MMDA vs Bel-Air Village Assoc.

March 27, 2000

Puno,J.

FACTS

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.

Actions Filed:
1. BAVA – applied for injunction; trial court issued temporary restraining order but after due hearing, trial court
denied the issuance of a preliminary injunction.
2. BAVA – appealed to CA which issued preliminary injunction and later ruled that 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.
MMDA – filed motion for reconsideration but was denied by CA; hence the current recourse.

ISSUES

1. 1. Has the MMDA the mandate to open Neptune Street to public traffic pursuant to its regulatory
and police powers?
2. Is the passage of an ordinance a condition precedent before the MMDA may order the opening of
subdivision roads to public traffic?

HELD

The MMDA is, as termed in the charter itself, "development authority." All its functions are administrative in
nature.

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.

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.

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.

DISPOSITION

IN VIEW WHEREOF, the petition is denied. The Decision and Resolution of the Court of Appeals
are affirmed.

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

WAS RESPONDENT DEPRIVED OF DUE PROCESS DESPITE THE SEVERAL MEETINGS HELD
BETWEEN MMDA AND THE AFFECTED BEL-AIR RESIDENTS AND BAVA OFFICERS?

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 policy-making. 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.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 79956 January 29, 1990

CORDILLERA BROAD COALITION, petitioner,

vs.
COMMISSION ON AUDIT, respondent.

G.R. No. 82217 January 29, 1990

LILIA YARANON and BONA BAUTISTA, assisted by their spouses, BRAULIO D. YARANON and DEMETRIO D.
BAUTISTA, JR., respectively; JAMES BRETT and SINAI C. HAMADA, petitioners,
vs.
THE COMMISSION ON AUDIT, HON. CATALINO MACARAIG, Executive Secretary, HON. VICENTE JAYME,
Secretary of Finance, HON. GUILLERMO N. CARAGUE, Secretary of Budget and Management, and HON.
ROSALINA S. CAJUCOM, OIC National Treasurer, respondents.

CORTES, J.:

In these consolidated petitions, the constitutionality of Executive Order No. 220, dated July 15, 1987, which
created the (Cordillera Administrative Region, is assailed on the primary ground that it pre-empts the enactment
of an organic act by the Congress and the creation of' the autonomous region in the Cordilleras conditional on
the approval of the act through a plebiscite.

Relative to the creation of autonomous regions, the constitution, in Article X, provides:

AUTONOMOUS REGIONS
 Sec. 15. There shall be created autonomous regions in Muslim Mindanao and in the Cordilleras consisting
of provinces, cities, municipalities, and geographical areas sharing common and distinctive historical and
cultural heritage, economic and social structures, and other relevant characteristics within the framework
of this Constitution and the national sovereignty as well as territorial integrity of the Republic of the
Philippines.

SEC. 16. The President shall exercise general supervision over autonomous regions to ensure that laws are
faithfully executed.

Sec. 17. All powers, functions, and responsibilities not granted Constitution or by law to the autonomous
regions shall be vested in the National Government.

Sec. 18. The Congress shall enact an organic act for each autonomous region with the assistance and
participation of the regional consultative commission composed of representatives appointed by the
President from a list of nominees from multi-sectoral bodies. The organic act shall define the basic
structure of government for the region consisting of the executive department and legislative assembly,
both of which shall be elective and representative of the constituent political units. The organic acts shall
likewise provide for special courts with personal, family and property law jurisdiction consistent with the
provisions of this Constitution and national laws.

The creation of the autonomous region shall be effective when approved by majority of the votes cast
by the constituent units in a plebiscite called for the purpose, provided that only provinces, cities, and
geographic areas voting favorably in such plebiscite shall be included in the autonomous region.

Sec. 19. The first Congress elected under this Constitution shall, within eighteen months from the time of
organization of both Houses, pass the organic acts for the autonomous regions in Muslim Mindanao and
the Cordilleras.

Sec. 20. Within its territorial jurisdiction and subject to the provisions of this Constitution and national
laws, the organic act of autonomous regions shall provide for legislative powers over:

(1) Administrative organization;

(2) Creation of sources of revenues;

(3) Ancestral domain and natural resources;

(4) Personal, family and property relations;

(5) Regional urban and rural planning development;

(6) Economic, social and tourism development ;

(7) Educational policies;

(8) Preservation and development of the cultural heritage; and

(9) Such other matters as may be authorized by law for the promotion of the general welfare of the
people of the region.

Sec. 21. The preservation of peace and order within the regions shall be the responsibility of the local
police agencies which shall be organized, maintained, supervised, and utilized in accordance with
applicable laws. The defense and security of the regions shall be the responsibility of the National
Government.

A study of E.O. No. 220 would be incomplete Without reference to its historical background.

In April 1986, just after the EDSA Revolution, Fr. Conrado M. Balweg, S.V.D., broke off on ideological
grounds from the Communist Party of the Philippines (CPP) and its military arm the New People's Army.
(NPA).

After President Aquino was installed into office by People Power, she advocated a policy of national
reconciliation. She called on all revolutionary forces to a peace dialogue. The CPLA heeded this call of
the President. After the preliminary negotiations, President Aquino and some members of her Cabinet
flew to Mt. Data in the Mountain Province on September 13, 1986 and signed with Fr. Conrado M.
Balweg (As Commander of the CPLA and Ama Mario Yag-ao (as President of Cordillera Bodong
 Administration, the civil government of the CPLA a ceasefire agreement that signified the cessation of
hostilities (WHEREAS No. 7, E.O. 220).

The parties arrived at an agreement in principle: the Cordillera people shall not undertake their demands
through armed and violent struggle but by peaceful means, such as political negotiations. The
negotiations shall be a continuing process until the demands of the Cordillera people shall have been
substantially granted.

On March 27, 1987, Ambassador Pelaez [Acting as Chief Negotiator of the government], in pursuance of
the September 13, 1986 agreement, flew to the Mansion House, Baguio City, and signed with Fr. Balweg
(as Chairman of the Cordillera panel) a joint agreement, paragraphs 2 and 3 of which state:

Par. 2- Work together in drafting an Executive Order to create a preparatory body that could perform
policy-making and administrative functions and undertake consultations and studies leading to a draft
organic act for the Cordilleras.

Par. 3- Have representatives from the Cordillera panel join the study group of the R.P. Panel in drafting
the Executive Order.

Pursuant to the above joint agreement, E.O. 220 was drafted by a panel of the Philippine government
and of the representatives of the Cordillera people.

On July 15, 1987, President Corazon C. Aquino signed the joint draft into law, known now as E.O. 220.
[Rejoinder G.R. No. 82217, pp. 2-3].

Executive Order No. 220, issued by the President in the exercise of her legislative powers under Art. XVIII, sec. 6
of the 1987 Constitution, created the Cordillera Administrative Region (CAR) , which covers the provinces of
Abra, Benguet, Ifugao, Kalinga-Apayao and Mountain Province and the City of Baguio [secs. 1 and 2]. It was
created to accelerate economic and social growth in the region and to prepare for the establishment of the
autonomous region in the Cordilleras [sec. 3]. Its main function is to coordinate the planning and
implementation of programs and services in the region, particularly, to coordinate with the local government
units as well as with the executive departments of the National Government in the supervision of field offices
and in identifying, planning, monitoring, and accepting projects and activities in the region [sec. 5]. It shall also
monitor the implementation of all ongoing national and local government projects in the region [sec. 20]. The
CAR shall have a Cordillera Regional Assembly as a policy-formulating body and a Cordillera Executive Board as
an implementing arm [secs. 7, 8 and 10]. The CAR and the Assembly and Executive Board shall exist until such
time as the autonomous regional government is established and organized [sec. 17].

Explaining the rationale for the issuance of E.O. No. 220, its last "Whereas" clause provides:

WHEREAS, pending the convening of the first Congress and the enactment of the organic act for a
Cordillera autonomous region, there is an urgent need, in the interest of national security and public
order, for the President to reorganize immediately the existing administrative structure in the Cordilleras
to suit it to the existing political realities therein and the Government's legitimate concerns in the areas,
without attempting to pre-empt the constitutional duty of the first Congress to undertake the creation of
an autonomous region on a permanent basis.

During the pendency of this case, Republic Act No. 6766 entitled "An Act Providing for an Organic Act for the
Cordillera Autonomous Region," was enacted and signed into law. The Act recognizes the CAR and the offices
and agencies created under E.O. No. 220 and its transitory nature is reinforced in Art. XXI of R.A. No. 6766, to
wit:

SEC. 3. The Cordillera Executive Board, the Cordillera Region Assembly as well as all offices and agencies
created under Execute Order No. 220 shall cease to exist immediately upon the ratification of this
Organic Act.

All funds, properties and assets of the Cordillera Executive Board and the Cordillera Regional Assembly
shall automatically be transferred to the Cordillera Autonomous Government.

It is well-settled in our jurisprudence that respect for the inherent and stated powers and prerogatives of the
law-making body, as well as faithful adherence to the principle of separation of powers, require that its
enactment be accorded the presumption of constitutionality. Thus, in any challenge to the constitutionality of a
statute, the burden of clearly and unequivocally proving its unconstitutionality always rests upon the challenger.
Conversely, failure to so prove will necessarily defeat the challenge.

We shall be guided by these principles in considering these consolidated petitions.

In these cases, petitioners principally argue that by issuing E.O. No. 220 the President, in the exercise of her
legislative powers prior to the convening of the first Congress under the 1987 Constitution, has virtually pre-
empted Congress from its mandated task of enacting an organic act and created an autonomous region in the
Cordilleras. We have carefully studied the Constitution and E.O. No. 220 and we have come to the conclusion
that petitioners' assertions are unfounded. Events subsequent to the issuance of E.O. No. 220 also bear out this
conclusion.

1. A reading of E.O. No. 220 will easily reveal that what it actually envisions is the consolidation and
coordination of the delivery of services of line departments and agencies of the National Government in the
areas covered by the administrative region as a step preparatory to the grant of autonomy to the Cordilleras. It
does not create the autonomous region contemplated in the Constitution. It merely provides for transitory
measures in anticipation of the enactment of an organic act and the creation of an autonomous region. In short,
it prepares the ground for autonomy. This does not necessarily conflict with the provisions of the Constitution
on autonomous regions, as we shall show later.

The Constitution outlines a complex procedure for the creation of an autonomous region in the Cordilleras. A
regional consultative commission shall first be created. The President shall then appoint the members of a
regional consultative commission from a list of nominees from multi-sectoral bodies. The commission shall assist
the Congress in preparing the organic act for the autonomous region. The organic act shall be passed by the first
Congress under the 1987 Constitution within eighteen months from the time of its organization and enacted
into law. Thereafter there shall be held a plebiscite for the approval of the organic act [Art. X, sec. 18]. Only
then, after its approval in the plebiscite, shall the autonomous region be created.

Undoubtedly, all of these will take time. The President, in 1987 still exercising legislative powers, as the first
Congress had not yet convened, saw it fit to provide for some measures to address the urgent needs of the
Cordilleras in the meantime that the organic act had not yet been passed and the autonomous region created.
These measures we find in E.O. No. 220. The steps taken by the President are obviously perceived by
petitioners, particularly petitioner Yaranon who views E.O. No. 220 as capitulation to the Cordillera People's
Liberation Army (CPLA) of Balweg, as unsound, but the Court cannot inquire into the wisdom of the measures
taken by the President, We can only inquire into whether or not the measures violate the Constitution. But as
we have seen earlier, they do not.

2. Moreover, the transitory nature of the CAR does not necessarily mean that it is, as petitioner Cordillera Broad
Coalition asserts, "the interim autonomous region in the Cordilleras" [Petition, G.R. No. 79956, p. 25].

The Constitution provides for a basic structure of government in the autonomous region composed of an
elective executive and legislature and special courts with personal, family and property law jurisdiction [Art. X,
sec. 18]. Using this as a guide, we find that E.O. No. 220 did not establish an autonomous regional government.
It created a region, covering a specified area, for administrative purposes with the main objective of
coordinating the planning and implementation of programs and services [secs. 2 and 5]. To determine policy, it
created a representative assembly, to convene yearly only for a five-day regular session, tasked with, among
others, identifying priority projects and development programs [sec. 9]. To serve as an implementing body, it
created the Cordillera Executive Board composed of the Mayor of Baguio City, provincial governors and
representatives of the Cordillera Bodong Administration, ethno-linguistic groups and non-governmental
organizations as regular members and all regional directors of the line departments of the National Government
as ex-officio members and headed by an Executive Director [secs. 10 and 11]. The bodies created by E.O. No.
220 do not supplant the existing local governmental structure, nor are they autonomous government agencies.
They merely constitute the mechanism for an "umbrella" that brings together the existing local governments, the
agencies of the National Government, the ethno-linguistic groups or tribes, and non-governmental organizations
in a concerted effort to spur development in the Cordilleras.

The creation of the CAR for purposes of administrative coordination is underscored by the mandate of E.O. No.
220 for the President and appropriate national departments and agencies to make available sources of funds for
priority development programs and projects recommended by the CAR [sec. 21] and the power given to the
President to call upon the appropriate executive departments and agencies of the National Government to assist
the CAR [sec. 24].

3. Subsequent to the issuance of E.O. No. 220, the Congress, after it was convened, enacted Republic Act No.
6658 which created the Cordillera Regional Consultative Commission. The President then appointed its
members. The commission prepared a draft organic act which became the basis for the deliberations of the
Senate and the House of Representatives. The result was Republic Act No. 6766, the organic act for the
Cordillera autonomous region, which was signed into law on October 23, 1989. A plebiscite for the approval of
the organic act, to be conducted shortly, shall complete the process outlined in the Constitution.

In the meantime, E.O. No. 220 had been in force and effect for more than two years and we find that, despite
E.O. No. 220, the autonomous region in the Cordilleras is still to be created, showing the lack of basis of
petitioners' assertion. Events have shown that petitioners' fear that E.O. No. 220 was a "shortcut" for the
creation of the autonomous region in the Cordilleras was totally unfounded.

Clearly, petitioners' principal challenge has failed.

II

A collateral issue raised by petitioners is the nature of the CAR: whether or not it is a territorial and political
subdivision. The Constitution provides in Article X:

Section 1. The territorial and political subdivisions of the Republic of the Philippines are the provinces,
cities, municipalities, and barangays. There shall be autonomous regions in Muslim Mindanao and the
Cordilleras as hereinafter provided.

xxx xxx xxx

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.

We have seen earlier that the CAR is not the autonomous region in the Cordilleras contemplated by the
Constitution, Thus, we now address petitioners' assertion that E. 0. No. 220 contravenes the Constitution by
creating a new territorial and political subdivision.

After carefully considering the provisions of E.O. No. 220, we find that it did not create a new territorial and
political subdivision or merge existing ones into a larger subdivision.

1. Firstly, the CAR is not a public corporation or a territorial and political subdivision. It does not have a
separate juridical personality, unlike provinces, cities and municipalities. Neither is it vested with the powers that
are normally granted to public corporations, e.g. the power to sue and be sued, the power to own and dispose
of property, the power to create its own sources of revenue, etc. As stated earlier, the CAR was created
primarily to coordinate the planning and implementation of programs and services in the covered areas.

The creation of administrative regions for the purpose of expediting the delivery of services is nothing
new.1âwphi1 The Integrated Reorganization Plan of 1972, which was made as part of the law of the land by
virtue of Presidential Decree No. 1, established eleven (11) regions, later increased to twelve (12), with definite
regional centers and required departments and agencies of the Executive Branch of the National Government to
set up field offices therein. The functions of the regional offices to be established pursuant to the Reorganization
Plan are: (1) to implement laws, policies, plans, programs, rules and regulations of the department or agency in
the regional areas; (2) to provide economical, efficient and effective service to the people in the area; (3) to
coordinate with regional offices of other departments, bureaus and agencies in the area; (4) to coordinate with
local government units in the area; and (5) to perform such other functions as may be provided by law. [See
Part II, chap. III, art. 1, of the Reorganization Plan].

We can readily see that the CAR is in the same genre as the administrative regions created under the
Reorganization Plan, albeit under E.O. No. 220 the operation of the CAR requires the participation not only of
the line departments and agencies of the National Government but also the local governments, ethno-linguistic
groups and non-governmental organizations in bringing about the desired objectives and the appropriation of
funds solely for that purpose.

2. Then, considering the control and supervision exercised by the President over the CAR and the offices created
under E.O. No. 220, and considering further the indispensable participation of the line departments of the
National Government, the CAR may be considered more than anything else as a regional coordinating agency
of the National Government, similar to the regional development councils which the President may create under
the Constitution [Art. X, sec. 14]. These councils are "composed of local government officials, regional heads of
departments and other government offices, and representatives from non-governmental organizations within
the region for purposes of administrative decentralization to strengthen the autonomy of the units therein and
to accelerate the economic and social growth and development of the units in the region." [Ibid.] In this wise,
the CAR may be considered as a more sophisticated version of the regional development council.

III

Finally, petitioners incidentally argue that the creation of the CAR contravened the constitutional guarantee of
the local autonomy for the provinces (Abra, Benguet, Ifugao, Kalinga-Apayao and Mountain Province) and city
(Baguio City) which compose the CAR.

We find first a need to clear up petitioners' apparent misconception of the concept of local autonomy.

It must be clarified that the constitutional guarantee of local autonomy in the Constitution [Art. X, sec. 2] refers
to the administrative autonomy of local government units or, cast in more technical language, the
decentralization of government authority [Villegas v. Subido, G.R. No. L-31004, January 8, 1971, 37 SCRA 1].
Local autonomy is not unique to the 1987 Constitution, it being guaranteed also under the 1973 Constitution
[Art. II, sec. 10]. And while there was no express guarantee under the 1935 Constitution, the Congress enacted
the Local Autonomy Act (R.A. No. 2264) and the Decentralization Act (R.A. No. 5185), which ushered the
irreversible march towards further enlargement of local autonomy in the country [Villegas v. Subido, supra.]

On the other hand, the creation of autonomous regions in Muslim Mindanao and the Cordilleras, which is
peculiar to the 1987 Constitution contemplates the grant of political autonomy and not just administrative
autonomy these regions. Thus, the provision in the Constitution for an autonomous regional government with a
basic structure consisting of an executive department and a legislative assembly and special courts with personal,
family and property law jurisdiction in each of the autonomous regions [Art. X, sec. 18].

As we have said earlier, the CAR is a mere transitory coordinating agency that would prepare the stage for
political autonomy for the Cordilleras. It fills in the resulting gap in the process of transforming a group of
adjacent territorial and political subdivisions already enjoying local or administrative autonomy into an
autonomous region vested with political autonomy.

Anent petitioners' objection, we note the obvious failure to show how the creation of the CAR has actually
diminished the local autonomy of the covered provinces and city. It cannot be over-emphasized that pure
speculation and a resort to probabilities are insufficient to cause the invalidation of E.O. No. 220.

WHEREFORE, the petitions are DISMISSED for lack of merit.

SO ORDERED.

EN BANC

[ GR No. 79956, Jan 29, 1990 ]

CORDILLERA BROAD COALITION v. COA +

DECISION
260 Phil. 528

CORTES, J.:

In these consolidated petitions, the constitutionality of Executive Order No. 220, dated July 15, 1987, which
created the Cordillera Administrative Region, is assailed on the primary ground that it pre-empts the enactment
of an organic act by the Congress and the creation of the autonomous region in the Cordilleras conditional on
the approval of the act through a plebiscite.

Relative to the creation of autonomous regions, the Constitution, in Article X, provides:

AUTONOMOUS REGIONS

Sec. 15. There shall be created autonomous regions in Muslim Mindanao and in the Cordilleras consisting of
provinces, cities, municipalities, and geographical areas sharing common and distinctive historical and cultural
heritage, economic and social structures, and other relevant characteristics within the framework of this
Constitution and the national sovereignty as well as territorial integrity of the Republic of the Philippines.

Sec. 16. The President shall exercise general supervision over autonomous regions to ensure that laws are
faithfully executed.

Sec. 17. All powers, functions, and responsibilities not granted by this Constitution or by law to the autonomous
regions shall be vested in the National Government.

Sec. 18. The Congress shall enact an organic act for each autonomous region with the assistance and
participation of the regional consultative commission composed of representatives appointed by the President
from a list of nominees from multisectoral bodies. The organic act shall define the basic structure of government
for the region consisting of the executive department and legislative assembly, both of which shall be elective
and representative of the constituent political units. The organic acts shall likewise provide for special courts
with personal, family and property law jurisdiction consistent with the provisions of this Constitution and
national laws.

The creation of the autonomous region shall be effective when approved by majority of the votes cast by the
constituent units in a plebiscite called for the purpose, provided that only provinces, cities, and geographic areas
voting favorably in such plebiscite shall be included in the autonomous region.
Sec. 19. The first Congress elected under this Constitution shall, within eighteen months from the time of
organization of both Houses, pass the organic acts for the autonomous regions in Muslim Mindanao and the
Cordilleras.

Sec. 20. Within its territorial jurisdiction and subject to the provisions of this Constitution and national laws, the
organic act of autonomous regions shall provide for legislative powers over:

(1) Administrative organization;

(2) Creation of sources of revenues;
(3) Ancestral domain and natural resources;
(4) Personal, family and property relations;
(5) Regional urban and rural planning development;
(6) Economic, social and tourism development;
(7) Educational policies;
(8) Preservation and development of the cultural heritage; and
(9) Such other matters as may be authorized by law for the promotion of the general welfare of the people of
the region.
Sec. 21. The preservation of peace and order within the regions shall be the responsibility of the local police
agencies which shall be organized, maintained, supervised, and utilized in accordance with applicable laws. The
defense and security of the regions shall be the responsibility of the National Government.

A study of E.O. No. 220 would be incomplete without reference to its historical background.

In April 1986, just after the EDSA Revolution, Fr. Conrado M. Balweg, S.V.D., broke off on ideological grounds
from the Communist Party of the Philippines (CPP) and its military arm the New People's Army (NPA).

After President Aquino was installed into office by People Power, she advocated a policy of national
reconciliation. She called on all revolutionary forces to a peace dialogue. The CPLA heeded this call of the
President. After preliminary negotiations, President Aquino and some members of her, Cabinet flew to Mt. Data
in the Mountain Province on September 13, 1986 and signed with Fr. Conrado M. Balweg (as Commander of
the CPLA) and Ama Mario Yag-ao (as President of Cordillera Bodong Administration, the civil government of
the CPLA) a ceasefire agreement that signified the cessation of hostilities (WHEREAS No. 7, E.O. 220).

The parties arrived at an agreement in principle: the Cordillera people shall not undertake their demands
through armed and violent struggle but by peaceful means, such as political negotiations. The negotiations shall
be a continuing process until the demands of the Cordillera people shall have been substantially granted.

On March 27, 1987, Ambassador Pelaez [Acting as Chief Negotiator of the government], in pursuance of the
September 13, 1986 agreement, flew to the Mansion House, Baguio City, and signed with Fr. Balweg (as
Chairman of the Cordillera panel) a joint agreement, paragraphs 2 and 3 of which state:

Par. 2 - Work together in drafting an Executive Order to create a preparatory body that could perform policy-
making and administrative functions and undertake consultations and studies leading to a draft organic act for
the Cordilleras.

Par. 3 - Have representatives from the Cordillera panel join the study group of the R.P. Panel in drafting the
Executive Order.
Pursuant to the above joint agreement, E.O. 220 was drafted by a panel of the Philippine government and of
the representatives of the Cordillera people.

On July 15, 1987, President Corazon C. Aquino signed the joint draft into law, known now as E.O. 220.
[Rejoinder, G.R. No. 82217, pp. 2-3.]
Executive Order No. 220, issued by the President in the exercise of her legislative powers under Art. XVIII, sec. 6
of the 1987 Constitution, created the Cordillera Administrative Region (CAR), which covers the provinces of
Abra, Benguet, Ifugao, Kalinga-Apayao and Mountain Province and the City of Baguio [secs. 1 and 2.] It was
created to accelerate economic and social growth in the region and to prepare for the establishment of the
autonomous region in the Cordilleras [sec. 3.] Its main function is to coordinate the planning and
implementation of programs and services in the region, particularly, to coordinate with the local government
units as well as with the executive departments of the National Government in the supervision of field offices
and in identifying, planning, monitoring, and accepting projects and activities in the region [sec. 5.] It shall also
monitor the implementation of all ongoing national and local government projects in the region [sec. 20.]. The
CAR shall have a Cordillera Regional Assembly as a policy-formulating body and a Cordillera Executive Board as
an implementing arm [secs. 7, 8 and 10.] The CAR and the Assembly and Executive Board shall exist until such
time as the autonomous regional government is established and organized [sec. 17.]
Explaining the rationale for the issuance of E.O. No. 220, its last "Whereas" clause provides:

WHEREAS, pending the convening of the first Congress and the enactment of the organic act for a Cordillera
autonomous region, there is an urgent need, in the interest of national security and public order, for the
President to reorganize immediately the existing administrative structure in the Cordilleras to suit it to the
existing political realities therein and the Government's legitimate concerns in the areas, without attempting to
pre-empt the constitutional duty of the first Congress to undertake the creation of an autonomous region on a
permanent basis.
During the pendency of this case, Republic Act No. 6766 entitled "An Act Providing for an Organic Act for the
Cordillera Autonomous Region," was enacted and signed into law. The Act recognizes the CAR and the offices
and agencies created under E.O. No. 220 and its transitory nature is reinforced in Art. XXI of R.A. No. 6766, to
wit:

SEC. 3. The Cordillera Executive Board, the Cordillera Regional Assembly, as well as all offices and agencies
created under Executive Order No. 220 shall cease to exist immediately upon the ratification of this Organic
Act.

All funds, properties and assets of the Cordillera Executive Board and the Cordillera Regional Assembly shall
automatically be transferred to the Cordillera Autonomous Government.
I

It is well-settled in our jurisprudence that respect for the inherent and stated powers and prerogatives of the
law-making body, as well as faithful adherence to the principle of separation of powers, require that its
enactment be accorded the presumption of constitutionality. Thus, in any challenge to the constitutionality of a
statute, the burden of clearly and unequivocally proving its unconstitutionality always rests upon the challenger.
Conversely, failure to so prove will necessarily defeat the challenge.

We shall be guided by these principles in considering these consolidated petitions.

In these cases, petitioners principally argue that by issuing E.O. No. 220 the President, in the exercise of her
legislative powers prior to the convening of the first Congress under the 1987 Constitution, has virtually pre-
empted Congress from its mandated task of enacting an organic act and created an autonomous region in the
Cordilleras. We have carefully studied the Constitution and E.O. No. 220 and we have come to the conclusion
that petitioners' assertions are unfounded. Events subsequent to the issuance of E.O. No. 220 also bear out this
conclusion.

1. A reading of E.O. No. 220 will easily reveal that what it actually envisions is the consolidation and
coordination of the delivery of services of line departments and agencies of the National Government in the
areas covered by the administrative region as a step preparatory to the grant of autonomy to the Cordilleras. It
does not create the autonomous region contemplated in the Constitution. It merely provides for transitory
measures in anticipation of the enactment of an organic act and the creation of an autonomous region. In short,
it prepares the ground for autonomy. This does not necessarily conflict with the provisions of the Constitution
on autonomous regions, as we shall show later.

The Constitution outlines a complex procedure for the creation of an autonomous region in the Cordilleras. A
regional consultative commission shall first be created. The President shall then appoint the members of a
regional consultative commission from a list of nominees from multisectoral bodies. The commission shall assist
the Congress the in preparing organic act for the autonomous region. The organic act shall be passed by the first
Congress under the 1987 Constitution within eighteen months from the time of its organization and enacted
into law. Thereafter there shall be held a plebiscite for the approval of the organic act [Art. X, sec. 18.] Only
then, after its approval in the plebiscite, shall the autonomous region be created.

Undoubtedly, all of these will take time. The President, in 1987 still exercising legislative powers as the first
Congress had not yet convened, saw it fit to provide for some measures to address the urgent needs of the
Cordilleras in the meantime that the organic act had not yet been passed and the autonomous region created.
These measures we find in E.O. No. 220. The steps taken by the President are obviously perceived by
petitioners, particularly petitioner Yaranon who views E.O. No. 220 as capitulation to the Cordillera People's
Liberation Army (CPLA) of Balweg, as unsound, but the Court cannot inquire into the wisdom of the measures
taken by the President. We can only inquire into whether or not the measures violate the Constitution. But as
we have seen earlier, they do not.

2. Moreover, the transitory nature of the CAR does not necessarily mean that it is, as petitioner Cordillera Broad
Coalition asserts, "the interim autonomous region in the Cordilleras" [Petition, G.R. No. 79956, p. 25.]
The Constitution provides for a basic structure of government in the autonomous region composed of an
elective executive and legislature and special courts with personal, family and property law jurisdiction [Art. X,
sec. 18.] Using this as a guide, we find that E.O. No. 220 did not establish an autonomous regional government.
It created a region, covering a specified area, for administrative purposes with the main objective of
coordinating the planning and implementation of programs and services [secs. 2 and 5.] To determine policy, it
created a representative assembly, to convene yearly only for a five-day regular session, tasked with, among
others, identifying priority projects and development programs [sec. 9.] To serve as an implementing body, it
created the Cordillera Executive Board composed of the Mayor of Baguio City, Provincial governors and
representatives of the Cordillera Bodong Administration, ethno-linguistic groups and non-governmental
organizations as regular members and all regional directors of the line departments of the National Government
as ex-officio members and headed by an Executive Director [secs. 10 and 11.] The bodies created by E.O. No.
220 do not supplant the existing local governmental structure, nor are they autonomous government agencies.
They merely constitute the mechanism for an "umbrella" that brings together the existing local governments, the
agencies of the National Government, the ethno-linguistic groups or tribes, and non-governmental organizations
in a concerted effort to spur development in the Cordilleras.

The creation of the CAR for purposes of administrative coordination is underscored by the mandate of E.O. No.
220 for the President and appropriate national departments and agencies to make available sources of funds for
priority development programs and projects recommended by the CAR [sec. 21] and the power given to the
President to call upon the appropriate executive departments and agencies of the National Government to assist
the CAR [sec. 24.]

3. Subsequent to the issuance of E.O. No. 220, the Congress, after it was convened, enacted Republic Act No.
6658 which created the Cordillera Regional Consultative Commission. The President then appointed its
members. The commission prepared a draft organic act which became the basis for the deliberations of the
Senate and the House of Representatives. The result was Republic Act No. 6766, the organic act for the
Cordillera autonomous region, which was signed into law on October 23, 1989. A plebiscite for the approval of
the organic act, to be conducted shortly, shall complete the process outlined in the Constitution.

In the meantime, E.O. No. 220 had been in force and effect for more than two years and we find that, despite
E.O. No. 220, the autonomous region in the Cordilleras is still to be created, showing the lack of basis of
petitioners' assertion. Events have shown that petitioners' fear that E.O. No. 220 was a "shortcut" for the
creation of the autonomous region in the Cordilleras was totally unfounded.

Clearly, petitioners' principal challenge has failed.

II

A collateral issue raised by petitioners is the nature of the CAR: whether or not it is a territorial and political
subdivision.

The Constitution provides in Article X:

Section 1. The territorial and political subdivisions of the Republic of the Philippines are the provinces, cities,
municipalities, andbarangays. There shall be autonomous regions in Muslim Mindanao and the Cordilleras as
hereinafter provided.
xxx

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.
We have seen earlier that the CAR is not the autonomous region in the Cordilleras contemplated by the
Constitution. Thus, we now address petitioners' assertion that E.O. No. 220 contravenes the Constitution by
creating a new territorial and political subdivision.

After carefully considering the provisions of E.O. No. 220, we find that it did not create a new territorial and
political subdivision or merge existing ones into a larger subdivision.

1. Firstly, the CAR is not a public corporation or a territorial and political subdivision. It does not have a
separate juridical personality, unlike provinces, cities and municipalities. Neither is it vested with the powers that
are normally granted to public corporations, e.g.the power to sue and be sued, the power to own and dispose
of property, the power to create its own sources of revenue, etc. As stated earlier, the CAR was created
primarily to coordinate the planning and implementation of programs and services in the covered areas.
The creation of administrative regions for the purpose of expediting the delivery of services is nothing new. The
Integrated Reorganization Plan of 1972, which was made as part of the law of the land by virtue of Presidential
Decree No. 1, established eleven (11) regions, later increased to twelve (12), with definite regional centers and
required departments and agencies of the Executive Branch of the National Government to set up field offices
therein. The functions of the regional offices to be established pursuant to the Reorganization Plan are: (1) to
implement laws, policies, plans, programs, rules and regulations of the department or agency in the regional
areas; (2) to provide economical, efficient and effective service to the people in the area; (3) to coordinate with
regional offices of other departments, bureaus and agencies in the area; (4) to coordinate with local government
units in the area; and (5) to perform such other functions as may be provided by law. [ See Part II, chap. III, art.
I, of the Reorganization Plan.]

We can readily see that the CAR is in the same genre as the administrative regions created under the
Reorganization Plan, albeit under E.O. No. 220 the operation of the CAR requires the participation not only of
the line departments and agencies of the National Government but also the local governments, ethno-linguistic
groups and non-governmental organizations in bringing about the desired objectives and the appropriation of
funds solely for that purpose.

2. Then, considering the control and supervision exercised by the President over the CAR and the offices created
under E.O. No. 220, and considering further the indispensable participation of the line departments of the
National Government, the CAR may be considered more than anything else as a regional coordinating agency
of the National Government, similar to the regional development councils which the President may create under
the Constitution [Art. X, sec. 14.] These councils are "composed of local government officials, regional heads of
departments and other government offices, and representatives from non-governmental organizations within
the region for purposes of administrative decentralization to strengthen the autonomy of the units therein and
to accelerate the economic and social growth and development of the units in the region" [Ibid.] In this wise,
the CAR may be considered as a more sophisticated version of the regional development council.

III

Finally, petitioners incidentally argue that the creation of the CAR contravened the constitutional guarantee of
local autonomy for the provinces (Abra, Benguet, Ifugao, Kalinga-Apayao and Mountain Province) and city
(Baguio City) which compose the CAR.

We find first a need to clear up petitioners' apparent misconception of the concept of local autonomy.

It must be clarified that the constitutional guarantee of local autonomy in the Constitution [Art. X, sec. 2] refers
to theadministrative autonomy of local government units or, cast in more technical language, the
decentralization of government authority [Villegas v. Subido, G.R. No. L-31004, January 8, 1971, 37 SCRA 1.]
Local autonomy is not unique to the 1987 Constitution, it being guaranteed also under the 1973 Constitution
[Art. II, Sec. 10.] And while there was no express guarantee under the 1935 Constitution, the Congress enacted
the Local Autonomy Act (R.A. No. 2264) and the Decentralization Act (R.A. No. 5185), which ushered the
irreversible march towards further enlargement of local autonomy in the country [Villegas v. Subido, supra.]

On the other hand, the creation of autonomous regions in Muslim Mindanao and the Cordilleras, which is
peculiar to the 1987 Constitution, contemplates the grant of political autonomy and not just administrative
autonomy to these regions. Thus, the provision in the Constitution for an autonomous regional government
with a basic structure consisting of an executive department and a legislative assembly and special courts with
personal, family and property law jurisdiction in each of the autonomous regions [Art. X, sec. 18.]

As we have said earlier, the CAR is a mere transitory coordinating agency that would prepare the stage for
political autonomy for the Cordilleras. It fills in the resulting gap in the process of transforming a group of
adjacent territorial and political subdivisions already enjoying local or administrative autonomy into an
autonomous region vested with political autonomy.

Anent petitioners' objection, we note the obvious failure to show how the creation of the CAR has actually
diminished the local autonomy of the covered provinces and city. It cannot be over-emphasized that pure
speculation and a resort to probabilities are insufficient to cause the invalidation of E.O. No. 220.

WHEREFORE, the petitions are DISMISSED for lack of merit.

SO ORDERED.
G.R. No. 149110 April 9, 2003

NATIONAL POWER CORPORATION, petitioner,

vs.
CITY OF CABANATUAN, respondent.

PUNO, J.:

This is a petition for review1 of the Decision2 and the Resolution3 of the Court of Appeals dated March 12, 2001
and July 10, 2001, respectively, finding petitioner National Power Corporation (NPC) liable to pay franchise tax
to respondent City of Cabanatuan.

Petitioner is a government-owned and controlled corporation created under Commonwealth Act No. 120, as
amended.4 It is tasked to undertake the "development of hydroelectric generations of power and the production
of electricity from nuclear, geothermal and other sources, as well as, the transmission of electric power on a
nationwide basis."5 Concomitant to its mandated duty, petitioner has, among others, the power to construct,
operate and maintain power plants, auxiliary plants, power stations and substations for the purpose of
developing hydraulic power and supplying such power to the inhabitants.6

For many years now, petitioner sells electric power to the residents of Cabanatuan City, posting a gross income
of P107,814,187.96 in 1992.7 Pursuant to section 37 of Ordinance No. 165-92,8 the respondent assessed the
petitioner a franchise tax amounting to P808,606.41, representing 75% of 1% of the latter's gross receipts for
the preceding year.9

Petitioner, whose capital stock was subscribed and paid wholly by the Philippine Government,10 refused to pay
the tax assessment. It argued that the respondent has no authority to impose tax on government entities.
Petitioner also contended that as a non-profit organization, it is exempted from the payment of all forms of
taxes, charges, duties or fees11 in accordance with sec. 13 of Rep. Act No. 6395, as amended, viz:

"Sec.13. Non-profit Character of the Corporation; Exemption from all Taxes, Duties, Fees, Imposts and
Other Charges by Government and Governmental Instrumentalities.- The Corporation shall be non-
profit and shall devote all its return from its capital investment, as well as excess revenues from its
operation, for expansion. To enable the Corporation to pay its indebtedness and obligations and in
furtherance and effective implementation of the policy enunciated in Section one of this Act, the
Corporation is hereby exempt:

(a) From the payment of all taxes, duties, fees, imposts, charges, costs and service fees in any court or
administrative proceedings in which it may be a party, restrictions and duties to the Republic of the
Philippines, its provinces, cities, municipalities and other government agencies and instrumentalities;

(b) From all income taxes, franchise taxes and realty taxes to be paid to the National Government, its
provinces, cities, municipalities and other government agencies and instrumentalities;

(c) From all import duties, compensating taxes and advanced sales tax, and wharfage fees on import of
foreign goods required for its operations and projects; and

(d) From all taxes, duties, fees, imposts, and all other charges imposed by the Republic of the Philippines,
its provinces, cities, municipalities and other government agencies and instrumentalities, on all petroleum
products used by the Corporation in the generation, transmission, utilization, and sale of electric
power."12

The respondent filed a collection suit in the Regional Trial Court of Cabanatuan City, demanding that petitioner
pay the assessed tax due, plus a surcharge equivalent to 25% of the amount of tax, and 2% monthly
interest.13Respondent alleged that petitioner's exemption from local taxes has been repealed by section 193 of
Rep. Act No. 7160,14 which reads as follows:

"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."

On January 25, 1996, the trial court issued an Order15 dismissing the case. It ruled that the tax exemption
privileges granted to petitioner subsist despite the passage of Rep. Act No. 7160 for the following reasons: (1)
Rep. Act No. 6395 is a particular law and it may not be repealed by Rep. Act No. 7160 which is a general law;
(2) section 193 of Rep. Act No. 7160 is in the nature of an implied repeal which is not favored; and (3) local
governments have no power to tax instrumentalities of the national government. Pertinent portion of the Order
reads:
 "The question of whether a particular law has been repealed or not by a subsequent law is a matter of
legislative intent. The lawmakers may expressly repeal a law by incorporating therein repealing
provisions which expressly and specifically cite(s) the particular law or laws, and portions thereof, that
are intended to be repealed. A declaration in a statute, usually in its repealing clause, that a particular
and specific law, identified by its number or title is repealed is an express repeal; all others are implied
repeal. Sec. 193 of R.A. No. 7160 is an implied repealing clause because it fails to identify the act or acts
that are intended to be repealed. It is a well-settled rule of statutory construction that repeals of statutes
by implication are not favored. The presumption is against inconsistency and repugnancy for the
legislative is presumed to know the existing laws on the subject and not to have enacted inconsistent or
conflicting statutes. It is also a well-settled rule that, generally, general law does not repeal a special law
unless it clearly appears that the legislative has intended by the latter general act to modify or repeal the
earlier special law. Thus, despite the passage of R.A. No. 7160 from which the questioned Ordinance
No. 165-92 was based, the tax exemption privileges of defendant NPC remain.

Another point going against plaintiff in this case is the ruling of the Supreme Court in the case of Basco
vs. Philippine Amusement and Gaming Corporation, 197 SCRA 52, where it was held that:

'Local governments have no power to tax instrumentalities of the National Government.

PAGCOR is a government owned or controlled corporation with an original charter, PD 1869.
All of its shares of stocks are owned by the National Government. xxx Being an instrumentality
of the government, PAGCOR should be and actually is exempt from local taxes. Otherwise, its
operation might be burdened, impeded or subjected to control by mere local government.'

Like PAGCOR, NPC, being a government owned and controlled corporation with an original charter
and its shares of stocks owned by the National Government, is beyond the taxing power of the Local
Government. Corollary to this, it should be noted here that in the NPC Charter's declaration of Policy,
Congress declared that: 'xxx (2) the total electrification of the Philippines through the development of
power from all services to meet the needs of industrial development and dispersal and needs of rural
electrification are primary objectives of the nations which shall be pursued coordinately and supported
by all instrumentalities and agencies of the government, including its financial institutions.' (underscoring
supplied). To allow plaintiff to subject defendant to its tax-ordinance would be to impede the avowed
goal of this government instrumentality.

Unlike the State, a city or municipality has no inherent power of taxation. Its taxing power is limited to
that which is provided for in its charter or other statute. Any grant of taxing power is to be construed
strictly, with doubts resolved against its existence.

From the existing law and the rulings of the Supreme Court itself, it is very clear that the plaintiff could
not impose the subject tax on the defendant."16

On appeal, the Court of Appeals reversed the trial court's Order17 on the ground that section 193, in relation to
sections 137 and 151 of the LGC, expressly withdrew the exemptions granted to the petitioner.18 It ordered the
petitioner to pay the respondent city government the following: (a) the sum of P808,606.41 representing the
franchise tax due based on gross receipts for the year 1992, (b) the tax due every year thereafter based in the
gross receipts earned by NPC, (c) in all cases, to pay a surcharge of 25% of the tax due and unpaid, and (d) the
sum of P 10,000.00 as litigation expense.19

On April 4, 2001, the petitioner filed a Motion for Reconsideration on the Court of Appeal's Decision. This was
denied by the appellate court, viz:

"The Court finds no merit in NPC's motion for reconsideration. Its arguments reiterated therein that the
taxing power of the province under Art. 137 (sic) of the Local Government Code refers merely to private
persons or corporations in which category it (NPC) does not belong, and that the LGC (RA 7160) which
is a general law may not impliedly repeal the NPC Charter which is a special law—finds the answer in
Section 193 of the LGC to the effect that '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 xxx are hereby withdrawn.' The repeal is direct and unequivocal, not implied.

IN VIEW WHEREOF, the motion for reconsideration is hereby DENIED.

SO ORDERED."20

In this petition for review, petitioner raises the following issues:

"A. THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT NPC, A PUBLIC NON-PROFIT
CORPORATION, IS LIABLE TO PAY A FRANCHISE TAX AS IT FAILED TO CONSIDER THAT SECTION
137 OF THE LOCAL GOVERNMENT CODE IN RELATION TO SECTION 131 APPLIES ONLY TO
PRIVATE PERSONS OR CORPORATIONS ENJOYING A FRANCHISE.
 B. THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT NPC'S EXEMPTION FROM ALL
FORMS OF TAXES HAS BEEN REPEALED BY THE PROVISION OF THE LOCAL GOVERNMENT CODE
AS THE ENACTMENT OF A LATER LEGISLATION, WHICH IS A GENERAL LAW, CANNOT BE
CONSTRUED TO HAVE REPEALED A SPECIAL LAW.

C. THE COURT OF APPEALS GRAVELY ERRED IN NOT CONSIDERING THAT AN EXERCISE OF

POLICE POWER THROUGH TAX EXEMPTION SHOULD PREVAIL OVER THE LOCAL GOVERNMENT
CODE."21

It is beyond dispute that the respondent city government has the authority to issue Ordinance No. 165-92 and
impose an annual tax on "businesses enjoying a franchise," pursuant to section 151 in relation to section 137 of
the LGC, viz:

"Sec. 137. Franchise Tax. - Notwithstanding any exemption granted by any law or other special law, the
province may impose a tax on businesses enjoying a franchise, at a rate not exceeding fifty percent
(50%) of one percent (1%) of the gross annual receipts for the preceding calendar year based on the
incoming receipt, or realized, within its territorial jurisdiction.

In the case of a newly started business, the tax shall not exceed one-twentieth (1/20) of one percent (1%)
of the capital investment. In the succeeding calendar year, regardless of when the business started to
operate, the tax shall be based on the gross receipts for the preceding calendar year, or any fraction
thereof, as provided herein." (emphasis supplied)

x x x

Sec. 151. Scope of Taxing Powers.- Except as otherwise provided in this Code, the city, may levy the
taxes, fees, and charges which the province or municipality may impose: Provided, however, That the
taxes, fees and charges levied and collected by highly urbanized and independent component cities shall
accrue to them and distributed in accordance with the provisions of this Code.

The rates of taxes that the city may levy may exceed the maximum rates allowed for the province or
municipality by not more than fifty percent (50%) except the rates of professional and amusement
taxes."

Petitioner, however, submits that it is not liable to pay an annual franchise tax to the respondent city
government. It contends that sections 137 and 151 of the LGC in relation to section 131, limit the taxing power
of the respondent city government to private entities that are engaged in trade or occupation for profit.22

Section 131 (m) of the LGC defines a "franchise" as "a right or privilege, affected with public interest which is
conferred upon private persons or corporations, under such terms and conditions as the government and its
political subdivisions may impose in the interest of the public welfare, security and safety." From the
phraseology of this provision, the petitioner claims that the word "private" modifies the terms "persons" and
"corporations." Hence, when the LGC uses the term "franchise," petitioner submits that it should refer specifically
to franchises granted to private natural persons and to private corporations.23 Ergo, its charter should not be
considered a "franchise" for the purpose of imposing the franchise tax in question.

On the other hand, section 131 (d) of the LGC defines "business" as "trade or commercial activity regularly
engaged in as means of livelihood or with a view to profit." Petitioner claims that it is not engaged in an activity
for profit, in as much as its charter specifically provides that it is a "non-profit organization." In any case,
petitioner argues that the accumulation of profit is merely incidental to its operation; all these profits are
required by law to be channeled for expansion and improvement of its facilities and services.24

Petitioner also alleges that it is an instrumentality of the National Government,25 and as such, may not be taxed
by the respondent city government. It cites the doctrine in Basco vs. Philippine Amusement and Gaming
Corporation26 where this Court held that local governments have no power to tax instrumentalities of the
National Government, viz:

"Local governments have no power to tax instrumentalities of the National Government.

PAGCOR has a dual role, to operate and regulate gambling casinos. The latter role is governmental,
which places it in the category of an agency or instrumentality of the Government. Being an
instrumentality of the Government, PAGCOR should be and actually is exempt from local taxes.
Otherwise, its operation might be burdened, impeded or subjected to control by a mere local
government.

'The states have no power by taxation or otherwise, to retard, impede, burden or in any manner
control the operation of constitutional laws enacted by Congress to carry into execution the
powers vested in the federal government. (MC Culloch v. Maryland, 4 Wheat 316, 4 L Ed. 579)'

This doctrine emanates from the 'supremacy' of the National Government over local governments.
 'Justice Holmes, speaking for the Supreme Court, made reference to the entire absence of power
on the part of the States to touch, in that way (taxation) at least, the instrumentalities of the
United States (Johnson v. Maryland, 254 US 51) and it can be agreed that no state or political
subdivision can regulate a federal instrumentality in such a way as to prevent it from
consummating its federal responsibilities, or even seriously burden it from accomplishment of
them.' (Antieau, Modern Constitutional Law, Vol. 2, p. 140, italics supplied)

Otherwise, mere creatures of the State can defeat National policies thru extermination of what local
authorities may perceive to be undesirable activities or enterprise using the power to tax as ' a tool
regulation' (U.S. v. Sanchez, 340 US 42).

The power to tax which was called by Justice Marshall as the 'power to destroy' (Mc Culloch v.
Maryland,supra) cannot be allowed to defeat an instrumentality or creation of the very entity which has
the inherent power to wield it."27

Petitioner contends that section 193 of Rep. Act No. 7160, withdrawing the tax privileges of government-owned
or controlled corporations, is in the nature of an implied repeal. A special law, its charter cannot be amended or
modified impliedly by the local government code which is a general law. Consequently, petitioner claims that its
exemption from all taxes, fees or charges under its charter subsists despite the passage of the LGC, viz:

"It is a well-settled rule of statutory construction that repeals of statutes by implication are not favored
and as much as possible, effect must be given to all enactments of the legislature. Moreover, it has to be
conceded that the charter of the NPC constitutes a special law. Republic Act No. 7160, is a general law.
It is a basic rule in statutory construction that the enactment of a later legislation which is a general law
cannot be construed to have repealed a special law. 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."28

Finally, petitioner submits that the charter of the NPC, being a valid exercise of police power, should prevail
over the LGC. It alleges that the power of the local government to impose franchise tax is subordinate to
petitioner's exemption from taxation; "police power being the most pervasive, the least limitable and most
demanding of all powers, including the power of taxation."29

The petition is without merit.

Taxes are the lifeblood of the government,30 for without taxes, the government can neither exist nor endure. A
principal attribute of sovereignty,31 the exercise of taxing power derives its source from the very existence of the
state whose social contract with its citizens obliges it to promote public interest and common good. The theory
behind the exercise of the power to tax emanates from necessity;32 without taxes, government cannot fulfill its
mandate of promoting the general welfare and well-being of the people.

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.33 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
charges34 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 country's 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."35 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, section 3 of Article X of 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, viz:

"Section 3. The Congress shall enact a local government code which shall provide for a more responsive
and accountable local government structure instituted through a system of decentralization with effective
mechanisms of recall, initiative, and referendum, allocate among the different local government units
their powers, responsibilities, and resources, and provide for the qualifications, election, appointment
and removal, term, salaries, powers and functions and duties of local officials, and all other matters
relating to the organization and operation of the local units."
To recall, prior to the enactment of the Rep. Act No. 7160,36 also known as the Local Government Code of 1991
(LGC), various measures have been enacted to promote local autonomy. These include the Barrio Charter of
1959,37 the Local Autonomy Act of 1959,38 the Decentralization Act of 196739 and the Local Government Code
of 1983.40 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.41

Considered as the most revolutionary piece of legislation on local autonomy,42 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 such as the imposition of taxes on forest products, forest concessionaires, mineral products, mining
operations, and the like. The LGC likewise provides enough flexibility to impose tax rates in accordance with
their needs and capabilities. It does not prescribe graduated fixed rates but merely specifies the minimum and
maximum tax rates and leaves the determination of the actual rates to the respective sanggunian.43

One of the most significant provisions of the LGC is the removal of the blanket exclusion of instrumentalities and
agencies of the national government from the coverage of local taxation. Although as a general rule, LGUs
cannot impose taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities,
this rule now admits an exception, i.e., when specific provisions of the LGC authorize the LGUs to impose taxes,
fees or charges on the aforementioned entities, viz:

"Section 133. Common Limitations on the Taxing Powers of the Local Government Units.- Unless
otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities,
and barangays shall not extend to the levy of the following:

x x x

(o) Taxes, fees, or charges of any kind on the National Government, its agencies and instrumentalities,
and local government units." (emphasis supplied)

In view of the afore-quoted provision of the LGC, the doctrine in Basco vs. Philippine Amusement and Gaming
Corporation44 relied upon by the petitioner to support its claim no longer applies. To emphasize, the Basco case
was decided prior to the effectivity of the LGC, when no law empowering the local government units to tax
instrumentalities of the National Government was in effect. However, as this Court ruled in the case of Mactan
Cebu International Airport Authority (MCIAA) vs. Marcos,45 nothing prevents Congress from decreeing that
even instrumentalities or agencies of the government performing governmental functions may be subject to
tax.46 In enacting the LGC, Congress exercised its prerogative to tax instrumentalities and agencies of
government as it sees fit. Thus, after reviewing the specific provisions of the LGC, this Court held that MCIAA,
although an instrumentality of the national government, was subject to real property tax, viz:

"Thus, reading together sections 133, 232, and 234 of the LGC, we conclude that as a general rule, as
laid down in section 133, the taxing power of local governments cannot extend to the levy of inter alia,
'taxes, fees and charges of any kind on the national government, its agencies and instrumentalities, and
local government units'; however, pursuant to section 232, provinces, cities and municipalities in the
Metropolitan Manila Area may impose the real property tax except on, inter alia, 'real property owned
by the Republic of the Philippines or any of its political subdivisions except when the beneficial use
thereof has been granted for consideration or otherwise, to a taxable person as provided in the item (a)
of the first paragraph of section 12.'"47

In the case at bar, section 151 in relation to section 137 of the LGC clearly authorizes the respondent city
government to impose on the petitioner the franchise tax in question.

In its general signification, a franchise is a privilege conferred by government authority, which does not belong
to citizens of the country generally as a matter of common right.48 In its specific sense, a franchise may refer to a
general or primary franchise, or to a special or secondary franchise. The former relates to the right to exist as a
corporation, by virtue of duly approved articles of incorporation, or a charter pursuant to a special law creating
the corporation.49 The right under a primary or general franchise is vested in the individuals who compose the
corporation and not in the corporation itself.50 On the other hand, the latter refers to the right or privileges
conferred upon an existing corporation such as the right to use the streets of a municipality to lay pipes of
tracks, erect poles or string wires.51 The rights under a secondary or special franchise are vested in the
corporation and may ordinarily be conveyed or mortgaged under a general power granted to a corporation to
dispose of its property, except such special or secondary franchises as are charged with a public use.52

In section 131 (m) of the LGC, Congress unmistakably defined a franchise in the sense of a secondary or special
franchise. This is to avoid any confusion when the word franchise is used in the context of taxation. As
commonly used, a franchise tax is "a tax on the privilege of transacting business in the state and exercising
corporate franchises granted by the state."53 It is not levied on the corporation simply for existing as a
corporation, upon its property54 or its income,55 but on its exercise of the rights or privileges granted to it by the
government. Hence, a corporation need not pay franchise tax from the time it ceased to do business and
exercise its franchise.56 It is within this context that the phrase "tax on businesses enjoying a franchise" in section
137 of the LGC should be interpreted and understood. Verily, to determine whether the petitioner is covered by
the franchise tax in question, the following requisites should concur: (1) that petitioner has a "franchise" in the
sense of a secondary or special franchise; and (2) that it is exercising its rights or privileges under this franchise
within the territory of the respondent city government.

Petitioner fulfills the first requisite. Commonwealth Act No. 120, as amended by Rep. Act No. 7395, constitutes
petitioner's primary and secondary franchises. It serves as the petitioner's charter, defining its composition,
capitalization, the appointment and the specific duties of its corporate officers, and its corporate life span.57 As
its secondary franchise, Commonwealth Act No. 120, as amended, vests the petitioner the following powers
which are not available to ordinary corporations, viz:

"x x x

(e) To conduct investigations and surveys for the development of water power in any part of the
Philippines;

(f) To take water from any public stream, river, creek, lake, spring or waterfall in the Philippines, for the
purposes specified in this Act; to intercept and divert the flow of waters from lands of riparian owners
and from persons owning or interested in waters which are or may be necessary for said purposes, upon
payment of just compensation therefor; to alter, straighten, obstruct or increase the flow of water in
streams or water channels intersecting or connecting therewith or contiguous to its works or any part
thereof: Provided, That just compensation shall be paid to any person or persons whose property is,
directly or indirectly, adversely affected or damaged thereby;

(g) To construct, operate and maintain power plants, auxiliary plants, dams, reservoirs, pipes, mains,
transmission lines, power stations and substations, and other works for the purpose of developing
hydraulic power from any river, creek, lake, spring and waterfall in the Philippines and supplying such
power to the inhabitants thereof; to acquire, construct, install, maintain, operate, and improve gas, oil,
or steam engines, and/or other prime movers, generators and machinery in plants and/or auxiliary plants
for the production of electric power; to establish, develop, operate, maintain and administer power and
lighting systems for the transmission and utilization of its power generation; to sell electric power in bulk
to (1) industrial enterprises, (2) city, municipal or provincial systems and other government institutions,
(3) electric cooperatives, (4) franchise holders, and (5) real estate subdivisions x x x;

(h) To acquire, promote, hold, transfer, sell, lease, rent, mortgage, encumber and otherwise dispose of
property incident to, or necessary, convenient or proper to carry out the purposes for which the
Corporation was created: Provided, That in case a right of way is necessary for its transmission lines,
easement of right of way shall only be sought: Provided, however, That in case the property itself shall
be acquired by purchase, the cost thereof shall be the fair market value at the time of the taking of such
property;

(i) To construct works across, or otherwise, any stream, watercourse, canal, ditch, flume, street, avenue,
highway or railway of private and public ownership, as the location of said works may require xxx;

(j) To exercise the right of eminent domain for the purpose of this Act in the manner provided by law
for instituting condemnation proceedings by the national, provincial and municipal governments;

x x x

(m) To cooperate with, and to coordinate its operations with those of the National Electrification
Administration and public service entities;

(n) To exercise complete jurisdiction and control over watersheds surrounding the reservoirs of plants
and/or projects constructed or proposed to be constructed by the Corporation. Upon determination by
the Corporation of the areas required for watersheds for a specific project, the Bureau of Forestry, the
Reforestation Administration and the Bureau of Lands shall, upon written advice by the Corporation,
forthwith surrender jurisdiction to the Corporation of all areas embraced within the watersheds, subject
to existing private rights, the needs of waterworks systems, and the requirements of domestic water
supply;

(o) In the prosecution and maintenance of its projects, the Corporation shall adopt measures to prevent
environmental pollution and promote the conservation, development and maximum utilization of
natural resources xxx "58

With these powers, petitioner eventually had the monopoly in the generation and distribution of electricity. This
monopoly was strengthened with the issuance of Pres. Decree No. 40,59 nationalizing the electric power
industry. Although Exec. Order No. 21560 thereafter allowed private sector participation in the generation of
electricity, the transmission of electricity remains the monopoly of the petitioner.
Petitioner also fulfills the second requisite. It is operating within the respondent city government's territorial
jurisdiction pursuant to the powers granted to it by Commonwealth Act No. 120, as amended. From its
operations in the City of Cabanatuan, petitioner realized a gross income of P107,814,187.96 in 1992. Fulfilling
both requisites, petitioner is, and ought to be, subject of the franchise tax in question.

Petitioner, however, insists that it is excluded from the coverage of the franchise tax simply because its stocks are
wholly owned by the National Government, and its charter characterized it as a "non-profit" organization.

These contentions must necessarily fail.

To stress, a franchise tax is imposed based not on the ownership but on the exercise by the corporation of a
privilege to do business. The taxable entity is the corporation which exercises the franchise, and not the
individual stockholders. By virtue of its charter, petitioner was created as a separate and distinct entity from the
National Government. It can sue and be sued under its own name,61 and can exercise all the powers of a
corporation under the Corporation Code.62

To be sure, the ownership by the National Government of its entire capital stock does not necessarily imply that
petitioner is not engaged in business. Section 2 of Pres. Decree No. 202963 classifies government-owned or
controlled corporations (GOCCs) into those performing governmental functions and those performing
proprietary functions, viz:

"A government-owned or controlled corporation is a stock or a non-stock corporation, whether

performing governmental or proprietary functions, which is directly chartered by special law or if
organized under the general corporation law is owned or controlled by the government directly, or
indirectly through a parent corporation or subsidiary corporation, to the extent of at least a majority of
its outstanding voting capital stock x x x." (emphases supplied)

Governmental functions are those pertaining to the administration of government, and as such, are treated as
absolute obligation on the part of the state to perform while proprietary functions are those that are undertaken
only by way of advancing the general interest of society, and are merely optional on the
government.64 Included in the class of GOCCs performing proprietary functions are "business-like" entities such as
the National Steel Corporation (NSC), the National Development Corporation (NDC), the Social Security
System (SSS), the Government Service Insurance System (GSIS), and the National Water Sewerage Authority
(NAWASA),65 among others.

Petitioner was created to "undertake the development of hydroelectric generation of power and the production
of electricity from nuclear, geothermal and other sources, as well as the transmission of electric power on a
nationwide basis."66 Pursuant to this mandate, petitioner generates power and sells electricity in bulk. Certainly,
these activities do not partake of the sovereign functions of the government. They are purely private and
commercial undertakings, albeit imbued with public interest. The public interest involved in its activities,
however, does not distract from the true nature of the petitioner as a commercial enterprise, in the same league
with similar public utilities like telephone and telegraph companies, railroad companies, water supply and
irrigation companies, gas, coal or light companies, power plants, ice plant among others; all of which are
declared by this Court as ministrant or proprietary functions of government aimed at advancing the general
interest of society.67

A closer reading of its charter reveals that even the legislature treats the character of the petitioner's enterprise as
a "business," although it limits petitioner's profits to twelve percent (12%), viz:68

"(n) When essential to the proper administration of its corporate affairs or necessary for the proper
transaction of its business or to carry out the purposes for which it was organized, to contract
indebtedness and issue bonds subject to approval of the President upon recommendation of the
Secretary of Finance;

(o) To exercise such powers and do such things as may be reasonably necessary to carry out the business
and purposes for which it was organized, or which, from time to time, may be declared by the Board to
be necessary, useful, incidental or auxiliary to accomplish the said purpose xxx."(emphases supplied)

It is worthy to note that all other private franchise holders receiving at least sixty percent (60%) of its electricity
requirement from the petitioner are likewise imposed the cap of twelve percent (12%) on profits.69 The main
difference is that the petitioner is mandated to devote "all its returns from its capital investment, as well as excess
revenues from its operation, for expansion"70 while other franchise holders have the option to distribute their
profits to its stockholders by declaring dividends. We do not see why this fact can be a source of difference in
tax treatment. In both instances, the taxable entity is the corporation, which exercises the franchise, and not the
individual stockholders.

We also do not find merit in the petitioner's contention that its tax exemptions under its charter subsist despite
the passage of the LGC.
As a rule, tax exemptions are construed strongly against the claimant. Exemptions must be shown to exist clearly
and categorically, and supported by clear legal provisions.71 In the case at bar, the petitioner's sole refuge is
section 13 of Rep. Act No. 6395 exempting from, among others, "all income taxes, franchise taxes and realty
taxes to be paid to the National Government, its provinces, cities, municipalities and other government agencies
and instrumentalities." However, section 193 of the LGC withdrew, subject to limited exceptions, the sweeping
tax privileges previously enjoyed by private and public corporations. Contrary to the contention of petitioner,
section 193 of the LGC is an express, albeit general, repeal of all statutes granting tax exemptions from local
taxes.72 It reads:

"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." (emphases supplied)

It is a basic precept of statutory construction that the express mention of one person, thing, act, or consequence
excludes all others as expressed in the familiar maxim expressio unius est exclusio alterius.73 Not being a local
water district, a cooperative registered under R.A. No. 6938, or a non-stock and non-profit hospital or
educational institution, petitioner clearly does not belong to the exception. It is therefore incumbent upon the
petitioner to point to some provisions of the LGC that expressly grant it exemption from local taxes.

But this would be an exercise in futility. Section 137 of the LGC clearly states that the LGUs can impose franchise
tax "notwithstanding any exemption granted by any law or other special law." This particular provision of the
LGC does not admit any exception. In City Government of San Pablo, Laguna v. Reyes,74 MERALCO's
exemption from the payment of franchise taxes was brought as an issue before this Court. The same issue was
involved in the subsequent case of Manila Electric Company v. Province of Laguna.75 Ruling in favor of the local
government in both instances, we ruled that the franchise tax in question is imposable despite any exemption
enjoyed by MERALCO under special laws, viz:

"It is our view that petitioners correctly rely on provisions of Sections 137 and 193 of the LGC to support
their position that MERALCO's tax exemption has been withdrawn. The explicit language of section 137
which authorizes the province to impose franchise tax 'notwithstanding any exemption granted by any
law or other special law' is all-encompassing and clear. The franchise tax is imposable despite any
exemption enjoyed under special laws.

Section 193 buttresses the withdrawal of extant tax exemption privileges. By stating that 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 (1) local
water districts, (2) cooperatives duly registered under R.A. 6938, (3) non-stock and non-profit hospitals
and educational institutions, are withdrawn upon the effectivity of this code, the obvious import is to
limit the exemptions to the three enumerated entities. It is a basic precept of statutory construction that
the express mention of one person, thing, act, or consequence excludes all others as expressed in the
familiar maxim expressio unius est exclusio alterius. In the absence of any provision of the Code to the
contrary, and we find no other provision in point, any existing tax exemption or incentive enjoyed by
MERALCO under existing law was clearly intended to be withdrawn.

Reading together sections 137 and 193 of the LGC, we conclude that under the LGC the local
government unit may now impose a local tax at a rate not exceeding 50% of 1% of the gross annual
receipts for the preceding calendar based on the incoming receipts realized within its territorial
jurisdiction. The legislative purpose to withdraw tax privileges enjoyed under existing law or charter is
clearly manifested by the language used on (sic) Sections 137 and 193 categorically withdrawing such
exemption subject only to the exceptions enumerated. Since it would be not only tedious and
impractical to attempt to enumerate all the existing statutes providing for special tax exemptions or
privileges, the LGC provided for an express, albeit general, withdrawal of such exemptions or privileges.
No more unequivocal language could have been used."76 (emphases supplied).

It is worth mentioning that section 192 of the LGC empowers the LGUs, through ordinances duly approved, to
grant tax exemptions, initiatives or reliefs.77 But in enacting section 37 of Ordinance No. 165-92 which imposes
an annual franchise tax "notwithstanding any exemption granted by law or other special law," the respondent
city government clearly did not intend to exempt the petitioner from the coverage thereof.

Doubtless, the power to tax is the most effective instrument to raise needed revenues to finance and support
myriad activities of the local government units for the delivery of basic services essential to the promotion of the
general welfare and the enhancement of peace, progress, and prosperity of the people. As this Court observed
in the Mactan case, "the original reasons for the withdrawal of tax exemption privileges granted to government-
owned or controlled corporations and all other units of government were that such privilege resulted in serious
tax base erosion and distortions in the tax treatment of similarly situated enterprises."78 With the added burden
of devolution, it is even more imperative for government entities to share in the requirements of development,
fiscal or otherwise, by paying taxes or other charges due from them.
IN VIEW WHEREOF, the instant petition is DENIED and the assailed Decision and Resolution of the Court of
Appeals dated March 12, 2001 and July 10, 2001, respectively, are hereby AFFIRMED.

SO ORDERED.

NATIONAL POWER CORPORATION, petitioner,

vs.
CITY OF CABANATUAN, respondent.
FACTS: Petitioner is a government-owned and controlled corporation created under Commonwealth Act No.
120, as amended.
For many years now, petitioner sells electric power to the residents of Cabanatuan City, posting a gross income
of P107,814,187.96 in 1992.7 Pursuant to section 37 of Ordinance No. 165-92,8 the respondent assessed the
petitioner a franchise tax amounting to P808,606.41, representing 75% of 1% of the latter’s gross receipts for
the preceding year.

Petitioner refused to pay the tax assessment arguing that the respondent has no authority to impose tax on
government entities. Petitioner also contended that as a non-profit organization, it is exempted from the
payment of all forms of taxes, charges, duties or fees in accordance with sec. 13 of Rep. Act No. 6395, as
amended.

The respondent filed a collection suit in the RTC, demanding that petitioner pay the assessed tax due, plus
surcharge. Respondent alleged that petitioner’s exemption from local taxes has been repealed by section 193 of
the LGC, which reads as follows:

“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.”
RTC upheld NPC’s tax exemption. On appeal the CA reversed the trial court’s Order on the ground that section
193, in relation to sections 137 and 151 of the LGC, expressly withdrew the exemptions granted to the
petitioner.

ISSUE: W/N the respondent city government has the authority to issue Ordinance No. 165-92 and impose an
annual tax on “businesses enjoying a franchise
HELD: YES. Taxes are the lifeblood of the government, for without taxes, the government can neither exist nor
endure. A principal attribute of sovereignty, the exercise of taxing power derives its source from the very
existence of the state whose social contract with its citizens obliges it to promote public interest and common
good. The theory behind the exercise of the power to tax emanates from necessity;32 without taxes,
government cannot fulfill its mandate of promoting the general welfare and well-being of the people.
Section 137 of the LGC clearly states that the LGUs can impose franchise tax “notwithstanding any exemption
granted by any law or other special law.” This particular provision of the LGC does not admit any exception.
In City Government of San Pablo, Laguna v. Reyes,74 MERALCO’s exemption from the payment of franchise
taxes was brought as an issue before this Court. The same issue was involved in the subsequent case of Manila
Electric Company v. Province of Laguna.75 Ruling in favor of the local government in both instances, we ruled
that the franchise tax in question is imposable despite any exemption enjoyed by MERALCO under special
laws, viz:
“It is our view that petitioners correctly rely on provisions of Sections 137 and 193 of the LGC to support their
position that MERALCO’s tax exemption has been withdrawn. The explicit language of section 137 which
authorizes the province to impose franchise tax ‘notwithstanding any exemption granted by any law or other
special law’ is all-encompassing and clear. The franchise tax is imposable despite any exemption enjoyed under
special laws.
Section 193 buttresses the withdrawal of extant tax exemption privileges. By stating that 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 (1) local water districts, (2)
cooperatives duly registered under R.A. 6938, (3) non-stock and non-profit hospitals and educational
institutions, are withdrawn upon the effectivity of this code, the obvious import is to limit the exemptions to the
three enumerated entities. It is a basic precept of statutory construction that the express mention of one person,
thing, act, or consequence excludes all others as expressed in the familiar maxim expressio unius est exclusio
alterius. In the absence of any provision of the Code to the contrary, and we find no other provision in point,
any existing tax exemption or incentive enjoyed by MERALCO under existing law was clearly intended to be
withdrawn.
Reading together sections 137 and 193 of the LGC, we conclude that under the LGC the local government unit
may now impose a local tax at a rate not exceeding 50% of 1% of the gross annual receipts for the preceding
calendar based on the incoming receipts realized within its territorial jurisdiction. The legislative purpose to
withdraw tax privileges enjoyed under existing law or charter is clearly manifested by the language used on (sic)
Sections 137 and 193 categorically withdrawing such exemption subject only to the exceptions enumerated.
Since it would be not only tedious and impractical to attempt to enumerate all the existing statutes providing for
special tax exemptions or privileges, the LGC provided for an express, albeit general, withdrawal of such
exemptions or privileges. No more unequivocal language could have been used.”76 (emphases supplied)
Doubtless, the power to tax is the most effective instrument to raise needed revenues to finance and support
myriad activities of the local government units for the delivery of basic services essential to the promotion of the
general welfare and the enhancement of peace, progress, and prosperity of the people. As this Court observed
in the Mactan case, “the original reasons for the withdrawal of tax exemption privileges granted to government-
owned or controlled corporations and all other units of government were that such privilege resulted in serious
tax base erosion and distortions in the tax treatment of similarly situated enterprises.” With the added burden of
devolution, it is even more imperative for government entities to share in the requirements of development,
fiscal or otherwise, by paying taxes or other charges due from them.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 93252 August 5, 1991

RODOLFO T. GANZON, petitioner,

vs.
THE HONORABLE COURT OF APPEALS and LUIS T. SANTOS, respondents.

G.R. No. 93746 August 5,1991

MARY ANN RIVERA ARTIEDA, petitioner,

vs.
HON. LUIS SANTOS, in his capacity as Secretary of the Department of Local Government, NICANOR M.
PATRICIO, in his capacity as Chief, Legal Service of the Department of Local Government and SALVADOR
CABALUNA JR., respondents.

G.R. No. 95245 August 5,1991

RODOLFO T. GANZON, petitioner,

vs.
THE HONORABLE COURT OF APPEALS and LUIS T. SANTOS, in his capacity as the Secretary of the
Department of Local Government, respondents.

SARMIENTO, J.:

The petitioners take common issue on the power of the President (acting through the Secretary of Local
Government), to suspend and/or remove local officials.

The petitioners are the Mayor of Iloilo City (G.R. Nos. 93252 and 95245) and a member of the Sangguniang
Panglunsod thereof (G.R. No. 93746), respectively.

The petitions of Mayor Ganzon originated from a series of administrative complaints, ten in number, filed
against him by various city officials sometime in 1988, on various charges, among them, abuse of authority,
oppression, grave misconduct, disgraceful and immoral conduct, intimidation, culpable violation of the
Constitution, and arbitrary detention.1 The personalities involved are Joceleehn Cabaluna, a clerk at the city
health office; Salvador Cabaluna, her husband; Dr. Felicidad Ortigoza, Assistant City Health Officer; Mansueto
Malabor, Vice-Mayor; Rolando Dabao, Dan Dalido, German Gonzales, Larry Ong, and Eduardo Pefia Redondo
members of the Sangguniang Panglunsod; and Pancho Erbite, a barangay tanod. The complaints against the
Mayor are set forth in the opinion of the respondent Court of Appeals.2 We quote:

xxx xxx xxx

In her verified complaint (Annex A), Mrs. Cabaluna, a clerk assigned to the City Health, Office of Iloilo
City charged that due to political reasons, having supported the rival candidate, Mrs. Rosa 0. Caram, the
petitioner City Mayor, using as an excuse the exigency of the service and the interest of the public, pulled
her out from rightful office where her qualifications are best suited and assigned her to a work that
should be the function of a non-career service employee. To make matters worse, a utility worker in the
office of the Public Services, whose duties are alien to the complainant's duties and functions, has been
detailed to take her place. The petitioner's act are pure harassments aimed at luring her away from her
permanent position or force her to resign.

In the case of Dra. Felicidad Ortigoza, she claims that the petitioner handpicked her to perform task not
befitting her position as Assistant City Health Officer of Iloilo City; that her office was padlocked without
any explanation or justification; that her salary was withheld without cause since April 1, 1988; that
when she filed her vacation leave, she was given the run-around treatment in the approval of her leave
in connivance with Dr. Rodolfo Villegas and that she was the object of a well-engineered trumped-up
charge in an administrative complaint filed by Dr. Rodolfo Villegas (Annex B).

On the other hand, Mansuelo Malabor is the duly elected Vice-Mayor of Iloilo City and complainants
Rolando Dabao, Dan Dalido, German Gonzales, Larry Ong and Eduardo Pefia Pedondo are members of
the Sangguniang Panglunsod of the City of Iloilo. Their complaint arose out from the case where
Councilor Larry Ong, whose key to his office was unceremoniously and without previous notice, taken
 by petitioner. Without an office, Councilor Ong had to hold office at Plaza Libertad, The Vice-Mayor
and the other complainants sympathized with him and decided to do the same. However, the
petitioner, together with its fully-armed security men, forcefully drove them away from Plaza Libertad.
Councilor Ong denounced the petitioner's actuations the following day in the radio station and decided
to hold office at the Freedom Grandstand at Iloilo City and there were so many people who gathered to
witness the incident. However, before the group could reach the area, the petitioner, together with his
security men, led the firemen using a firetruck in dozing water to the people and the bystanders.

Another administrative case was filed by Pancho Erbite, a barangay tanod, appointed by former mayor
Rosa O. Caram. On March 13, 1988, without the benefit of charges filed against him and no warrant of
arrest was issued, Erbite was arrested and detained at the City Jail of Iloilo City upon orders of
petitioner. In jail, he was allegedly mauled by other detainees thereby causing injuries He was released
only the following day.3

The Mayor thereafter answered4 and the cases were shortly set for hearing. The opinion of the Court of Appeals
also set forth the succeeding events:

xxx xxx xxx

The initial hearing in the Cabaluna and Ortigoza cases were set for hearing on June 20-21, 1988 at the
Regional Office of the Department of Local Government in Iloilo City. Notices, through telegrams, were
sent to the parties (Annex L) and the parties received them, including the petitioner. The petitioner asked
for a postponement before the scheduled date of hearing and was represented by counsel, Atty. Samuel
Castro. The hearing officers, Atty. Salvador Quebral and Atty. Marino Bermudez had to come all the
way from Manila for the two-day hearings but was actually held only on June 20,1988 in view of the
inability and unpreparedness of petitioner's counsel.

The next hearings were re-set to July 25, 26, 27,1988 in the same venue-Iloilo City. Again, the petitioner
attempted to delay the proceedings and moved for a postponement under the excuse that he had just
hired his counsel. Nonetheless, the hearing officers denied the motion to postpone, in view of the fact
that the parties were notified by telegrams of the scheduled hearings (Annex M).

In the said hearings, petitioner's counsel cross-examined the complainants and their witnesses.

Finding probable grounds and reasons, the respondent issued a preventive suspension order on August
11, 1988 to last until October 11,1988 for a period of sixty (60) days.

Then the next investigation was set on September 21, 1988 and the petitioner again asked for a
postponement to September 26,1988. On September 26, 1988, the complainants and petitioner were
present, together with their respective counsel. The petitioner sought for a postponement which was
denied. In these hearings which were held in Mala the petitioner testified in Adm. Case No. C-10298 and
10299.

The investigation was continued regarding the Malabor case and the complainants testified including
their witnesses.

On October 10, 1988, petitioner's counsel, Atty. Original moved for a postponement of the October 24,
1988 hearing to November 7 to 11, 1988 which was granted. However, the motion for change of venue
as denied due to lack of funds. At the hearing on November 7, 1988, the parties and counsel were
present. Petitioner reiterated his motion to change venue and moved for postponement anew. The
counsel discussed a proposal to take the deposition of witnesses in Iloilo City so the hearing was
indefinitely postponed. However, the parties failed to come to terms and after the parties were notified
of the hearing, the investigation was set to December 13 to 15, 1988.

The petitioner sought for another postponement on the ground that his witnesses were sick or cannot
attend the investigation due to lack of transportation. The motion was denied and the petitioner was
given up to December 14, 1988 to present his evidence.

On December 14,1988, petitioner's counsel insisted on his motion for postponement and the hearing
officers gave petitioner up to December 15, 1988 to present his evidence. On December 15, 1988, the
petitioner failed to present evidence and the cases were considered submitted for resolution.

In the meantime, a prima facie evidence was found to exist in the arbitrary detention case filed by
Pancho Erbite so the respondent ordered the petitioner's second preventive suspension dated October 11,
1988 for another sixty (60) days. The petitioner was able to obtain a restraining order and a writ of
 preliminary injunction in the Regional Trial Court, Branch 33 of Iloilo City. The second preventive
suspension was not enforced.5

Amidst the two successive suspensions, Mayor Ganzon instituted an action for prohibition against the
respondent Secretary of Local Government (now, Interior) in the Regional Trial Court, Iloilo City, where he
succeeded in obtaining a writ of preliminary injunction. Presently, he instituted CA-G.R. SP No. 16417, an action
for prohibition, in the respondent Court of Appeals.

Meanwhile, on May 3, 1990, the respondent Secretary issued another order, preventively suspending Mayor
Ganzon for another sixty days, the third time in twenty months, and designating meantime Vice-Mayor
Mansueto Malabor as acting mayor. Undaunted, Mayor Ganzon commenced CA-G.R. SP No. 20736 of the
Court of Appeals, a petition for prohibition,6 (Malabor it is to be noted, is one of the complainants, and hence,
he is interested in seeing Mayor Ganzon ousted.)

On September 7, 1989, the Court of Appeals rendered judgment, dismissing CA-G.R. SP No. 16417. On July 5,
1990, it likewise promulgated a decision, dismissing CA-G.R. SP No. 20736. In a Resolution dated January 24,
1990, it issued a Resolution certifying the petition of Mary Ann Artieda, who had been similary charged by the
respondent Secretary, to this Court.

On June 26,1990, we issued a Temporary Restraining Order, barring the respondent Secretary from
implementing the suspension orders, and restraining the enforcement of the Court of Appeals' two decisions.

In our Resolution of November 29, 1990, we consolidated all three cases. In our Resolutions of January 15,
1991, we gave due course thereto.

Mayor Ganzon claims as a preliminary (GR No. 93252), that the Department of Local Government in hearing
the ten cases against him, had denied him due process of law and that the respondent Secretary had been
"biased, prejudicial and hostile" towards him7 arising from his (Mayor Ganzon's) alleged refusal to join the Laban
ng Demokratikong Pilipino party8 and the running political rivalry they maintained in the last congressional and
local elections;9 and his alleged refusal to operate a lottery in Iloilo City.10 He also alleges that he requested the
Secretary to lift his suspension since it had come ninety days prior to an election (the barangay elections of
November 14, 1988),11 notwithstanding which, the latter proceeded with the hearing and meted out two more
suspension orders of the aforementioned cases.12 He likewise contends that he sought to bring the cases to Iloilo
City (they were held in Manila) in order to reduce the costs of proceeding, but the Secretary rejected his
request.13He states that he asked for postponement on "valid and justifiable"14 grounds, among them, that he was
suffering from a heart ailment which required confinement; that his "vital"15 witness was also hospitalized16 but
that the latter unduly denied his request.17

Mayor Ganzon's primary argument (G.R. Nos. 93252 and 95245) is that the Secretary of Local Government is
devoid, in any event, of any authority to suspend and remove local officials, an argument reiterated by the
petitioner Mary Ann Rivera Artieda (G.R. No. 93746).

As to Mayor Ganzon's charges of denial of due process, the records do not show very clearly in what manner
the Mayor might have been deprived of his rights by the respondent Secretary. His claims that he and Secretary
Luis-Santos were (are) political rivals and that his "persecution" was politically motivated are pure speculation
and although the latter does not appear to have denied these contentions (as he, Mayor Ganzon, claims), we
can not take his word for it the way we would have under less political circumstances, considering furthermore
that "political feud" has often been a good excuse in contesting complaints.

The Mayor has failed furthermore to substantiate his say-so's that Secretary Santos had attempted to seduce him
to join the administration party and to operate a lottery in Iloilo City. Again, although the Secretary failed to
rebut his allegations, we can not accept them, at face value, much more, as judicial admissions as he would have
us accept them18 for the same reasons above-stated and furthermore, because his say so's were never
corroborated by independent testimonies. As a responsible public official, Secretary Santos, in pursuing an
official function, is presumed to be performing his duties regularly and in the absence of contrary evidence, no ill
motive can be ascribed to him.

As to Mayor Ganzon's contention that he had requested the respondent Secretary to defer the hearing on
account of the ninety-day ban prescribed by Section 62 of Batas Blg. 337, the Court finds the question to be
moot and academic since we have in fact restrained the Secretary from further hearing the complaints against
the petitioners.19

As to his request, finally, for postponements, the Court is afraid that he has not given any compelling reason
why we should overturn the Court of Appeals, which found no convincing reason to overrule Secretary Santos
in denying his requests. Besides, postponements are a matter of discretion on the part of the hearing officer, and
based on Mayor Ganzon's above story, we are not convinced that the Secretary has been guilty of a grave abuse
of discretion.

The Court can not say, under these circumstances, that Secretary Santos' actuations deprived Mayor Ganzon of
due process of law.

We come to the core question: Whether or not the Secretary of Local Government, as the President's alter ego,
can suspend and/or remove local officials.

It is the petitioners' argument that the 1987 Constitution20 no longer allows the President, as the 1935 and 1973
Constitutions did, to exercise the power of suspension and/or removal over local officials. According to both
petitioners, the Constitution is meant, first, to strengthen self-rule by local government units and second, by
deleting the phrase21 as may be provided by law to strip the President of the power of control over local
governments. It is a view, so they contend, that finds support in the debates of the Constitutional Commission.
The provision in question reads as follows:

Sec. 4. The President of the Philippines shall exercise general supervision over local governments.
Provinces with respect to component cities and municipalities, and cities and municipalities with respect
to component barangays shall ensure that the acts of their component units are within the scope of their
prescribed powers and functions.22

It modifies a counterpart provision appearing in the 1935 Constitution, which we quote:

Sec. 10. 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.23

The petitioners submit that the deletion (of "as may be provided by law") is significant, as their argument goes,
since: (1) the power of the President is "provided by law" and (2) hence, no law may provide for it any longer.

It is to be noted that in meting out the suspensions under question, the Secretary of Local Government acted in
consonance with the specific legal provisions of Batas Blg. 337, the Local Government Code, we quote:

Sec. 62. Notice of Hearing. — Within seven days after the complaint is filed, the Minister of local
Government, or the sanggunian concerned, as the case may be, shall require the respondent to submit
his verified answer within seven days from receipt of said complaint, and commence the hearing and
investigation of the case within ten days after receipt of such answer of the respondent. No investigation
shall be held within ninety days immediately prior to an election, and no preventive suspension shall be
imposed with the said period. If preventive suspension has been imposed prior to the aforesaid period,
the preventive suspension shall be lifted.24

Sec. 63. Preventive Suspension. — (1) Preventive suspension may be imposed by the Minister of Local
Government if the respondent is a provincial or city official, by the provincial governor if the respondent
is an elective municipal official, or by the city or municipal mayor if the respondent is an elective
barangay official.

(2) Preventive suspension may be imposed at any time after the issues are joined, when there is
reasonable ground to believe that the respondent has committed the act or acts complained of, when
the evidence of culpability is strong, when the gravity of the offense so warrants, or when the
continuance in office of the respondent could influence the witnesses or pose a threat to the safety and
integrity of the records and other evidence. In all cases, preventive suspension shall not extend beyond
sixty days after the start of said suspension.

(3) At the expiration of sixty days, the suspended official shall be deemed reinstated in office without
prejudice to the continuation of the proceedings against him until its termination. However ' if the delay
in the proceedings of the case is due to his fault, neglect or request, the time of the delay shall not be
counted in computing the time of suspension.25

The issue, as the Court understands it, consists of three questions: (1) Did the 1987 Constitution, in deleting the
phrase "as may be provided by law" intend to divest the President of the power to investigate, suspend,
discipline, and/or remove local officials? (2) Has the Constitution repealed Sections 62 and 63 of the Local
Government Code? (3) What is the significance of the change in the constitutional language?

It is the considered opinion of the Court that notwithstanding the change in the constitutional language, the
charter did not intend to divest the legislature of its right or the President of her prerogative as conferred by
existing legislation to provide administrative sanctions against local officials. It is our opinion that the omission
(of "as may be provided by law") signifies nothing more than to underscore local governments' autonomy from
congress and to break Congress' "control" over local government affairs. The Constitution did not, however,
intend, for the sake of local autonomy, to deprive the legislature of all authority over municipal corporations, in
particular, concerning discipline.

Autonomy does not, after all, contemplate making mini-states out of local government units, as in the federal
governments of the United States of America (or Brazil or Germany), although Jefferson is said to have
compared municipal corporations euphemistically to "small republics."26 Autonomy, in the constitutional sense, is
subject to the guiding star, though not control, of the legislature, albeit the legislative responsibility under the
Constitution and as the "supervision clause" itself suggest-is to wean local government units from over-
dependence on the central government.

It is noteworthy that under the Charter, "local autonomy" is not instantly self-executing, but subject to, among
other things, the passage of a local government code,27 a local tax law,28 income distribution legislation,29 and a
national representation law,30 and measures31 designed to realize autonomy at the local level. It is also
noteworthy that in spite of autonomy, the Constitution places the local government under the general
supervision of the Executive. It is noteworthy finally, that the Charter allows Congress to include in the local
government code provisions for removal of local officials, which suggest that Congress may exercise removal
powers, and as the existing Local Government Code has done, delegate its exercise to the President. Thus:

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, term, salaries, powers and functions and duties of local officials, and all other matters relating
to the organization and operation of the local units.32

As hereinabove indicated, the deletion of "as may be provided by law" was meant to stress, sub silencio, the
objective of the framers to strengthen local autonomy by severing congressional control of its affairs, as
observed by the Court of Appeals, like the power of local legislation.33 The Constitution did nothing more,
however, and insofar as existing legislation authorizes the President (through the Secretary of Local
Government) to proceed against local officials administratively, the Constitution contains no prohibition.

The petitioners are under the impression that the Constitution has left the President mere supervisory powers,
which supposedly excludes the power of investigation, and denied her control, which allegedly embraces
disciplinary authority. It is a mistaken impression because legally, "supervision" is not incompatible with
disciplinary authority as this Court has held,34 thus:

xxx xxx xxx

It is true that in the case of Mondano vs. Silvosa, 51 Off. Gaz., No. 6 p. 2884, this Court had occasion to
discuss the scope and extent of the power of supervision by the President over local government officials
in contrast to the power of control given to him over executive officials of our government wherein it
was emphasized that the two terms, control and supervision, are two different things which differ one
from the other in meaning and extent. Thus in that case the Court has made the following digression: "In
administration law supervision means overseeing or the power or authority of an officer to see that
subordinate officers perform their duties. If the latter fail or neglect to fulfill them the former may take
such action or step as prescribed by law to make them perform their duties. Control, on the other hand,
means the power of an officer to alter or modify or nullify of set aside what a subordinate officer had
done in the performance of his duties and to substitute the judgment of the former for that of the latter."
But from this pronouncement it cannot be reasonably inferred that the power of supervision of the
President over local government officials does not include the power of investigation when in his
opinion the good of the public service so requires, as postulated in Section 64(c) of the Revised
Administrative Code. ...35

xxx xxx xxx

"Control" has been defined as "the power of an officer to alter or modify or nullify or set aside what a
subordinate officer had done in the performance of his duties and to substitute the judgment of the former for
test of the latter."36 "Supervision" on the other hand means "overseeing or the power or authority of an officer
to see that subordinate officers perform their duties.37 As we held,38 however, "investigating" is not inconsistent
with "overseeing", although it is a lesser power than "altering". The impression is apparently exacerbated by the
Court's pronouncements in at least three cases, Lacson v. Roque,39 Hebron v. Reyes,40 and Mondano v.
Silvosa,41and possibly, a fourth one, Pelaez v. Auditor General.42 In Lacson, this Court said that the President
enjoyed no control powers but only supervision "as may be provided by law,"43 a rule we reiterated in Hebron,
and Mondano. In Pelaez, we stated that the President "may not . . . suspend an elective official of a regular
municipality or take any disciplinary action against him, except on appeal from a decision of the corresponding
provincial board."44However, neither Lacson nor Hebron nor Mondano categorically banned the Chief
Executive from exercising acts of disciplinary authority because she did not exercise control powers, but because
no law allowed her to exercise disciplinary authority. Thus, according to Lacson:

The contention that the President has inherent power to remove or suspend municipal officers is without
doubt not well taken. Removal and suspension of public officers are always controlled by the particular
law applicable and its proper construction subject to constitutional limitations.45

In Hebron we stated:

Accordingly, when the procedure for the suspension of an officer is specified by law, the same must be
deemed mandatory and adhered to strictly, in the absence of express or clear provision to the contrary-
which does not et with respect to municipal officers ...46

In Mondano, the Court held:

... The Congress has expressly and specifically lodged the provincial supervision over municipal officials
in the provincial governor who is authorized to "receive and investigate complaints made under oath
against municipal officers for neglect of duty, oppression, corruption or other form of maladministration
of office, and conviction by final judgment of any crime involving moral turpitude." And if the charges
are serious, "he shall submit written charges touching the matter to the provincial board, furnishing a
copy of such charges to the accused either personally or by registered mail, and he may in such case
suspend the officer (not being the municipal treasurer) pending action by the board, if in his opinion the
charge by one affecting the official integrity of the officer in question." Section 86 of the Revised
Administration Code adds nothing to the power of supervision to be exercised by the Department Head
over the administration of ... municipalities ... . If it be construed that it does and such additional power
is the same authority as that vested in the Department Head by section 79(c) of the Revised
Administrative Code, then such additional power must be deemed to have been abrogated by Section
110(l), Article VII of the Constitution.47

xxx xxx xxx

In Pelaez, we stated that the President can not impose disciplinary measures on local officials except on appeal
from the provincial board pursuant to the Administrative Code.48

Thus, in those case that this Court denied the President the power (to suspend/remove) it was not because we
did not think that the President can not exercise it on account of his limited power, but because the law lodged
the power elsewhere. But in those cases ii which the law gave him the power, the Court, as in Ganzon v.
Kayanan, found little difficulty in sustaining him.49

The Court does not believe that the petitioners can rightfully point to the debates of the Constitutional
Commission to defeat the President's powers. The Court believes that the deliberations are by themselves
inconclusive, because although Commissioner Jose Nolledo would exclude the power of removal from the
President,50Commissioner Blas Ople would not.51

The Court is consequently reluctant to say that the new Constitution has repealed the Local Government Code,
Batas Blg. 37. As we said, "supervision" and "removal" are not incompatible terms and one may stand with the
other notwithstanding the stronger expression of local autonomy under the new Charter. We have indeed held
that in spite of the approval of the Charter, Batas Blg. 337 is still in force and effect.52

As the Constitution itself declares, local autonomy means "a more responsive and accountable local government
structure instituted through a system of decentralization."53 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 inter-dependence between the central administration and local
government units, or otherwise, to user 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,54 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 favor of
local governments units declared to be autonomous, In that case, the autonomous government is free to
chart its own destiny and shape its future with minimum intervention from central authorities. According
to a constitutional author, decentralization of power amounts to "self-immolation," since in that event,
the autonomous government becomes accountable not to the central authorities but to its
constituency.55

The successive sixty-day suspensions imposed on Mayor Rodolfo Ganzon is albeit another matter. What bothers
the Court, and what indeed looms very large, is the fact that since the Mayor is facing ten administrative
charges, the Mayor is in fact facing the possibility of 600 days of suspension, in the event that all ten cases
yield prima faciefindings. The Court is not of course tolerating misfeasance in public office (assuming that Mayor
Ganzon is guilty of misfeasance) but it is certainly another question to make him serve 600 days of suspension,
which is effectively, to suspend him out of office. As we held:56

2. Petitioner is a duly elected municipal mayor of Lianga, Surigao del Sur. His term of office does not
expire until 1986. Were it not for this information and the suspension decreed by the Sandiganbayan
according to the Anti-Graft and Corrupt Practices Act, he would have been all this while in the full
discharge of his functions as such municipal mayor. He was elected precisely to do so. As of October 26,
1983, he has been unable to. it is a basic assumption of the electoral process implicit in the right of
suffrage that the people are entitled to the services of elective officials of their choice. For misfeasance or
malfeasance, any of them could, of course, be proceeded against administratively or, as in this instance,
criminally. In either case, Ms culpability must be established. Moreover, if there be a criminal action, he
is entitled to the constitutional presumption of innocence. A preventive suspension may be justified. Its
continuance, however, for an unreasonable length of time raises a due process question. For even if
thereafter he were acquitted, in the meanwhile his right to hold office had been nullified. Clearly, there
would be in such a case an injustice suffered by him. Nor is he the only victim. There is injustice inflicted
likewise on the people of Lianga They were deprived of the services of the man they had elected to
serve as mayor. In that sense, to paraphrase Justice Cardozo, the protracted continuance of this
preventive suspension had outrun the bounds of reason and resulted in sheer oppression. A denial of due
process is thus quite manifest. It is to avoid such an unconstitutional application that the order of
suspension should be lifted.57

The plain truth is that this Court has been ill at ease with suspensions, for the above reasons,58 and so also,
because it is out of the ordinary to have a vacancy in local government. The sole objective of a suspension, as
we have held,59 is simply "to prevent the accused from hampering the normal cause of the investigation with his
influence and authority over possible witnesses"60 or to keep him off "the records and other evidence.61

It is a means, and no more, to assist prosecutors in firming up a case, if any, against an erring local official.
Under the Local Government Code, it can not exceed sixty days,62 which is to say that it need not be exactly
sixty days long if a shorter period is otherwise sufficient, and which is also to say that it ought to be lifted if
prosecutors have achieved their purpose in a shorter span.

Suspension is not a penalty and is not unlike preventive imprisonment in which the accused is held to insure his
presence at the trial. In both cases, the accused (the respondent) enjoys a presumption of innocence unless and
until found guilty.

Suspension finally is temporary and as the Local Government Code provides, it may be imposed for no more
than sixty days. As we held,63 a longer suspension is unjust and unreasonable, and we might add, nothing less
than tyranny.

As we observed earlier, imposing 600 days of suspension which is not a remote possibility Mayor Ganzon is to
all intents and purposes, to make him spend the rest of his term in inactivity. It is also to make, to all intents and
purposes, his suspension permanent.

It is also, in fact, to mete out punishment in spite of the fact that the Mayor's guilt has not been proven. Worse,
any absolution will be for naught because needless to say, the length of his suspension would have, by the time
he is reinstated, wiped out his tenure considerably.

The Court is not to be mistaken for obstructing the efforts of the respondent Secretary to see that justice is done
in Iloilo City, yet it is hardly any argument to inflict on Mayor Ganzon successive suspensions when apparently,
the respondent Secretary has had sufficient time to gather the necessary evidence to build a case against the
Mayor without suspending him a day longer. What is intriguing is that the respondent Secretary has been
cracking down, so to speak, on the Mayor piecemeal apparently, to pin him down ten times the pain, when he,
the respondent Secretary, could have pursued a consolidated effort.

We reiterate that we are not precluding the President, through the Secretary of Interior from exercising a legal
power, yet we are of the opinion that the Secretary of Interior is exercising that power oppressively, and
needless to say, with a grave abuse of discretion.

The Court is aware that only the third suspension is under questions, and that any talk of future suspensions is in
fact premature. The fact remains, however, that Mayor Ganzon has been made to serve a total of 120 days of
suspension and the possibility of sixty days more is arguably around the corner (which amounts to a violation of
the Local Government Code which brings to light a pattern of suspensions intended to suspend the Mayor the
rest of his natural tenure. The Court is simply foreclosing what appears to us as a concerted effort of the State to
perpetuate an arbitrary act.

As we said, we can not tolerate such a state of affairs.

We are therefore allowing Mayor Rodolfo Ganzon to suffer the duration of his third suspension and lifting, for
the purpose, the Temporary Restraining Order earlier issued. Insofar as the seven remaining charges are
concerned, we are urging the Department of Local Government, upon the finality of this Decision, to undertake
steps to expedite the same, subject to Mayor Ganzon's usual remedies of appeal, judicial or administrative, or
certiorari, if warranted, and meanwhile, we are precluding the Secretary from meting out further suspensions
based on those remaining complaints, notwithstanding findings of prima facie evidence.

In resume the Court is laying down the following rules:

1. Local autonomy, under the Constitution, involves a mere decentralization of administration, not of power, in
which local officials remain accountable to the central government in the manner the law may provide;

2. The new Constitution does not prescribe federalism;

3. The change in constitutional language (with respect to the supervision clause) was meant but to deny
legislative control over local governments; it did not exempt the latter from legislative regulations provided
regulation is consistent with the fundamental premise of autonomy;

4. Since local governments remain accountable to the national authority, the latter may, by law, and in the
manner set forth therein, impose disciplinary action against local officials;

5. "Supervision" and "investigation" are not inconsistent terms; "investigation" does not signify "control" (which
the President does not have);

6. The petitioner, Mayor Rodolfo Ganzon. may serve the suspension so far ordered, but may no longer be
suspended for the offenses he was charged originally; provided:

a) that delays in the investigation of those charges "due to his fault, neglect or request, (the time of the
delay) shall not be counted in computing the time of suspension. [Supra, sec. 63(3)]

b) that if during, or after the expiration of, his preventive suspension, the petitioner commits another or
other crimes and abuses for which proper charges are filed against him by the aggrieved party or parties,
his previous suspension shall not be a bar to his being preventively suspended again, if warranted under
subpar. (2), Section 63 of the Local Government Code.

WHEREFORE, premises considered, the petitions are DISMISSED. The Temporary Restraining Order issued is
LIFTED.1âwphi1 The suspensions of the petitioners are AFFIRMED, provided that the petitioner, Mayor Rodolfo
Ganzon, may not be made to serve future suspensions on account of any of the remaining administrative
charges pending against him for acts committed prior to August 11, 1988. The Secretary of Interior is ORDERED
to consolidate all such administrative cases pending against Mayor Ganzon.
The sixty-day suspension against the petitioner, Mary Ann Rivera Artieda, is AFFIRMED. No costs.

SO ORDERED.

G.R. No. 93252 August 5 1991

FACTS:
Ganzon, after having been issued three successive 60-day of suspension order by Secretary of Local Government,
filed a petition for prohibition with the CA to bar Secretary Santos from implementing the said orders. Ganzon
was faced with 10 administrative complaints on various charges on abuse of authority and grave misconduct.

ISSUE:
Whether or not the Secretary of Local Government (as the alter ego of the President) has the authority to
suspend and remove local officials.

RULING:
The Constitution did nothing more, and insofar as existing legislation authorizes the President (through the
Secretary of Local Government) to proceed against local officials administratively, the Constitution contains no
prohibition. The Chief Executive is not banned from exercising acts of disciplinary authority because she did not
exercise control powers, but because no law allowed her to exercise disciplinary authority.

In those case that this Court denied the President the power (to suspend/remove) it was not because that the
President cannot exercise it on account of his limited power, but because the law lodged the power elsewhere.
But in those cases in which the law gave him the power, the Court, as in Ganzon v. Kayanan, found little
difficulty in sustaining him.

We reiterate that we are not precluding the President, through the Secretary of Interior from exercising a legal
power, yet we are of the opinion that the Secretary of interior is exercising that power oppressively, and
needless to say, with a grave abuse of discretion.
As we observed earlier, imposing 600 days of suspension which is not a remote possibility Mayor Ganzon is to
all intents and purposes, to make him spend the rest of his term in inactivity. It is also to make, to all intents and
purposes, his suspension permanent.

G.R. No. 80391 February 28, 1989

SULTAN ALIMBUSAR P. LIMBONA, petitioner,

vs.
CONTE MANGELIN, SALIC ALI, SALINDATO ALI, PILIMPINAS CONDING, ACMAD TOMAWIS, GERRY
TOMAWIS, JESUS ORTIZ, ANTONIO DELA FUENTE, DIEGO PALOMARES, JR., RAUL DAGALANGIT, and
BIMBO SINSUAT, respondents.

SARMIENTO, J.:

The acts of the Sangguniang Pampook of Region XII are assailed in this petition. The antecedent facts are as
follows:

1. On September 24, 1986, petitioner Sultan Alimbusar Limbona was appointed as a member of
the Sangguniang Pampook, Regional Autonomous Government, Region XII, representing Lanao
del Sur.

2. On March 12, 1987 petitioner was elected Speaker of the Regional Legislative Assembly or
Batasang Pampook of Central Mindanao (Assembly for brevity).

3. Said Assembly is composed of eighteen (18) members. Two of said members, respondents
Acmad Tomawis and Pakil Dagalangit, filed on March 23, 1987 with the Commission on
Elections their respective certificates of candidacy in the May 11, 1987 congressional elections for
the district of Lanao del Sur but they later withdrew from the aforesaid election and thereafter
resumed again their positions as members of the Assembly.

4. On October 21, 1987 Congressman Datu Guimid Matalam, Chairman of the Committee on
Muslim Affairs of the House of Representatives, invited Mr. Xavier Razul, Pampook Speaker of
Region XI, Zamboanga City and the petitioner in his capacity as Speaker of the Assembly, Region
XII, in a letter which reads:
 The Committee on Muslim Affairs well undertake consultations and dialogues
with local government officials, civic, religious organizations and traditional
leaders on the recent and present political developments and other issues affecting
Regions IX and XII.

The result of the conference, consultations and dialogues would hopefully chart
the autonomous governments of the two regions as envisioned and may prod the
President to constitute immediately the Regional Consultative Commission as
mandated by the Commission.

You are requested to invite some members of the Pampook Assembly of your
respective assembly on November 1 to 15, 1987, with venue at the Congress of
the Philippines. Your presence, unstinted support and cooperation is (sic)
indispensable.

5. Consistent with the said invitation, petitioner sent a telegram to Acting Secretary Johnny
Alimbuyao of the Assembly to wire all Assemblymen that there shall be no session in November
as "our presence in the house committee hearing of Congress take (sic) precedence over any
pending business in batasang pampook ... ."

6. In compliance with the aforesaid instruction of the petitioner, Acting Secretary Alimbuyao sent
to the members of the Assembly the following telegram:

TRANSMITTING FOR YOUR INFORMATION AND GUIDANCE TELEGRAM

RECEIVED FROM SPEAKER LIMBONA QUOTE CONGRESSMAN JIMMY
MATALAM CHAIRMAN OF THE HOUSE COMMITTEE ON MUSLIM AFFAIRS
REQUESTED ME TO ASSIST SAID COMMITTEE IN THE DISCUSSION OF THE
PROPOSED AUTONOMY ORGANIC NOV. 1ST TO 15. HENCE WERE ALL
ASSEMBLYMEN THAT THERE SHALL BE NO SESSION IN NOVEMBER AS OUR
PRESENCE IN THE HOUSE COMMITTEE HEARING OF CONGRESS TAKE
PRECEDENCE OVER ANY PENDING BUSINESS IN BATASANG PAMPOOK OF
MATALAM FOLLOWS UNQUOTE REGARDS.

7. On November 2, 1987, the Assembly held session in defiance of petitioner's advice, with the
following assemblymen present: (names of people)

After declaring the presence of a quorum, the Speaker Pro-Tempore was authorized to preside in
the session. On Motion to declare the seat of the Speaker vacant, all Assemblymen in attendance
voted in the affirmative, hence, the chair declared said seat of the Speaker vacant. 8. On
November 5, 1987, the session of the Assembly resumed with the following Assemblymen
present: (names)

An excerpt from the debates and proceeding of said session reads:

HON. DAGALANGIT: Mr. Speaker, Honorable Members of the House, with the presence of our
colleagues who have come to attend the session today, I move to call the names of the new
comers in order for them to cast their votes on the previous motion to declare the position of the
Speaker vacant. But before doing so, I move also that the designation of the Speaker Pro
Tempore as the Presiding Officer and Mr. Johnny Evangelists as Acting Secretary in the session
last November 2, 1987 be reconfirmed in today's session.

HON. SALIC ALI: I second the motions.

PRESIDING OFFICER: Any comment or objections on the two motions presented? Me chair
hears none and the said motions are approved. ...

Twelve (12) members voted in favor of the motion to declare the seat of the Speaker vacant; one
abstained and none voted against. 1

Accordingly, the petitioner prays for judgment as follows:

WHEREFORE, petitioner respectfully prays that-

 (a) This Petition be given due course;

(b) Pending hearing, a restraining order or writ of preliminary injunction be issued enjoining
respondents from proceeding with their session to be held on November 5, 1987, and on any
day thereafter;

(c) After hearing, judgment be rendered declaring the proceedings held by respondents of their
session on November 2, 1987 as null and void;

(d) Holding the election of petitioner as Speaker of said Legislative Assembly or Batasan
Pampook, Region XII held on March 12, 1987 valid and subsisting, and

(e) Making the injunction permanent.

Petitioner likewise prays for such other relief as may be just and equitable. 2

Pending further proceedings, this Court, on January 19, 1988, received a resolution filed by the Sangguniang
Pampook, "EXPECTING ALIMBUSAR P. LIMBONA FROM MEMBERSHIP OF THE SANGGUNIANG PAMPOOK
AUTONOMOUS REGION XII," 3 on the grounds, among other things, that the petitioner "had caused to be
prepared and signed by him paying [sic] the salaries and emoluments of Odin Abdula, who was considered
resigned after filing his Certificate of Candidacy for Congressmen for the First District of Maguindanao in the last
May 11, elections. . . and nothing in the record of the Assembly will show that any request for reinstatement by
Abdula was ever made . . ." 4 and that "such action of Mr. Lim bona in paying Abdula his salaries and
emoluments without authority from the Assembly . . . constituted a usurpation of the power of the
Assembly," 5 that the petitioner "had recently caused withdrawal of so much amount of cash from the Assembly
resulting to the non-payment of the salaries and emoluments of some Assembly [sic]," 6 and that he had "filed a
case before the Supreme Court against some members of the Assembly on question which should have been
resolved within the confines of the Assembly," 7 for which the respondents now submit that the petition had
become "moot and academic". 8

The first question, evidently, is whether or not the expulsion of the petitioner (pending litigation) has made the
case moot and academic.

We do not agree that the case has been rendered moot and academic by reason simply of the expulsion
resolution so issued. For, if the petitioner's expulsion was done purposely to make this petition moot and
academic, and to preempt the Court, it will not make it academic.

On the ground of the immutable principle of due process alone, we hold that the expulsion in question is of no
force and effect. In the first place, there is no showing that the Sanggunian had conducted an investigation, and
whether or not the petitioner had been heard in his defense, assuming that there was an investigation, or
otherwise given the opportunity to do so. On the other hand, what appears in the records is an admission by
the Assembly (at least, the respondents) that "since November, 1987 up to this writing, the petitioner has not set
foot at the Sangguniang Pampook." 9 "To be sure, the private respondents aver that "[t]he Assemblymen, in a
conciliatory gesture, wanted him to come to Cotabato City," 10 but that was "so that their differences could be
threshed out and settled." 11 Certainly, that avowed wanting or desire to thresh out and settle, no matter how
conciliatory it may be cannot be a substitute for the notice and hearing contemplated by law.

While we have held that due process, as the term is known in administrative law, does not absolutely require
notice and that a party need only be given the opportunity to be heard, 12 it does not appear herein that the
petitioner had, to begin with, been made aware that he had in fact stood charged of graft and corruption before
his collegues. It cannot be said therefore that he was accorded any opportunity to rebut their accusations. As it
stands, then, the charges now levelled amount to mere accusations that cannot warrant expulsion.

In the second place, (the resolution) appears strongly to be a bare act of vendetta by the other Assemblymen
against the petitioner arising from what the former perceive to be abduracy on the part of the latter. Indeed, it
(the resolution) speaks of "a case [having been filed] [by the petitioner] before the Supreme Court . . . on
question which should have been resolved within the confines of the Assemblyman act which some members
claimed unnecessarily and unduly assails their integrity and character as representative of the people" 13 an act
that cannot possibly justify expulsion. Access to judicial remedies is guaranteed by the Constitution, 14 and, unless
the recourse amounts to malicious prosecution, no one may be punished for seeking redress in the courts.

We therefore order reinstatement, with the caution that should the past acts of the petitioner indeed warrant his
removal, the Assembly is enjoined, should it still be so minded, to commence proper proceedings therefor in
line with the most elementary requirements of due process. And while it is within the discretion of the members
of the Sanggunian to punish their erring colleagues, their acts are nonetheless subject to the moderating band of
this Court in the event that such discretion is exercised with grave abuse.
It is, to be sure, said that precisely because the Sangguniang Pampook(s) are "autonomous," the courts may not
rightfully intervene in their affairs, much less strike down their acts. We come, therefore, to the second issue: Are
the so-called autonomous governments of Mindanao, as they are now constituted, subject to the jurisdiction of
the national courts? In other words, what is the extent of self-government given to the two autonomous
governments of Region IX and XII?

The autonomous governments of Mindanao were organized in Regions IX and XII by Presidential Decree No.
161815 promulgated on July 25, 1979. Among other things, the Decree established "internal autonomy" 16 in the
two regions "[w]ithin the framework of the national sovereignty and territorial integrity of the Republic of the
Philippines and its Constitution," 17 with legislative and executive machinery to exercise the powers and
responsibilities 18specified therein.

It requires the autonomous regional governments to "undertake all internal administrative matters for the
respective regions," 19 except to "act on matters which are within the jurisdiction and competence of the
National Government," 20 "which include, but are not limited to, the following:

(1) National defense and security;

(2) Foreign relations;

(3) Foreign trade;

(4) Currency, monetary affairs, foreign exchange, banking and quasi-banking, and external
borrowing,

(5) Disposition, exploration, development, exploitation or utilization of all natural resources;

(6) Air and sea transport

(7) Postal matters and telecommunications;

(8) Customs and quarantine;

(9) Immigration and deportation;

(10) Citizenship and naturalization;

(11) National economic, social and educational planning; and

(12) General auditing. 21

In relation to the central government, it provides that "[t]he President shall have the power of general
supervision and control over the Autonomous Regions ..." 22

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," 23 "and ensure their fullest development as self-reliant communities and
make them more effective partners in the pursuit of national development and social progress." 24 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" 25 over them, but only to "ensure that local
affairs are administered according to law." 26 He has no control over their acts in the sense that he can substitute
their judgments with his own. 27

Decentralization of power, on the other hand, involves an abdication of political power in the favor of local
governments units declare 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. 28

But the question of whether or not the grant of autonomy Muslim Mindanao under the 1987 Constitution
involves, truly, an effort to decentralize power rather than mere administration is a question foreign to this
petition, since what is involved herein is a local government unit constituted prior to the ratification of the
present Constitution. Hence, the Court will not resolve that controversy now, in this case, since no controversy
in fact exists. We will resolve it at the proper time and in the proper case.

Under the 1987 Constitution, local government units enjoy autonomy in these two senses, thus:

Section 1. The territorial and political subdivisions of the Republic of the Philippines are the
provinces, cities, municipalities, and barangays. Here shall be autonomous regions in Muslim
Mindanao ,and the Cordilleras as hereinafter provided. 29

Sec. 2. The territorial and political subdivisions shall enjoy local autonomy. 30

xxx xxx xxx

See. 15. Mere shall be created autonomous regions in Muslim Mindanao and in the Cordilleras
consisting of provinces, cities, municipalities, and geographical areas sharing common and
distinctive historical and cultural heritage, economic and social structures, and other relevant
characteristics within the framework of this Constitution and the national sovereignty as well as
territorial integrity of the Republic of the Philippines. 31

An autonomous government that enjoys autonomy of the latter category [CONST. (1987), art. X, sec. 15.] is
subject alone to the decree of the organic act creating it and accepted principles on the effects and limits of
"autonomy." On the other hand, an autonomous government of the former class is, as we noted, under the
supervision of the national government acting through the President (and the Department of Local
Government).32 If the Sangguniang Pampook (of Region XII), then, is autonomous in the latter sense, its acts are,
debatably beyond the domain of this Court in perhaps the same way that the internal acts, say, of the Congress
of the Philippines are beyond our jurisdiction. But if it is autonomous in the former category only, it comes
unarguably under our jurisdiction. An examination of the very Presidential Decree creating the autonomous
governments of Mindanao persuades us that they were never meant to exercise autonomy in the second sense,
that is, in which the central government commits an act of self-immolation. Presidential Decree No. 1618, in the
first place, mandates that "[t]he President shall have the power of general supervision and control over
Autonomous Regions."33 In the second place, the Sangguniang Pampook, their legislative arm, is made to
discharge chiefly administrative services, thus:

SEC. 7. Powers of the Sangguniang Pampook. The Sangguniang Pampook shall exercise local
legislative powers over regional affairs within the framework of national development plans,
policies and goals, in the following areas:

(1) Organization of regional administrative system;

(2) Economic, social and cultural development of the Autonomous Region;

(3) Agricultural, commercial and industrial programs for the Autonomous Region;

(4) Infrastructure development for the Autonomous Region;

(5) Urban and rural planning for the Autonomous Region;

(6) Taxation and other revenue-raising measures as provided for in this Decree;

(7) Maintenance, operation and administration of schools established by the Autonomous

Region;

(8) Establishment, operation and maintenance of health, welfare and other social services,
programs and facilities;

(9) Preservation and development of customs, traditions, languages and culture indigenous to the
Autonomous Region; and

(10) Such other matters as may be authorized by law,including the enactment of such measures as
may be necessary for the promotion of the general welfare of the people in the Autonomous
Region.
 The President shall exercise such powers as may be necessary to assure that enactment and acts of
the Sangguniang Pampook and the Lupong Tagapagpaganap ng Pook are in compliance with this
Decree, national legislation, policies, plans and programs.

The Sangguniang Pampook shall maintain liaison with the Batasang Pambansa. 34

Hence, we assume jurisdiction. And if we can make an inquiry in the validity of the expulsion in question, with
more reason can we review the petitioner's removal as Speaker.

Briefly, the petitioner assails the legality of his ouster as Speaker on the grounds that: (1) the Sanggunian, in
convening on November 2 and 5, 1987 (for the sole purpose of declaring the office of the Speaker vacant), did
so in violation of the Rules of the Sangguniang Pampook since the Assembly was then on recess; and (2)
assuming that it was valid, his ouster was ineffective nevertheless for lack of quorum.

Upon the facts presented, we hold that the November 2 and 5, 1987 sessions were invalid. It is true that under
Section 31 of the Region XII Sanggunian Rules, "[s]essions shall not be suspended or adjourned except by
direction of the Sangguniang Pampook," 35 but it provides likewise that "the Speaker may, on [sic] his discretion,
declare a recess of "short intervals." 36 Of course, there is disagreement between the protagonists as to whether
or not the recess called by the petitioner effective November 1 through 15, 1987 is the "recess of short intervals"
referred to; the petitioner says that it is while the respondents insist that, to all intents and purposes, it was an
adjournment and that "recess" as used by their Rules only refers to "a recess when arguments get heated up so
that protagonists in a debate can talk things out informally and obviate dissenssion [sic] and disunity. 37 The
Court agrees with the respondents on this regard, since clearly, the Rules speak of "short intervals." Secondly, the
Court likewise agrees that the Speaker could not have validly called a recess since the Assembly had yet to
convene on November 1, the date session opens under the same Rules. 38 Hence, there can be no recess to speak
of that could possibly interrupt any session. But while this opinion is in accord with the respondents' own, we
still invalidate the twin sessions in question, since at the time the petitioner called the "recess," it was not a
settled matter whether or not he could. do so. In the second place, the invitation tendered by the Committee
on Muslim Affairs of the House of Representatives provided a plausible reason for the intermission sought.
Thirdly, assuming that a valid recess could not be called, it does not appear that the respondents called his
attention to this mistake. What appears is that instead, they opened the sessions themselves behind his back in
an apparent act of mutiny. Under the circumstances, we find equity on his side. For this reason, we uphold the
"recess" called on the ground of good faith.

It does not appear to us, moreover, that the petitioner had resorted to the aforesaid "recess" in order to forestall
the Assembly from bringing about his ouster. This is not apparent from the pleadings before us. We are
convinced that the invitation was what precipitated it.

In holding that the "recess" in question is valid, we are not to be taken as establishing a precedent, since, as we
said, a recess can not be validly declared without a session having been first opened. In upholding the petitioner
herein, we are not giving him a carte blanche to order recesses in the future in violation of the Rules, or
otherwise to prevent the lawful meetings thereof.

Neither are we, by this disposition, discouraging the Sanggunian from reorganizing itself pursuant to its lawful
prerogatives. Certainly, it can do so at the proper time. In the event that be petitioner should initiate obstructive
moves, the Court is certain that it is armed with enough coercive remedies to thwart them. 39

In view hereof, we find no need in dwelling on the issue of quorum.

WHEREFORE, premises considered, the petition is GRANTED. The Sangguniang Pampook, Region XII, is
ENJOINED to (1) REINSTATE the petitioner as Member, Sangguniang Pampook, Region XII; and (2) REINSTATE
him as Speaker thereof. No costs.

SO ORDERED.

GR No. 80391 28 February 1989

Facts: Petitioner, Sultan Alimbusar Limbona, was elected Speaker of the Regional Legislative Assembly or
Batasang Pampook of Central Mindanao (Assembly). On October 21, 1987 Congressman Datu Guimid Matalam,
Chairman of the Committee on Muslim Affairs of the House of Representatives, invited petitioner in his capacity
as Speaker of the Assembly of Region XII in a consultation/dialogue with local government officials. Petitioner
accepted the invitation and informed the Assembly members through the Assembly Secretary that there shall be
no session in November as his presence was needed in the house committee hearing of Congress. However, on
November 2, 1987, the Assembly held a session in defiance of the Limbona's advice, where he was unseated
from his position. Petitioner prays that the session's proceedings be declared null and void and be it declared
that he was still the Speaker of the Assembly. Pending further proceedings of the case, the SC received a
resolution from the Assembly expressly expelling petitioner's membership therefrom. Respondents argue that
petitioner had "filed a case before the Supreme Court against some members of the Assembly on a question
which should have been resolved within the confines of the Assembly," for which the respondents now submit
that the petition had become "moot and academic" because its resolution.

Issue: Whether or not the courts of law have jurisdiction over the autonomous governments or regions. What is
the extent of self-government given to the autonomous governments of Region XII?

Held: 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". 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 favor of local governments units
declared to be autonomous. In that case, the autonomous government is free to chart its own destiny and shape
its future with minimum intervention from central authorities.

An autonomous government that enjoys autonomy of the latter category [CONST. (1987), Art. X, Sec. 15.] is
subject alone to the decree of the organic act creating it and accepted principles on the effects and limits of
"autonomy." On the other hand, an autonomous government of the former class is, as we noted, under the
supervision of the national government acting through the President (and the Department of Local
Government). If the Sangguniang Pampook (of Region XII), then, is autonomous in the latter sense, its acts are,
debatably beyond the domain of this Court in perhaps the same way that the internal acts, say, of the Congress
of the Philippines are beyond our jurisdiction. But if it is autonomous in the former category only, it comes
unarguably under our jurisdiction. An examination of the very Presidential Decree creating the autonomous
governments of Mindanao persuades us that they were never meant to exercise autonomy in the second sense
(decentralization of power). PD No. 1618, in the first place, mandates that "[t]he President shall have the power
of general supervision and control over Autonomous Regions." Hence, we assume jurisdiction. And if we can
make an inquiry in the validity of the expulsion in question, with more reason can we review the petitioner's
removal as Speaker.

This case involves the application of a most

important constitutional policy and principle, that of local autonomy. We have to obey the clear mandate on
local autonomy.

Where a law is capable of two interpretations, one in favor of centralized power in Malacañang and the other
beneficial to local autonomy, the scales must be weighed in favor of autonomy.

Upon the facts presented, we hold that the November 2 and 5, 1987 sessions were invalid. It is true that under
Section 31 of the Region XII Sanggunian Rules, "[s]essions shall not be suspended or adjourned except by
direction of the Sangguniang Pampook". But while this opinion is in accord with the respondents' own, we still
invalidate the twin sessions in question, since at the time the petitioner called the "recess," it was not a settled
matter whether or not he could do so. In the second place, the invitation tendered by the Committee on
Muslim Affairs of the House of Representatives provided a plausible reason for the intermission sought. Also,
assuming that a valid recess could not be called, it does not appear that the respondents called his attention to
this mistake. What appears is that instead, they opened the sessions themselves behind his back in an apparent
act of mutiny. Under the circumstances, we find equity on his side. For this reason, we uphold the "recess" called
on the ground of good faith.
PROVINCE OF BATANGAS v. ALBERTO G. ROMULO, GR No. 152774, 2004-05-27

Facts:

On December 7, 1998, then President Joseph Ejercito Estrada issued Executive Order (E.O.) No. 48 entitled
"ESTABLISHING A PROGRAM FOR DEVOLUTION ADJUSTMENT AND EQUALIZATION." The program was
established to "facilitate the process of enhancing the capacities of local government... units (LGUs) in the
discharge of the functions and services devolved to them by the National Government Agencies concerned
pursuant to the Local Government Code."[1] The Oversight Committee (referred to as the Devolution
Committee in E.O. No. 48)... constituted under Section 533(b) of Republic Act No. 7160 (The Local
Government Code of 1991) has been tasked to formulate and issue the appropriate rules and regulations
necessary for its effective implementation.[2] Further, to address the funding... shortfalls of functions and
services devolved to the LGUs and other funding requirements of the program, the "Devolution Adjustment and
Equalization Fund" was created.[3] For 1998, the DBM was directed to set aside an amount to be determined by
the

Oversight Committee based on the devolution status appraisal surveys undertaken by the DILG.[4] The initial
fund was to be sourced from the available savings of the national government for CY 1998. [5] For 1999 and
the succeeding... years, the corresponding amount required to sustain the program was to be incorporated in the
annual GAA.[6] The Oversight Committee has been authorized to issue the implementing rules and regulations
governing the equitable allocation and distribution of... said fund to the LGUs.

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, OCD-2000-023, OCD-2001-029... and OCD-2002-001 issued pursuant
thereto. The petitioner submits that the assailed provisos in the GAAs and the OCD resolutions, insofar as they
earmarked the amount of five billion pesos of the IRA of the LGUs for 1999, 2000 and 2001 for the LGSEF and
imposed conditions for the... release thereof, violate the Constitution and the Local Government Code of 1991.

Section 6, Article X of the Constitution is invoked as it mandates that the "just share" of the LGUs shall be
automatically released to them. Sections 18 and 286 of the Local Government Code of 1991, which enjoin that
the "just share" of the LGUs shall be "automatically and... directly" released to them "without need of further
action" are, likewise, cited.

The petitioner posits that to subject the distribution and release of the five- billion-peso portion of the IRA,
classified as the LGSEF, to compliance by the LGUs with the implementing rules and regulations, including the
mechanisms and guidelines prescribed by the Oversight

Committee, contravenes the explicit directive of the Constitution that the LGUs' share in the national taxes "shall
be automatically released to them." The petitioner maintains that the use of the word "shall" must be given a
compulsory meaning.

To further buttress this argument, the petitioner contends that to vest the Oversight Committee with the
authority to determine the distribution and release of the LGSEF, which is a part of the IRA of the LGUs, is an
anathema to the principle of local autonomy as embodied in the

Constitution and the Local Government Code of 1991.

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

Issues:

whether the issue had been rendered moot and academic.

(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.

Ruling:

The petitioner has locus standi... to maintain the present suit

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

.
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.

The petition involves a significant... legal issue

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

S... upervening events, whether intended or accidental, cannot prevent the Court from rendering a decision if
there is a grave violation of the

Constitution.

Even in cases where supervening events had made the cases moot, the Court did not hesitate to resolve the legal
or constitutional issues raised to formulate controlling principles to guide the bench, bar and public.

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."

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.

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.

Section 2. The territorial and political subdivisions shall enjoy local autonomy.

C... onsistent with the principle of local autonomy, the Constitution confines the President's power over the
LGUs to one of general supervision.

Drilon v. Lim:

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.

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.

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.

As a rule, the term

"SHALL" is a word of command that must be given a compulsory meaning. The provision is, therefore,
IMPERATIVE.

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.

G.R. No. L-107330 December 17, 1993

EDGAR N. RAPISORA, petitioner,

vs.
CIVIL SERVICE COMMISSION, respondent.

Concepcion B. Buencamino for petitioner.

The Solicitor General for respondent.

PADILLA, J.:

This petition for certiorari with mandamus seeks to set aside Resolution No. 92-1214 dated 3 September
1992 1 of the respondent Civil Service Commission denying petitioner's motion for reconsideration of the
Commission's Resolution No. 92-699 dated 26 May 1992 2 which disapproved the permanent appointment of
petitioner as Provincial Health Officer I, Integrated Provincial Health Office, Benguet Province. The dispositive
part of Resolution No. 92-699 reads as follows:

WHEREFORE, premises considered, the Commission resolves that: the appointment of Dr. Edgar
N. Rapisora as Provincial Health Officer I, Integrated Provincial Health Office, Benguet be
disapproved; and, the action of Director E. Tadle-Herrera of CSC-DOH be set aside.3

Petitioner was the Chief of Hospital of the Kalamansig District Hospital in the Province of Sultan Kudarat,
Mindanao, when he learned that the position of Provincial Health Officer I of Benguet would become vacant.
He forthwith applied for the said position. A committee was created by the Department of Health to screen
applicants for the vacant positions in the Department including the position applied for by petitioner.

On 5 November 1991, then Secretary of Health, Honorable Alfredo R.A. Bengzon designated herein petitioner
as officer-in-charge of the Office of the Provincial Health Officer I, Integrated Provincial Health Office of
Benguet. 4Thereafter, he was extended a permanent appointment, by transfer with promotion, on 24 December
1991. 5Petitioner actually assumed the duties of the position on 2 January 1992.

When petitioner assumed office as Provincial Health Officer I on 2 January 1992, the new Local Government
Code had taken effect on 1 January 1992, for which reason respondent, through Director E. Tadle-Herrera, CSC-
DOH, returned to the Secretary of Health petitioner's appointment calling the Secretary's attention to Section
463, Chapter 2, Title IV of the Local Government Code of 1992. 6 Hence, the secretary of Health, Honorable
Antonio O. Periquet who had succeeded Secretary Alfredo R.A. Bengzon, wrote Benguet Governor Andres R.
Bugnosen seeking his concurrence in the appointment of petitioner and informing the Governor that the
Department of health after a formal screening and evaluation by its executive committee believed that
petitioner was the most appropriate person to assume the position in question. Governor Bugnosen concurred
with petitioner's appointment.7

On 3 April 1992, petitioner's appointment was approved by the Field Officer of the respondent, Director E.
Tadle-Herrera as TEMPORARY, "(P)ending promulgation of the guidelines on who will be the appointing
authority pursuant to the Local Government Code of 1991."8

Petitioner appealed to respondent Commission, seeking reconsideration of his appointment from temporary to
permanent which was the appointment extended to him by the Secretary of Health. Respondent instead set
aside the action of Director E. Tadle-Herrera and entirely disapproved petitioner's appointment on the ground
that he did not possess a Certificate/Master in Public Health/Hospital Administration which is the educational
requirement for the position at the time of appointment, in accordance with DOH qualification standards.
Moreover, according to respondent, the Local Government Code of 1992 already took effect when petitioner
assumed office on 2 January 1992, so that in accordance therewith, the Provincial Health Officer I should be
appointed by the local chief executive concerned with the concurrence of a majority of all the members of the
Sanggunian, subject to Civil Service Law.

The issues raised in the present petition 9 may be simplified to whether or not respondent Civil Service
Commission committed grave abuse of discretion in disapproving petitioner's permanent appointment as
Provincial Health Officer I of Benguet Province.

We find the petition meritorious.

Petitioner was extended a permanent appointment even before the Local Government Code took effect, after
he went through a rigid interview by the Executive Committee created by the Department of Health to screen
applicants for available positions in the Department. Under DOH qualification standards for the position of
Provincial Health Officer I, the appointee must meet the following requirements.

Education: Doctor of Medicine with a certificate/Master in Public

Health/Hospital Administration

Experience: 5 years experience in planning, organizing, directing,

coordinating and supervising various public health and medical
activities.

Eligibility: RA 1080 (Physician) 10

True enough, petitioner did not possess a Certificate/Master in Public Health/Hospital Administration at the time
of his appointment. Apparently, then Health Secretary Bengzon decided that petitioner's other qualifications,
such as, his training and experience in hospital administration offset or made up for his deficiency in educational
requirement. Prior to his appointment to the position in question, petitioner held the position of Chief of
Hospital, Kalamansig District Hospital, Kalamansig, Sultan Kudarat. In addition, while in foreign employment
from 1976 to 1985, he served as officer-in-charge of two (2) general hospitals in Nigeria and attended seminars,
symposia, workshops, clinical conferences, and trained newly-graduated Nigerian physicians in general surgery.
These training and experience must have been taken into account by Health Secretary Bengzon when he
extended a permanent appointment to petitioner, which appointment his successors, Honorable Antonio O.
Periquet and the incumbent Honorable Juan M. Flavier, also recommended for approval by the Civil Service
Commission.

Respondent finds untenable petitioner's contention that his deficiency in educational requirement (Master in
Public Health/Hospital Administration) can be offset by his training and experience. It maintains that petitioner
should at least have earned for himself some units or started pursuing such particular educational requirements
as allegedly required by the rule on substitution.

We do not agree. This rule cannot be strictly interpreted as to curtail an agency's discretionary power to appoint
as long as the appointee possesses other qualifications required by law.

Recently, this Court held:

It would be appropriate to state at the outset that when necessary, education, experience or
training may be used interchangeably to offset deficiencies (in fact, the CSC issued Memorandum
Circular No. 23 series of 1991 expressly allowing the offsetting of deficiencies except the required
 eligibility). The necessity exists if the appointee's training or experience is of such a level that the
same would more than supplement the deficiency in education considering the demands of the
position in question. The converse holds true if the appointee's deficiency is in the required
training or experience. The decision as to when the conditions give rise to a necessity to
interchange education with experience and vice-versa rests upon the sound discretion of the
appointing authority. This is not to be viewed as an unbridled license given to the appointing
authority to appoint whomsoever he desires. This is rather a recognition of the fact that the
appointing authority is in the best position to determine the needs of his department or agency
and how to satisfy those needs. Moreover, it is precisely the province of the QS to provide the
gauge by which the appointing authority shall exercise his discretion. The QS has been defined in
Section 20, PD 807 as expressing the minimum requirements for a class of position in terms of
education, training and experience, civil service eligibility, physical fitness and other qualities
required for successful performance. It is, thus, the QS which provides for the considerations
upon which the appointing authority decides when the levels of education or experience may be
sufficient to offset each other. 11

As repeatedly ruled by the Court, the Civil Service Commission is not empowered to determine or change the
kind of nature of the appointment, for it is an essential discretionary power and must be performed by the
officer on whom its is vested according to his best lights, the only condition being that the appointee should
possess the minimum qualification required by law. In the case at bench, then Secretary of Health, Honorable
Alfredo R.A. Bengzon, and his successors, Honorable Antonio O. Periquet and Ho. Juan M. Flavier, believe that
petitioner possesses the necessary qualifications required by law for the position.

It is worthy to note that respondent Commission had approved the appointment of a former Public Health
Officer I in Benguet, Dr. Emilio B. Cadayona, who at the time of his appointment in 1988 did not also possess a
Certificate/-Master's degree in Public Health/Hospital Administration but, like petitioner, was a holder of the
Degree of Doctor of Medicine. The Court suggests that respondent look more closely into its own resolutions
and be consistent in resolving the qualifications of appointees.

WHEREFORE, the petition is GRANTED. The Court sets aside Resolution No. 92-699, dated 26 May 1992, and
Resolution No. 92-1214, dated 3 September 1992 of respondent Civil Service Commission, and orders the
respondent Commission to approve petitioner's permanent appointment as Provincial Health Officer I,
Integrated Provincial Health Office, Benguet Province.

SO ORDERED.
 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.[2] Further, to address the funding shortfalls of functions and services devolved to the LGUs and
other funding requirements of the program, the Devolution Adjustment and Equalization Fund was
created.[3] For 1998, the DBM was directed to set aside an amount to be determined by the Oversight
Committee based on the devolution status appraisal surveys undertaken by the DILG.[4] The initial fund was to
be sourced from the available savings of the national government for CY 1998.[5] For 1999 and the succeeding
years, the corresponding amount required to sustain the program was to be incorporated in the annual
GAA.[6] The Oversight Committee has been authorized to issue the implementing rules and regulations
governing the equitable allocation and distribution of said fund to the LGUs.[7]

The LGSEF in the GAA of 1999

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

... 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 multi-LGUs or leagues

of LGUs, especially those belonging to the 5th and 6th class, may access the fund to support any
projects or activities that satisfy any of the aforecited purposes. A barangay may also access this
fund directly or through their respective municipality or city.
2. The proposed project/activity should be need-based, a local priority, with high development impact
and are congruent with the socio-cultural, economic and development agenda of the Estrada
Administration, such as food security, poverty alleviation, electrification, and peace and order,
among others.

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

a. delivery of local health and sanitation services, hospital services and other tertiary services;

b. delivery of social welfare services;

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

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

e. improvement of community-based forestry projects and other local projects on environment

and natural resources protection and conservation;

f. improvement of tourism facilities and promotion of tourism;

g. peace and order and public safety;

h. construction, repair and maintenance of public works and infrastructure, including public
buildings and facilities for public use, especially those destroyed or damaged by man-
made or natural calamities and disaster as well as facilities for water supply, flood control
and river dikes;

i. provision of local electrification facilities;

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

k. other projects that may be authorized by the OCD consistent with the aforementioned
objectives and guidelines;

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

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

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

implementation of devolved programs, projects and activities;

b. repair and/or improvement of facilities;

c. repair and/or upgrading of equipment;

d. acquisition of basic equipment;

e. construction of additional or new facilities;

f. counterpart contribution to joint arrangements or collective projects among groups of

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

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

(b) objectives and justifications for undertaking the project, which should highlight the benefits to
the locality and the expected impact to the local program/project arising from the full
and efficient implementation of social services and facilities, at the local levels;

(c) target outputs or key result areas;

(d) schedule of activities and details of requirements;

(e) total cost requirement of the project;

(f) proponents counterpart funding share, if any, and identified source(s) of counterpart funds for
the full implementation of the project;

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

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

The LGSEF in the GAA of 2000

Under Rep. Act No. 8760, otherwise known as the GAA of 2000, the amount of P111,778,000,000 was
allotted as the share of the LGUs in the internal revenue taxes. As in the GAA of 1999, the GAA of 2000
contained a proviso earmarking five billion pesos of the IRA for the LGSEF. This proviso, found in Item No. 1,
Special Provisions, Title XXXVII A. Internal Revenue Allotment, was similarly worded as that contained in the
GAA of 1999.
The Oversight Committee, in its Resolution No. OCD-2000-023 dated June 22, 2000, adopted the
following allocation scheme governing the five billion pesos LGSEF for 2000:

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-2002-001 allocating the five
billion pesos LGSEF for 2001 as follows:

Modified Codal Formula P 3.000 billion

Priority Projects 1.900 billion
Capability Building Fund .100 billion
P 5.000 billion

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

LGUs Percentage Amount

Provinces 25 P 0.750 billion

Cities 25 0.750

Municipalities 35 1.050

Barangays 15 0.450

100 P 3.000 billion

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 Presidents State of the Nation Address (SONA)/summit
commitments.

RESOLVED FURTHER, that the remaining P100 million LGSEF capability building fund shall be distributed in
accordance with the recommendation of the Leagues of Provinces, Cities, Municipalities and Barangays, and
approved by the OCD.
 Upon receipt of a copy of the above resolution, Gov. Mandanas wrote to the individual members of the
Oversight Committee seeking the reconsideration of Resolution No. OCD-2002-001.He also wrote to Pres.
Macapagal-Arroyo urging her to disapprove said resolution as it violates the Constitution and the Local
Government Code of 1991.
On January 25, 2002, Pres. Macapagal-Arroyo approved Resolution No. OCD-2002-001.

The Petitioners Case

The petitioner now comes to this Court assailing as unconstitutional and void the provisos in the GAAs of
1999, 2000 and 2001, relating to the LGSEF. Similarly assailed are the Oversight Committees Resolutions Nos.
OCD-99-003, OCD-99-005, OCD-99-006, OCD-2000-023, OCD-2001-029 and OCD-2002-001 issued pursuant
thereto. The petitioner submits that the assailed provisos in the GAAs and the OCD resolutions, insofar as they
earmarked the amount of five billion pesos of the IRA of the LGUs for 1999, 2000 and 2001 for the LGSEF and
imposed conditions for the release thereof, violate the Constitution and the Local Government Code of 1991.
Section 6, Article X of the Constitution is invoked as it mandates that the just share of the LGUs shall be
automatically released to them. Sections 18 and 286 of the Local Government Code of 1991, which enjoin that
the just share of the LGUs shall be automatically and directly released to them without need of further action
are, likewise, cited.
The petitioner posits that to subject the distribution and release of the five-billion-peso portion of the IRA,
classified as the LGSEF, to compliance by the LGUs with the implementing rules and regulations, including the
mechanisms and guidelines prescribed by the Oversight Committee, contravenes the explicit directive of the
Constitution that the LGUs share in the national taxes shall be automatically released to them. The petitioner
maintains that the use of the word shall must be given a compulsory meaning.
To further buttress this argument, the petitioner contends that to vest the Oversight Committee with the
authority to determine the distribution and release of the LGSEF, which is a part of the IRA of the LGUs, is an
anathema to the principle of local autonomy as embodied in the Constitution and the Local Government Code
of 1991. The petitioner cites as an example the experience in 2001 when the release of the LGSEF was long
delayed because the Oversight Committee was not able to convene that year and no guidelines were issued
therefor. Further, the possible disapproval by the Oversight Committee of the project proposals of the LGUs
would result in the diminution of the latters share in the IRA.
Another infringement alleged to be occasioned by the assailed OCD resolutions is the improper amendment
to Section 285 of the Local Government Code of 1991 on the percentage sharing of the IRA among the
LGUs. Said provision allocates the IRA as follows: Provinces 23%; Cities 23%; Municipalities 34%; and
Barangays 20%.[8] This formula has been improperly amended or modified, with respect to the five-billion-peso
portion of the IRA allotted for the LGSEF, by the assailed OCD resolutions as they invariably provided for a
different sharing scheme.
The modifications allegedly constitute an illegal amendment by the executive branch of a substantive
law. Moreover, the petitioner mentions that in the Letter dated December 5, 2001 of respondent Executive
Secretary Romulo addressed to respondent Secretary Boncodin, the former endorsed to the latter the release of
funds to certain LGUs from the LGSEF in accordance with the handwritten instructions of President
Arroyo. Thus, the LGUs are at a loss as to how a portion of the LGSEF is actually allocated. Further, there are
still portions of the LGSEF that, to date, have not been received by the petitioner; hence, resulting in damage
and injury to the petitioner.
The petitioner prays that the Court declare as unconstitutional and void the assailed provisos relating to the
LGSEF in the GAAs of 1999, 2000 and 2001 and the assailed OCD resolutions (Resolutions Nos. OCD-99-003,
OCD-99-005, OCD-99-006, OCD-2000-023, OCD-2001-029 and OCD-2002-001) issued by the Oversight
Committee pursuant thereto. The petitioner, likewise, prays that the Court direct the respondents to rectify the
unlawful and illegal distribution and releases of the LGSEF for the aforementioned years and release the same in
accordance with the sharing formula under Section 285 of the Local Government Code of 1991. Finally, the
petitioner urges the Court to declare that the entire IRA should be released automatically without further action
by the LGUs as required by the Constitution and the Local Government Code of 1991.

The Respondents Arguments

The respondents, through the Office of the Solicitor General, urge the Court to dismiss the petition on
procedural and substantive grounds. On the latter, the respondents contend that the assailed provisos in the
GAAs of 1999, 2000 and 2001 and the assailed resolutions issued by the Oversight Committee are not
constitutionally infirm. The respondents advance the view that Section 6, Article X of the Constitution does not
 specify that the just share of the LGUs shall be determined solely by the Local Government Code of
1991. Moreover, the phrase as determined by law in the same constitutional provision means that there exists no
limitation on the power of Congress to determine what is the just share of the LGUs in the national taxes. In
other words, Congress is the arbiter of what should be the just share of the LGUs in the national taxes.
The respondents further theorize that Section 285 of the Local Government Code of 1991, which provides
for the percentage sharing of the IRA among the LGUs, was not intended to be a fixed determination of their
just share in the national taxes. Congress may enact other laws, including appropriations laws such as the GAAs
of 1999, 2000 and 2001, providing for a different sharing formula. Section 285 of the Local Government Code
of 1991 was merely intended to be the default share of the LGUs to do away with the need to determine
annually by law their just share. However, the LGUs have no vested right in a permanent or fixed percentage as
Congress may increase or decrease the just share of the LGUs in accordance with what it believes is appropriate
for their operation. There is nothing in the Constitution which prohibits Congress from making such
determination through the appropriations laws. If the provisions of a particular statute, the GAA in this case, are
within the constitutional power of the legislature to enact, they should be sustained whether the courts agree or
not in the wisdom of their enactment.
On procedural grounds, the respondents urge the Court to dismiss the petition outright as the same is
defective. The petition allegedly raises factual issues which should be properly threshed out in the lower courts,
not this Court, not being a trier of facts. Specifically, the petitioners allegation that there are portions of the
LGSEF that it has not, to date, received, thereby causing it (the petitioner) injury and damage, is subject to proof
and must be substantiated in the proper venue, i.e., the lower courts.
Further, according to the respondents, the petition has already been rendered moot and academic as it no
longer presents a justiciable controversy. The IRAs for the years 1999, 2000 and 2001, have already been
released and the government is now operating under the 2003 budget. In support of this, the respondents
submitted certifications issued by officers of the DBM attesting to the release of the allocation or shares of the
petitioner in the LGSEF for 1999, 2000 and 2001. There is, therefore, nothing more to prohibit.
Finally, the petitioner allegedly has no legal standing to bring the suit because it has not suffered any
injury. In fact, the petitioners just share has even increased. Pursuant to Section 285 of the Local Government
Code of 1991, the share of the provinces is 23%. OCD Nos. 99-005, 99-006 and 99-003 gave the provinces
40% of P2 billion of the LGSEF. OCD Nos. 2000-023 and 2001-029 apportioned 26% of P3.5 billion to the
provinces. On the other hand, OCD No. 2001-001 allocated 25% of P3 billion to the provinces. Thus, the
petitioner has not suffered any injury in the implementation of the assailed provisos in the GAAs of 1999, 2000
and 2001 and the OCD resolutions.

The Ruling of the Court

Procedural Issues

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

The petitioner has locus standi

to maintain the present suit

The gist of the question of standing is whether a party has alleged such a personal stake in the outcome of
the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the
court so largely depends for illumination of difficult constitutional questions.[9] Accordingly, it has been held that
the interest of a party assailing the constitutionality of a statute must be direct and personal. Such party must be
able to show, not only that the law or any government act is invalid, but also that he has sustained or is in
imminent danger of sustaining some direct injury as a result of its enforcement, and not merely that he suffers
thereby in some indefinite way. It must appear that the person complaining has been or is about to be denied
some right or privilege to which he is lawfully entitled or that he is about to be subjected to some burdens or
penalties by reason of the statute or act complained of.[10]
The Court holds that the petitioner possesses the requisite standing to maintain the present suit. The
petitioner, a local government unit, seeks relief in order to protect or vindicate an interest of its own, and of the
other LGUs. This interest pertains to the LGUs share in the national taxes or the IRA. The petitioners
constitutional claim is, in substance, that the assailed provisos in the GAAs of 1999, 2000 and 2001, and the
OCD resolutions contravene Section 6, Article X of the Constitution, mandating the automatic release to the
 LGUs of their share in the national taxes.Further, the injury that the petitioner claims to suffer is the
diminution of its share in the IRA, as provided under Section 285 of the Local Government Code of 1991,
occasioned by the implementation of the assailed measures. These allegations are sufficient to grant the
petitioner standing to question the validity of the assailed provisos in the GAAs of 1999, 2000 and 2001, and
the OCD resolutions as the petitioner clearly has a plain, direct and adequate interest in the manner and
distribution of the IRA among the LGUs.

The petition involves a significant

legal issue

The crux of the instant controversy is whether the assailed provisos contained in the GAAs of 1999, 2000
and 2001, and the OCD resolutions infringe the Constitution and the Local Government Code of 1991. This is
undoubtedly a legal question. On the other hand, the following facts are not disputed:
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 Courts 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.[13] Even in cases where supervening events had made the cases moot, the Court did not hesitate to
resolve the legal or constitutional issues raised to formulate controlling principles to guide the bench, bar and
public.[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 Presidents power over the
LGUs to one of general supervision.[17] This provision has been interpreted to exclude the power of control. The
distinction between the two powers was enunciated in Drilon v. Lim:[18]

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 1991[20] 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.

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

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 Committees prior
approval. Further, with respect to the portion of the LGSEF allocated for various projects of the LGUs (P1 billion
for 1999; P1.5 billion for 2000 and P2 billion for 2001), the Oversight Committee, through the assailed OCD
resolutions, laid down guidelines and mechanisms that the LGUs had to comply with before they could avail of
 funds from this portion of the LGSEF. The guidelines required (a) the LGUs to identify the projects eligible
for funding based on the criteria laid down by the Oversight Committee; (b) the LGUs to submit their project
proposals to the DILG for appraisal; (c) the project proposals that passed the appraisal of the DILG to be
submitted to the Oversight Committee for review, evaluation and approval. It was only upon approval thereof
that the Oversight Committee would direct the DBM to release the funds for the projects.
To the Courts mind, the entire process involving the distribution and release of the LGSEF is constitutionally
impermissible. The LGSEF is part of the IRA or just share of the LGUs in the national taxes. To subject its
distribution and release to the vagaries of the implementing rules and regulations, including the guidelines and
mechanisms unilaterally prescribed by the Oversight Committee from time to time, as sanctioned by the assailed
provisos in the GAAs of 1999, 2000 and 2001 and the OCD resolutions, makes the release not automatic, a
flagrant violation of the constitutional and statutory mandate that the just share of the LGUs shall be
automatically released to them. The LGUs are, thus, placed at the mercy of the Oversight Committee.
Where the law, the Constitution in this case, is clear and unambiguous, it must be taken to mean exactly
what it says, and courts have no choice but to see to it that the mandate is obeyed. [27]Moreover, as correctly
posited by the petitioner, the use of the word shall connotes a mandatory order. Its use in a statute denotes an
imperative obligation and is inconsistent with the idea of discretion.[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 Committees work was supposed to be done a year from the
approval of the Code, or on October 10, 1992.[30] The Oversight Committees authority is undoubtedly limited
to the implementation of the Local Government Code of 1991, not to supplant or subvert the same. Neither can
it exercise control over the IRA, or even a portion thereof, of the LGUs.
That the automatic release of the IRA was precisely intended to guarantee and promote local autonomy
can be gleaned from the discussion below between Messrs. Jose N. Nolledo and Regalado M. Maambong, then
members of the 1986 Constitutional Commission, to wit:

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 Appeals[33] 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.
Aguirre[35] is particularly instructive. The Court declared therein that local fiscal autonomy includes the power of
the LGUs to, inter alia, allocate their resources in accordance with their own priorities:

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 284[38] 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 peoples reach; they teach men how to use and enjoy it. A nation
may establish a system of free governments but without the spirit of municipal institutions, it cannot have the
spirit of liberty.[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.