Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No.

152675 April 28, 2004

BATANGAS POWER CORPORATION, petitioner, vs. BATANGAS CITY and NATIONAL POWER CORPORATION, respondents. x--------------------x G.R. No. 152771 April 28, 2004 NATIONAL POWER CORPORATION, petitioner, vs. HON. RICARDO R. ROSARIO, in his capacity as Presiding Judge, RTC, Br. 66, Makati City; BATANGAS CITY GOVERNMENT; ATTY. TEODULFO DEGUITO, in his capacity as Chief Legal Officer, Batangas City; and BENJAMIN PARGAS, in his capacity as City Treasurer, Batangas City, respondents. DECISION PUNO, J.: Before us are two (2) consolidated petitions for review under Rule 45 of the Rules of Civil Procedure, seeking to set aside the rulings of the Regional Trial Court of Makati in its February 27, 2002 Decision in Civil Case No. 00-205. The facts show that in the early 1990s, the country suffered from a crippling power crisis. Power outages lasted 8-12 hours daily and power generation was badly needed. Addressing the problem, the government, through the National Power Corporation (NPC), sought to attract investors in power plant operations by providing them with incentives, one of which was through the NPCs assumption of payment of their taxes in the Build Operate and Transfer (BOT) Agreement. On June 29, 1992, Enron Power Development Corporation (Enron) and petitioner NPC entered into a Fast Track BOT Project. Enron agreed to supply a power station to NPC and transfer its plant to the latter after ten (10) years of operation. Section 11.02 of the BOT Agreement provided that NPC shall be responsible for the payment of all taxes that may be imposed on the power station, except income taxes and permit fees. Subsequently, Enron assigned its obligation under the BOT Agreement to petitioner Batangas Power Corporation (BPC). On September 13, 1992, BPC registered itself with the Board of Investments (BOI) as a pioneer enterprise. On September 23, 1992, the BOI issued a certificate of registration1 to BPC as a pioneer enterprise entitled to a tax holiday for a period of six (6) years. The construction of the power station in respondent Batangas City was then completed. BPC operated the station.

On October 12, 1998, Batangas City (the city, for brevity), thru its legal officer Teodulfo A. Deguito, sent a letter to BPC demanding payment of business taxes and penalties, commencing from the year 1994 as provided under Ordinance XI or the 1992 Batangas City Tax Code.2 BPC refused to pay, citing its tax-exempt status as a pioneer enterprise for six (6) years under Section 133 (g) of the Local Government Code (LGC).3 On April 15, 1999, city treasurer Benjamin S. Pargas modified the citys tax claim4 and demanded payment of business taxes from BPC only for the years 1998-1999. He acknowledged that BPC enjoyed a 6-year tax holiday as a pioneer industry but its tax exemption period expired on September 22, 1998, six (6) years after its registration with the BOI on September 23, 1992. The city treasurer held that thereafter BPC became liable to pay its business taxes. BPC still refused to pay the tax. It insisted that its 6-year tax holiday commenced from the date of its commercial operation on July 16, 1993, not from the date of its BOI registration in September 1992.5 It furnished the city with a BOI letter6 wherein BOI designated July 16, 1993 as the start of BPCs income tax holiday as BPC was not able to immediately operate due to force majeure. BPC claimed that the local tax holiday is concurrent with the income tax holiday. In the alternative, BPC asserted that the city should collect the tax from the NPC as the latter assumed responsibility for its payment under their BOT Agreement. The matter was not put to rest. The city legal officer insisted7 that BPCs tax holiday has already expired, while the city argued that it directed its tax claim to BPC as it is the entity doing business in the city and hence liable to pay the taxes. The city alleged that it was not privy to NPCs assumption of BPCs tax payment under their BOT Agreement as the only parties thereto were NPC and BPC. BPC adamantly refused to pay the tax claims and reiterated its position.8 The city was likewise unyielding on its stand.9 On August 26, 1999, the NPC intervened.10 While admitting assumption of BPCs tax obligations under their BOT Agreement, NPC refused to pay BPCs business tax as it allegedly constituted an indirect tax on NPC which is a tax-exempt corporation under its Charter.11 In view of the deadlock, BPC filed a petition for declaratory relief12 with the Makati Regional Trial Court (RTC) against Batangas City and NPC, praying for a ruling that it was not bound to pay the business taxes imposed on it by the city. It alleged that under the BOT Agreement, NPC is responsible for the payment of such taxes but as NPC is exempt from taxes, both the BPC and NPC are not liable for its payment. NPC and Batangas City filed their respective answers. On February 23, 2000, while the case was still pending, the city refused to issue a permit to BPC for the operation of its business unless it paid the assessed business taxes amounting to close to P29M. In view of this supervening event, BPC, whose principal office is in Makati City, filed a supplemental petition13 with the Makati RTC to convert its original petition into an action for injunction to enjoin the city from withholding the issuance of its business permit and closing its power plant. The city opposed on the grounds of lack of jurisdiction and lack of cause of action.14 The Supplemental Petition was nonetheless admitted by the Makati RTC. On February 27, 2002, the Makati RTC dismissed the petition for injunction. It held that: (1) BPC is liable to pay business taxes to the city; (2) NPCs tax exemption was withdrawn with

the passage of R.A. No. 7160 (The Local Government Code); and, (3) the 6-year tax holiday granted to pioneer business enterprises starts on the date of registration with the BOI as provided in Section 133 (g) of R.A. No. 7160, and not on the date of its actual business operations.15 BPC and NPC filed with this Court a petition for review on certiorari16 assailing the Makati RTC decision. The petitions were consolidated as they impugn the same decision, involve the same parties and raise related issues.17 In G.R. No. 152771, the NPC contends: I RESPONDENT COURT ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT ARBITRARILY AND CAPRICIOUSLY RULED THAT PETITIONER NPC HAS LOST ITS TAX EXEMPTION PRIVILEGE BECAUSE SECTION 193 OF R.A. 7160 (LOCAL GOVERNMENT CODE) HAS WITHDRAWN SUCH PRIVILEGE DESPITE THE SETTLED JURISPRUDENCE THAT THE ENACTMENT OF A LEGISLATION, WHICH IS A GENERAL LAW, CANNOT REPEAL A SPECIAL LAW AND THAT SECTION 13 OF R.A. 6395 (NPC LAW) WAS NOT SPECIFICALLY MENTIONED IN THE REPEALING CLAUSE IN SECTION 534 OF R.A. 7160, AMONG OTHERS. II RESPONDENT COURT ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT ARBITRARILY AND CAPRICIOUSLY OMITTED THE CLEAR PROVISION OF SECTION 133, PARAGRAPH (O) OF R.A. 7160 WHICH EXEMPTS "NATIONAL GOVERNMENT, ITS AGENCIES AND INSTRUMENTALITIES" FROM THE IMPOSITION OF "TAXES, FEES OR CHARGES OF ANY KIND." III RESPONDENT COURT ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT ERRONEOUSLY AND CAPRICIOUSLY ADMITTED BPCs SUPPLEMENTAL PETITION FOR INJUNCTION NOTWITHSTANDING THAT IT HAD NO JURISDICTION OVER THE PARTY (CITY GOVERNMENT OF BATANGAS) SOUGHT TO BE ENJOINED. In G.R. No. 152675, BPC also contends that the trial court erred: 1) in holding it liable for payment of business taxes even if it is undisputed that NPC has already assumed payment thereof; and, 2) in ruling that BPCs 6-year tax holiday commenced on the date of its registration with the BOI as a pioneer enterprise. The issues for resolution are: 1. whether BPCs 6-year tax holiday commenced on the date of its BOI registration as a pioneer enterprise or on the date of its actual commercial operation as certified by the BOI;

2. whether the trial court had jurisdiction over the petition for injunction against Batangas City; and, 3. whether NPCs tax exemption privileges under its Charter were withdrawn by Section 193 of the Local Government Code (LGC). We find no merit in the petition. On the first issue, petitioners BPC and NPC contend that contrary to the impugned decision, BPCs 6-year tax holiday should commence on the date of its actual commercial operations as certified to by the BOI, not on the date of its BOI registration. We disagree. Sec. 133 (g) of the LGC, which proscribes local government units (LGUs) from levying taxes on BOI-certified pioneer enterprises for a period of six years from the date of registration, applies specifically to taxes imposed by the local government, like the business tax imposed by Batangas City on BPC in the case at bar. Reliance of BPC on the provision of Executive Order No. 226,18 specifically Section 1, Article 39, Title III, is clearly misplaced as the six-year tax holiday provided therein which commences from the date of commercial operation refers to income taxes imposed by the national government on BOI-registered pioneer firms. Clearly, it is the provision of the Local Government Code that should apply to the tax claim of Batangas City against the BPC. The 6-year tax exemption of BPC should thus commence from the date of BPCs registration with the BOI on July 16, 1993 and end on July 15, 1999. Anent the second issue, the records disclose that petitioner NPC did not oppose BPCs conversion of the petition for declaratory relief to a petition for injunction or raise the issue of the alleged lack of jurisdiction of the Makati RTC over the petition for injunction before said court. Hence, NPC is estopped from raising said issue before us. The fundamental rule is that a party cannot be allowed to participate in a judicial proceeding, submit the case for decision, accept the judgment only if it is favorable to him but attack the jurisdiction of the court when it is adverse.19 Finally, on the third issue, petitioners insist that NPCs exemption from all taxes under its Charter had not been repealed by the LGC. They argue that NPCs Charter is a special law which cannot be impliedly repealed by a general and later legislation like the LGC. They likewise anchor their claim of tax-exemption on Section 133 (o) of the LGC which exempts government instrumentalities, such as the NPC, from taxes imposed by local government units (LGUs), citing in support thereof the case of Basco v. PAGCOR.20 We find no merit in these contentions. The effect of the LGC on the tax exemption privileges of the NPC has already been extensively discussed and settled in the recent case of National Power Corporation v. City of Cabanatuan.21 In said case, this Court recognized the removal of the blanket exclusion of government instrumentalities from local taxation as one of the most significant provisions of the 1991 LGC.Specifically, we stressed that Section 193 of the LGC,22 an express and general repeal of all statutes granting exemptions from local taxes, withdrew the sweeping tax privileges previously enjoyed by the NPC under its Charter. We explained the rationale for this provision, thus: In recent years, the increasing social challenges of the times expanded the scope of state activity, and taxation has become a tool to realize social justice and the equitable distribution of wealth, economic progress and the protection of local industries as well as public welfare and similar objectives. Taxation assumes even

greater significance with the ratification of the 1987 Constitution. Thenceforth, 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 pursuant to Article X, section 5 of the 1987 Constitution, viz: Section 5.- Each Local Government unit shall have the power to create its own sources of revenue, 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. This paradigm shift results from the realization that genuine development can be achieved only by strengthening local autonomy and promoting decentralization of governance. For a long time, the countrys highly centralized government structure has bred a culture of dependence among local government leaders upon the national leadership. It has also "dampened the spirit of initiative, innovation and imaginative resilience in matters of local development on the part of local government leaders. The only way to shatter this culture of dependence is to give the LGUs a wider role in the delivery of basic services, and confer them sufficient powers to generate their own sources for the purpose. To achieve this goal, x x x the 1987 Constitution mandates Congress to enact a local government code that will, consistent with the basic policy of local autonomy, set the guidelines and limitations to this grant of taxing powers x x x." To recall, prior to the enactment of the x x x Local Government Code x x x, various measures have been enacted to promote local autonomy. x x x Despite these initiatives, however, the shackles of dependence on the national government remained. Local government units were faced with the same problems that hamper their capabilities to participate effectively in the national development efforts, among which are: (a) inadequate tax base, (b) lack of fiscal control over external sources of income, (c) limited authority to prioritize and approve development projects, (d) heavy dependence on external sources of income, and (e) limited supervisory control over personnel of national line agencies. Considered as the most revolutionary piece of legislation on local autonomy, the LGC effectively deals with the fiscal constraints faced by LGUs. It widens the tax base of LGUs to include taxes which were prohibited by previous laws x x x. Neither can the NPC successfully rely on the Basco case23 as this was decided prior to the effectivity of the LGC, when there was still no law empowering local government units to tax instrumentalities of the national government. Consequently, when NPC assumed the tax liabilities of the BPC under their 1992 BOT Agreement, the LGC which removed NPCs tax exemption privileges had already been in effect for six (6) months. Thus, while BPC remains to be the entity doing business in said city, it is the NPC that is ultimately liable to pay said taxes under the provisions of both the 1992 BOT Agreement and the 1991 Local Government Code. IN VIEW WHEREOF, the petitions are DISMISSED. No costs. SO ORDERED. Quisumbing, Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.

Footnotes
1

G.R. No. 152771 Rollo, p. 66. In the amount of P34, 551, 543.96; G.R. No. 152675 Rollo, p. 60.

Republic Act No. 7160 which took effect on January 1, 1992; See letter of BPC President Miguel T. Gaffud, Jr.; G.R. No. 152675 Rollo, p. 61.
4

Amount of business tax assessed was lowered to P28, 689, 732.41 as of July 1999, based on the gross receipt of every preceding year; G.R. No. 152675 Rollo, p. 62.
5

See BPC Letter, G.R. No. 152675 Rollo, p. 63.

G.R. No. 152771 Rollo, p. 67; BOI cited Article 7 (14) of Executive Order 226 to support its decision to designate a later date.
7

G.R. No. 152675 Rollo, p. 64. BPC Letter, dated July 21, 1999; G.R. No. 152675 Rollo, pp. 65-66. See Letter of City Legal Officer; G.R. No. 152675 Rollo, p. 67. See Letter of NPC OIC Comie P. Doromal, G.R. No. 152675 Rollo, pp. 68-70. Under Section 13, Republic Act No. 6395, as amended.

10

11

12

Docketed as Civil Case No. 00-205 and raffled to RTC Branch 66, Makati City, presided by public respondent Judge Ricardo R. Rosario; G.R. No. 152771 Rollo, pp. 58-65.
13

G.R. No. 152771 Rollo, pp. 89-94. G.R. No. 152771 Rollo, pp. 97-99. Decision, id., pp. 49-57. Docketed as G.R. No. 152675. October 2, 2002 Resolution, G.R. No. 152771 Rollo, p. 130.

14

15

16

17

18

Otherwise known as the 1987 Omnibus Investment Code, as amended in 1995 by Republic Act No. 7918.
19

Roxas vs. Court of Appeals, 391 SCRA 351 (2002). 197 SCRA 51 (1991).

20

21

Promulgated April 9, 2003, G.R. No. 149110.

22

"Sec. 193. Withdrawal of Tax Exemption Privileges. - Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations, except local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code." Section 534, the repealing clause of the LGC, also states that all general and special laws, acts, city charters, decrees, executive orders, proclamations and administrative regulations or parts thereof inconsistent with the provisions of this Code are repealed or modified accordingly.
23

Supra. Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. 152774

May 27, 2004

THE PROVINCE OF BATANGAS, represented by its Governor, HERMILANDO I. MANDANAS, petitioner, vs. HON. ALBERTO G. ROMULO, Executive Secretary and Chairman of the Oversight Committee on Devolution; HON. EMILIA BONCODIN, Secretary, Department of Budget and Management; HON. JOSE D. LINA, JR., Secretary, Department of Interior and Local Government, respondents. DECISION CALLEJO, SR., J.: The Province of Batangas, represented by its Governor, Hermilando I. Mandanas, filed the present petition for certiorari, prohibition and mandamus under Rule 65 of the Rules of Court, as amended, to declare as unconstitutional and void certain provisos contained in the General Appropriations Acts (GAA) of 1999, 2000 and 2001, insofar as they uniformly earmarked for each corresponding year the amount of five billion pesos (P5,000,000,000.00) of the Internal Revenue Allotment (IRA) for the Local Government Service Equalization Fund (LGSEF) and imposed conditions for the release thereof. Named as respondents are Executive Secretary Alberto G. Romulo, in his capacity as Chairman of the Oversight Committee on Devolution, Secretary Emilia Boncodin of the Department of Budget and Management (DBM) and Secretary Jose Lina of the Department of Interior and Local Government (DILG). Background

On December 7, 1998, then President Joseph Ejercito Estrada issued Executive Order (E.O.) No. 48 entitled "ESTABLISHING A PROGRAM FOR DEVOLUTION ADJUSTMENT AND EQUALIZATION." The program was established to "facilitate the process of enhancing the capacities of local government units (LGUs) in the discharge of the functions and services devolved to them by the National Government Agencies concerned pursuant to the Local Government Code."1 The Oversight Committee (referred to as the Devolution Committee in E.O. No. 48) constituted under Section 533(b) of Republic Act No. 7160 (The Local Government Code of 1991) has been tasked to formulate and issue the appropriate rules and regulations necessary for its effective implementation.2Further, to address the funding shortfalls of functions and services devolved to the LGUs and other funding requirements of the program, the "Devolution Adjustment and Equalization Fund" was created.3 For 1998, the DBM was directed to set aside an amount to be determined by the Oversight Committee based on the devolution status appraisal surveys undertaken by the DILG.4 The initial fund was to be sourced from the available savings of the national government for CY 1998.5 For 1999 and the succeeding years, the corresponding amount required to sustain the program was to be incorporated in the annual GAA.6 The Oversight Committee has been authorized to issue the implementing rules and regulations governing the equitable allocation and distribution of said fund to the LGUs.7 The LGSEF in the GAA of 1999 In Republic Act No. 8745, otherwise known as the GAA of 1999, the program was renamed as the LOCAL GOVERNMENT SERVICE EQUALIZATION FUND (LGSEF). Under said appropriations law, the amount ofP96,780,000,000 was allotted as the share of the LGUs in the internal revenue taxes. Item No. 1, Special Provisions, Title XXXVI A. Internal Revenue Allotment of Rep. Act No. 8745 contained the following proviso: ... PROVIDED, That the amount of FIVE BILLION PESOS (P5,000,000,000) shall be earmarked for the Local Government Service Equalization Fund for the funding requirements of projects and activities arising from the full and efficient implementation of devolved functions and services of local government units pursuant to R.A. No. 7160, otherwise known as the Local Government Code of 1991: PROVIDED, FURTHER, That such amount shall be released to the local government units subject to the implementing rules and regulations, including such mechanisms and guidelines for the equitable allocations and distribution of said fund among local government units subject to the guidelines that may be prescribed by the Oversight Committee on Devolution as constituted pursuant to Book IV, Title III, Section 533(b) of R.A. No. 7160. The Internal Revenue Allotment shall be released directly by the Department of Budget and Management to the Local Government Units concerned. On July 28, 1999, the Oversight Committee (with then Executive Secretary Ronaldo B. Zamora as Chairman) passed Resolution Nos. OCD-99-003, OCD-99-005 and OCD-99-006 entitled as follows: OCD-99-005 RESOLUTION ADOPTING THE ALLOCATION SCHEME FOR THE PhP5 BILLION CY 1999 LOCAL GOVERNMENT SERVICE EQUALIZATION FUND (LGSEF) AND REQUESTING HIS EXCELLENCY PRESIDENT JOSEPH EJERCITO ESTRADA TO APPROVE SAID ALLOCATION SCHEME. OCD-99-006

RESOLUTION ADOPTING THE ALLOCATION SCHEME FOR THE PhP4.0 BILLION OF THE 1999 LOCAL GOVERNMENT SERVICE EQUALIZATION FUND AND ITS CONCOMITANT GENERAL FRAMEWORK, IMPLEMENTING GUIDELINES AND MECHANICS FOR ITS IMPLEMENTATION AND RELEASE, AS PROMULGATED BY THE OVERSIGHT COMMITTEE ON DEVOLUTION. OCD-99-003 RESOLUTION REQUESTING HIS EXCELLENCY PRESIDENT JOSEPH EJERCITO ESTRADA TO APPROVE THE REQUEST OF THE OVERSIGHT COMMITTEE ON DEVOLUTION TO SET ASIDE TWENTY PERCENT (20%) OF THE LOCAL GOVERNMENT SERVICE EQUALIZATION FUND (LGSEF) FOR LOCAL AFFIRMATIVE ACTION PROJECTS AND OTHER PRIORITY INITIATIVES FOR LGUs INSTITUTIONAL AND CAPABILITY BUILDING IN ACCORDANCE WITH THE IMPLEMENTING GUIDELINES AND MECHANICS AS PROMULGATED BY THE COMMITTEE. These OCD resolutions were approved by then President Estrada on October 6, 1999. Under the allocation scheme adopted pursuant to Resolution No. OCD-99-005, the five billion pesos LGSEF was to be allocated as follows: 1. The PhP4 Billion of the LGSEF shall be allocated in accordance with the allocation scheme and implementing guidelines and mechanics promulgated and adopted by the OCD. To wit: a. The first PhP2 Billion of the LGSEF shall be allocated in accordance with the codal formula sharing scheme as prescribed under the 1991 Local Government Code; b. The second PhP2 Billion of the LGSEF shall be allocated in accordance with a modified 1992 cost of devolution fund (CODEF) sharing scheme, as recommended by the respective leagues of provinces, cities and municipalities to the OCD. The modified CODEF sharing formula is as follows: Province : 40% Cities : 20% Municipalities : 40% This is applied to the P2 Billion after the approved amounts granted to individual provinces, cities and municipalities as assistance to cover decrease in 1999 IRA share due to reduction in land area have been taken out. 2. The remaining PhP1 Billion of the LGSEF shall be earmarked to support local affirmative action projects and other priority initiatives submitted by LGUs to the

Oversight Committee on Devolution for approval in accordance with its prescribed guidelines as promulgated and adopted by the OCD. In Resolution No. OCD-99-003, the Oversight Committee set aside the one billion pesos or 20% of the LGSEF to support Local Affirmative Action Projects (LAAPs) of LGUs. This remaining amount was intended to "respond to the urgent need for additional funds assistance, otherwise not available within the parameters of other existing fund sources." For LGUs to be eligible for funding under the one-billion-peso portion of the LGSEF, the OCD promulgated the following: III. CRITERIA FOR ELIGIBILITY: 1. LGUs (province, city, municipality, or barangay), individually or by group or multiLGUs or leagues of LGUs, especially those belonging to the 5th and 6th class, may access the fund to support any projects or activities that satisfy any of the aforecited purposes. A barangay may also access this fund directly or through their respective municipality or city. 2. The proposed project/activity should be need-based, a local priority, with high development impact and are congruent with the socio-cultural, economic and development agenda of the Estrada Administration, such as food security, poverty alleviation, electrification, and peace and order, among others. 3. Eligible for funding under this fund are projects arising from, but not limited to, the following areas of concern: a. delivery of local health and sanitation services, hospital services and other tertiary services; b. delivery of social welfare services; c. provision of socio-cultural services and facilities for youth and community development; d. provision of agricultural and on-site related research; e. improvement of community-based forestry projects and other local projects on environment and natural resources protection and conservation; f. improvement of tourism facilities and promotion of tourism; g. peace and order and public safety; h. construction, repair and maintenance of public works and infrastructure, including public buildings and facilities for public use, especially those destroyed or damaged by man-made or natural calamities and disaster as well as facilities for water supply, flood control and river dikes; i. provision of local electrification facilities; j. livelihood and food production services, facilities and equipment;

k. other projects that may be authorized by the OCD consistent with the aforementioned objectives and guidelines; 4. Except on extremely meritorious cases, as may be determined by the Oversight Committee on Devolution, this portion of the LGSEF shall not be used in expenditures for personal costs or benefits under existing laws applicable to governments. Generally, this fund shall cover the following objects of expenditures for programs, projects and activities arising from the implementation of devolved and regular functions and services: a. acquisition/procurement of supplies and materials critical to the full and effective implementation of devolved programs, projects and activities; b. repair and/or improvement of facilities; c. repair and/or upgrading of equipment; d. acquisition of basic equipment; e. construction of additional or new facilities; f. counterpart contribution to joint arrangements or collective projects among groups of municipalities, cities and/or provinces related to devolution and delivery of basic services. 5. To be eligible for funding, an LGU or group of LGU shall submit to the Oversight Committee on Devolution through the Department of Interior and Local Governments, within the prescribed schedule and timeframe, a Letter Request for Funding Support from the Affirmative Action Program under the LGSEF, duly signed by the concerned LGU(s) and endorsed by cooperators and/or beneficiaries, as well as the duly signed Resolution of Endorsement by the respective Sanggunian(s) of the LGUs concerned. The LGU-proponent shall also be required to submit the Project Request (PR), using OCD Project Request Form No. 99-02, that details the following: (a) general description or brief of the project; (b) objectives and justifications for undertaking the project, which should highlight the benefits to the locality and the expected impact to the local program/project arising from the full and efficient implementation of social services and facilities, at the local levels; (c) target outputs or key result areas; (d) schedule of activities and details of requirements; (e) total cost requirement of the project; (f) proponent's counterpart funding share, if any, and identified source(s) of counterpart funds for the full implementation of the project;

(g) requested amount of project cost to be covered by the LGSEF. Further, under the guidelines formulated by the Oversight Committee as contained in Attachment - Resolution No. OCD-99-003, the LGUs were required to identify the projects eligible for funding under the one-billion-peso portion of the LGSEF and submit the project proposals thereof and other documentary requirements to the DILG for appraisal. The project proposals that passed the DILG's appraisal would then be submitted to the Oversight Committee for review, evaluation and approval. Upon its approval, the Oversight Committee would then serve notice to the DBM for the preparation of the Special Allotment Release Order (SARO) and Notice of Cash Allocation (NCA) to effect the release of funds to the said LGUs. The LGSEF in the GAA of 2000 Under Rep. Act No. 8760, otherwise known as the GAA of 2000, the amount of P111,778,000,000 was allotted as the share of the LGUs in the internal revenue taxes. As in the GAA of 1999, the GAA of 2000 contained a proviso earmarking five billion pesos of the IRA for the LGSEF. This proviso, found in Item No. 1, Special Provisions, Title XXXVII A. Internal Revenue Allotment, was similarly worded as that contained in the GAA of 1999. The Oversight Committee, in its Resolution No. OCD-2000-023 dated June 22, 2000, adopted the following allocation scheme governing the five billion pesos LGSEF for 2000: 1. The PhP3.5 Billion of the CY 2000 LGSEF shall be allocated to and shared by the four levels of LGUs, i.e., provinces, cities, municipalities, and barangays, using the following percentage-sharing formula agreed upon and jointly endorsed by the various Leagues of LGUs: For Provinces 26% or P 910,000,000 For Cities 23% or 805,000,000 For Municipalities 35% or 1,225,000,000 For Barangays 16% or 560,000,000 Provided that the respective Leagues representing the provinces, cities, municipalities and barangays shall draw up and adopt the horizontal distribution/sharing schemes among the member LGUs whereby the Leagues concerned may opt to adopt direct financial assistance or project-based arrangement, such that the LGSEF allocation for individual LGU shall be released directly to the LGU concerned; Provided further that the individual LGSEF shares to LGUs are used in accordance with the general purposes and guidelines promulgated by the OCD for the implementation of the LGSEF at the local levels pursuant to Res. No. OCD-99-006 dated October 7, 1999 and pursuant to the Leagues' guidelines and mechanism as approved by the OCD;

Provided further that each of the Leagues shall submit to the OCD for its approval their respective allocation scheme, the list of LGUs with the corresponding LGSEF shares and the corresponding project categories if project-based; Provided further that upon approval by the OCD, the lists of LGUs shall be endorsed to the DBM as the basis for the preparation of the corresponding NCAs, SAROs, and related budget/release documents. 2. The remaining P1,500,000,000 of the CY 2000 LGSEF shall be earmarked to support the following initiatives and local affirmative action projects, to be endorsed to and approved by the Oversight Committee on Devolution in accordance with the OCD agreements, guidelines, procedures and documentary requirements: On July 5, 2000, then President Estrada issued a Memorandum authorizing then Executive Secretary Zamora and the DBM to implement and release the 2.5 billion pesos LGSEF for 2000 in accordance with Resolution No. OCD-2000-023. Thereafter, the Oversight Committee, now under the administration of President Gloria Macapagal-Arroyo, promulgated Resolution No. OCD-2001-29 entitled "ADOPTING RESOLUTION NO. OCD-2000-023 IN THE ALLOCATION, IMPLEMENTATION AND RELEASE OF THE REMAINING P2.5 BILLION LGSEF FOR CY 2000." Under this resolution, the amount of one billion pesos of the LGSEF was to be released in accordance with paragraph 1 of Resolution No. OCD-2000-23, to complete the 3.5 billion pesos allocated to the LGUs, while the amount of 1.5 billion pesos was allocated for the LAAP. However, out of the latter amount, P400,000,000 was to be allocated and released as follows: P50,000,000 as financial assistance to the LAAPs of LGUs; P275,360,227 as financial assistance to cover the decrease in the IRA of LGUs concerned due to reduction in land area; and P74,639,773 for the LGSEF Capability-Building Fund. The LGSEF in the GAA of 2001 In view of the failure of Congress to enact the general appropriations law for 2001, the GAA of 2000 was deemed re-enacted, together with the IRA of the LGUs therein and the proviso earmarking five billion pesos thereof for the LGSEF. On January 9, 2002, the Oversight Committee adopted Resolution No. OCD-2002001 allocating the five billion pesos LGSEF for 2001 as follows: Modified Codal Formula Priority Projects P 3.000 billion 1.900 billion

Capability Building Fund .100 billion P 5.000 billion RESOLVED FURTHER, that the P3.0 B of the CY 2001 LGSEF which is to be allocated according to the modified codal formula shall be released to the four levels of LGUs, i.e., provinces, cities, municipalities and barangays, as follows:

LGUs Provinces Cities

Percentage 25 25

Amount P 0.750 billion 0.750 1.050 0.450 P 3.000 billion

Municipalities 35 Barangays 15 100

RESOLVED FURTHER, that the P1.9 B earmarked for priority projects shall be distributed according to the following criteria: 1.0 For projects of the 4th, 5th and 6th class LGUs; or 2.0 Projects in consonance with the President's State of the Nation Address (SONA)/summit commitments. RESOLVED FURTHER, that the remaining P100 million LGSEF capability building fund shall be distributed in accordance with the recommendation of the Leagues of Provinces, Cities, Municipalities and Barangays, and approved by the OCD. Upon receipt of a copy of the above resolution, Gov. Mandanas wrote to the individual members of the Oversight Committee seeking the reconsideration of Resolution No. OCD2002-001. He also wrote to Pres. Macapagal-Arroyo urging her to disapprove said resolution as it violates the Constitution and the Local Government Code of 1991. On January 25, 2002, Pres. Macapagal-Arroyo approved Resolution No. OCD-2002-001. The Petitioner's Case The petitioner now comes to this Court assailing as unconstitutional and void the provisos in the GAAs of 1999, 2000 and 2001, relating to the LGSEF. Similarly assailed are the Oversight Committee's Resolutions Nos. OCD-99-003, OCD-99-005, OCD-99-006, OCD2000-023, OCD-2001-029 and OCD-2002-001 issued pursuant thereto. The petitioner submits that the assailed provisos in the GAAs and the OCD resolutions, insofar as they earmarked the amount of five billion pesos of the IRA of the LGUs for 1999, 2000 and 2001 for the LGSEF and imposed conditions for the release thereof, violate the Constitution and the Local Government Code of 1991. Section 6, Article X of the Constitution is invoked as it mandates that the "just share" of the LGUs shall be automatically released to them. Sections 18 and 286 of the Local Government Code of 1991, which enjoin that the "just share" of the LGUs shall be "automatically and directly" released to them "without need of further action" are, likewise, cited. The petitioner posits that to subject the distribution and release of the five-billion-peso portion of the IRA, classified as the LGSEF, to compliance by the LGUs with the implementing rules and regulations, including the mechanisms and guidelines prescribed by the Oversight Committee, contravenes the explicit directive of the Constitution that the LGUs' share in the national taxes "shall be automatically released to them." The petitioner maintains that the use of the word "shall" must be given a compulsory meaning.

To further buttress this argument, the petitioner contends that to vest the Oversight Committee with the authority to determine the distribution and release of the LGSEF, which is a part of the IRA of the LGUs, is an anathema to the principle of local autonomy as embodied in the Constitution and the Local Government Code of 1991. The petitioner cites as an example the experience in 2001 when the release of the LGSEF was long delayed because the Oversight Committee was not able to convene that year and no guidelines were issued therefor. Further, the possible disapproval by the Oversight Committee of the project proposals of the LGUs would result in the diminution of the latter's share in the IRA. Another infringement alleged to be occasioned by the assailed OCD resolutions is the improper amendment to Section 285 of the Local Government Code of 1991 on the percentage sharing of the IRA among the LGUs. Said provision allocates the IRA as follows: Provinces 23%; Cities 23%; Municipalities 34%; and Barangays 20%.8 This formula has been improperly amended or modified, with respect to the five-billion-peso portion of the IRA allotted for the LGSEF, by the assailed OCD resolutions as they invariably provided for a different sharing scheme. The modifications allegedly constitute an illegal amendment by the executive branch of a substantive law. Moreover, the petitioner mentions that in the Letter dated December 5, 2001 of respondent Executive Secretary Romulo addressed to respondent Secretary Boncodin, the former endorsed to the latter the release of funds to certain LGUs from the LGSEF in accordance with the handwritten instructions of President Arroyo. Thus, the LGUs are at a loss as to how a portion of the LGSEF is actually allocated. Further, there are still portions of the LGSEF that, to date, have not been received by the petitioner; hence, resulting in damage and injury to the petitioner. The petitioner prays that the Court declare as unconstitutional and void the assailed provisos relating to the LGSEF in the GAAs of 1999, 2000 and 2001 and the assailed OCD resolutions (Resolutions Nos. OCD-99-003, OCD-99-005, OCD-99-006, OCD-2000-023, OCD-2001-029 and OCD-2002-001) issued by the Oversight Committee pursuant thereto. The petitioner, likewise, prays that the Court direct the respondents to rectify the unlawful and illegal distribution and releases of the LGSEF for the aforementioned years and release the same in accordance with the sharing formula under Section 285 of the Local Government Code of 1991. Finally, the petitioner urges the Court to declare that the entire IRA should be released automatically without further action by the LGUs as required by the Constitution and the Local Government Code of 1991. The Respondents' Arguments The respondents, through the Office of the Solicitor General, urge the Court to dismiss the petition on procedural and substantive grounds. On the latter, the respondents contend that the assailed provisos in the GAAs of 1999, 2000 and 2001 and the assailed resolutions issued by the Oversight Committee are not constitutionally infirm. The respondents advance the view that Section 6, Article X of the Constitution does not specify that the "just share" of the LGUs shall be determined solely by the Local Government Code of 1991. Moreover, the phrase "as determined by law" in the same constitutional provision means that there exists no limitation on the power of Congress to determine what is the "just share" of the LGUs in the national taxes. In other words, Congress is the arbiter of what should be the "just share" of the LGUs in the national taxes. The respondents further theorize that Section 285 of the Local Government Code of 1991, which provides for the percentage sharing of the IRA among the LGUs, was not intended to

be a fixed determination of their "just share" in the national taxes. Congress may enact other laws, including appropriations laws such as the GAAs of 1999, 2000 and 2001, providing for a different sharing formula. Section 285 of the Local Government Code of 1991 was merely intended to be the "default share" of the LGUs to do away with the need to determine annually by law their "just share." However, the LGUs have no vested right in a permanent or fixed percentage as Congress may increase or decrease the "just share" of the LGUs in accordance with what it believes is appropriate for their operation. There is nothing in the Constitution which prohibits Congress from making such determination through the appropriations laws. If the provisions of a particular statute, the GAA in this case, are within the constitutional power of the legislature to enact, they should be sustained whether the courts agree or not in the wisdom of their enactment. On procedural grounds, the respondents urge the Court to dismiss the petition outright as the same is defective. The petition allegedly raises factual issues which should be properly threshed out in the lower courts, not this Court, not being a trier of facts. Specifically, the petitioner's allegation that there are portions of the LGSEF that it has not, to date, received, thereby causing it (the petitioner) injury and damage, is subject to proof and must be substantiated in the proper venue, i.e., the lower courts. Further, according to the respondents, the petition has already been rendered moot and academic as it no longer presents a justiciable controversy. The IRAs for the years 1999, 2000 and 2001, have already been released and the government is now operating under the 2003 budget. In support of this, the respondents submitted certifications issued by officers of the DBM attesting to the release of the allocation or shares of the petitioner in the LGSEF for 1999, 2000 and 2001. There is, therefore, nothing more to prohibit. Finally, the petitioner allegedly has no legal standing to bring the suit because it has not suffered any injury. In fact, the petitioner's "just share" has even increased. Pursuant to Section 285 of the Local Government Code of 1991, the share of the provinces is 23%. OCD Nos. 99-005, 99-006 and 99-003 gave the provinces 40% of P2 billion of the LGSEF. OCD Nos. 2000-023 and 2001-029 apportioned 26% of P3.5 billion to the provinces. On the other hand, OCD No. 2001-001 allocated 25% of P3 billion to the provinces. Thus, the petitioner has not suffered any injury in the implementation of the assailed provisos in the GAAs of 1999, 2000 and 2001 and the OCD resolutions. The Ruling of the Court Procedural Issues Before resolving the petition on its merits, the Court shall first rule on the following procedural issues raised by the respondents: (1) whether the petitioner has legal standing or locus standi to file the present suit; (2) whether the petition involves factual questions that are properly cognizable by the lower courts; and (3) whether the issue had been rendered moot and academic. The petitioner has locus standi to maintain the present suit The gist of the question of standing is whether a party has "alleged such a personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination of difficult constitutional questions."9 Accordingly, it has been held that the interest of a party assailing the constitutionality of a statute must be direct and personal. Such party must be able to show, not only that the law or any government act is invalid, but also that he has sustained or is in imminent danger of sustaining some direct injury as a result of its enforcement, and not

merely that he suffers thereby in some indefinite way. It must appear that the person complaining has been or is about to be denied some right or privilege to which he is lawfully entitled or that he is about to be subjected to some burdens or penalties by reason of the statute or act complained of.10 The Court holds that the petitioner possesses the requisite standing to maintain the present suit. The petitioner, a local government unit, seeks relief in order to protect or vindicate an interest of its own, and of the other LGUs. This interest pertains to the LGUs' share in the national taxes or the IRA. The petitioner's constitutional claim is, in substance, that the assailed provisos in the GAAs of 1999, 2000 and 2001, and the OCD resolutions contravene Section 6, Article X of the Constitution, mandating the "automatic release" to the LGUs of their share in the national taxes. Further, the injury that the petitioner claims to suffer is the diminution of its share in the IRA, as provided under Section 285 of the Local Government Code of 1991, occasioned by the implementation of the assailed measures. These allegations are sufficient to grant the petitioner standing to question the validity of the assailed provisos in the GAAs of 1999, 2000 and 2001, and the OCD resolutions as the petitioner clearly has "a plain, direct and adequate interest" in the manner and distribution of the IRA among the LGUs. The petition involves a significant legal issue The crux of the instant controversy is whether the assailed provisos contained in the GAAs of 1999, 2000 and 2001, and the OCD resolutions infringe the Constitution and the Local Government Code of 1991. This is undoubtedly a legal question. On the other hand, the following facts are not disputed: 1. The earmarking of five billion pesos of the IRA for the LGSEF in the assailed provisos in the GAAs of 1999, 2000 and re-enacted budget for 2001; 2. The promulgation of the assailed OCD resolutions providing for the allocation schemes covering the said five billion pesos and the implementing rules and regulations therefor; and 3. The release of the LGSEF to the LGUs only upon their compliance with the implementing rules and regulations, including the guidelines and mechanisms, prescribed by the Oversight Committee. Considering that these facts, which are necessary to resolve the legal question now before this Court, are no longer in issue, the same need not be determined by a trial court.11 In any case, the rule on hierarchy of courts will not prevent this Court from assuming jurisdiction over the petition. The said rule may be relaxed when the redress desired cannot be obtained in the appropriate courts or where exceptional and compelling circumstances justify availment of a remedy within and calling for the exercise of this Court's primary jurisdiction.12 The crucial legal issue submitted for resolution of this Court entails the proper legal interpretation of constitutional and statutory provisions. Moreover, the "transcendental importance" of the case, as it necessarily involves the application of the constitutional principle on local autonomy, cannot be gainsaid. The nature of the present controversy, therefore, warrants the relaxation by this Court of procedural rules in order to resolve the case forthwith. The substantive issue needs to be resolved notwithstanding the supervening events

Granting arguendo that, as contended by the respondents, the resolution of the case had already been overtaken by supervening events as the IRA, including the LGSEF, for 1999, 2000 and 2001, had already been released and the government is now operating under a new appropriations law, still, there is compelling reason for this Court to resolve the substantive issue raised by the instant petition. Supervening events, whether intended or accidental, cannot prevent the Court from rendering a decision if there is a grave violation of the Constitution.13Even in cases where supervening events had made the cases moot, the Court did not hesitate to resolve the legal or constitutional issues raised to formulate controlling principles to guide the bench, bar and public.14 Another reason justifying the resolution by this Court of the substantive issue now before it is the rule that courts will decide a question otherwise moot and academic if it is "capable of repetition, yet evading review."15 For the GAAs in the coming years may contain provisos similar to those now being sought to be invalidated, and yet, the question may not be decided before another GAA is enacted. It, thus, behooves this Court to make a categorical ruling on the substantive issue now. Substantive Issue As earlier intimated, the resolution of the substantive legal issue in this case calls for the application of a most important constitutional policy and principle, that of local autonomy.16 In Article II of the Constitution, the State has expressly adopted as a policy that: Section 25. The State shall ensure the autonomy of local governments. An entire article (Article X) of the Constitution has been devoted to guaranteeing and promoting the autonomy of LGUs. Section 2 thereof reiterates the State policy in this wise: Section 2. The territorial and political subdivisions shall enjoy local autonomy. Consistent with the principle of local autonomy, the Constitution confines the President's power over the LGUs to one of general supervision.17 This provision has been interpreted to exclude the power of control. The distinction between the two powers was enunciated in Drilon v. Lim:18 An officer in control lays down the rules in the doing of an act. If they are not followed, he may, in his discretion, order the act undone or re-done by his subordinate or he may even decide to do it himself. Supervision does not cover such authority. The supervisor or superintendent merely sees to it that the rules are followed, but he himself does not lay down such rules, nor does he have the discretion to modify or replace them. If the rules are not observed, he may order the work done or re-done but only to conform to the prescribed rules. He may not prescribe his own manner for doing the act. He has no judgment on this matter except to see to it that the rules are followed.19 The Local Government Code of 199120 was enacted to flesh out the mandate of the Constitution.21 The State policy on local autonomy is amplified in Section 2 thereof: Sec. 2. Declaration of Policy. (a) It is hereby declared the policy of the State that the territorial and political subdivisions of the State shall enjoy genuine and meaningful local autonomy to enable them to attain their fullest development as self-reliant communities and make them more effective partners in the attainment of national goals. Toward this end, the State shall provide for a more responsive and accountable local government structure

instituted through a system of decentralization whereby local government units shall be given more powers, authority, responsibilities, and resources. The process of decentralization shall proceed from the National Government to the local government units. Guided by these precepts, the Court shall now determine whether the assailed provisos in the GAAs of 1999, 2000 and 2001, earmarking for each corresponding year the amount of five billion pesos of the IRA for the LGSEF and the OCD resolutions promulgated pursuant thereto, transgress the Constitution and the Local Government Code of 1991. The assailed provisos in the GAAs of 1999, 2000 and 2001 and the OCD resolutions violate the constitutional precept on local autonomy Section 6, Article X of the Constitution reads: Sec. 6. Local government units shall have a just share, as determined by law, in the national taxes which shall be automatically released to them. When parsed, it would be readily seen that this provision mandates that (1) the LGUs shall have a "just share" in the national taxes; (2) the "just share" shall be determined by law; and (3) the "just share" shall be automatically released to the LGUs. The Local Government Code of 1991, among its salient provisions, underscores the automatic release of the LGUs' "just share" in this wise: 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; ... Sec. 286. Automatic Release of Shares. (a) The share of each local government unit shall be released, without need of any further action, directly to the provincial, city, municipal or barangay treasurer, as the case may be, on a quarterly basis within five (5) days after the end of each quarter, and which shall not be subject to any lien or holdback that may be imposed by the national government for whatever purpose. (b) Nothing in this Chapter shall be understood to diminish the share of local government units under existing laws. Webster's Third New International Dictionary defines "automatic" as "involuntary either wholly or to a major extent so that any activity of the will is largely negligible; of a reflex nature; without volition; mechanical; like or suggestive of an automaton." Further, the word "automatically" is defined as "in an automatic manner: without thought or conscious intention." Being "automatic," thus, connotes something mechanical, spontaneous and perfunctory. As such, the LGUs are not required to perform any act to receive the "just share" accruing to them from the national coffers. As emphasized by the Local Government

Code of 1991, the "just share" of the LGUs shall be released to them "without need of further action." Construing Section 286 of the LGC, we held in Pimentel, Jr. v. Aguirre,22 viz: Section 4 of AO 372 cannot, however, be upheld. A basic feature of local fiscal autonomy is the automatic release of the shares of LGUs in the National internal revenue. This is mandated by no less than the Constitution. The Local Government Code specifies further that the release shall be made directly to the LGU concerned within five (5) days after every quarter of the year and "shall not be subject to any lien or holdback that may be imposed by the national government for whatever purpose." As a rule, the term "SHALL" is a word of command that must be given a compulsory meaning. The provision is, therefore, IMPERATIVE. Section 4 of AO 372, however, orders the withholding, effective January 1, 1998, of 10 percent of the LGUs' IRA "pending the assessment and evaluation by the Development Budget Coordinating Committee of the emerging fiscal situation" in the country. Such withholding clearly contravenes the Constitution and the law. Although temporary, it is equivalent to a holdback, which means "something held back or withheld, often temporarily." Hence, the "temporary" nature of the retention by the national government does not matter. Any retention is prohibited. In sum, while Section 1 of AO 372 may be upheld as an advisory effected in times of national crisis, Section 4 thereof has no color of validity at all. The latter provision effectively encroaches on the fiscal autonomy of local governments. Concededly, the President was well-intentioned in issuing his Order to withhold the LGUs' IRA, but the rule of law requires that even the best intentions must be carried out within the parameters of the Constitution and the law. Verily, laudable purposes must be carried out by legal methods.23 The "just share" of the LGUs is incorporated as the IRA in the appropriations law or GAA enacted by Congress annually. Under the assailed provisos in the GAAs of 1999, 2000 and 2001, a portion of the IRA in the amount of five billion pesos was earmarked for the LGSEF, and these provisos imposed the condition that "such amount shall be released to the local government units subject to the implementing rules and regulations, including such mechanisms and guidelines for the equitable allocations and distribution of said fund among local government units subject to the guidelines that may be prescribed by the Oversight Committee on Devolution." Pursuant thereto, the Oversight Committee, through the assailed OCD resolutions, apportioned the five billion pesos LGSEF such that: For 1999 P2 billion - allocated according to Sec. 285 LGC P2 billion - Modified Sharing Formula (Provinces 40%; Cities 20%; Municipalities 40%) P1 billion projects (LAAP) approved by OCD.24 For 2000 P3.5 billion Modified Sharing Formula (Provinces 26%;

Cities 23%; Municipalities 35%; Barangays 16%); P1.5 billion projects (LAAP) approved by the OCD.25 For 2001 P3 billion Modified Sharing Formula (Provinces 25%; Cities 25%; Municipalities 35%; Barangays 15%) P1.9 billion priority projects P100 million capability building fund.26 Significantly, the LGSEF could not be released to the LGUs without the Oversight Committee's prior approval. Further, with respect to the portion of the LGSEF allocated for various projects of the LGUs (P1 billion for 1999;P1.5 billion for 2000 and P2 billion for 2001), the Oversight Committee, through the assailed OCD resolutions, laid down guidelines and mechanisms that the LGUs had to comply with before they could avail of funds from this portion of the LGSEF. The guidelines required (a) the LGUs to identify the projects eligible for funding based on the criteria laid down by the Oversight Committee; (b) the LGUs to submit their project proposals to the DILG for appraisal; (c) the project proposals that passed the appraisal of the DILG to be submitted to the Oversight Committee for review, evaluation and approval. It was only upon approval thereof that the Oversight Committee would direct the DBM to release the funds for the projects. To the Court's mind, the entire process involving the distribution and release of the LGSEF is constitutionally impermissible. The LGSEF is part of the IRA or "just share" of the LGUs in the national taxes. To subject its distribution and release to the vagaries of the implementing rules and regulations, including the guidelines and mechanisms unilaterally prescribed by the Oversight Committee from time to time, as sanctioned by the assailed provisos in the GAAs of 1999, 2000 and 2001 and the OCD resolutions, makes the release not automatic, a flagrant violation of the constitutional and statutory mandate that the "just share" of the LGUs "shall be automatically released to them." The LGUs are, thus, placed at the mercy of the Oversight Committee. Where the law, the Constitution in this case, is clear and unambiguous, it must be taken to mean exactly what it says, and courts have no choice but to see to it that the mandate is obeyed.27 Moreover, as correctly posited by the petitioner, the use of the word "shall" connotes a mandatory order. Its use in a statute denotes an imperative obligation and is inconsistent with the idea of discretion.28 Indeed, the Oversight Committee exercising discretion, even control, over the distribution and release of a portion of the IRA, the LGSEF, is an anathema to and subversive of the principle of local autonomy as embodied in the Constitution. Moreover, it finds no statutory basis at all as the Oversight Committee was created merely to formulate the rules and regulations for the efficient and effective implementation of the Local Government Code of 1991 to ensure "compliance with the principles of local autonomy as defined under the Constitution."29 In fact, its creation was placed under the title of "Transitory Provisions," signifying its ad hoc character. According to Senator Aquilino Q. Pimentel, the principal author and sponsor of the bill that eventually became Rep. Act No. 7160, the Committee's work was supposed to be done a year from the approval of the Code, or on October 10,

1992.30 The Oversight Committee's authority is undoubtedly limited to the implementation of the Local Government Code of 1991, not to supplant or subvert the same. Neither can it exercise control over the IRA, or even a portion thereof, of the LGUs. That the automatic release of the IRA was precisely intended to guarantee and promote local autonomy can be gleaned from the discussion below between Messrs. Jose N. Nolledo and Regalado M. Maambong, then members of the 1986 Constitutional Commission, to wit: MR. MAAMBONG. Unfortunately, under Section 198 of the Local Government Code, the existence of subprovinces is still acknowledged by the law, but the statement of the Gentleman on this point will have to be taken up probably by the Committee on Legislation. A second point, Mr. Presiding Officer, is that under Article 2, Section 10 of the 1973 Constitution, we have a provision which states: The State shall guarantee and promote the autonomy of local government units, especially the barrio, to insure their fullest development as self-reliant communities. This provision no longer appears in the present configuration; does this mean that the concept of giving local autonomy to local governments is no longer adopted as far as this Article is concerned? MR. NOLLEDO. No. In the report of the Committee on Preamble, National Territory, and Declaration of Principles, that concept is included and widened upon the initiative of Commissioner Bennagen. MR. MAAMBONG. Thank you for that. With regard to Section 6, sources of revenue, the creation of sources as provided by previous law was "subject to limitations as may be provided by law," but now, we are using the term "subject to such guidelines as may be fixed by law." In Section 7, mention is made about the "unique, distinct and exclusive charges and contributions," and in Section 8, we talk about "exclusivity of local taxes and the share in the national wealth." Incidentally, I was one of the authors of this provision, and I am very thankful. Does this indicate local autonomy, or was the wording of the law changed to give more autonomy to the local government units?31 MR. NOLLEDO. Yes. In effect, those words indicate also "decentralization" because local political units can collect taxes, fees and charges subject merely to guidelines, as recommended by the league of governors and city mayors, with whom I had a dialogue for almost two hours. They told me that limitations may be questionable in the sense that Congress may limit and in effect deny the right later on. MR. MAAMBONG. Also, this provision on "automatic release of national tax share" points to more local autonomy. Is this the intention? MR. NOLLEDO. Yes, the Commissioner is perfectly right.32 The concept of local autonomy was explained in Ganzon v. Court of Appeals33 in this wise: As the Constitution itself declares, local autonomy 'means a more responsive and accountable local government structure instituted through a system of decentralization.' The

Constitution, as we observed, does nothing more than to break up the monopoly of the national government over the affairs of local governments and as put by political adherents, to "liberate the local governments from the imperialism of Manila." Autonomy, however, is not meant to end the relation of partnership and interdependence between the central administration and local government units, or otherwise, to usher in a regime of federalism. The Charter has not taken such a radical step. Local governments, under the Constitution, are subject to regulation, however limited, and for no other purpose than precisely, albeit paradoxically, to enhance self-government. As we observed in one case, decentralization means devolution of national administration but not power to the local levels. Thus: Now, autonomy is either decentralization of administration or decentralization of power. There is decentralization of administration when the central government delegates administrative powers to political subdivisions in order to broaden the base of government power and in the process to make local governments 'more responsive and accountable' and 'ensure their fullest development as self-reliant communities and make them more effective partners in the pursuit of national development and social progress.' At the same time, it relieves the central government of the burden of managing local affairs and enables it to concentrate on national concerns. The President exercises 'general supervision' over them, but only to 'ensure that local affairs are administered according to law.' He has no control over their acts in the sense that he can substitute their judgments with his own. Decentralization of power, on the other hand, involves an abdication of political power in the [sic] favor of local governments [sic] units declared to be autonomous. In that case, the autonomous government is free to chart its own destiny and shape its future with minimum intervention from central authorities. According to a constitutional author, decentralization of power amounts to 'self-immolation,' since in that event, the autonomous government becomes accountable not to the central authorities but to its constituency.34 Local autonomy includes both administrative and fiscal autonomy. The fairly recent case of Pimentel v. Aguirre35is particularly instructive. The Court declared therein that local fiscal autonomy includes the power of the LGUs to, inter alia, allocate their resources in accordance with their own priorities: Under existing law, local government units, in addition to having administrative autonomy in the exercise of their functions, enjoy fiscal autonomy as well. Fiscal autonomy means that local governments have the power to create their own sources of revenue in addition to their equitable share in the national taxes released by the national government, as well as the power to allocate their resources in accordance with their own priorities. It extends to the preparation of their budgets, and local officials in turn have to work within the constraints thereof. They are not formulated at the national level and imposed on local governments, whether they are relevant to local needs and resources or not ...36 Further, a basic feature of local fiscal autonomy is the constitutionally mandated automatic release of the shares of LGUs in the national internal revenue.37 Following this ratiocination, the Court in Pimentel struck down as unconstitutional Section 4 of Administrative Order (A.O.) No. 372 which ordered the withholding, effective January 1, 1998, of ten percent of the LGUs' IRA "pending the assessment and evaluation by the Development Budget Coordinating Committee of the emerging fiscal situation."

In like manner, the assailed provisos in the GAAs of 1999, 2000 and 2001, and the OCD resolutions constitute a "withholding" of a portion of the IRA. They put on hold the distribution and release of the five billion pesos LGSEF and subject the same to the implementing rules and regulations, including the guidelines and mechanisms prescribed by the Oversight Committee from time to time. Like Section 4 of A.O. 372, the assailed provisos in the GAAs of 1999, 2000 and 2001 and the OCD resolutions effectively encroach on the fiscal autonomy enjoyed by the LGUs and must be struck down. They cannot, therefore, be upheld. The assailed provisos in the GAAs of 1999, 2000 and 2001 and the OCD resolutions cannot amend Section 285 of the Local Government Code of 1991 Section 28438 of the Local Government Code provides that, beginning the third year of its effectivity, the LGUs' share in the national internal revenue taxes shall be 40%. This percentage is fixed and may not be reduced except "in the event the national government incurs an unmanageable public sector deficit" and only upon compliance with stringent requirements set forth in the same section: Sec. 284. ... Provided, That in the event that the national government incurs an unmanageable public sector deficit, the President of the Philippines is hereby authorized, upon recommendation of Secretary of Finance, Secretary of Interior and Local Government and Secretary of Budget and Management, and subject to consultation with the presiding officers of both Houses of Congress and the presidents of the liga, to make the necessary adjustments in the internal revenue allotment of local government units but in no case shall the allotment be less than thirty percent (30%) of the collection of the national internal revenue taxes of the third fiscal year preceding the current fiscal year; Provided, further That in the first year of the effectivity of this Code, the local government units shall, in addition to the thirty percent (30%) internal revenue allotment which shall include the cost of devolved functions for essential public services, be entitled to receive the amount equivalent to the cost of devolved personnel services. Thus, from the above provision, the only possible exception to the mandatory automatic release of the LGUs' IRA is if the national internal revenue collections for the current fiscal year is less than 40 percent of the collections of the preceding third fiscal year, in which case what should be automatically released shall be a proportionate amount of the collections for the current fiscal year. The adjustment may even be made on a quarterly basis depending on the actual collections of national internal revenue taxes for the quarter of the current fiscal year. In the instant case, however, there is no allegation that the national internal revenue tax collections for the fiscal years 1999, 2000 and 2001 have fallen compared to the preceding three fiscal years. Section 285 then specifies how the IRA shall be allocated among the LGUs: Sec. 285. Allocation to Local Government Units. The share of local government units in the internal revenue allotment shall be allocated in the following manner: (a) Provinces Twenty-three (23%)

(b) Cities Twenty-three percent (23%); (c) Municipalities Thirty-four (34%); and (d) Barangays Twenty percent (20%). However, this percentage sharing is not followed with respect to the five billion pesos LGSEF as the assailed OCD resolutions, implementing the assailed provisos in the GAAs of 1999, 2000 and 2001, provided for a different sharing scheme. For example, for 1999, P2 billion of the LGSEF was allocated as follows: Provinces 40%; Cities 20%; Municipalities 40%.39 For 2000, P3.5 billion of the LGSEF was allocated in this manner: Provinces 26%; Cities 23%; Municipalities 35%; Barangays 26%.40 For 2001, P3 billion of the LGSEF was allocated, thus: Provinces 25%; Cities 25%; Municipalities 35%; Barangays 15%.41 The respondents argue that this modification is allowed since the Constitution does not specify that the "just share" of the LGUs shall only be determined by the Local Government Code of 1991. That it is within the power of Congress to enact other laws, including the GAAs, to increase or decrease the "just share" of the LGUs. This contention is untenable. The Local Government Code of 1991 is a substantive law. And while it is conceded that Congress may amend any of the provisions therein, it may not do so through appropriations laws or GAAs. Any amendment to the Local Government Code of 1991 should be done in a separate law, not in the appropriations law, because Congress cannot include in a general appropriation bill matters that should be more properly enacted in a separate legislation.42 A general appropriations bill is a special type of legislation, whose content is limited to specified sums of money dedicated to a specific purpose or a separate fiscal unit.43 Any provision therein which is intended to amend another law is considered an "inappropriate provision." The category of "inappropriate provisions" includes unconstitutional provisions and provisions which are intended to amend other laws, because clearly these kinds of laws have no place in an appropriations bill.44 Increasing or decreasing the IRA of the LGUs or modifying their percentage sharing therein, which are fixed in the Local Government Code of 1991, are matters of general and substantive law. To permit Congress to undertake these amendments through the GAAs, as the respondents contend, would be to give Congress the unbridled authority to unduly infringe the fiscal autonomy of the LGUs, and thus put the same in jeopardy every year. This, the Court cannot sanction. It is relevant to point out at this juncture that, unlike those of 1999, 2000 and 2001, the GAAs of 2002 and 2003 do not contain provisos similar to the herein assailed provisos. In other words, the GAAs of 2002 and 2003 have not earmarked any amount of the IRA for the LGSEF. Congress had perhaps seen fit to discontinue the practice as it recognizes its infirmity. Nonetheless, as earlier mentioned, this Court has deemed it necessary to make a definitive ruling on the matter in order to prevent its recurrence in future appropriations laws and that the principles enunciated herein would serve to guide the bench, bar and public. Conclusion In closing, it is well to note that the principle of local autonomy, while concededly expounded in greater detail in the present Constitution, dates back to the turn of the century when President William McKinley, in his Instructions to the Second Philippine Commission dated

April 7, 1900, ordered the new Government "to devote their attention in the first instance to the establishment of municipal governments in which the natives of the Islands, both in the cities and in the rural communities, shall be afforded the opportunity to manage their own affairs to the fullest extent of which they are capable, and subject to the least degree of supervision and control in which a careful study of their capacities and observation of the workings of native control show to be consistent with the maintenance of law, order and loyalty."45 While the 1935 Constitution had no specific article on local autonomy, nonetheless, it limited the executive power over local governments to "general supervision ... as may be provided by law."46 Subsequently, the 1973 Constitution explicitly stated that "[t]he State shall guarantee and promote the autonomy of local government units, especially the barangay to ensure their fullest development as self-reliant communities."47 An entire article on Local Government was incorporated therein. The present Constitution, as earlier opined, has broadened the principle of local autonomy. The 14 sections in Article X thereof markedly increased the powers of the local governments in order to accomplish the goal of a more meaningful local autonomy. Indeed, the value of local governments as institutions of democracy is measured by the degree of autonomy that they enjoy.48 As eloquently put by M. De Tocqueville, a distinguished French political writer, "[l]ocal assemblies of citizens constitute the strength of free nations. Township meetings are to liberty what primary schools are to science; they bring it within the people's reach; they teach men how to use and enjoy it. A nation may establish a system of free governments but without the spirit of municipal institutions, it cannot have the spirit of liberty."49 Our national officials should not only comply with the constitutional provisions on local autonomy but should also appreciate the spirit and liberty upon which these provisions are based.50 WHEREFORE, the petition is GRANTED. The assailed provisos in the General Appropriations Acts of 1999, 2000 and 2001, and the assailed OCD Resolutions, are declared UNCONSTITUTIONAL. SO ORDERED. ROMEO J. CALLEJO, SR. Associate Justice WE CONCUR: On official leave HILARIO G. DAVIDE, JR. Chief Justice On official leave REYNATO S. PUNO JOSE C. VITUG Associate Justice Associate Justice

ARTEMIO V. PANGANIBAN LEONARDO A. QUISUMBING Associate Justice Associate Justice CONSUELO YNARES-SANTIAGO ANGELINA SANDOVAL-GUTIERREZ Associate Justice Associate Justice ANTONIO T. CARPIO MA. ALICIA AUSTRIA-MARTINEZ Associate Justice Associate Justice RENATO C. CORONA CONCHITA CARPIO MORALES Associate Justice Associate Justice ADOLFO S. AZCUNA DANTE O. TINGA Associate Justice Associate Justice CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. JOSE C. VITUG Acting Chief Justice

Footnotes
1

Section 1, E.O. No. 48. Section 2, id. Section 4, id. Ibid. Id. Id. Id. Infra.

Baker v. Carr, 369 U.S. 186, 7 L.Ed. 2d 633 cited in, among others, Agan, Jr. v. PIATCO, G.R. Nos. 155001, 155547 and 155661, May 5, 2003 and Farias v. Executive Secretary, G.R. Nos. 147387 and 152161, December 10, 2003.
10

Agan, Jr. v. PIATCO, supra.

11

Ibid. Id. 13 Chavez v. Public Estates Authority, 384 SCRA 152 (2002). Ibid, citing, among others, Salonga v. Pao, 134 SCRA 438 (1995).

12

14

15

Southern Pac. Terminal Co. v. ICC, 219 U.S. 498, 55 L.Ed. 310 (1911) cited in, among others, Viola v. Alunan III, 277 SCRA 409 (1997); Acop v. Guingona, Jr., 383 SCRA 577 (2002).
16

San Juan v. Civil Service Commission, 196 SCRA 69 (1991). Section 4, Article X. 235 SCRA 135 (1994). Id. at 142.

17

18

19

20

Rep. Act No. 7160 was signed into law by then President Corazon C. Aquino on October 10, 1991. It took effect on January 1, 1992.
21

Section 3, Article X reads: Sec. 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, terms, salaries, powers and functions and duties of local officials, and all other matters relating to the organization and operation of local government units.

22

336 SCRA 201 (2000). Id. at 220-221. (Emphasis supplied.) Per OCD-99-005, 99-006, 99-003. Per OCD-2000-023 and 2001-029. Per OCD-2002-001. Quisumbing v. Manila Electric Co., 380 SCRA 195 (2002). Codoy v. Calugay, 312 SCRA 333 (1999). Section 533 of Rep. Act 7160 reads in part: Sec. 533. Formulation of Implementing Rules and Regulations. (a) Within one (1) month after the approval of this Code, the President shall convene

23

24

25

26

27

28

29

the Oversight Committee as herein provided for. The said Committee shall formulate and issue the appropriate rules and regulations necessary for the efficient and effective implementation of any and all provisions of this Code, thereby ensuring compliance with the principles of local autonomy as defined under the Constitution. ... (c) The Committee shall submit its report and recommendation to the President within two (2) months after its organization. If the President fails to act within thirty (30) days from receipt thereof, the recommendation of the Oversight Committee shall be deemed approved. Thereafter, the Committee shall supervise the transfer of such powers and functions mandated under this Code to the local government units, together with the corresponding personnel, properties, assets and liabilities of the offices or agencies concerned, with the least possible disruptions to existing programs and projects. The Committee shall, likewise, recommend the corresponding appropriations necessary to effect the said transfer.
30

Pimentel, The Local Government Code of 1991: The Key to National Development, p. 576.
31

The Committee Report No. 21 submitted by the Committee on Local Governments of the Constitutional Commission, headed by Commissioner Jose N. Nolledo, proposed to incorporate the following provisions: SEC. 6. Each government unit shall have the power to create its own sources of revenue and to levy taxes, fees and charges subject to such guidelines as may be fixed by law. SEC. 7. Local governments shall have the power to levy and collect charges or contributions unique, distinct and exclusive to them. SEC. 8. 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. The share of local governments in the national taxes shall be released to them automatically.
32

3 RECORD OF THE CONSTITUTIONAL COMMISSION 231. 200 SCRA 271 (1991). Id. at 286-287. (Citations omitted.) Supra at note 22. Id. at 218. Id. at 220.

33

34

35

36

37

38

The provision reads in part: Sec. 284. Allotment of Internal Revenue Taxes. Local government units shall have a share in the national internal revenue taxes based on the collection of the third fiscal year preceding the current fiscal year as follows: (a) On the first year of the effectivity of this Code, thirty percent (30%); (b) On the second year, thirty-five percent (35%); and (c) On the third year and, thereafter, forty percent (40%).

39

Per OCD Res.-99-005, 99-006, 99-003. Per OCD-2000-023 and 2001-029. Per OCD-2002-001. Philippine Constitutional Association v. Enriquez, 235 SCRA 506 (1994).

40

41

42

43

Ibid, citing Beckman, The Item Veto Power of the Executive, 31 Temple Law Quarterly 27 (1957).
44

Id.

45

Mendoza, From McKinley's Instructions to the New Constitution: Documents on the Philippine Constitutional System, pp. 67-68.
46

Paragraph (1), Section 11, Article VII of the 1935 Constitution reads: Sec. 11(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.

47

Section 10, Article II thereof. Sinco, Philippine Political Law, 10th ed., pp. 681-682. Ibid. San Juan v. Civil Service Commission, supra.

48

49

50

FIRST DIVISION
[G.R. No. 135962. March 27, 2000]

METROPOLITAN MANILA DEVELOPMENT AUTHORITY, petitioner, vs. BEL-AIR VILLAGE ASSOCIATION, INC., respondent. DECISION
PUNO, J.: Not infrequently, the government is tempted to take legal shortcuts to solve urgent problems of the people. But even when government is armed with the best of intention, we cannot allow it to run roughshod over the rule of law. Again, we let the hammer fall and fall hard on the illegal attempt of the MMDA to open for public use a private road in a private subdivision. While we hold that the general welfare should be promoted, we stress that it should not be achieved at the expense of the rule of law. h Y Petitioner MMDA is a government agency tasked with the delivery of basic services in Metro Manila. Respondent Bel-Air Village Association, Inc. (BAVA) is a non-stock, non-profit corporation whose members are homeowners in Bel-Air Village, a private subdivision in Makati City. Respondent BAVA is the registered owner of Neptune Street, a road inside Bel-Air Village. On December 30, 1995, respondent received from petitioner, through its Chairman, a notice dated December 22, 1995 requesting respondent to open Neptune Street to public vehicular traffic starting January 2, 1996. The notice reads: Court "SUBJECT: NOTICE of the Opening of Neptune Street to Traffic "Dear President Lindo, "Please be informed that pursuant to the mandate of the MMDA law or Republic Act No. 7924 which requires the Authority to rationalize the use of roads and/or thoroughfares for the safe and convenient movement of persons, Neptune Street shall be opened to vehicular traffic effective January 2, 1996. "In view whereof, the undersigned requests you to voluntarily open the points of entry and exit on said street. "Thank you for your cooperation and whatever assistance that may be extended by your association to the MMDA personnel who will be directing traffic in the area. "Finally, we are furnishing you with a copy of the handwritten instruction of the President on the matter.

"Very truly yours, PROSPERO I. ORETA Chairman"[1] On the same day, respondent was apprised that the perimeter wall separating the subdivision from the adjacent Kalayaan Avenue would be demolished. Sppedsc On January 2, 1996, respondent instituted against petitioner before the Regional Trial Court, Branch 136, Makati City, Civil Case No. 96-001 for injunction. Respondent prayed for the issuance of a temporary restraining order and preliminary injunction enjoining the opening of Neptune Street and prohibiting the demolition of the perimeter wall. The trial court issued a temporary restraining order the following day. On January 23, 1996, after due hearing, the trial court denied issuance of a preliminary injunction.[2] Respondent questioned the denial before the Court of Appeals in CA-G.R. SP No. 39549. The appellate court conducted an ocular inspection of Neptune Street[3] and on February 13, 1996, it issued a writ of preliminary injunction enjoining the implementation of the MMDAs proposed action.[4] On January 28, 1997, the appellate court rendered a Decision on the merits of the case finding that the MMDA has no authority to order the opening of Neptune Street, a private subdivision road and cause the demolition of its perimeter walls. It held that the authority is lodged in the City Council of Makati by ordinance. The decision disposed of as follows: Jurissc "WHEREFORE, the Petition is GRANTED; the challenged Order dated January 23, 1995, in Civil Case No. 96-001, is SET ASIDE and the Writ of Preliminary Injunction issued on February 13, 1996 is hereby made permanent. "For want of sustainable substantiation, the Motion to Cite Roberto L. del Rosario in contempt is denied.[5] "No pronouncement as to costs. "SO ORDERED."[6] The Motion for Reconsideration of the decision was denied on September 28, 1998. Hence, this recourse. Jksm Petitioner MMDA raises the following questions:

"I HAS THE METROPOLITAN MANILA DEVELOPMENT AUTHORITY (MMDA) THE MANDATE TO OPEN NEPTUNE STREET TO PUBLIC TRAFFIC PURSUANT TO ITS REGULATORY AND POLICE POWERS? II IS THE PASSAGE OF AN ORDINANCE A CONDITION PRECEDENT BEFORE THE MMDA MAY ORDER THE OPENING OF SUBDIVISION ROADS TO PUBLIC TRAFFIC? III IS RESPONDENT BEL-AIR VILLAGE ASSOCIATION, INC. ESTOPPED FROM DENYING OR ASSAILING THE AUTHORITY OF THE MMDA TO OPEN THE SUBJECT STREET? Jlexj V WAS RESPONDENT DEPRIVED OF DUE PROCESS DESPITE THE SEVERAL MEETINGS HELD BETWEEN MMDA AND THE AFFECTED BEL-AIR RESIDENTS AND BAVA OFFICERS? V HAS RESPONDENT COME TO COURT WITH UNCLEAN HANDS?"[7] Neptune Street is owned by respondent BAVA. It is a private road inside Bel-Air Village, a private residential subdivision in the heart of the financial and commercial district of Makati City. It runs parallel to Kalayaan Avenue, a national road open to the general public. Dividing the two (2) streets is a concrete perimeter wall approximately fifteen (15) feet high. The western end of Neptune Street intersects Nicanor Garcia, formerly Reposo Street, a subdivision road open to public vehicular traffic, while its eastern end intersects Makati Avenue, a national road. Both ends of Neptune Street are guarded by iron gates. Edp mis Petitioner MMDA claims that it has the authority to open Neptune Street to public traffic because it is an agent of the state endowed with police power in the delivery of basic services in Metro Manila. One of these basic services is traffic management which involves the regulation of the use of thoroughfares to insure the safety, convenience and welfare of the general public. It is alleged that the police power of MMDA was affirmed by this Court in the consolidated cases of Sangalang v. Intermediate Appellate Court.[8] From the premise that it has police

power, it is now urged that there is no need for the City of Makati to enact an ordinance opening Neptune street to the public.[9] Police power is an inherent attribute of sovereignty. It has been defined as the power vested by the Constitution in the legislature to make, ordain, and establish all manner of wholesome and reasonable laws, statutes and ordinances, either with penalties or without, not repugnant to the Constitution, as they shall judge to be for the good and welfare of the commonwealth, and for the subjects of the same.[10] The power is plenary and its scope is vast and pervasive, reaching and justifying measures for public health, public safety, public morals, and the general welfare.[11] It bears stressing that police power is lodged primarily in the National Legislature.[12] It cannot be exercised by any group or body of individuals not possessing legislative power.[13] The National Legislature, however, may delegate this power to the President and administrative boards as well as the lawmaking bodies of municipal corporations or local government units.[14] Once delegated, the agents can exercise only such legislative powers as are conferred on them by the national lawmaking body.[15] A local government is a "political subdivision of a nation or state which is constituted by law and has substantial control of local affairs."[16] The Local Government Code of 1991 defines a local government unit as a "body politic and corporate"[17]-- one endowed with powers as a political subdivision of the National Government and as a corporate entity representing the inhabitants of its territory.[18] Local government units are the provinces, cities, municipalities and barangays.[19] They are also the territorial and political subdivisions of the state.[20] Our Congress delegated police power to the local government units in the Local Government Code of 1991. This delegation is found in Section 16 of the same Code, known as the general welfare clause, viz: Chief "Sec. 16. General Welfare.Every local government unit shall exercise the powers expressly granted, those necessarily implied therefrom, as well as powers necessary, appropriate, or incidental for its efficient and effective governance, and those which are essential to the promotion of the general welfare. Within their respective territorial jurisdictions, local government units shall ensure and support, among other things, the preservation and enrichment of culture, promote health and safety, enhance the right of the people to a balanced ecology, encourage and support the development of appropriate and self-reliant scientific and technological capabilities, improve public morals, enhance economic prosperity and social justice, promote full employment among their residents, maintain peace and order, and preserve the comfort and convenience of their inhabitants."[21]

Local government units exercise police power through their respective legislative bodies. The legislative body of the provincial government is the sangguniang panlalawigan, that of the city government is the sangguniang panlungsod, that of the municipal government is the sangguniang bayan, and that of the barangay is the sangguniang barangay. The Local Government Code of 1991 empowers the sangguniang panlalawigan, sangguniang panlungsod and sangguniang bayan to "enact ordinances, approve resolutions and appropriate funds for the general welfare of the [province, city or municipality, as the case may be], and its inhabitants pursuant to Section 16 of the Code and in the proper exercise of the corporate powers of the [province, city municipality] provided under the Code x x x."[22] The same Code gives the sangguniang barangay the power to "enact ordinances as may be necessary to discharge the responsibilities conferred upon it by law or ordinance and to promote the general welfare of the inhabitants thereon."[23] Metropolitan or Metro Manila is a body composed of several local government units - i.e., twelve (12) cities and five (5) municipalities, namely, the cities of Caloocan, Manila, Mandaluyong, Makati, Pasay, Pasig, Quezon, Muntinlupa, Las Pinas, Marikina, Paranaque and Valenzuela, and the municipalities of Malabon, , Navotas, , Pateros, San Juan and Taguig. With the passage of Republic Act (R. A.) No. 7924[24] in 1995, Metropolitan Manila was declared as a "special development and administrative region" and the Administration of "metro-wide" basic services affecting the region placed under "a development authority" referred to as the MMDA.[25] "Metro-wide services" are those "services which have metro-wide impact and transcend local political boundaries or entail huge expenditures such that it would not be viable for said services to be provided by the individual local government units comprising Metro Manila."[26] There are seven (7) basic metro-wide services and the scope of these services cover the following: (1) development planning; (2) transport and traffic management; (3) solid waste disposal and management; (4) flood control and sewerage management; (5) urban renewal, zoning and land use planning, and shelter services; (6) health and sanitation, urban protection and pollution control; and (7) public safety. The basic service of transport and traffic management includes the following:Lexjuris "(b) Transport and traffic management which include the formulation, coordination, and monitoring of policies, standards, programs and projects to rationalize the existing transport operations, infrastructure requirements, the use of thoroughfares, and promotion of safe and convenient movement of persons and goods; provision for the mass transport system and the institution of a system to regulate road users; administration and implementation of all traffic enforcement operations, traffic engineering services and

traffic education programs, including the institution of a single ticketing system in Metropolitan Manila;"[27] In the delivery of the seven (7) basic services, the MMDA has the following powers and functions: Esm "Sec. 5. Functions and powers of the Metro Manila Development Authority.The MMDA shall: (a) Formulate, coordinate and regulate the implementation of medium and long-term plans and programs for the delivery of metro-wide services, land use and physical development within Metropolitan Manila, consistent with national development objectives and priorities; (b) Prepare, coordinate and regulate the implementation of medium-term investment programs for metro-wide services which shall indicate sources and uses of funds for priority programs and projects, and which shall include the packaging of projects and presentation to funding institutions; Esmsc (c) Undertake and manage on its own metro-wide programs and projects for the delivery of specific services under its jurisdiction, subject to the approval of the Council. For this purpose, MMDA can create appropriate project management offices; (d) Coordinate and monitor the implementation of such plans, programs and projects in Metro Manila; identify bottlenecks and adopt solutions to problems of implementation; (e) The MMDA shall set the policies concerning traffic in Metro Manila, and shall coordinate and regulate the implementation of all programs and projects concerning traffic management, specifically pertaining to enforcement, engineering and education. Upon request, it shall be extended assistance and cooperation, including but not limited to, assignment of personnel, by all other government agencies and offices concerned; (f) Install and administer a single ticketing system, fix, impose and collect fines and penalties for all kinds of violations of traffic rules and regulations, whether moving or non-moving in nature, and confiscate and suspend or revoke drivers licenses in the enforcement of such traffic laws and regulations, the provisions of RA 4136 and PD 1605 to the contrary notwithstanding. For this purpose, the Authority shall impose

all traffic laws and regulations in Metro Manila, through its traffic operation center, and may deputize members of the PNP, traffic enforcers of local government units, duly licensed security guards, or members of non-governmental organizations to whom may be delegated certain authority, subject to such conditions and requirements as the Authority may impose; and (g) Perform other related functions required to achieve the objectives of the MMDA, including the undertaking of delivery of basic services to the local government units, when deemed necessary subject to prior coordination with and consent of the local government unit concerned." Jurismis The implementation of the MMDAs plans, programs and projects is undertaken by the local government units, national government agencies, accredited peoples organizations, non-governmental organizations, and the private sector as well as by the MMDA itself. For this purpose, the MMDA has the power to enter into contracts, memoranda of agreement and other cooperative arrangements with these bodies for the delivery of the required services within Metro Manila.[28] The governing board of the MMDA is the Metro Manila Council. The Council is composed of the mayors of the component 12 cities and 5 municipalities, the president of the Metro Manila Vice-Mayors League and the president of the Metro Manila Councilors League.[29] The Council is headed by a Chairman who is appointed by the President and vested with the rank of cabinet member. As the policy-making body of the MMDA, the Metro Manila Council approves metro-wide plans, programs and projects, and issues the necessary rules and regulations for the implementation of said plans; it approves the annual budget of the MMDA and promulgates the rules and regulations for the delivery of basic services, collection of service and regulatory fees, fines and penalties. These functions are particularly enumerated as follows: LEX "Sec. 6. Functions of the Metro Manila Council. (a) The Council shall be the policy-making body of the MMDA; (b) It shall approve metro-wide plans, programs and projects and issue rules and regulations deemed necessary by the MMDA to carry out the purposes of this Act; (c) It may increase the rate of allowances and per diems of the members of the Council to be effective during the term of the succeeding Council. It shall fix the compensation of the officers and

personnel of the MMDA, and approve the annual budget thereof for submission to the Department of Budget and Management (DBM); (d) It shall promulgate rules and regulations and set policies and standards for metro-wide application governing the delivery of basic services, prescribe and collect service and regulatory fees, and impose and collect fines and penalties." Jj sc Clearly, the scope of the MMDAs function is limited to the delivery of the seven (7) basic services. One of these is transport and traffic management which includes the formulation and monitoring of policies, standards and projects to rationalize the existing transport operations, infrastructure requirements, the use of thoroughfares and promotion of the safe movement of persons and goods. It also covers the mass transport system and the institution of a system of road regulation, the administration of all traffic enforcement operations, traffic engineering services and traffic education programs, including the institution of a single ticketing system in Metro Manila for traffic violations. Under this service, the MMDA is expressly authorized "to set the policies concerning traffic" and "coordinate and regulate the implementation of all traffic management programs." In addition, the MMDA may "install and administer a single ticketing system," fix, impose and collect fines and penalties for all traffic violations. Ca-lrsc It will be noted that the powers of the MMDA are limited to the following acts: formulation, coordination, regulation, implementation, preparation, management, monitoring, setting of policies, installation of a system and administration. There is no syllable in R. A. No. 7924 that grants the MMDA police power, let alone legislative power. Even the Metro Manila Council has not been delegated any legislative power. Unlike the legislative bodies of the local government units, there is no provision in R. A. No. 7924 that empowers the MMDA or its Council to "enact ordinances, approve resolutions and appropriate funds for the general welfare" of the inhabitants of Metro Manila. The MMDA is, as termed in the charter itself, a "development authority."[30] It is an agency created for the purpose of laying down policies and coordinating with the various national government agencies, peoples organizations, non-governmental organizations and the private sector for the efficient and expeditious delivery of basic services in the vast metropolitan area. All its functions are administrative in nature and these are actually summed up in the charter itself, viz: "Sec. 2. Creation of the Metropolitan Manila Development Authority. -- x x x. The MMDA shall perform planning, monitoring and coordinative functions, and in the process exercise regulatory and supervisory authority over the delivery of metro-wide services within Metro Manila, without diminution of the autonomy of the local government units concerning purely local matters."[31]

Petitioner cannot seek refuge in the cases of Sangalang v. Intermediate Appellate Court[32] where we upheld a zoning ordinance issued by the Metro Manila Commission (MMC), the predecessor of the MMDA, as an exercise of police power. The first Sangalang decision was on the merits of the petition,[33] while the second decision denied reconsideration of the first case and in addition discussed the case of Yabut v. Court of Appeals.[34] Sangalang v. IAC involved five (5) consolidated petitions filed by respondent BAVA and three residents of Bel-Air Village against other residents of the Village and the Ayala Corporation, formerly the Makati Development Corporation, as the developer of the subdivision. The petitioners sought to enforce certain restrictive easements in the deeds of sale over their respective lots in the subdivision. These were the prohibition on the setting up of commercial and advertising signs on the lots, and the condition that the lots be used only for residential purposes. Petitioners alleged that respondents, who were residents along Jupiter Street of the subdivision, converted their residences into commercial establishments in violation of the "deed restrictions," and that respondent Ayala Corporation ushered in the full commercialization" of Jupiter Street by tearing down the perimeter wall that separated the commercial from the residential section of the village.[35] The petitions were dismissed based on Ordinance No. 81 of the Municipal Council of Makati and Ordinance No. 81-01 of the Metro Manila Commission (MMC). Municipal Ordinance No. 81 classified Bel-Air Village as a Class A Residential Zone, with its boundary in the south extending to the center line of Jupiter Street. The Municipal Ordinance was adopted by the MMC under the Comprehensive Zoning Ordinance for the National Capital Region and promulgated as MMC Ordinance No. 81-01. Bel-Air Village was indicated therein as bounded by Jupiter Street and the block adjacent thereto was classified as a High Intensity Commercial Zone.[36] We ruled that since both Ordinances recognized Jupiter Street as the boundary between Bel-Air Village and the commercial district, Jupiter Street was not for the exclusive benefit of Bel-Air residents. We also held that the perimeter wall on said street was constructed not to separate the residential from the commercial blocks but simply for security reasons, hence, in tearing down said wall, Ayala Corporation did not violate the "deed restrictions" in the deeds of sale. Scc-alr We upheld the ordinances, specifically MMC Ordinance No. 81-01, as a legitimate exercise of police power.[37] The power of the MMC and the Makati Municipal Council to enact zoning ordinances for the general welfare prevailed over the "deed restrictions". In the second Sangalang/Yabut decision, we held that the opening of Jupiter Street was warranted by the demands of the common good in terms of "traffic decongestion and public convenience." Jupiter was opened by the Municipal

Mayor to alleviate traffic congestion along the public streets adjacent to the Village.[38] The same reason was given for the opening to public vehicular traffic of Orbit Street, a road inside the same village. The destruction of the gate in Orbit Street was also made under the police power of the municipal government. The gate, like the perimeter wall along Jupiter, was a public nuisance because it hindered and impaired the use of property, hence, its summary abatement by the mayor was proper and legal.[39] Contrary to petitioners claim, the two Sangalang cases do not apply to the case at bar. Firstly, both involved zoning ordinances passed by the municipal council of Makati and the MMC. In the instant case, the basis for the proposed opening of Neptune Street is contained in the notice of December 22, 1995 sent by petitioner to respondent BAVA, through its president. The notice does not cite any ordinance or law, either by the Sangguniang Panlungsod of Makati City or by the MMDA, as the legal basis for the proposed opening of Neptune Street. Petitioner MMDA simply relied on its authority under its charter "to rationalize the use of roads and/or thoroughfares for the safe and convenient movement of persons." Rationalizing the use of roads and thoroughfares is one of the acts that fall within the scope of transport and traffic management. By no stretch of the imagination, however, can this be interpreted as an express or implied grant of ordinance-making power, much less police power. Misjuris Secondly, the MMDA is not the same entity as the MMC in Sangalang. Although the MMC is the forerunner of the present MMDA, an examination of Presidential Decree (P. D.) No. 824, the charter of the MMC, shows that the latter possessed greater powers which were not bestowed on the present MMDA. Jjlex Metropolitan Manila was first created in 1975 by Presidential Decree (P.D.) No. 824. It comprised the Greater Manila Area composed of the contiguous four (4) cities of Manila, Quezon, Pasay and Caloocan, and the thirteen (13) municipalities of Makati, Mandaluyong, San Juan, Las Pinas, Malabon, Navotas, Pasig, Pateros, Paranaque, Marikina, Muntinlupa and Taguig in the province of Rizal, and Valenzuela in the province of Bulacan.[40] Metropolitan Manila was created as a response to the finding that the rapid growth of population and the increase of social and economic requirements in these areas demand a call for simultaneous and unified development; that the public services rendered by the respective local governments could be administered more efficiently and economically if integrated under a system of central planning; and this coordination, "especially in the maintenance of peace and order and the eradication of social and economic ills that fanned the flames of rebellion and discontent [were] part of reform measures under Martial Law essential to the safety and security of the State."[41] Metropolitan Manila was established as a "public corporation" with the following powers: Calrs-pped

"Section 1. Creation of the Metropolitan Manila.There is hereby created a public corporation, to be known as the Metropolitan Manila, vested with powers and attributes of a corporation including the power to make contracts, sue and be sued, acquire, purchase, expropriate, hold, transfer and dispose of property and such other powers as are necessary to carry out its purposes. The Corporation shall be administered by a Commission created under this Decree."[42] The administration of Metropolitan Manila was placed under the Metro Manila Commission (MMC) vested with the following powers: "Sec. 4. Powers and Functions of the Commission. - The Commission shall have the following powers and functions: 1. To act as a central government to establish and administer programs and provide services common to the area; 2. To levy and collect taxes and special assessments, borrow and expend money and issue bonds, revenue certificates, and other obligations of indebtedness. Existing tax measures should, however, continue to be operative until otherwise modified or repealed by the Commission; 3. To charge and collect fees for the use of public service facilities; 4. To appropriate money for the operation of the metropolitan government and review appropriations for the city and municipal units within its jurisdiction with authority to disapprove the same if found to be not in accordance with the established policies of the Commission, without prejudice to any contractual obligation of the local government units involved existing at the time of approval of this Decree; 5. To review, amend, revise or repeal all ordinances, resolutions and acts of cities and municipalities within Metropolitan Manila; 6. To enact or approve ordinances, resolutions and to fix penalties for any violation thereof which shall not exceed a fine of P10,000.00 or imprisonment of six years or both such fine and imprisonment for a single offense; 7. To perform general administrative, executive and policy-making functions;

8. To establish a fire control operation center, which shall direct the fire services of the city and municipal governments in the metropolitan area; 9. To establish a garbage disposal operation center, which shall direct garbage collection and disposal in the metropolitan area; 10. To establish and operate a transport and traffic center, which shall direct traffic activities; Jjjuris 11. To coordinate and monitor governmental and private activities pertaining to essential services such as transportation, flood control and drainage, water supply and sewerage, social, health and environmental services, housing, park development, and others; 12. To insure and monitor the undertaking of a comprehensive social, economic and physical planning and development of the area; 13. To study the feasibility of increasing barangay participation in the affairs of their respective local governments and to propose to the President of the Philippines definite programs and policies for implementation; 14. To submit within thirty (30) days after the close of each fiscal year an annual report to the President of the Philippines and to submit a periodic report whenever deemed necessary; and 15. To perform such other tasks as may be assigned or directed by the President of the Philippines." Sc jj The MMC was the "central government" of Metro Manila for the purpose of establishing and administering programs providing services common to the area. As a "central government" it had the power to levy and collect taxes and special assessments, the power to charge and collect fees; the power to appropriate money for its operation, and at the same time, review appropriations for the city and municipal units within its jurisdiction. It was bestowed the power to enact or approve ordinances, resolutions and fix penalties for violation of such ordinances and resolutions. It also had the power to review, amend, revise or repeal all ordinances, resolutions and acts of any of the four (4) cities and thirteen (13) municipalities comprising Metro Manila. P. D. No. 824 further provided: "Sec. 9. Until otherwise provided, the governments of the four cities and thirteen municipalities in the Metropolitan Manila shall continue

to exist in their present form except as may be inconsistent with this Decree. The members of the existing city and municipal councils in Metropolitan Manila shall, upon promulgation of this Decree, and until December 31, 1975, become members of the Sangguniang Bayan which is hereby created for every city and municipality of Metropolitan Manila. In addition, the Sangguniang Bayan shall be composed of as many barangay captains as may be determined and chosen by the Commission, and such number of representatives from other sectors of the society as may be appointed by the President upon recommendation of the Commission. x x x. The Sangguniang Bayan may recommend to the Commission ordinances, resolutions or such measures as it may adopt; Provided, that no such ordinance, resolution or measure shall become effective, until after its approval by the Commission; and Provided further, that the power to impose taxes and other levies, the power to appropriate money and the power to pass ordinances or resolutions with penal sanctions shall be vested exclusively in the Commission." The creation of the MMC also carried with it the creation of the Sangguniang Bayan. This was composed of the members of the component city and municipal councils, barangay captains chosen by the MMC and sectoral representatives appointed by the President. The Sangguniang Bayan had the power to recommend to the MMC the adoption of ordinances, resolutions or measures. It was the MMC itself, however, that possessed legislative powers. All ordinances, resolutions and measures recommended by the Sangguniang Bayan were subject to the MMCs approval. Moreover, the power to impose taxes and other levies, the power to appropriate money, and the power to pass ordinances or resolutions with penal sanctions were vested exclusively in the MMC. Sce-dp Thus, Metropolitan Manila had a "central government," i.e., the MMC which fully possessed legislative and police powers. Whatever legislative powers the component cities and municipalities had were all subject to review and approval by the MMC. After President Corazon Aquino assumed power, there was a clamor to restore the autonomy of the local government units in Metro Manila. Hence, Sections 1 and 2 of Article X of the 1987 Constitution provided: Sj cj

"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 herein provided. Section 2. The territorial and political subdivisions shall enjoy local autonomy." The Constitution, however, recognized the necessity of creating metropolitan regions not only in the existing National Capital Region but also in potential equivalents in the Visayas and Mindanao.[43] Section 11 of the same Article X thus provided: "Section 11. The Congress may, by law, create special metropolitan political subdivisions, subject to a plebiscite as set forth in Section 10 hereof. The component cities and municipalities shall retain their basic autonomy and shall be entitled to their own local executives and legislative assemblies. The jurisdiction of the metropolitan authority that will thereby be created shall be limited to basic services requiring coordination." The Constitution itself expressly provides that Congress may, by law, create "special metropolitan political subdivisions" which shall be subject to approval by a majority of the votes cast in a plebiscite in the political units directly affected; the jurisdiction of this subdivision shall be limited to basic services requiring coordination; and the cities and municipalities comprising this subdivision shall retain their basic autonomy and their own local executive and legislative assemblies.[44] Pending enactment of this law, the Transitory Provisions of the Constitution gave the President of the Philippines the power to constitute the Metropolitan Authority, viz: "Section 8. Until otherwise provided by Congress, the President may constitute the Metropolitan Authority to be composed of the heads of all local government units comprising the Metropolitan Manila area."[45] In 1990, President Aquino issued Executive Order (E. O.) No. 392 and constituted the Metropolitan Manila Authority (MMA). The powers and functions of the MMC were devolved to the MMA.[46] It ought to be stressed, however, that not all powers and functions of the MMC were passed to the MMA. The MMAs power was limited to the "delivery of basic urban services requiring coordination in Metropolitan Manila."[47] The MMAs governing body, the Metropolitan Manila Council, although composed of the mayors of the component cities and municipalities, was merely given the power of: (1) formulation of policies on the delivery of basic services requiring coordination and consolidation; and (2) promulgation of

resolutions and other issuances, approval of a code of basic services and the exercise of its rule-making power.[48] Under the 1987 Constitution, the local government units became primarily responsible for the governance of their respective political subdivisions. The MMAs jurisdiction was limited to addressing common problems involving basic services that transcended local boundaries. It did not have legislative power. Its power was merely to provide the local government units technical assistance in the preparation of local development plans. Any semblance of legislative power it had was confined to a "review [of] legislation proposed by the local legislative assemblies to ensure consistency among local governments and with the comprehensive development plan of Metro Manila," and to "advise the local governments accordingly."[49] When R.A. No. 7924 took effect, Metropolitan Manila became a "special development and administrative region" and the MMDA a "special development authority" whose functions were "without prejudice to the autonomy of the affected local government units." The character of the MMDA was clearly defined in the legislative debates enacting its charter. R. A. No. 7924 originated as House Bill No. 14170/ 11116 and was introduced by several legislators led by Dante Tinga, Roilo Golez and Feliciano Belmonte. It was presented to the House of Representatives by the Committee on Local Governments chaired by Congressman Ciriaco R. Alfelor. The bill was a product of Committee consultations with the local government units in the National Capital Region (NCR), with former Chairmen of the MMC and MMA,[50] and career officials of said agencies. When the bill was first taken up by the Committee on Local Governments, the following debate took place: "THE CHAIRMAN [Hon. Ciriaco Alfelor]: Okay, Let me explain. This has been debated a long time ago, you know. Its a special we can create a special metropolitan political subdivision. Supreme Actually, there are only six (6) political subdivisions provided for in the Constitution: barangay, municipality, city, province, and we have the Autonomous Region of Mindanao and we have the Cordillera. So we have 6. Now. HON. [Elias] LOPEZ: May I interrupt, Mr. Chairman. In the case of the Autonomous Region, that is also specifically mandated by the Constitution. THE CHAIRMAN: Thats correct. But it is considered to be a political subdivision. What is the meaning of a political subdivision? Meaning to say, that it has its own government, it has its own political personality, it has the power to tax, and all

governmental powers: police power and everything. All right. Authority is different; because it does not have its own government. It is only a council, it is an organization of political subdivision, powers, no, which is not imbued with any political power. Esmmis If you go over Section 6, where the powers and functions of the Metro Manila Development Authority, it is purely coordinative. And it provides here that the council is policymaking. All right. Under the Constitution is a Metropolitan Authority with coordinative power. Meaning to say, it coordinates all of the different basic services which have to be delivered to the constituency. All right. There is now a problem. Each local government unit is given its respective as a political subdivision. Kalookan has its powers, as provided for and protected and guaranteed by the Constitution. All right, the exercise. However, in the exercise of that power, it might be deleterious and disadvantageous to other local government units. So, we are forming an authority where all of these will be members and then set up a policy in order that the basic services can be effectively coordinated. All right. justice Of course, we cannot deny that the MMDA has to survive. We have to provide some funds, resources. But it does not possess any political power. We do not elect the Governor. We do not have the power to tax. As a matter of fact, I was trying to intimate to the author that it must have the power to sue and be sued because it coordinates. All right. It coordinates practically all these basic services so that the flow and the distribution of the basic services will be continuous. Like traffic, we cannot deny that. Its before our eyes. Sewerage, flood control, water system, peace and order, we cannot deny these. Its right on our face. We have to look for a solution. What would be the right solution? All right, we envision that there should be a coordinating agency and it is called an authority. All right, if you do not want to call it an authority, its alright. We may call it a council or maybe a management agency. x x x."[51] Clearly, the MMDA is not a political unit of government. The power delegated to the MMDA is that given to the Metro Manila Council to promulgate administrative rules and regulations in the implementation of the MMDAs functions. There is no grant of authority to enact ordinances and regulations for the general welfare of the inhabitants of the metropolis. This was

explicitly stated in the last Committee deliberations prior to the bills presentation to Congress. Thus: Ed-p "THE CHAIRMAN: Yeah, but we have to go over the suggested revision. I think this was already approved before, but it was reconsidered in view of the proposals, set-up, to make the MMDA stronger. Okay, so if there is no objection to paragraph "f" And then next is paragraph "b," under Section 6. "It shall approve metro-wide plans, programs and projects and issue ordinances or resolutions deemed necessary by the MMDA to carry out the purposes of this Act." Do you have the powers? Does the MMDA because that takes the form of a local government unit, a political subdivision. HON. [Feliciano] BELMONTE: Yes, I believe so, your Honor. When we say that it has the policies, its very clear that those policies must be followed. Otherwise, whats the use of empowering it to come out with policies. Now, the policies may be in the form of a resolution or it may be in the form of a ordinance. The term "ordinance" in this case really gives it more teeth, your honor. Otherwise, we are going to see a situation where you have the power to adopt the policy but you cannot really make it stick as in the case now, and I think here is Chairman Bunye. I think he will agree that that is the case now. Youve got the power to set a policy, the body wants to follow your policy, then we say lets call it an ordinance and see if they will not follow it. THE CHAIRMAN: Thats very nice. I like that. However, there is a constitutional impediment. You are making this MMDA a political subdivision. The creation of the MMDA would be subject to a plebiscite. That is what Im trying to avoid. Ive been trying to avoid this kind of predicament. Under the Constitution it states: if it is a political subdivision, once it is created it has to be subject to a plebiscite. Im trying to make this as administrative. Thats why we place the Chairman as a cabinet rank. HON. BELMONTE: All right, Mr. Chairman, okay, what you are saying there is . THE CHAIRMAN: In setting up ordinances, it is a political exercise. Believe me. HON. [Elias] LOPEZ: Mr. Chairman, it can be changed into issuances of rules and regulations. That would be it shall also be enforced. Jksm

HON. BELMONTE: Okay, I will . HON. LOPEZ: And you can also say that violation of such rule, you impose a sanction. But you know, ordinance has a different legal connotation. HON. BELMONTE: All right. I defer to that opinion, your Honor. sc THE CHAIRMAN: So instead of ordinances, say rules and regulations. HON. BELMONTE: Or resolutions. Actually, they are actually considering resolutions now. THE CHAIRMAN: Rules and resolutions. HON. BELMONTE: Rules, regulations and resolutions."[52] The draft of H. B. No. 14170/ 11116 was presented by the Committee to the House of Representatives. The explanatory note to the bill stated that the proposed MMDA is a "development authority" which is a "national agency, not a political government unit."[53] The explanatory note was adopted as the sponsorship speech of the Committee on Local Governments. No interpellations or debates were made on the floor and no amendments introduced. The bill was approved on second reading on the same day it was presented.[54] When the bill was forwarded to the Senate, several amendments were made. These amendments, however, did not affect the nature of the MMDA as originally conceived in the House of Representatives.[55] It is thus beyond doubt that the MMDA is not a local government unit or a public corporation endowed with legislative power. It is not even a "special metropolitan political subdivision" as contemplated in Section 11, Article X of the Constitution. The creation of a "special metropolitan political subdivision" requires the approval by a majority of the votes cast in a plebiscite in the political units directly affected.[56] R. A. No. 7924 was not submitted to the inhabitants of Metro Manila in a plebiscite. The Chairman of the MMDA is not an official elected by the people, but appointed by the President with the rank and privileges of a cabinet member. In fact, part of his function is to perform such other duties as may be assigned to him by the President,[57]whereas in local government units, the President merely exercises supervisory authority. This emphasizes the administrative character of the MMDA. Newmiso Clearly then, the MMC under P. D. No. 824 is not the same entity as the MMDA under R. A. No. 7924. Unlike the MMC, the MMDA has no power to

enact ordinances for the welfare of the community. It is the local government units, acting through their respective legislative councils, that possess legislative power and police power. In the case at bar, the Sangguniang Panlungsod of Makati City did not pass any ordinance or resolution ordering the opening of Neptune Street, hence, its proposed opening by petitioner MMDA is illegal and the respondent Court of Appeals did not err in so ruling. We desist from ruling on the other issues as they are unnecessary. Esmso We stress that this decision does not make light of the MMDAs noble efforts to solve the chaotic traffic condition in Metro Manila. Everyday, traffic jams and traffic bottlenecks plague the metropolis. Even our once sprawling boulevards and avenues are now crammed with cars while city streets are clogged with motorists and pedestrians. Traffic has become a social malaise affecting our peoples productivity and the efficient delivery of goods and services in the country. The MMDA was created to put some order in the metropolitan transportation system but unfortunately the powers granted by its charter are limited. Its good intentions cannot justify the opening for public use of a private street in a private subdivision without any legal warrant. The promotion of the general welfare is not antithetical to the preservation of the rule of law. Sdjad IN VIEW WHEREOF, the petition is denied. The Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 39549 are affirmed. Sppedsc SO ORDERED. Davide, Jr., C.J., (Chairman), Kapunan, Pardo, and Ynares-Santiago, JJ., concur.

[1] [2]

Annex "D" to the CA petition, Court of Appeals (CA) Rollo, p. 27. Annex "J" to Petition, Rollo, pp. 76-78. [3] Minutes of the Ocular Inspection, Court of Appeals Rollo, pp. 193-194. [4] CA Rollo, p. 332. [5] Roberto L. del Rosario is a resident of Neptune Street who allegedly spearheaded a campaign to open Neptune Street to the public-- Motion to Cite in Contempt, CA Rollo, pp. 412-415. [6] CA decision, p. 10, Rollo, p. 61. [7] Petition, p. 15, Rollo, p. 24. [8] 168 SCRA 634 (1988). [9] Petition, p. 24, Rollo, p. 33. [10] United States v. Pompeya, 31 Phil. 245, 253-254 [1915]; Churchill v. Rafferty, 32 Phil. 580, 603 [1915]; People v. Pomar, 46 Phil. 440, 447 [1924]. [11] Bernas, The 1987 Constitution of the Philippines, A Commentary, pp. 95-98 [1996]. [12] Cruz, Constitutional Law, p. 44 [1995]. [13] Id., see also 16 C.J.S., Constitutional Law, Sec. 177 [1956 ed.]. [14] Cruz, supra, at 44; Binay v. Domingo, 201 SCRA 508, 513-514 [1991]. [15] Magtajas v. Pryce Properties, 234 SCRA 255, 272 [1994].

Bernas, supra, at 959, citing UP Law Center Revision Project, Part II, 712 [1970] citing Sady, "Improvement of Local Government Administration for Development Purpose," Journal of Local Administration Overseas 135 [July 1962]. [17] Section 15, Book I, Local Government Code of 1991 [18] Id. [19] Titles I, II, III, IV, Book III, Local Government Code of 1991. [20] Section 1, Article X, 1987 Constitution. [21] Section 16, Book I, Local Government Code of 1991; also cited in Magtajas v. Pryce Properties Corp., Inc. supra, at 264-265. [22] Sections 468 (a), 458 (a), and 447 (a), Book III, Local Government Code of 1991. [23] Section 391 (a), Book III, Local Government Code of 1991. [24] Entitled "An Act Creating the Metropolitan Manila Development Authority, Defining its Powers and Functions, Providing Funds Therefor and for Other Purposes." [25] Section 1, R.A. 7924. [26] Section 3, par. 1, R. A. 7924. [27] Section 3 (b), supra; emphasis supplied. [28] Section 9, paragraph 5, supra. [29] Section 4, supra. Non-voting members of the Council are the heads of the Department of Transportation and Communications (DOTC), Department of Public Works and Highways (DPWH), Department of Tourism (DOT), Department of Budget and Management (DBM), Housing and Urban Development Coordinating Committee (HUDCC), and the Philippine National Police (PNP) or their duly authorized representatives. [30] Section 1, R.A. 7924. [31] Section 2, supra. [32] Op cit. [33] 168 SCRA 634 [1988]. [34] 176 SCRA 719 [1989]. [35] 168 SCRA 634, 654-655. [36] Id. at 643. [37] Id, at 730. [38] Id. at 723. [39] Like the perimeter wall along Jupiter StreetId. at 734. [40] Section 2, P.D. 824. [41] Whereas Clauses, P.D. 824. [42] Section 1, P.D. 824; emphasis supplied. [43] Speech of then Constitutional Commissioner Blas Ople, see Bernas, The Intent of the 1986 Constitution Writers, pp. 706-707 [1995]. [44] Section 11, Article X, 1987 Constitution. [45] Section 8, Article XVIII, 1987 Constitution. [46] Section 3, E.O. 392. [47] Section 1, supra. [48] Section 2, supra. [49] Section 6, supra. [50] Chairmen Ismael Mathay, Jr. and Ignacio Bunye. [51] Deliberations of the Committee on Local Government, House of Representatives, Congress of the Philippines, November 10, 1993, pp. 46-48. [52] Deliberations of the Committee on Local Governments, House of Representatives, Congress of the Philippines, November 9, 1994, pp. 68-70. [53] Explanatory Note to H. B. 11116, p. 3. [54] H.B. 14170/ 11116, Sponsorship and Debates, December 20, 1994. [55] Compare H.B. 14170/ 11116 with R. A. 7924; see Senate Amendments, February 21, 1995.
[56]

[16]

Section 10, Article X of the 1987 Constitution reads:

Sec. 10. No province, city, municipality, or barangay may be created, divided, merged, abolished, or its boundary substantially altered except in accordance with the criteria established in the local government code and subject to approval by a majority of the votes cast in a plebiscite in the political units directly affected." [57] Section 7 (g), R.A. 7924.

THIRD DIVISION

[G. R. No. 136809. July 27, 2004]

DEMOCRITO D. PLAZA II and VIRGINIA V. TUAZON, petitioners, vs. CAROLINA M. CASSION, ALBERTA M. SAMPAYAN, JOSEPHINE NATALIA U. LOPEZ, JOCELYN M. ALMANZOR, LUZVIMINDA G. ARDECER, MAGDALENA S. BALACUIT, WINDELYN B. CABUSAO, JULIETA R. JANDAYAN, NERI O. SAMUYA, INES V. YAOYAO, TERESITA I. ROSALES, MARIA DEBRA M. LANAJA, RUTH O. NICOLASURA, respondents. DECISION
SANDOVAL-GUTIERREZ, J.:

Republic Act No. 7160, otherwise known as The Local Government Code of 1991, aims to transform local government units into self-reliant communities and active partners of the national government in the attainment of effective services to the people. As a result of the devolution of concerned personnel from the national government to the various local government units pursuant to the same Code, the interest of the service demands that their working relations with the local employees should be harmonious. This is a petition for review on certiorari[1] assailing the Decision[2] of the Court of Appeals dated February 14, 1996 and its Resolution dated December 9, 1998 in CA-G.R. SP No. 55052, Carolina M. Cassion, et al. vs. Civil Service Commission, et al. Before the passage of Republic Act No. 7160, the task of delivering basic social services was dispensed by the national government through the Department of Social Welfare and Development (DSWD). Upon the promulgation and implementation of the Local Government Code, some of the functions of the DSWD were transferred to the local government units. The City of Butuan, through its Sangguniang Panglungsod (Sanggunian) passed SP Resolution 427-92,[3] entitled Resolution Authorizing the City Mayor,

Honorable Democrito D. Plaza II, to Sign the Memorandum of Agreement for the Devolution of the DSWD to the City of Butuan. Pursuant to the Memorandum of Agreement (MOA)[4] entered into between the City of Butuan, through then Mayor Democrito Plaza II, petitioner, and the DSWD, the latters services, personnel, assets and liabilities, and technical support systems were transferred to its city counterpart. By virtue of the same MOA, Mayor Plaza issued Executive Order (EO) No. 06-92[5] dated October 5, 1992 reconstituting the City Social Services Development Office (CSSDO), devolving or adding thereto 19 national DSWD employees headed by petitioner Virginia Tuazon, Social Welfare Officer V. Mayor Plaza designated her Officer-in-Charge of the reconstituted CSSDO. Its office was transferred from the original CSSDO building to the DSWD building. The CSSDO was originally composed of herein respondents, headed by Carolina M. Cassion, Social Welfare Officer IV. Aggrieved by such development, they refused to recognize petitioner Tuazon as their new head and to report at the DSWD building. They contended that the issuance of EO No. 0692 by Mayor Plaza and the designation of petitioner Tuazon as Officer-in-charge of the CSSDO are illegal. Despite Mayor Plazas series of orders to respondents to report for work at the DSWD building, they failed to do so. On January 18, 1993, Mayor Plaza issued a memorandum to the City Legal Officer directing him to conduct an administrative investigation against respondents. They then submitted their respective explanations. Thereafter, they were charged administratively for grave misconduct and insubordination and were preventively suspended for 60 days. This prompted them to file with the Civil Service Regional Office No. 10 a complaint against Mayor Plaza for violation of the Civil Service Law. However, their complaint was dismissed for lack of merit. Upon expiration of their preventive suspension, respondents informed Mayor Plaza that they are willing to return to work, but to their old office, not to the DSWD building. For the last time, or on April 14, 1993, Mayor Plaza notified respondents to report to petitioner Tuazon at the new office in the DSWD building, but they remained obstinate. On February 9, 1994, Mayor Plaza inquired from the Civil Service Commission (CSC) on what appropriate action could be taken against respondents for their continued refusal to report for work since April 1993. In turn, the CSC, through Atty. Lorea, Director II, informed the Mayor that respondents could be dropped from the rolls pursuant to CSC Memorandum Circular No. 38, Series of 1993.

On February 16, 1994, Mayor Plaza issued an Order dropping respondents from the rolls pursuant to the said CSC Memorandum Circular. Forthwith, respondents appealed to the CSC. On August 22, 1994, the CSC issued Resolution Nos. 94-4626 and 94-6243 dismissing respondents appeal. In affirming Mayor Plazas Order dropping respondents from the rolls, the CSC held:

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

the rolls is a non-disciplinary action wherein the respondent is entitled to notice and hearing. In the above-quoted provision, an officer or employee may be dropped from the rolls if he was continuously absent without official leave for a period of at least thirty days. Prior notice is not necessary. As to the last contention of the appellants that it was really the intention of the mayor to systematically remove them, the Commission likewise finds it without merit. No evidence was submitted by the appellants to support such contention.
Respondents then filed with the Court of Appeals a petition for review. On February 14, 1996, the Appellate Court rendered its Decision setting aside the assailed CSC Resolutions and EO No. 06-92 issued by Mayor Plaza and reinstating respondents to their former positions without loss of seniority rights and emoluments with full back wages and other benefits corresponding to the period from January 1993 up to actual reinstatement. Petitioners filed a motion for reconsideration but was denied. The Court of Appeals ratiocinated as follows:

The fundamental rule of due process, on the other hand, requires that a person be accorded notice and opportunity to be heard (Rebuena v. Civil Service Commission, G.R. No. 115942, 31 May 1995; Klaveness Maritime Agency, Inc. v. Palmos, 232 SCRA 448 [1994]). Ample opportunity contemplated by law connotes every kind of assistance which must be accorded to the employee to enable him to prepare adequately for his defense including legal representation (Segismundo v. NLRC, G.R. No. 112203, 13 December 1994, 329 SCRA 167, citing Abiera v. NLRC, 215 SCRA 476 [1992]). Noncompliance with the twin requirements of notice and hearing is fatal because these requirements are conditions sine qua non before a dismissal may be validly effected (Maneho v. NLRC, 229 SCRA 240 [1994], citing Tiu v. NLRC, 215 SCRA 540 [1992]). In fact, notice and hearing must be accorded an employee even though the employee does not affirmatively demand it (Century Textile Mills v. NLRC, 161 SCRA 528 [1988]). A circumspect scrutiny of the record leaves Us unconvinced that petitioners were accorded this opportunity to be heard when they sought relief before respondent CSCs Regional Office No. X which dismissed their complaint, docketed as ADM. Case No. ND 93-023, against respondents City Mayor and Virginia V. Tuazon for violation of the Civil Service Law and its implementing rules and regulations. x x x xxx

As regards the validity of the issuance of E.O. No. 06-92, there can be no dispute over the power of the government to reorganize, whether traditional, progressive or whatever adjective is appended to it. However, the essence of constitutional government is adherence to basic rules. The rule of law requires that no government official should feel free to do as he pleases using only his avowedly sincere intentions and conscience to guide him. The fundamental standards of fairness embodied in the bona fide rule can not be disregarded (Mendoza v. Quisumbing, 186 SCRA 108 [1990]; see also Romualdez-Yap v. CSC, 225 SSCRA 285 [1993].
In the main, petitioners contend that the Court of Appeals erred in setting aside the CSC Resolutions dropping respondents from the rolls and EO No. 0692 directing the devolution of 19 national DSWD employees to the local or city DSWD to be headed by petitioner Virginia Tuazon. Private respondents, on the other hand, aver that their refusal to report for work is justified since EO No. 06-92 is not valid as it was issued without prior approval by the Sanggunian in violation of Article 164, Rule XXII of the Rules and Regulations Implementing the Local Government Code. Section 17 of the Local Government Code authorizes the devolution of personnel, assets and liabilities, records of basic services, and facilities of a national government agency to local government units. Under this Code, the term devolution refers to the act by which the national government confers power and authority upon the various local government units to perform specific functions and responsibilities. As a consequence of the devolution of national agencies, Executive Order No. 503 was enacted by then President Corazon C. Aquino to govern and ensure the efficient transfer of responsibilities to the local government unit concerned. Section 2 (g) provides:

The local chief executive shall be responsible for all devolved functions. He may delegate such powers and functions to his duly authorized representative whose position shall preferably not be lower than the rank of a local government department head. In all cases of delegated authority, the local chief executive shall at all times observe the principle of command responsibility.
Section 2 (a) states that:

Except as herein otherwise provided, devolved permanent personnel shall be automatically reappointed by the local chief executive concerned immediately upon their transfer which shall not go beyond June 30, 1992.

Likewise, Section 22 of CSC Memorandum Circular No. 19, Series of 1992, specifies that:

The positions absorbed by the local government units from the national government agencies shall be automatically created upon transfer of their corresponding budgetary allocation. Devolved permanent personnel shall be automatically reappointed by the local chief executive concerned immediately upon their transfer. However, pending the completion of the new organizational structure and staffing pattern, the local government executives may assign devolved personnel to divisions/sections/units where their qualifications are best suited or appropriate.
It is thus clear that Mayor Plaza is empowered to issue EO No. 06-92 in order to give effect to the devolution decreed by the Local Government Code. As the local chief executive of ButuanCity, Mayor Plaza has the authority to reappoint devolved personnel and may designate an employee to take charge of a department until the appointment of a regular head, as was done by the Mayor here. CSC Memorandum Circular No. 19, Series of 1992, provides further that heads of departments appointed by the local chief executive must have the concurrence of the majority of all the members of the Sanggunian concerned. While initially, the Sanggunian rejected petitioner Tuazons appointment as the City Government Department Head II of the CSSDO, however, it later confirmed her appointment. The Court Appeals erred in ruling that EO No. 06-92 violated respondents security of tenure as they were transferred to another office without their consent. There was no such transfer. Transfer is a movement from one position to another which is of equivalent rank, level or salary without break in service and may be imposed as an administrative penalty.[6] The change of respondents place of work from the original CSSDO office to the DSWD building is not a transfer. It was only a physical transfer of their office to a new one done in the interest of public service. There were no new movements or appointments from one position to another. Private respondents argue that they were denied due process when they were dropped from the rolls. CSC Memorandum Circular No. 38, Series of 1993, provides:

VI. Requirements For Certain Mode of Separation.

Dropping from the Rolls Non-disciplinary in nature, executory but appealable to the CSC office concerned within fifteen (15) days from receipt of the order or notice. Officers and employees who are absent for at least thirty (30) days without approved leave are considered on Absence Without Leave (AWOL) and may be dropped from the service without prior notice. A notice or order of the dropping from the rolls of an employee shall be issued by the appointing authority and submitted to the CSC office concerned for record purposes.
Pursuant to the above provisions and as ruled by the CSC, the dropping from the rolls of private respondents is not disciplinary in nature. Thus, their assertion that they were denied due process is untenable. Since the dropping from the rolls is not an administrative sanction, they need not be notified or be heard. WHEREFORE, the Decision dated February 14, 1996 of the Court of Appeals is REVERSED. The CSC Resolution No. 94-4626 dated August 22, 1994, and Resolution No. 94-6243 datedNovember 17, 1994 dropping private respondents from the rolls are AFFIRMED. SO ORDERED. Panganiban, (Chairman), and Carpio-Morales, JJ., concur. Corona, J., on leave.

[1]

Pursuant to Rule 45 of the 1997 Rules of Civil Procedure, as amended. Penned by Associate Justice Consuelo Ynares-Santiago (now a member of this Court), with Associate Justices Arturo B. Buena, now a retired member also of this Court, and Ruben T. Reyes, concurring. Rollo at 118. Id. at 120-124. Id. at 125. Cruz, The Law of Public Officers, 1999 Edition at 68.

[2]

[3]

[4]

[5]

[6]

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION

G.R. Nos. 120865-71 December 7, 1995 LAGUNA LAKE DEVELOPMENT AUTHORITY, petitioner, vs. COURT OF APPEALS; HON. JUDGE HERCULANO TECH, PRESIDING JUDGE, BRANCH 70, REGIONAL TRIAL COURT OF BINANGONAN RIZAL; FLEET DEVELOPMENT, INC. and CARLITO ARROYO; THE MUNICIPALITY OF BINANGONAN and/or MAYOR ISIDRO B. PACIS, respondents. LAGUNA LAKE DEVELOPMENT AUTHORITY, petitioner, vs. COURT OF APPEALS; HON. JUDGE AURELIO C. TRAMPE, PRESIDING JUDGE, BRANCH 163, REGIONAL TRIAL COURT OF PASIG; MANILA MARINE LIFE BUSINESS RESOURCES, INC. represented by, MR. TOBIAS REYNALD M. TIANGCO; MUNICIPALITY OF TAGUIG, METRO MANILA and/or MAYOR RICARDO D. PAPA, JR., respondents. LAGUNA LAKE DEVELOPMENT AUTHORITY, petitioner, vs. COURT OF APPEALS; HON. JUDGE ALEJANDRO A. MARQUEZ, PRESIDING JUDGE, BRANCH 79, REGIONAL TRIAL COURT OF MORONG, RIZAL; GREENFIELD VENTURES INDUSTRIAL DEVELOPMENT CORPORATION and R. J. ORION DEVELOPMENT CORPORATION; MUNICIPALITY OF JALA-JALA and/or MAYOR WALFREDO M. DE LA VEGA, respondents. LAGUNA LAKE DEVELOPMENT AUTHORITY, petitioner, vs. COURT OF APPEALS; HON. JUDGE MANUEL S. PADOLINA, PRESIDING JUDGE, BRANCH 162, REGIONAL TRIAL COURT OF PASIG, METRO MANILA; IRMA FISHING & TRADING CORP.; ARTM FISHING CORP.; BDR CORPORATION, MIRT CORPORATION and TRIM CORPORATION; MUNICIPALITY OF BINANGONAN and/or MAYOR ISIDRO B. PACIS, respondents. LAGUNA LAKE DEVELOPMENT AUTHORITY, petitioner, vs. COURT OF APPEALS; HON. JUDGE ARTURO A. MARAVE, PRESIDING JUDGE, BRANCH 78, REGIONAL TRIAL COURT OF MORONG, RIZAL; BLUE LAGOON FISHING CORP. and ALCRIS CHICKEN GROWERS, INC.; MUNICIPALITY OF JALA-JALA and/or MAYOR WALFREDO M. DE LA VEGA, respondents. LAGUNA LAKE DEVELOPMENT AUTHORITY, petitioner, vs. COURT OF APPEALS; HON. JUDGE ARTURO A. MARAVE, PRESIDING JUDGE, BRANCH 78, REGIONAL TRIAL COURT OF MORONG, RIZAL; AGP FISH VENTURES, INC., represented by its PRESIDENT ALFONSO PUYAT; MUNICIPALITY OF JALAJALA and/or MAYOR WALFREDO M. DE LA VEGA, respondents. LAGUNA LAKE DEVELOPMENT AUTHORITY, petitioner, vs. COURT OF APPEALS; HON. JUDGE EUGENIO S. LABITORIA, PRESIDING JUDGE, BRANCH 161, REGIONAL TRIAL COURT OF PASIG, METRO MANILA; SEA MAR

TRADING CO. INC.; EASTERN LAGOON FISHING CORP.; MINAMAR FISHING CORP.; MUNICIPALITY OF BINANGONAN and/or MAYOR ISIDRO B. PACIS,respondents.

HERMOSISIMA, JR., J.: It is difficult for a man, scavenging on the garbage dump created by affluence and profligate consumption and extravagance of the rich or fishing in the murky waters of the Pasig River and the Laguna Lake or making a clearing in the forest so that he can produce food for his family, to understand why protecting birds, fish, and trees is more important than protecting him and keeping his family alive. How do we strike a balance between environmental protection, on the one hand, and the individual personal interests of people, on the other? Towards environmental protection and ecology, navigational safety, and sustainable development, Republic Act No. 4850 created the "Laguna Lake Development Authority." This Government Agency is supposed to carry out and effectuate the aforesaid declared policy, so as to accelerate the development and balanced growth of the Laguna Lake area and the surrounding provinces, cities and towns, in the act clearly named, within the context of the national and regional plans and policies for social and economic development. Presidential Decree No. 813 of former President Ferdinand E. Marcos amended certain sections of Republic Act No. 4850 because of the concern for the rapid expansion of Metropolitan Manila, the suburbs and the lakeshore towns of Laguna de Bay, combined with current and prospective uses of the lake for municipal-industrial water supply, irrigation, fisheries, and the like. Concern on the part of the Government and the general public over: the environment impact of development on the water quality and ecology of the lake and its related river systems; the inflow of polluted water from the Pasig River, industrial, domestic and agricultural wastes from developed areas around the lake; the increasing urbanization which induced the deterioration of the lake, since water quality studies have shown that the lake will deteriorate further if steps are not taken to check the same; and the floods in Metropolitan Manila area and the lakeshore towns which will influence the hydraulic system of Laguna de Bay, since any scheme of controlling the floods will necessarily involve the lake and its river systems, likewise gave impetus to the creation of the Authority. Section 1 of Republic Act No. 4850 was amended to read as follows:
Sec. 1. Declaration of Policy. It is hereby declared to be the national policy to promote, and accelerate the development and balanced growth of the Laguna Lake area and the surrounding provinces, cities and towns hereinafter referred to as the region, within the context of the national and regional plans and policies for social and economic development and to carry out the development of the Laguna Lake region with due regard and adequate provisions for environmental management and control, preservation of the quality of human life and ecological systems, and the prevention of undue ecological disturbances, deterioration and pollution. 1

Special powers of the Authority, pertinent to the issues in this case, include:

Sec. 3. Section 4 of the same Act is hereby further amended by adding thereto seven new paragraphs to be known as paragraphs (j), (k), (l), (m), (n), (o), and (p) which shall read as follows: xxx xxx xxx (j) The provisions of existing laws to the contrary notwithstanding, to engage in fish production and other aquaculture projects in Laguna de Bay and other bodies of water within its jurisdiction and in pursuance thereof to conduct studies and make experiments, whenever necessary, with the collaboration and assistance of the Bureau of Fisheries and Aquatic Resources, with the end in view of improving present techniques and practices. Provided, that until modified, altered or amended by the procedure provided in the following sub-paragraph, the present laws, rules and permits or authorizations remain in force; (k) For the purpose of effectively regulating and monitoring activities in Laguna de Bay,the Authority shall have exclusive jurisdiction to issue new permit for the use of the lake waters for any projects or activities in or affecting the said lake including navigation, construction, and operation of fishpens, fish enclosures, fish corrals and the like, and to impose necessary safeguards for lake quality control and management and to collect necessary fees for said activities and projects: Provided, That the fees collected for fisheries may be shared between the Authority and other government agencies and political sub-divisions in such proportion as may be determined by the President of the Philippines upon recommendation of the Authority's Board: Provided, further, That the Authority's Board may determine new areas of fishery development or activities which it may place under the supervision of the Bureau of Fisheries and Aquatic Resources taking into account the overall development plans and programs for Laguna de Bay and related bodies of water: Provided, finally, That the Authority shall subject to the approval of the President of the Philippines promulgate such rules and regulations which shall govern fisheries development activities in Laguna de Bay which shall take into consideration among others the following: socio-economic amelioration of bonafide resident fishermen whether individually or collectively in the form of cooperatives, lakeshore town development, a master plan for fishpen construction and operation, communal fishing ground for lake shore town residents, and preference to lake shore town residents in hiring laborer for fishery projects; (l) To require the cities and municipalities embraced within the region to pass appropriate zoning ordinances and other regulatory measures necessary to carry out the objectives of the Authority and enforce the same with the assistance of the Authority;

(m) The provisions of existing laws to the contrary notwithstanding, to exercise water rights over public waters within the Laguna de Bay region whenever necessary to carry out the Authority's projects;
(n) To act in coordination with existing governmental agencies in establishing water quality standards for industrial, agricultural and municipal waste discharges into the lake and to cooperate with said existing agencies of the government of the Philippines in enforcing such standards, or to separately pursue enforcement and penalty actions as provided for in Section 4 (d) and Section 39-A of this Act: Provided, That in case of conflict on the appropriate water quality standard to be enforced such conflict shall be resolved thru the NEDA Board. 2

To more effectively perform the role of the Authority under Republic Act No. 4850, as though Presidential Decree No. 813 were not thought to be completely effective, the Chief Executive, feeling that the land and waters of the Laguna Lake Region are limited natural resources requiring judicious management to their optimal utilization to insure renewability and to preserve the ecological balance, the competing options for the use of such resources and conflicting jurisdictions over such uses having created undue constraints on the institutional capabilities of the Authority in the light of the limited powers vested in it by its charter, Executive Order No. 927 further defined and enlarged the functions and powers of the Authority and named and enumerated the towns, cities and provinces encompassed by the term "Laguna de Bay Region". Also, pertinent to the issues in this case are the following provisions of Executive Order No. 927 which include in particular the sharing of fees: Sec 2. Water Rights Over Laguna de Bay and Other Bodies of Water within the Lake Region: To effectively regulate and monitor activities in the Laguna de Bay region, the Authority shall have exclusive jurisdiction to issue permit for the use of all surface water for any projects or activities in or affecting the said region including navigation, construction, and operation of fishpens, fish enclosures, fish corrals and the like. For the purpose of this Executive Order, the term "Laguna de Bay Region" shall refer to the Provinces of Rizal and Laguna; the Cities of San Pablo, Pasay, Caloocan, Quezon, Manila and Tagaytay; the towns of Tanauan, Sto. Tomas and Malvar in Batangas Province; the towns of Silang and Carmona in Cavite Province; the town of Lucban in Quezon Province; and the towns of Marikina, Pasig, Taguig, Muntinlupa, and Pateros in Metro Manila. Sec 3. Collection of Fees. The Authority is hereby empowered to collect fees for the use of the lake water and its tributaries for all beneficial purposes including but not limited to fisheries, recreation, municipal, industrial, agricultural, navigation, irrigation, and waste disposal purpose; Provided, that the rates of the fees to be collected, and the sharing with other government agencies and political subdivisions, if necessary, shall be subject to the approval of the President of the Philippines upon recommendation of the Authority's Board, except fishpen fee, which will be shared in the following manner; 20 percent of the fee shall go to the lakeshore local governments, 5 percent shall go to the Project Development Fund which shall be

administered by a Council and the remaining 75 percent shall constitute the share of LLDA. However, after the implementation within the three-year period of the Laguna Lake Fishery Zoning and Management Plan, the sharing will be modified as follows: 35 percent of the fishpen fee goes to the lakeshore local governments, 5 percent goes to the Project Development Fund and the remaining 60 percent shall be retained by LLDA; Provided, however, that the share of LLDA shall form part of its corporate funds and shall not be remitted to the National Treasury as an exception to the provisions of Presidential Decree No. 1234. (Emphasis supplied) It is important to note that Section 29 of Presidential Decree No. 813 defined the term "Laguna Lake" in this manner: Sec 41. Definition of Terms. (11) Laguna Lake or Lake. Whenever Laguna Lake or lake is used in this Act, the same shall refer to Laguna de Bay which is that area covered by the lake water when it is at the average annual maximum lake level of elevation 12.50 meters, as referred to a datum 10.00 meters below mean lower low water (M.L.L.W). Lands located at and below such elevation are public lands which form part of the bed of said lake. Then came Republic Act No. 7160, the Local Government Code of 1991. The municipalities in the Laguna Lake Region interpreted the provisions of this law to mean that the newly passed law gave municipal governments the exclusive jurisdiction to issue fishing privileges within their municipal waters because R.A. 7160 provides: Sec. 149. Fishery Rentals, Fees and Charges. (a) Municipalities shall have the exclusive authority to grant fishery privileges in the municipal waters and impose rental fees or charges therefor in accordance with the provisions of this Section. (b) The Sangguniang Bayan may: (1) Grant fishing privileges to erect fish corrals, oyster, mussel or other aquatic beds or bangus fry areas, within a definite zone of the municipal waters, as determined by it; . . . . (2) Grant privilege to gather, take or catch bangus fry, prawn fry or kawag-kawag or fry of other species and fish from the municipal waters by nets, traps or other fishing gears to marginal fishermen free from any rental fee, charges or any other imposition whatsoever. xxx xxx xxx Sec. 447. Power, Duties, Functions and Compensation. . . . . xxx xxx xxx

(XI) Subject to the provisions of Book II of this Code, grant exclusive privileges of constructing fish corrals or fishpens, or the taking or catching of bangus fry, prawn fry orkawagkawag or fry of any species or fish within the municipal waters. xxx xxx xxx Municipal governments thereupon assumed the authority to issue fishing privileges and fishpen permits. Big fishpen operators took advantage of the occasion to establish fishpens and fishcages to the consternation of the Authority. Unregulated fishpens and fishcages, as of July, 1995, occupied almost one-third of the entire lake water surface area, increasing the occupation drastically from 7,000 hectares in 1990 to almost 21,000 hectares in 1995. The Mayor's permit to construct fishpens and fishcages were all undertaken in violation of the policies adopted by the Authority on fishpen zoning and the Laguna Lake carrying capacity. To be sure, the implementation by the lakeshore municipalities of separate independent policies in the operation of fishpens and fishcages within their claimed territorial municipal waters in the lake and their indiscriminate grant of fishpen permits have already saturated the lake area with fishpens, thereby aggravating the current environmental problems and ecological stress of Laguna Lake. In view of the foregoing circumstances, the Authority served notice to the general public that: In compliance with the instructions of His Excellency PRESIDENT FIDEL V. RAMOS given on June 23, 1993 at Pila, Laguna pursuant to Republic Act 4850 as amended by Presidential Decree 813 and Executive Order 927 series of 1983 and in line with the policies and programs of the Presidential Task Force on Illegal Fishpens and Illegal Fishing, the general public is hereby notified that: 1. All fishpens, fishcages and other aqua-culture structures in the Laguna de Bay Region, which were not registered or to which no application for registration and/or permit has been filed with Laguna Lake Development Authority as of March 31, 1993 are hereby declared outrightly as illegal. 2. All fishpens, fishcages and other aqua-culture structures so declared as illegal shall be subject to demolition which shall be undertaken by the Presidential Task Force for Illegal Fishpen and Illegal Fishing. 3. Owners of fishpens, fishcages and other aqua-culture structures declared as illegal shall, without prejudice to demolition of their structures be criminally charged in accordance with Section 39-A of Republic Act 4850 as amended by P.D. 813 for violation of the same laws. Violations of these laws carries a penalty of imprisonment of not exceeding 3 years or a fine not exceeding Five Thousand Pesos or both at the discretion of the court. All operators of fishpens, fishcages and other aqua-culture structures declared as illegal in accordance with the foregoing Notice shall have one (1) month on or before 27 October 1993 to show cause before the LLDA why their said fishpens, fishcages and other aqua-culture structures should not be demolished/dismantled.

One month, thereafter, the Authority sent notices to the concerned owners of the illegally constructed fishpens, fishcages and other aqua-culture structures advising them to dismantle their respective structures within 10 days from receipt thereof, otherwise, demolition shall be effected. Reacting thereto, the affected fishpen owners filed injunction cases against the Authority before various regional trial courts, to wit: (a) Civil Case No. 759-B, for Prohibition, Injunction and Damages, Regional Trial Court, Branch 70, Binangonan, Rizal, filed by Fleet Development, Inc. and Carlito Arroyo; (b) Civil Case No. 64049, for Injunction, Regional Trial Court, Branch 162, Pasig, filed by IRMA Fishing and Trading Corp., ARTM Fishing Corp., BDR Corp., MIRT Corp. and TRIM Corp.; (c) Civil Case No. 566, for Declaratory Relief and Injunction, Regional Trial Court, Branch 163, Pasig, filed by Manila Marine Life Business Resources, Inc. and Tobias Reynaldo M. Tianco; (d) Civil Case No. 556-M, for Prohibition, Injunction and Damages, Regional Trial Court, Branch 78, Morong, Rizal, filed by AGP Fishing Ventures, Inc.; (e) Civil Case No. 522-M, for Prohibition, Injunction and Damages, Regional Trial Court, Branch 78, Morong, Rizal, filed by Blue Lagoon and Alcris Chicken Growers, Inc.; (f) Civil Case No. 554-, for Certiorari and Prohibition, Regional Trial Court, Branch 79, Morong, Rizal, filed by Greenfields Ventures Industrial Corp. and R.J. Orion Development Corp.; and (g) Civil Case No. 64124, for Injunction, Regional Trial Court, Branch 15, Pasig, filed by SEA-MAR Trading Co., Inc. and Eastern Lagoon Fishing Corp. and Minamar Fishing Corporation. The Authority filed motions to dismiss the cases against it on jurisdictional grounds. The motions to dismiss were invariably denied. Meanwhile, temporary restraining order/writs of preliminary mandatory injunction were issued in Civil Cases Nos. 64124, 759 and 566 enjoining the Authority from demolishing the fishpens and similar structures in question. Hence, the herein petition for certiorari, prohibition and injunction, G.R. Nos. 120865-71, were filed by the Authority with this court. Impleaded as parties-respondents are concerned regional trial courts and respective private parties, and the municipalities and/or respective Mayors of Binangonan, Taguig and Jala-jala, who issued permits for the construction and operation of fishpens in Laguna de Bay. The Authority sought the following reliefs,viz.: (A) Nullification of the temporary restraining order/writs of preliminary injunction issued in Civil Cases Nos. 64125, 759 and 566; (B) Permanent prohibition against the regional trial courts from exercising jurisdiction over cases involving the Authority which is a co-equal body; (C) Judicial pronouncement that R.A. 7610 (Local Government Code of 1991) did not repeal, alter or modify the provisions of R.A. 4850, as amended, empowering the Authority to issue permits for fishpens, fishcages and other aqua-culture structures in Laguna de Bay and that, the Authority the government agency vested with exclusive authority to issue said permits. By this Court's resolution of May 2, 1994, the Authority's consolidated petitions were referred to the Court of Appeals. In a Decision, dated June 29, 1995, the Court of Appeals dismissed the Authority's consolidated petitions, the Court of Appeals holding that: (A) LLDA is not among those quasijudicial agencies of government whose decision or order are appealable only to the Court of Appeals; (B) the LLDA charter does vest LLDA with quasi-judicial functions insofar as

fishpens are concerned; (C) the provisions of the LLDA charter insofar as fishing privileges in Laguna de Bay are concerned had been repealed by the Local Government Code of 1991; (D) in view of the aforesaid repeal, the power to grant permits devolved to and is now vested with their respective local government units concerned. Not satisfied with the Court of Appeals decision, the Authority has returned to this Court charging the following errors: 1. THE HONORABLE COURT OF APPEALS PROBABLY COMMITTED AN ERROR WHEN IT RULED THAT THE LAGUNA LAKE DEVELOPMENT AUTHORITY IS NOT A QUASI-JUDICIAL AGENCY. 2. THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR WHEN IT RULED THAT R.A. 4850 AS AMENDED BY P.D. 813 AND E.O. 927 SERIES OF 1983 HAS BEEN REPEALED BY REPUBLIC ACT 7160. THE SAID RULING IS CONTRARY TO ESTABLISHED PRINCIPLES AND JURISPRUDENCE OF STATUTORY CONSTRUCTION. 3. THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR WHEN IT RULED THAT THE POWER TO ISSUE FISHPEN PERMITS IN LAGUNA DE BAY HAS BEEN DEVOLVED TO CONCERNED (LAKESHORE) LOCAL GOVERNMENT UNITS. We take a simplistic view of the controversy. Actually, the main and only issue posed is: Which agency of the Government the Laguna Lake Development Authority or the towns and municipalities comprising the region should exercise jurisdiction over the Laguna Lake and its environs insofar as the issuance of permits for fishery privileges is concerned? Section 4 (k) of the charter of the Laguna Lake Development Authority, Republic Act No. 4850, the provisions of Presidential Decree No. 813, and Section 2 of Executive Order No. 927, cited above, specifically provide that the Laguna Lake Development Authority shall have exclusive jurisdiction to issue permits for the use of all surface water for any projects or activities in or affecting the said region, including navigation, construction, and operation of fishpens, fish enclosures, fish corrals and the like. On the other hand, Republic Act No. 7160, the Local Government Code of 1991, has granted to the municipalities the exclusive authority to grant fishery privileges in municipal waters. The Sangguniang Bayan may grant fishery privileges to erect fish corrals, oyster, mussels or other aquatic beds or bangus fry area within a definite zone of the municipal waters. We hold that the provisions of Republic Act No. 7160 do not necessarily repeal the aforementioned laws creating the Laguna Lake Development Authority and granting the latter water rights authority over Laguna de Bay and the lake region. The Local Government Code of 1991 does not contain any express provision which categorically expressly repeal the charter of the Authority. It has to be conceded that there was no intent on the part of the legislature to repeal Republic Act No. 4850 and its amendments. The repeal of laws should be made clear and expressed. It has to be conceded that the charter of the Laguna Lake Development Authority constitutes a special law. Republic Act No. 7160, the Local Government Code of 1991, is a general law. It is basic in statutory construction that the enactment of a later legislation which is a general law cannot be construed to have repealed a special law. It is a well-settled rule in this

jurisdiction that "a special statute, provided for a particular case or class of cases, is not repealed by a subsequent statute, general in its terms, provisions and application, unless the intent to repeal or alter is manifest, although the terms of the general law are broad enough to include the cases embraced in the special law." 3 Where there is a conflict between a general law and a special statute, the special statute should prevail since it evinces the legislative intent more clearly than the general statute. The special law is to be taken as an exception to the general law in the absence of special circumstances forcing a contrary conclusion. This is because implied repeals are not favored and as much as possible, effect must be given to all enactments of the legislature. A special law cannot be repealed, amended or altered by a subsequent general law by mere implication. 4 Thus, it has to be concluded that the charter of the Authority should prevail over the Local Government Code of 1991. Considering the reasons behind the establishment of the Authority, which are environmental protection, navigational safety, and sustainable development, there is every indication that the legislative intent is for the Authority to proceed with its mission. We are on all fours with the manifestation of petitioner Laguna Lake Development Authority that "Laguna de Bay, like any other single body of water has its own unique natural ecosystem. The 900 km lake surface water, the eight (8) major river tributaries and several other smaller rivers that drain into the lake, the 2,920 km basin or watershed transcending the boundaries of Laguna and Rizal provinces, greater portion of Metro Manila, parts of Cavite, Batangas, and Quezon provinces, constitute one integrated delicate natural ecosystem that needs to be protected with uniform set of policies; if we are to be serious in our aims of attaining sustainable development. This is an exhaustible natural resource a very limited one which requires judicious management and optimal utilization to ensure renewability and preserve its ecological integrity and balance." "Managing the lake resources would mean the implementation of a national policy geared towards the protection, conservation, balanced growth and sustainable development of the region with due regard to the inter-generational use of its resources by the inhabitants in this part of the earth. The authors of Republic Act 4850 have foreseen this need when they passed this LLDA law the special law designed to govern the management of our Laguna de Bay lake resources." "Laguna de Bay therefore cannot be subjected to fragmented concepts of management policies where lakeshore local government units exercise exclusive dominion over specific portions of the lake water. The garbage thrown or sewage discharged into the lake, abstraction of water therefrom or construction of fishpens by enclosing its certain area, affect not only that specific portion but the entire 900 km of lake water. The implementation of a cohesive and integrated lake water resource management policy, therefore, is necessary to conserve, protect and sustainably develop Laguna de Bay." 5 The power of the local government units to issue fishing privileges was clearly granted for revenue purposes. This is evident from the fact that Section 149 of the New Local Government Code empowering local governments to issue fishing permits is embodied in Chapter 2, Book II, of Republic Act No. 7160 under the heading, "Specific Provisions On The Taxing And Other Revenue Raising Power Of Local Government Units."

On the other hand, the power of the Authority to grant permits for fishpens, fishcages and other aqua-culture structures is for the purpose of effectively regulating and monitoring activities in the Laguna de Bay region (Section 2, Executive Order No. 927) and for lake quality control and management. 6 It does partake of the nature of police power which is the most pervasive, the least limitable and the most demanding of all State powers including the power of taxation. Accordingly, the charter of the Authority which embodies a valid exercise of police power should prevail over the Local Government Code of 1991 on matters affecting Laguna de Bay. There should be no quarrel over permit fees for fishpens, fishcages and other aqua-culture structures in the Laguna de Bay area. Section 3 of Executive Order No. 927 provides for the proper sharing of fees collected. In respect to the question as to whether the Authority is a quasi-judicial agency or not, it is our holding that, considering the provisions of Section 4 of Republic Act No. 4850 and Section 4 of Executive Order No. 927, series of 1983, and the ruling of this Court in Laguna Lake Development Authority vs. Court of Appeals, 231 SCRA 304, 306, which we quote: xxx xxx xxx As a general rule, the adjudication of pollution cases generally pertains to the Pollution Adjudication Board (PAB), except in cases where the special law provides for another forum. It must be recognized in this regard that the LLDA, as a specialized administrative agency, is specifically mandated under Republic Act No. 4850 and its amendatory laws to carry out and make effective the declared national policy of promoting and accelerating the development and balanced growth of the Laguna Lake area and the surrounding provinces of Rizal and Laguna and the cities of San Pablo, Manila, Pasay, Quezon and Caloocan with due regard and adequate provisions for environmental management and control, preservation of the quality of human life and ecological systems, and the prevention of undue ecological disturbances, deterioration and pollution. Under such a broad grant of power and authority, the LLDA, by virtue of its special charter, obviously has the responsibility to protect the inhabitants of the Laguna Lake region from the deleterious effects of pollutants emanating from the discharge of wastes from the surrounding areas. In carrying out the aforementioned declared policy, the LLDA is mandated, among others, to pass upon and approve or disapprove all plans, programs, and projects proposed by local government offices/agencies within the region, public corporations, and private persons or enterprises where such plans, programs and/or projects are related to those of the LLDA for the development of the region. xxx xxx xxx . . . . While it is a fundamental rule that an administrative agency has only such powers as are expressly granted to it by law, it is likewise a settled rule that an administrative agency has also such powers as are necessarily implied in the exercise of its express powers. In the exercise, therefore, of its express powers under its charter, as a regulatory and quasi-judicial body with respect to pollution cases in the Laguna Lake region, the authority of the

LLDA to issue a "cease and desist order" is, perforce, implied. Otherwise, it may well be reduced to a "toothless" paper agency. there is no question that the Authority has express powers as a regulatory and quasijudicial body in respect to pollution cases with authority to issue a "cease and desist order" and on matters affecting the construction of illegal fishpens, fishcages and other aqua-culture structures in Laguna de Bay. The Authority's pretense, however, that it is co-equal to the Regional Trial Courts such that all actions against it may only be instituted before the Court of Appeals cannot be sustained. On actions necessitating the resolution of legal questions affecting the powers of the Authority as provided for in its charter, the Regional Trial Courts have jurisdiction. In view of the foregoing, this Court holds that Section 149 of Republic Act No. 7160, otherwise known as the Local Government Code of 1991, has not repealed the provisions of the charter of the Laguna Lake Development Authority, Republic Act No. 4850, as amended. Thus, the Authority has the exclusive jurisdiction to issue permits for the enjoyment of fishery privileges in Laguna de Bay to the exclusion of municipalities situated therein and the authority to exercise such powers as are by its charter vested on it. Removal from the Authority of the aforesaid licensing authority will render nugatory its avowed purpose of protecting and developing the Laguna Lake Region. Otherwise stated, the abrogation of this power would render useless its reason for being and will in effect denigrate, if not abolish, the Laguna Lake Development Authority. This, the Local Government Code of 1991 had never intended to do. WHEREFORE, the petitions for prohibition, certiorari and injunction are hereby granted, insofar as they relate to the authority of the Laguna Lake Development Authority to grant fishing privileges within the Laguna Lake Region. The restraining orders and/or writs of injunction issued by Judge Arturo Marave, RTC, Branch 78, Morong, Rizal; Judge Herculano Tech, RTC, Branch 70, Binangonan, Rizal; and Judge Aurelio Trampe, RTC, Branch 163, Pasig, Metro Manila, are hereby declared null and void and ordered set aside for having been issued with grave abuse of discretion. The Municipal Mayors of the Laguna Lake Region are hereby prohibited from issuing permits to construct and operate fishpens, fishcages and other aqua-culture structures within the Laguna Lake Region, their previous issuances being declared null and void. Thus, the fishing permits issued by Mayors Isidro B. Pacis, Municipality of Binangonan; Ricardo D. Papa, Municipality of Taguig; and Walfredo M. de la Vega, Municipality of Jala-jala, specifically, are likewise declared null and void and ordered cancelled. The fishpens, fishcages and other aqua-culture structures put up by operators by virtue of permits issued by Municipal Mayors within the Laguna Lake Region, specifically, permits issued to Fleet Development, Inc. and Carlito Arroyo; Manila Marine Life Business Resources, Inc., represented by, Mr. Tobias Reynald M. Tiangco; Greenfield Ventures Industrial Development Corporation and R.J. Orion Development Corporation; IRMA Fishing And Trading Corporation, ARTM Fishing Corporation, BDR Corporation, Mirt Corporation and Trim Corporation; Blue Lagoon Fishing Corporation and ALCRIS Chicken Growers, Inc.; AGP Fish Ventures, Inc., represented by its President Alfonso Puyat; SEA MAR Trading Co., Inc., Eastern Lagoon Fishing Corporation, and MINAMAR Fishing Corporation, are hereby declared illegal structures subject to demolition by the Laguna Lake Development Authority.

SO ORDERED. Davide, Jr., Bellosillo and Kapunan, JJ., concur.

Separate Opinions

PADILLA, J., concurring: I fully concur with the decision written by Mr. Justice R. Hermosisima, Jr.. I would only like to stress what the decision already states, i.e., that the local government units in the Laguna Lake area are not precluded from imposing permits on fishery operations for revenue raising purposes of such local government units. In other words, while the exclusive jurisdiction to determine whether or not projects or activities in the lake area should be allowed, as well as their regulation, is with the Laguna Lake Development Authority, once the Authority grants a permit, the permittee may still be subjected to an additional local permit or license for revenue purposes of the local government units concerned. This approach would clearly harmonize the special law, Rep. Act No. 4850, as amended, with Rep. Act No. 7160, the Local Government Code. It will also enable small towns and municipalities in the lake area, like Jala-Jala, to rise to some level of economic viability. Separate Opinions PADILLA, J., concurring: I fully concur with the decision written by Mr. Justice R. Hermosisima, Jr.. I would only like to stress what the decision already states, i.e., that the local government units in the Laguna Lake area are not precluded from imposing permits on fishery operations for revenue raising purposes of such local government units. In other words, while the exclusive jurisdiction to determine whether or not projects or activities in the lake area should be allowed, as well as their regulation, is with the Laguna Lake Development Authority, once the Authority grants a permit, the permittee may still be subjected to an additional local permit or license for revenue purposes of the local government units concerned. This approach would clearly harmonize the special law, Rep. Act No. 4850, as amended, with Rep. Act No. 7160, the Local Government Code. It will also enable small towns and municipalities in the lake area, like Jala-Jala, to rise to some level of economic viability. Footnotes 1 Section 1, PD No. 813. 2 At pages 64-65.

3 Manila Railroad Company vs. Rafferty, 40 Phils. 225; National Power Corporation vs. Arca, 25 SCRA 935; Province of Misamis Oriental vs. Cagayan Electric Power and Light Company, Inc., 181 SCRA 43. 4 Fajardo vs. Villafuerte, G.R. No. 89135, December 21, 1989. 5 Petition, under caption, "Nature of Petition". 6 Section 3 (k), Presidential Decree No. 813. Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. 111097 July 20, 1994 MAYOR PABLO P. MAGTAJAS & THE CITY OF CAGAYAN DE ORO, petitioners, vs. PRYCE PROPERTIES CORPORATION, INC. & PHILIPPINE AMUSEMENT AND GAMING CORPORATION,respondents. Aquilino G. Pimentel, Jr. and Associates for petitioners. R.R. Torralba & Associates for private respondent.

CRUZ, J.: There was instant opposition when PAGCOR announced the opening of a casino in Cagayan de Oro City. Civic organizations angrily denounced the project. The religious elements echoed the objection and so did the women's groups and the youth. Demonstrations were led by the mayor and the city legislators. The media trumpeted the protest, describing the casino as an affront to the welfare of the city. The trouble arose when in 1992, flush with its tremendous success in several cities, PAGCOR decided to expand its operations to Cagayan de Oro City. To this end, it leased a portion of a building belonging to Pryce Properties Corporation, Inc., one of the herein private respondents, renovated and equipped the same, and prepared to inaugurate its casino there during the Christmas season. The reaction of the Sangguniang Panlungsod of Cagayan de Oro City was swift and hostile. On December 7, 1992, it enacted Ordinance No. 3353 reading as follows: ORDINANCE NO. 3353

AN ORDINANCE PROHIBITING THE ISSUANCE OF BUSINESS PERMIT AND CANCELLING EXISTING BUSINESS PERMIT TO ANY ESTABLISHMENT FOR THE USING AND ALLOWING TO BE USED ITS PREMISES OR PORTION THEREOF FOR THE OPERATION OF CASINO. BE IT ORDAINED by the Sangguniang Panlungsod of the City of Cagayan de Oro, in session assembled that: Sec. 1. That pursuant to the policy of the city banning the operation of casino within its territorial jurisdiction, no business permit shall be issued to any person, partnership or corporation for the operation of casino within the city limits. Sec. 2. That it shall be a violation of existing business permit by any persons, partnership or corporation to use its business establishment or portion thereof, or allow the use thereof by others for casino operation and other gambling activities. Sec. 3. PENALTIES. Any violation of such existing business permit as defined in the preceding section shall suffer the following penalties, to wit: a) Suspension of the business permit for sixty (60) days for the first offense and a fine of P1,000.00/day b) Suspension of the business permit for Six (6) months for the second offense, and a fine of P3,000.00/day c) Permanent revocation of the business permit and imprisonment of One (1) year, for the third and subsequent offenses. Sec. 4. This Ordinance shall take effect ten (10) days from publication thereof. Nor was this all. On January 4, 1993, it adopted a sterner Ordinance No. 3375-93 reading as follows: ORDINANCE NO. 3375-93 AN ORDINANCE PROHIBITING THE OPERATION OF CASINO AND PROVIDING PENALTY FOR VIOLATION THEREFOR. WHEREAS, the City Council established a policy as early as 1990 against CASINO under its Resolution No. 2295; WHEREAS, on October 14, 1992, the City Council passed another Resolution No. 2673, reiterating its policy against the establishment of CASINO;

WHEREAS, subsequently, thereafter, it likewise passed Ordinance No. 3353, prohibiting the issuance of Business Permit and to cancel existing Business Permit to any establishment for the using and allowing to be used its premises or portion thereof for the operation of CASINO; WHEREAS, under Art. 3, section 458, No. (4), sub paragraph VI of the Local Government Code of 1991 (Rep. Act 7160) and under Art. 99, No. (4), Paragraph VI of the implementing rules of the Local Government Code, the City Council as the Legislative Body shall enact measure to suppress any activity inimical to public morals and general welfare of the people and/or regulate or prohibit such activity pertaining to amusement or entertainment in order to protect social and moral welfare of the community; NOW THEREFORE, BE IT ORDAINED by the City Council in session duly assembled that: Sec. 1. The operation of gambling CASINO in the City of Cagayan de Oro is hereby prohibited. Sec. 2. Any violation of this Ordinance shall be subject to the following penalties: a) Administrative fine of P5,000.00 shall be imposed against the proprietor, partnership or corporation undertaking the operation, conduct, maintenance of gambling CASINO in the City and closure thereof; b) Imprisonment of not less than six (6) months nor more than one (1) year or a fine in the amount of P5,000.00 or both at the discretion of the court against the manager, supervisor, and/or any person responsible in the establishment, conduct and maintenance of gambling CASINO. Sec. 3. This Ordinance shall take effect ten (10) days after its publication in a local newspaper of general circulation. Pryce assailed the ordinances before the Court of Appeals, where it was joined by PAGCOR as intervenor and supplemental petitioner. Their challenge succeeded. On March 31, 1993, the Court of Appeals declared the ordinances invalid and issued the writ prayed for to prohibit their enforcement. 1 Reconsideration of this decision was denied on July 13, 1993. 2 Cagayan de Oro City and its mayor are now before us in this petition for review under Rule 45 of the Rules of Court. 3 They aver that the respondent Court of Appeals erred in holding that: 1. Under existing laws, the Sangguniang Panlungsod of the City of Cagayan de Oro does not have the power and authority to prohibit the establishment and operation of a PAGCOR gambling casino within the City's territorial limits.

2. The phrase "gambling and other prohibited games of chance" found in Sec. 458, par. (a), sub-par. (1) (v) of R.A. 7160 could only mean "illegal gambling." 3. The questioned Ordinances in effect annul P.D. 1869 and are therefore invalid on that point. 4. The questioned Ordinances are discriminatory to casino and partial to cockfighting and are therefore invalid on that point. 5. The questioned Ordinances are not reasonable, not consonant with the general powers and purposes of the instrumentality concerned and inconsistent with the laws or policy of the State. 6. It had no option but to follow the ruling in the case of Basco, et al. v. PAGCOR, G.R. No. 91649, May 14, 1991, 197 SCRA 53 in disposing of the issues presented in this present case. PAGCOR is a corporation created directly by P.D. 1869 to help centralize and regulate all games of chance, including casinos on land and sea within the territorial jurisdiction of the Philippines. In Basco v. Philippine Amusements and Gaming Corporation, 4 this Court sustained the constitutionality of the decree and even cited the benefits of the entity to the national economy as the third highest revenue-earner in the government, next only to the BIR and the Bureau of Customs. Cagayan de Oro City, like other local political subdivisions, is empowered to enact ordinances for the purposes indicated in the Local Government Code. It is expressly vested with the police power under what is known as the General Welfare Clause now embodied in Section 16 as follows: Sec. 16. General Welfare. Every local government unit shall exercise the powers expressly granted, those necessarily implied therefrom, as well as powers necessary, appropriate, or incidental for its efficient and effective governance, and those which are essential to the promotion of the general welfare. Within their respective territorial jurisdictions, local government units shall ensure and support, among other things, the preservation and enrichment of culture, promote health and safety, enhance the right of the people to a balanced ecology, encourage and support the development of appropriate and self-reliant scientific and technological capabilities, improve public morals, enhance economic prosperity and social justice, promote full employment among their residents, maintain peace and order, and preserve the comfort and convenience of their inhabitants. In addition, Section 458 of the said Code specifically declares that: Sec. 458. Powers, Duties, Functions and Compensation. (a) The Sangguniang Panlungsod, as the legislative body of the city, shall enact ordinances, approve resolutions and appropriate funds for the general welfare of the city and its inhabitants pursuant to Section 16 of this Code and in the proper exercise of the corporate powers of the city as provided for under Section 22 of this Code, and shall:

(1) Approve ordinances and pass resolutions necessary for an efficient and effective city government, and in this connection, shall: xxx xxx xxx (v) Enact ordinances intended to prevent, suppress and impose appropriate penalties for habitual drunkenness in public places, vagrancy, mendicancy, prostitution, establishment and maintenance of houses of ill repute,gambling and other prohibited games of chance, fraudulent devices and ways to obtain money or property, drug addiction, maintenance of drug dens, drug pushing, juvenile delinquency, the printing, distribution or exhibition of obscene or pornographic materials or publications, and such other activities inimical to the welfare and morals of the inhabitants of the city; This section also authorizes the local government units to regulate properties and businesses within their territorial limits in the interest of the general welfare. 5 The petitioners argue that by virtue of these provisions, the Sangguniang Panlungsod may prohibit the operation of casinos because they involve games of chance, which are detrimental to the people. Gambling is not allowed by general law and even by the Constitution itself. The legislative power conferred upon local government units may be exercised over all kinds of gambling and not only over "illegal gambling" as the respondents erroneously argue. Even if the operation of casinos may have been permitted under P.D. 1869, the government of Cagayan de Oro City has the authority to prohibit them within its territory pursuant to the authority entrusted to it by the Local Government Code. It is submitted that this interpretation is consonant with the policy of local autonomy as mandated in Article II, Section 25, and Article X of the Constitution, as well as various other provisions therein seeking to strengthen the character of the nation. In giving the local government units the power to prevent or suppress gambling and other social problems, the Local Government Code has recognized the competence of such communities to determine and adopt the measures best expected to promote the general welfare of their inhabitants in line with the policies of the State. The petitioners also stress that when the Code expressly authorized the local government units to prevent and suppress gambling and other prohibited games of chance, like craps, baccarat, blackjack and roulette, it meant allforms of gambling without distinction. Ubi lex non distinguit, nec nos distinguere debemos. 6 Otherwise, it would have expressly excluded from the scope of their power casinos and other forms of gambling authorized by special law, as it could have easily done. The fact that it did not do so simply means that the local government units are permitted to prohibit all kinds of gambling within their territories, including the operation of casinos. The adoption of the Local Government Code, it is pointed out, had the effect of modifying the charter of the PAGCOR. The Code is not only a later enactment than P.D. 1869 and so is deemed to prevail in case of inconsistencies between them. More than this, the powers of

the PAGCOR under the decree are expressly discontinued by the Code insofar as they do not conform to its philosophy and provisions, pursuant to Par. (f) of its repealing clause reading as follows: (f) All general and special laws, acts, city charters, decrees, executive orders, proclamations and administrative regulations, or part or parts thereof which are inconsistent with any of the provisions of this Code are hereby repealed or modified accordingly. It is also maintained that assuming there is doubt regarding the effect of the Local Government Code on P.D. 1869, the doubt must be resolved in favor of the petitioners, in accordance with the direction in the Code calling for its liberal interpretation in favor of the local government units. Section 5 of the Code specifically provides: Sec. 5. Rules of Interpretation. In the interpretation of the provisions of this Code, the following rules shall apply: (a) Any provision on a power of a local government unit shall be liberally interpreted in its favor, and in case of doubt, any question thereon shall be resolved in favor of devolution of powers and of the lower local government unit. Any fair and reasonable doubt as to the existence of the power shall be interpreted in favor of the local government unit concerned; xxx xxx xxx (c) The general welfare provisions in this Code shall be liberally interpreted to give more powers to local government units in accelerating economic development and upgrading the quality of life for the people in the community; . . . (Emphasis supplied.) Finally, the petitioners also attack gambling as intrinsically harmful and cite various provisions of the Constitution and several decisions of this Court expressive of the general and official disapprobation of the vice. They invoke the State policies on the family and the proper upbringing of the youth and, as might be expected, call attention to the old case of U.S. v. Salaveria, 7 which sustained a municipal ordinance prohibiting the playing of panguingue. The petitioners decry the immorality of gambling. They also impugn the wisdom of P.D. 1869 (which they describe as "a martial law instrument") in creating PAGCOR and authorizing it to operate casinos "on land and sea within the territorial jurisdiction of the Philippines." This is the opportune time to stress an important point. The morality of gambling is not a justiciable issue. Gambling is not illegal per se. While it is generally considered inimical to the interests of the people, there is nothing in the Constitution categorically proscribing or penalizing gambling or, for that matter, even mentioning it at all. It is left to Congress to deal with the activity as it sees fit. In the exercise of its own discretion, the legislature may prohibit gambling altogether or allow it without limitation or it may prohibit some forms of gambling and allow others for whatever reasons it may consider sufficient. Thus, it has prohibited jueteng and monte but permits lotteries, cockfighting and horse-racing. In making such choices, Congress has consulted its own wisdom, which this Court has no authority to review, much less reverse. Well has it been said that courts do not sit to resolve the merits of conflicting theories. 8 That is the

prerogative of the political departments. It is settled that questions regarding the wisdom, morality, or practicibility of statutes are not addressed to the judiciary but may be resolved only by the legislative and executive departments, to which the function belongs in our scheme of government. That function is exclusive. Whichever way these branches decide, they are answerable only to their own conscience and the constituents who will ultimately judge their acts, and not to the courts of justice. The only question we can and shall resolve in this petition is the validity of Ordinance No. 3355 and Ordinance No. 3375-93 as enacted by the Sangguniang Panlungsod of Cagayan de Oro City. And we shall do so only by the criteria laid down by law and not by our own convictions on the propriety of gambling. The tests of a valid ordinance are well established. A long line of decisions 9 has held that to be valid, an ordinance must conform to the following substantive requirements: 1) It must not contravene the constitution or any statute. 2) It must not be unfair or oppressive. 3) It must not be partial or discriminatory. 4) It must not prohibit but may regulate trade. 5) It must be general and consistent with public policy. 6) It must not be unreasonable. We begin by observing that under Sec. 458 of the Local Government Code, local government units are authorized to prevent or suppress, among others, "gambling and other prohibited games of chance." Obviously, this provision excludes games of chance which are not prohibited but are in fact permitted by law. The petitioners are less than accurate in claiming that the Code could have excluded such games of chance but did not. In fact it does. The language of the section is clear and unmistakable. Under the rule of noscitur a sociis, a word or phrase should be interpreted in relation to, or given the same meaning of, words with which it is associated. Accordingly, we conclude that since the word "gambling" is associated with "and other prohibited games of chance," the word should be read as referring to only illegal gambling which, like the other prohibited games of chance, must be prevented or suppressed. We could stop here as this interpretation should settle the problem quite conclusively. But we will not. The vigorous efforts of the petitioners on behalf of the inhabitants of Cagayan de Oro City, and the earnestness of their advocacy, deserve more than short shrift from this Court. The apparent flaw in the ordinances in question is that they contravene P.D. 1869 and the public policy embodied therein insofar as they prevent PAGCOR from exercising the power conferred on it to operate a casino in Cagayan de Oro City. The petitioners have an ingenious answer to this misgiving. They deny that it is the ordinances that have changed P.D. 1869 for an ordinance admittedly cannot prevail against a statute. Their theory is that the change has been made by the Local Government Code itself, which was also enacted by the national lawmaking authority. In their view, the decree has been, not really repealed by the Code, but merely "modified pro tanto" in the sense that PAGCOR cannot now operate a

casino over the objection of the local government unit concerned. This modification of P.D. 1869 by the Local Government Code is permissible because one law can change or repeal another law. It seems to us that the petitioners are playing with words. While insisting that the decree has only been "modifiedpro tanto," they are actually arguing that it is already dead, repealed and useless for all intents and purposes because the Code has shorn PAGCOR of all power to centralize and regulate casinos. Strictly speaking, its operations may now be not only prohibited by the local government unit; in fact, the prohibition is not only discretionary but mandated by Section 458 of the Code if the word "shall" as used therein is to be given its accepted meaning. Local government units have now no choice but to prevent and suppress gambling, which in the petitioners' view includes both legal and illegal gambling. Under this construction, PAGCOR will have no more games of chance to regulate or centralize as they must all be prohibited by the local government units pursuant to the mandatory duty imposed upon them by the Code. In this situation, PAGCOR cannot continue to exist except only as a toothless tiger or a white elephant and will no longer be able to exercise its powers as a prime source of government revenue through the operation of casinos. It is noteworthy that the petitioners have cited only Par. (f) of the repealing clause, conveniently discarding the rest of the provision which painstakingly mentions the specific laws or the parts thereof which are repealed (or modified) by the Code. Significantly, P.D. 1869 is not one of them. A reading of the entire repealing clause, which is reproduced below, will disclose the omission: Sec. 534. Repealing Clause. (a) Batas Pambansa Blg. 337, otherwise known as the "Local Government Code," Executive Order No. 112 (1987), and Executive Order No. 319 (1988) are hereby repealed. (b) Presidential Decree Nos. 684, 1191, 1508 and such other decrees, orders, instructions, memoranda and issuances related to or concerning the barangay are hereby repealed. (c) The provisions of Sections 2, 3, and 4 of Republic Act No. 1939 regarding hospital fund; Section 3, a (3) and b (2) of Republic Act. No. 5447 regarding the Special Education Fund; Presidential Decree No. 144 as amended by Presidential Decree Nos. 559 and 1741; Presidential Decree No. 231 as amended; Presidential Decree No. 436 as amended by Presidential Decree No. 558; and Presidential Decree Nos. 381, 436, 464, 477, 526, 632, 752, and 1136 are hereby repealed and rendered of no force and effect. (d) Presidential Decree No. 1594 is hereby repealed insofar as it governs locally-funded projects. (e) The following provisions are hereby repealed or amended insofar as they are inconsistent with the provisions of this Code: Sections 2, 16, and 29 of Presidential Decree No. 704; Sections 12 of Presidential Decree No. 87, as amended; Sections 52, 53, 66, 67, 68, 69, 70, 71, 72, 73, and 74 of Presidential Decree No. 463, as amended; and Section 16 of Presidential Decree No. 972, as amended, and (f) All general and special laws, acts, city charters, decrees, executive orders, proclamations and administrative regulations, or part or parts thereof which

are inconsistent with any of the provisions of this Code are hereby repealed or modified accordingly. Furthermore, it is a familiar rule that implied repeals are not lightly presumed in the absence of a clear and unmistakable showing of such intention. In Lichauco & Co. v. Apostol, 10 this Court explained: The cases relating to the subject of repeal by implication all proceed on the assumption that if the act of later date clearly reveals an intention on the part of the lawmaking power to abrogate the prior law, this intention must be given effect; but there must always be a sufficient revelation of this intention, and it has become an unbending rule of statutory construction that the intention to repeal a former law will not be imputed to the Legislature when it appears that the two statutes, or provisions, with reference to which the question arises bear to each other the relation of general to special. There is no sufficient indication of an implied repeal of P.D. 1869. On the contrary, as the private respondent points out, PAGCOR is mentioned as the source of funding in two later enactments of Congress, to wit, R.A. 7309, creating a Board of Claims under the Department of Justice for the benefit of victims of unjust punishment or detention or of violent crimes, and R.A. 7648, providing for measures for the solution of the power crisis. PAGCOR revenues are tapped by these two statutes. This would show that the PAGCOR charter has not been repealed by the Local Government Code but has in fact been improved as it were to make the entity more responsive to the fiscal problems of the government. It is a canon of legal hermeneutics that instead of pitting one statute against another in an inevitably destructive confrontation, courts must exert every effort to reconcile them, remembering that both laws deserve a becoming respect as the handiwork of a coordinate branch of the government. On the assumption of a conflict between P.D. 1869 and the Code, the proper action is not to uphold one and annul the other but to give effect to both by harmonizing them if possible. This is possible in the case before us. The proper resolution of the problem at hand is to hold that under the Local Government Code, local government units may (and indeed must) prevent and suppress all kinds of gambling within their territories except only those allowed by statutes like P.D. 1869. The exception reserved in such laws must be read into the Code, to make both the Code and such laws equally effective and mutually complementary. This approach would also affirm that there are indeed two kinds of gambling, to wit, the illegal and those authorized by law. Legalized gambling is not a modern concept; it is probably as old as illegal gambling, if not indeed more so. The petitioners' suggestion that the Code authorizes them to prohibit all kinds of gambling would erase the distinction between these two forms of gambling without a clear indication that this is the will of the legislature. Plausibly, following this theory, the City of Manila could, by mere ordinance, prohibit the Philippine Charity Sweepstakes Office from conducting a lottery as authorized by R.A. 1169 and B.P. 42 or stop the races at the San Lazaro Hippodrome as authorized by R.A. 309 and R.A. 983. In light of all the above considerations, we see no way of arriving at the conclusion urged on us by the petitioners that the ordinances in question are valid. On the contrary, we find that the ordinances violate P.D. 1869, which has the character and force of a statute, as well as the public policy expressed in the decree allowing the playing of certain games of chance despite the prohibition of gambling in general.

The rationale of the requirement that the ordinances should not contravene a statute is obvious. Municipal governments are only agents of the national government. Local councils exercise only delegated legislative powers conferred on them by Congress as the national lawmaking body. The delegate cannot be superior to the principal or exercise powers higher than those of the latter. It is a heresy to suggest that the local government units can undo the acts of Congress, from which they have derived their power in the first place, and negate by mere ordinance the mandate of the statute.
Municipal corporations owe their origin to, and derive their powers and rights wholly from the legislature. It breathes into them the breath of life, without which they cannot exist. As it creates, so it may destroy. As it may destroy, it may abridge and control. Unless there is some constitutional limitation on the right, the legislature might, by a single act, and if we can suppose it capable of so great a folly and so great a wrong, sweep from existence all of the municipal corporations in the State, and the corporation could not prevent it. We know of no limitation on the right so far as to the corporation themselves are concerned. They are, so to phrase it, the mere tenants at will of the legislature. 11

This basic relationship between the national legislature and the local government units has not been enfeebled by the new provisions in the Constitution strengthening the policy of local autonomy. Without meaning to detract from that policy, we here confirm that Congress retains control of the local government units although in significantly reduced degree now than under our previous Constitutions. The power to create still includes the power to destroy. The power to grant still includes the power to withhold or recall. True, there are certain notable innovations in the Constitution, like the direct conferment on the local government units of the power to tax, 12which cannot now be withdrawn by mere statute. By and large, however, the national legislature is still the principal of the local government units, which cannot defy its will or modify or violate it. The Court understands and admires the concern of the petitioners for the welfare of their constituents and their apprehensions that the welfare of Cagayan de Oro City will be endangered by the opening of the casino. We share the view that "the hope of large or easy gain, obtained without special effort, turns the head of the workman"13 and that "habitual gambling is a cause of laziness and ruin." 14 In People v. Gorostiza, 15 we declared: "The social scourge of gambling must be stamped out. The laws against gambling must be enforced to the limit." George Washington called gambling "the child of avarice, the brother of iniquity and the father of mischief." Nevertheless, we must recognize the power of the legislature to decide, in its own wisdom, to legalize certain forms of gambling, as was done in P.D. 1869 and impliedly affirmed in the Local Government Code. That decision can be revoked by this Court only if it contravenes the Constitution as the touchstone of all official acts. We do not find such contravention here. We hold that the power of PAGCOR to centralize and regulate all games of chance, including casinos on land and sea within the territorial jurisdiction of the Philippines, remains unimpaired. P.D. 1869 has not been modified by the Local Government Code, which empowers the local government units to prevent or suppress only those forms of gambling prohibited by law. Casino gambling is authorized by P.D. 1869. This decree has the status of a statute that cannot be amended or nullified by a mere ordinance. Hence, it was not competent for the Sangguniang Panlungsod of Cagayan de Oro City to enact Ordinance No. 3353 prohibiting the use of buildings for the operation of a casino and Ordinance No. 3375-93 prohibiting the

operation of casinos. For all their praiseworthy motives, these ordinances are contrary to P.D. 1869 and the public policy announced therein and are therefore ultra vires and void. WHEREFORE, the petition is DENIED and the challenged decision of the respondent Court of Appeals is AFFIRMED, with costs against the petitioners. It is so ordered. Narvasa, C.J., Feliciano, Bidin, Regalado, Romero, Bellosillo, Melo, Quiason, Puno, Vitug, Kapunan and Mendoza, JJ., concur.

Separate Opinions

PADILLA, J., concurring: I concur with the majority holding that the city ordinances in question cannot modify much less repeal PAGCOR's general authority to establish and maintain gambling casinos anywhere in the Philippines under Presidential Decree No. 1869. In Basco v. Philippine Amusement and Gaming Corporation (PAGCOR), 197 SCRA 52, I stated in a separate opinion that: . . . I agree with the decision insofar as it holds that the prohibition, control, and regulation of the entire activity known as gambling properly pertain to "state policy". It is, therefore, the political departments of government, namely, the legislative and the executive that should decide on what government should do in the entire area of gambling, and assume full responsibility to the people for such policy." (Emphasis supplied) However, despite the legality of the opening and operation of a casino in Cagayan de Oro City by respondent PAGCOR, I wish to reiterate my view that gambling in any form runs counter to the government's own efforts to re-establish and resurrect the Filipino moral character which is generally perceived to be in a state of continuing erosion. It is in the light of this alarming perspective that I call upon government to carefully weigh the advantages and disadvantages of setting up more gambling facilities in the country. That the PAGCOR contributes greatly to the coffers of the government is not enough reason for setting up more gambling casinos because, undoubtedly, this will not help improve, but will cause a further deterioration in the Filipino moral character. It is worth remembering in this regard that, 1) what is legal is not always moral and 2) the ends do not always justify the means.

As in Basco, I can easily visualize prostitution at par with gambling. And yet, legalization of the former will not render it any less reprehensible even if substantial revenue for the government can be realized from it. The same is true of gambling. In the present case, it is my considered view that the national government (through PAGCOR) should re-examine and re-evaluate its decision of imposing the gambling casino on the residents of Cagayan de Oro City; for it is abundantly clear that public opinion in the city is very much against it, and again the question must be seriously deliberated: will the prospects of revenue to be realized from the casino outweigh the further destruction of the Filipino sense of values?

DAVIDE, JR., J., concurring: While I concur in part with the majority, I wish, however, to express my views on certain aspects of this case. I. It must at once be noted that private respondent Pryce Properties Corporation (PRYCE) directly filed with the Court of Appeals its so-called petition for prohibition, thereby invoking the said court's original jurisdiction to issue writs of prohibition under Section 9(1) of B.P. Blg. 129. As I see it, however, the principal cause of action therein is one for declaratory relief: to declare null and unconstitutional for, inter alia, having been enacted without or in excess of jurisdiction, for impairing the obligation of contracts, and for being inconsistent with public policy the challenged ordinances enacted by the Sangguniang Panglungsod of the City of Cagayan de Oro. The intervention therein of public respondent Philippine Amusement and Gaming Corporation (PAGCOR) further underscores the "declaratory relief" nature of the action. PAGCOR assails the ordinances for being contrary to the non-impairment and equal protection clauses of the Constitution, violative of the Local Government Code, and against the State's national policy declared in P.D. No. 1869. Accordingly, the Court of Appeals does not have jurisdiction over the nature of the action. Even assuming arguendo that the case is one for prohibition, then, under this Court's established policy relative to the hierarchy of courts, the petition should have been filed with the Regional Trial Court of Cagayan de Oro City. I find no special or compelling reason why it was not filed with the said court. I do not wish to entertain the thought that PRYCE doubted a favorable verdict therefrom, in which case the filing of the petition with the Court of Appeals may have been impelled by tactical considerations. A dismissal of the petition by the Court of Appeals would have been in order pursuant to our decisions in People vs. Cuaresma (172 SCRA 415, [1989]) and DefensorSantiago vs. Vasquez (217 SCRA 633 [1993]). In Cuaresma, this Court stated: A last word. This court's original jurisdiction to issue writs of certiorari (as well as prohibition,mandamus, quo warranto, habeas corpus and injunction) is not exclusive. It is shared by this Court with Regional Trial Courts (formerly Courts of First Instance), which may issue the writ, enforceable in any part of their respective regions. It is also shared by this court, and by the Regional Trial Court, with the Court of Appeals (formerly, Intermediate Appellate Court), although prior to the effectivity ofBatas Pambansa Bilang 129 on August 14, 1981, the latter's competence to issue the extraordinary writs was restricted by those "in aid of its appellate jurisdiction." This concurrence of jurisdiction is not, however, to be taken as according to parties seeking any

of the writs an absolute, unrestrained freedom of choice of the court to which application therefor will be directed. There is after all a hierarchy of courts. That hierarchy is determinative of the revenue of appeals, and should also serve as a general determinant of the appropriate forum for petitions for the extraordinary writs. A becoming regard for that judicial hierarchy most certainly indicates that petitions for the issuance of extraordinary writs against first level ("inferior") courts should be filed with the Regional Trial Court, and those against the latter, with the Court of Appeals. A direct invocation of the Supreme Court's original jurisdiction to issue these writs should be allowed only when there are special and important reasons therefor, clearly and specifically set out in the petition. This is established policy. It is a policy that is necessary to prevent inordinate demands upon the Court's time and attention which are better devoted to those matters within its exclusive jurisdiction, and to prevent further over-crowding of the Court's docket. Indeed, the removal of the restriction of the jurisdiction of the Court of Appeals in this regard, supra resulting from the deletion of the qualifying phrase, "in aid of its appellate jurisdiction" was evidently intended precisely to relieve this Court pro tanto of the burden of dealing with applications for extraordinary writs which, but for the expansion of the Appellate Court's corresponding jurisdiction, would have had to be filed with it. (citations omitted) And in Vasquez, this Court said: One final observation. We discern in the proceedings in this case a propensity on the part of petitioner, and, for that matter, the same may be said of a number of litigants who initiate recourses before us, to disregard the hierarchy of courts in our judicial system by seeking relief directly from this Court despite the fact that the same is available in the lower courts in the exercise of their original or concurrent jurisdiction, or is even mandated by law to be sought therein. This practice must be stopped, not only because of the imposition upon the previous time of this Court but also because of the inevitable and resultant delay, intended or otherwise, in the adjudication of the case which often has to be remanded or referred to the lower court as the proper forum under the rules of procedure, or as better equipped to resolve the issues since this Court is not a trier of facts. We, therefore, reiterate the judicial policy that this Court will not entertain direct resort to it unless the redress desired cannot be obtained in the appropriate courts or where exceptional and compelling circumstances justify availment of a remedy within and calling for the exercise of our primary jurisdiction. II. The challenged ordinances are (a) Ordinance No. 3353 entitled, "An Ordinance Prohibiting the Issuance of Business Permit and Canceling Existing Business Permit To Any Establishment for the Using and Allowing to be Used Its Premises or Portion Thereof for the Operation of Casino," and (b) Ordinance No. 3375-93 entitled, "An Ordinance Prohibiting the Operation of Casino and Providing Penalty for Violation Therefor." They were enacted to implement Resolution No. 2295 entitled, "Resolution Declaring As a Matter of Policy to Prohibit and/or Not to Allow the Establishment of the Gambling Casino in the City of Cagayan de Oro," which was promulgated on 19 November 1990 nearly two years before PRYCE and PAGCOR entered into a contract of lease under which the latter leased a

portion of the former's Pryce Plaza Hotel for the operation of a gambling casino which resolution was vigorously reiterated in Resolution No. 2673 of 19 October 1992. The challenged ordinances were enacted pursuant to the Sangguniang Panglungsod's express powers conferred by Section 458, paragraph (a), subparagraphs (1)-(v), (3)-(ii), and (4)-(i), (iv), and (vii), Local Government Code, and pursuant to its implied power under Section 16 thereof (the general welfare clause) which reads: Sec. 16. General Welfare. Every local government unit shall exercise the powers expressly granted, those necessarily implied therefrom, as well as powers necessary, appropriate, or incidental for its efficient and effective governance, and those which are essential to the promotion of the general welfare. Within their respective territorial jurisdictions, local government units shall ensure and support, among other things, the preservation and enrichment of culture, promote health and safety, enhance the right of the people to a balanced ecology, encourage and support the development of appropriate and self-reliant scientific and technological capabilities, improve public morals, enhance economic prosperity and social justice, promote full employment among their residents, maintain peace and order, and preserve the comfort and convenience of their inhabitants. The issue that necessarily arises is whether in granting local governments (such as the City of Cagayan de Oro) the above powers and functions, the Local Government Code has, pro tanto, repealed P.D. No. 1869 insofar as PAGCOR's general authority to establish and maintain gambling casinos anywhere in the Philippines is concerned. I join the majority in holding that the ordinances cannot repeal P.D. No. 1869. III. The nullification by the Court of Appeals of the challenged ordinances as unconstitutional primarily because it is in contravention to P.D. No. 1869 is unwarranted. A contravention of a law is not necessarily a contravention of the constitution. In any case, the ordinances can still stand even if they be conceded as offending P.D. No. 1869. They can be reconciled, which is not impossible to do. So reconciled, the ordinances should be construed as not applying to PAGCOR. IV. From the pleadings, it is obvious that the government and the people of Cagayan de Oro City are, for obvious reasons, strongly against the opening of the gambling casino in their city. Gambling, even if legalized, would be inimical to the general welfare of the inhabitants of the City, or of any place for that matter. The PAGCOR, as a government-owned corporation, must consider the valid concerns of the people of the City of Cagayan de Oro and should not impose its will upon them in an arbitrary, if not despotic, manner.

# Separate Opinions

PADILLA, J., concurring: I concur with the majority holding that the city ordinances in question cannot modify much less repeal PAGCOR's general authority to establish and maintain gambling casinos anywhere in the Philippines under Presidential Decree No. 1869. In Basco v. Philippine Amusement and Gaming Corporation (PAGCOR), 197 SCRA 52, I stated in a separate opinion that: . . . I agree with the decision insofar as it holds that the prohibition, control, and regulation of the entire activity known as gambling properly pertain to "state policy". It is, therefore, the political departments of government, namely, the legislative and the executive that should decide on what government should do in the entire area of gambling, and assume full responsibility to the people for such policy. (emphasis supplied) However, despite the legality of the opening and operation of a casino in Cagayan de Oro City by respondent PAGCOR, I wish to reiterate my view that gambling in any form runs counter to the government's own efforts to re-establish and resurrect the Filipino moral character which is generally perceived to be in a state of continuing erosion. It is in the light of this alarming perspective that I call upon government to carefully weigh the advantages and disadvantages of setting up more gambling facilities in the country. That the PAGCOR contributes greatly to the coffers of the government is not enough reason for setting up more gambling casinos because, undoubtedly, this will not help improve, but will cause a further deterioration in the Filipino moral character. It is worth remembering in this regard that, 1) what is legal is not always moral and 2) the ends do not always justify the means. As in Basco, I can easily visualize prostitution at par with gambling. And yet, legalization of the former will not render it any less reprehensible even if substantial revenue for the government can be realized from it. The same is true of gambling. In the present case, it is my considered view that the national government (through PAGCOR) should re-examine and re-evaluate its decision of imposing the gambling casino on the residents of Cagayan de Oro City; for it is abundantly clear that public opinion in the city is very much against it, and again the question must be seriously deliberated: will the prospects of revenue to be realized from the casino outweigh the further destruction of the Filipino sense of values? DAVIDE, JR., J., concurring: While I concur in part with the majority, I wish, however, to express my views on certain aspects of this case. I. It must at once be noted that private respondent Pryce Properties Corporation (PRYCE) directly filed with the Court of Appeals its so-called petition for prohibition, thereby invoking

the said court's original jurisdiction to issue writs of prohibition under Section 9(1) of B.P. Blg. 129. As I see it, however, the principal cause of action therein is one for declaratory relief: to declare null and unconstitutional for, inter alia, having been enacted without or in excess of jurisdiction, for impairing the obligation of contracts, and for being inconsistent with public policy the challenged ordinances enacted by the Sangguniang Panglungsod of the City of Cagayan de Oro. The intervention therein of public respondent Philippine Amusement and Gaming Corporation (PAGCOR) further underscores the "declaratory relief" nature of the action. PAGCOR assails the ordinances for being contrary to the non-impairment and equal protection clauses of the Constitution, violative of the Local Government Code, and against the State's national policy declared in P.D. No. 1869. Accordingly, the Court of Appeals does not have jurisdiction over the nature of the action. Even assuming arguendo that the case is one for prohibition, then, under this Court's established policy relative to the hierarchy of courts, the petition should have been filed with the Regional Trial Court of Cagayan de Oro City. I find no special or compelling reason why it was not filed with the said court. I do not wish to entertain the thought that PRYCE doubted a favorable verdict therefrom, in which case the filing of the petition with the Court of Appeals may have been impelled by tactical considerations. A dismissal of the petition by the Court of Appeals would have been in order pursuant to our decisions in People vs. Cuaresma (172 SCRA 415, [1989]) and DefensorSantiago vs. Vasquez (217 SCRA 633 [1993]). In Cuaresma, this Court stated: A last word. This court's original jurisdiction to issue writs of certiorari (as well as prohibition,mandamus, quo warranto, habeas corpus and injunction) is not exclusive. It is shared by this Court with Regional Trial Courts (formerly Courts of First Instance), which may issue the writ, enforceable in any part of their respective regions. It is also shared by this court, and by the Regional Trial Court, with the Court of Appeals (formerly, Intermediate Appellate Court), although prior to the effectivity ofBatas Pambansa Bilang 129 on August 14, 1981, the latter's competence to issue the extraordinary writs was restricted by those "in aid of its appellate jurisdiction." This concurrence of jurisdiction is not, however, to be taken as according to parties seeking any of the writs an absolute, unrestrained freedom of choice of the court to which application therefor will be directed. There is after all a hierarchy of courts. That hierarchy is determinative of the revenue of appeals, and should also serve as a general determinant of the appropriate forum for petitions for the extraordinary writs. A becoming regard for that judicial hierarchy most certainly indicates that petitions for the issuance of extraordinary writs against first level ("inferior") courts should be filed with the Regional Trial Court, and those against the latter, with the Court of Appeals. A direct invocation of the Supreme Court's original jurisdiction to issue these writs should be allowed only when there are special and important reasons therefor, clearly and specifically set out in the petition. This is established policy. It is a policy that is necessary to prevent inordinate demands upon the Court's time and attention which are better devoted to those matters within its exclusive jurisdiction, and to prevent further over-crowding of the Court's docket. Indeed, the removal of the restriction of the jurisdiction of the Court of Appeals in this regard, supra resulting from the deletion of the qualifying phrase, "in aid of its appellate jurisdiction" was evidently intended precisely to relieve this Court pro tanto of the burden of dealing with applications for extraordinary writs which, but for the expansion of the Appellate Court's corresponding jurisdiction, would have had to be filed with it. (citations omitted) And in Vasquez, this Court said:

One final observation. We discern in the proceedings in this case a propensity on the part of petitioner, and, for that matter, the same may be said of a number of litigants who initiate recourses before us, to disregard the hierarchy of courts in our judicial system by seeking relief directly from this Court despite the fact that the same is available in the lower courts in the exercise of their original or concurrent jurisdiction, or is even mandated by law to be sought therein. This practice must be stopped, not only because of the imposition upon the previous time of this Court but also because of the inevitable and resultant delay, intended or otherwise, in the adjudication of the case which often has to be remanded or referred to the lower court as the proper forum under the rules of procedure, or as better equipped to resolve the issues since this Court is not a trier of facts. We, therefore, reiterate the judicial policy that this Court will not entertain direct resort to it unless the redress desired cannot be obtained in the appropriate courts or where exceptional and compelling circumstances justify availment of a remedy within and calling for the exercise of our primary jurisdiction. II. The challenged ordinances are (a) Ordinance No. 3353 entitled, "An Ordinance Prohibiting the Issuance of Business Permit and Canceling Existing Business Permit To Any Establishment for the Using and Allowing to be Used Its Premises or Portion Thereof for the Operation of Casino," and (b) Ordinance No. 3375-93 entitled, "An Ordinance Prohibiting the Operation of Casino and Providing Penalty for Violation Therefor." They were enacted to implement Resolution No. 2295 entitled, "Resolution Declaring As a Matter of Policy to Prohibit and/or Not to Allow the Establishment of the Gambling Casino in the City of Cagayan de Oro," which was promulgated on 19 November 1990 nearly two years before PRYCE and PAGCOR entered into a contract of lease under which the latter leased a portion of the former's Pryce Plaza Hotel for the operation of a gambling casino which resolution was vigorously reiterated in Resolution No. 2673 of 19 October 1992. The challenged ordinances were enacted pursuant to the Sangguniang Panglungsod's express powers conferred by Section 458, paragraph (a), subparagraphs (1)-(v), (3)-(ii), and (4)-(i), (iv), and (vii), Local Government Code, and pursuant to its implied power under Section 16 thereof (the general welfare clause) which reads: Sec. 16. General Welfare. Every local government unit shall exercise the powers expressly granted, those necessarily implied therefrom, as well as powers necessary, appropriate, or incidental for its efficient and effective governance, and those which are essential to the promotion of the general welfare. Within their respective territorial jurisdictions, local government units shall ensure and support, among other things, the preservation and enrichment of culture, promote health and safety, enhance the right of the people to a balanced ecology, encourage and support the development of appropriate and self-reliant scientific and technological capabilities, improve public morals, enhance economic prosperity and social justice, promote full employment among their residents, maintain peace and order, and preserve the comfort and convenience of their inhabitants. The issue that necessarily arises is whether in granting local governments (such as the City of Cagayan de Oro) the above powers and functions, the Local Government Code has, pro

tanto, repealed P.D. No. 1869 insofar as PAGCOR's general authority to establish and maintain gambling casinos anywhere in the Philippines is concerned. I join the majority in holding that the ordinances cannot repeal P.D. No. 1869. III. The nullification by the Court of Appeals of the challenged ordinances as unconstitutional primarily because it is in contravention to P.D. No. 1869 is unwarranted. A contravention of a law is not necessarily a contravention of the constitution. In any case, the ordinances can still stand even if they be conceded as offending P.D. No. 1869. They can be reconciled, which is not impossible to do. So reconciled, the ordinances should be construed as not applying to PAGCOR. IV. From the pleadings, it is obvious that the government and the people of Cagayan de Oro City are, for obvious reasons, strongly against the opening of the gambling casino in their city. Gambling, even if legalized, would be inimical to the general welfare of the inhabitants of the City, or of any place for that matter. The PAGCOR, as a government-owned corporation, must consider the valid concerns of the people of the City of Cagayan de Oro and should not impose its will upon them in an arbitrary, if not despotic, manner.
#Footnotes

1 Rollo, pp. 64-94. 2 Ibid., pp. 53-62. 3 Pryce was dropped as private respondent in the resolution of the Court dated June 13, 1994. 4 197 SCRA 53. 5 Sec. 458, [2(vi-xv)]; [3(ii-vii)]; [4(i-ix)], Local Government Code, 1991. 6 Where the law does not distinguish, neither ought we to distinguish. 7 39 Phil. 102. 8 Garcia v. Executive Secretary, 204 SCRA 516, quoting Cooley, Constitutional Limitations, 8th ed., 379-380. 9 Tatel v. Municipality of Virac, 207 SCRA 157; Solicitor General v. Metropolitan Manila Authority, 204 SCRA 837; De la Cruz v. Paras, 123 SCRA 569; U.S. v. Abandan, 24 Phil. 165. 10 44 Phil. 138. 11 Clinton v. Ceder Rapids, etc. Railroad Co., 24 Iowa 455.

12 Art. X, Sec. 5, Constitution. 13 Planiol, Droit Civil, Vol. 2, No. 2210. 14 Ibid. 15 77 Phil. 88.