on real property
accruing to the Special Education Fund (SEF) shall be automatically released
to the local school boards: Provided, That, in case of provinces, the proceeds
shall be divided equally between the provincial and municipal school boards:
Provided, however, That the proceeds shall be allocated for the operation
and maintenance of public schools, construction and repair of school
buildings, facilities and equipment, educational research, purchase of books
and periodicals, and sports development as determined and approved by the
Local School Board.
60. Salalima v. Guingona, 326 Phil. 847, 874-875 (1996) [Per J. Davide, Jr., En
Banc].
61. Rollo , p. 214.
62. Valley Trading Co., Inc. v. CFI of Isabela, 253 Phil. 494 (1989) [Per J. Regalado,
Second Division]. See also Social Justice Society v. Atienza, 568 Phil. 658,
682-683 (2008) [Per J. Corona, First Division].

THIRD DIVISION
[G.R. Nos. 186739-960. April 17, 2013.]
LEOVEGILDO R. RUZOL, petitioner, vs. THE HON.

SANDIGANBAYAN and the PEOPLE OF THE PHILIPPINES ,
respondents.
DECISION
VELASCO, JR., J : p
This is an appeal seeking to nullify the December 19, 2008 Decision 1

of the First Division of the Sandiganbayan in Criminal Case Nos. SB-08-CRIM-
0039 to 0259, which convicted Leovegildo R. Ruzol (Ruzol), then Mayor of
General Nakar, Quezon, of Usurpation of Official Functions penalized under
Article 177 of the Revised Penal Code (RPC).
The Facts
Ruzol was the mayor of General Nakar, Quezon from 2001 to 2004.
Earlier in his term, he organized a Multi-Sectoral Consultative Assembly
composed of civil society groups, public officials and concerned stakeholders
with the end in view of regulating and monitoring the transportation of
salvaged forest products within the vicinity of General Nakar. Among those
present in the organizational meeting were Provincial Environment and
Natural Resources Officer (PENRO) Rogelio Delgado Sr. and Bishop Julio
Xavier Labayen, the OCD-DD of the Prelature of Infanta Emeritus of the
Catholic Church and Chairperson of TIPAN, an environmental non-
government organization that operates in the municipalities of General
Nakar, Infanta and Real in Quezon province. During the said assembly, the
participants agreed that to regulate the salvaged forests products, the Office
of the Mayor, through Ruzol, shall issue a permit to transport after
payment of the corresponding fees to the municipal treasurer. 2 cCDAHE
Consequently, from 2001 to 2004, two hundred twenty-one (221)

permits to transport salvaged forest products were issued to various
recipients, of which forty-three (43) bore the signature of Ruzol while the
remaining one hundred seventy-eight (178) were signed by his co-accused
Guillermo T. Sabiduria (Sabiduria), then municipal administrator of General
Nakar. 3
On June 2006, on the basis of the issued Permits to Transport, 221
Informations for violation of Art. 177 of the RPC or for Usurpation of Authority
or Official Functions were filed against Ruzol and Sabiduria, docketed as
Criminal Case Nos. SB-08-CRIM-0039 to 0259.
Except for the date of commission, the description of forest product,
person given the permit, and official receipt number, the said Informations
uniformly read:
That, on (date of commission ) or sometime prior or subsequent
thereto, in General Nakar, Quezon, and within the jurisdiction of this
Honorable Court, the above-named accused Leovegildo R. Ruzol and
Guillermo M. Sabiduria, both public officers, being then the Municipal
Mayor and Municipal Administrator, respectively, of General Nakar,
Quezon, taking advantage of their official position and committing the
offense in relation to their office, conspiring and confederating with
each other did then and there willfully, unlawfully and criminally, issue
permit to transport (description of forest product ) to (person
given the permit) under O.R. No. ( official receipt number ) under
the pretense of official position and without being lawfully entitled to
do so, such authority properly belonging to the Department of
Environment and Natural Resources, to the damage and prejudice of
the government.
CONTRARY TO LAW. 4
The details for each Information are as follows: 5

Description of Person Given
Criminal Date of Official
Forest the
Case No. Commission Product Permit Receipt No.
39 20 Jan. 2004 1,000 board ft David Villareal Jr. 1623446

malaruhat/marang
40 16 Jan. 2004 600 board ft lawaan Pepito 1623463
Aumentado
41 15 Jan. 2004 100 pcs. malaruhat Francisco 1708352
Mendoza
(assorted sizes)
42 15 Jan. 2004 300 cubic m or 3,000 Edmundo dela 1708353
Vega
board ft good lumber
43 15 Jan. 2004 600 board ft good David Villareal, 1708321
lumber Jr.
44 15 Jan. 2004 1,050 board ft good Romeo Sabiduria 1708322
lumber
45 12 Jan. 2004 1,000 board ft Nestor Astejada 1625521
malaruhat
46 09 Jan. 2004 4,000 board ft good Naty Orozco 1623421
lumber (assorted
sizes)
47 08 Jan. 2004 700 board ft lauan Winnie Aceboque 1623415
48 05 Jan. 2004 500 board ft lauan Edmundo dela 1623041
Vega
49 07 Jan. 2004 4 x 5 haligi Mercy Vargas 1623314
50 06 Jan. 2004 good lumber Mario Pujeda 1623310
51 21 Oct. 2002 1,000 board ft sliced Conchita Odi 830825
lumber
52 21 Oct. 2002 400 board ft sliced Lita Crisostomo 830826
lumber
53 28 Oct. 2002 450 board ft marang Agosto Astoveza 830829
lumber
54 08 Jan. 2003 300 board ft sliced Edna E. Moises 943941
lumber (assorted
sizes)
55 13 Jan. 2003 1,500 board ft sliced Dante Z. Medina 943964
lumber (assorted
sizes)
56 16 Jan. 2003 400 board ft sliced Johnny A. 943975
Astoveza
lumber (assorted
sizes)
57 27 Jan. 2003 7 pcs sliced lumber & Sonny Leynes 1181827
1
piece 18 roda
58 14 Feb. 2003 2,000 pcs trophy Flordeliza 1182033
(wood Espiritu
carvings)
59 17 Feb. 2003 700 board ft sliced Nestor Astejada 1181917
lumber (assorted
sizes)
60 18 Feb. 2003 1,632 board ft hard Arthur/Lanie 1182207
wood, kisame & Occeña
sanipa
61 20 Feb. 2004 126 pcs lumber Lamberto 1708810
Aumentado
62 3-Mar-03 450 board ft hard Nestor Astoveza 1182413
wood
(assorted sizes)
63 6-Mar-03 160 pcs sliced Remedios Orozco 1182366
lumber
(assorted sizes)
64 10-Mar-03 1,500 board ft Nestor Astejada 1181996
malaruhat (assorted
sizes)
65 11-Mar-03 900 board ft sliced Fernando 1182233
Calzado
lumber (assorted
sizes)
66 13-Mar-03 1,408 board ft hard Nestor Astejada 1182553
wood (assorted
sizes)
67 20-Mar-03 90 pcs. sliced lumber Remy Orozco 1182157
(assorted sizes)
68 21-Mar-03 90 pcs. sliced lumber Rene Francia 1182168
(assorted sizes)
69 25-Mar-03 500 board ft lumber Thelma Ramia 1182179
(assorted sizes)
70 26-Mar-03 1 pc. 60 x 75 bed Roy Justo 1182246
(narra) finished
product
71 14-Apr-04 95 pcs. kalap (9 ft.); Anita Solloza 3651059
6 pcs. post (10 ft.) &
500 pcs. anahaw
72 8-Apr-04 460 board ft lumber Remy Orozco 3651101
(assorted sizes)
73 14-Apr-04 69 pcs. sliced lumber Dindo America 3651101
(assorted sizes)
74 23-Apr-03 870 board ft hard Amado Pradillada 3651268
lumber (assorted
sizes)
75 24-Apr-03 400 board ft lumber Romy Buendicho 3651237
(assorted sizes)
76 24-Apr-03 400 board ft rattan Emmanuel 3651324
Buendicho
77 30-Apr-04 1,000 board ft good Mylene Moises 3651335-C
lumber (assorted
sizes)
78 30-Apr-04 500 board ft sliced Carlito Vargas 3651336
lumber (assorted
sizes)
79 8-May-03 72 x 78 bed (narra); Fely Justo 3651519
3 pcs. 60 x 75 bed
(ling
manok) & 1 pc. 48 x
75 ed
(kuling manok)
finished
product
80 12-May-03 294 board ft lumber Virgilio Cuerdo 3650927
81 13-May-03 43 pcs. sliced Amando Lareza 3651783
lumber
(assorted sizes)
82 14-May-03 750 board ft good Wilma Cuerdo 3651529
lumber
83 15-May-03 440 board ft lumber Marte Cuballes 3651532
84 15-May-03 214 pcs. 2x6x7 or Anneliza Vargas 3651531
1,500
board ft finished
product
85 26-May-03 57 pcs. sliced lumber Danny Sanchez 3651585
(assorted sizes)
86 27-May-03 400 board ft cut Emy Francia 3651394
woods
87 30-May-03 300 board ft lumber Daisy Cuerdo 3650943
88 30-May-03 1,000 board ft Lea Astoveza 3651161
lumber
(assorted sizes)
89 5-Jun-03 130 pcs. or 1,500 Jose Noly Moises 3651809
board
ft lumber cut woods
90 6-Jun-03 300 board ft lumber Mercy Escaraga 3651169
91 18-Jun-03 800 board ft good Dante Medena 3651749
lumber
92 24-Jun-03 28 pcs. good lumber Virgilio Cuerdo 1247102
(assorted sizes)
93 25-Jun-03 190 pcs. good Dante Medina 1247205
lumber
(assorted sizes)
94 2-Jul-03 800 board ft. good Dante Medina 1247221
lumber
95 2-Jul-03 105 pcs. fresh cut Emmanuel 1247167
lumber Lusang
(assorted sizes)
96 4-Jul-03 Assorted sizes of Alberto dela Cruz 1247172
good
lumber
97 7-Jul-03 Bulukan woods Conchita Ligaya 1247175
98 7-Jul-03 6 pcs. haligi Jane Bulagay 1247173
99 11-Jul-03 700 board ft. cut Dominador 1247452
woods Aveno
100 14-Jul-03 800 board ft. cut Dante Medina 1247180
wood/
lumber
101 16-Jul-03 600 board ft. cut Rachelle Solana 1247182
lumber
102 23-Jul-03 1,200 board ft. hard Necito 1247188
Crisostomo
lumber
103 23-Jul-03 700 board ft. good Nestor Astejada 1247129
lumber
104 28-Jul-03 959 board ft. cut Necito 1247428
lumber Crisostomo
105 29-Jul-03 600 board ft. lumber Marilou Astejada 1247191
106 01 Aug. 2003 1,000 board Ruel Ruzol 1247198
Malaruhat
107 05 Aug. 2003 800 board ft. lumber Virgilio 1322853
Aumentado
108 08 Aug. 2003 4.8 cubic ft. Amlang Rosa Turgo 1322862
woods
109 12 Aug. 2003 788 Board ft. cut Maria Teresa 1322865
woods
Adornado
110 25 Aug. 2003 500 board ft. Romy Buendicho 1322929
assorted
lumber
111 28 Aug. 2003 2 sala sets Roy Justo 1322879
112 29 Aug. 2003 456 pieces good Marilou Astejada 1323056
lumber
(assorted sizes)
113 03 Sept. 2003 5 cubic ft softwoods Rosa Turgo 1322834
(assorted sizes)
114 05 Sept. 2003 1,000 board ft. good Agustin Vargas 1323064
lumber (assorted
sizes)
115 08 Sept. 2003 80 pcs. wood post Peter Banton 1323124
116 09 Sept. 2003 1 forward load Efifania V. 1323023
Astrega
(soft wood)
117 11 Sept. 2003 1 forward load Noling Multi 1323072
(assorted
species) Purpose Corp.
118 11 Sept. 2003 500 board ft. good Agustin Vargas 1323071
lumber
119 12 Sept. 2003 900 board ft. good Nestor Astejada 1323073
lumber (assorted
sizes)
120 15 Sept. 2003 950 board ft. Edna Moises 1323128
Malaruhat
121 16 Sept. 2003 14 pcs. Panel door Roy Justo 1323041
122 17 Sept. 2003 546 board ft. soft Mr. Marquez 1322951
woods
123 19 Sept. 2003 1,600 board ft. good Decembrano 1323085
lumber (assorted Sabiduria
sizes)
124 22 Sept. 2003 900 board ft. good Jeffrey dela Vega 1323095
lumber
125 22 Sept. 2003 1 Jeep load hard Federico 1323100
wood Marquez
126 25 Sept. 2003 750 board ft. Virgilio Villareal 1323252
Malaruhat/
Marang
127 03 Oct. 2003 750 board ft. Virgilio Villareal 1323252
Malaruhat/
Marang
128 02 Oct. 2003 60 pcs. good lumber Nestor Astorza 1482662
(assorted sizes)
129 03 Oct. 2003 1,600 board ft. good Virgilio Villareal 1482666
lumber (assorted
sizes)
130 03 Oct. 2003 400 board ft. Amado Pradillada 1482815
Malaruhat
(assorted sizes)
131 03 Oct. 2003 1 full load (soft Flordeliza 1482867
wood) Espiritu
132 03 Oct. 2003 6,342 board ft sticks Joel Pacaiqui 1482716
133 03 Oct. 2003 6,090 board ft sticks Joel Pacaiqui 1482717
134 07 Oct. 2003 900 board ft. good Mylene Moises 1482670
lumber (assorted
sizes)
135 13 Oct. 2003 600 board ft. LawaanWinnie Acebaque 1482734
(assorted sizes)
136 13 Oct. 2003 1,700 board ft. Nestor Bautista 1482740
Malaruhat
(assorted sizes)
137 13 Oct. 2003 300 board ft. Lawaan Trinidad Guerero 1482774
(assorted sizes)
138 16 Oct. 2003 700 board ft. Lawaan Federico 1482782
Marquez
139 17 Oct. 2003 4,602 board ft. good Nenita Juntreal 1482787
lumber (assorted
sizes)
140 20 Oct. 2003 1,700 board ft. Belen Ordinado 1482793
Malaruhat
(assorted sizes)
141 23 Oct. 2003 66 pcs. good lumber Nestor Astejada 1482847
(assorted sizes)
142 25 Oct. 2003 1,700 board ft. good Dante Medina 1323277
lumber
lumber (assorted
sizes)
144 28 Oct. 2003 1,254 board ft. good Jonathan 1323281
Supremo
lumber (assorted
sizes)
145 28 Oct. 2003 2,500 board ft. Ramir Sanchez 1483001
lumber
(assorted sizes)
146 28 Oct. 2003 500 board ft. good Rolando Franela 1323280
lumber
(assorted sizes)
147 03 Nov. 2003 850 finished Naty Orozco 1483020
products
(cabinet component,
balusters, door
jambs)
148 03 Nov. 2003 400 board ft. good Elizabeth Junio 1483022
lumber
(assorted sizes) & 6
bundles of sticks
149 10 Nov. 2003 1,770 board ft. good Dante Medina 1483032
lumber (assorted
sizes)
150 10 Nov. 2003 1,000 board ft. Nestor Astejada 1483033
lumber
151 12 Nov. 2003 900 board ft. lumber Federico 1483041
Marquez
(assorted sizes)
152 12 Nov. 2003 Mini dump truck Rizalito Francia 1483042
good
lumber (assorted
sizes)
153 14 Nov. 2003 500 components, Annie Gonzales 1483070
100 pcs
balusters (assorted
sizes
of stringers, tassels)
154 14 Nov. 2003 700 board ft. good Winnie Aceboque 1323287
lumber
155 17 Nov. 2003 1,600 board ft. Federico 1483072
Malaruhat Marquez
lumber (assorted
sizes)
156 05 Nov. 2003 400 board ft. Tapil & Belen Ordinado 1483023
7
pcs. 1x10x14
157 05 Nov. 2003 1,000 board ft. Leonardo Aveno 1623003
lumber
(assorted sizes)
158 05 Nov. 2003 150 board ft. good Francisco 1483027
lumber Mendoza
159 07 Nov. 2003 433 bundles of semi- Naty Orozco 1483031
finished products
160 08 Nov. 2003 800 board ft. lumber Armando 1483134
Pradillada
(assorted sizes)
161 25 Nov. 2003 30 pcs. sliced lumber Ariel Molina 1632059
162 19 Nov. 2003 1,000 board ft. good Dante Medina 1623053
lumber (assorted
sizes)
163 20 Nov. 2003 500 board ft. good Maria Teresa 1323288
lumber
(assorted sizes) Adornado
164 20 Nov. 2003 1,500 board ft. good Romeo Sabiduria 1483080
lumber (assorted
sizes)
165 21 Nov. 2003 1,000 board ft. Dante Medina 1623057
Malaruhat
lumber (assorted
sizes)
166 25 Oct. 2003 2,000 board ft. Federico 1322982
lumber Marquez
(assorted sizes)
167 25 Nov. 2003 500 board ft. Federico 1483090
Malaruhat Marquez
168 25 Nov. 2003 70 bundles of Rattan Manuel 1483095
Buendicho
(assorted sizes)
169 28 Nov. 2003 6,542 board ft. Nenita Juntareal 1623019
finished
products (cabinet
and
components)
170 01 Dec. 2003 400 board ft. Federico 1623061
Malaruhat Marquez
171 01 Dec. 2003 500 board ft. good Nestor Astejada 1483123
lumber
172 01 Dec. 2003 1,500 board ft. Belen Ordinado 1623063
lumber
(assorted sizes)
173 03 Dec. 2003 500 board ft. Laniti Rosa Turgo 1483125
174 04 Dec. 2003 1,000 board ft. Dante Medina 1483127
lumber
175 04 Dec. 2003 26 pcs. lumber Nenita Juntareal 1483128
sizes) (assorted
& 2 bundles of
sticks
176 05 Dec. 2003 800 board ft. lumber Nestor Astejada 1483131
177 08 Dec. 2003 678 board ft. good Elenor Rutaquio 1623082
lumber (assorted
sizes)
178 08 Dec. 2003 200 board ft. lumber William Rutaquio 1623010
(assorted sizes)
179 09 Dec. 2003 1,800 board ft. Nestor Astejada 1623090
lumber
180 12 Dec. 2003 One jeep load of Angelo Avellano 1623099
good
lumber (assorted
sizes)
181 12 Dec. 2003 500 board ft. Lawaan Merly Pante 1623100
182 12 Dec. 2003 800 board ft. lumber Pepito 1483147
Aumentado
183 16 Dec. 2003 600 board ft. Jonathan Marcial 1623033
Malaruhat
Aumentado
185 16 Dec. 2003 1,000 board ft. Dante Medina 1482986
Malaruhat
186 18 Dec. 2003 100 board ft. lumber Aladin Aveno 1322992
Aumentado
188 19 Dec. 2003 1,500 board ft. coco Felecita Marquez 1322998
lumber
189 22 Dec. 2003 600 board ft. lumber Belen C. 1623209
Ordinado
190 29 Dec. 2003 600 board ft. Lawaan Winnie Aciboque 1623211
191 29 Dec. 2003 300 board ft. lumber Yolanda 1623210
Crisostomo
192 30 Dec. 2003 800 board ft. Lawaan Pepito 1623215
Aumentado
193 20 Nov. 2003 150 board ft. good Francisco 1483086
Mendoza
lumber (assorted
sizes)
194 30-Jun-03 450 board ft. fresh Mylene Moises 1247126
cut
lumber
195 13-Jul-01 1 L-300 load of Evangeline 9894843-Q
Moises
finished and semi-
finished products
196 2-Jul-01 96 pcs. good lumber Rollie L. Velasco 9894996-Q
(assorted sizes)
197 7-May-04 1,500 board ft. Nemia Molina 200647
babayahin lumber
198 19-Apr-04 107 pcs. sliced Carlo Gudmalin 1868050
lumber
(assorted sizes)
199 5-Mar-04 10 pcs. Deadwood Elizabeth Junio 1708899
(Bulakan)
200 2-Mar-04 600 board ft. Roda Turgo 1867608
Amalang
wood
201 1-Mar-04 149 sliced lumber Necito 1708891
Crisostomo
(assorted sizes)
202 1-Mar-04 80 bundles of rattan Manuel 1708890
Buendicho
203 23 Feb. 2004 30 pcs. sliced lumber Leonardo Aveno 1708863
(assorted sizes)
204 13 Feb. 2004 50 pcs. sliced sliced Federico 1708698
Marquez
lumber (assorted
sizes)
205 12 Feb. 2004 69 pcs. sliced sliced Florencio Borreo 1708694
lumber (assorted
sizes)
206 17 Feb. 2004 50 pcs. sliced sliced Ronnie Astejada 1708774
lumber (assorted
sizes)
207 04 Feb. 2004 600 board ft. sliced Pepito 1708486
Aumentado
lumber (assorted
sizes)
208 1-Mar-04 21 pcs. Lawaan Atan Marquez 1708878
(assorted sizes)
209 4 Feb. 2004 563 board ft. sliced Decembrano 1708487
lumber
(assorted sizes) Sabiduria
210 06 Feb. 2004 80 pcs. Buukan Maila S. Orozco 1708547
(Ugat)
211 30 Jan. 2004 1,000 board ft. good Pepito 1708534
Aumentado
lumber (assorted
sizes)
212 29 Jan. 2004 950 board ft. good Leonardo Moises 1708528
lumber (assorted
sizes)
213 28 Jan. 2004 1,000 board ft. good Pepito 1708518
Aumentado
lumber (assorted
sizes)
214 28 Jan. 2004 5,000 board ft. good Carmelita 1708521
Lorenzo
lumber (assorted
sizes)
215 28 Jan. 2004 350 board ft. good Amando 1708368
Pradillada
lumber (assorted
sizes)
216 23 Jan. 2004 800 board ft. lumber Pepito 1708517
Aumentado
(assorted sizes)
217 21 Jan. 2004 1,050 board ft. good Romeo Sabiduria 1708508
lumber (assorted
sizes)
218 6-Apr-04 800 board ft. sliced Mylene Moises 1868025
lumber (assorted
sizes)
219 11-Mar-04 300 pieces or 1,200 Ernesto 1708975
Aumentado
board ft. sliced
lumber
(assorted sizes)
220 02 Feb. 2004 7,000 board ft. good Carmelita 1708376
Lorenzo
lumber
221 08 Jan. 2004 600 board ft. Nestor Astejada 1623451
Malaruhat
222 10 Dec. 2003 300 pieces good Francisco 1623096
lumber Mendoza
223 18 Nov. 2003 6,432 board ft. Naty Orozco 1483048
assorted
species
224 30 Oct. 2003 8,000 board ft. Ma. Teresa 1483019
Malauban Adornado
lumber (assorted
sizes)
226 21 Oct. 2003 300 board ft. Leonardo S. 1323271
Malaruhat Aveno
(assorted sizes)
227 21 Oct. 2003 10,875 board ft. Annie Gonzales 1323273
lumber
(assorted sizes)
228 20 Oct. 2003 300 board ft. sliced Bernardo 1482835
Gonzalvo
lumber
229 17 Oct. 2003 6,090 board ft. Naty Orozco 1482834
lumber
230 17 Oct. 2003 16 pcs. panel door Roy Justo 1482743
(finished product)
231 01 Oct. 2003 300 board ft. good Analiza Vargas 1482710
lumber
(assorted sizes)
232 01 Oct. 2003 700 board ft. Engr. Mercado 1482760
Malaruhat
(assorted sizes)
233 30 Sept. 2003 500 board ft. sliced Mylene Moises 1482810
lumber (assorted
sizes)
234 29 Sept. 2003 800 board ft. good Wennie 1482703
Acebuque
lumber (assorted
sizes)
235 15 Sept. 2003 1,500 board ft. Decembrano 1323076
malaruhat
lumber (assorted Sabiduria
sizes)
236 10 Sept. 2003 200 board ft. good Junier Franquia 1323027
lumber
(assorted sizes)
237 29 Aug. 2003 600 board ft. good Annaliza Vargas 1322830
lumber
238 07 Aug. 2003 2,000 board ft. Abilardo dela 1247200
lumber Cruz
(assorted sizes)
239 06 Aug. 2003 1,000 board ft. Jennifer Nudalo 1322802
hardwood
240 25-Jun-03 600 board ft. good Roy Justo 1247024
lumber
241 26-May-03 800 board ft. lumber Adelino Lareza 3651096
242 26-May-03 Assorted sizes good Rollie Velasco 3651587
lumber
243 23-May-03 342 sliced lumber Dolores S. Gloria 3651499
(assorted sizes)
244 20-May-03 500 board ft. lumber Marylyn de 3651574
Loreto/
Melita Masilang
245 2-May-03 123 pieces sliced Armando Lariza 3651656
lumber
(assorted sizes)
246 17 Feb. 2003 70 pieces sliced Efren 1182204
lumber Tena/Romeo
(assorted sizes) Serafines
247 07 Feb. 2003 1 piece narra bed; 1 Roy D. Justo 1182060
piece narra panel
door;
6 pcs. Refrigerator
stand
& 1 pc. Narra cabinet
(finished product)
248 05 Dec. 2002 140 pcs. round poles Lamberto R. 943647
Ruzol
249 20 Nov. 2002 500 board ft. lumber Luz Astoveza 943618
(assorted sizes)
250 30 Oct. 2002 1,200 board ft. sliced Arceli Fortunado 830698
lumber (assorted
sizes)
251 04 Oct. 2002 500 board ft. Huling Roy Justo 830646
Manok
252 27 Sept. 2002 300 board ft. sliced Roy Justo 830625
lumber (assorted
253 sizes)ft. sliced
24 Sept. 2002 1,000 board Inna L. 830771
Customerado
lumber (assorted
sizes)
254 23 Sept. 2002 1,000 board ft. sliced Normelita L. 830610
Curioso
lumber (assorted
sizes)
255 03 Sept. 2002 2,000 pcs. trophy Floredeliza D. 686642
(wood
carvings) Espiritu
256 7-Mar-02 2,000 sets trophy Floredeliza D. 90549
(wood carvings) Espiritu
257 03 Dec. 2001 10,000 sets trophy Floredeliza D. 90769
(wood
carvings) Espiritu
258 12 Sept. 2001 1,075 board ft of Lea A. Rivera 7786333
sticks &
1,450 board ft. Bollilo
(assorted sizes)
259 07 Oct. 2003 Assorted lumber Roy D. Justo 1482765
Considering that the facts are undisputed, the parties during Pre-Trial
agreed to dispense with the presentation of testimonial evidence and submit
the case for decision based on the documentary evidence and joint
stipulation of facts contained in the Pre-Trial Order. Thereafter, the accused
and the prosecution submitted their respective memoranda. 6
Ruzol's Defense
As summarized by the Sandiganbayan, Ruzol professes his innocence
based on following arguments:
(1) As Chief Executive of the municipality of General Nakar,
Quezon, he is authorized to issue permits to transport forest
products pursuant to RA 7160 which give the LGU not only
express powers but also those powers that are necessarily
implied from the powers expressly granted as well as those that
are necessary, appropriate or incidental to the LGU's efficient
and effective governance. The LGU is likewise given powers that
are essential to the promotion of the general welfare of the
inhabitants. The general welfare clause provided in Section 16,
Chapter 2, Title One, Book I of R.A. 7160 is a massive grant of
authority that enables LGUs to perform or exercise just about any
power that will benefit their local constituencies. SEDIaH
(2) In addition to the foregoing, R.A. 7160 has devolved certain

functions and responsibilities of the DENR to the LGU. And the
permits to transport were issued pursuant to the devolved
function to manage and control communal forests with an area
not exceeding fifty (50) square kilometers.
(3) The Permits to Transport were issued as an incident to the

payment of Transport Fees levied by the municipality for the use
of local public roads for the transport of salvaged forest products.
Under (a) Section 5, Article X of the Constitution, (b) Section 129,
Chapter I, Title One Book II of R.A. 7160, and (c) Section 186,
Article Five, Chapter 5, Title One, Book II of R.A. 7160, the
municipality is granted the power to create its own sources of
revenue and to levy fees in accordance therewith.
(4) The only kind of document the DENR issues relating to log,
timber or lumber is denominated "Certificate of Timber Origin" or
CTO for logs and "Certificate of Lumber Origin" or CLO for
lumber; hence, even if accused issued the Transport Permits on
his side, a person wanting to transport the said forest products
would have to apply and obtain a CTO or CLO from the DENR.
The Transport Permits issued by the accused were never taken
as a substitute for the CTO or CLO, and this is the reason why
said permits contain the annotation "Subject to DENR rules, laws
and regulations."
(5) There is no proof of conspiracy between the accused. The
Transport Permits were issued by accused Sabiduria in his
capacity as Municipal Administrator and his mere issuance is not
enough to impute upon the accused Ruzol any transgression or
wrongdoing that may have been committed in the issuance
thereof following the ruling in Arias v. Sandiganbayan (180 SCRA
309).
(6) The DENR directly sanctioned and expressly authorized the

issuance of the 221 Transport permits through the Provincial
Environment and natural Resources officer Rogelio Delgado Sr.,
in a Multi-Sectoral Consultative Assembly. HCaIDS
(7) The accused cannot be convicted of Usurpation of Authority

since they did not act "under the pretense of official position,"
accused Ruzol having issued the permits in his capacity as Mayor
and there was no pretense or misrepresentation on his part that
he was an officer of DENR. 7
Ruling of the Sandiganbayan

After due consideration, the Sandiganbayan rendered on December 19,
2008 a Decision, acquitting Sabiduria but finding Ruzol guilty as charged, to
wit:
WHEREFORE, premises considered, the Court resolves these
cases as follows:
1. Against the accused LEOVEGILDO R. RUZOL,
judgment is hereby rendered finding him GUILTY beyond
reasonable doubt of Two Hundred Twenty One (221) counts of
the offense of Usurpation of Official Functions as defined and
penalized under Article 177 of the Revised Penal Code and
hereby sentences him to suffer for each case a straight penalty
of SIX (6) MONTHS and ONE (1) DAY.
However, in the service of his sentences, accused Ruzol

shall be entitled to the benefit of the three-fold rule as provided
in Article 70 of the Revised Penal Code, as amended.
2. On the ground of reasonable doubt, accused

GUILLERMO M. SABIDURIA is ACQUITTED of all 221 charges. The
cash bond posted by him for his provisional liberty may now be
withdrawn by said accused upon presentation of the original
receipt evidencing payment thereof subject to the usual
accounting and auditing procedures. The hold departure
procedure issued by this Court dated 16 April 2008 is set aside
and the Order issued by the Bureau of Immigration dated 29 April
2008 including the name of Sabiduria in the Hold Departure List
is ordered recalled and cancelled.
SO ORDERED. 8 HScDIC
The Sandiganbayan predicated its ruling on the postulate that the

authority to issue transport permits with respect to salvaged forest products
lies with the Department of Environment and Natural Resources (DENR) and
that such authority had not been devolved to the local government of
General Nakar. 9 To the graft court, Ruzol's issuance of the subject permits
constitutes usurpation of the official functions of the DENR.
The Issue
The critical issue having a determinative bearing on the guilt or
innocence of Ruzol for usurpation revolves around the validity of the subject
permits to transport, which in turn resolves itself into the question of
whether the authority to monitor and regulate the transportation of salvaged
forest product is solely with the DENR, and no one else.
The Ruling of this Court
The petition is partly meritorious.
Subsidiary Issue:
Whether the Permits to Transport Issued by Ruzol are Valid
In ruling that the DENR, and not the local government units (LGUs), has
the authority to issue transportation permits of salvaged forest products, the
Sandiganbayan invoked Presidential Decree No. 705 (PD 705), otherwise
known as the Revised Forestry Code of the Philippines and in relation to
Executive Order No. 192, Series of 1987 (EO 192), or the Reorganization Act
of the Department of Environment and Natural Resources.
Section 5 of PD 705 provides: DaCTcA
Section 5. Jurisdiction of Bureau. — The Bureau [of Forest

Management] shall have jurisdiction and authority over all forest land,
grazing lands, and all forest reservations including watershed
reservations presently administered by other government agencies or
instrumentalities.
It shall be responsible for the protection, development,
management, regeneration, and reforestation of forest lands;
the regulation and supervision of the operation of licensees,
lessees and permittees for the taking or use of forest products
therefrom or the occupancy or use thereof; the implementation of
multiple use and sustained yield management in forest lands; the
protection, development and preservation of national parks, marine
parks, game refuges and wildlife; the implementation of measures and
programs to prevent kaingin and managed occupancy of forest and
grazing lands; in collaboration with other bureaus, the effective,
efficient and economic classification of lands of the public domain; and
the enforcement of forestry, reforestation, parks, game and wildlife
laws, rules, and regulations.
The Bureau shall regulate the establishment and operation of
sawmills, veneer and plywood mills and other wood processing plants
and conduct studies of domestic and world markets of forest products.
(Emphasis Ours.)
On the other hand, the pertinent provisions of EO 192 state:

SECTION 4. Mandate. — The Department shall be the
primary government agency responsible for the conservation,
management, development, and proper use of the country's
environment and natural resources, specifically forest and
grazing lands of the public domain, as well as the licensing and
regulation of all natural resources as maybe provided for by law in
order to ensure equitable sharing of the benefits derived therefrom for
the welfare of the present and future generations of Filipinos.
xxx xxx xxx

SECTION 5. Powers and Functions. — To accomplish its
mandate, the Department shall have the following functions: cDHAES
xxx xxx xxx
(d) Exercise supervision and control over forest lands ,

alienable and disposal lands, and mineral resources and in the
process of exercising such control the Department shall impose
appropriate payments, fees, charges, rentals and any such
revenues for the exploration, development, utilization or
gathering of such resources.
xxx xxx xxx
(j) Regulate the development, disposition, extraction,

exploration and use of the country's forest, land and mineral
resources;
(k) Assume responsibility for the assessment,
development, protection, conservation, licensing and
regulation as provided for by law, where applicable, of all
natural resources; the regulation and monitoring of service
contractors, licensees, lessees, and permittees for the
extraction, exploration, development and utilization of natural
resources products; the implementation of programs and measures
with the end in view of promoting close collaboration between the
government and the private sector; the effective and efficient
classification and sub-classification of lands of the public domain; and
the enforcement of natural resources laws, rules and regulations;
(l) Promulgate rules, regulations and guidelines on the
issuance of co-production, joint venture or production sharing
agreements, licenses, permits, concessions, leases and such other
privileges and arrangement concerning the development,
exploration and utilization of the country's natural resources
and shall continue to oversee, supervise and police our natural
resources; to cancel or cause to cancel such privileges and
arrangement upon failure, non-compliance or violations of any
regulations, orders, and for all other causes which are furtherance of
the conservation of natural resources and supportive of the national
interests; AcISTE
xxx xxx xxx
(n) Implement measures for the regulation and

supervision of the processing of forest products, grading and
inspection of lumber and other forest products and monitoring of the
movement of timber and other forest products. (Emphasis Ours.)
Invoked too is DENR Administrative Order No. 2000-78 (DAO 2000-78)

which mandates that the permittee should secure the necessary transport
and other related documents before the retrieved wood materials are sold to
the buyers/users and/or wood processing plants. 10 DAO 2000-78 obliges the
entity or person concerned to secure a Wood Recovery Permit — a
"permit issued by the DENR to gather/retrieve and dispose abandoned logs,
drifted logs, sunken logs, uprooted, and fire and typhoon damaged tress,
tree stumps, tops and branches." 11 It prescribes that the permittee shall
only be allowed to gather or recover logs or timber which had already been
marked and inventoried by the Community Environment and Natural
Resources Officer. 12 To the Sandiganbayan, this mandatory requirement for
Wood Recovery Permit illustrates that DENR is the sole agency vested with
the authority to regulate the transportation of salvaged forest products.
The Sandiganbayan further reasoned that the "monitoring and
regulating salvaged forest products" is not one of the DENR's functions
which had been devolved upon LGUs. It cited Sec. 17 of Republic Act No.
7160 (RA 7160) or the Local Government Code (LGC) of 1991 which
provides:
Section 17. Basic Services and Facilities. —
(a) Local government units shall endeavor to be self-reliant
and shall continue exercising the powers and discharging the duties
and functions currently vested upon them. They shall also discharge
the functions and responsibilities of national agencies and
offices devolved to them pursuant to this Code. Local
government units shall likewise exercise such other powers and
discharge such other functions and responsibilities as are necessary,
appropriate, or incidental to efficient and effective provisions
of the basic services and facilities enumerated herein. DACTSa
xxx xxx xxx
(2) For a Municipality:

xxx xxx xxx
(ii) Pursuant to national policies and subject to supervision,
control and review of the DENR, implementation of community-
based forestry projects which include integrated social forestry
programs and similar projects; management and control of
communal forests with an area not exceeding fifty (50) square
kilometers; establishment of tree parks, greenbelts, and similar
forest development projects. (Emphasis Ours.)
According to the Sandiganbayan, Sec. 17 of the LGC has limited the

devolved functions of the DENR to the LGUs to the following: (1) the
implementation of community-based forestry products; (2)
management and control of communal forests with an area not
exceeding fifty (50) square kilometers; and (3) establishment of tree parks,
greenbelts and similar forest development projects. 13 It also referred to
DENR Administrative Order No. 30, Series of 1992 (DAO 1992-30), which
enumerates the forest management functions, programs and projects of the
DENR which had been devolved to the LGUs, as follows: 14
Section 3.1. Forest Management. —
a. Implementation of the following community-based forestry
projects: SHIcDT
i. Integrated Social Forestry Projects, currently funded

out of regular appropriations, except at least one
project per province that shall serve as research and
training laboratory, as identified by the DENR, and
those areas located in protected areas and critical
watersheds;
ii. Establishment of new regular reforestation projects,

except those areas located in protected areas and
critical watersheds;
iii. Completed family and community-based contract

reforestation projects, subject to policies and
procedures prescribed by the DENR;
iv. Forest Land Management Agreements in accordance
with DENR Administrative Order No. 71, Series of
1990 and other guidelines that the DENR may adopt;
and
v. Community Forestry Projects, subject to concurrence

of financing institution(s), if foreign assisted.
b. Management and control of communal forests with an area

not exceeding fifty (50) square kilometers or five thousand
(5,000) hectares, as defined in Section 2, above. Provided,
that the concerned LGUs shall endeavor to convert said
areas into community forestry projects;
c. Management, protection, rehabilitation and maintenance of
small watershed areas which are sources of local water
supply as identified or to be identified by the DENR; and
d. Enforcement of forest laws in community-based forestry

project areas, small watershed areas and communal
forests, as defined in Section 2 above, such as but not
limited to: CacISA
i. Prevention of forest fire, illegal cutting and kaingin;

ii. Apprehension of violators of forest laws, rules and
regulations;
iii. Confiscation of illegally extracted forest products on

site;
iv. Imposition of appropriate penalties for illegal
logging, smuggling of natural resources products and
of endangered species of flora and fauna, slash and
burn farming and other unlawful activities; and
v. Confiscation, forfeiture and disposition of

conveyances, equipment and other implements used
in the commission of offenses penalized under P.D.
705 as amended by E.O. 277, series of 1987 and
other forestry laws, rules and regulations.
Provided, that the implementation of the foregoing

activities outside the devolved areas above mentioned, shall
remain with the DENR .
The Sandiganbayan ruled that since the authority relative to salvaged

forest products was not included in the above enumeration of devolved
functions, the correlative authority to issue transport permits remains with
the DENR 15 and, thus, cannot be exercised by the LGUs.
We disagree and refuse to subscribe to this postulate suggesting
exclusivity. As shall be discussed shortly, the LGU also has, under the LGC of
1991, ample authority to promulgate rules, regulations and ordinances to
monitor and regulate salvaged forest products, provided that the parameters
set forth by law for their enactment have been faithfully complied with. cSHIaA
While the DENR is, indeed, the primary government instrumentality

charged with the mandate of promulgating rules and regulations for the
protection of the environment and conservation of natural resources, it is not
the only government instrumentality clothed with such authority. While the
law has designated DENR as the primary agency tasked to protect the
environment, it was not the intention of the law to arrogate unto the DENR
the exclusive prerogative of exercising this function. Whether in ordinary or
in legal parlance, the word "primary" can never be taken to be synonymous
with "sole" or "exclusive." In fact, neither the pertinent provisions of PD 705
nor EO 192 suggest that the DENR, or any of its bureaus, shall exercise such
authority to the exclusion of all other government instrumentalities, i.e.,
LGUs.
On the contrary, the claim of DENR's supposedly exclusive mandate is
easily negated by the principle of local autonomy enshrined in the 1987
Constitution 16 in relation to the general welfare clause under Sec. 16 of the
LGC of 1991, which provides:
shall exercise the powers expressly granted, those necessarily
implied therefrom, as well as powers necessary, appropriate,
or incidental for its efficient and effective governance , and
those which are essential to the promotion of the general welfare.
Within their respective territorial jurisdictions, local government units
shall ensure and support, among other things, the preservation and
enrichment of culture, promote health and safety, enhance the right
of the people to a balanced ecology, encourage and support the
development of appropriate and self-reliant scientific and technological
capabilities, improve public morals, enhance economic prosperity and
social justice, promote full employment among their residents,
maintain peace and order, and preserve the comfort and convenience
of their inhabitants. (Emphasis Ours.)
Pursuant to the aforequoted provision, municipal governments are

clothed with authority to enact such ordinances and issue such regulations
as may be necessary to carry out and discharge the responsibilities
conferred upon them by law, and such as shall be necessary and proper to
provide for the health, safety, comfort and convenience, maintain peace and
order, improve public morals, promote the prosperity and general welfare of
the municipality and its inhabitants, and ensure the protection of property in
the municipality. 17
As held in Oposa v. Factoran, Jr. , 18 the right of the people "to a
balanced and healthful ecology carries with it the correlative duty to refrain
from impairing the environment." In ensuring that this duty is upheld and
maintained, a local government unit may, if it deems necessary, promulgate
ordinances aimed at enhancing the right of the people to a balanced ecology
and, accordingly, provide adequate measures in the proper utility and
conservation of natural resources within its territorial jurisdiction. As can be
deduced from Ruzol's memoranda, as affirmed by the parties in their Joint
Stipulation of Facts, it was in the pursuit of this objective that the subject
permits to transport were issued by Ruzol — to regulate the salvaged forest
products found within the municipality of General Nakar and, hence, prevent
abuse and occurrence of any untoward illegal logging in the area. 19 CSIcHA
In the same vein, there is a clear merit to the view that the monitoring
and regulation of salvaged forest products through the issuance of
appropriate permits is a shared responsibility which may be done either
by DENR or by the LGUs or by both. DAO 1992-30, in fact, says as much,
thus: the "LGUs shall share with the national government,
particularly the DENR, the responsibility in the sustainable
management and development of the environment and natural
resources within their territorial jurisdiction." 20 The significant role of
the LGUs in environment protection is further echoed in Joint Memorandum
Circular No. 98-01 (JMC 1998-01) or the Manual of Procedures for DENR-
DILG-LGU Partnership on Devolved and other Forest Management Functions ,
which was promulgated jointly by the DILG and the DENR in 1998, and
provides as follows:
Section 1. Basic Policies. —
Subject to the general policies on devolution as contained in RA
7160 and DENR Administrative Order No. 30, Series of 1992, the
following basic policies shall govern the implementation of DENR-DILG-
LGU partnership on devolved and other forest management functions:
1.1. The Department of Environment and Natural
Resources (DENR) shall be the primary government agency
responsible for the conservation, management, protection,
proper use and sustainable development of the country's
environment and natural resources. TCEaDI
1.2. The LGUs shall share with DENR the

responsibility in the sustainable management and
development of the forest resources within their
territorial jurisdiction. Toward this end, the DENR and the
LGUs shall endeavor to strengthen their collaboration and
partnership in forest management.
1.3. Comprehensive land use and forest land use plans

are important tools in the holistic and efficient management of
forest resources. Toward this end, the DENR and the LGUs
together with other government agencies shall undertake
forest land use planning as an integral activity of
comprehensive land use planning to determine the
optimum and balanced use of natural resources to support
local, regional and national growth and development.
1.4. To fully prepare the LGUs to undertake their

shared responsibilities in the sustainable management of
forest land resources, the DENR, in coordination with
DILG, shall enhance the capacities of the LGUs in the
various aspects of forest management. Initially, the DENR
shall coordinate, guide and train the LGUs in the management of
the devolved functions. As the LGUs' capacity in forest
management is enhanced, the primary tasks in the
management of devolved functions shall be performed by
the LGUs and the role of the DENR becomes assistive and
coordinative.
1.5. To further the ends of local autonomy, the DENR

in consultation with the LGUs shall devolved [sic]
additional functions and responsibilities to the local
government units, or enter into agreements with them for
enlarged forest management and other ENR-related functions.
1.6. To seek advocacy, popular support and ultimately

help achieve community empowerment, DENR and DILG shall
forge the partnership and cooperation of the LGUs and other
concerned sectors in seeking and strengthening the participation
of local communities for forest management including
enforcement of forestry laws, rules and regulations. (Emphasis
Ours.)
To our mind, the requirement of permits to transport salvaged forest

products is not a manifestation of usurpation of DENR's authority but rather
a n additional measure which was meant to complement DENR's duty to
regulate and monitor forest resources within the LGU's territorial jurisdiction.
TaCSAD
This is consistent with the "canon of legal hermeneutics that instead of

pitting one statute against another in an inevitably destructive
confrontation, courts must exert every effort to reconcile them,
remembering that both laws deserve respect as the handiwork of coordinate
branches of the government." 21 Hence, if there appears to be an apparent
conflict between promulgated statutes, rules or regulations issued by
different government instrumentalities, the proper action is not to
immediately uphold one and annul the other, but rather give effect to both
by harmonizing them if possible. 22 Accordingly, although the DENR requires
a Wood Recovery Permit, an LGU is not necessarily precluded from
promulgating, pursuant to its power under the general welfare clause,
complementary orders, rules or ordinances to monitor and regulate the
transportation of salvaged forest products.
Notwithstanding, We still find that the Permits to Transport issued
by Ruzol are invalid for his failure to comply with the procedural
requirements set forth by law for its enforcement.
Then and now, Ruzol insists that the Permit to Transport partakes the
nature of transport fees levied by the municipality for the use of public
roads. 23 In this regard, he argues that he has been conferred by law the
right to issue subject permits as an incident to the LGU's power to create its
own sources of revenue pursuant to the following provisions of the LGC:
Section 153. Service Fees and Charges. — Local
government units may impose and collect such reasonable fees
and charges for services rendered.
xxx xxx xxx
Section 186. Power to Levy Other Taxes, Fees or Charges. —

Local government units may exercise the power to levy taxes, fees
or charges on any base or subject not otherwise specifically
enumerated herein or taxed under the provisions of the National
Internal Revenue Code, as amended, or other applicable laws:
Provided, That the taxes, fees, or charges shall not be unjust,
excessive, oppressive, confiscatory or contrary to declared national
policy: Provided, further, That the ordinance levying such taxes, fees or
charges shall not be enacted without any prior public hearing
conducted for the purpose. (Emphasis Ours.) ISCaDH
Ruzol further argued that the permits to transport were issued under
his power and authority as Municipal Mayor under Sec. 444 of the same law:
(iv) Issue licenses and permits and suspend or revoke the
same for any violation of the conditions upon which said licenses or
permits had been issued, pursuant to law or ordinance ;
xxx xxx xxx
(vii) Adopt adequate measures to safeguard and

conserve land, mineral, marine, forest, and other resources of the
municipality; provide efficient and effective property and supply
management in the municipality; and protect the funds, credits, rights
and other properties of the municipality. (Emphasis Ours.)
Ruzol is correct to a point. Nevertheless, We find that an enabling

ordinance is necessary to confer the subject permits with validity. As
correctly held by the Sandiganbayan, the power to levy fees or charges
under the LGC is exercised by the Sangguniang Bayan through the
enactment of an appropriate ordinance wherein the terms, conditions and
rates of the fees are prescribed. 24 Needless to say, one of the fundamental
principles of local fiscal administration is that "local revenue is generated
only from sources expressly authorized by law or ordinance." 25
It is likewise expressly stated in Sec. 444 (b) (3) (iv) of the LGC that the
authority of the municipal mayor to issue licenses and permits should be
"pursuant to a law or ordinance." It is the Sangguniang Bayan, as the
legislative body of the municipality, which is mandated by law to enact
ordinances against acts which endanger the environment, i.e., illegal
logging, and smuggling of logs and other natural resources. 26 aTEAHc
In this case, an examination of the pertinent provisions of General

Nakar's Revised Municipal Revenue Code 27 and Municipal Environment Code
28 reveals that there is no provision unto which the issuance of the permits
to transport may be grounded. Thus, in the absence of an ordinance for the

regulation and transportation of salvaged products, the permits to transport
issued by Ruzol are infirm.
Ruzol's insistence that his actions are pursuant to the LGU's devolved
function to "manage and control communal forests" under Sec. 17 of the LGC
and DAO 1992-30 29 is specious. Although We recognize the LGU's authority
in the management and control of communal forests within its territorial
jurisdiction, We reiterate that this authority should be exercised and
enforced in accordance with the procedural parameters established by law
for its effective and efficient execution. As can be gleaned from the same
Sec. 17 of the LGC, the LGU's authority to manage and control communal
forests should be "pursuant to national policies and is subject to supervision,
control and review of DENR."
As correctly held by the Sandiganbayan, the term "communal forest" 30
has a well-defined and technical meaning. 31 Consequently, as an entity
endowed with specialized competence and knowledge on forest resources,
the DENR cannot be discounted in the establishment of communal forest.
The DILG, on behalf of the LGUs, and the DENR promulgated JMC 1998-01
which outlined the following procedure:
Section 8.4. Communal Forest. —
8.4.1 Existing Communal Forest

The devolution to and management of the communal forest by
the city and municipal governments shall be governed by the following
general procedures: STcHDC
(a) DENR, through its CENRO, and the concerned LGU shall
undertake the actual identification and assessment of
existing communal forests. The assessment shall
determine the suitability of the existing communal forests.
If these are no longer suitable, then these communal
forests may be disestablished. The Approval for
disestablishment shall be by the RED upon
recommendation of the DENR-LGU assessment Team
through the PENRO and the RTD for Forestry;
(b) Existing communal forest which are found and
recommended by the DENR-LGU Assessment Team as still
suitable to achieve their purpose shall be maintained as
such. Thereafter, the Sangguniang Panlungsod or
Sangguniang Bayan where the communal forest is
located shall pass resolution requesting the DENR
Secretary for the turnover of said communal forest
to the city or municipality. Upon receipt of said
resolution, the DENR Secretary shall issue an
Administrative Order officially transferring said communal
forest to the concerned LGU. The DENR RED shall effect the
official transfer to the concerned LGU within fifteen (15)
days from the issuance of the administrative order;
(c) Within twelve months from the issuance of the
Administrative Order and turnover of said communal forest
to the city or municipality, the LGU to which the
communal forest was transferred shall formulate
and submit to the Provincial ENR Council for
approval a management plan governing the
sustainable development of the communal forest.
For the purpose of formulating the communal forest

management plan, DENR shall, in coordination with the
concerned LGU, undertake a forest resource inventory and
determine the sustainable level of forest resource
utilization and provide the LGU technical assistance in all
facets of forest management planning to ensure
sustainable development. The management plan should
include provision for replanting by the communities and the
LGUs of the communal forests to ensure sustainability.
8.4.2 Establishment of New Communal Forest
The establishment of new communal forests shall be governed
by the following guidelines: HDTISa
(a) DENR, through its CENRO, together with the concerned

city/municipal LGU shall jointly identify potential
communal forest areas within the geographic jurisdiction
of the concerned city/municipality.
(b) Communal forests to be established shall be identified
through a forest land use planning to be undertaken jointly
between the DENR and the concerned LGU. The ensuing
forest land use plan shall indicate, among others, the
site and location of the communal forests within the
production forest categorized as such in the forest land use
plan;
(c) Once the forest land use plan has been affirmed, the local
chief executive shall initiate the passage by the LGU's
sanggunian of a resolution requesting the DENR
Secretary to issue an Administrative Order declaring
the identified area as a communal forest. The
required administrative order shall be issued within sixty
(60) days after receipt of the resolution;
(d) Upon acceptance of the responsibility for the communal
forest, the city/municipal LGU shall formulate the
management plan and submit the same to its ENR Council.
The management plan shall include provision for replanting
by the communities and the LGUs of the communal forests
to ensure sustainability.
The communal forests of each municipality shall in no case
exceed a total of 5,000 hectares. (Emphasis Ours.)
It is clear, therefore, that before an area may be considered a

communal forest, the following requirements must be accomplished: (1) an
identification of potential communal forest areas within the geographic
jurisdiction of the concerned city/municipality; (2) a forest land use plan
which shall indicate, among other things, the site and location of the
communal forests; (3) a request to the DENR Secretary through a
resolution passed by the Sangguniang Bayan concerned; and (4) an
administrative order issued by DENR Secretary declaring the identified
area as a communal forest.
In the present case, the records are bereft of any showing that these
requirements were complied with. Thus, in the absence of an established
communal forest within the Municipality of General Nakar, there was no way
that the subject permits to transport were issued as an incident to the
management and control of a communal forest.
This is not to say, however, that compliance with abovementioned
statutory requirements for the issuance of permits to transport foregoes the
necessity of obtaining the Wood Recovery Permit from the DENR. As earlier
discussed, the permits to transport may be issued to complement, and not
substitute, the Wood Recovery Permit, and may be used only as an
additional measure in the regulation of salvaged forest products. To
elucidate, a person seeking to transport salvaged forest products
still has to acquire a Wood Recovery Permit from the DENR as a
prerequisite before obtaining the corresponding permit to transport
issued by the LGU. cEDIAa
Main Issue:
Whether Ruzol Is Guilty of Usurpation of Official Functions
The foregoing notwithstanding, Ruzol cannot be held guilty of
Usurpation of Official Functions as defined and penalized under Art. 177 of
the RPC, to wit:
Art. 177. Usurpation of authority or official functions. — Any
person who shall knowingly and falsely represent himself to be an
officer, agent or representative of any department or agency of the
Philippine Government or of any foreign government, or who, under
pretense of official position, shall perform any act pertaining to any
person in authority or public officer of the Philippine Government or
any foreign government, or any agency thereof, without being lawfully
entitled to do so, shall suffer the penalty of prision correccional in its
minimum and medium periods. (Emphasis Ours.)
As the aforementioned provision is formulated, there are two ways of

committing this crime: first, by knowingly and falsely representing himself to
be an officer, agent or representative of any department or agency of the
Philippine Government or of any foreign government; or second, under
pretense of official position, shall perform any act pertaining to any person
in authority or public officer of the Philippine Government or any foreign
government, or any agency thereof, without being lawfully entitled to do so.
32 The former constitutes the crime of usurpation of authority, while the
latter act constitutes the crime of usurpation of official functions. 33
In the present case, Ruzol stands accused of usurpation of official
functions for issuing 221 permits to transport salvaged forest products
under the alleged "pretense of official position and without being lawfully
entitled to do so, such authority properly belonging to the Department of
Environment and Natural Resources." 34 The Sandiganbayan ruled that all
the elements of the crime were attendant in the present case because the
authority to issue the subject permits belongs solely to the DENR. 35
We rule otherwise.
First, it is settled that an accused in a criminal case is presumed
innocent until the contrary is proved and that to overcome the presumption,
nothing but proof beyond reasonable doubt must be established by the
prosecution. 36 As held by this Court in People v. Sitco: 37
The imperative of proof beyond reasonable doubt has a vital role
in our criminal justice system, the accused, during a criminal
prosecution, having a stake interest of immense importance, both
because of the possibility that he may lose his freedom if convicted and
because of the certainly that his conviction will leave a permanent
stain on his reputation and name. (Emphasis supplied.)
Citing Rabanal v. People, 38 the Court further explained:
Law and jurisprudence demand proof beyond reasonable doubt
before any person may be deprived of his life, liberty, or even property.
Enshrined in the Bill of Rights is the right of the petitioner to be
presumed innocent until the contrary is proved, and to overcome the
presumption, nothing but proof beyond reasonable doubt must be
established by the prosecution. The constitutional presumption of
innocence requires courts to take "a more than casual
consideration" of every circumstance of doubt proving the
innocence of petitioner. (Emphasis added.) TEAICc
Verily, an accused is entitled to an acquittal unless his or her guilt is

shown beyond reasonable doubt and it is the primordial duty of the
prosecution to present its side with clarity and persuasion, so that conviction
becomes the only logical and inevitable conclusion, with moral certainty. 39
As explained by this Court in People v. Berroya: 40
The necessity for proof beyond reasonable doubt lies in the fact
that "(i)n a criminal prosecution, the State is arrayed against the
subject; it enters the contest with a prior inculpatory finding in its
hands; with unlimited means of command; with counsel usually of
authority and capacity, who are regarded as public officers, and
therefore as speaking semi-judicially, and with an attitude of tranquil
majesty often in striking contrast to that of defendant engaged in a
perturbed and distracting struggle for liberty if not for life. These
inequalities of position, the law strives to meet by the rule that there is
to be no conviction when there is a reasonable doubt of guilt."
Indeed, proof beyond reasonable doubt does not mean such a degree
of proof, excluding possibility of error, produces absolute certainty; moral
certainty only is required, or that degree of proof which produces conviction
in an unprejudiced mind. 41 However, contrary to the ruling of the
Sandiganbayan, We find that a careful scrutiny of the events surrounding
this case failed to prove that Ruzol is guilty beyond reasonable doubt of
committing the crime of usurpation of official functions of the DENR.
We note that this case of usurpation against Ruzol rests principally on
the prosecution's theory that the DENR is the only government
instrumentality that can issue the permits to transport salvaged forest
products. The prosecution asserted that Ruzol usurped the official functions
that properly belong to the DENR.
But erstwhile discussed at length, the DENR is not the sole government
agency vested with the authority to issue permits relevant to the
transportation of salvaged forest products, considering that, pursuant to the
general welfare clause, LGUs may also exercise such authority. Also, as can
be gleaned from the records, the permits to transport were meant to
complement and not to replace the Wood Recovery Permit issued by the
DENR. In effect, Ruzol required the issuance of the subject permits under his
authority as municipal mayor and independently of the official functions
granted to the DENR. The records are likewise bereft of any showing that
Ruzol made representations or false pretenses that said permits could be
used in lieu of, or at the least as an excuse not to obtain, the Wood Recovery
Permit from the DENR.
Second, contrary to the findings of the Sandiganbayan, Ruzol acted in
good faith. HCTDIS

It bears stressing at this point that in People v. Hilvano , 42 this Court
enunciated that good faith is a defense in criminal prosecutions for
usurpation of official functions. 43 The term "good faith" is ordinarily used to
describe that state of mind denoting "honesty of intention, and freedom from
knowledge of circumstances which ought to put the holder upon inquiry; an
honest intention to abstain from taking any unconscientious advantage of
another, even though technicalities of law, together with absence of all
information, notice, or benefit or belief of facts which render transaction
unconscientious." 44 Good faith is actually a question of intention and
although something internal, it can be ascertained by relying not on one's
self-serving protestations of good faith but on evidence of his conduct and
outward acts. 45
In dismissing Ruzol's claim of good faith, the Sandiganbayan reasoned
as follows:
If it is really true that Ruzol believed himself to be authorized
under R.A. 7160 to issue the subject permits, why did he have to
secure the approval of the various NGOs, People's Organizations and
religious organizations before issuing the said permits? He could very
well have issued subject permits even without the approval of
these various organizations if he truly believed that he was
legally empowered to do so considering that the endorsement of
these organizations is not required by law. That Ruzol had to arm
himself with their endorsement could only mean that he
actually knew that he had no legal basis for issuing the said
permits; thus he had to look elsewhere for support and back-
up. 46 (Emphasis Ours.)
We, however, cannot subscribe to this posture as there is neither legal

basis nor established doctrine to draw a conclusion that good faith is
negated when an accused sought another person's approval. Neither is there
any doctrine in law which provides that bad faith is present when one seeks
the opinion or affirmation of others. CIcTAE
Contrary to the conclusions made by the Sandiganbayan, We find that

the conduct of the public consultation was not a badge of bad faith, but a
sign supporting Ruzol's good intentions to regulate and monitor the
movement of salvaged forest products to prevent abuse and occurrence of
untoward illegal logging. In fact, the records will bear that the requirement of
permits to transport was not Ruzol's decision alone; it was, as earlier
narrated, a result of the collective decision of the participants during the
Multi-Sectoral Consultative Assembly. As attested to by Bishop Julio Xavier
Labayen, it was the participants who agreed that the subject permits be
issued by the Office of the Mayor of General Nakar, through Ruzol, in the
exercise of the latter's authority as local chief executive. 47
The Sandiganbayan also posits the view that Ruzol's good faith is
negated by the fact that if he truly believed he was authorized to issue the
subject permits, Ruzol did not have to request the presence and obtain the
permission of PENRO Rogelio Delgado Sr. during the Multi-Sectoral
Assembly. 48
The graft court's above posture, however, does not commend itself for
concurrence. If, indeed, Ruzol willfully and deliberately intended to usurp the
official functions of the DENR as averred by the prosecution, he would not
have asked the presence of a DENR official who has the authority and
credibility to publicly object against Ruzol's allegedly intended usurpation.
Thus, the presence of PENRO Delgado during the Multi-Sectoral Assembly
does not negate, but strengthens Ruzol's claim of good faith.
As a final note, We emphasize that the burden of protecting the
environment is placed not on the shoulders of DENR alone — each and every
one of us, whether in an official or private capacity, has his or her significant
role to play. Indeed, protecting the environment is not only a responsibility
but also a right for which a citizen could and should freely exercise.
Considering the rampant forest denudation, environmental degradation and
plaguing scarcity of natural resources, each of us is now obligated to
contribute and share in the responsibility of protecting and conserving our
treasured natural resources. cDTHIE
Ruzol chose to exercise this right and to share in this responsibility by

exercising his authority as municipal mayor — an act which was executed
with the concurrence and cooperation of non-governmental organizations,
industry stakeholders, and the concerned citizens of General Nakar.
Admittedly, We consider his acts as invalid but it does necessarily mean that
such mistakes automatically demand Us to rule a conviction. This is in
consonance with the settled principle that "all reasonable doubt intended
to demonstrate error and not crime should be indulged in for the
benefit of the accused." 49
Under our criminal judicial system, "evil intent must unite with the
unlawful act for a crime to exist," as "there can be no crime when the
criminal mind is wanting." 50 Actus non facit reum, nisi mens sit rea .
In the present case, the prosecution has failed to prove beyond
reasonable doubt that Ruzol possessed that "criminal mind" when
he issued the subject permits. What is clear from the records is that
Ruzol, as municipal mayor, intended to regulate and monitor salvaged forest
products within General Nakar in order to avert the occurrence of illegal
logging in the area. We find that to hold him criminally liable for these
seemingly noble intentions would be a step backward and would run
contrary to the standing advocacy of encouraging people to take a pro-
active stance in the protection of the environment and conservation of our
natural resources.
Incidentally, considering the peculiar circumstances of the present case
and considering further that this case demands only the determination of
Ruzol's guilt or innocence for usurpation of official functions under
the RPC, for which the issue on the validity of the subject Permits to
Transport is only subsidiary, We hereby resolve this case only for this
purpose and only in this instance, pro hac vice, and, in the interest of justice,
rule in favor of Ruzol's acquittal.
IN VIEW OF THE FOREGOING, the December 19, 2008 Decision of
the Sandiganbayan First Division in Criminal Case Nos. SB-08-CRIM-0039 to
0259, finding Leovegildo R. Ruzol guilty of violating Art. 177 of the Revised
Penal Code, is hereby REVERSED and SET ASIDE.
Accused Leovegildo R. Ruzol is, thus, ACQUITTED on the basis of
reasonable doubt of the crimes as charged. aATHIE
SO ORDERED.
Leonardo-de Castro, * Abad, Mendoza and Leonen, JJ., concur.
Footnotes
*Additional member per raffle dated September 16, 2009.
1.Penned by Associate Justice Alexander G. Gesmundo and concurred in by
Presiding Justice Diosdado M. Peralta (now a member of this Court) and
Associate Justice Rodolfo A. Ponferrada.
2.Rollo , pp. 341-342, 155.
3.Id. at 192.
4.Id. at 147-148.
5.Id. at 148-154.
6.Id. at 157.
7.Id. at 159-161.
8.Id. at 193-194.
9.Id. at 161.
10.DAO 2000-78, entitled Regulations in the Recovery and Disposition, Abandoned
Logs, Drifted Logs, Sunken Logs, Uprooted, and Fire/Typhoon Damaged
Trees, Tree Stumps, Tops and Branches, Sec. 5.4.
11.Id., Sec. 2.8.
12.Id., Sec. 5.3.
13.Rollo , p. 166.
14.DAO 1992-30, entitled Guidelines for the Transfer and Implementation of DENR
Functions Devolved to Local Government Units.
15.Rollo , p. 166.
16.Art. X, Sec. 2. The territorial and political subdivisions shall enjoy local
autonomy.
17.Binay v. Domingo, G.R. No. 92389, September 11, 1991, 201 SCRA 508, 514.
18.G.R. No. 101083, July 30, 1993, 224 SCRA 792, 805.
19.Rollo , pp. 156, 187.
20.Sec. 1.2.
21.Batangas CATV, Inc. v. Court of Appeals , G.R. No. 138810, September 29, 2004,
439 SCRA 326, 345.
22.Id.
23.Rollo , p. 159.
24.Id. at 188.
25.LOCAL GOVERNMENT CODE, Sec. 305.
26.Id., Sec. 447 (a) (1) (u).
27.Rollo , pp. 461-578.

28.Id. at 657-670.
29.Id. at 64-65.
30.DAO 1992-30, Sec. 2.3. Communal Forest. — Refers to a tract of forest land set
aside by the Secretary of the DENR for the use of the residents of a
municipality from which said residents may cut, collect and remove forest
products for their personal use in accordance with existing laws and
regulations.
31.Rollo , p. 171.
32.L.B. Reyes, THE REVISED PENAL CODE, BOOK TWO 241-242 (2006).
33.Gigantoni v. People , No. L-74727, June 16, 1988, 162 SCRA 158, 162-163.
34.Rollo , p. 18.
35.Id. at 191.
36.RULES OF COURT, Rule 133, Sec. 2.
37.G.R. No. 178202, May 14, 2010, 620 SCRA 561, 574.
38.G.R. No. 160858, February 28, 2006, 483 SCRA 601, 617.
39.Amanquiton v. People, G.R. No. 186080, August 14, 2009, 596 SCRA 366, 373.
40.347 Phil. 410, 423 (1997).
41.RULES OF COURT, Rule 133, Sec. 2.

42.99 Phil. 655, 657 (1956).
43.In Hilvano, the accused was initially prosecuted for and convicted of "usurpation
of public authority" as defined in RA 10. However, it was later found out that
RA 10 was no longer applicable and that the applicable law is Art. 177 of the
RPC, as amended by RA 379. Apparently, the crime of "usurpation of public
authority" as designated in RA 10 was redefined and is presently what we
refer to as "usurpation of official functions" defined and penalized under the
second portion of Art. 177 of the RPC. In effect, Hilvano was convicted not
of usurpation of authority but of usurpation of official functions.
44.Civil Service Commission v. Maala , G.R. No. 165253, August 18, 2005, 467
SCRA 390, 399; citations omitted.
45.Id.; citing Gabriel v. Mabanta , G.R. No. 142403, March 26, 2003, 399 SCRA 573.
46.Rollo , p. 180.
47.Id. at 156.
48.Id. at 181.
49.L.B. Reyes, THE REVISED PENAL CODE, BOOK TWO 48 (2006).
50.Bahilidad v. People, G.R. No. 185195, March 17, 2010, 615 SCRA 597, 608.

EN BANC
[G.R. No. 170867. December 4, 2018.]
REPUBLIC OF THE PHILIPPINES, REPRESENTED BY RAPHAEL

P.M. LOTILLA, SECRETARY, DEPARTMENT OF ENERGY (DOE),
MARGARITO B. TEVES, SECRETARY, DEPARTMENT OF
FINANCE (DOF), AND ROMULO L. NERI, SECRETARY,
DEPARTMENT OF BUDGET AND MANAGEMENT (DBM) ,
petitioners, vs. PROVINCIAL GOVERNMENT OF PALAWAN,
REPRESENTED BY GOVERNOR ABRAHAM KAHLIL B. MITRA,
respondent.
[G.R. No. 185941. December 4, 2018.]
BISHOP PEDRO DULAY ARIGO, CESAR N. SARINO, DR. JOSE

ANTONIO N. SOCRATES, PROF. H. HARRY L. ROQUE, JR .,
petitioners, vs. HON. EXECUTIVE SECRETARY, EDUARDO R.
ERMITA, HON. ENERGY SECRETARY ANGELO T. REYES, HON.
FINANCE SECRETARY MARGARITO B. TEVES, HON. BUDGET
AND MANAGEMENT SECRETARY ROLANDO D. ANDAYA, JR.,
HON. PALAWAN GOVERNOR JOEL T. REYES, HON.
REPRESENTATIVE ANTONIO C. ALVAREZ (1st District), HON.
REPRESENTATIVE ABRAHAM MITRA (2nd District), RAFAEL
E. DEL PILAR, PRESIDENT AND CEO, PNOC EXPLORATION
CORPORATION, respondents.
DECISION
TIJAM, J : p
G.R. No. 170867 is a petition for review on certiorari 1 under Rule 45 of

the Rules of Court assailing the Decision 2 dated December 16, 2005 of the
Regional Trial Court (RTC) of Palawan, Branch 95 in Civil Case No. 3779
which declared the Province of Palawan entitled to forty percent (40%) of the
government's earnings derived from the Camago-Malampaya natural gas
project since October 16, 2001. The petition also seeks ad cautelam to nullify
the RTC Amended Order 3 dated January 16, 2006 which directed the
"freezing" of said 40% share under pain of contempt.
G.R. No. 185941 is a petition for review on certiorari 4 under Rule 45 of
the Rules of Court assailing the Resolution 5 dated May 29, 2008 of the Court
of Appeals (CA) in CA-G.R. SP No. 102247 which dismissed the certiorari
petition questioning the constitutionality of Executive Order (E.O.) No. 683, 6
and the CA Resolution 7 dated December 16, 2008 which denied the motion
for reconsideration.
The Antecedents
The Camago-Malampaya Natural

Gas Project
On December 11, 1990, the Republic of the Philippines (Republic or

National Government), through the Department of Energy (DoE), entered
into Service Contract No. 38 with Shell Philippines Exploration B.V. and
Occidental Philippines, Incorporated (collectively SPEX/OXY), as Contractor,
for the exclusive conduct of petroleum operations in the area known as
"Camago-Malampaya" located offshore northwest of Palawan. Exploration of
the area led to the drilling of the Camago-Malampaya natural gas reservoir
about 80 kilometers from the main island of Palawan and 30 kms from the
platform. 8
The nearest point of the Camago-Malampaya production area is at a
distance of 93.264 kms or 50.3585 nautical miles to the Kalayaan Island
Group (Kalayaan); 55.476 kms or 29.9546 nm to mainland Palawan (Nacpan
Point, south of Patuyo Cove, Municipality of El Nido); and 48.843 kms or
26.9546 nm to the Province of Palawan (northwest of Tapiutan Island,
Municipality of El Nido). 9
The quantity of natural gas contained in the Camago-Malampaya was
estimated to be sufficient to justify the pursuit of gas-to-power projects
having an aggregate power-generating capacity of approximately 3,000
megawatts operating at baseload for 20 to 25 years. 10
Service Contract No. 38, as clarified by the Memorandum of
Clarification between the same parties dated December 11, 1990, provides
for a production sharing scheme whereby the National Government was
entitled to receive an amount equal to sixty percent (60%) of the net
proceeds 11 from the sale of petroleum (including natural gas) produced
from petroleum operations while SPEX/OXY, as service contractor, was
entitled to receive an amount equal to forty percent (40%) of the net
proceeds. 12
The Contractor was subsequently composed of the consortium of SPEX,
Shell Philippines LLC, Chevron Malampaya LLC and Philippine National Oil
Company-Exploration Corporation (PNOC-EC). 13
Administrative Order No. 381
On February 17, 1998, President Fidel V. Ramos issued Administrative

Order (A.O.) No. 381 14 which, in part, stated that the Province of Palawan
was expected to receive about US$2.1 Billion from the estimated US$8.1
Billion total government share from the Camago-Malampaya natural gas
project for the 20-year contract period. 15
CAIHTE
On June 10, 1998, DoE Secretary Francisco L. Viray wrote Palawan

Governor Salvador P. Socrates, requesting for the deferment of payment of
50% of Palawan's share in the project for the first seven years of operations,
estimated at US$222.89 Million, which it would use to pay for the National
Power Corporation's Take-or-Pay Quantity (TOPQ) obligations under the
latter's Gas Sale and Purchase Agreements with SPEX/OXY. 16
On October 16, 2001, the Camago-Malampaya natural gas project was
inaugurated. 17
Palawan's Claim
The Provincial Government of Palawan asserted its claim over forty

percent (40%) of the National Government's share in the proceeds of the
project. It argued that since the reservoir is located within its territorial
jurisdiction, it is entitled to said share under Section 290 18 of the Local
Government Code. The National Government disputed the claim, arguing
that since the gas fields were approximately 80 kms from Palawan's
coastline, they are outside the territorial jurisdiction of the province and is
within the national territory of the Philippines. 19
Negotiations took place between the National Government and the
Provincial Government of Palawan on the sharing of the proceeds from the
project, with the former proposing to give Palawan 20% of said proceeds
after tax. The negotiations, however, were unsuccessful. On March 14, 2003,
in a letter to the Secretaries of the Department of Energy (DoE), the
Department of Budget and Management (DBM) and the Department of
Finance (DoF), Palawan Governor Mario Joel T. Reyes (Governor Reyes)
reiterated his province's demand for the release of its 40% share. Attached
to said letter was Resolution No. 5340-03 20 of the Sangguniang
Panlalawigan of Palawan calling off further negotiations with the National
Government and authorizing Governor Reyes to engage legal services to
prosecute the province's claim. 21
Civil Case No. 3779
On May 7, 2003, the Provincial Government of Palawan filed a petition

22 for declaratory relief before the RTC of Palawan and Puerto Princesa
against DoE Secretary Vicente S. Perez, Jr., DoF Secretary Jose Isidro N.
Camacho and DBM Secretary Emilia T. Boncodin (Department Secretaries),
docketed as Civil Case No. 3779. It sought judicial determination of its rights
under A.O. No. 381 (1998), Republic Act (R.A.) No. 7611 23 or the Strategic
Environmental Plan (SEP) for Palawan Act, Section 290 of R.A. No. 7160 24 or
the Local Government Code of 1991 (Local Government Code), and
Provincial Ordinance No. 474 25 (series of 2000). It asked the RTC to declare
that the Camago-Malampaya natural gas reservoir is part of the territorial
jurisdiction of the Province of Palawan and that the Provincial Government of
Palawan was entitled to receive 40% of the National Government's share in
the proceeds of the Camago-Malampaya natural gas project. 26
Commenting on the petition, the Republic maintained that Palawan
was not entitled to the 40% share because the Camago-Malampaya reservoir
is outside its territorial jurisdiction. It postulated that Palawan's territorial
jurisdiction is limited to its land area and to the municipal waters within 15
km from its coastline. It denied being estopped by the acts of government
officials who earlier acknowledged Palawan's share in the proceeds of the
project. 27
The Interim Agreement
On February 9, 2005, DoE Secretary Vincent S. Perez, Jr., DBM

Secretary Mario L. Relampagos and DoF Secretary Juanita D. Amatong, with
authority from President Gloria Macapagal-Arroyo, executed an Interim
Agreement 28 with the Province of Palawan, represented by its Governor
Reyes. The agreement provided for the equal sharing between the National
Government and the Province of Palawan of 40% of (a) the funds already
remitted to the National Government under Service Contract No. 38 and (b)
the funds to be remitted to the National Government up the earlier of (i) the
effective date of the final and executory judgment on the petition by a court
of competent jurisdiction on Civil Case No. 3779, or (ii) June 30, 2010. The
parties also agreed that the amount of P600 Million, which was previously
released to the Province of Palawan under E.O. Nos. 254 and 254-A, would
be deducted from the initial release of the province's 50% share.
Furthermore, the release of funds under the agreement would be without
prejudice to the respective positions of the parties in any legal dispute
regarding the territorial jurisdiction over the Camago-Malampaya area.
Should Civil Case No. 3779 be decided with finality in favor of either party,
the Interim Agreement treated the share which the prevailing party has
received as financial assistance to the other. 29 DETACa
The Province of Palawan claims that the National Government failed to

fulfill their commitments under the Interim Agreement and that it has not
received its stipulated share since it was signed. 30
The RTC Rulings in Civil Case No. 3779
On December 16, 2005, the RTC decided Civil Case No. 3779 in favor of
the Province of Palawan, disposing as follows:
WHEREFORE, premises considered, the Court declares that the
province of Palawan is entitled to the 40% share of the national
wealth pursuant to the provisions of Sec. 7, Article X of the 1987
Constitution and this right is in accord with the provisions of the
Enabling Act, R.A. 7160 (The Local Government Code of 1991),
computed based on revenues generated from the Camago-
Malampaya Natural Gas Project since October 16, 2001.
IT IS SO ORDERED. 31
The RTC held that it was "unthinkable" to limit Palawan's territorial

jurisdiction to its landmass and municipal waters considering that the Local
Government Code empowered them to protect the environment, and R.A.
No. 7611 adopted a comprehensive framework for the sustainable
development of Palawan compatible with protecting and enhancing the
natural resources and endangered environment of the province. 32
Applying the principles of decentralization and devolution of powers to
local government units (LGUs) as recognized in the 1987 Constitution, the
RTC explained that the State's resources must be shared with the LGUs if
they were expected to deliver basic services to their constituents and to
discharge their functions as agents of the State in enforcing laws, preserving
the integrity of the national territory and protecting the environment. 33
The RTC rejected the Department Secretaries' reliance on the cases of
Tan v. COMELEC 34 and Laguna Lake Development Authority v. CA 35 (LLDA)
in arguing that territorial jurisdiction refers only to landmass. The RTC held
that the cases were inapplicable as Tan was an election controversy
involving the creation of a new province while LLDA merely highlighted the
primacy of the said agency's Charter over the Local Government Code. The
1950 case of Municipality of Paoay v. Manaois, 36 where a municipality was
declared as holding only a usufruct, not exclusive ownership, over the
municipal waters, was also held to be inapplicable since it was rendered
before the principle of local autonomy was instituted in the 1987
Constitution and the Local Government Code. 37
The RTC further declared that the Regalian Doctrine could not be used
by the Department Secretaries as a shield to defeat the Constitutional
provision giving LGUs an equitable share in the proceeds of the utilization
and development of national wealth within their respective areas. The
doctrine, said the RTC, is subject to this Constitutional limitation and the 40%
LGU share set by the Local Government Code. 38
Finally, the RTC noted that from 1992 to 1998, Palawan received a total
of P116,343,197.76 from collections derived from the West Linapacan Oil
Fields, and that former President Fidel V. Ramos issued A.O. No. 381
acknowledging Palawan's claim and share in the proceeds of the Camago-
Malampaya project. The RTC, thus, held that by its previous actions and
issuances, the National Government legally acknowledged Palawan's claim
to the proceeds of the Camago-Malampaya project and it was "too late in the
day for [it] to take a 180 degree turn." 39
On December 29, 2005, the Provincial Government of Palawan filed a
motion to require the Secretaries of the DoE, DoF and DBM to render a full
accounting of actual payments made by SPEX to the Bureau of Treasury
from October 1, 2001 to December 2005, and to freeze and/or place
Palawan's 40% share in an escrow account. 40
On January 4, 2006, the aforesaid Secretaries filed an urgent
manifestation asserting that the motion was premature and should not be
heard by the RTC because the Republic still had fifteen (15) days to appeal.
41 The Provincial Government of Palawan countered that pending finality of
the December 16, 2005 Decision, there was a need to secure its 40% share
over which it had a "vested and inchoate right." 42
The RTC subsequently issued an Order which was erroneously dated
December 16, 2006 and later amended to indicate the date as January 16,
2006. 43 The dispositive portion of the Amended Order 44 reads:
WHEREFORE, premises considered, the public respondents
individually or collectively DIRECTED within ten (10) days from
receipt of this Order pursuant to a "Freeze Order" hereby granted by
this Court:
a. HON. Respondent SECRETARY OF THE DEPARTMENT OF
ENERGY RAPHAEL P.M. LOTILLA
To render a FULL ACCOUNTING of the total gross collections
derived by the National Government from the development and
utilization of Camago-Malampaya national gas project for the period
January 2002 to December 2005, including its conversion to peso
denomination and showing the 40% LGU share and henceforth,
submit MONTHLY an accounting of all succeeding collections until the
finality of the decision;
b. HON. Respondent SECRETARY OF FINANCE MARGARITO
TEVEZ
To submit a full report of the actual payments made by Shell
Spex from January 2002 to December 2005 deposited under Special
Account 151 of the Bureau of Treasury, Department of Finance,
including the dates when the payments were made, the Official
Receipts covering the same and the present status, particularly the
disputed 40% LGU share for Palawan and to make MONTHLY reports
of actual payments received during the pendency of this case; aDSIHc
c. HON. Respondent SECRETARY DEPARTMENT OF BUDGET

[sic] ROMULO NERI
Effective immediately, NOT TO ISSUE nor CHARGE allotment
release orders, disbursements and cash allocation against the
deposit/account Special Fund 151 corresponding to the 40% LGU
share for the period January 2002 to December 2005 pending the
finality of the decision in this case.
d. ALL RESPONDENTS, collectively or individually, effective
immediately, CEASE and DESIST from USING/DISBURSING the 40%
share of the LGU-Palawan, for any other purpose, except in
compliance with the decision of this Court dated December 16, 2005,
under pain of CONTEMPT, until the finality of the decision;
e. Furthermore, the HON. Respondent Secretary of Finance
Margarito Tevez [sic] and/or his subordinate officer Hon. Omar T. Cruz
Treasurer of the Philippines, to deposit in escrow in the LAND BANK
OF THE PHILIPPINES the fund/deposit to the 40% disputed LGU share,
identified as Special Account 151, and to "freeze" said account, under
pain of CONTEMPT, until finality of the decision or except as directed
by this Court pursuant to the Decision dated December 16, 2005.
The RTC held that the motion for full accounting and freezing of
Palawan's claimed 40% share was actually part of the petition for review
which sought to declare the duties of the National Government and the
rights of the Provincial Government of Palawan, and that a resolution thereof
would guide this Court as to the actual amount due the local government
since it is not a trier of facts. 46 The RTC also noted that the National
Government's track record in complying with the Constitutional provisions on
local autonomy was not exactly immaculate as supposedly evidenced by the
case of Gov. Mandanas v. Hon. Romulo 47 where, after sharing with the
Province of Palawan collections from the West Linapacan oil fields from 1992
to 1998, the National Government "turned its back on its legal commitment
to the former." The trial court stressed that the local government of Palawan
was merely preempting any possible dissipation of funds that would render
any judgment favorable to it an empty victory. 48
On February 6, 2006, the Department Secretaries filed a motion for
reconsideration 49 of the Amended Order dated January 16, 2006. 50
G.R. No. 170867
On February 16, 2006, the Republic, represented by DoE Secretary

Raphael P.M. Lotilla, DoF Secretary Margarito B. Teves and DBM Secretary
Romulo L. Neri, challenged the RTC's December 16, 2005 Decision before
this Court through a petition for review 51 docketed as G.R. No. 170867. In
the same petition, the Republic, in anticipation of the RTC's denial of its
motion for reconsideration, also assailed the January 16, 2006 Amended
Order ad cautelam, ascribing grave abuse of discretion to the RTC for
granting affirmative relief in a special civil action for declaratory relief. 52
On June 6, 2006, the RTC in its Order 53 lifted its January 16, 2006
Order, holding that:
[A] becoming sense of modesty on the part of this Court, compels it
to defer to the Supreme Court's First Division as the Movants have
deviously appealed to the High Court the very issues raised in the
Motion for Reconsideration now pending before this Court. 54
The dispositive portion of the RTC's June 6, 2006 Order, thus, reads:
WHEREFORE, premises considered, the Amended Order dated
January 16, 2006 is hereby LIFTED and SET ASIDE to await final
determination thereof in view of the Petition for Review on Certiorari
filed by Movants in this case directly with the Supreme Court.
Consequently, the Republic manifested to the Court that its ad

cautelam arguments relative to the Amended Order dated January 16, 2006
need no longer be resolved unless the Provincial Government of Palawan
raised the same in its comment. 56
The Provisional Implementation

Agreement
On July 25, 2007, the duly authorized representatives of the National

Government and the Province of Palawan, with the conformity of the
Representatives of the Congressional Districts of Palawan, agreed on a
Provisional Implementation Agreement (PIA) that allowed 50% of the
disputed 40% of the Net Government Share in the proceeds of Service
Contract No. 38 to be utilized for the immediate and effective
implementation of development projects for the people of Palawan. 57
E.O. No. 683
On December 1, 2007, President Gloria Macapagal-Arroyo issued E.O.
No. 683 which authorized the release of funds to the implementing agencies
pursuant to the PIA, without prejudice to any ongoing discussion or the final
judicial resolution of Palawan's claim of territorial jurisdiction over the
Camago-Malampaya area. E.O. No. 683 provided:
SECTION 1. Subject to existing laws, and the usual
government accounting and auditing rules and regulations, the
Department of Budget and Management (DBM) is hereby authorized
to release funds to the implementing agencies (IA) pursuant to the
PIA, upon the endorsement and submission by the DOE and/or the
PNOC Exploration Corporation of the following documents:
1.1. Directive by the Office of the President or written
request of the Province of Palawan, the Palawan Congressional
Districts or the Highly Urbanized City of Puerto Princes[a], for the
funding of designated projects;
1.2. A certification that the designated projects fall under
the investment program of the Province of Palawan, City of Puerto
Princesa, and/or the development projects identified in the
development program of the National Government or its agencies;
and
1.3. Bureau of Treasury certification on the availability of
funds from the 50% of the 40% share being claimed by the Province
of Palawan from the Net Government Share under SC 38;
Provided, that the DBM shall be subject to the actual collections
deposited with the National Treasury, and shall be in accordance with
the Annual Fiscal Program of the National Government.
SECTION 2. The IA to whom the DBM released the funds
pursuant to Section 1 hereof shall be accountable for the
implementation of the projects and the expenditures thereon, subject
to applicable laws and existing budgeting, accounting and auditing
rules and regulations. For recording purposes, the DBM may authorize
the IAs to open and maintain a special account for the amounts
released pursuant to this Executive Order (EO).
SECTION 3. The National government, with due regard to
the pending judicial dispute, shall allow the Province of Palawan, the
Congressional Districts of Palawan and the City of Puerto Princesa to
securitize their respective shares in the 50% of the disputed 40% of
the Net Government Share in the proceeds of SC 38 pursuant to the
PIA. For the purpose, the DOE shall, in consultation with the
Department of Finance, be responsible for preparing the Net
Government Revenues for the period of to June 30, 2010.
SECTION 4. The amounts released pursuant to this EO shall
be without prejudice to any on-going discussions or final judicial
resolution of the legal dispute regarding the National Government's
territorial jurisdiction over the areas covered by SC 38 in relation to
the claim of the Province of Palawan under Sec. 290 of RA 7160. ETHIDa
CA-G.R. SP No. 102247
On February 7, 2008, a petition for certiorari 58 questioning the

constitutionality of E.O. No. 683 was filed before the CA by Bishop Pedro
Dulay Arigo, Cesar N. Sarino, Dr. Jose Antonio N. Socrates and Prof. H. Harry
L. Roque, Jr. (Arigo, et al.), as citizens and taxpayers, against Executive
Secretary Eduardo R. Ermita (Executive Secretary Ermita), DoE Secretary
Angelo T. Reyes (DoE Secretary Reyes), DoF Secretary Margarito B. Teves,
DBM Secretary Rolando D. Andaya, Jr., Palawan Governor Reyes,
Representative Antonio C. Alvarez (Alvarez) of the First District of Palawan,
Representative Abraham Mitra (Mitra) and Rafael E. Del Pilar, President and
Chief Executive Officer, PNOC-EC. Docketed as CA-G.R. SP No. 102247, the
petition also asked the CA to: (1) prohibit respondents therein from
disbursing funds allocated under E.O. No. 683; (2) direct the National
Government to release the 40% allocation of the Province of Palawan from
the proceeds of the Camago-Malampaya project pursuant to the sharing
formula under the Constitution and the Local Government Code; and (3)
prohibit the parties to the PIA from implementing the same for being
violative of the Constitution and the Local Government Code. 59
In a Resolution dated March 18, 2008, the CA required Arigo, et al., to
submit, within five (5) days from notice, copies of relevant pleadings and
other material documents, namely: (1) the petition for review on certiorari,
docketed as G.R. No. 170867, filed before this Court; (2) the RTC's Decision
in Civil Case No. 3779; (3) the motion for reconsideration of said RTC
Decision; (4) the Service Contract No. 38; and (5) the PIA, as required under
Section 1, Rule 65, in relation to Section 3, Rule 46 of the Rules of Court. 60
Arigo, et al., asked for additional ten (10) days to comply with the
Resolution, which the CA granted. They later submitted the required
documents except for the copies of the petition in G.R. No. 170867 and the
PIA. They informed the CA that despite having made a formal request for
said petition, they were unable to secure a copy because they were not
parties to the case. The Third Division's Clerk of Court also informed them
that the records of G.R. No. 170867 were unavailable as the case had
already been submitted to the ponente for resolution. Though unable to
obtain a copy of the PIA, they submitted a copy of Service Contract No. 38
which they supposedly secured from "unofficial sources." Considering the
difficulty they allegedly encountered in obtaining the documents, they asked
the CA to direct DoE Secretary Reyes and Executive Secretary Ermita to
submit a copy of the petition in G.R. No. 170867 and Service Contract No.
38, respectively. They also asked the CA to require any of the respondents-
officials of the Province of Palawan to submit a copy of the PIA to which they
were supposed to have been signatories. 61
Ruling of the CA
In the CA's Resolution 62 dated May 29, 2008, Arigo, et al.'s, petition for
certiorari was denied due course and dismissed. The CA held that the task of
submitting relevant documents fell squarely on Arigo, et al., as petitioners
invoking its jurisdiction. It added that Arigo, et al., should have submitted a
certification from this Court's Third Division concerning the unavailability of
the records of G.R. No. 170867 and that they could have simply secured a
copy of the PIA from the Malacañang Records Office as the official repository
of all documents related to the Executive's functions.
The CA also held that apart from its procedural defect, the petition was
also prematurely filed considering that it was anchored on the same
essential facts and circumstances and raised the same issues in G.R. No.
170867. The CA likewise noted that the interim undertaking between the
parties to the PIA was contingent on the final adjudication of G.R. No.
170867. Taking judicial notice of on-going efforts of both legislative and
executive departments to arrive at a common position in redefining the
country's baseline in the light of the United Nations Convention on the Law
of the Sea (UNCLOS), the appeals court further explained that ruling on the
case may be tantamount to a collateral adjudication of the archipelagic
baseline which involved a policy issue. 63
Arigo, et al., asked the CA to reconsider its May 29, 2008 Resolution
and later submitted an original duplicate of the Resolution 64 dated June 23,
2008 of this Court's Third Division which denied their counsel's request for
certified true copies of certain documents since it was not a counsel for any
party. 65
On December 16, 2008, the CA issued a Resolution 66 denying the
motion for reconsideration.
G.R. No. 185941 (Arigo, et al., petition)
On February 23, 2009, Arigo, et al., filed a petition for review on

certiorari 67 over the CA's May 29, 2008 and December 16, 2008 Resolutions,
arguing that the case was ripe for decision and that the documents required
by the CA were not necessary. 68 They assert anew their constitutional
challenge to E.O. No. 638, claiming that it was in violation of the mandated
equitable sharing of resources between the National Government and LGUs.
69 cSEDTC
Consolidation of Cases
On June 23, 2009, the Court in its Resolution 70 consolidated G.R. No.
185941 with G.R. No. 170867.
Oral Argument
On September 1, 2009 71 and November 24, 2009, 72 the cases were

heard on oral argument. After the parties presented their respective
arguments, the Court heard the opinions of Atty. Henry Bensurto, Jr. (Atty.
Bensurto) of the Department of Foreign Affairs and Dean Raul Pangalangan
of the University of the Philippines as amici curiae.
Remittances under Service Contract No. 38
As of August 31, 2009, the amounts remitted to the DoE under Service
Contract No. 38 are as follows: 73
Year Total Collection
2002 646,333,100.11
2003 1,475,334,680.12
2004 1,631,245,574.33
2005 2,393,400,010.73
2006 5,369,720,905.73
2007 8,228,450,883.72
2008 25,498,646,553.39
January 1 to August 31, 15,947,078,304.12
2009
Total 61,190,210,012.25
Based on the aforesaid remittances, the Republic computed the share

claimed by the Province of Palawan (as of August 31, 2009) as follows: 74
Source of Assistance to the LGUs

Year DoE Share 75 Palawan's 40% Total Collection
Claim
2002 10,113,578.87 636,219,521.24 646,333,100.11
2003 1,475,334,680.12 1,475,334,680.12
2004 1,631,245,574.33 1,631,245,574.33
2005 2,393,400,010.73 2,393,400,010.73
2006 5,369,720,905.73 5,369,720,905.73
2007 8,228,450,883.72 8,228,450,883.72
2008 15,057,426,163.39 10,441,220,390.00 25,498,646,553.39
January 1 to
August 31, 10,600,881,085.36 5,346,197,218.76 15,947,078,304.12
2009
Total 25,668,420,827.62 35,521,789,184.63 61,190,210,012.25
The Parties' Submissions
Precised, the parties' respective arguments are as follows:
The Republic
1. An LGU's territorial jurisdiction refers only to its land area. 76

1.1. Since Section 7 of the Local Government Code uses
"population" and "land area" as indicators in the creation and
conversion of LGUs, it follows that the territorial jurisdiction is the
land where the people live and excludes seas or marine areas. 77
1.2. In describing the territorial requirement for a province,
Section 461(a)(i) of the Local Government Code speaks of "a
contiguous territory, as certified by the Lands Management Bureau"
while Section 461(b) of the same law provides that "the territory need
not be contiguous if it comprises two (2) or more islands," indicating
that "territory" is limited to the landmass. 78
1.3. "Territory" as used in Section 461 of the Local
Government Code and "land area" as used in Section 7 of the same
law, must be attested to by the Lands Management Bureau which has
jurisdiction only over land areas. 79
1.4. In Tan, 80 the Court interpreted "territory" to refer only
to the mass of land above sea water and excludes the waters over
which the political unit exercises control. 81 The RTC erred in holding
that Tan is not applicable when it also involved the issue of whether
the province should include the waters around it. Tan applies whether
the purpose is the creation of a province or the determination of its
territorial jurisdiction. 82
2. The area referred to under Section 7, Article X of the 1987
Constitution, which grants LGUs a share in the proceeds of the utilization and
development of national wealth within their respective areas, refers to the
territorial boundaries of the LGU as defined in its charter and not to its
exercise of jurisdiction. 83 SDAaTC
2.1. As examples of such national wealth, members of the

1986 Constitutional Commission referred to natural resources found
inland or onshore, even when offshore explorations were being
conducted years before the Commission was formed. 84
2.2. The Local Government Code provides that the
territorial jurisdiction of municipalities, cities and barangays should be
identified by metes and bounds, thus confirming that "territorial
jurisdiction" refers to the LGU's territorial boundaries. 85
3. The Camago-Malampaya reservoir is outside the territorial
boundaries of the Province of Palawan as defined in its Charter. Under said
Charter, Palawan's territory is composed only of islands. 86
4. On municipal waters:
4.1. As argued in the petition: Assuming an LGU's territory
includes the waters around its land area, the same should refer only
to the municipal waters as defined under Section 131(r) of the Local
Government Code and Section 4.58 87 of R.A. No. 8550, 88 otherwise
known as the Philippine Fisheries Code of 1998. 89
4.1.1. In defining "municipal waters," Section
131(r) of the Local Government Code only includes
marine waters within fifteen (15) kms from the coastline.
Section 4.58 of R.A. No. 8550 gives a similar definition of
"municipal waters." 90
4.1.2. Under Sections 6 and 7 of R.A. No. 8550,
it is the Department of Agriculture, through the Bureau of
Fisheries and Aquatic Resources, that has jurisdiction
over Philippine waters beyond the 15-km limit of
municipal waters, with respect to the issuance of license,
charging of fees and access to fishery resources. 91
4.1.3. Section 16 of R.A. No. 8550 provides that
the jurisdiction of a municipal or city government extends
only to the municipal waters, while Section 65 of the
same law provides that the enforcement of laws and the
formulation of rules, except in municipal waters, are
vested in the National Government. 92
4.1.4. Thus, the LGUs' authority may be
enforced only within the 15-km limit of the municipal
waters. Beyond it, jurisdiction rests with the National
Government through the Philippine Navy, Philippine Coast
Guard, Philippine National Police-Maritime Command, and
the Department of Agriculture in their respective areas of
concern. 93
4.1.5. It was held in Municipality of Paoay 94
that a municipality's right over municipal waters consists
merely of usufruct. Contrary to the RTC's pronouncement,
the decision in said case remains good law since nothing
in the 1987 Constitution overthrew the principle that the
State owns all natural resources whether found on land or
under the sea. 95
4.1.6. Even assuming that the LGU's territory
extends to the municipal waters, the Camago-Malampaya
natural gas reservoir is located approximately 80 kms
from mainland Palawan, thus, way beyond the 15-km
radius. 96
4.2. As argued in the Memorandum: Under the Local
Government Code, the 15-km municipal waters and beyond, including
the continental margin, do not form part of the territory of an LGU. 97
4.2.1. I n Tan, the Court excluded from the
territory of the political unit the "waters over which [it]
exercises control" or the municipal waters. 98
4.2.3. n The Local Government Code and the
Philippine Fisheries Code did not redefine and extend the
territorial jurisdiction of LGUs to include the 15-km
municipal waters. Instead, they merely granted
"extraterritorial" jurisdiction over the municipal waters,
which is limited only to the waters, excluding the seabed,
subsoil and continental shelf; to fishery and aquatic
resources, excluding other resources; and to revenue
generation and regulation of said resources. 99
4.2.4. Other than the 15-km municipal waters,
the Local Government Code did not vest jurisdiction
beyond the LGU's territorial boundaries. 100
5. Under the Archipelagic and Regalian Doctrines enshrined in the
1987 Constitution, the maritime area between Kalayaan and mainland
Palawan belongs to the national territory and does not pertain to any local
government unit. 101
5.1. The fact that a territorial sea belongs to the internal
waters of a coastal State does not necessarily imply that it belongs to
the province or local government closest to it. R.A. No. 3046, entitled
An Act to Define the Baselines of the Territorial Sea of the Philippines,
as amended by R.A. No. 5446, which defines the State's "internal
waters," does not expressly state that the internal waters should also
belong to the LGU. 102
5.2. The Archipelagic Doctrine, as enunciated in the
UNCLOS and affirmed in Article I of the 1987 Constitution, pertains to
the sovereign state and does not place within the territory of LGUs
the waters between and surrounding its islands. Nowhere in
international or domestic law does it state that said doctrine applies
in pari materia to LGUs. 103
5.3. The application of the Archipelagic Doctrine to a
political subdivision will encroach on territories that belong to the
State. Section 3 of the Water Code provides that "all waters belong to
the State" and Section 5 of the same law specifies that "seawater
belongs to the State." So also, while the definition of Philippine waters
under the Philippine Fisheries Code acknowledges that waters may
exist in political subdivisions, nothing therein implies that such waters
form part of the territory of the LGU. Furthermore, said definition
treats the waters connecting the islands as a separate group from the
waters existing in the political subdivisions, implying that waters
between islands are not deemed found in LGUs. 104
5.4. The Regalian Doctrine, as embodied in Section 2,
Article XII of the 1987 Constitution, is all encompassing; thus, it
behooves the claimant to present proof of title before his right is
recognized. Without a specific and unmistakable grant by the State,
the property remains to be that of the State and the LGU cannot claim
an area to be part of its territorial jurisdiction. Inclusion of any land or
water as part of Palawan's territory must be expressly provided by
law and not merely inferred by vague and ambiguous construction.
Statutes in derogation of authority should be construed in favor of the
State and should not be permitted to divest it of any of its rights or
prerogatives unless the legislature expressly intended otherwise. 105
acEHCD
5.5. In a number of cases involving conflicting claims of the

United States Federal Government and the coastal states over natural
wealth found within the latter's adjoining maritime area, the Supreme
Court of the United States of America (U.S.), applying the Federal
Paramountcy Doctrine, consistently ruled on the fundamental right of
the national government over the national wealth in maritime areas,
to the exclusion of the coastal state. The reason behind the doctrine
equally applies to the conflicting claims between the Philippine
National Government and the Province of Palawan. In fact, there are
more reasons to apply the doctrine in the Philippines since unlike the
individual states of the America which preexisted the U.S., the LGUs
are creations and agents of the Philippine National Government. 106
6. The inclusion of the Kalayaan Group of Islands (Kalayaan) to the
Province of Palawan under Presidential Decree (P.D.) No. 1596 107 did not
ipso facto make the waters between Kalayaan and the main island of
Palawan part of the territorial jurisdiction of Palawan. 108
6.1. There is nothing in P.D. No. 1596, or the charter of
Palawan, Act No. 1396, that states that the waters around Kalayaan
are part of Palawan's territory. P.D. No. 1596 refers to Kalayaan as a
cluster of islands and islets while Act No. 1396 identifies the islands
included in the Province of Palawan. Thus, the areas referred to are
limited to the landmass. Since the Camago-Malampaya reservoir is
not an island, it cannot possibly be covered by either statute. More
importantly, the reservoir is outside the geographical lines mentioned
in said laws. 109
6.2. Absent an express grant by Congress, the Province of
Palawan cannot validly claim that the area between mainland
Palawan and Kalayaan are automatically part of its territorial
jurisdiction. 110
7. Section 1, Article X of the 1987 Constitution provides that the
territorial and political subdivisions of the Republic are the provinces, cities,
municipalities and barangays. It, however, does not require that every
portion of the Philippine territory be made part of the territory of an LGU. It
was intended merely to institutionalize the LGUs. And even on the
supposition that the Constitution intended to apportion the Philippine
territory to the LGUs, legislation is still needed to implement said provision.
However, no law has been enacted to divide the Philippine territory,
including its continental margin and exclusive economic zones, to all LGUs.
111
8. Palawan's territorial boundaries do not embrace the continental

shelf where the Camago-Malampaya reservoir is located. Contrary to Dean
Raul Pangalangan's view, the UNCLOS cannot be considered to have vested
the LGUs with their own continental shelf based on the doctrine of
transformation. The concept of continental shelf under the UNCLOS does not
automatically apply to a province. 112
8.1. A treaty is an agreement between states and governs
the legal relations between nations. And even if the UNCLOS were to
be deemed transformed as part of municipal law after its ratification
by the Batasang Pambansa in 1984 under Resolution No. 121, it did
not automatically amend the Local Government Code and the
charters of the LGUs. No such intent is manifest either in the UNCLOS
nor Resolution No. 121. Instead, the UNCLOS, as transformed into our
municipal law, is to be applied verba legis. 113
8.2. Under the express terms of the UNCLOS, the rights and
duties over maritime zones and the continental shelf pertain to the
State, and no provision therein suggests any reference to an LGU. 114
8.3. In other sovereign states such as Canada and the U.S.,
the maritime zones were ruled to be outside the LGUs' territorial
jurisdiction. The Federal Paramountcy Doctrine was upheld in four
leading U.S. cases where the claims of various U.S. coastal states
over the marginal and coastal waters and the continental shelf were
rejected. 115
9. The State is not estopped by the alleged mistakes of its officials
or agents. 116
9.1. On June 10, 1988, the DoE requested the Province of

Palawan for a seven-year deferment of payment to enable the
National Government to pay a portion of NPC's TOPQ obligations. On
February 17, 1998, President Ramos issued A.O. No. 381 which
projected US$2.1 Billion as Palawan's share from the Camago-
Malampaya project. Although they seem to acknowledge Palawan's
share in the proceeds of the Camago-Malampaya project, they cannot
contravene the laws that delineate Palawan's territorial jurisdiction.
Furthermore, the President has no authority to expand the territorial
jurisdiction of a province as this can only be done by Congress. 117
9.2. In issuing A.O. No. 381, President Ramos made no
misrepresentation as to give rise to estoppel. The statements in said
A.O. were not calculated to mislead the Province of Palawan; they
were not even directed to Palawan. No estoppel can be invoked if the
complaining party has not been misled to his prejudice. There is no
proof that the Province of Palawan sustained injury as a result of a
misrepresentation. 118
9.3. The doctrine of estoppel should be applied only in
extraordinary circumstances and should not be given effect beyond
what is necessary to accomplish justice between the parties. 119
9.4. The doctrine of estoppel does not preclude the
correction of an erroneous construction by the officer himself, by his
successor in office, or by the court in an appropriate case. An
erroneous construction creates no vested right and cannot be taken
as precedent. 120
9.5. Accordingly, the Province of Palawan cannot rely on the
fact that in 1992, they shared in the proceeds derived from the West
Linapacan oil fields located approximately 76 kms off the western
coastline of Palawan. 121
9.6. The public funds available for various projects in other
provinces would be significantly reduced if Palawan is allowed to
receive its claimed 40% share in the Camago-Malampaya project. 122
10. Ordinance No. 474, series of 2000, enacted by the Sangguniang
Panlalawigan of Palawan and delineating the territorial jurisdiction of the
province to include the Camago-Malampaya area, is ultra vires. 123
10.1. Ordinance No. 474 conflicts with the Charter of the
Province of Palawan as it expanded the boundaries of the province
and included the area between its constituent islands. It is also in
conflict with the limits of LGUs' rights over marine areas under the
Local Government Code, the Fisheries Code and other pertinent laws.
124 SDHTEC
10.2. An LGU cannot fix its territorial jurisdiction, or limit or

expand the same through an ordinance. Pursuant to Section 10,
Article X of the 1987 Constitution and Sections 6 and 10 of the Local
Government Code, only Congress can create, divide or merge LGUs
and alter their boundaries, subject to the plebiscite requirement. An
ordinance cannot contravene the Constitution or any statute. 125
10.3. As plotted by the National Mapping and Resource
Information Authority (NAMRIA), the territorial boundaries of Palawan
under Ordinance No. 474 appear to be inconsistent with the
delineation of the Philippine territory under the Treaty of Paris. 126
11. Section 3 (1) of R.A. No. 7611 or SEP for Palawan Act contains a
definition of "Palawan." The Camago-Malampaya reservoir is undoubtedly
within the area described and plotted on the map. However, R.A. No. 7611
did not redefine Palawan's territory or amend its charter. 127
11.1. With the words "(A)s used in this Act," Section 3 of
R.A. No. 7611 limited the application of the definitions therein to said
law which was enacted to promote sustainable development goals for
the province through proper conservation, utilization and
development of natural resources. 128
11.2. Just like Palawan's Charter, Section 3(1) of R.A. No.
7611 limited the territory to the islands and islets within the area. 129
11.3. The metes and bounds under Section 3(1) of R.A. No.
7611, when plotted on the map, excluded portions of mainland
Palawan and several islands, municipalities or portions thereof. 130
11.4. The basis of the description of Palawan is unclear and
there is no record that the alteration in Palawan's boundaries
complied with Section 10, Article X of the 1987 Constitution which
requires that the alteration be in accordance with the criteria
established in the local government code and approved by a majority
of the votes cast in a plebiscite in the political unit(s) directly
affected. 131
11.5. Based on the Declaration of Policy in R.A. No. 7611,
the object of the law is not to expand the territory of Palawan but to
make the province an agent of the National Government in the
protection of the environment. There is nothing in the title of the law
or any of its provisions indicating that there was a legislative intent to
expand or alter the boundaries of the province or to remove certain
municipalities from its territory. 132
11.6. If the description of Palawan under R.A. No. 7611
would be read as a new definition of its territory, it would be
unconstitutional because the title of the law does not indicate that
boundaries would be expanded, in contravention of the Constitutional
requirement that every bill must embrace only one subject to be
expressed in its title. 133
11.7. Even if the term "territorial jurisdiction" were to be
understood as including the grant of limited extraterritorial
jurisdiction, the Camago-Malampaya reservoir remains to be beyond
Palawan's jurisdiction under R.A. No. 7611. The said law did not
expand the province's police or administrative jurisdiction; it did not
impose any additional function or jurisdiction on the Province of
Palawan. If anything, the SEP limited the province's governmental
authority since all LGUs in the area must align their projects and
budgets with the SEP. Furthermore, tasked to implement the SEP was
not the province but the Palawan Council for Sustainable
Development (PCSD), a national agency created under the law,
composed of both national and local officials. The participation of local
officials did not turn PCSD into an arm of the Province of Palawan;
their inclusion is to allow a holistic view of the environmental issues
and opportunities for coordination. 134
12. A.O. No. 381 was not issued to redefine Palawan's territory; its
title precisely states that it was issued to provide for the fulfillment by the
National Power Corporation of its obligations under the December 30, 1997
Agreement for Sale and Purchase of Natural Gas with SPEX/OXY and for the
compliance of the National Government's performance undertaking. Palawan
was mentioned but not in the context of redefining its territory. Only a
statute can expand the territory or boundaries of an LGU. 135
13. Sections 465 and 468 of the Local Government Code which
respectively authorize the Provincial Governor to adopt measures to
safeguard marine resources of the province and the Sangguniang
Panlalawigan to impose penalties for destructive fishing, did not give the
provinces government authority over marine resources beyond the municipal
waters. 136
14. Palawan's claim that it exercises jurisdiction over the Camago-
Malampaya area is bereft of credible proof. Absent a law which vests LGUs
jurisdiction over areas outside their territorial boundaries, its acts over the
Camago-Malampaya area are ultra vires or at most an exercise of
extraterritorial jurisdiction. 137
15. The proposition of the amici curiae that the principle of equity
justifies granting Palawan 40% of the government's share in the Camago-
Malampaya project, may set a dangerous precedent. Furthermore, the
principle of equity cannot be applied when there is a law applicable to the
case. Applicable to the instant case are Section 7, Article X of the 1987
Constitution and Section 290 of the Local Government Code based on which
the Province of Palawan is not entitled to share in the proceeds of the
Camago-Malampaya project. 138 AScHCD
15.1. The concerns of the amici curiae appear to rest on the

possible damage to the environment surrounding Palawan. However,
this eventuality is covered by the Contractor's obligations under the
Environmental Compliance Certificate (ECC) which required SPEX to
ensure minimal impact on the environment and to provide for an
Environmental Guarantee Fund to cover expenses for environmental
monitoring and to compensate for whatever damage that may be
caused by the project. 139
16. The PIA and E.O. No. 683 do not constitute evidence of the
Republic's admission that Palawan is entitled to the proceeds of the Camago-
Malampaya project. In civil cases, an offer of compromise is not admissible in
evidence against the offeror. Furthermore, the whereas clauses of E.O. No.
683 clearly show that the President issued the E.O. based on a "broad
perspective of the requirements to develop Palawan as a major tourism
destination" and Section 25 of the Local Government Code which authorizes
the President, on the LGU's request, to provide financial assistance to the
LGU. The E.O. also expressly states that the amounts released shall be
without prejudice to the final resolution of the legal dispute between the
National Government and the Province of Palawan regarding the latter's
claimed share under the Service Contract No. 38. 140
17. The National Government has no intention to deprive the
Province of Palawan a share in the proceeds of the Camago-Malampaya
project if were so entitled. 141
18. The RTC committed grave abuse of discretion when it issued
Amended Order dated January 16, 2006 because it granted affirmative relief
in a special civil action for declaratory relief. 142
18.1. While courts have the inherent power to issue
interlocutory orders as may be necessary to carry its jurisdiction into
effect, such authority should be exercised as necessary in light of the
jurisdiction conferred in the main action. In this case, the main action
is one for declaratory relief, which is a preventive and anticipatory
remedy designed to declare the parties' rights or to express the
court's opinion on a question of law, without ordering anything to be
done. 143
19. Arigo, et al., have no legal standing to question E.O. No. 683
either as citizens or as taxpayers since they have not shown any actual or
threatened injury or that the case involves disbursement of public funds in
contravention of law. 144
20. G.R. No. 185941 is not ripe for judicial adjudication considering
that there is still no final determination as to whether the Province of
Palawan is entitled to share in the proceeds of the Camago-Malampaya
project. Also, the interim undertaking of the parties under the PIA is
contingent on the final adjudication of G.R. No. 170867. Furthermore, the
validity and manner by which the funds were realigned under E.O. No. 683
could not be questioned since they are considered as financial assistance
subject to the discretion of the President pursuant to the authority granted
by Section 25 (c) of the Local Government Code. 145
Arigo, et al.
1. Their petition was not prematurely filed. While the interim

undertaking between the National Government and the Province of Palawan
under the PIA was contingent on the final adjudication of G.R. No. 170867,
disbursements of public funds would ensue or were already taking place in
violation of the provisions of the Constitution and the Local Government
Code on the equitable sharing of national wealth between the National
Government and the LGUs. 146
2. Neither Governor Reyes nor Representatives Alvarez and Mitra
had the authority to sign the PIA on behalf of the cities, municipalities and
barangays of Palawan. In fact, the cities, municipalities and barangays have
a bigger share that the Provincial Government in the allocation of the
revenues from the Camago-Malampaya project. Under Section 292 of the
Local Government Code, the city or municipality gets 45% and the barangay
gets 35%, or a combined share of 80% as against the Province's share of
only 20%. Governor Reyes and Representatives Alvarez and Mitra could not
sign the PIA as if they were the sole recipients of the proceeds of the
Camago-Malampaya project. 147
3. The PIA reduces the share of Palawan's LGUs in two ways: first,
by making "net proceeds" the basis for sharing instead of "gross collection"
as provided by Section 290 of the Local Government Code; and second, by
cutting down the LGUs' equitable share in such proceeds by half, with the
Province solely claiming such allocation. 148
4. The equitable share of LGUs in the utilization and development of

national wealth is not subject to compromise. 149 AcICHD
5. The PIA requires that any fund allocation is subject to the prior
approval of the DoE and/or the PNOC-EC and to actual collections deposited
with the National Treasury, in contravention of the Local Government Code,
which requires that the proceeds of the utilization of natural resources
should be directly released to each LGU without need of further action, and
the Court's ruling in Pimentel, Jr. v. Hon. Aguirre 150 on the automatic release
of the LGUs' shares in the National Internal Revenue. 151
6. In providing that only those projects identified by the Office of
the President, or the Province of Palawan, or the Palawan Congressional
Districts, or the Highly Urbanized City of Puerto Princesa, may be funded, the
PIA violates the intent of the Local Government Code to grant autonomy to
LGUs. 152
7. The PIA allows the securitization of the shares of the LGUs and
the National Government in the utilization of the Camago-Malampaya Oil and
Gas resources, but the National Government cannot securitize what it does
not own legally and neither can the Province of Palawan securitize what it
does not fully own. 153
8. E.O. No. 683 is nothing more than a realignment of funds carried
out in violation of the Constitutional provision giving LGUs an equitable share
in the proceeds of the utilization of national wealth, for in usual budgeting
procedures of Congress, such share should be included in the appropriation
for "Allocation to LGUs" which is classified as a mandatory obligation of the
National Government and automatically released to the LGUs. 154
9. E.O. No. 683 is a usurpation of the power of the purse lodged in
Congress under Section 29 (1) and (3), 155 Article VI of the 1987
Constitution. Since the proceeds from the Camago-Malampaya project is the
production share of the government in a service contract, it cannot be
disbursed without an appropriation law. 156
10. E.O. No. 683 fails to consider its implications on the country's
claim to an Extended Continental Shelf (ECS) under the UNCLOS III regime.
The best way to claim an ECS is to consider the Camago-Malampaya area
and the Kalayaan to be part of Palawan's continental shelf. One basis for the
Philippine claim to Kalayaan is that it constitutes a natural prolongation of
Palawan's land territory. 157
11. The Republic's invocation of U.S. case law to dispute the LGUs'
entitlement under Section 7, Article X of the 1987 Constitution is
inappropriate and odd for a unitary state like the Philippines. Said provision
in the unitary Philippine state only means that the entitlement exists only
because of a constitutional grant and not because the LGUs have
sovereignty and jurisdiction in their respective areas distinct from the
Republic's. 158
12. The definition of "municipal waters" under applicable laws is
irrelevant. The Camago-Malampaya reservoir is located in the continental
shelf which, under Article 76 of the UNCLOS, pertains to the seabed and
subsoil as the natural prolongation of the landmass. 159
13. The constitutionality of E.O. No. 683 may be resolved without
reference to the conflicting territorial claims in G.R. No. 170867. In making
reference to said case, they merely meant to provide a historical backdrop to
the issuance of E.O. No. 683. It is for this reason that they attached only a
copy of E.O. No. 683 to their petition. 160
14. R.A. No. 7611 and A.O. No. 381 both recognize that the
Camago-Malampaya area falls with the continental shelf of Palawan. As
regards the Republic's contention that R.A. No. 7611 is illegal for having
redrawn the boundaries of the Province of Palawan without a plebiscite, the
same ignores the fact that R.A. No. 7611 only incorporates the continental
shelf regime found in Article II of the 1987 Constitution. A plebiscite was
unnecessary because the 1987 Constitution was overwhelmingly ratified. 161
15. The CA erred in dismissing CA-G.R. SP No. 102247 in deference
to executive and legislative deliberations on the country's baselines as it is
in violation of its constitutional duty to interpret the constitutional provisions
defining the national territory. Furthermore, until revoked or amended, the
country's existing law on baselines (R.A. No. 3046 as amended by R.A. No.
5446) remains good law. 162
16. The CA erred in dismissing their action for certiorari for failure
to submit a copy of the PIA considering that the terms of E.O. No. 683
embody all the provisions of the assailed PIA. It was also unnecessary to
submit a copy of the petition in G.R. No. 170867 as it was only tangential to
the resolution of the case. Furthermore, the alleged failure to submit said
documents has been mooted by the June 23, 2008 Resolution of the Court's
Third Division indicating that non-parties could not have access to the
records of G.R. No. 170867. At any rate, the records of said case are now a
matter of judicial notice to this Court. 163 TAIaHE
The Province of Palawan
1. Section 7 of the Local Government Code, on the creation and

conversion of LGUs, does not expressly provide that an LGU's territorial
jurisdiction refers only to its land area. 164
1.1. Land area is included as one of the requisites for the
creation or conversion of an LGU because evidently, no LGU can be
created out of the maritime area alone. 165
1.2. Another requisite — population — is determined as the
total number of inhabitants within the territorial jurisdiction of the
LGU. The law thus aptly uses the phrase "territorial jurisdiction"
instead of territory or land area since there are communities that live
in coastal areas or low-water areas that form part of the sea. If a local
government's territorial jurisdiction is limited to its land area, then
these communities will not belong to any LGU. 166
2. Section 461 of the Local Government Code does not define the
territorial jurisdiction of a province. It merely specifies the requisites for the
creation of a province. In fact, said provision shows that territory and
population are alternative requirements for the creation of a new province,
with income being the indispensable requirement. It does not necessarily
exclude the maritime area over which a province exercises control and
authority, but merely provides that to determine whether an area is
sufficient to constitute a province, only the landmass or land territory shall
be included. 167
3. I n Tan , which involves the creation of a province under the old
Local Government Code, the Court held that the word "territory" as used in
said law "has reference only to the mass of land area and excludes the
waters over which the political unit exercises control." This ruling affirms
that an LGU exercises control over waters, making them part of the political
unit's territorial jurisdiction. Furthermore, Tan only defines the word
"territory" as used in Section 197 of the old Local Government Code. In
convoluting the words "territory" and "territorial jurisdiction," the Republic
misapplied the doctrine laid out in Tan . 168
4. Section 7, Article X of the 1987 Constitution provides that the
LGU is "entitled to an equitable share in the proceeds of the utilization and
development of the national wealth within their respective areas, in the
manner provided by law x x x." The provision does not state "within their
respective land areas." The word "area" should accordingly be construed in
its ordinary meaning to mean a distinct part of the surface of something. It,
therefore, encompasses land, maritime area and the space above them. 169
5. The delineation of the territorial jurisdiction by metes and bounds
is required only for landlocked LGUs. 170
6. Limiting the LGU's territorial jurisdiction to its land area is
inconsistent with the State's policy of local autonomy as enshrined in Section
25, Article II of the 1987 Constitution and amplified in Section 2 of the Local
Government Code. Extending such jurisdiction to all areas where the
Province of Palawan has control or authority will give it more resources to
discharge its responsibilities, particularly in the enforcement of
environmental laws in its vast marine area. 171
7. Numerous provisions of the Local Government Code indicate that
an LGU's territorial jurisdiction includes the maritime area. Section 138
speaks of public waters within the territorial jurisdiction of the province.
Section 465 (3) (v) authorizes the Provincial Governor to adopt adequate
measures to safeguard and conserve the province's marine resources.
Section 468 (1) (vi) empowers the Sangguniang Panlalawigan to protect the
environment and impose appropriate penalties for acts that endanger it,
such as dynamite fishing. More importantly, Section 3, which provides for
the operative principles of decentralization and local autonomy, states that
the vesting of duties in the LGU shall be accompanied with provision for
reasonably adequate resources to effectively carry them out. When the
same provision speaks of ecological balance which the LGUs shall manage
with the National Government, it encompasses the maritime area. 172
7.1. The environmental impact that the Camago-
Malampaya project may have on the people of Palawan requires that
the Province of Palawan must equitably share in its proceeds so it can
have adequate resources to ensure that the extraction of natural gas
will not have a deleterious effect on its environment. 173
8. The Provincial Government of Palawan exercises administrative,
environmental and police jurisdiction over public waters within its territorial
jurisdiction, including the Camago-Malampaya reservoir. Local police, under
the supervision of local executives, maintain peace and order over the said
area. Crimes committed therein are filed and tried in Palawan courts. The
provincial government also enforces local and national environmental laws
over this area. In fact, SPEX consistently recognized Palawan as the location
of the project, having obtained the necessary endorsement from the
Sangguniang Panlalawigan of Palawan before starting its operations, in
accordance with Sections 26 and 27 of the Local Government Code.
Furthermore, the plant, equipment and platform of SPEX, situated offshore,
were declared for tax purposes with the Province of Palawan. 174
9. Based on the Senate deliberations on the Local Government
Code, it is a foregone conclusion that the Province of Palawan has equitable
share in the proceeds of the Camago-Malampaya project. 175
10. Under Section 5 (a) of the Local Government Code, any
question on a particular provision of law on the power of an LGU shall be
liberally construed, and any doubt shall be resolved, in favor of the LGU. 176
11. Neither the Local Government Code nor the Philippine Fisheries
Code provides that beyond the land area, the LGU's territorial jurisdiction
can extend only up to the 15-km stretch of municipal waters. 177
11.1. The definition of "municipal waters" in Section 131(r)
of the Local Government Code shall be used only for purposes of local
government taxation inasmuch as it is found under Title I of Book II
on Local Taxation and Fiscal Matters. Section 131(r) also indicates
that the definition applies when the term "municipal waters" is used
in Title I which refers to Local Government Taxation. If anything, the
definition bolsters the argument that the LGU's territorial jurisdiction
extends to the maritime area. 178 cDHAES
11.2. The Philippine Fisheries Code did not limit or define

the territorial jurisdiction of an LGU. The definition of "municipal
waters" under both this law and the Local Government Code was
intended merely to qualify the degree of governmental powers to be
exercised by the coastal municipality or city over said waters. 179
11.3. Palawan is composed of 1,786 islands and islets.
Twelve (12) out of its twenty-three (23) municipalities are island
municipalities. Between them are expansive maritime areas that
exceed the 15-km municipal water-limit. It will, thus, be inevitable for
the province to exercise governmental powers over these areas. If
Palawan will be authorized to enforce laws only up to the municipal
water-limit, it will be tantamount to a duplication of functions already
being performed by the component municipalities. It will also render
the province inutile in enforcing laws in maritime areas between
these municipalities. It was not the intention of the lawmakers, in
enacting the Local Government Code, to create a vacuum in the
enforcement of laws in these areas or to disintegrate LGUs. 180
12. Laws other than the Local Government Code recognize that the
Province of Palawan has territorial jurisdiction over the maritime area
beyond the municipal waters. 181
12.1. R.A. No. 7611 defines Palawan as comprising islands
and islets and the surrounding sea, which includes the entire
coastline up to the open sea. 182
12.1.1. Based on the coordinates of Palawan
provided in Section 3(1) of R.A. No. 7611, the Camago-
Malampaya reservoir is within the territorial jurisdiction of
the province. 183
12.1.2. R.A. No. 7611 did not alter the territorial
jurisdiction of Palawan, as provided in Section 37 of its
charter, Act No. 2711. R.A. No. 7611 merely recognized
the fact that the islands comprising Palawan are bounded
by waters that form part of its territorial jurisdiction.
Palawan's area as described in said law could be called
the province's "environmental jurisdiction." 184
12.1.3. Pursuant to R.A. No. 7611, the Palawan
Council for Sustainable Development (PCSD) shall
establish a graded system of protection and development
control over the whole of Palawan, including mangroves,
coral reefs, seagrass beds and the surrounding sea. 185
12.1.4. R.A. No. 7611 encompasses the entire
ecological system of Palawan, including the coastal and
marine areas which it considers a main component of the
Environmentally Critical Areas Network. 186
12.1.5. Local government officials of Palawan
have representations in PCSD, the agency tasked to
enforce the integrated plan under R.A. No. 7611. Since
the enforcement of environmental laws is a joint
obligation of the national and local governments, with
local communities being the real stakeholders, LGUs
should benefit from the proceeds of the natural wealth
found in their territorial jurisdictions. 187
12.1.6. The Republic's attempt to remove the
Camago-Malampaya area from the Province of Palawan is
contrary to the declared state policy of adopting an
integrated ecological system for Palawan under R.A. No.
7611. 188
12.2. A.O. No. 381 explicitly declared that the Camago-
Malampaya reservoir is located offshore northwest of Palawan and
that the Province of Palawan was expected to receive about US$2.1
Billion from the total government share of US$8.1 Billion out of the
proceeds from the Camago-Malampaya project. 189
12.3. P.D. No. 1596 declared Kalayaan as a distinct and
separate municipality of the Province of Palawan. In delineating
Kalayaan's boundaries, P.D. No. 1596 included the seabed, subsoil,
continental margin and airspace. 190
12.3.1. P.D. No. 1596 states that the Republic's
claim to Kalayaan is foremost based on the fact that said
group of islands is part of the Philippine archipelago's
continental margin which includes the continental shelf.
The continental shelf is the submerged natural
prolongation of the land territory and is an integral part of
the landmass it is contiguous with. Oil and gas are found
not in the waters off Palawan but in the continental shelf
which is contiguous to and a prolongation of the
landmass of Palawan. 191
13. The Province of Palawan cannot be said to be holding a mere
usufruct over the municipal waters based on the 1950 case of Municipality of
Paoay . Said case is not applicable as it was decided when there was a
concentration of powers and resources in the national government, unlike
the decentralized system espoused in the Local Government Code. 192 ASEcHI
14. The federal paramountcy doctrine is a constitutional law

doctrine followed in federal states, particularly in the U.S. and Canada. The
application of this doctrine to the Philippine setting is legally inconceivable
because the Philippines has not adopted a federal form of government.
Furthermore, most of the states in the U.S. were previously independent
states who were obliged to surrender their sovereign functions over their
maritime area or marginal belt to the federal government when they joined
the federal union. Contrarily, the Philippines had a unitary system of
government until it adopted the ideas of decentralization and local
autonomy as fundamental state principles. Instead of different states
surrendering their imperium and dominium over the maritime area to a
federal government, the Philippine setting works in the opposite as the
National Government, which is presumed to own all resources within the
Philippine territory, is mandated to share the proceeds of the national wealth
with the LGUs. 193
15. The Republic is divided into political and territorial subdivisions.
Thus, for a territory to be part of the Republic, it must belong to a political
and territorial subdivision. These subdivisions are the provinces, cities,
municipalities and barangays, and they are indispensable partners of the
National Government in the proper and efficient exercise of governmental
powers and functions. The Camago-Malampaya reservoir, which is part of the
Philippines, must necessarily belong to a political and territorial subdivision.
That subdivision is the Province of Palawan which has long been exercising
governmental powers and functions over the area. 194
15.1. Since the Camago-Malampaya reservoir is nearest to
the Province of Palawan than any other LGU, it is imperative that the
province becomes the National Government's co-protector and co-
administrator in said maritime area. 195
15.2. Under Section 25(b) of the Local Government Code,
national agencies are to coordinate with LGUs in planning and
implementing national projects, while under Section 3(i) of the same
law, LGUs shall share with the National Government the responsibility
of maintaining ecological balance within their territorial jurisdiction.
Thus, governmental powers are not solely exercised by the National
Government but are shared with LGUs. However, they cannot be
effective partners of the National Government without sufficient
resources. For this reason, the 1987 Constitution grants them an
equitable share in the proceeds of the utilization of national wealth.
196
15.3. Numerous cases of illegal fishing, poaching and illegal

entry have been committed within the waters surrounding Palawan,
particularly westward of mainland Palawan and bound by the South
China Sea, along the same area where the Camago-Malampaya
project is located. These cases were prosecuted and tried before the
courts of Palawan. In Hon. Roldan, Jr. v. Judge Arca , 197 an illegal
fishing case, the jurisdiction of the Court of First Instance of Palawan
was upheld given that the vessels seized were engaged in prohibited
fishing within the territorial waters of Palawan, in obedience to the
rule that the place where a criminal offense was committed not only
determines the venue of the case but is also an essential element of
jurisdiction. 198
15.4. Sections 26 and 27 of the Local Government Code
require mandatory consultation with the LGUs concerned and the
approval of their respective Sanggunian before the National
Government may commence any project that will have an
environmental impact. The National Government and SPEX
recognized Palawan's jurisdiction over the Camago-Malampaya area
when it requested the indorsement of the Sangguniang Panlalawigan
of Palawan before commencing the Camago-Malampaya project, and
when SPEX obtained an ECC in compliance with the requirement of
PCSD, an agency created by R.A. No. 7611. 199
15.5. In the implementation of tariff and customs laws, the
Province of Palawan is being referred to by the Bureau of Customs as
the place of origin of the barrels of condensate (crude oil) being
exported to Singapore from the Camago-Malampaya area. Export
Declarations for said condensate, as issued by the Department of
Trade and Industry, also showed Palawan as the place of origin. 200
15.6. I n Tano v. Socrates , 201 the Court upheld the
ordinances, passed by the Sangguniang Panlalawigan of Palawan and
the Sangguniang Panlungsod of the City of Puerto Princesa, which
banned the transport of live fish to protect their seawater and corals
from the effects of destructive fishing, in recognition of the LGUs'
power and duty to protect the right of the people to a balanced
ecology. The destructive way of catching live fish had been conducted
not just within the 15-km municipal waters of Palawan but also
beyond said waters. 202
16. Palawan's claim is not inconsistent with, but upholds, the
archipelagic and regalian doctrines enshrined in the 1987 Constitution. 203
16.1. The Province of Palawan agrees that all waters within
the Philippine archipelago are owned by the Republic. The issue in
this case, however, is not the ownership of the Camago-Malampaya
reservoir. The Province of Palawan is not claiming dominion over said
area. It merely contends that since the reservoir is located in an area
over which it exercises control and shares in the National
Government's management responsibility, it is only just and equitable
that the Province of Palawan should share in the proceeds generated
from its utilization. Furthermore, the law does not require that the
LGUs should own the area where the national wealth is located before
they can share in the proceeds of its use and development; it merely
requires that the national wealth be "found within their respective
areas." It is, thus, error for the Republic to assert that the Camago-
Malampaya area is not part of Palawan's territorial jurisdiction
because it belongs to the State. Otherwise, no LGU will share in the
proceeds derived from the utilization and development of national
wealth because the State owns it under the regalian doctrine. 204 ITAaHc
17. International law has no application in this case. While the

UNCLOS establishes various maritime regimes of archipelagos like the
Philippines, nothing therein purports to govern internal matters such as the
sharing of national wealth between its national government and political
subdivisions. 205
18. The State has long recognized the fact that the Camago-
Malampaya area is part of Palawan. 206
18.1. Palawan was allotted P38,110,586.00 as its share in
the national wealth based on actual 1992 collections from petroleum
operations in the West Linapacan oil fields, situated offshore, about
the same distance from mainland Palawan as the Camago-
Malampaya reservoir. Furthermore, from 1993 to 1998, DBM
consistently released to Palawan its 40% share from the West
Linapacan oil production. Because these are lawful executive acts,
the Republic may not invoke the rule that it cannot be placed in
estoppel by the mistakes of its agents. 207
18.2. Jurisprudence holds that estoppels against the public,
which are little favored, must be applied with circumspection and only
in special cases where the interests of justice clearly require it. To
deprive Palawan of its constitutional right to a just share in the
national wealth will indisputably work injustice to its people and
generations to come. As it is, developmental projects have been
adversely stunted as a result of the National Government's
withdrawal of its commitment to give Palawan its 40% share. 208
18.3. It has been held that the contemporaneous
construction of a statute by the executive officers of the government
is entitled to great respect and unless shown to be clearly erroneous,
should ordinarily control the construction of the statute by the courts.
209
19. Ordinance No. 474 (series of 2000), which the Sangguniang

Panlalawigan of Palawan enacted to delineate the territorial jurisdiction of
the Province of Palawan, including therein the Camago-Malampaya area, is
valid. Laws, including ordinances, enjoy the presumption of constitutionality.
Moreover, there is no flaw in the Ordinance since it does not contravene
Section 10, Article X of the Constitution or Sections 6 and 10 of the Local
Government Code. It is likewise settled that a statute or ordinance cannot be
impugned collaterally. 210
20. Since the RTC has deferred its ruling on the propriety of the
Amended Order dated January 16, 2006 to this Court, the Province of
Palawan asks that said Order be sustained because:
20.1. Under Section 6, Rule 135 of the Rules of Court, when
by law jurisdiction is conferred on a court, all auxiliary writs and
processes necessary to carry it into effect may be employed by such
court. The Amended Order merely sought to protect the subject of
the litigation and to ensure that the RTC's decision may be carried
into effect when it attains finality. 211
20.2. The Amended Order encompasses issues that were
raised and passed upon by the RTC, particularly, the issue of whether
the Province of Palawan is entitled to receive 40% of the
government's share in the proceeds of the Camago-Malampaya
project. 212
20.3. In a catena of decisions, the Court has allowed
affirmative and even injunctive reliefs in cases for declaratory relief.
213
21. The Provincial Governor's signing of the PIA was valid. 214
21.1. Under Article 85(b)(1)(vi), Rule XV of the
Implementing Rules and Regulations of the Local Government Code,
the Provincial Governor is authorized to represent the province in all
its business transactions and to sign all contracts on its behalf upon
the authority of the Sangguniang Panlalawigan or pursuant to law or
ordinance. The Provincial Governor of Palawan signed the PIA with the
authority of the Sangguniang Panlalawigan , representing all of its
component municipalities and its capital city of Puerto Princesa.
Palawan's two congressmen also signed the PIA to warrant that they
were the duly elected representatives of the province and to comply
with the requirement under the General Appropriations Act that
implementation of the projects must be in coordination with them. 215
21.2. The Province of Palawan is the only LGU which has
territorial jurisdiction over the Camago-Malampaya area under R.A.
No. 7611. 216
21.3. It may have been the Provincial Governor that signed
the PIA, but the proposed projects thereunder would be implemented
province-wide, to include all component municipalities and barangays
as well as Puerto Princesa. This is more advantageous to the 23
municipalities of Palawan compared to Arigo, et al.'s, stand that "the
sharing should be one municipality (45%) and one barangay (35%) or
a total of 80%, with the balance of 20% for the rest of Palawan's 22
municipalities including Puerto Princesa City." 217
22. E.O. No. 683, which uses "net proceeds" of Camago-Malampaya
project as the basis of sharing, does not violate Section 290 of the Local
Government Code where the share of the LGU is based on gross collection.
218
22.1. The allocation of funds under E.O. No. 683 is not,

strictly speaking, the sharing of proceeds of national wealth
development under Section 290 of the Local Government Code
considering that Palawan's claimed 40% share is still under litigation.
219
22.2. In any case, "gross collection" under Section 290 of

the Local Government Code cannot refer to gross proceeds because
under Service Contract No. 38 and A.O. No. 381, the production
sharing scheme involves deduction of exploration, development and
production costs from the gross proceeds of the gas sales. Since the
net proceeds referred to in E.O. No. 683 is the same amount as the
government's gross collection from the Camago-Malampaya project,
the Local Government Code was not violated. 220 CHTAIc
23. The Pimentel ruling cannot be applied to the release of funds

under E.O. No. 683. It does not refer to the LGU's claimed 40% share; it is in
the form of financial assistance pursuant to Section 25 (c) of the Local
Government Code which authorizes the President to direct the appropriate
national agency to provide financial and other forms of assistance to the
LGU. The funds were appropriated in the General Appropriations Act of 2007
and 2008 for the DoE and not under the items for allocations from national
wealth to LGUs. 221
24. CA-G.R. SP No. 102247 was correctly dismissed by the CA.
Failure to submit essential and necessary documents is a sufficient ground
to dismiss a petition under Rule 46 of the Rules of Court. Arigo, et al.,
prematurely filed its petition before the CA as it was anchored on the same
basic issues to be resolved in G.R. No. 170867. Furthermore, Arigo, et al.,
had no legal standing either as real parties-in-interest, as they failed to
establish that they would be benefitted or injured by the judgment in the
suit, or as taxpayers, as they failed to show that the E.O. No. 638 and PIA
involved an illegal disbursement of public funds. 222
Ruling of the Court
LGUs' share in national wealth
Under Section 25, Article II of the 1987 Constitution, "(t)he State shall
ensure the autonomy of local governments." In furtherance of this State
policy, the 1987 Constitution conferred on LGUs the power to create its own
sources of revenue and the right to share not only in the national taxes, but
also in the proceeds of the utilization of national wealth in their respective
areas. Thus, Sections 5, 6, and 7 of Article X of the 1987 Constitution
provides:
Section 5. Each local government unit shall have the power
to create its own sources of revenues and to levy taxes, fees, and
charges subject to such guidelines and limitations as the Congress
may provide, consistent with the basic policy of local autonomy. Such
taxes, fees, and charges shall accrue exclusively to the local
governments.
Section 6. Local government units shall have a just share,
as determined by law, in the national taxes which shall be
equitable share in the proceeds of the utilization and
development of the national wealth within their respective
areas, in the manner provided by law, including sharing the
same with the inhabitants by way of direct benefits. (Emphasis ours)
At the center of this controversy is Section 7, an innovation in the 1987
Constitution aimed at giving fiscal autonomy to local governments.
Deliberations of the 1986 Constitutional Commission reveal the rationale for
this provision, thus:
MR. OPLE. x x x
Just to cite specific examples, in the case of timberland within the
area of jurisdiction of the Province of Quirino or the Province of
Aurora, we feel that the local governments ought to share in
whatever revenues are generated from this particular natural
resource which is also considered a national resource in a
proportion to be determined by Congress. This may mean
sharing not with the local government but with the local
population. The geothermal plant in the Macban, Makiling-
Banahaw area in Laguna, the Tiwi Geothermal Plant in Albay,
there is a sense in which the people in these areas, hosting the
physical facility based on the resources found under the ground
in their area which are considered national wealth, should
participate in terms of reasonable rebates on the cost of power
that they pay. This is true of the Maria Cristina area in Central
Mindanao, for example. May I point out that in the previous
government, this has always been a very nettlesome subject of
the Cabinet debates. Are the people in the locality, where
God chose to locate His bounty, not entitled to some
reasonable modest sharing of this with the national
government? Why should the national government claim
all the revenues arising from them? And the usual reply of
the technocrats at that time is that there must be uniform
treatment of all citizens regardless of where God's gifts are
located, whether below the ground or above the ground. This, of
course, has led to popular disenchantment. In Albay, for
example, the government then promised a 20-percent rebate in
power because of the contributions of the Tiwi Plant to the Luzon
grid. Although this was ordered, I remember that the Ministry of
Finance, together with the National Power Corporation, refused
to implement it. There is a bigger economic principle
behind this, the principle of equity. If God chose to locate
the great rivers and sources of hydroelectric power in
Iligan, in Central Mindanao, for example, or in the
Cordillera, why should the national government impose
fuel adjustment taxes in order to cancel out the
comparative advantage given to the people in these
localities through these resources? So, it is in that sense
that under Section 8, the local populations, if not the local
governments, should have a share of whatever national proceeds
may be realized from this natural wealth of the nation located
within their jurisdictions.

xxx xxx xxx
MR. NATIVIDAD.
The history of local governments shows that the usual
weaknesses of local governments are: 1) fiscal inability to
support itself; 2) lack of sufficient authority to carry out its
duties; and 3) lack of authority to appoint key officials.
Under this Article, are these traditional weaknesses of local
governments addressed to [sic]? EATCcI
MR. NOLLEDO.
Yes. The first question is on fiscal inability to support itself. It will
be noticed that we widened the taxing powers if local
governments. I explained that exhaustively yesterday unless the
Gentleman wants me to explain again.
MR. NATIVIDAD.
No, that is all right with me.
MR. NOLLEDO.
There is a right of retention of local taxes by local governments
and according to the Natividad, Ople, Maambong, de los Reyes
amendment, local government units shall share in the
proceeds of the exploitation of the national wealth within
the area or region, etc. x x x
xxx xxx xxx
MR. OPLE. x x x
In the hinterland regions of the Philippines, most
municipalities receive an annual income of only about
P200,000 so that after paying the salaries of local
officials and employees, nothing is left to fund any local
development project. This is a prescription for a self-
perpetuating stagnation and backwardness, and numbing
community frustrations, as well as a chronic
disillusionment with the central government. The thrust
towards local autonomy in this entire Article on Local
Governments may suffer the fate of earlier heroic efforts of
decentralization which, without innovative features for local
income generation, remained a pious hope and a source of
discontent. To prevent this, this amendment which Commissioner
Davide and I jointly propose will open up a whole new source
of local financial self-reliance by establishing a
constitutional principle of local governments, and their
populations, sharing in the proceeds of national wealth in their
areas of jurisdiction. The sharing with the national government
can be in the form of shares from revenues, fees and charges
levied on the exploitation or development and utilization of
natural resources such as mines, hydro-electric and geothermal
facilities, timber, including rattan, fisheries, and processing
industries based on indigenous raw materials.
But the sharing, Madam President, can also take the form of
direct benefits to the population in terms of price advantages to
the people where, say, cheaper electric power is sourced from a
local hydroelectric or geothermal facility. For example, in the
provinces reached by the power from the Maria Cristina hydro-
electric facility in Mindanao, the direct benefits to the population
cited in this section can take the form of lower prices of
electricity. The same benefit can be extended to the people of
Albay, for example, where volcanic steam in Tiwi provides 55
megawatts of cheap power to the Luzon grid.
The existing policy of slapping uniform fuel adjustment taxes to
equalize rates throughout the country in the name of price
standardization will have to yield to a more rational pricing
policy that recognizes the entitlement of local
communities to the enjoyment of their own comparative
advantage based on resources that God has given them.
And so, Madam President, I ask that the Committee consider this
proposed amendment. 223 (Emphasis ours)
The Local Government Code gave flesh to Section 7, providing that:
Section 18. Power to Generate and Apply Resources. —
Local government units shall have the power and authority to
establish an organization that shall be responsible for the efficient
and effective implementation of their development plans, program
objectives and priorities; to create their own sources of revenues and
to levy taxes, fees, and charges which shall accrue exclusively for
their use and disposition and which shall be retained by them; to have
a just share in national taxes which shall be automatically and
directly released to them without need of any further action; to have
an equitable share in the proceeds from the utilization and
development of the national wealth and resources within
their respective territorial jurisdictions including sharing the
same with the inhabitants by way of direct benefits; to acquire,
develop, lease, encumber, alienate, or otherwise dispose of real or
personal property held by them in their proprietary capacity and to
apply their resources and assets for productive, developmental, or
welfare purposes, in the exercise or furtherance of their governmental
or proprietary powers and functions and thereby ensure their
development into self-reliant communities and active participants in
the attainment of national goals.
Section 289. Share in the Proceeds from the Development
and Utilization of the National Wealth. — Local government units shall
have an equitable share in the proceeds derived from the
utilization and development of the national wealth within
their respective areas, including sharing the same with the
inhabitants by way of direct benefits.
Section 290. Amount of Share of Local Government Units.
— Local government units shall, in addition to the internal revenue
allotment, have a share of forty percent (40%) of the gross
collection derived by the national government from the
preceding fiscal year from mining taxes, royalties, forestry and
fishery charges, and such other taxes, fees, or charges, including
related surcharges, interests, or fines, and from its share in any
co-production, joint venture or production sharing agreement
in the utilization and development of the national wealth
within their territorial jurisdiction.
Section 291. Share of the Local Governments from any
Government Agency or Owned or Controlled Corporation. — Local
government units shall have a share based on the preceding fiscal
year from the proceeds derived by any government agency or
government-owned or controlled corporation engaged in the
utilization and development of the national wealth based on
the following formula whichever will produce a higher share for the
local government unit:
(a) One percent (1%) of the gross sales or receipts of the
preceding calendar year; or
(b) Forty percent (40%) of the mining taxes, royalties,
forestry and fishery charges and such other taxes, fees or charges,
including related surcharges, interests, or fines the government
agency or government owned or controlled corporation would have
paid if it were not otherwise exempt. (Emphasis ours)
Underlying these and other fiscal prerogatives granted to the LGUs
under the Local Government Code is an enhanced policy of local autonomy
that entails not only a sharing of powers, but also of resources, between the
National Government and the LGUs. Thus, during the Senate deliberations
on the proposed local government code, it was emphasized:
Senator Gonzales.
The old concept of local autonomy, Mr. President, is, we grant
more powers, more functions, more duties, more prerogatives,
more responsibilities to local government units. But actually that
is not autonomy. Because autonomy, without giving them the
resources or the means in order that they can effectively carry
out their enlarged duties and responsibilities, will be a sham
autonomy. I understand that the Gentleman's concept of
autonomy is really centered in not merely granting them more
powers and more responsibilities, but also more means;
meaning, funding, more powers to raise funds in order that they
can put into effect whatever policies, decisions and programs
that the local government may approve. Is my understanding
correct, Mr. President?
Senator Pimentel.
The distinguished Gentleman is correct, Mr. President, Book II of
the draft bill under consideration deals with fiscal matters. 224
This push for both administrative and fiscal autonomy was reaffirmed
during the deliberations of the Bicameral Conference Committee on the
proposed Local Government Code and the eventual signing of the Bicameral
Conference Committee Report. On these occasions, Senator Aquilino Q.
Pimentel, Jr., as Committee Chairman for the Senate panel, declared: DHITCc
CHAIRMAN PIMENTEL:
Mr. Chairman, in response to your opening statement, let me say
in behalf of the Senate panel that we believe the local
government code is long overdue. It is time that we really
empower our people in the countryside. And to do this, the local
government code version of the Senate is based upon two
premises. No. 1, we have to share power between the national
government and local government. And No. 2, we have to share
resources between the national government and local
government. It is the only way by which we believe countryside
development will become a reality in our nation. We can all
speak out and spew rhetoric about countryside development, but
unless and until local governments are empowered and given
financial wherewithal to transform the countryside by the
delivery of basic services, then we can never attain such a dream
of ensuring that we share the development of this nation to the
countryside where most of our people reside. x x x 225
xxx xxx xxx
CHAIRMAN PIMENTEL. x x x
Yes, we'd like to announce that finally, after three years of
deliberation and hundreds of meeting not only by the Technical
Committee, but by the Bicameral Conference Committee itself,
we have finally come up with the final version of the Local
Government Code for 1991.
x x x And if there's any one thing that the Local Government Code will
do for our country, it is to provide the mechanism for the
development of the countryside without additional cost to the
government because here, what we are actually doing is merely
to reallocate the funds of the national government giving a
substantial portion of those funds to the Local Government Units
so that they, in turn, can begin the process of development in
their own respective territories.
And to my mind, this would be a signal achievement of the
Senate and the House of Representatives. And that finally, we
are placing in the hands of the local government officials their
wherewithals [sic] and the tools necessary for the development
of the people in the countryside and of our Local Government
Units in particular.
xxx xxx xxx 226
None of the parties in the instant cases dispute the LGU's entitlement
to an equitable share in the proceeds of the utilization and development of
national wealth within their respective areas. The question principally raised
here is whether the national wealth, in this case the Camago-Malampaya
reservoir, is within the Province of Palawan's "area" for it to be entitled to
40% of the government's share under Service Contract No. 38. The issue,
therefore, hinges on what comprises the province's "area" which the Local
Government Code has equated as its "territorial jurisdiction." While the
Republic asserts that the term pertains to the LGU's territorial boundaries,
the Province of Palawan construes it as wherever the LGU exercises
jurisdiction.
Territorial jurisdiction refers to

territorial boundaries as defined in
the LGU's charter
The Local Government Code does not define the term "territorial
jurisdiction." Provisions therein, however, indicate that territorial jurisdiction
refers to the LGU's territorial boundaries.
Under the Local Government Code, a "province" is composed of a
cluster of municipalities, or municipalities and component cities. 227 A
"municipality," in turn, is described as a group of barangays, 228 while a
"city" is referred to as consisting of more urbanized and developed
barangays. 229
In the creation of municipalities, cities and barangays, the Local
Government Code uniformly requires that the territorial jurisdiction of these
government units be "properly identified by metes and bounds," thus:
Section 386. Requisites for Creation. —
xxx xxx xxx
(b) The territorial jurisdiction of the new barangay
shall be properly identified by metes and bounds or by more or
less permanent natural boundaries. The territory need not be
contiguous if it comprises two (2) or more islands.
xxx xxx xxx
xxx xxx xxx
(b) The territorial jurisdiction of a newly-created
municipality shall be properly identified by metes and
bounds. The requirement on land area shall not apply where the
municipality proposed to be created is composed of one (1) or more
islands. The territory need not be contiguous if it comprises two (2) or
more islands.
xxx xxx xxx
xxx xxx xxx
(b) The territorial jurisdiction of a newly-created city
shall be properly identified by metes and bounds. The
requirement on land area shall not apply where the city proposed to
be created is composed of one (1) or more islands. The territory need
not be contiguous if it comprises two (2) or more islands.
xxx xxx xxx (Emphasis ours)
The intention, therefore, is to consider an LGU's territorial jurisdiction
as pertaining to a physical location or area as identified by its boundaries.
This is also clear from other provisions of the Local Government Code,
particularly Sections 292 and 294, on the allocation of LGUs' shares from the
utilization of national wealth, which speak of the location of the natural
resources: cEaSHC
Section 292. Allocation of Shares. — The share in the

preceding Section shall be distributed in the following manner:
(a) Where the natural resources are located in the
province:
(1) Province — Twenty percent (20%);
(2) Component City/Municipality — Forty-five percent (45%);
and
(3) Barangay — Thirty-five percent (35%).
Provided, however, That where the natural resources are
located in two (2) or more provinces, or in two (2) or more
component cities or municipalities or in two (2) or more barangays,
their respective shares shall be computed on the basis of:
(1) Population — Seventy percent (70%); and
(2) Land area — Thirty percent (30%).
(b) Where the natural resources are located in a highly
urbanized or independent component city:
(1) City — Sixty-five percent (65%); and
Provided, however, That where the natural resources are
located in such two (2) or more cities, the allocation of shares shall
be based on the formula on population and land area as specified in
paragraph (a) of this Section.
Section 294. Development and Livelihood Projects. — The
proceeds from the share of local government units pursuant to this
chapter shall be appropriated by their respective sanggunian to
finance local government and livelihood projects: Provided, however,
That at least eighty percent (80%) of the proceeds derived from the
development and utilization of hydrothermal, geothermal, and other
sources of energy shall be applied solely to lower the cost of
electricity in the local government unit where such a source of
energy is located. (Emphasis ours)
That "territorial jurisdiction" refers to the LGU's territorial boundaries is
a construction reflective of the discussion of the framers of the 1987
Constitution who referred to the local government as the "locality" that is
"hosting" the national resources and a "place where God chose to locate His
bounty." 230 It is also consistent with the language ultimately used by the
Constitutional Commission when they referred to the national wealth as
those found within (the LGU's) respective areas. By definition, "area" refers
to a particular extent of space or surface or a geographic region. 231
Such construction is in conformity with the pronouncement in Sen.
Alvarez v. Hon. Guingona, Jr. 232 where the Court, in explaining the need for
adequate resources for LGUs to undertake the responsibilities ensuing from
decentralization, made the following disquisition in which "territorial
jurisdiction" was equated with territorial boundaries:
The practical side to development through a decentralized local
government system certainly concerns the matter of financial
resources. With its broadened powers and increased responsibilities,
a local government unit must now operate on a much wider scale.
More extensive operations, in turn, entail more expenses.
Understandably, the vesting of duty, responsibility and accountability
in every local government unit is accompanied with a provision for
reasonably adequate resources to discharge its powers and
effectively carry out its functions. Availment of such resources is
effectuated through the vesting in every local government unit of (1)
the right to create and broaden its own source of revenue; (2) the
right to be allocated a just share in national taxes, such share being
in the form of internal revenue allotments (IRAs); and (3) the right to
be given its equitable share in the proceeds of the utilization
and development of the national wealth, if any, within its
territorial boundaries. 233 (Emphasis ours)
An LGU has been defined as a political subdivision of the State which is
constituted by law and possessed of substantial control over its own affairs.
234 LGUs, therefore, are creations of law. In this regard, Sections 6 and 7 of
the Local Government Code provide:
Section 6. Authority to Create Local Government Units. —
A local government unit may be created, divided, merged, abolished,
or its boundaries substantially altered either by law enacted by
Congress in the case of a province, city, municipality, or any other
political subdivision, or by ordinance passed by the sangguniang
panlalawigan or sangguniang panlungsod concerned in the case of a
barangay located within its territorial jurisdiction, subject to such
limitations and requirements prescribed in this Code.
Section 7. Creation and Conversion. — As a general rule,
the creation of a local government unit or its conversion from one
level to another level shall be based on verifiable indicators of
viability and projected capacity to provide services, to wit:
(a) Income. — It must be sufficient, based on acceptable
standards, to provide for all essential government facilities and
services and special functions commensurate with the size of its
population, as expected of the local government unit concerned;
(b) Population. — It shall be determined as the total number
of inhabitants within the territorial jurisdiction of the local government
unit concerned; and CTIEac
(c) Land Area. — It must be contiguous, unless it comprises

two or more islands or is separated by a local government unit
independent of the others; properly identified by metes and
bounds with technical descriptions; and sufficient to provide for
such basic services and facilities to meet the requirements of its
populace.
Compliance with the foregoing indicators shall be attested to by
the Department of Finance (DOF), the National Statistics Office (NSO),
and the Lands Management Bureau (LMB) of the Department of
Environment and Natural Resources (DENR). (Emphasis ours)
In enacting charters of LGUs, Congress is called upon to properly
identify their territorial jurisdiction by metes and bounds. Mariano, Jr. v.
COMELEC 235 stressed the need to demarcate the territorial boundaries of
LGUs with certitude because they define the limits of the local governments'
territorial jurisdiction. Reiterating this dictum, the Court, in Municipality of
Pateros v. Court of Appeals, et al., 236 held:
[W]e reiterate what we already said about the importance and
sanctity of the territorial jurisdiction of an LGU:
The importance of drawing with precise strokes the
territorial boundaries of a local unit of government cannot be
overemphasized. The boundaries must be clear for they
define the limits of the territorial jurisdiction of a local
government unit. It can legitimately exercise powers of
government only within the limits of its territorial
jurisdiction. Beyond these limits, its acts are ultra vires.
Needless to state, any uncertainty in the boundaries of local
government units will sow costly conflicts in the exercise of
governmental powers which ultimately will prejudice the people's
welfare. This is the evil sought to be avoided by the Local
Government Unit in requiring that the land area of a local
government unit must be spelled out in metes and bounds,
with technical descriptions. 237 (Emphasis ours)
Clearly, therefore, a local government's territorial jurisdiction cannot
extend beyond the boundaries set by its organic law.
Area as delimited by law and not

exercise of jurisdiction as basis of
the LGU's equitable share
The Court cannot subscribe to the argument posited by the Province of

Palawan that the national wealth, the proceeds from which the State is
mandated to share with the LGUs, shall be wherever the local government
exercises any degree of jurisdiction.
An LGU's territorial jurisdiction is not necessarily co-extensive with its
exercise or assertion of powers. To hold otherwise may result in condoning
acts that are clearly ultra vires. It may lead to, in the words of the Republic,
LGUs "rush[ing] to exercise its powers and functions in areas rich in natural
resources (even if outside its boundaries) with the intention of seeking a
share in the proceeds of its exploration" 238 — a situation that "would sow
conflict not only among the local government units and the national
government but worse, between and among local government units." 239
There is likewise merit in the Republic's assertion that Palawan's
interpretation of what constitutes an LGU's territorial jurisdiction may
produce absurd consequences. Indeed, there are natural resources, such as
forests and mountains, which can be found within the LGU's territorial
boundaries, but are, strictly speaking, under national jurisdiction, specifically
that of the Department of Environment and Natural Resources. 240 To equate
territorial jurisdiction to areas where the LGU exercises jurisdiction means
that these natural resources will have to be excluded from the sharing
scheme although they are geographically within the LGU's territorial limits.
241 The consequential incongruity of this scenario finds no support either in
the language or in the context of the equitable sharing provisions of the
1987 Constitution and the Local Government Code.
The Court finds it appropriate to also cite Section 150 of the Local
Government Code which speaks of the situs of local business taxes under
Section 143 of the same law. Section 150 provides:
Section 150. Situs of the Tax. —
xxx xxx xxx
(b) The following sales allocation shall apply to
manufacturers, assemblers, contractors, producers, and exporters
with factories, project offices, plants, and plantations in the pursuit of
their business:
(1) Thirty percent (30%) of all sales recorded in
the principal office shall be taxable by the city or
municipality where the principal office is located; and
(2) Seventy percent (70%) of all sales
recorded in the principal office shall be taxable by
the city or municipality where the factory, project
office, plant, or plantation is located.
(c) In case of a plantation located at a place other
than the place where the factory is located, said seventy
percent (70%) mentioned in subparagraph (b) of subsection
(2) above shall be divided as follows:
(1) Sixty percent (60%) to the city or
municipality where the factory is located; and
(2) Forty percent (40%) to the city or
municipality where the plantation is located.
(d) In cases where a manufacturer, assembler, producer,
exporter or contractor has two (2) or more factories, project offices,
plants, or plantations located in different localities, the seventy
percent (70%) sales allocation mentioned in subparagraph (b) of
subsection (2) above shall be prorated among the localities
where the factories, project offices, plants, and plantations
are located in proportion to their respective volumes of
production during the period for which the tax is due.
(e) The foregoing sales allocation shall be applied
irrespective of whether or not sales are made in the locality
where the factory, project office, plant, or plantation is
located. (Emphasis ours)
The foregoing provision illustrates the untenability of the Province of
Palawan's interpretation of "territorial jurisdiction" based on exercise of
jurisdiction. To sustain the province's construction would mean that the
territorial jurisdiction of the municipality or city where the factory, plant,
project office or plantation is situated, extends to the LGU where the
principal office is located because said municipality or city can exercise the
authority to tax the sale transactions made or recorded in the principal
office. This could not have been the intent of the framers of the Local
Government Code.

The Provincial Government of Palawan argues that its territorial
jurisdiction extends to the Camago-Malampaya reservoir considering that its
local police maintains peace and order in the area; crimes committed within
the waters surrounding the province have been prosecuted and tried in the
courts of Palawan; and the provincial government enforces environmental
laws over the same area. 242 The province also cites Section 468 of the Local
Government Code, which authorizes the Sanggunian Panlalawigan to enact
ordinances that protect the environment, as well as Sections 26 and 27 of
the law, which require consultation with the LGUs concerned and the
approval of their respective sanggunian before the National Government
may commence any project that will have an environmental impact. 243 The
province avers that the Contractor, in fact, obtained the necessary
endorsement from the Sangguniang Panlalawigan of Palawan before starting
its operations. 244
The Court notes, however, that the province's claims of maintaining
peace and order in the Camago-Malampaya area and of enforcing
environmental laws therein have not been substantiated by credible proof.
The province likewise failed to adduce evidence of the crimes supposedly
committed in the same area or their prosecution in Palawan's courts. SCaITA
The province cites illegal fishing, poaching and illegal entry as the
cases tried before the courts of Palawan. As conceded by the parties,
however, the subject gas reservoir is situated, not in the marine waters, but
in the continental shelf. The Province of Palawan has not established that it
has, in fact, exercised jurisdiction over this submerged land area.
The LGU's authority to adopt and implement measures to protect the
environment does not determine the extent of its territorial jurisdiction. The
deliberations of the Bicameral Conference Committee on the proposed Local
Government Code provides the proper context for the exercise of such
authority:
HON. DE PEDRO.
The Senate version does not have any specific provision on this.
The House's reads:
"The delegation to each local government unit of the
responsibility in the management and maintenance of
environmental balance within its territorial jurisdiction."
CHAIRMAN PIMENTEL.
Well, this is a matter of delegating to the local government units
power to determine environmental concerns, which is good.
However, we have some reservations precisely because
environment does not know of territorial boundaries . That
is our reservation there. And we have to speak of the totality
of the environment of the nation rather than the
provincial or municipal in that respect. x x x 245 (Emphasis
ours)
Thus, the LGU's statutory obligation to maintain ecological balance is
but part of the nation's collective effort to preserve its environment as a
whole. The extent to which local legislation or enforcement protects the
environment will not define the LGU's territory.
Sections 26 and 27 of the Local Government Code provide:
Section 26. Duty of National Government Agencies in the
Maintenance of Ecological Balance. — It shall be the duty of every
national agency or government-owned or controlled corporation
authorizing or involved in the planning and implementation of any
project or program that may cause pollution, climatic change,
depletion of non-renewable resources, loss of crop land, rangeland, or
forest cover, and extinction of animal or plant species, to consult with
the local government units, nongovernmental organizations, and
other sectors concerned and explain the goals and objectives of the
project or program, its impact upon the people and the
community in terms of environmental or ecological balance,
and the measures that will be undertaken to prevent or minimize the
adverse effects thereof.
Section 27. Prior Consultations Required. — No project or
program shall be implemented by government authorities unless the
consultations mentioned in Sections 2 (c) and 26 hereof are complied
with, and prior approval of the sanggunian concerned is obtained:
Provided, That occupants in areas where such projects are to be
implemented shall not be evicted unless appropriate relocation sites
have been provided, in accordance with the provisions of the
Constitution. (Emphasis ours)
It is clear from Sections 26 and 27 that the consideration for the
required consultation and sanggunian approval is the environmental impact
of the National Government's project on the local community. A project,
however, may have an ecological impact on a locality without necessarily
being situated therein. Thus, prior consultation made pursuant to the
foregoing provisions does not perforce establish that the national wealth
sought to be utilized is within the territory of the LGU consulted.
In fine, an LGU cannot claim territorial jurisdiction over an area simply
because its government has exercised a certain degree of authority over it.
Territorial jurisdiction is defined, not by the local government, but by the law
that creates it; it is delimited, not by the extent of the LGU's exercise of
authority, but by physical boundaries as fixed in its charter.
Unless clearly expanded by

Congress, the LGU's territorial
jurisdiction refers only to its land
area.
Utilization of natural resources

found within the land area as
delimited by law is subject to the
40% LGU share.
Since it refers to a demarcated area, the term "territorial jurisdiction" is

evidently synonymous with the term "territory." In fact, "territorial
jurisdiction" is defined as the limits or territory within which authority may
be exercised. 246
Under the Local Government Code, particularly the provisions on the
creation of municipalities, cities and provinces, and LGUs in general,
territorial jurisdiction is contextually synonymous with territory and the term
"territory" is used to refer to the land area comprising the LGU, thus:
(a) A municipality may be created if it has an average
annual income, as certified by the provincial treasurer, of at least Two
million five hundred thousand pesos (P2,500,000.00) for the last two
(2) consecutive years based on the 1991 constant prices; a
population of at least twenty-five thousand (25,000) inhabitants as
certified by the National Statistics Office; and a contiguous
territory of at least fifty (50) square kilometers as certified by
the Lands Management Bureau: Provided, That the creation
thereof shall not reduce the land area, population or income of the
original municipality or municipalities at the time of said creation to
less than the minimum requirements prescribed herein.
(b) T h e territorial jurisdiction of a newly-created
municipality shall be properly identified by metes and bounds .
The requirement on land area shall not apply where the municipality
proposed to be created is composed of one (1) or more islands. The
territory need not be contiguous if it comprises two (2) or more
islands.
(c) The average annual income shall include the income
accruing to the general fund of the municipality concerned, exclusive
of special funds, transfers and non-recurring income.
(d) Municipalities existing as of the date of the effectivity of
this Code shall continue to exist and operate as such. Existing
municipal districts organized pursuant to presidential issuances or
executive orders and which have their respective set of elective
municipal officials holding office at the time of the effectivity of this
Code shall henceforth be considered as regular municipalities.
(a) A municipality or a cluster of barangays may be
converted into a component city if it has an average annual income,
as certified by the Department of Finance, of at least Twenty million
(P20,000,000.00) for the last two (2) consecutive years based on
1991 constant prices, and if it has either of the following requisites:
(i) a contiguous territory of at least one
hundred (100) square kilometers, as certified by
the Lands Management Bureau; or aTHCSE
(ii) a population of not less than one hundred

fifty thousand (150,000) inhabitants, as certified by the
National Statistics Office:
Provided, That, the creation thereof shall not reduce the land
area, population, and income of the original unit or units at the time
of said creation to less than the minimum requirements prescribed
herein.
(b) T h e territorial jurisdiction of a newly-created city
shall be properly identified by metes and bounds . The
requirement on land area shall not apply where the city proposed to
be created is composed of one (1) or more islands. The territory
need not be contiguous if it comprises two (2) or more islands.
accruing to the general fund, exclusive of specific funds, transfers,
and non-recurring income.
(a) A province may be created if it has an average annual
income, as certified by the Department of Finance, of not less than
Twenty million pesos (P20,000,000.00) based on 1991 constant
prices and either of the following requisites:
(i) a contiguous territory of at least two
thousand (2,000) square kilometers, as certified by
the Lands Management Bureau; or
(ii) a population of not less than two hundred
fifty thousand (250,000) inhabitants as certified by the
National Statistics Office:
Provided, That, the creation thereof shall not reduce the land
area, population, and income of the original unit or units at the time
of said creation to less than the minimum requirements prescribed
herein.
(b) The territory need not be contiguous if it comprise
two (2) or more islands or is separated by a chartered city or cities
which do not contribute to the income of the province.
accruing to the general fund, exclusive of special funds, trust funds,
transfers and non-recurring income.
Section 7. Creation and Conversion. — As a general rule,
the creation of a local government unit or its conversion from one
level to another level shall be based on verifiable indicators of
viability and projected capacity to provide services, to wit:
(a) Income. — It must be sufficient, based on acceptable
standards, to provide for all essential government facilities and
services and special functions commensurate with the size of its
population, as expected of the local government unit concerned;
(b) Population. — It shall be determined as the total number
of inhabitants within the territorial jurisdiction of the local government
unit concerned; and
(c) Land Area. — It must be contiguous, unless it
comprises two or more islands or is separated by a local government
unit independent of the others; properly identified by metes and
bounds with technical descriptions; and sufficient to provide for
such basic services and facilities to meet the requirements of its
populace.

Environment and Natural Resources (DENR). (Emphasis ours)
That the LGUs' respective territories under the Local Government Code
pertain to the land area is clear from the fact that: (a) the law generally
requires the territory to be "contiguous"; (b) the minimum area of the
contiguous territory is measured in square kilometers; (c) such minimum
area must be certified by the Lands Management Bureau; and (d) the
territory should be identified by metes and bounds, with technical
descriptions.
The word "contiguous" signifies two solid masses being in actual
contact. Square kilometers are units typically used to measure large areas of
land. The Land Management Bureau, a government agency that absorbed
the functions of the Bureau of Lands, recommends policies and programs for
the efficient and effective administration, management and disposition of
alienable and disposable lands of the public domain and other lands outside
the responsibilities of other government agencies. 247 Finally, "metes and
bounds" are the boundaries or limits of a tract of land especially as
described by reference and distances between points on the land, 248 while
"technical descriptions" are used to describe these boundaries and are
commonly found in certificates of land title.
The following pronouncement in Tan v. COMELEC 249 is particularly
instructive:
It is of course claimed by the respondents in their Comment to
the exhibits submitted by the petitioners (Exhs. C and D, Rollo , pp. 19
and 91), that the new province has a territory of 4,019.95 square
kilometers, more or less. This assertion is made to negate the proofs
submitted, disclosing that the land area of the new province cannot
be more than 3,500 square kilometers because its land area would, at
most, be only about 2,856 square kilometers, taking into account
government statistics relative to the total area of the cities and
municipalities constituting Negros del Norte. Respondents insist
that when Section 197 of the Local Government Code speaks
of the territory of the province to be created and requires
that such territory be at least 3,500 square kilometers, what
is contemplated is not only the land area but also the land
and water over which the said province has jurisdiction and
control. It is even the submission of the respondents that in
this regard the marginal sea within the three mile limit
should be considered in determining the extent of the
territory of the new province. Such an interpretation is
strained, incorrect, and fallacious.
The last sentence of the first paragraph of Section 197 is most
revealing. As so stated therein the "territory need not be contiguous
if it comprises two or more islands." The use of the word territory in
this particular provision of the Local Government Code and in the very
last sentence thereof, clearly reflects that "territory" as therein
used, has reference only to the mass of land area and
excludes the waters over which the political unit exercises
control.
Said sentence states that the "territory need not be
contiguous." Contiguous means (a) in physical contact; (b)
touching along all or most of one side; (c) near, text, or
adjacent. "Contiguous," when employed as an adjective, as in
the above sentence, is only used when it describes physical
contact, or a touching of sides of two solid masses of matter.
The meaning of particular terms in a statute may be ascertained by
reference to words associated with or related to them in the statute.
Therefore, in the context of the sentence above, what need
not be "contiguous" is the "territory" the physical mass of
land area. There would arise no need for the legislators to use
the word contiguous if they had intended that the term
"territory" embrace not only land area but also territorial
waters. It can be safely concluded that the word territory in
the first paragraph of Section 197 is meant to be synonymous
with "land area" only. The words and phrases used in a statute
should be given the meaning intended by the legislature. The sense
in which the words are used furnished the rule of construction.
cAaDHT
The distinction between "territory" and "land area"

which respondents make is an artificial or strained
construction of the disputed provision whereby the words of
the statute are arrested from their plain and obvious meaning
and made to bear an entirely different meaning to justify an
absurd or unjust result. The plain meaning in the language in
a statute is the safest guide to follow in construing the
statute. A construction based on a forced or artificial
meaning of its words and out of harmony of the statutory
scheme is not to be favored. 250 (Emphasis ours and citations
omitted)
Though made in reference to the previous Local Government Code or
Batas Pambansa Blg. (BP) 337, the above-cited ruling remains relevant in
determining an LGU's territorial jurisdiction under the 1991 Local
Government Code. Section 197 of BP 337 251 cited the requisites for creating
a province, among which was a "territory," with a specified minimum area,
which did not need to be "contiguous" if it comprised two or more islands.
Tan, therefore, is clearly relevant since it explained the significance of the
word "contiguous," which is similarly used in the Local Government Code, in
the determination of the LGU's territory. More importantly, it appears that
the framers of the Local Government Code drew inspiration from the Tan
ruling such that in lieu of the word "territory," they specified that such
requisite in the creation of the LGU shall refer to the land area. Thus, in his
book on the Local Government Code, Senator Pimentel who, in former Chief
Justice Reynato S. Puno's words, "shepherded the Code through the
labyrinthine process of lawmaking," wrote:
When a law was passed in the Batasan Pambansa creating the
new province of Negros del Norte, the Supreme Court was asked to
rule in Tan v. Commission on Elections , whether or not the new
province complied properly with the "territory" requirement that it
must have no less then [sic] 3,500 square kilometers.
The respondents claimed that "the new province has a territory
of 4,019.95 square kilometers" by including in that computation not
only the land area, but also the "water over which said province had
jurisdiction and control," and "the marginal sea within the three mile
limit."
The Supreme Court ruled that such an interpretation is
strained, incorrect and fallacious. The Court added that the use of the
word "territory" in the Local Government Code clearly reflected that
"territory" as therein used had reference only to the mass of land
area and excluded the waters over which the political unit exercises
control.
Inspired by this Supreme Court ruling, the Code now
uses the words "land area" in lieu of "territory" to emphasize
that the area required of an LGU does not include the sea for
purposes of compliance with the requirements of the Code for
its creation. 252 (Emphasis ours)
Tan, in fact, establishes that an LGU may have control over the waters
but may not necessarily claim them as part of their territory. This supports
the Court's finding that the exercise of authority does not determine the
LGU's territorial jurisdiction.
It is true that under Sections 442 and 450 of the Local Government
Code, "(t)he requirement on land area shall not apply" if the municipality or
city proposed to be created is composed of one or more islands. This does
not mean, however, that the territory automatically extends to the waters
surrounding the islands or to the open sea. Nowhere in said provisions is it
even remotely suggested that marine waters, or for that matter the
continental shelf, are consequently to be included as part of the territory.
The provisions still speak of "islands" as constituting the LGU, and under
Article 121 of the UNCLOS, an island is defined as "a naturally formed area
of land, surrounded by water, which is above water at high tide." The
inapplicability of the requirement on land area only means that where the
proposed municipality or city is an island, or comprises two or more islands,
it need not be identified by metes and bounds or satisfy the required
minimum area. In that case, the island mass constitutes the area of the
municipality or city and its limits are the island's natural boundaries.
Significantly, during the Senate deliberations on the proposed Local
Government Code, then Senate President Jovito Salonga suggested an
amendment that would extend the territorial jurisdiction of municipalities
abutting bodies of water to at least two kms from the shoreline. The ensuing
exchange is worth highlighting:
The President.
Here is a proposed amendment: Line 17, to add the following:
FOR MUNICIPALITIES ABUTTING BODIES OF WATER THEIR
TERRITORIAL JURISDICTION SHALL EXTEND TO AT LEAST TWO
KILOMETERS FROM THE SHORELINE; PROVIDED, THAT IN CASE
THERE ARE TWO OR MORE MUNICIPALITIES ON EITHER SIDE OF
SUCH A BODY OF WATER MAKING THE TWO-KILOMETER
JURISDICTION INADVISABLE THE JURISDICTION OF THE AFFECTED
MUNICIPALITIES SHALL BE DETERMINED BY DRAWING A LINE AT
THE MIDDLE OF SUCH BODY OF WATER. This is only for
municipalities abutting bodies of water.
Senator Pimentel.
Mr. President, may we invite the attention of our Colleagues that
in Book IV, page 273, we define what constitutes municipal
waters. And, the measurement is not two kilometers but three
nautical miles starting from the sea-line boundary marks at low
tide. Therefore, there may be some complications here. We are
not against the amendment per se. What we are trying to make
of record is the fact that we have to consider also the provision of
Section 464 which defines "MUNICIPAL WATERS." So, probably,
we can increase the extension of the territorial jurisdiction to
three nautical miles instead of two kilometers as mentioned in
this proposed amendment.
In fact, Mr. President, it is also stated at the last sentence of Section
464:
Where two municipalities are so situated on the opposite
shores that there is less than six nautical miles of marine water
between them, the third line shall be aligned equally distant
from the opposite shores of the respective municipalities.
So, there is an attempt here to delineate, really, the jurisdiction
of the municipalities which may have a common body of water,
let us say, in between them. HCaDIS
The President.
So, that is acceptable, provided that it is three nautical miles?
Senator Pimentel.
Yes. Probably, Mr. President, what we can do is hold in abeyance
this proposed amendment and take it up when we reach Section
464. I think, it will be more appropriate in that section, Mr.
President.
The President.
But, if it is a question of territorial jurisdiction, may not this be the
proper place for it?
Senator Pimentel.
All right, Mr. President, what we can do is, we will accept the
proposed amendment, subject to the observations that we have
placed on record.
The President.
All right. Subject to the three-nautical-mile limit.
Senator Saguisag.
Mr. President.
The President.

Senator Saguisag is recognized.
Senator Saguisag.
I just would like to find out, Mr. President, if we are codifying
something that may represent the present state of the law, or
are we creating a new concept here? Ang ibig po bang sabihin
nito ay mayroong magmamay-ari ng Pasig River? Kasi, I do not
believe that we have ever talked about Manila owning a river or
Manila owning Manila Bay. Is that what we are introducing here?
And what are its implications? Taga-Maynila lamang ba ang
maaaring gumamit niyan at sila lamang ang magpapasiya kung
ano ang dapat gawin o puwedeng pumasok ang coast guard?
What do we intend to achieve by now saying that. . .
The President.
Inland waters lamang naman yata ang pinag-uusapang ito.
Senator Saguisag.
Opo. Pero, I am not sure whether there is an owner of the Pasig
River. I am not sure. Maybe, there is. Pero, my own recollection is
that we have never talked of that idea before. I do not know what
it means. Does it mean now that the municipality owning it can
exclude the rest of the population from using it without going
through licensing processes? Ano po ang gusto nating gawin
dito?
Ang alam ko ho riyan, they cannot be owned in the sense that
they are really owned by every Filipino. Iyon lamang po. Kasi,
capitals po ang naririto sa page 273, baka bago ito. Pero, ano po
ba and ibig sabihin nito?
In my study of property before, hindi ko narinig. . . So, maybe, we
should really reserve this as suggested by the distinguished
Chairman.
The President.
All right. Why do we not defer this until we can determine which
is the better place?
Senator Pimentel.
Yes, Mr. President.
The President.
All right. So let us defer consideration of this plus the major
question that Senator Saguisag is posing, is this something new
that we are laying down?
Senator Pimentel.
No. Actually the definition of "municipal waters" came about,
really, because of several complaints that our Committee has
received from fisherpeople. They have complained that the
municipality is not able to help them, because the definition of
"municipal waters" has not been clearly spelled out. That is the
reason why we attempted to introduce some definitions of
"municipal waters" here, basically, in answer to the demands of
the fisherfolk who believe that their rights are being intruded
upon by other people coming from other places. Probably, the
definition of municipal waters will also delineate the criminal
jurisdiction of, let us say, the municipal police in certain acts, like
dynamite fishing in a particular locality. It can help, Mr.
President.
The President.
Sa palagay ba ninyo, iyong Marikina River that goes through
several municipalities — we have the Municipality of Pasig, then
the Municipality of Marikina, then the Municipality of San Mateo,
and then the Municipality of Montalban — how will that be
apportioned?
Senator Pimentel.
Ifa river passes through several municipalities, the boundary will
be an imaginary line drawn at the middle of this river, basically,
Mr. President.
The President.
Anyway, we will defer this until we reach Book IV. 253
Based on the records of the Senate and the Bicameral Conference
Committee on Local Government, however, the Salonga amendment was not
considered anew in subsequent deliberations. Neither did the proposed
amendment appear in the text of the Local Government Code as approved.
By Senator Pimentel's account, the Code deferred to the Court's ruling in Tan
which excluded the marginal sea from the LGU's territory. It can, thus, be
concluded that under the Local Government Code, an LGU's territory does
not extend to the municipal waters beyond the LGU's shoreline. AHCETa
The parties all agree that the Camago-Malampaya reservoir is located

in the continental shelf. 254 If the marginal sea is not included in the LGU's
territory, with more reason should the continental shelf, located miles
further, be deemed excluded therefrom.
To recapitulate, an LGU's territorial jurisdiction refers to its territorial
boundaries or to its territory. The territory of LGUs, in turn, refers to their
land area, unless expanded by law to include the maritime area. Accordingly,
only the utilization of natural resources found within the land area as
delimited by law is subject to the LGU's equitable share under Sections 290
and 291 of the Local Government Code. This conclusion finds support in the
deliberations of the 1986 Constitutional Commission which cited, as
examples of national wealth the proceeds from which the LGU may share,
the Tiwi Geothermal Plant in Albay, the geothermal plant in Macban,
Makiling-Banahaw area in Laguna, the Maria Cristina area in Central
Mindanao, the great rivers and sources of hydroelectric power in Iligan, in
Central Mindanao, the geothermal resources in the area of Palimpiñon,
Municipality of Valencia and mountainous areas, which are all situated
inland. 255 In his 2011 treatise on the Local Government Code, former
Senator Pimentel cited as examples of such national wealth, the geothermal
fields of Tongonan, Leyte and Palinpinon, Negros Oriental which are both
found inland. 256
Section 6 of the Local Government Code empowers Congress to create,
divide, merge and abolish LGUs, and to substantially alter their boundaries,
subject to the plebiscite requirement under Section 10 of the law which
reads:
Section 10. Plebiscite Requirement. — No creation,
division, merger, abolition or substantial alteration of boundaries of
local government units shall take effect unless approved by a
majority of the votes cast in a plebiscite called for the purpose in the
political unit or units directly affected. Said plebiscite shall be
conducted by the Commission on Elections (COMELEC) within one
hundred twenty (120) days from the date of effectivity of the law or
ordinance effecting such action, unless said law or ordinance fixes
another date.
Accordingly, unless Congress, with the approval of the political units
directly affected, clearly extends an LGU's territorial boundaries beyond its
land area, to include marine waters, the seabed and the subsoil, it cannot
rightfully share in the proceeds of the utilization of national wealth found
therein.
No law clearly granting the
Province of Palawan territorial
jurisdiction over the Camago-
Malampaya reservoir
The Republic has enumerated the laws defining the territory of

Palawan. 257 The following table has been culled from said enumeration:
Governing Territorial Limits

Law
Act No. 422 258 The Province of Paragua shall consist of all that
portion of the Island of Paragua north of the tenth
parallel of north latitude and the small islands
adjacent thereto, including Dumaran, and of the
islands forming the Calamianes Group and the
Cuyos group. (Section 2)
Act No. 567 259 The Province of Paragua shall consist of all that
portion of the Island of Paragua north of a line
beginning in the middle of the channel at the mouth
of the Ulugan River in the Ulugan Bay, thence
following the main channel of the Ulugan River to the
village of Bahile, thence along the main trail leading
from Bahile to the Tapul River, thence following the
course of the Tapul River to its mouth in the Honda
Bay; except at the towns of Bahile and Tapul the west
boundary line shall be the arc of a circle with one
mile radius, the center of the circle being the center
of the said towns of Bahile and Tapul. There shall be
included in the Province of Paragua the small islands
adjacent thereto, including Dumaran and the island
forming the Calamianes group and the Cuyos group.
(Section 1)
Act No. 747 260 The Province of Paragua shall consist of the entire
Island of Paragua, the Islands of Dumaran and
Balabac, the Calamianes Islands, the Cuyos Islands,
the Cagayanes Islands, and all other islands
adjacent thereto and not included within the limits of
any province. (Section 1)
Act No. 1363 Upon the recommendation of the Philippine
261 Committee on Geographical Names the name of the
Province and Island of Paragua is hereby changed to
that of Palawan. (Section 1)
Act No. 1396 The Province of Palawan shall include the entire
262 Island of Palawan, the Islands of Dumaran and
Balabac, the Calamianes Islands, the Cuyos Islands,
the Cagayanes Islands, and all other islands
adjacent to these islands and not included within the
limits of any other province. (Section 26)
Act No. 2657 Article II (Situs and Major Subdivisions of Provinces
263 Other than such as are Contained in Department of
Mindanao and Sulu)
Section 43. Situs of Provinces and Major Subdivisions.

— The general location of the provinces other than
such as are contained in the Department of Mindanao
and Sulu, together with the subprovinces,
municipalities, and townships respectively contained
in them is as follows:
xxx xxx xxx
The Province of Palawan consists of the Island of
Palawan, the islands of Dumaran and Balabac, the
Calamian Islands, the Cuyo Islands, the Cagayanes
Islands, and all other islands adjacent to any of
them, not included in some other province. It
contains the townships of Cagayancillo, Coron, Cuyo,
Puerto Princesa (the capital of the province), and
Taytay.
Act No. 2711 Chapter 2 (Political Grand Divisions and Subdivisions)
264
Article I
Grand Divisions
Section 37. Grand divisions of (Philippines Islands)

Philippines. — The (Philippine Islands) Philippines
comprises the forty-two provinces named in the next
succeeding paragraph hereof, the seven provinces of
the Department of Mindanao and Sulu, and the
territory of the City of Manila.
xxx xxx xxx
Calamian Islands, the Cuyo Islands, the Cagayanes
Islands, and all other islands adjacent to any of
them, not included in some other province, and
comprises the following municipalities: Agutaya,
Bacuit, Cagayancillo, Coron, Cuyo, Dumaran, Puerto
Princesa (the capital of the province), and Taytay.
The province also contains the following municipal

districts: Aborlan, Balabac and Brooke's Point.
As defined in its organic law, the Province of Palawan is comprised

merely of islands. The continental shelf, where the Camago-Malampaya
reservoir is located, was clearly not included in its territory.
An island, as herein before-mentioned, is defined under Article 121 of
the UNCLOS as "a naturally formed area of land, surrounded by water,
which is above water at high tide." The continental shelf, on the other
hand, is defined in Article 76 of the same Convention as comprising "the
seabed and subsoil of the submarine areas that extend beyond (the
coastal State's) territorial sea throughout the natural prolongation of its land
territory to the outer edge of the continental margin, or to a distance of 200
nm from the baselines from which the breadth of the territorial sea is
measured where the outer edge of the continental margin does not extend
up to that distance." Where the continental shelf of the coastal state extends
beyond 200 nm, Article 76 allows the State to claim an extended continental
shelf up to 350 nm from the baselines. 265 ScHADI
Under Palawan's charter, therefore, the Camago-Malampaya reservoir

is not located within its territorial boundaries.
P.D. No. 1596, which constituted Kalayaan as a separate municipality
of the Province of Palawan, cannot be the basis for holding that the Camago-
Malampaya reservoir forms part of Palawan's territory. Section 1 of P.D. No.
1596 provides:
SECTION 1. The area within the following boundaries:
KALAYAAN ISLAND GROUP
From a point [on the Philippine Treaty Limits] at latitude 7º40'
North and longitude 116º00' East of Greenwich, thence due West
along the parallel of 7º40' N to its intersection with the meridian of
longitude 112º10' E, thence due north along the meridian of 112º10'
E to its intersection with the parallel of 9º00' N, thence northeastward
to the intersection of the parallel of 12º00' N with the meridian of
longitude 114º30' E, thence, due East along the parallel of 12º00' N to
its intersection with the meridian of 118º00' E, thence, due South
along the meridian of longitude 118º00' E to its intersection with the
parallel of 10º00' N, thence Southwestwards to the point of beginning
at 7º40' N, latitude and 116º00' E longitude; including the sea-bed,
sub-soil, continental margin and air space shall belong and be
subject to the sovereignty of the Philippines. Such area is hereby
constituted as a distinct and separate municipality of the
Province of Palawan and shall be known as "Kalayaan."
(Emphasis ours)
None of the parties assert that the Camago-Malampaya reservoir is
within the territory of Kalayaan as delimited in Section 1 of P.D. No. 1596 or
as referred to in R.A. No. 9522, 266 commonly known as the "2009 baselines
law." The Province of Palawan, however, invokes P.D. No. 1596 to argue that
similar to Kalayaan, its territory extends to the seabed, the subsoil and the
continental margin. The Court is not persuaded.
The delineation of territory in P.D. No. 1596 refers to Kalayaan alone.
The inclusion of the seabed, subsoil and continental margin in Kalayaan's
territory cannot, by simple analogy, be applied to the Province of Palawan.
To hold otherwise is to expand the province's territory, as presently defined
by law, without the requisite legislation and plebiscite.
The Court likewise finds no merit in the Province of Palawan's assertion
that R.A. No. 7611 establishes that the Camago-Malampaya area is within
the territorial jurisdiction of Palawan. It is true that R.A. No. 7611 contains a
definition of "Palawan" that states:
Section 3. Definition of Terms. — As used in this Act, the
following terms are defined as follows:
(1) "Palawan" refers to the Philippine province composed
of islands and islets located 7º47' and 12º'22' north latitude and
117º'00' and 119º'51' east longitude, generally bounded by the South
China Sea to the northwest and by the Sulu Sea to the east.
xxx xxx xxx
Both the Republic and the Province of Palawan agree that the above
geographic coordinates, when plotted, would show that the Camago-
Malampaya reservoir is within the area described. However, no less than the
m a p 267 submitted by the Province of Palawan showed that substantial
portions of Palawan's territory were excluded from the area so defined.
The Republic cites, without controversion from the province, that
portions of mainland Palawan and several islands, municipalities or portions
thereof, namely, the Municipalities of Balabac, Cagayancillo, Busuanga,
Coron, Agutaya, Magsaysay, Cuyo, Araceli, Linapacan and Dumaran were
excluded. 268 Their exclusion constitutes a substantial alteration of
Palawan's territory which, under Section 10 of the Local Government Code,
cannot take effect without the approval of the majority of the votes cast for
the purpose in a plebiscite in the political units directly affected.
There is also no showing that the criteria for the alteration, as
established in Sections 7 and 461 of the Local Government Code, had been
met. The definition, therefore, does not have the effect of redefining
Palawan's territory. In fact, R.A. No. 7611 was enacted not for such purpose
but to adopt a comprehensive framework for the sustainable development of
Palawan compatible with protecting and enhancing the natural resources and
endangered environment of the province. 269
The definitions under Section 1 of R.A. No. 7611 are also qualified by
the phrase "[A]s used in this Act." Thus, the definition of "Palawan" should
be taken, not as a statement of territorial limits for purposes of Section 7,
Article X of the 1987 Constitution, but in the context of R.A. No. 7611 which
is aimed at environmental monitoring, research and education. 270
It is true, as the Province of Palawan has pointed out, that R.A. No.
7611 includes the coastal or marine area as one of the three components of
the Environmentally Critical Areas Network designated in said law, the other
two being the terrestrial component and the tribal ancestral lands. R.A. No.
7611 refers to the coastal or marine area as the whole coastline up to the
open sea, characterized by active fisheries and tourism activities. By all the
parties' accounts, however, the Camago-Malampaya reservoir, is located not
in such coastal or marine area but in the continental shelf. Thus, even on the
supposition that R.A. No. 7611 redefined Palawan's territory, it clearly did
not include the seabed and subsoil comprising the continental shelf. In fact,
what it expressly declares as composing the Province of Palawan are the
"islands and islets." aICcHA
It is also clear that R.A. No. 7611 does not vest any additional
jurisdiction on the Province of Palawan. The PCSD, formed under said law, is
composed of both provincial officials and representatives from national
government agencies. It was also established under the Office of the
President. The tasks outlined by R.A. No. 7611, which largely involve policy
formulation and coordination, are carried out not by the province, but by the
council.
Thus, even if the Court were to apply the province's definition of
"territorial jurisdiction" as co-extensive with its exercise of authority, R.A. No.
7611 cannot be considered as conferring territorial jurisdiction over the
Camago-Malampaya reservoir to Palawan since the law did not grant
additional power to the province.
It must be pointed out, too, that the Province of Palawan never alleged
in which of its municipalities or component cities and barangays the
Camago-Malampaya reservoir is located. Under Section 292 of the Local
Government Code, the local government's share in the utilization of national
wealth located in a province shall be allocated in the following ratio:
(1) Province — Twenty percent (20%);
(2) Component City/Municipality — Forty-five percent (45%); and
The allocation of the LGU share to the component city/municipality and
the barangay cannot but indicate that the natural resource is necessarily
found therein. This is only logical since a province is composed of
component cities and municipalities, and municipalities are in turn
composed of barangays. Senate deliberations on the proposed Local
Government Code also reflect that at bottom, the natural resource is located
in the municipality or component city:
Senator Rasul.
Mr. President, may I continue. Also on the same page, same
section, "Share of Local Government in the Proceeds from the
Exploration," I propose that there should be a specific sharing in
this section, because this section does not speak of the sharing;
how much goes to the barangay, municipality, city, or province?
Senator Pimentel.
Yes, in fact, we have Mr. President, and I was about to read it into
the record, so that, there will be a new paragraph after the word
"Resources on page 54, and it will read as follows:
THE SHARES OF THE LOCAL GOVERNMENT UNITS IN THE
PROCEEDS FROM THE EXPLANATION [sic], DEVELOPMENT AND
UTILIZATION OF NATURAL RESOURCES LOCATED WITHIN THEIR
TERRITORIAL JURISDICTIONS SHALL BE AS FOLLOWS:
1. IN THE CASE OF MUNICIPALITIES AND COMPONENT CITIES: (A)
THE BARANGAY UNIT WHERE THE NATURAL RESOURCES ARE
SITUATED AN EXTRACTED, FORTY PERCENT.
The President.
Is there any objection? [Silence] Hearing none, the amendment is
approved.
Senator Pimentel.
Then "(B)." "THE MUNICIPALITY OR COMPONENT CITY
WHERE THE BARANGAY WITH THE NATURAL RESOURCES
ARE SITUATED," THIRTY PERCENT.
The President.
Is there any objection? [Silence] Hearing none, the amendment is
approved.
Senator Pimentel.
Then we have a paragraph 2 on the same aspect of sharing; "IN
THE CASE OF HIGHLY URBANIZED CITIES, THE FOLLOWING RULES
SHALL APPLY;
A) BARANGAY WHERE THE NATURAL RESOURCES ARE
SITUATED AND EXTRACTED, SIXTY (60%) PERCENT;
B) FOR THE HIGHLY URBANIZED CITY WHERE THE BARANGAY
WITH THE NATURAL RESOURCES ARE LOCATED, FORTY (40%)
PERCENT."
So it is a 60:40 sharing.
The President.
Before we use the word SITUATED, probably, we should make it
uniform — SITUATED AND EXTRACTED.
Senator Pimentel.
AND EXTRACTED. Yes, Mr. President.
The President.
Is there any objection? [Silence] Hearing one [sic], the
amendment is approved. Any more? 271 (Emphasis ours.)
During the oral argument, Dean Pangalangan, as amicus curiae,
stressed that the Camago-Malampaya reservoir is not part of any barangay:
JUSTICE CARPIO:
Following your argument counsel Malampaya would form part of
one barangay in Palawan but yet it is outside of the Philippine
territorial waters, how do you reconcile that?
DEAN PANGALANGAN:
Oh, no, Your Honor, Malampaya will lie within our continental
shelf and that is in fact the way by which we claim title over a
resource lying out there in the seas on the seabed. It will not be
considered in itself a barangay for instance. EHaASD
JUSTICE CARPIO:
So, it is not part of any barangay?
DEAN PANGALANGAN:
Yes, Your Honor, it is not. 272
The Province of Palawan's failure to specify the component city or
municipality, or the barangay for that matter, in which the Camago-
Malampaya reservoir is situated militates against its claim that the area
forms part of its area or territory.
The Republic endeavored to enumerate the different LGUs composing
the Province of Palawan and their respective territorial limits under
applicable organic laws. 273 The following matrix has been culled from its
enumeration:
LGU Governing Law Territorial Description/Component

Barangays
Cagayancillo Act No. 2657 Section 43. Situs of Provinces and Major
Coron Subdivisions. — The general location of the
Cuyo provinces other than such as are contained in the
Puerto Princesa Department of Mindanao and Sulu, together with
274 the subprovinces, municipalities, and townships
Taytay respectively contained in them is as follows:
xxx xxx xxx
Calamian Islands, the Cuyo Islands, the
Cagayanes Islands, and all other islands adjacent
to any of them, not included in some other
province. It contains the townships of
Cagayancillo, Coron, Cuyo, Puerto Princesa
(the capital of the province), and Taytay.
Act No. 2711 Section 37. Grand divisions of (Philippines
Islands) Philippines. — The (Philippine Islands)
Philippines comprises the forty-two provinces
named in the next succeeding paragraph hereof,
the seven provinces of the Department of
Mindanao and Sulu, and the territory of the City of
Manila.
xxx xxx xxx
Calamian Islands, the Cuyo Islands, the
Cagayanes Islands, and all other islands adjacent
province, and comprises the following
municipalities: Agutaya, Bacuit, Cagayancillo,
Coron, Cuyo, Dumaran, Puerto Princesa (the
capital of the province), and Taytay.
xxx xxx xxx
Roxas R.A. No. 615 275 Section 1. The barrios of Tinitian, Caramay, Rizal,
Del Pilar, Malcampo Tumarbong, Taraduñgan,
Ilian, and Capayas in the municipality of Puerto
Princesa, Province of Palawan, are hereby
separated from said municipality and constituted
into a new municipality to be known as the
Municipality of Roxas. The seat of the
government of the new municipality shall be at
the sitio of Barbacan in the barrio of Del Pilar,
Puerto Princesa.
Agutaya Act No. 2711 Section 37. Grand divisions of (Philippines
Bacuit (now El Islands) Philippines. — x x x
Nido) 276
Dumaran The Province of Palawan consists of the Island of
Aborlan Palawan, the islands of Dumaran and Balabac, the
Balabac Calamian Islands, the Cuyo Islands, the
Brooke's Point Cagayanes Islands, and all other islands adjacent
province, and comprises the following
municipalities: Agutaya, Bacuit, Cagayancillo,
Coron, Cuyo, Dumaran, Puerto Princesa (the
capital of the province), and Taytay.
The province also contains the following

municipal districts: Aborlan, Balabac and
Brooke's Point.
R.A. No. 1111 RA 1111 changed the name of the Municipality
277 of Dumaran to Araceli. However, under RA 3418,
R.A. No. 3418 a distinct and independent municipality, to be
278 known as the Municipality of Dumaran, was
constituted from certain barrios of the
municipalities of Araceli, Roxas and Taytay.
Section 1 of RA 3418 provides "The barrios of
Dumaran, San Juan, Bacao, Calasag and Bohol in
the Municipality of Araceli; the barrios of Ilian,
Capayas, and Leguit in the Municipality of Roxas;
and the barrios of Danleg and Pangolasian in the
Municipality of Taytay, all in the province of
Palawan, are separated from the said
municipalities, and are constituted into a distinct
and independent municipality, to be known as the
Municipality of Dumaran, with the seat of
government at the site of the barrio of Dumaran."
Busuanga R.A. No. 560 279 Section 1. The barrios of Concepcion, Salvacion,
Busuanga, New Busuanga, Buluang, Quezon,
Calawit, and Cheey in the Municipality of Coron
are separated from the said municipality and
constituted into a new and regular municipality to
be known as the Municipality of Busuanga,
with the present site of the barrio of New
Busuanga as the seat of the government.
R.A. No. 5943 RA 5943 amended Section 1 of RA 560 to read as
280 follows: "The barrios of Sagrada, Maglalambay,
Bogtong, San Isidro, Pallitan, San Rafael,
Concepcion, Salvacion, Busuanga, Buluang,
Quezon, Calawit, and Cheey, in the Municipality of
Coron, Province of Palawan, are separated from
said municipality and constituted into a new
Municipality of Busuanga with the present site
of the barrio of Salvacion as the seat of the
government."
Quezon R.A. No. 617 281 Section 1. The barrios of Berong and Alfonso XII in
the Municipality of Aborlan and the barrios of
Iraan, Candawaga and Canipaan in the
Municipality of Brook's Point are separated from
the said municipalities and constituted into a new
and regular municipality to be known as the
Municipality of Quezon, with the present site of
the barrio of Alfonso XIII as the seat of the
government.
Linapacan R.A. No. 1020 Section 1. The islands of Linapacan, Cabunlaoan,
282 Niangalao, Decabayotot, Calibanbangan, Pical,
and Barangonan are hereby separated from the
Municipality of Coron, Province of Palawan, and
constituted into a municipality to be known as the
Municipality of Linapacan with the seat of
government in the barrio of San Miguel in the
island of Linapacan.
Araceli Act No. 2711 Comprises the original territorial jurisdiction of
R.A. No. 1111 the Municipality of Dumaran under Act No. 2711,
R.A. No. 3418 excluding the barrios of Dumaran, San Juan,
Bacao, Calasag and Bohol which were included in
the newly created Municipality of Dumaran under
RA 3418.
Batarasa R.A. No. 3425 Section 1. The barrios of Inogbong, Marangas,
283 Bonobono, Malihod, Bulalakaw, Tarusan, Iwahig,
Iganigang, Sarong, Akayan, Rio Tuba, Sumbiling,
Sapa, Malitub, Puring, Buliluyan and Tahod in the
Municipality of Brooke's Point, Province of
Palawan, are separated from said municipality
and constituted into a distinct and independent
municipality, to be known as the Municipality of
Batarasa, same province. The seat of
government of the new municipality shall be in
the present site of the barrio of Marangas.
Magsaysay R.A. No. 3426 Section 1. The barrios of Los Angeles, Rizal,
284 Lucbuan, Igabas, Imilod, Balaguen, Danawan,
Cocoro, Patonga, Tagawayan Island, Siparay
Island and Canipo in the Municipality of Cuyo,
Province of Palawan, are separated from said
municipality and constituted into a distinct and
independent municipality, to be known as the
Municipality of Magsaysay. The seat of
government of the new municipality shall be the
present site of the barrio of Danawan.
San Vicente R.A. No. 5821 Section 1. The barrios of Binga, New Canipo,
San Vicente R.A. No. 5821 Section 1. The barrios of Binga, New Canipo,
285 Alimanguan and New Agutaya, now in the
Municipality of Taytay and all barrios from Vicente
to Caruray in the Municipality of Puerto Princesa,
Province of Palawan, are separated from said
municipalities, and constituted into a distinct and
independent municipality, to be known as the
Municipality of San Vicente, same province.
The seat of government of the municipality shall
be in the present site of the barrio of San Vicente.
Narra R.A. No. 5642 Section 1. The barrios of Malatgao, Tinagong-

286 dagat, Taritien, Antipoloan, Teresa, Panacan,
Narra, Caguisan, Batang-batang, Bato-bato,
Barirao, Malinao, Sandoval, Dumagueña, El Vita,
Calategas, Arumayuan, Tacras, Borirao and that
part of barrio Abo-abo now belonging to the
Municipality of Aborlan, Province of Palawan, are
separated from said municipality and constituted
into a distinct and independent municipality, to
be known as the Municipality of Narra. The
seat of the new municipality shall be in the
present site of Barrio Narra.
Kalayaan P.D. No. 1596 Section 1. The area within the following
boundaries:
From a point [on the Philippine Treaty Limits] at

latitude 7º40' North and longitude 116º00' East of
Greenwich, thence due West along the parallel of
7º40' N to its intersection with the meridian of
longitude 112º10' E, thence due north along the
meridian of 112º10' E to its intersection with the
parallel of 9º00' N, thence northeastward to the
intersection of the parallel of 12º00' N with the
meridian of longitude 114º30' E, thence, due East
along the parallel of 12º00' N to its intersection
with the meridian of 118º00' E, thence, due South
along the meridian of longitude 118º00' E to its
intersection with the parallel of 10º00' N, thence
Southwestwards to the point of beginning at
7º40' N, latitude and 116º00' E longitude;
including the sea-bed, sub-soil, continental
margin and air space shall belong to and be
subject to the sovereignty of the Philippines.
Such area is hereby constituted as a distinct
and separate municipality of the Province of
Palawan and shall be known as "Kalayaan."
Marcos (now BP Blg. 386 288 Section 1. The barangays of Bunog, Iraan, Punta
Rizal) 287 Baja, Capung Ulay, Ramsang, Candawag,
Culasian, Panalingaan, Tabuin, Latud, and
Canipaan are hereby separated from the
Municipality of Quezon, Province of Palawan, and
constituted into a distinct and independent
municipality to be known as the Municipality of
Marcos. The seat of government of the new
municipality will be in Barangay Punta Baja.
Section 2. The Municipality of Marcos shall be

bounded as follows:
"A parcel of land known as the proposed

Municipality of Marcos, in the Province of
Palawan, Luzon Island, bounded in the north
along lines 11 and 1 in the Plan by the municipal
boundary of Quezon, on the south along lines 2
and 3 by Sulu Sea, on the east along lines 1 and 2
by the municipal boundary of Brooke's Point, on
the west along lines 3 to 11 by the shoreline of
the South China Sea. Beginning at the point
marked 1 in the plan at latitude 8º59'10" T north,
longitude 117º50'32"; thence S 62-00W 80,750
meters to point 2; thence N 85-00W 5,800 meters
to point 3; thence N 31-29E 20,670.35 meters to
point 4; thence N 46-13E 8,298.46 meters to
point 11; thence S 48-10E 14,442.69 meters to
point 12, containing an area of nine hundred
seventy-seven million, two hundred sixty-one
thousand two hundred square meters
(977,261,200 square meters) or ninety-seven
thousand seven hundred twenty-six and twelve
hundredth hectares (97,726.12 hectares)."
Culion R.A. No. 7193 Section 1. The Islands of Culion Leper Colony,
289 as amended Marily, Sand, Tampel, Lamud, Galoc, Lanka,
by R.A. No. 9032 Tambon, Dunaun, Alava, Chindonan and a small
290 island without a name situated directly south of
Chindonan Island in latitude 11º55' N, longitude
12º02' E, comprising the national reservation for
lepers in the Province of Palawan as described
under Executive Order No. 35, Series of 1912, are
hereby constituted into a distinct and
independent municipality to be known as the
Municipality of Culion. The seat of government
of the new municipality shall be in Barangay
Balala.
Section 1-A. The barangays of Balala, Baldat,

Binudac, Culango, Galoc, Jardin, Libis, Luac,
Malaking Patag, Osmeña and Tiza which have
been existing and functioning as regular
barangays before the creation of the municipality
in 1992 are hereby declared as legally existent
upon the creation of the Municipality of Culion.
These barangays shall comprise the Municipality
of Culion, subject to the provisions of the
succeeding paragraphs. The territorial boundaries
of these barangays are specified in Annex "A" of
this Act.
Subject to the provisions of Section 10, Republic

Act No. 7160, Burabod and Halsey in the
Municipality of Busuanga, Province of Palawan,
are hereby separated from said municipality and
are transferred as part of the political jurisdiction
of the Municipality of Culion.
A barangay for the indigenous cultural

communities to be known as Barangay Carabao
is hereby created to be composed of the following
sitios, namely: Bacutao, Baracuan, Binabaan,
Cabungalen, Corong, De Carabao (Lumber
Camp), Igay, Layang-layang, Marily Pula and
Pinanganduyan.
Section 2. The Municipality of Culion shall be

bounded and described as follows:
The municipality shall be bounded on the north

by the Municipality of Busuanga-Coron Island with
Concepcion and Salvacion in the Calamian Island
Group; on the south by the Municipality of Bacuit-
Taytay and Linapacan area; on the east by the
South China Sea; on the west by the Cuyo West
Pass.
The land contained in all the above named

islands in Section One is shown on C.G. Map No.
4717 published in Washington D.C., September,
1908, and lies within the following limits, i.e.,
between the parallels of 11º36' N and 12º03' N,
and the meridians of 119º47' E and 120º15' E.
Sofronio R.A. No. 7679 Section 1. Barangays Pulot Center, Pulot Shore
Española 291 (Pulot I), Pulot Interior (Pulot II,) Iraray, Punang,
Labog, Panitian, Isumbo, and Abo-Abo in the
Municipality of Brooke's Point, Province of
Palawan, are hereby separated from the
Municipality and constituted into a distinct and
independent municipality of the province, to be
known as the Municipality of Sofronio
Española. The seat of government of the new
municipality shall be in Barangay Pulot Center.
Section 2. The boundary of the Municipality of

Sofronio Española is described as follows:
Corner Latitude Longitude Location
1 8º53'50.23" 118º00'20.28" on the
southern side
of Caramay
Bay
2 8º59'58.01" 117º51'24.42" on the slopes
of
Mantalingahan
Range
3 9º01'01.84" 117º54'03.69" on the slopes
3 9º01'01.84" 117º54'03.69" on the slopes
of
Mantalingahan
Range
4 9º02'52.18" 117º54'29.33" on the slopes
of
Mantalingahan
Range
5 9º04'18.78" 117º55'15.71" on the slopes
of Mount
Corumi
6 9º05'34.18" 117º55'18.00" on the slopes
of Pulot Range
7 9º07'49.27" 117º56'48.09" on the slopes
of Pulot Range
8 9º09'50.88" 117º59'50.82" on the slopes
of Malanut
Range
9 9º11'26.26" 118º03'49.28" on the slopes
of Malanut
Range
10 9º11'26.26" 118º03'49.28" on the slopes
of Malanut
Range
11 9º08'58.93" 118º07'35.58" southern side,
mouth of Abo-
Abo River
Line Bearing Distance
1-2 N. 55º23' W 19,886.37 m.
2-3 N. 68º03' E 5,244.48 m.
3-4 N. 13º00' E 3,478.91 m.
4-5 N. 28º02' E 3,013.93 m.
5-6 N. 01º44' E 2,317.35 m.
6-7 N. 33º33' E 4,979.17 m.
7-8 N. 71º16' E 5,892.79 m.
8-9 N. 16º10' E 4,168.24 m.
9-10 N. 82º50' E 6,170.26 m.
10-11 S. 56º50' E 8,261.31 m.
11-1 SW, meandering mainland coastline.
The new municipality shall include the islands of

Bintaugan, Inamukan, Arrecife, Bessie, Gardiner,
and Tagalinog.
Based on the foregoing territorial descriptions, the municipalities of

Palawan do not include the continental shelf where the Camago-Malampaya
reservoir is concededly located. In fact, with the exception of Kalayaan,
which includes the seabed, the subsoil and the continental margin as part of
its demarcated area, the municipalities are either located within an island or
are comprised of islands. That only Kalayaan (under P.D. No. 1596), among
the municipalities of Palawan, had land submerged in water as part of its
area or territory, was confirmed by the amicus curiae, Atty. Bensurto, during
the oral argument as gleaned from the following exchange:
JUSTICE DE CASTRO:
It is not a question of belonging to Palawan, it is a question of
Palawan having a share because it is within the area of Palawan,
that is the question before the Court now, it is not, the right to
govern is not in question, that is not the issue because we are
very clear. The Philippines is not a Federal Government x x x So,
we are just defining the area of the Province of Palawan, if it is
not included in the polygon, what about in other islands of
Palawan, is there any continental shelf in the other areas,
if there is none here in the polygon, within the polygon and which
will extend up to the Camago-Malampaya, is there any other
continental shelf in the other islands comprising Palawan
where there is such a continental shelf that will extend up
to the Camago-Malampaya.
ATTY. HENRY BENSURTO: x x x
[W]ith all due respect, Your Honor, I do not think Federalism or
Unitary is relevant in the issue of maritime concepts or maritime
jurisdiction the end would still be the same, Your Honor. Thank
you.
JUSTICE DE CASTRO:
You see that is my point, we are just here trying to analyze
domestic law and if, only P.D. 1596 refers to areas
submerged in water, that is (interrupted)
ATTY. HENRY BENSURTO:
Everything, Your Honor.
JUSTICE DE CASTRO:
You find that only in 1596.
Yes, Your Honor. 292 (Emphasis ours)
The parties, however, agreed that the Camago-Malampaya reservoir
lies outside the geographic coordinates mentioned in P.D. No. 1596 which
constituted Kalayaan as a distinct municipality of Palawan. Atty. Bensurto
also confirmed during the oral argument that "the area of Malampaya is not
within the polygon area described under P.D. [No.] 1596." 293 The
succeeding exchange between Atty. Bensurto and Associate Justice Teresita
Leonardo-de Castro (Justice De Castro) illumines:
JUSTICE DE CASTRO:
Now, the question is — if in the other islands even assuming that
there is a continental shelf which extends up to Camago there is
now that legal question of whether that belongs to Palawan,
whether Palawan, that is within the area of Palawan even if it is
protruding from an island in Palawan because there is no such
law like P.D. 1596 pertaining to the other islands? DaIAcC

Yes, Your Honor.

JUSTICE DE CASTRO:
So, if there is none and Camago is in the continental shelf
protruding from any other island in Palawan and then we
cannot apply 1596?
No, Your Honor.
JUSTICE DE CASTRO:
All right, so, there maybe some doubt as to whether or not
Palawan should have a bigger share in that Camago-Malampaya?
Yes, Your Honor.
JUSTICE DE CASTRO:
Okay, that is clear now. Thank you. 294 (Emphasis ours)
Estoppel does not lie against the

Republic
Fundamental is the rule that the State cannot be estopped by the

omission, mistake or error of its officials or agents. 295 Thus, neither the
DoE's June 10, 1998 letter to the Province of Palawan nor President Ramos'
A.O. No. 381, which acknowledged Palawan's share in the Camago-
Malampaya project, will place the Republic in estoppel as they had been
based on a mistaken assumption of the LGU's entitlement to said allocation.
Erroneous application and enforcement of the law by public officers do
not preclude subsequent corrective application of the statute. 296 As the
Court explained in Adasa v. Abalos: 297
True indeed is the principle that a contemporaneous
interpretation or construction by the officers charged with the
enforcement of the rules and regulations it promulgated is entitled to
great weight by the court in the latter's construction of such rules and
regulations. That does not, however, make such a construction
necessarily controlling or binding. For equally settled is the rule that
courts may disregard contemporaneous construction in
instances where the law or rule construed possesses no ambiguity,
where the construction is clearly erroneous , where strong
reason to the contrary exists, and where the court has previously
given the statute a different interpretation.
If through misapprehension of law or a rule an executive
or administrative officer called upon to implement it has
erroneously applied or executed it, the error may be
corrected when the true construction is ascertained. If a
contemporaneous construction is found to be erroneous, the same
must be declared null and void. Such principle should be as it is
applied in the case at bar. 298 (Emphasis ours)
Section 1, Article X of the 1987

Constitution did not apportion the
entire Philippine territory among
the LGUs
Dean Pangalangan shares the Province of Palawan's claim that based

on Section 1, Article X of the 1987 Constitution, the entire Philippine territory
is necessarily divided into political and territorial subdivisions, such that at
any one time, a body of water or a piece of land should belong to some
province or city. 299 The Court finds this position untenable.
Section 1, Article X of the 1987 Constitution states:
Section 1. The territorial and political subdivisions of
the Republic of the Philippines are the provinces, cities,
municipalities, and barangays. There shall be autonomous
regions in Muslim Mindanao and the Cordilleras as hereinafter
provided. (Emphasis ours)
By indicating that the LGUs comprise the territorial subdivisions of the
State, the Constitution did not ipso facto make every portion of the national
territory a part of an LGU's territory. TAacHE
The above-quoted section is found under the General Provisions of

Article X on Local Government. Explaining this provision, the eminent author
and member of the 1986 Constitutional Commission, Fr. Joaquin G. Bernas,
S.J. wrote:
The existence of "provinces" and "municipalities" was already
acknowledged in the 1935 Constitution. Section 1, however, when
first enacted in 1973, went a step further than mere acknowledgment
of their existence and recognized them, together with cities and
barrios, as "(t)he territorial and political subdivisions of the
Philippines." Thus, the municipalities, and barrios (now
barangays) have been fixed as the standard territorial and
political subdivisions of the Philippines. To these the 1987
Constitution has added the "autonomous regions." But the
Constitution allows only two regions: one for the Cordilleras and one
for Muslim Mindanao. The creation of other autonomous regions
whether by dividing the Cordilleras or Muslim Mindanao into two or by
creating others outside these two regions, can be accomplished only
by constitutional amendment.
xxx xxx xxx
Neither Section 1, however, nor any part of the Constitution
prescribed the actual form and structure which individual local
government units must take. These are left by Sections 3, 18 and 20
to legislation. As constitutional precepts, therefore, they are
very general. x x x
xxx xxx xxx
The designation by the 1973 Constitution of provinces, cities,
municipalities and barangays as the political and territorial
subdivisions of the Philippines effected a measure of institutional
instability. To this extent, it was a move in the direction of real local
autonomy. The 1987 Constitution moved farther forward by
authorizing the creation of autonomous regions. These are the
passive aspects of local autonomy. The dynamic and more
important aspect of local autonomy must be measured in terms of the
scope of the powers given to the local units. 300 (Emphasis ours)
There is, thus, merit in the Republic's assertion that Section 1, Article X
of the 1987 Constitution was intended merely to institutionalize the LGUs.
The Court is further inclined to agree with the Republic's argument that
assuming Section 1 of Article X was meant to divide the entire Philippine
territory among the LGUs, it cannot be deemed as self-executing and
legislation will still be necessary to implement it. LGUs are constituted by law
and it is through legislation that their respective territorial boundaries are
delineated. Furthermore, in the creation, division, merger and abolition of
LGUs and in the substantial alteration of their boundaries, Section 10 of
Article X requires satisfying the criteria set by the Local Government Code. It
further requires the approval by the majority of the votes cast in a plebiscite
in the political units directly affected. Needless to say, apportionment of the
national territory by the LGUs, based solely on the general terms of Section
1 of Article X, may only sow conflict and dissension among these political
subdivisions.
As the Republic asserted, no law has been enacted dividing the
Philippine territory, including its continental margin and exclusive economic
zones, among the LGUs.
The UNCLOS did not confer on

LGUs their own continental shelf
Dean Pangalangan posited that since the Constitution has incorporated

into Philippine law the concepts of the UNCLOS, including the concept of the
continental shelf, Palawan's "area" could be construed as including its own
continental shelf. 301 The Province of Palawan and Arigo, et al., accordingly
assert that Camago-Malampaya reservoir forms part of Palawan's continental
shelf. 302
The Court is unconvinced. The Republic was correct in arguing that the
concept of continental shelf under the UNCLOS does not, by the doctrine of
transformation, automatically apply to the LGUs. We quote with approval its
disquisition on this issue:
The Batasang Pambansa ratified the UNCLOS through
Resolution No. 121 adopted on February 27, 1984. Through this
process, the UNCLOS attained the force and effect of municipal law.
But even if the UNCLOS were to be considered to have been
transformed to be part of the municipal law, after its ratification by
the Batasang Pambansa, the UNCLOS did not automatically amend
the Local Government Code and the charters of the local government
units. No such intent is manifest either in the UNCLOS or in Resolution
No. 121. Instead, the UNCLOS, transformed into our municipal laws,
should be applied as it is worded. Verba legis.
xxx xxx xxx
It must be stressed that the provisions under the UNCLOS are
specific in declaring the rights and duties of a state, not a local
government unit. The UNCLOS confirms the sovereign rights of the
States over the continental shelf and the maritime zones. The
UNCLOS did not confer any rights to the States' local government
units.
xxx xxx xxx
At the risk of being repetitive, it is respectfully emphasized that
the foregoing indubitably established that under the express terms of
the UNCLOS, the rights and duties over the maritime zones and
continental shelf pertain to the State. No provision was set forth to
even suggest any reference to a local government unit. Simply put,
the UNCLOS did not obligate the States to grant to, much less
automatically vest upon, their respective local government units
territorial jurisdiction over the different maritime zones and the
continental shelf. Hence, contrary to the submission of Dean
Pangalangan, no such application can be made. 303 HDICSa
Atty. Bensurto took a similar stand, declaring during the oral argument
that:
x x x [T]here was an assertion earlier, Your Honor, that there was
a reference in fact to the continental shelf, that there is an
automatic application of the continental shelf with respect to the
municipal territories. I submit, Your Honor that this should not be
the case, why? Because the United Nation Convention on the
Law of the Sea which is the conventional law directly
applicable in this case is an International Law.
International Law by definition is a body of rules
governing relations between sovereign States or other
entities which are capable of having rights and
obligations under International Law. Therefore, it is the
State that is the subject of International Law, the only exception
to this is with respect to individuals with respect to the issue of
Humanitarian and Human Rights Law. From there, it flows the
principal [sic] therefore that International Law affects only
sovereign States. With respect to the relationship between the
State and its Local Government Units this is reserved to the
sovereign right of the sovereign State. It is a dangerous
proposition for us to make that there is an automatic application
because to do that would mean a violation of the sovereign right
of a State and the State always reserves the right to promulgate
laws governing its domestic jurisdiction. Therefore, the United
Nations Convention of the Law of the Sea affects only the
right of the Philippines vis a vis another sovereign State.
And so, when we talk of the different maritime jurisdictions
enumerated, illustrated and explained under the United Nations
Convention on the Law of the Sea we are actually referring to
inter state relations not intra state relations. x x x 304
(Emphasis ours)
In fact, Arigo, et al., acknowledged during the oral argument that the
UNCLOS applies to the coastal state and not to their provinces, and that
Palawan, both under constitutional and international, has no distinct and
separate continental shelf, thus:
ASSOCIATE JUSTICE VELASCO:
You admit that under UNCLOS it is only the coastal states
that are recognized not the provinces of the coastal state.
ATTY. BAGARES:
That is true, Your Honor, and we do not dispute that, Your
Honor.
That's correct. And you cited that in your petition. . . .
ATTY. BAGARES:
Yes, Your Honor. That is true, Your Honor.
. . . that under Article 76, it is the continental shelf of the
coastal state.
ATTY. BAGARES:
Yes, Your Honor.
And in our case, the Republic of the Philippines, right?
ATTY. BAGARES:
Yes, Your Honor.
Okay. You also made the submission that under Republic Act
7611 and Administrative Order 381, there is a provision there
that serves as basis for, what you call again the continental shelf
of Palawan. What provisions in 7611 and AO 381 are there that
serves as basis, for you to say that there is such a continental
shelf of Palawan?
ATTY. BAGARES:
Your Honor, I apologize that perhaps I've been like Atty. Roque
very academic in the language in which we make our
presentations but our position, Your Honor, exactly just to make
it clear, Your Honor, we're not saying that there's a separate
continental shelf of the Province of Palawan outside the territorial
bounds of the sovereign State of the Republic of the Philippines.
We are only saying, Your Honor, that that continental shelf is
reckoned, Your Honor, from the Province of Palawan. We are not
saying, Your Honor, that there is a distinct and separate
continental shelf that Palawan may lay acclaim [sic] to,
under the Constitutional Law and under International
Law, Your Honor.
Alright.And that is only the continental shelf of the coastal
State, which is the Philippines.
ATTY. BAGARES:
Yes, Your Honor. I hope that is clear, Your Honor. 305
(Emphasis ours)
The Federal Paramountcy doctrine

as well as the Regalian and
Archipelagic doctrines are
inapplicable
Contrary to the Republic's submission, the LGU's share under Section

7, Article X of the 1987 Constitution cannot be denied on the basis of the
archipelagic and regalian doctrines.
The archipelagic doctrine is embodied in Article I of the 1987
Constitution which provides: IDaEHC
The national territory comprises the Philippine archipelago, with

all the islands and waters embraced therein, and all other territories
over which the Philippines has sovereignty or jurisdiction, consisting
of its terrestrial, fluvial, and aerial domains, including its territorial
sea, the seabed, the subsoil, the insular shelves, and other submarine
areas. The waters around, between, and connecting the islands of the
archipelago, regardless of their breadth and dimensions, form part of
the internal waters of the Philippines.
The regalian doctrine, in turn, is found in Section 2, Article XII of the
1987 Constitution which states:
Section 2. All lands of the public domain, waters, minerals,
coal, petroleum, and other mineral oils, all forces of potential energy,
fisheries, forests or timber, wildlife, flora and fauna, and other natural
resources are owned by the State. x x x
It is at once evident that the foregoing doctrines find no application in
this case which involves neither a question of what comprises the Philippine
territory or the ownership of all natural resources found therein.
There is no debate that the natural resources in the Camago-
Malampaya reservoir belong to the State. Palawan's claim is anchored not on
ownership of the reservoir but on a revenue-sharing scheme, under Section
7, Article X of the 1987 Constitution and Section 290 of the Local
Government Code, that allows LGUs to share in the proceeds of the
utilization of national wealth provided they are found within their respective
areas. To deny the LGU's share on the basis of the State's ownership of all
natural resources is to render Section 7 of Article X nugatory for in such
case, it will not be possible for any LGU to benefit from the utilization of
national wealth.
Accordingly, the Court cannot subscribe to Atty. Bensurto's opinion 306
that the Province of Palawan cannot claim the 40% LGU share from the
proceeds of the Camago-Malampaya project because the National
Government "remains to have full dominium" (or ownership rights) over the
gas reservoir.
Atty. Bensurto's theory is ostensibly drawn from several U.S. cases,
namely U.S. v. California, 307 U.S. v. Louisiana, 308 U.S. v. Texas 309 and U.S.
v. Maine , 310 which the Republic also cites in applying the federal
paramountcy doctrine to the Province of Palawan's claim. To explain this
doctrine, the Republic turns to the case of Native Village of Eyak v. Trawler
Diane Marie, Inc., 311 where the U.S. Court of Appeals for the Ninth Circuit, in
part, stated:
The "federal paramountcy doctrine" is derived, in essence, from
four Supreme Court cases in which the federal government and
various coastal states disputed ownership and control of the
territorial sea and the adjacent portions of the OCS.
The first of these cases was United States v. California , 332
U.S. 19, 67 S.Ct. 1658, 91 L.Ed. 1889 (1947), in which the United
States sued to enjoin the State of California from executing leases
authorizing the taking of petroleum, gas, and other mineral deposits
from the Pacific Ocean. x x x
xxx xxx xxx
[T]hus, the Court declared, "California is not the owner of the three-
mile marginal belt along its coast." Instead, "the Federal Government
rather than the state has paramount rights in and power over that
belt, an incident to which is full dominion over the resources of the
soil under that water area, including oil."
Bolstered by the favorable outcome in California, the United
States brought similar actions to confirm its title to the seabed
adjacent to other coastal states. In United States v. Louisiana , 339
U.S. 699, 70 S.Ct. 914, 94 L.Ed. 1216 (1950), the United States
brought suit against the State of Louisiana, which argued that it held
title to the seabed under the waters extending twenty-seven miles
into the Gulf of Mexico. x x x
xxx xxx xxx
The Court found that the only difference between the argument
raised by Louisiana and the one raised by California was that
Louisiana's claimed boundary extended twenty-four miles beyond
California's three-mile claim. This difference did not weigh in
Louisiana's favor, however:
If the three-mile belt is in the domain of the
Nation rather than that of the separate States, it
follows a fortiori that the ocean beyond that limit
also is the ocean seaward of the marginal belt is perhaps
even more directly related to the national defense, the
conduct of foreign affairs, and world commerce than is
the marginal sea. Certainly it is not less so far as the
issues presented here are concerned, Louisiana's
enlargement of her boundary emphasizes the strength of
the claim of the United States to this part of the ocean
and the resources of the soil under that area, including
oil.
In the companion case to Louisiana, United States v. Texas ,
339 U.S. 707, 70 S.Ct. 918, 94 L.Ed. 1221 (1950), the Supreme Court
again reaffirmed its holding in California. The State of Texas had, by
statute, extended its boundary first to a line twenty-four miles
beyond the three-mile limit, and thereafter to the outer edge of the
continental shelf. Texas raised a somewhat different argument than
had either California or Louisiana, one more analogous to that
asserted by the Villages here. Texas argued that, because it was a
separate republic prior to its entry into the United States, it had both
dominium (ownership or proprietary rights) and imperium
(governmental powers of regulation and control) with respect to the
lands, minerals, and other products underlying the marginal sea.
Upon entering the Union, Texas transferred to the federal government
its powers of sovereignty-its imperium-over the marginal sea, but
retained its dominium.
The Supreme Court was not persuaded. While the Republic of
Texas may have had complete sovereignty and ownership over the
marginal sea and all things of value derived therefrom, the State of
Texas did not. x x x "When Texas came into the Union, she ceased to
be an independent nation. The United States then took her place as
respects foreign commerce, the waging of war, the making of
treaties, defense of the shores, and the like." As an incident to the
transfer of that sovereignty, any "claim that Texas may have had
to the marginal sea was relinquished to the United States."
The Court recognized that "dominion and imperium are
normally separable and separate"; however, in this instance,
"property interests are so subordinated to the rights of
sovereignty as to follow sovereignty." x x x
xxx xxx xxx
In the last of the paramountcy cases, United States v. Maine ,
420 U.S. 515, 95 S.Ct. 1155, 43 L.Ed.2d 363 (1975), the United States
brought an action against the thirteen Atlantic Coastal States
asserting that the federal government was entitled to exercise
sovereign rights over the seabed and subsoil underlying the Atlantic
Ocean to the exclusion of the coastal states for the purpose of
exploring the area and exploiting its natural resources. x x x
At the urging of the coastal states, the Supreme Court
reexamined the decisions in California, Louisiana, and Texas. To the
states' dismay, the Court concluded that these cases remained
grounded on sound constitutional principles. Whatever interest the
states may have held in the sea prior to statehood, the Court held, as
a matter of "purely legal principle the Constitution allotted to the
federal government jurisdiction over foreign commerce, foreign
affairs, and national defense and it necessarily follows, as a matter of
constitutional law, that as attributes of these external sovereign
powers the federal government has paramount rights in the
marginal sea." x x x. (Emphasis ours and citations omitted) DTCSHA
There are several reasons why the foregoing doctrine cannot be

applied to this case. First, the U.S. does not appear to have an equitable
sharing provision similar to Section 7, Article X of the 1987 Constitution.
Second , the Philippines is not composed of states that were previously
independent nations. Third, the resolution of these cases does not
necessitate distinguishing between dominium and imperium since neither
determines the LGU's entitlement to the equitable share under Section 7 of
Article X. Fourth, the Court is not called upon to determine who between the
Province of Palawan and the National Government has the paramount or
dominant right to explore or exploit the natural resources in the marginal sea
or beyond. Fifth, adjudication of these cases does not entail upholding the
dominion of the National Government over a political subdivision since
ownership of the natural resources is concededly vested in the State. Sixth,
it is settled that dominion over national wealth belongs to the State under
the regalian doctrine. Ownership of the subject reservoir, therefore, is a non-
issue and what simply needs to be determined is whether said resource is
located within the area or territorial jurisdiction of the Province of Palawan.
Justice De Castro's observation during the oral argument is thus
apropos:
JUSTICE DE CASTRO:
It is not a question of belonging to Palawan, it is a
question of Palawan having a share because it is within
the area of Palawan, that is the question before the Court now,
it is not, the right to govern is not in question, that is not the
issue because we are very clear. The Philippines is not a Federal
Government so as distinguished from a Federal Government
where the sovereign authority came from the member State and
granted to the Federal Government, here we have the reverse it
is the central government giving to the local government certain
powers and defining the limits of these powers. So, in this case
there is no question about the right to govern, the local
government have [sic] have only such powers granted to it by
the Local Government Code. Now, the question is whether
the Province of Palawan should have a share in the
proceeds in the development of the Camago-Malampaya
because it is within its area. So, we are just defining the
area of the Province of Palawan x x x. 312 (Emphasis ours)
LGU's share cannot be granted

based on equity
Atty. Bensurto opined that under the existing law, the Province of
Palawan is not entitled to the statutory 40% LGU share. He posited that it is
only on equitable grounds that the Province of Palawan could participate in
the proceeds of the utilization of the Camago-Malampaya reservoir. He
concluded that from the perspective of the principle of equity, it may be
appropriate for the Province of Palawan to be given some share in the
operation of the Camago-Malampaya gas reservoir considering: (a) its
proximity to the province which makes the latter environmentally vulnerable
to any major accidents in the gas reservoir; and (b) the gas pipes that pass
through the northern part of the province. 313
The Court finds the submission untenable. Our courts are basically
courts of law, not courts of equity. 314 Furthermore, for all its conceded
merits, equity is available only in the absence of law and not as its
replacement. 315 As explained in the old case of Tupas v. Court of Appeals :
316
Equity is described as justice outside legality, which simply

means that it cannot supplant although it may, as often happens,
supplement the law. We said in an earlier case, and we repeat it now,
that all abstract arguments based only on equity should yield to
positive rules, which preempt and prevail over such persuasions.
Emotional appeals for justice, while they may wring the heart of the
Court, cannot justify disregard of the mandate of the law as long as it
remains in force. The applicable maxim, which goes back to the
ancient days of the Roman jurists — and — is now still reverently
observed — is " aequetas nunquam contravenit legis." 317
In this case, there are applicable laws found in Section 7, Article X of
the 1987 Constitution and in Sections 289 and 290 of the Local Government
Code. They limit the LGUs' share to the utilization of national wealth located
within their respective areas or territorial jurisdiction. As herein before-
discussed, however, existing laws do not include the Camago-Malampaya
reservoir within the area or territorial jurisdiction of the Province of Palawan.
The pertinent positive rules being present here, they should preempt
and prevail over all abstract arguments based only on equity. 318
The supposed presence of gas pipes through the northern part of
Palawan cannot justify granting the province the 40% LGU share because
both the Constitution and the Local Government Code refer to the LGU
where the natural resource is situated. The 1986 Constitutional Commission
referred to this area as "the locality, where God chose to locate his bounty,"
while the Senate deliberations on the proposed Local Government Code
cited it as the area where the natural resource is "extracted." To hold
otherwise, on the basis of equity, will run afoul of the letter and spirit of both
constitutional and statutory law. It is settled that equity cannot supplant,
overrule or transgress existing law.
Furthermore, as the Republic noted, any possible environmental
damage to the province is addressed by the contractor's undertakings, under
the ECC, to ensure minimal impact on the environment and to set up an
Environmental Guarantee Fund that would cover expenses for environmental
monitoring, as well as a replenishable fund that would compensate for any
damage the project may cause. 319 The ECC, in pertinent part, provides:
This Certificate is being issued subject to the following
conditions:
1. This Certificate shall cover the construction of the shallow
water platform (SWP) in the Service Contract 38 (SC38) offshore
northwest Palawan, a pipeline from the Malampaya wells (well drilling
site) to the SWP passing the offshore route from Mindoro to a land
terminal at Shell Tabangao's refinery plant in Batangas;
2. The proponent shall consider the offshore route of the
pipeline to minimize its environment socio-economic impacts
particularly to the province of Mindoro;
3. Selection of the SWP site and the final offshore pipeline
route should avoid environmentally sensitive areas such as coral
reefs, sea grass, mangroves, fisheries, pearl farms, habitats of
endangered wildlife, tourism areas and areas declared as protected
by the national, provincial and local government agencies. It shall
also be routed away from geologically high risk areas;
4. Proponent shall use the optimum amount of anti-
corrosion anodes necessary in order to maintain pipeline integrity
and minimize impacts on water quality;
5. The design of the pipeline shall conform to the
international standards that can handle extreme conditions. The
proponent shall ensure extensive monitoring (internal and external
inspections) to maintain the pipeline integrity;
xxx xxx xxx
26. The proponent shall set up an Environmental Guarantee
Fund (EGF) to cover expenses for environmental monitoring and the
establishment of a readily available and replenishable fund to
compensate for whatever damage may be caused by the project, for
the rehabilitation and/or restoration of affected-areas, the future
abandonment/decommissioning of project facilities and other
activities related to the prevention of possible negative impacts.CScTED
The amount and mechanics of the EGF shall be determined by

the DENR and the proponent taking into consideration the concerns of
the affected areas stakeholders and formalized through a MOA which
shall be submitted within ninety (90) days prior to project
implementation. The absence of the EGF shall cause the cancellation
of this Certificate;
xxx xxx xxx
29. In cases where pipe laying activities will adversely affect
existing fishing grounds, the proponent in coordination with the
Bureau of Fisheries and Aquatic Resources (BFAR) shall identify
alternative fishing grounds and negotiate with affected fisherfolks the
reasonable compensation to be paid[.] 320
There is logic in the Republic's contention that the National
Government cannot be compelled to compensate the province for damages
it has not yet sustained.
The foregoing considered, the Court finds that the Province of
Palawan's remedy is not judicial adjudication based on equity but legislation
that clearly entitles it to share in the proceeds of the utilization of the
Camago-Malampaya reservoir. Mariano instructs that the territorial
boundaries must be clearly defined "with precise strokes." Defining those
boundaries is a legislative, not a judicial function. 321 The Court cannot, on
the basis of equity, engage in judicial legislation and alter the boundaries of
the Province of Palawan to include the continental shelf where the subject
natural resource lies. As conceded by Dean Pangalangan, "territorial
jurisdiction is fixed by a law, by a charter and that defines the territory of
Palawan very strictly," and it is "something that can be altered only in
accordance with [the] proper procedure ending with a plebiscite." 322
It is true that the Local Government Code envisioned a genuine and
meaningful autonomy to enable local government units to attain their fullest
development as self-reliant communities and make them effective partners
in the attainment of national goals. 323 This objective, however, must be
enforced within the extent permitted by law. As the Court held in Hon. Lina,
Jr. v. Hon. Paño: 324
Nothing in the present constitutional provision enhancing local
autonomy dictates a different conclusion.
The basic relationship between the national
legislature and the local government units has not
been enfeebled by the new provisions in the
Constitution strengthening the policy of local
autonomy. Without meaning to detract from that policy,
we here confirm that Congress retains control of the local
government units although in significantly reduced
degree now than under our previous Constitutions. The
power to create still includes the power to destroy. The
power to grant still includes the power to withhold or
recall. True, there are certain notable innovations in the
Constitution, like the direct conferment on the local
government units of the power to tax (citing Art. X, Sec.
5, Constitution), which cannot now be withdrawn by mere
statute. By and large, however, the national legislature is
still the principal of the local government units, which
cannot defy its will or modify or violate it.
Ours is still a unitary form of government, not a federal state.
Being so, any form of autonomy granted to local governments
will necessarily be limited and confined within the extent
allowed by the central authority. Besides, the principle of local
autonomy under the 1987 Constitution simply means
"decentralization." It does not make local governments sovereign
within the state or an "imperium in imperio ." 325 (Emphasis ours)
Constitutional challenge to E.O. No. 683
The challenge to the constitutionality of E.O. No. 683, brought by Arigo,

et al., is premised on the alleged violation of Section 7, Article X of the 1987
Constitution and Sections 289 and 290 of the Local Government Code, which
is the basic issue submitted for resolution by the Republic and the Province
of Palawan in G.R. No. 170867. Considering its ruling in G.R. No. 170867, the
Court resolves to deny the Arigo petition, without need of passing upon the
procedural issues therein raised. The same ruling also renders it
unnecessary to rule upon the propriety of the Amended Order dated January
16, 2006, which the Republic raised ad cautelam in G.R. No. 170867.
WHEREFORE, the Petition in G.R. No. 170867 is GRANTED. The
Decision dated December 16, 2005 of the Regional Trial Court of the
Province of Palawan, Branch 95 in Civil Case No. 3779 is REVERSED and
SET ASIDE. The Court declares that under existing law, the Province of
Palawan is not entitled to share in the proceeds of the Camago-Malampaya
natural gas project. The Petition in G.R. No. 185941 is DENIED. cDCEIA
SO ORDERED.
Bersamin, C.J., Carpio, Peralta, Del Castillo, Perlas-Bernabe, Caguioa,
A.B. Reyes, Jr., Gesmundo, J.C. Reyes, Jr. and Hernando, JJ., concur.
Leonen, J., see separate opinion.
Jardeleza, * J., took no part.
Carandang, ** J., is on leave.
Separate Opinions
I concur, but only in the result.

The Province of Palawan should be entitled to an equitable share in the
utilization and development of resources within its territorial jurisdiction. Due
to Palawan's unique position and archipelagic shape, its territorial
jurisdiction should not only encompass land mass. It should also include its
coastline, subsoil, and seabed.
However, the maps submitted to this Court failed to substantially prove
that the Camago-Malampaya Natural Gas Project was within the area of
responsibility of the Province of Palawan.
The factual antecedents of this case are undisputed. On December 11,
1990, the Republic, through the Department of Energy, entered into a
service contract (Service Contract No. 38) with Shell Philippines Exploration
B.V. (Shell) and Occidental Philippines, Inc. (Occidental) for the drilling of a
natural gas reservoir in the Camago-Malampaya area, located about 80
kilometers from the main island of Palawan. 1
Specifically, Camago-Malampaya is located:
From Kalayaan Island Group 93.264 kilometers or 50.3585

nautical miles
Mainland Palawan (Nacpan Point, 55.476 kilometers or 29.9546
south of Patuyo Cove, nautical miles
Municipality of El Nido)
Tapiutan Island, Municipality of 48.843 kilometers or 26.[3731]
El Nido nautical miles 2
Service Contract No. 38 provides for a production sharing scheme,

where the National Government would receive 60% of the net proceeds from
the sale of petroleum while Shell and Occidental, as service contractors,
would receive 40% of the net proceeds. Subsequently, Shell and Occidental
were replaced by a consortium of Shell, Occidental, Shell Philippines LLC,
Chevron Malampaya LLC, and Philippine National Oil Company Explorations
Corporation (Shell Consortium). 3
On February 17, 1998, then President Fidel V. Ramos (President
Ramos) issued Administrative Order No. 381, 4 which provided that the
National Government's share from the net proceeds of the Camago-
Malampaya Natural Gas Project would "be reduced . . . by the share of the
concerned local government units pursuant to the Local Government
Code[.]" 5 It further provided that "the Province of Palawan [was] expected to
receive about US$2.1 billion from the total Government share of US$8.1
billion" 6 throughout the 20-year contract period. For reference, Section 290
of the Local Government Code provides:
Section 290. Amount of Share of Local Government Units. —
Local government units shall, in addition to the internal revenue
allotment, have a share of forty percent (40%) of the gross collection
derived by the national government from the preceding fiscal year
from mining taxes, royalties, forestry and fishery charges, and such
other taxes, fees, or charges, including related surcharges, interests,
or fines, and from its share in any co-production, joint venture or
production sharing agreement in the utilization and development of
the national wealth within their territorial jurisdiction.
On June 10, 1998, then Secretary of Energy Francisco L. Viray (Viray)
wrote to then Palawan Governor Salvador P. Socrates (Socrates), requesting
that the payment of 50% of Palawan's share in the Camago-Malampaya
Natural Gas Project be "spread over in the initial seven years of operations . .
. to pay [for] the [National Power Corporation]'s . . . obligations" in its Gas
Sales and Purchase Agreements with Shell Consortium. 7
On July 30, 2001, then Secretary of Finance Jose Isidro N. Camacho
wrote to then Secretary of Justice Hernando B. Perez, seeking legal opinion
on whether the Province of Palawan had a share in the national wealth from
the proceeds of the Camago-Malampaya Natural Gas Project. It was the
position of the Department of Finance that a local government unit's
territorial jurisdiction was only within its land area and excludes marine
waters more than 15 kilometers from its coastline. 8
On October 16, 2001, the Camago-Malampaya Natural Gas Project was
formally inaugurated. 9
Negotiations were held between the Province of Palawan, the
Department of Energy, the Department of Finance, and the Department of
Budget and Management to determine the Province of Palawan's share in the
net proceeds of the Camago-Malampaya Natural Gas Project. 10 However, on
February 11, 2003, the Sangguniang Panlalawigan of Palawan resolved to
call off further negotiations since the National Government would not grant
its expected share in the net proceeds amounting to approximately over
US$2 billion. 11
On March 14, 2003, then Palawan Governor Mario Joel T. Reyes wrote
to the Department of Energy, and the Department of Budget and
Management reiterating the Province's claim of its 40% share citing "long
historical precedent and the statutory definition of Palawan under Republic
Act No. 7611." 12
On May 7, 2003, the Province of Palawan filed a Petition for Declaratory
Relief, 13 docketed as Civil Case No. 3779, before the Regional Trial Court to
seek a judicial determination of its rights under Administrative Order No.
381, series of 1998; Republic Act No. 7611; Section 290 of the Local
Government Code; and Palawan Provincial Ordinance No. 474, series of
2000. In particular, it sought a judicial declaration that the Camago-
Malampaya reservoir was part of its territorial jurisdiction, and hence, it was
entitled to an equitable share in its utilization and development. 14
During the pendency of the case before the Regional Trial Court, or on
February 9, 2005, then Secretary of Energy Vincent S. Perez, Jr. (Perez), then
Secretary of Budget and Management Mario L. Relampagos (Relampagos),
and then Secretary of Finance Juanita D. Amatong (Amatong) executed an
Interim Agreement 15 with the Province of Palawan. This Interim Agreement
provided for equal sharing of the 40% being claimed by the Province of
Palawan, to be called the "Palawan Share," for its development and
infrastructure projects, environment protection and conservation,
electrification of 431 barangays, and establishment of facilities for the
security enhancements of the exclusive economic zone. 16
The Interim Agreement likewise stated that the release of funds would
be without prejudice to the outcome of the legal dispute between the parties.
Once Civil Case No. 3779 was decided with finality in favor of either party,
the shares already received would be treated as financial assistance. To this
end, the parties further agreed that the amount of P600,000,000.00 already
released to the Province of Palawan would be deducted from the initial
release of its 50% share in the 40% of the remitted funds. 17
On December 16, 2005, the Regional Trial Court rendered a Decision 18
holding that the Province of Palawan was entitled to a 40% share of the
revenues generated from the Camago-Malampaya Natural Gas Project from
October 16, 2001, in view of Article X, Section 7 of the Constitution and the
provisions of the Local Government Code.
Subsequently, the Province of Palawan filed a Motion to require the
Secretary of Energy, the Secretary of Budget and Management, and the
Secretary of Finance to render a full accounting of the actual payments
made by the Shell Consortium to the Bureau of Treasury from October 1,
2001 to December 2005, 19 and to freeze and/or place Palawan's 40% share
in an escrow account. 20
In its January 16, 2006 Amended Order, 21 the Regional Trial Court
issued a Freeze Order directing a full accounting of actual payments made
by Shell Consortium and ordering the Secretary of Finance to deposit 40% of
the Province of Palawan's share in escrow until the finality of its December
16, 2005 Decision.
On February 16, 2006, 22 the Republic filed a Petition for Review before
this Court, docketed as G.R. No. 170867, assailing the Regional Trial Court's
December 16, 2005 Decision and its January 16, 2006 Amended Order. 23
On June 6, 2006, the Regional Trial Court lifted its January 16, 2006
Amended Order in view of the pending Petition before this Court. The
Republic subsequently manifested that its arguments relating to the January
16, 2006 Amended Order no longer needed to be resolved unless the
Province of Palawan raises them as issues before this Court. 24
While the Petition was pending before this Court, or on July 25, 2007,
the National Government and the Province of Palawan, in conformity with the
representatives of the legislative districts of Palawan, executed a Provisional
Implementation Agreement 25 which allowed for the release of 50% of the
disputed 40% share of Palawan to be utilized for its development projects.
On December 1, 2007, then President Gloria Macapagal-Arroyo
(President Arroyo) issued Executive Order No. 683, authorizing the release of
funds pursuant to the Provisional Implementation Agreement, or 50% of the
disputed 40% share, without prejudice to this Court's final resolution of
Palawan's claim in G.R. No. 170867. 26
On February 7, 2008, Bishop Pedro Dulay Arigo (Bishop Arigo), Cesar N.
Sarino (Sarino), Dr. Jose Antonio N. Socrates (Dr. Socrates), and H. Harry L.
Roque, Jr. (Roque), as citizens and taxpayers, filed a Petition for Certiorari
against the Executive Secretary, the Secretary of Energy, the Secretary of
Finance, the Secretary of Budget and Management, the Palawan Governor,
the Representative of the First District of Palawan, the Philippine National Oil
Company Explorations Corporation President and Chief Executive Officer
before the Court of Appeals. The Petition assailed Executive Order No. 683,
series of 2007, and the Provisional Implementation Agreement for being
contrary to the Constitution and the Local Government Code. It also sought
the release of the Province of Palawan's full 40% share in the Camago-
Malampaya Natural Gas Project. 27
In its May 29, 2008 Resolution, 28 the Court of Appeals dismissed the
Petition on procedural grounds, finding that Bishop Arigo, Sarino, Dr.
Socrates, and Roque failed to submit the required documents substantiating
their allegations. It likewise noted that the Petition was prematurely filed
since the implementation of the Provisional Implementation Agreement was
contingent on the final adjudication of G.R. No. 170867. The Court of Appeals
also took judicial notice of the "on-going efforts" 29 by the Executive and
Legislative branches to arrive at a common position on the country's
baselines under the United Nations Convention on the Law of the Sea. Thus,
any judicial ruling may be tantamount to a "collateral adjudication" 30 of a
policy issue.
Bishop Arigo, Sarino, Dr. Socrates, and Roque filed a Motion for
Reconsideration, which was denied by the Court of Appeals in its December
16, 2008 Resolution. Hence, they filed a Petition for Review on Certiorari
before this Court, docketed as G.R. No. 185941, insisting that Executive
Order No. 683, series of 2007, and the Provisional Implementation
Agreement were invalid for being unconstitutional and for violating the
provisions of the Local Government Code. 31
G.R. Nos. 170867 and 185941 were consolidated by this Court on June
23, 2009. Oral arguments were heard on September 1, 2009 and November
24, 2009. 32
As of August 31, 2009, P61,190,210,012.25 has been remitted to the
Department of Energy. The amount claimed by the Province of Palawan as
its 40% share was P35,521,789,184.63 as of August 31, 2009. 33
It is the position of the ponencia that the interpretation of the phrase
"within their respective areas" in Article X, Section 7 of the Constitution 34
refers to only to areas where a local government unit exercises territorial
jurisdiction. The ponencia further opines that the territorial jurisdiction of a
local government unit is limited only to its land area and will not extend to
its marine waters, seabed, and subsoil. Thus, the equitable share of a local
government unit in the proceeds of the utilization and development of
national wealth within its respective area refers only to national wealth that
can be found within its land mass.
I disagree.
The Constitution declares it a policy of the State to ensure the

autonomy of local governments. 35
The entirety of Article X of the Constitution is devoted to local
governments. Under this article, local autonomy means "a more responsive
and accountable local government structure instituted through a system of
decentralization." 36 To this end, the Local Government Code reiterates the
declared policy of the State to ensure local autonomy, providing:
Section 2. Declaration of Policy. — (a) It is hereby declared
the policy of the State that the territorial and political subdivisions of
the State shall enjoy genuine and meaningful local autonomy to
enable them to attain their fullest development as self-reliant
communities and make them more effective partners in the
attainment of national goals. Toward this end, the State shall provide
for a more responsive and accountable local government structure
instituted through a system of decentralization whereby local
government units shall be given more powers, authority,
responsibilities, and resources. The process of decentralization shall
proceed from the national government to the local government units.
Under this concept of autonomy, administration over local affairs is
delegated by the national government to the local government units to be
more responsive and effective at the local level. 37 Thus, Section 17 of the
Local Government Code tasks local government units to provide basic
services and facilities to their local constituents:
Section 17. Basic Services and Facilities. — (a) Local
pursuant to this Code. Local government units shall likewise exercise
such other powers and discharge such other functions and
responsibilities as are necessary, appropriate, or incidental to
efficient and effective provision of the basic services and facilities
enumerated herein.
In addition to administrative autonomy, local governments are likewise
granted fiscal autonomy, or "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." 38 Section 18 of the Local Government
Code provides:
Section 18. Power to Generate and Apply Resources. —
Local government units shall have the power and authority to
establish an organization that shall be responsible for the efficient
and effective implementation of their development plans, program
objectives and priorities; to create their own sources of revenues and
to levy taxes, fees, and charges which shall accrue exclusively for
their use and disposition and which shall be retained by them; to have
a just share in national taxes which shall be automatically and
directly released to them without need of any further action; to have
an equitable share in the proceeds from the utilization and
development of the national wealth and resources within their
respective territorial jurisdictions including sharing the same with the
inhabitants by way of direct benefits; to acquire, develop, lease,
encumber, alienate, or otherwise dispose of real or personal property
held by them in their proprietary capacity and to apply their
resources and assets for productive, developmental, or welfare
purposes, in the exercise or furtherance of their governmental or
proprietary powers and functions and thereby ensure their
development into self-reliant communities and active participants in
the attainment of national goals.
The Local Government Code mandates that local government units
shall have "an equitable share in the proceeds from the utilization and
development of the national wealth and resources within their respective
territorial jurisdictions." This provision implements Article X, Section 7 of the
Constitution, which reads:
ARTICLE X
Local Government
General Provisions
Thus, Section 290 of the Local Government Code provides:
Section 290. Amount of Share of Local Government Units. —
Local government units shall, in addition to the internal revenue
allotment, have a share of forty percent (40%) of the gross collection
derived by the national government from the preceding fiscal year
from mining taxes, royalties, forestry and fishery charges, and such
other taxes, fees, or charges, including related surcharges, interests,
or fines, and from its share in any co-production, joint venture or
production sharing agreement in the utilization and development of
the national wealth within their territorial jurisdiction.
The controversy in this case revolves around the proper interpretation
of "within their respective areas" and "within their territorial jurisdiction."
II
The Constitution itself provides for the natural boundaries of the

State's political units. Article X, Section 1 of the Constitution allocates them
as either "territorial and political subdivisions" or "autonomous regions,"
thus:
ARTICLE X
Local Government
General Provisions
Section 1. The territorial and political subdivisions of the
Republic of the Philippines are the provinces, cities, municipalities,
and barangays. There shall be autonomous regions in Muslim
Mindanao and the Cordilleras as hereinafter provided.
Territorial and political subdivisions are the provinces, cities,
municipalities, and barangays. Article X, Section 2 of the Constitution further
provides:
Section 2. The territorial and political subdivisions shall
enjoy local autonomy.
Autonomous regions are covered by a different set of provisions in the
Constitution. 39 Thus, the territorial jurisdiction of an autonomous region is
not defined in the same manner as that of a territorial and political
subdivision.
A local government unit can only be created by an act of Congress. 40
Its creation is based on "verifiable indicators of viability and projected
capacity to provide services," 41 one of which is land area, thus:
(c) Land Area. — It must be contiguous, unless it comprises
two (2) or more islands or is separated by a local government unit
independent of the others; properly identified by metes and bounds
with technical descriptions; and sufficient to provide for such basic
services and facilities to meet the requirements of its populace.
Environment and Natural Resources (DENR). 42
The Local Government Code requires that the land area be contiguous
unless it comprises of two (2) or more islands. The same provision is
repeated throughout the Code, thus:
Section 386. Requisites for Creation. — . . .
(b) The territorial jurisdiction of the new Barangay shall be
properly identified by metes and bounds or by more or less
permanent natural boundaries. The territory need not be contiguous
if it comprises two (2) or more islands.
xxx xxx xxx
(b) The territorial jurisdiction of a newly-created
municipality shall be properly identified by metes and bounds. The
requirement on land area shall not apply where the municipality
proposed to be created is composed of one (1) or more islands. The
territory need not be contiguous if it comprises two (2) or more
islands.
xxx xxx xxx
(b) The territorial jurisdiction of a newly-created city shall be
properly identified by metes and bounds. The requirement on land
area shall not apply where the city proposed to be created is
composed of one (1) or more islands. The territory need not be
contiguous if it comprises two (2) or more islands.
xxx xxx xxx
The requirement of contiguity does not apply if the territory is
comprised of islands. All that is required is that it is properly identified by its
metes and bounds.
The Province of Palawan, previously known as Paragua, was organized
under Act No. 422. 43 Section 2 of the Act, as amended, provided:
Section 2. The Province of Paragua shall consist of all that
portion of the Island of Paragua north of a line beginning in the
middle of the channel at the mouth of the Ulugan River in the Ulugan
Bay, thence following the main channel of the Ulugan River to the
village of Bahile, thence along the main trail leading from Bahile to
the Tapul River, thence following the course of the Tapul River to its
mouth in the Honda Bay; except that the towns of Bahile and Tapul
the west boundary line shall be the arc of a circle with one mile
radius, the center of the circle being the center of the said towns of
Bahile and Tapul. There shall be included in the Province of Paragua
the small islands adjacent thereto, including Dumaran and the islands
forming the Calamianes group and the Cuyos Group. 44
The law that created the Province of Palawan had no technical
description. Instead, it anchored the province's borders on the bodies of
water surrounding it. Since, the province's metes and bounds are not
technically described, reference must be made to other laws interpreting the
province's borders.
Palawan comprises 1,780 islands. To determine its metes and bounds
would be to go beyond the contiguity of its land mass.
T h e ponencia places too much reliance on Tan v. Commission on
Elections, 45 a case that was decided long before the passage of the present
Local Government Code. In Tan , a petition was filed before this Court to halt
the conduct of a plebiscite to pass a law creating the province of Negros. A
question was raised on whether the marginal sea within the three (3)-mile
limit should be considered in determining a province's extent. This Court, in
finding the argument unmeritorious, held:

As so stated therein the "territory need not be contiguous if it
comprises two or more islands." The use of the word territory in this
particular provision of the Local Government Code and in the very last
sentence thereof, clearly, reflects that "territory" as therein used, has
reference only to the mass of land area and excludes the waters over
which the political unit exercises control. 46 (Emphasis omitted)
This Court's wording is peculiar. It speaks of territory as a mass of land
area, not waters, over which the political unit exercises control. In the same
breath, Tan also establishes that political units may have control over the
waters in their territory.
It can be presumed that when Tan discussed the metes and bounds of
a local government unit's territory, it only meant to refer to its physical land
area. It did not include a discussion on what may encompass a local
government unit's territorial jurisdiction.
In any case, the creation of a local government unit is not solely
dependent on land mass. Article 9 (2) of the Implementing Rules and
Regulations of the Local Government Code provides:
Article 9. Provinces. — (a) Requisites for creation — A
province shall not be created unless the following requisites on
income and either population or land area are present:
xxx xxx xxx
(2) Population or land area — Population which shall not be
less than two hundred fifty thousand (250,000) inhabitants, as
certified by NSO; or land area which must be contiguous with an area
of at least two thousand (2,000) square kilometers, as certified by
LMB. The territory need not be contiguous if it comprises two (2) or
more islands or is separated by a chartered city or cities which do not
contribute to the income of the province. The land area requirement
shall not apply where the proposed province is composed of one (1)
or more islands. The territorial jurisdiction of a province sought to be
created shall be properly identified by metes and bounds. (Emphasis
supplied)
I n Navarro v. Ermita, 47 a controversy arose on the creation of the
Province of Dinagat Islands considering that its total land mass was only
802.12 square kilometers, or below the 2,000 square kilometers required by
law. Petitioners in that case, who were the former Vice Governor and
members of the Provincial Board of the Province of Surigao del Norte,
questioned the constitutionality of Article 9 (2), arguing that the exemption
to land area requirement was not explicitly provided for in the Local
Government Code.
The majority initially declared Article 9 (2) unconstitutional for being an
extraneous provision not intended by the Local Government Code.
On reconsideration, however, the majority reversed its prior decision
and upheld the constitutionality of the assailed provision. 48 In particular,
Navarro found:
. . . [W]hen the local government unit to be created consists of
one (1) or more islands, it is exempt from the land area requirement
as expressly provided in Section 442 and Section 450 of the LGC if
the local government unit to be created is a municipality or a
component city, respectively. This exemption is absent in the
enumeration of the requisites for the creation of a province under
Section 461 of the LGC, although it is expressly stated under Article 9
(2) of the LGC-IRR.
There appears neither rhyme nor reason why this exemption
should apply to cities and municipalities, but not to provinces. In fact,
considering the physical configuration of the Philippine archipelago,
there is a greater likelihood that islands or group of islands would
form part of the land area of a newly-created province than in most
cities or municipalities. It is, therefore, logical to infer that the
genuine legislative policy decision was expressed in Section 442 (for
municipalities) and Section 450 (for component cities) of the LGC, but
was inadvertently omitted in Section 461 (for provinces). Thus, when
the exemption was expressly provided in Article 9 (2) of the LGC-IRR,
the inclusion was intended to correct the congressional oversight in
Section 461 of the LGC — and to reflect the true legislative intent. It
would, then, be in order for the Court to uphold the validity of Article
9 (2) of the LGC-IRR.
This interpretation finds merit when we consider the basic
policy considerations underpinning the principle of local autonomy.
xxx xxx xxx
Consistent with the declared policy to provide local government
units genuine and meaningful local autonomy, contiguity and
minimum land area requirements for prospective local government
units should be liberally construed in order to achieve the desired
results. The strict interpretation adopted by the February 10, 2010
Decision could prove to be counter-productive, if not outright absurd,
awkward, and impractical. Picture an intended province that consists
of several municipalities and component cities which, in themselves,
also consist of islands. The component cities and municipalities which
consist of islands are exempt from the minimum land area
requirement, pursuant to Sections 450 and 442, respectively, of the
LGC. Yet, the province would be made to comply with the minimum
land area criterion of 2,000 square kilometers, even if it consists of
several islands. This would mean that Congress has opted to assign a
distinctive preference to create a province with contiguous land area
over one composed of islands — and negate the greater imperative of
development of self-reliant communities, rural progress, and the
delivery of basic services to the constituency. This preferential option
would prove more difficult and burdensome if the 2,000-square-
kilometer territory of a province is scattered because the islands are
separated by bodies of water, as compared to one with a contiguous
land mass.
Moreover, such a very restrictive construction could trench on
the equal protection clause, as it actually defeats the purpose of local
autonomy and decentralization as enshrined in the Constitution.
Hence, the land area requirement should be read together with
territorial contiguity. 49
Neither can it be said that a local government unit's territorial
jurisdiction can only be exercised over its municipal waters.
The Local Government Code provides:
(r) "Municipal Waters" includes not only streams, lakes, and
tidal waters within the municipality, not being the subject of private
ownership and not comprised within the national parks, public forest,
timber lands, forest reserves or fishery reserves, but also marine
waters included between two lines drawn perpendicularly to the
general coastline from points where the boundary lines of the
municipality or city touch the sea at low tide and a third line parallel
with the general coastline and fifteen (15) kilometers from it. Where
two (2) municipalities are so situated on the opposite shores that
there is less than fifteen (15) kilometers of marine waters between
them, the third line shall be equally distant from opposite shores of
their respective municipalities. 50
Under this provision, Palawan can only exercise jurisdiction over waters
that are within 15 kilometers from its general coastline.
This narrow interpretation, however, disregards other laws that have
defined and specified portions of Palawan's territory and the extent of its
territorial jurisdiction.
Presidential Decree No. 1596 51 established the Kalayaan Island Group,
delineated as follows:
Section 1. The area within the following boundaries:
From a point [on the Philippine Treaty Limits] at
latitude 7º40' North and longitude 116º00' East of
Greenwich, thence due West along the parallel of 7º40' N
to its intersection with the meridian of longitude 112º10'
E, thence due north along the meridian of 112º10' E to its
intersection with the parallel of 9º00' N, thence
northeastward to the intersection of parallel of 12º00' N
with the meridian of longitude 114º30' E, thence, due
East along the parallel of 12º00' N to its intersection with
the meridian of 118º00' E, thence, due South along the
meridian of longitude 118º00' E to its intersection with
the parallel of 10º00' N, thence Southwestwards to the
point of beginning at 7º40' N, latitude and 116º00' E
longitude;
including the sea-bed, sub-soil, continental margin and air space shall
belong and be subject to the sovereignty of the Philippines. Such area
is hereby constituted as a distinct and separate municipality of the
Province of Palawan and shall be known as "Kalayaan". 52
The law categorically states that the area includes the seabed, subsoil,
and the continental margin, and that the island shall be a municipality in the
Province of Palawan.
Republic Act No. 7611, or the Strategic Environmental Plan for
Palawan, includes in its Environmentally Critical Areas Network:
Section 8. Main Components. — . . .
(1) Terrestrial — The terrestrial component shall consist of
the mountainous as well as ecologically important low hills and
lowland areas of the whole province. It may be further subdivided into
smaller management components.
(2) Coastal/marine area — This area includes the whole
coastline up to the open sea. This is characterized by active fisheries
and tourism activities; and
(3) Tribal Ancestral lands — These are the areas
traditionally occupied by the cultural communities. (Emphasis
supplied)
Under this law, local chief executives, together with representatives of
national government, are tasked with the protection and preservation of
environmentally critical areas in Palawan. This includes the exercise of
jurisdiction beyond the province's land mass.
Under Article 76 (1) of the United Nations Convention on the Law of the
Sea:
1. The continental shelf of a coastal State comprises the
seabed and subsoil of the submarine areas that extend beyond its
territorial sea throughout the natural prolongation of its land territory
to the outer edge of the continental margin, or to a distance of 200
nautical miles from the baselines from which the breadth of the
territorial sea is measured where the outer edge of the continental
margin does not extend up to that distance.
In the recent arbitral case between the Republic and China, the
Permanent Court of Arbitration, in ruling favorably for the Republic, made
the following factual findings:
285. Cuarteron Reef is known as "Huayang Jiao" ( ) in China
and "Calderon Reef" in the Philippines. It is a coral reef located at
08º 51' 41'' N, 112º 50' 08'' E and is the easternmost of four
maritime features known collectively as the London Reefs that
are located on the western edge of the Spratly Islands. Cuarteron
Reef is 245.3 nautical miles from the archipelagic baseline of the
Philippine island of Palawan and 585.3 nautical miles from
China's baseline point 39 (Dongzhou (2)) adjacent to the island of
Hainan. The general location of Cuarteron Reef, along with the
other maritime features in the Spratly Islands, is depicted in Map
3 on page 125 below.
286. Fiery Cross Reef is known as "Yongshu Jiao" ( ) in China
and "Kagitingan Reef" in the Philippines. It is a coral reef located
at 09º 33' 00'' N, 112º 53' 25'' E, to the north of Cuarteron Reef
and along the western edge of the Spratly Islands, adjacent to
the main shipping routes through the South China Sea. Fiery
Cross Reef is 254.2 nautical miles from the archipelagic baseline
of the Philippine island of Palawan and 547.7 nautical miles from
the China's baseline point 39 (Dongzhou (2)) adjacent to the
island of Hainan.
287. Johnson Reef, McKennan Reef, and Hughes Reef are all coral
reefs that form part of the larger reef formation in the centre of
the Spratly Islands known as Union Bank. Union Bank also
includes the high-tide feature of Sin Cowe Island. Johnson Reef
(also known as Johnson South Reef) is known as "Chigua Jiao" (
) in China and "Mabini Reef" in the Philippines. It is located
at 9º 43' 00'' N, 114º 16' 55'' E and is 184.7 nautical miles from
the archipelagic baseline of the Philippine island of Palawan and
570.8 nautical miles from China's baseline point 39 (Dongzhou
(2)) adjacent to Hainan. Although the Philippines has referred to
"McKennan Reef (including Hughes Reef)" in its Submissions, the
Tribunal notes that McKennan Reef and Hughes Reef are distinct
features, albeit adjacent to one another, and considers it
preferable, for the sake of clarity, to address them separately.
McKennan Reef is known as "Ximen Jiao" ( ) in China and,
with Hughes Reef, is known collectively as "Chigua Reef" in the
Philippines. It is located at 09º 54' 13'' N, 114º 27' 53'' E and is
181.3 nautical miles from the archipelagic baseline of the
China's baseline point 39 (Dongzhou (2)) adjacent to Hainan.
Hughes Reef is known as "Dongmen Jiao" ( ) in China and,
with McKennan Reef, is known collectively as "Chigua Reef" in
the Philippines. It is located at 09º 54' 48'' N, 114º 29' 48'' E and
is 180.3 nautical miles from the archipelagic baseline of the
288. The Gaven Reefs are known as "Nanxun Jiao" ( ) in China
and "Burgos" in the Philippines. They constitute a pair of coral
reefs that forms part of the larger reef formation known as Tizard
Bank, located directly to the north of Union Bank. Tizard Bank
also includes the high-tide features of Itu Aba Island, Namyit
Island, and Sand Cay. Gaven Reef (North) is located at 10º 12'
27'' N, 114º 13' 21'' E and is 203.0 nautical miles from the
archipelagic baseline of the Philippine island of Palawan and
544.1 nautical miles from China' s baseline point 39 (Dongzhou
(2)) adjacent to Hainan. Gaven Reef (South) is located at 10º 09'
42'' N, 114º 15' 09'' E and is 200.5 nautical miles from the
(2)) adjacent to Hainan.
289. Subi Reef is known as "Zhubi Jiao" ( ) in China and
"Zamora Reef" in the Philippines. It is a coral reef located to the
north of Tizard Bank and a short distance to the south-west of the
high-tide feature of Thitu Island and its surrounding Thitu Reefs.
Subi Reef is located at 10º 55' 22'' N, 114º 05' 04'' E and lies on
the north-western edge of the Spratly Islands. Subi Reef is 231.9
nautical miles from the archipelagic baseline of the Philippine
island of Palawan and 502.2 nautical miles from China's baseline
point 39 (Dongzhou (2)) adjacent to Hainan.
290. Mischief Reef and Second Thomas Shoal are both coral reefs
located in the centre of the Spratly Islands, to the east of Union
Bank and to the south-east of Tizard Bank. Mischief Reef is known
as "Meiji Jiao" ( ) in China and "Panganiban" in the
Philippines. It is located at 09º 54' 17'' N, 115º 31' 59'' E and is
125.4 nautical miles from the archipelagic baseline of the
Second Thomas Shoal is known as "Ren' ai Jiao" ( ) in China
and "Ayungin Shoal" in the Philippines. It is located at 09º 54' 17''
N, 115º 51' 49'' E and is 104.0 nautical miles from the
(2)) adjacent to Hainan. 53
The Permanent Court of Arbitration used the Province of Palawan as its
baseline point to determine the reefs' proximity to the Philippines. The
Republic likewise made argument with regard to Reed Bank in asserting its
sovereignty over the Kalayaan Island Group:
FIRST, the Republic of the Philippines has sovereignty and
jurisdiction over the Kalayaan Island Group (KIG);
SECOND, even while the Republic of the Philippines has
sovereignty and jurisdiction over the KIG, the Reed Bank where GSEC
101 is situated does not form part of the "adjacent waters,"
specifically the 12 M territorial waters of any relevant geological
feature in the KIG either under customary international law or the
United Nations Convention on the Law of the Sea (UNCLOS);
THIRD, Reed Bank is not an island, a rock, or a low tide
elevation. Rather, Reed Bank is a completely submerged bank that is
part of the continental margin of Palawan. Accordingly, Reed Bank,
which is about 85 M from the nearest coast of Palawan and about 595
M from the coast of Hainan, forms part of the 200 M continental shelf
of the Philippine archipelago under UNCLOS[.] 54
The Republic has manifested before an international audience that it
exercises sovereignty over territories without a definitive land mass on the
ground that they form part and parcel of the Province of Palawan. Thus, it
recognized that jurisdiction can be established even over areas which are
not susceptible of land mass or defined by contiguity.
In any case, the grant of an equitable share in the utilization and
development of resources within a local government unit's territorial
jurisdiction has practical basis.
When resources are being utilized and developed in a certain area,
there will be a need for the surrounding areas to be secured. The
environmental impacts to the nearby community will have to be addressed.
While amicus curiae Secretary General Bensurto eventually concluded that
the Camago-Malampaya reservoir was not within Palawan's territorial
jurisdiction, he nonetheless made the following observations:
1. The proximity of the Camago-Malampaya gas reservoir to the
Province of Palawan makes the latter environmentally vulnerable
to any major accidents in the gas reservoir;
2. The gas pipes of the Camago-Malampaya pass through the
Northern part of the Palawan Province. 55
The local government unit's equitable share is meant to address the
possible effects that the project may have on the local population. It can also
assist in strengthening the economic development of the local government
unit and uplift the lives of its constituents.
III
The ponencia submits that there was no estoppel on the part of the
Executive Branch when it promulgated issuances recognizing the Province of
Palawan's share in the Camago-Malampaya Project, as they were merely
"based on a mistaken assumption." 56
The doctrine of contemporaneous construction is settled. In Tamayo v.
Manila Hotel Company: 57
It is a rule of statutory construction that "courts will and should
respect the contemporaneous construction placed upon a statute by
the executive officers, whose duty it is to enforce it and unless such
interpretation is clearly erroneous will ordinarily be controlled
thereby." 58
Another variation of the doctrine states:
. . . [An] order, constituting executive or contemporaneous
construction of a statute by an administrative agency charged with
the task of interpreting and applying the same, is entitled to full
respect and should be accorded great weight by the courts, unless
such construction is clearly shown to be in sharp conflict with the
Constitution, the governing statute, or other laws. 59 (Citation
omitted)
The National Government has repeatedly recognized that the Province
of Palawan was entitled to an equitable share in the proceeds of its
utilization and development.
Administrative Order No. 381, issued by then President Ramos,
expressly recognized that the National Government would share in the net
proceeds of the Camago-Malampaya Natural Gas Project. 60 In particular, it
provided:
WHEREAS, under SC 38, as clarified, a production sharing
scheme has been provided whereby the Government is entitled to
receive an amount equal to sixty percent (60%) of the net proceeds
from the sale of Petroleum (including Natural Gas) produced from
Petroleum Operations (all as defined in SC 38) while Shell/Oxy, as
Service Contractor is entitled to receive an amount equal to forty
percent (40%) of the net proceeds;
xxx xxx xxx
WHEREAS, the Government has determined that it can derive
the following economic and social benefits from the Natural Gas
Project:
xxx xxx xxx
2. based on the estimated production level and Natural Gas
pricing formula between the Sellers and the Buyers of such Natural
Gas, the estimated Government revenues for the 20-year contract
period will be around US$8.1 billion; this includes estimated revenues
to be generated from the available oil and condensate reserves of the
Camago-Malampaya Reservoir; the province of Palawan is expected
to receive about US$2.1 billion from the total Government share of
US$8.1 billion;
xxx xxx xxx
WHEREAS, the Government's share in Petroleum (including
Natural Gas) produced under SC 38, as clarified, will be reduced (i) by
the share of concerned local government units pursuant to the Local
Government Code and (ii) by amounts of income taxes due from and
paid on behalf of the Service Contractor (the resulting amounts
hereinafter called the "Net Government Share") [.] 61
On June 10, 1998, then Secretary of Energy Viray wrote a letter to then
Palawan Governor Socrates, requesting for a deferred payment of 50% of
Palawan's share in the Camago-Malampaya Natural Gas Project, 62 which
likewise shows an effort by the Executive Branch to fulfill its commitments to
the Province of Palawan.
After the formal launch of the Camago-Malampaya Natural Gas Project,
negotiations occurred between agents of the National Government and the
Province of Palawan, to determine the Province of Palawan's share in the net
proceeds, until it was called off by the Province of Palawan. 63 This is yet
another instance of the Executive Branch's acceptance of the Province of
Palawan's territorial jurisdiction over the area. Otherwise, there would have
been no need to negotiate.
Even when the case before the Regional Trial Court was pending, then
Secretary of Energy Perez, then Secretary of Budget and Management
Relampagos, and then Secretary of Finance Amatong executed an Interim
Agreement 64 with the Province of Palawan, providing for equal sharing of
the 40% being claimed by the Province of Palawan, to be called the "Palawan
Share," for its development and infrastructure projects, environment
protection and conservation, electrification of 431 barangays, and
establishment of facilities for the security enhancements of the exclusive
economic zone. 65
Representatives of the National Government, with authority from then
President Arroyo, and the Province of Palawan, in conformity with the
representatives of the legislative districts of Palawan, likewise executed a
Provisional Implementation Agreement which allowed for the release of 50%
of the disputed 40% share to be utilized for development projects in
Palawan.
Then President Arroyo issued Executive Order No. 683 dated December
1, 2007, pertinent portions of which state:
WHEREAS, on 11 December, 1990, the Republic of the
Philippines, represented by the Department of Energy (DOE), entered
into Service Contract No. 38 (SC 38) and engaged the services of a
consortium composed today of Shell B.V., Shell Philippines LLC,
Chevron Malampaya LLC and PNOC-Exploration Corporation (EC), as
Contractor for the exploration, development and production of
petroleum resources in an identified offshore area, known as the
Camago-Malampaya Reservoir, to the West Philippines Sea;
xxx xxx xxx
WHEREAS, President as Chief Executive has a broad perspective
of the requirements to develop Palawan as a major tourism
destination from the point of view of the National Government, which
has identified the Central Philippines Superregion, of which Palawan is
a part, for tourism infrastructure investments;
WHEREAS, there is a pending court dispute between the
National Government and the Province of Palawan on the issue of
whether Camago-Malampaya Reservoir is within the territorial
boundaries of the Province of Palawan thus entitling the said province
to 40% of the Net Government Share in the proceeds of SC 38
pursuant to Sec. 290 of Republic Act No. (RA) 7160, otherwise known
as the "Local Government Code";
WHEREAS, Sec. 25 of RA 7160 provides that the President may,
upon request of the local government unit (LGU) concerned, direct
the appropriate national government agency to provide financial,
technical or other forms of assistance to the LGU;
WHEREAS, the duly-authorized representatives of the National
Government and the Province of Palawan, with the conformity of the
Representatives of the Congressional District of Palawan, have agreed
on a Provisional Implementation Agreement (PIA) that would allow
50% of the disputed 40% of the Net Government Share in the
proceeds of SC 38 to be utilized for the immediate and effective
implementation of development projects for the people of Palawan;
NOW, THEREFORE, I, GLORIA M. ARROYO, President of the
Philippines, by virtue of the power vested in me by law, do hereby
order:
SECTION 1. Subject to existing laws, and the usual
government accounting and auditing rules and regulations, the
Department of Budget and Management (DBM) is hereby authorized
to release funds to the implementing agencies (IA) pursuant to the
PIA, upon the endorsement and submission by the DOE and/or the
PNOC Exploration Corporation of the following documents:
1.1. Directive by the Office of the President or written request of
the Province of Palawan, the Palawan Congressional Districts or
the Highly Urbanized City of Puerto Princesa, for the funding of
designated projects;
1.2. A certification that the designated projects fall under the
investment program of the Province of Palawan, City of Puerto
Princesa, and/or the development projects identified in the
development program of the National Government or its
agencies; and
1.3. Bureau of Treasury certification on the availability of funds
from the 50% of the 40% share being claimed by the Province of
Palawan from the Net Government Share under SC 38;
Provided, that the DBM shall be subject to the actual collections
deposited with the National Treasury, and shall be in accordance with
the Annual Fiscal Program of the National Government.
xxx xxx xxx
SECTION 3. The National government, with due regard to
the pending judicial dispute, shall allow the Province of Palawan, the
Congressional Districts of Palawan and the City of Puerto Princesa to
securitize their respective shares in the 50% of the disputed 40% of
the Net Government Share in the proceeds of SC 38 pursuant to the
PIA. For the purpose, the DOE shall, in consultation with the
Department of Finance, be responsible for preparing the Net
Government Revenues for the period of to June 30, 1010.
SECTION 4. The amounts released pursuant to this EO shall
be without prejudice to any on-going discussions or final judicial
resolution of the legal dispute regarding the National Government's
territorial jurisdiction over the areas covered by SC 38 in relation to
the claim of the Province of Palawan under Sec. 290 of RA 7160.
These enactments show the Executive Branch's contemporaneous
construction of Section 290 of the Local Government Code in relation to
Service Contract No. 38.
Contemporaneous construction is resorted to when there is an
ambiguity in the law and its provisions cannot be discerned through plain
meaning. The interpretation of those called upon to implement the law is
given great respect. 66
Given the ambiguity of the phrase "within their respective areas" under
Article X, Section 7 of the Constitution, it was necessary to resort to the
examination of prior and subsequent acts of those required to implement the
law.
Considering that the Executive Branch has consistently recognized the
Province of Palawan's entitlement to its equitable share in the net proceeds
of the Camago-Malampaya Natural Gas Project, its interpretation must be
given its due weight.
The ponencia, in confining territorial jurisdiction to only that of land
mass, does a disservice to the entirety of Article X, Section 7, which reads:
ARTICLE X
Local Government
General Provisions
Under this provision, local governments are entitled to an equitable
share in the proceeds of the utilization and development of the national
wealth within their respective areas, in the manner provided by law. This
means that law may define what could be included within a local
government's respective area.
Thus, the extent of a local government unit's territorial jurisdiction
cannot be limited only to its land mass, as defined by the Local Government
Code. Reference must also be made to other statutes.
In this instance, Presidential Decree No. 1596 and Republic Act No.
7611 grants the Province of Palawan territorial jurisdiction over areas that
are beyond its coastline. Presidential Decree No. 1596 even explicitly
declares that the Province of Palawan may have territorial jurisdiction over
the continental shelf of the Kalayaan Island Group. Thus, I cannot agree with
t h e ponencia's recommendation that territorial jurisdiction is exercised
solely over a local government's land mass.
Unfortunately, the Province of Palawan failed to provide sufficient
evidence to show that the Camago-Malampaya Natural Gas Project was
within its area of responsibility. The maps submitted to this Court were
inadequate to prove that the Province of Palawan's claims. Thus, I am
constrained to vote with the majority.
Accordingly, I vote to GRANT the Petition in G.R. No. 170867 and
DENY the Petition in G.R. No. 189514.
Footnotes
* No Part.
** On leave.
1. Rollo (G.R. No. 170867), pp. 9-81.
2. Penned by Judge Bienvenido C. Blancaflor; id. at 83-112.
3. Id. at 113-116.
4. Rollo (G.R. No. 185941), pp. 13-58.
5. Penned by Associate Justice Rebecca De Guia-Salvador, concurred in by
Associate Justices Vicente S.E. Veloso and Apolinario D. Bruselas, Jr.; id. at
218-224.
6. AUTHORIZING THE USE OF FEES, REVENUES AND RECEIPTS FROM SERVICE
CONTRACT NO. 38 FOR THE IMPLEMENTATION OF DEVELOPMENT PROJECTS
FOR THE PEOPLE OF PALAWAN. Issued on December 1, 2007. Rollo , (G.R. No.
170867), pp. 392-J-392-L.
7. Rollo (G.R. No. 185941), pp. 250-252.
8. Rollo (G.R. No. 170867), pp. 14, 556, 891, 1464-1465; rollo (G.R. No. 185941), p.
17. TSN, November 24, 2009, p. 15.
9. Rollo (G.R. No. 170867), p. 1465.
10. Id. at 1466.
11. "Net proceeds" is defined under Section VII, paragraph 7.3 (c) of Service
Contract No. 38 as the difference between the gross income and the sum of
the Operating Expenses as defined in Section II, paragraph 2.19 of the
contract. Rollo (G.R. No. 185941), pp. 165 and 182.
12. Third Whereas Clause, Administrative Order No. 381; rollo (G.R. No. 170867),
pp. 549 and 556.
13. First Whereas Clause, Executive Order No. 683 issued on December 1, 2007; id.
at 392-J.
14. PROVIDING FOR THE FULFILLMENT BY THE NATIONAL POWER CORPORATION OF
ITS OBLIGATIONS UNDER THE AGREEMENT FOR THE SALE AND PURCHASE OF
NATURAL GAS DATED DECEMBER 30, 1997 WITH SHELL PHILIPPINE
EXPLORATION B.V./OCCIDENTAL PHILIPPINES, INC. AND THE COMPLIANCE OF
THE NATIONAL GOVERNMENT, THROUGH THE DEPARTMENT OF FINANCE
AND THE DEPARTMENT OF ENERGY WITH ITS PERFORMANCE UNDERTAKING
THEREFOR AND OTHER PURPOSES. Issued on February 17, 1998. Id. at 549-
550-A.
15. Fifteenth Whereas Clause, Administrative Order No. 381, paragraph 2; id. at
549-A and 892.
16. Id. at 551-552, 892-893.
17. Id. at 892.
18. Sec. 290. Amount of Share of Local Government Units. — Local government
19. Rollo (G.R. No. 170867), pp. 14, 894-895.
20. Id. at 128-129.
21. Id. at 15-16, 127-129, 895-896.
22. Id. at 130-158.
23. AN ACT ADOPTING THE STRATEGIC ENVIRONMENT PLAN FOR PALAWAN,
CREATING THE ADMINISTRATIVE MACHINERY TO ITS IMPLEMENTATION,
CONVERTING THE PALAWAN INTEGRATED AREA DEVELOPMENT PROJECT
OFFICE TO ITS SUPPORT STAFF, PROVIDING FUNDS THEREFOR, AND FOR
OTHER PURPOSES. Approved on June 19, 1992.
24. AN ACT PROVIDING FOR A LOCAL GOVERNMENT CODE OF 1991.
25. An Ordinance Delineating the Territorial Jurisdiction of the Province of Palawan.
Rollo (G.R. No. 170867), pp. 149 and 972.
26. Id. at 16-17, 130-158.
27. Id. at 89, 92.
28. Id. at 555-561.
29. Id. at 557-559, 896-897.
30. Id. at 897.
31. Id. at 112.
32. Id. at 109.
33. Id. at 109-110.
34. 226 Phil. 624 (1986).
35. 321 Phil. 395 (1995).
36. 86 Phil. 629 (1950).
37. Rollo (G.R. 170867), p. 111.
38. Id.
39. Id. at 112.
40. Id. at 17, 113-114.
41. Id. at 17-18.
42. Id. at 113.
43. Id. at 435.
44. Id. at 113-116.
45. Id. at 115-116.
46. Id. at 114.
47. 473 Phil. 806 (2004).
48. Rollo (G.R. No. 170867), p. 115.
49. Id. at 417-432.
50. Id. at 18 and 437.
51. Id. at 9-81.

52. Id. at 18, 21, 437.
53. Id. at 622-625.
54. Id. at 625.
55. Id.
56. Id. at 438.
57. Sixth Whereas Clause, Executive Order No. 683 issued on December 1, 2007;
id. at 392-J; <https://www.dbm.gov.ph/wp-
content/uploads/Issuances/2008/Joint%20Circular/JC_No3/jc_no3.pdf>.
58. Rollo (G.R. No. 185941), pp. 62-96.

59. Id. at 20 and 219.
60. Id. at 20-21, 219.
61. Id. at 21, 219-220.
62. Id. at 218-224.
63. Id. at 220-223.
64. Id. at 249.
65. Id. at 22.

66. Id. at 250-252.
67. Id. at 13-58.
68. Id. at 25.
69. Id. at 14.
70. Id. at 327.
71. Rollo (G.R. No. 170867), pp. 1210-1214.
72. Id. at 1260-1261.
73. Id. at 1466-1467.
74. Id. at 1467.
75. From 2002 to 2007, there were no or minimal remittance because of the Take-
or-Pay Quantity (TOPQ) obligation of the National Power Corporation as
implemented through Administrative Order No. 381 issued on February 17,
1998. Id.
76. Id. at 22.
77. Id.
78. Id. at 23.
79. Id.
80. Supra note 34.
81. Id. at 24.
82. Id. at 23-25.
83. Id. at 1473-1474.
84. Id. at 1475-1476.
85. Id. at 1481 and 1483.
86. Id. at 1487-1488.
87. Section 4. Definition of Terms. — x x x
xxx xxx xxx
58. Municipal waters — include not only streams, lakes, inland bodies of
water and tidal waters within the municipality which are not included within
the protected areas as defined under Republic Act No. 7586 (The NIPAS Law),
public forest, timber lands, forest reserves or fishery reserves, but also
marine waters included between two (2) lines drawn perpendicular to the
general coastline from points where the boundary lines of the municipality
touch the sea at low tide and a third line parallel with the general coastline
including offshore islands and fifteen (15) kilometers from such coastline.
Where two (2) municipalities are so situated on opposite shores that there is
less than thirty (30) kilometers of marine waters between them, the third line
shall be equally distant from opposite shore of the respective municipalities.
88. AN ACT PROVIDING FOR THE DEVELOPMENT, MANAGEMENT AND

CONSERVATION OF THE FISHERIES AND AQUATIC RESOURCES, INTEGRATING
ALL LAWS PERTINENT THERETO, AND FOR OTHER PURPOSES. Approved on
February 25, 1998.
89. Rollo (G.R. No. 170867), p. 26.
90. Id. at 26-28.
91. Id. at 28-29, 1559, 1562-1563.
92. Id. at 29-30, 1564.
93. Id. at 30, 1564-1565.
94. Supra note 36.
95. Rollo (G.R. No. 170867), pp. 30-31, 1566.
96. Id. at 32-33.
97. Id. at 1501-1502.
98. Id. at 1503.
99. Id. at 1556-1557.

100. Id. at 1557.
101. Id. at 34-35.
102. Id. at 36.
103. Id. at 1499-1501.
104. Id. at 37-38.
105. Id. at 38-40, 1530, 1532-1533.
106. Id. at 40-46.
107. DECLARING CERTAIN AREA PART OF THE PHILIPPINE TERRITORY AND
PROVIDING FOR THEIR GOVERNMENT AND ADMINISTRATION. Issued on June
11, 1978.
108. Rollo (G.R. 170867), pp. 46 and 1498.
109. Id. at 47-49 and 1492.
110. Id. at 1499.
111. Id. at 1504-1508.
112. Id. at 1487-1488 and 1511.
113. Id. at 1511-1513.
114. Id. at 1518.
115. Id. at 1519-1520.
116. Id. at 49.
117. Id. at 49-50.
118. Id. at 1576-1577 and 1579.
119. Id. at 1580.
120. Id. at 51 and 1580-1581.

121. Id. at 52.
122. Id. at 52 and 1579-1580.
123. Id. at 52.
124. Id. at 1552.
125. Id. at 54-56, 1548-1551.
126. Id. at 56-57.
127. Id. at 60 and 1533-1534.
128. Id. at 1535.
129. Id. at 62 and 1535.
130. Id. at 1535.
131. Id. at 60-61 and 1535.
132. Id. at 62 and 1535-1536.
133. Id.
134. Id. at 1567-1570.
135. Id. at 1536-1538.
136. Id. at 1572-1574.
137. Id. at 1473.
138. Id. at 1582-1583.
139. Id. at 1584.
140. Id. at 1588-1590.
141. Id. at 1590.
142. Id. at 63-65.
143. Id. at 66 and 72, citing Westminster High School v. Bernardo, 51 O.G. 6245.
144. Rollo (G.R. No. 185941), pp. 299-300.
145. Id. at 303-305.
146. Id. at 26 and 589.
147. Id. at 29 and 591.
148. Id. at 29-30 and 592.

149. Id. at 30 and 592.
150. 391 Phil. 84 (2000).
151. Rollo (G.R. No. 185941), pp. 30-31, 592-593
152. Id. at 30 and 593.
153. Id. at 31 and 593.
154. Id. at 33 and 595.
155. SECTION 29.
(1) No money shall be paid out of the Treasury except in pursuance of an
appropriation made by law.
xxx xxx xxx
(3) All money collected on any tax levied for a special purpose shall be
treated as a special fund and paid out for such purpose only. If the purpose
for which a special fund was created has been fulfilled or abandoned, the
balance, if any, shall be transferred to the general funds of the Government.
156. Rollo (G.R. No. 185941), p. 601.
157. Id. at 37-38, 42-43, 581, 586-587.
158. Id. at 599-600.
159. Id. at 602.
160. Id. at 34 and 596.

161. Id. at 603-604.
162. Id. at 36-37, 597-598.
163. Id. at 49-50 and 605.
164. Rollo (G.R. No. 170867), p. 907.
165. Id. at 908.
166. Id. at 908-908-A.
167. Id. at 909-910.
168. Id. at 910-911.
169. Id. at 912-914, 1380-1381.
170. Id. at 1381-1382.

171. Id. at 915-916 and 1382.
172. Id. at 916-918, 1383-1385.
173. Id. at 919.
174. Id. at 919-920 and 1386.
175. Id. at 921.
176. Id. at 922 and 1389.
177. Id. at 922-926 and 1389.
178. Id. at 924-925, 1389-1390, 1392.
179. Id. at 922-923.
180. Id. at 926, 1393-1394.
181. Id. at 927.
182. Id. at 927 and 1394.
183. Id. at 972, 1397-1398.

184. Id. at 973-974, 1397, 1400.
185 Id. at 1397.
186. Id. at 1399.
187. Id. at 974.
188. Id. at 958 and 1400.
189. Id. at 928.
190. Id. at 928 and 1394.
191. Id. at 950-951.
192. Id. at 929-930.
193. Id. at 937-938.
194. Id. at 940-944 and 1373.
195. Id. at 1377.
196. Id. at 1377-1379.

197. 160 Phil. 343 (1975).
198. Rollo (G.R. No. 170867), p. 941.
199. Id. at 942-943.
200. Id. at 943-944.
201. 343 Phil. 670 (1997).
202. Rollo (G.R. No. 170867), pp. 955-958.
203. Id. at 939.
204. Id. at 945-948.
205. Id. at 1403-1404.
206. Id. at 959.
207. Id. at 962, 967-968.
208. Id. at 968-969.
209. Id. at 1402-1403.
210. Id. at 969-971.
211. Id. at 977-978.

212. Id. at 978-979.
213. Id. at 981-985.
214. Id. at 1410.
215. Id. at 1410-1411.
216. Id. at 1411.
217. Id.
218. Id. at 1412.
219. Id.
220. Id. at 1412-1413.
221. Id. at 1413-1414.
222. Id. at 1409-1410.
223. Record of the 1986 Constitution Commission, Volume III, pp. 178, 216 and
482.
224. Record of the Senate, May 8, 1990, p. 16.
225. Record of the Bicameral Conference Committee on Local Government,
February 12, 1991, pp. 8-9.
226. Record of the Bicameral Conference Committee on Local Government,
September 4, 1991, pp. 12-13.
227. Section 459.
228. Section 440.
229. Section 448.
230. Record of the 1986 Constitution Commission, Volume III, pp. 178 and 194.
231. <http://www.merriam-webster.com/dictionary/area> (last updated November
28, 2018).
232. 322 Phil. 774 (1996).
233. Id. at 783.
234. Id.
235. 321 Phil. 259, 265-266 (1995).
236. 607 Phil. 104 (2009).
237. Id. at 121.
238. Rollo (G.R. No. 170867), p. 1574.
239. Id. at 1575.
240. Under Section 17 of the Local Government Code, municipalities and provinces
are authorized to exercise such powers as are "necessary, appropriate or
incidental to efficient provisions of the basic services and facilities
enumerated (therein)," including:
xxx xxx xxx
(2) For a Municipality:
xxx xxx xxx
(ii)Pursuant to national policies and subject to supervision, control

and review of the DENR, implementation of community-based forestry
projects which include integrated social forestry programs and similar
projects; management and control of communal forests with an area not
exceeding fifty (50) square kilometers; establishment of tree parks,
greenbelts, and similar forest development projects;
xxx xxx xxx
(3) For a Province:
xxx xxx xxx
(iii)Pursuant to national policies and subject to supervision, control

and review of the DENR, enforcement of forestry laws limited to
community-based forestry projects, pollution control law, small-scale mining
law, and other laws on the protection of the environment; and mini-
hydroelectric projects for local purposes;
xxx xxx xxx (Emphasis ours)

241. Rollo (G.R. No. 170867), p. 1485.
242. Id. at 478.
243. Id. at 474.

244. Id. at 478.
245. Records of the Bicameral Conference Committee on Local Government,
February 12, 1991, p. 39.
246. <https://www.merriam-webster.com/dictionary/jurisdiction#legalDictionary>
(last updated November 27, 2018).
247. Section 14, Executive Order No. 192 (1987).
248. <https://www.merriam-webster.com/legal/metes%20and%20bounds>.
249. Supra note 34.
250. Id. at 645-647.

251. AN ACT ENACTING A LOCAL GOVERNMENT CODE. Approved on February 10,
1983.
252. Aquilino Q. Pimentel, Jr., The Local Government Code, 2011 Edition, p. 44.
253. Record of the Senate, September 10, 1990, pp. 959-960.
254. TSN, November 24, 2009, p. 7.

255. Record of the 1986 Constitutional Commission, Volume III, pp. 178, 194 and
221.
256. Aquilino Q. Pimentel, Jr., The Local Government Code, 2011 Edition, p. 434.
257. Rollo (G.R. No. 170867), pp. 1595-1602.

258. AN ACT PROVIDING FOR THE ORGANIZATION OF A PROVINCIAL GOVERNMENT
IN THE PROVINCE OF PARAGUA, AND DEFINING THE LIMITS OF THAT
PROVINCE. Approved on June 23, 1902.
259. AN ACT AMENDING ACT NUMBERED FOUR AND TWENTY-TWO, PROVIDING FOR
THE ORGANIZATION OF A PROVINCIAL GOVERNMENT IN THE PROVINCE OF
PARAGUA AND DEFINING THE LIMITS OF THAT PROVINCE, BY FIXING NEW
BOUNDARIES FOR THE PROVINCE OF PARAGUA. Approved on December 22,
1902.
260. AN ACT TO AMEND ACT NUMBERED FOUR HUNDRED AND TWENTY-TWO, AS
AMENDED, BY DEFINING NEW LIMITS FOR THE PROVINCE OF PARAGUA AND
FOR OTHER PURPOSES. Approved on May 14, 1903.
261. AN ACT CHANGING THE NAME OF THE PROVINCE AND ISLAND OF PARAGUA
TO THAT OF PALAWAN. Approved on June 28, 1905.
262. AN ACT PROVIDING FOR THE ORGANIZATION OF PROVINCIAL GOVERNMENTS
OF THE PHILIPPINE ISLANDS, OTHER THAN THE MORO PROVINCE, WHICH ARE
NOT ORGANIZED UNDER THE PROVISIONS OF THE PROVINCIAL
GOVERNMENT ACT NUMBERED EIGHTY-THREE, AND REPEALING ACTS
NUMBERED FORTY-NINE, THREE HUNDRED AND THIRTY-SEVEN, FOUR
HUNDRED AND TEN, FOUR HUNDRED AND TWENTY-TWO, FOUR HUNDRED
AND FORTY-ONE, FIVE HUNDRED, FIVE HUNDRED AND SIXTY-SIX, AND FIVE
HUNDRED AND SIXTY-SEVEN, AND SECTIONS ONE AND TWO OF ACT
NUMBERED SEVEN HUNDRED AND FORTY-SEVEN. Approved on September
14, 1905.
263. AN ACT CONSISTING AN ADMINISTRATIVE CODE. Approved on December 31,
1916.
264. AN ACT AMENDING THE ADMINISTRATIVE CODE. Approved on March 10, 1917.
265. Rollo (G.R. No. 170867), p. 1339.

266. AN ACT TO AMEND CERTAIN PROVISIONS OF REPUBLIC ACT NO. 3046, AS
AMENDED BY REPUBLIC ACT NO. 5446, TO DEFINE THE ARCHIPELAGIC
BASELINE OF THE PHILIPPINES AND FOR OTHER PURPOSES. Approved on
March 10, 2009.
267. Rollo (G.R. No. 170867), p. 1395.
268. Id. at 1535.
269. Section 4.
270. Sections 13, 14 and 15.
271. Record of the Senate, November 17, 1990, pp. 1580-1581.
272. TSN, November 24, 2009, pp. 235-236.
273. Rollo (G.R. No. 170867), pp. 1596-1602.
274. Subsequent Act No. 2711, or the Administrative Code of 1917, also designated
Puerto Princesa as the capital of the Province of Palawan. RA 5906 created
the City of Puerto Princesa; Section 2 thereof states that the City shall
comprise the present territorial jurisdiction of the Municipality of Puerto
Princesa." On March 26, 2007, President Gloria Macapagal-Arroyo issued
Proclamation No. 1264 entitled "Conversion of the City of Puerto Princesa into
a Highly Urbanized City," reclassifying Puerto Princesa City as a "highly
urbanized city."
275. AN ACT CREATING THE MUNICIPALITY OF ROXAS, PROVINCE OF PALAWAN.
Approved on May 15, 1951.
276. R.A. No. 1140, entitled AN ACT CHANGING THE NAME OF THE MUNICIPALITY
OF BACUIT IN THE PROVINCE OF PALAWAN TO EL NIDO, approved on June 17,
1954, changed the name of Bacuit to El Nido.
277. AN ACT CHANGING THE NAME OF THE MUNICIPALITY OF DUMARAN, PROVINCE
OF PALAWAN, TO ARACELI. Approved on June 15, 1954.
278. AN ACT CREATING THE MUNICIPALITY OF DUMARAN IN THE PROVINCE OF
PALAWAN. Enacted on June 18, 1961.
279. AN ACT TO CREATE THE MUNICIPALITY OF BUSUANGA IN THE PROVINCE OF
PALAWAN. Approved on June 17, 1950.
280. AN ACT AMENDING SECTION ONE OF REPUBLIC ACT NUMBERED FIVE
HUNDRED SIXTY, ENTITLED "AN ACT CREATING THE MUNICIPALITY OF
BUSUANGA IN THE PROVINCE OF PALAWAN." Approved on June 21, 1969.
281. AN ACT TO CREATE THE MUNICIPALITY OF QUEZON IN THE PROVINCE OF
PALAWAN. Approved on May 15, 1951.
282. AN ACT TO CREATE THE MUNICIPALITY OF LINAPACAN IN THE PROVINCE OF
283. AN ACT CREATING THE MUNICIPALITY OF BATARASA IN THE PROVINCE OF
PALAWAN. Enacted without Executive approval on June 18, 1961.
284. AN ACT CREATING THE MUNICIPALITY OF MAGSAYSAY IN THE PROVINCE OF
285. AN ACT CREATING THE MUNICIPALITY OF SAN VICENTE IN THE PROVINCE OF
286. AN ACT CREATING THE MUNICIPALITY OF NARRA, PROVINCE OF PALAWAN.
Approved June 21, 1969.
287. AN ACT CHANGING THE NAME OF THE MUNICIPALITY OF MARCOS, PROVINCE
OF PALAWAN, TO MUNICIPALITY OF DR. JOSE P. RIZAL. Enacted without
executive approval on April 17, 1988.
288. AN ACT CREATING THE MUNICIPALITY OF MARCOS IN THE PROVINCE OF
PALAWAN. Approved on April 14, 1983.
289. AN ACT CREATING THE MUNICIPALITY OF CULION IN THE PROVINCE OF
PALAWAN. Approved on February 19, 1992.
290. AN ACT EXPANDING THE AREA OF JURISDICTION OF THE MUNICIPALITY OF
CULION, PROVINCE OF PALAWAN, AMENDING FOR THE PURPOSE REPUBLIC
ACT NO. 7193. Approved on March 12, 2001.
291. AN ACT CREATING THE MUNICIPALITY OF SOFRONIO ESPAÑOLA IN THE
PROVINCE OF PALAWAN. Lapsed into law on February 24, 1994 without the
President's signature.
292. TSN, November 24, 2009, pp. 196-200.
293. TSN, November 24, 2009, p. 166.
294. TSN, November 24, 2009, pp. 201-202.
295. Rep. of the Phils. v. Roxas, et al., 723 Phil. 279, 311 (2013) citing Republic of
the Phils. v. Hon. Mangotara, et al., 638 Phil. 353 (2010).
296. National Amnesty Commission v. COA , 481 Phil. 279 (2004).
297. 545 Phil. 168 (2007).
298. Id. at 186.
299. TSN, November 24, 2009, p. 232.
300. The 1987 Constitution of the Republic of the Philippines, A Commentary, 1996
Edition, pp. 960-961.
301. TSN, November 24, 2009, pp. 217-218 and 224.

302. Rollo (G.R. No. 170867), pp. 37-38.
303. Id. at 1514 and 1518.
304. TSN, November 24, 2009, pp. 156-158.
305. TSN, November 24, 2009, pp. 78-81.
306. Rollo (G.R. No. 170867), pp. 1355-1356.

307. 332 U.S. 19 (1947).
308. 339 U.S. 699 (1950).
309. 339 U.S. 707 (1950).
310. 420 U.S. 515 (1975).
311. U.S. 9th Circuit, No. 97-35944, September 9, 1998.
312. TSN, November 24, 2009, pp. 196-197.
313. Rollo (G.R. No. 170867), pp. 1344, 1355-1356.
314. GF Equity, Inc. v. Valenzona , 501 Phil. 153, 166 (2005).
315. Tupas v. Court of Appeals, 271 Phil. 628 (1991).
316. Id.
317. Id. at 632-633.
318. Development Bank of the Philippines v. Carpio, G.R. No. 195450, February 1,
2017, 816 SCRA 473, 487.
319. Rollo (G.R. No. 170867), p. 1584.
320. Id. at 1584-1586.
321. Supra note 235.
322. TSN, November 24, 2009, pp. 233 and 235.

323. Phil. Rural Electric Coop. Assoc., Inc. v. DILG Secretary, 451 Phil. 683, 698
(2003) citing MCIAA v. Marcos , 330 Phil. 392, 417 (1996).
324. 416 Phil. 438 (2001).
325. Id. at 448.
LEONEN, J., concurring opinion:

1. Rollo (G.R. No. 170867), p. 89.
2. Id. at 1465. The rollo indicated that Camago-Malampaya is located 26.9546
nautical miles northwest of Tapiutan Island.
3. Id. at 1305. Exec. Order No. 683 (2007), whereas clause.

4. Id. at 549-550-A.
5. Id. at 550.
6. Id. at 549-A.
7. Id. at 551-552.
8. Id. at 554. It is unclear from the records whether a legal opinion was issued by
the Department of Justice.
9. Ponencia , p. 4.
10. Rollo (G.R. No. 170867), pp. 127-128.
11. Id. at 129.
12. Id. at 127. Rep. Act No. 7611 (1992), Strategic Environmental Plan (SEP) for
Palawan Act.
13. Id. at 130-159.

14. Id. at 85-86.
15. Id. at 555-561.
16. Id. at 557.
17. Id. at 557-558.
18. Id. at 83-112. The Decision was penned by Judge Bienvenido C. Blancaflor of
Branch 95, Regional Trial Court, Puerto Princesa City.
19. Id. at 115.
20. Id. at 114.
21. Id. at 113-116. The original Order was erroneously dated December 16, 2006
instead of January 16, 2006. The Order was amended to conform to the
correct date.
22. Id. at 9.
24. Id. at 8-9.
25. Rollo (G.R. No. 185941), pp. 498-503.
26. Id. at 489-491.
28. Rollo (G.R. No. 185941), pp. 218-224. The Resolution, docketed as CA-G.R. SP
No. 102247, was penned by Associate Justice Rebecca De Guia-Salvador
(Chair) and concurred in by Associate Justices Vicente S.E. Veloso and
Apolinario D. Bruselas, Jr. of the Eleventh Division, Court of Appeals, Manila.
29. Id. at 223.
30. Id.
31. Ponencia , pp. 12-13.
32. Id. at 13. Dean Raul Pangalangan and Secretary General Henry Bensurto, Jr.
were made amici curiae for the oral arguments. Only Secretary General
Bensurto submitted an amicus brief.
33. Id. at 13-14.
34. CONST., art. X, sec. 7. Local governments shall be entitled to an equitable
share in the proceeds of the utilization and development of the national
wealth within their respective areas, in the manner provided by law,
including sharing the same with the inhabitants by way of direct benefits.
35. CONST., art. II, sec. 25.
36. CONST., art. X, sec. 3. See also Ganzon v. Court of Appeals, 277 Phil. 311
(1991) [Per J. Sarmiento, En Banc].
37. Pimentel v. Aguirre , 391 Phil. 84 (2000) [Per J. Panganiban, En Banc].
38. Id. at 103.
39. CONST., art. X, secs. 15 to 21.
40. LOCAL GOVT. CODE, sec. 6.
41. LOCAL GOVT. CODE, sec. 7.
42. LOCAL GOVT. CODE, sec. 7 (c).

43. Act No. 422 (1902), An Act Providing for the Organization of a Provincial
Government in the Province of Paragua, and Defining the Limits of that
Province.
44. Act No. 567 (1902).
45. 226 Phil. 624 (1986) [Per J. Alampay, En Banc].
46. Id. at 646.
47. 626 Phil. 23 (2010) [Per J. Peralta, En Banc].
48. Navarro v. Ermita , 663 Phil. 546 (2011) [Per J. Nachura, En Banc].
49. Id. at 584, 586.

50. LOCAL GOVT. CODE, sec. 131(r).
51. Pres. Decree No. 1596 (1978), Declaring Certain Area Part of the Philippine
Territory and Providing for their Government and Administration.
52. Pres. Decree No. 1596 (1978), sec. 1.

53. In the Matter of the South Sea China Arbitration, PCA Case No. 2013-19, July
12, 2016, <https://pca-cpa.org/wp-content/uploads/sites/175/2016/07/PH-CN-
20160712-Award.pdf> 121-122.
54. Id. at 266.
55. Rollo (G.R. No. 170867), p. 1356.
56. Id. at 75.
57. 101 Phil. 810 (1957) [Per J. Reyes, A., En Banc].
58. Id. at 815, citing Molina v. Rafferty, 37 Phil. 545 (1918) [Per J. Malcom, First
Division.]; In re Allen, 2 Phil. 630 (1903) [Per J. McDonough, En Banc]; and
Everett v. Bautista, 69 Phil. 137 (1939) [Per J. Diaz, En Banc].
59. Alvarez v. Guingona, Jr., 322 Phil. 774, 786 (1996) [Per J. Hermosisima, Jr., En
Banc].
60. Rollo (G.R. No. 170867), pp. 549-550-A.
61. Adm. Order No. 381 (1998), whereas clauses.
62. Rollo (G.R. No. 170867), pp. 551-552.
63. Id. at 127-128.
64. Id. at 555-561.
65. Id. at 557.
66. See Lim Hoa Ting v. Central Bank of the Philippines, 104 Phil. 573 (1958) [Per J.
Montemayor, En Banc).
n Note from the Publisher: Copied verbatim from the official document. Missing
item 4.2.2.

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EN BANC

[G.R. No. 199802. July 3, 2018.]

CONGRESSMAN HERMILANDO I. MANDANAS; MAYOR EFREN

[G.R. No. 208488. July 3, 2018.]

HONORABLE ENRIQUE T. GARCIA, JR., in his personal and

The petitioners hereby challenge the manner in which thejust share in

The cases were consolidated on October 22, 2013. 3 In the meanwhile,

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

Ruling of the Court

The petitions are partly meritorious.

Mandamus is an improper remedy

Mandanas, et al. seek the writs of certiorari, prohibition and

Section 3. Petition for mandamus. — When any tribunal,

In this regard, Garcia's llegation of the unconstitutionality of the

Municipal corporations and

Municipal corporations are now commonly known as local

Also, in the earlier ruling in Ganzon v. Court of Appeals, 15 the Court

The extent of local autonomy in the Philippines

Regardless, there remains no question that Congress possesses and

Two groups of LGUs enjoy decentralization in distinct ways. The

(l) The participation of the private sector in local

The constitutional authority extended to each and every LGU to create

Section 284 of the LGC deviates from

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(a) On the ﬁrst year of the eﬀectivity of this Code,

Congress can validly exclude taxes

(1) NIRTs collected by the cities and provinces and divided

Section 7. Local governments shall be entitled to an

This constitutional provision is implemented by Section 287 of the NIRC and

SEC. 287. Shares of Local Government Units in the Proceeds

Entitlement to the reliefs sought

The decision now on appeal reﬂects the orthodox

Automatic release of the LGUs'

Section 6, Article X of the 1987 Constitution commands that the just

Section 286. Automatic Release of Shares. — (a) The

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Nature of the Case

In these consolidated cases before the Court, petitioners question the

G.R. No. 199802 for Certiorari,

2. After notice & hearing, a preliminary injunction be issued.

G.R. No. 208488 for Mandamus

Enrique T. Garcia (Garcia), then congressional representative for the

7. Section 8 of RA 8240, as now provided in Section 288 of the

Speaking through the Oﬃce of the Solicitor General (OSG),

The issues in this case can be restated in the following wise:

I vote to partially grant the petitions.

The tax collections of the BOC

a. The VAT, DST, and Excise Tax

I find the contention tenable.

The contested phrase is unduly restrictive, nay unconstitutional, for it

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Constitutional considerations on the

The Constitution cannot be supplanted through ordinary legislative ﬁat.

RA 7643 amended Section 282 of the NIRC to read thusly:

xxx xxx xxx

(B) Incremental Revenues from Republic Act No. 8240. — Fifteen

Section 284 of the NIRC reads:

Pursuant to Article VI, Section 29 of the Constitution, "No money shall

Notwithstanding the postulation that the phrase "internal revenue" in

Increased national tax allotments

As a ﬁnal word, it cannot be gainsaid that this ruling of the Court

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6. Finally, once the General Appropriations Act for the succeeding