PRE-FINALS REVIEWER FOR PUBCORP | ATTY.
LARGO
Power Relations with National Government, Supreme Court, President and Congress;
Inter- Governmental Relations, And Hierarchal Relations Among Local Government Units
A. LGUs and National Government in General: LGUs are Agents of the State
LGUs are agents of the State – insofar as the exercise by the LGUs of its governmental functions
and therefore, as agents of the State, LGUs cannot be superior to the principal.
If the LGU in a particular controversy is not involved in a governmental or public function, don’t
look at the LGU as agent of the state, but as the representative of its inhabitants. The rationale of
the requirement that the ordinances should not contravene a statute is obvious. Municipal
governments are only agents of the national government.
Magtajas vs. Pryce Properties
When PAGCOR wanted to build a casino in Cagayan de Oro, it was met with massive
protests from women and religious groups including the local government unit. Thus,
they passed Ordinance No. 3355 revoking the business permits of establishments that
would allow the operation of casinos and Ordinance No. 3375-93 prohibiting the
operation of casinos in the city.
The Court held that it may not do so because an ordinance may not contravene a
statute. The rationale of the requirement that the ordinances should not contravene a
statute is obvious. Municipal governments are only agents of the national government.
Local councils exercise only delegated legislative powers conferred on them by
Congress as the national lawmaking body. The delegate cannot be superior to the
principal or exercise powers higher than those of the latter.
Pimentel Jr. vs Exec. Sec.
The Constitution declares it a policy of the State to ensure the autonomy of local
governments and even devotes a full article on the subject of local governance.
In order to fully secure to the LGUs the genuine and meaningful autonomy that would
develop them into self-reliant communities and effective partners in the attainment of
national goals, Section 17 of the Local Government Code vested upon the LGUs the
duties and functions pertaining to the delivery of basic services and facilities .
While the aforementioned provision charges the LGUs to take on the functions and
responsibilities that have already been devolved upon them from the national agencies
on the aspect of providing for basic services and facilities in their respective jurisdictions,
paragraph (c) of the same provision provides a categorical exception of cases involving
nationally-funded projects, facilities, programs and services. The essence of this
express reservation of power by the national government is that, unless an LGU is
particularly designated as the implementing agency, it has no power over a program
for which funding has been provided by the national government under the annual
general appropriations act, even if the program involves the delivery of basic
services within the jurisdiction of the LGU.
B. LGUs and the Supreme Court: LGUs are subject to Judicial Review
Under Section 4(2) of the 1987 Constitution, the Supreme Court has jurisdiction over all cases
involving the constitutionality, application, or operation of presidential decrees, proclamations,
orders, instructions, ordinances, and other regulations.
C. LGUs and the President: President exercises General Supervision
General Supervision essentially means that the president shall ensure “that laws are faithfully
executed” and “that LGUs acts are within the scope of their prescribed powers and functions.”
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 the ability to substitute
the judgment of the subordinate with his own.
2 Levels of Supervision:
1. Direct
- President has “direct” supervision over Provinces, Highly-Urbanized Cities, and
Independent Component Cities
2. Indirect
- President has “indirect” supervision over component cities and municipalities through
the province and barangays through the municipality or city.
This is seen in how administrative complaints are filed against erring local government officials
under Section 61 of the LGC.
When it is an elective official of a province, highly-urbanized city or independent
component city or component city shall be filed before the Office of the President
When it is an elective official of a municipality, it shall be filed before the sangguniang
panlalawigan whose decision shall be appealable to the Office of the President.
When it is an elective official of a barangay, it shall be filed before the sangguniang
panlungsod or sangguniang bayan whose decision shall be final and executory.
Ganzon vs. CA
The issue in this case is whether or not the Secretary of Local Government, as the President’s
alter ego, can suspend or remove local officials. The Supreme Court held in the affirmative.
However, this case was decided when the President still had the power to remove local
officials. Such power has now been given to the court.
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. In the
case at bar, the Secretary of Local Government, the President's alter ego, in consonance
with the specific legal provisions of Batas Blg. 337, the existing Local Government Code, can
suspend petitioner Mayor of Iloilo City and petitioner member of the Sangguniang
Panglunsod.
"Supervision" is not incompatible with disciplinary authority. As this Court held in Ganzon vs.
Cayanan, 104 Phil. 484, "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."
Drilon vs. Lim
Section 187 of the Local Government Code of 1991, which authorizes the Secretary of
Justice to review the constitutionality or legality of the tax ordinance, and, if warranted, to
revoke it on either or both of these grounds, was questioned as unconstitutional for it allows
the President, through the Justice Secretary, to exercise control over local government units.
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The Court held that the Secretary of Justice, as alter ego of the President, could not exercise
control under Section 187 because when he alters or modifies or sets aside a tax ordinance,
he is not also permitted to substitute his own judgment for the judgment of the local
government that enacted that measure.
Secretary Drilon did set aside the Manila Revenue Code, but he did not replace it with his
own version of what the Code should be. He did not pronounce the ordinance unwise or
unreasonable as a basis for its annulment. He did not say that in his judgment it was a bad
law. What he found only was that it was illegal. All he did in reviewing the said measure was
determine if the petitioners were performing their functions in accordance with law, that is,
with the prescribed procedure for the enactment of tax ordinances and the grant of powers
to the city government under the Local Government Code. As we see it, that was an act not
of control but of mere supervision.
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 the doing of the act. He has no judgment on this
matter except to see to it that the rules are followed. In the opinion of the Court, Secretary
Drilon did precisely this, and no more nor less than this, and so performed an act not of
control but of mere supervision.
Ampatuan vs. Puno
The day after the gruesome Maguindanao massacre, then President GMA issued
Proclamation No. 1946, placing “the Provinces of Maguindanao and Sulatan Kudarat and the
City of Cotabato under state of emergency” and directed the AFT and PNP “to undertake
such measures as may be allowed by the Constitution and by law to prevent and suppress
all incidents of lawlwss violence” in the named places. PGMA also issued AO 273
“transferring supervision of the ARMM from the Office of the President to the DILG. But due
to issues raised over terminology used in the said AO, PGMA issued AO 273-A by changing
“transferring” to “delegating.”
The claim of petitioners that the subject proclamation and administrative orders violate the
principle of local autonomy is anchored on the allegation that, through them, the President
authorized the DILG Secretary to take over the operations of the ARMM and assume direct
governmental powers over the region.
But, in the first place, the DILG Secretary did not take over control of the powers of the
ARMM. After law enforcement agents took respondent Governor of ARMM into custody for
alleged complicity in the Maguindanao massacre, the ARMM Vice-Governor, petitioner
Ansaruddin Adiong, assumed the vacated post on December 10, 2009 pursuant to the rule
on succession found in Article VII, Section 12, of RA 9054. In turn, Acting Governor Adiong
named the then Speaker of the ARMM Regional Assembly, petitioner Sahali-Generale,
Acting ARMM Vice-Governor. In short, the DILG Secretary did not take over the
administration or operations of the ARMM.
Does the President’s power of general supervision extend to the liga ng mga barangay,
which is not a local government unit?
National Liga ng mga Barangay vs. Paredes
The Court ruled in the affirmative. The Local Government Code defines the Liga ng mga
barangay as an organization of all Barangays for the primary purpose of determining the
representation of the liga in the sanggunians, and for ventilating, articulating and crystallizing
issues affecting barangay government administration and securing, through proper and legal
means, solutions thereto.
In this case, DILG, appointed as interim caretaker to administer and manage the affairs of
the Liga ng mga Barangay in giving remedy to alleged violations made by the incumbent
officer of the Liga in the conduct of their elections, issued 2 memorandum circulars which
alter, modify, nullify or set aside the actions of the Liga.
The rationale for making the Liga subject to DILG supervision is quite evident, whether from
the perspectives of logic or of practicality. The Liga is an aggroupment of barangays which
are in turn represented therein by their respective punong barangays. The representatives
of the Liga sit in an ex officio capacity at the municipal, city and provincial s anggunians. As
such, they enjoy all the powers and discharge all the functions of regular municipal
councilors, city councilors or provincial board members, as the case may be. Thus, the Liga
is the vehicle through which the barangay participates in the enactment of ordinances and
formulation of policies at all the legislative local levels higher than the sangguniang barangay,
at the same time serving as the mechanism for the bottom-to-top approach of development.
However, in this case, the DILG went beyond its “general supervision” power when the DILG
Secretary laid down the supplemental guidelines for the 1997 synchronized elections of the
provincial and metropolitan chapters and for the election of the national chapter of the Liga
ng mga Barangay; scheduled dates for the new provincial, metropolitan and national chapter
elections; and appointed respondent Rayos as president of Liga-Caloocan Chapter.
As the entity exercising supervision over the Liga ng mga Barangay, the DILG's authority
over the Liga is limited to seeing to it that the rules are followed, but it cannot lay down such
rules itself, nor does it have the discretion to modify or replace them. In this particular case,
the most that the DILG could do was review the acts of the incumbent officers of the Liga in
the conduct of the elections to determine if they committed any violation of
the Liga's Constitution and By-laws and its implementing rules. If the National Liga Board
and its officers had violated Liga rules, the DILG should have ordered the Liga to conduct
another election in accordance with the Liga'sown rules, but not in obeisance to DILG-
dictated guidelines. Neither had the DILG the authority to remove the incumbent officers of
the Liga and replace them, even temporarily, with unelected Liga officers. Like the local
government units, the Liga ng mga Barangay is not subject to control by the Chief Executive
or his alter ego.
D. LGUs and Congress: LGUs derive their existence and powers from Congress
LGUs derive their existence from Congress because it is Congress that creates, divides, merges,
abolishes or changes boundaries of LGUs in accordance with the criteria established in the lOcal
Government Code.
- Unless there is some constitutional limitation on the right, the legislature might, by a
single act, sweep from existence all of the municipal corporations in the State and the
municipal corporation could not prevent it.
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E. Mother LGU and Component LGU: Mother LGU reviews acts of component LGU
The Mother Sanggunian’s review power is limited to the following grounds –
If by the Sangguniang Panlalawigan in relation to Component Cities:
- If the acts are not ultra vires (Sec. 56)
If by the Sangguniang Panlungsod or Bayan in relation to Component Barangays:
- If the acts are consistent with law
- If the acts are consistent with municipal ordinances
Two types of reviews by the Mother LGU of acts of Component LGU:
1. Executive: Local Chief Executive (LCE) of Mother LGU reviews Executive Orders (EOs)
of LCE of Component LGU
- The governor shall review all executive orders promulgated by the component city or
municipal Mayor within his jurisdiction.
- The city of municipal Mayor shall review all executive orders promulgated by the Punong
Barangay within his jurisdiction.
- Such orders will be forwarded to the governor (for city and municipality) or the city or
municipal mayor (for barangays, within three days from their issuance.
- If the governor or the city or municipal mayor fails to act on said executive orders within
30 days after their submission, the same shall be deemed consistent with law and
therefore valid.
2. Legislative: Sanggunian of Mother LGU reviews Ordinances of Sanggunian and Eos of
LCE of Component LGU
On Component City and Municipal Ordinances and Resolutions
Component City and Municipal Ordinances and Resolutions approving the local
development plans and public investment programs formulated by the local development
councils
- The secretary of the Sangguniang Panlungsod or Bayan shall forward copies these
specific ordinances for review.
- Within 30 days after receipt, the Sangguniang Panlalawigan shall examine the
documents or transmit them to the provincial attorney, or if there is none, then to the
provincial prosecutor for prompt examination.
- If no action is taken after 30 days from the submission of such ordinance or resolution,
the same shall be presumed consistent with law and therefore valid.
Barangay Ordinances
(Same procedure above)
Said review mechanisms of ordinances and executive orders are however limited only to
determining “whether or not these are within the scope of the prescribed powers” of the component
LGU’s Sanggunian or Local Chief Executive.
F. LGUs and National Agencies and Offices (with project implementation functions):
Prior consultation and approval before implementation
National agencies and offices with project implementation fucntions shall coordinate with one
another and with the local government units concerned in the discharge of these functions. They
shall ensure the participation of local government units both in the planning and implementation
of said national projects. (Section 27)
Lina vs. Pano
Petitioners contend that prior consultation must be made before the PCSO can set up a lotto
station in the province of Laguna.
The Court held that petitioners erred in declaring that Sections 2 (c) [Declaration of Policy]
and 27 [Prior Consultations Required] of Republic Act 7160, otherwise known as the Local
Government Code of 1991, apply mandatorily in the setting up of lotto outlets around the
country. These apply only to national programs and/or projects which are to be implemented
in a particular local community, but if it is a GOCC, like PCSO, Sec. 27 will not apply. Lotto
is neither a program nor a project of the national government, but of a charitable institution,
the PCSO. Though sanctioned by the national government, it is far-fetched to say that lotto
falls within the contemplation of Sections 2 (c) and 27 of the Local Government Code. Section
27 of the Code should be read in conjunction with Section 26 thereof [Duty of National
Government Agencies in the Maintenance of Ecological Balance].
The projects and programs mentioned in Section 27 should be interpreted to mean
projects and programs whose effects are among those enumerated in Section 26 and 27,
to wit, those that: (1) may cause pollution; (2) may bring about climatic change; (3) may
cause the depletion of non-renewable resources; (4) may result in loss of crop land,
range-land, or forest cover; (5) may eradicate certain animal or plant species from the
face of the planet; and (6) other projects or programs that may call for the eviction of a
particular group of people residing in the locality where these will be implemented.
Obviously, none of these effects will be produced by the introduction of lotto in the
province of Laguna.
Bangus Fry Fisherfolk, et. al vs. Lanzanas
An ECC was issued in favor of respondent NPC authorizing the construction of a temporary
mooring facility in Minolo Cove in Puerto Galera which has been declared as a mangrove
area and breeding ground for bangus fry, an eco-tourist zone. They filed the complaint with
the ECC for the cancellation of the ECC and for the issuance of a writ of injunction. However,
the RTC dismissed the case for non-exhaustion of administrative remedies and for lack of
jurisdiction.
The Court ruled that a perusal of the allegations in the complaint showed that petitioners’
principal cause of action is the alleged illegality of the issuance of the ECC. The Court also
held that Sections 26 and 27 of the Local Government Code do not apply. Petitioners admit
that the mooring facility itself is not environmentally critical and hence does not belong to any
of the six types of projects mentioned in the law. There is no statutory requirement for the
concerned sanggunian to approve the construction of the mooring facility. It is another matter
if the operation of the power barge is at issue. As an environmentally critical project that
causes pollution, the operation of the power barge needs the prior approval of the
concerned sanggunian. However, what is before this Court is only the construction of the
mooring facility, not the operation of the power barge. Thus, the issuance of the ECC does
not violate Sections 26 and 27 of RA No. 7160.
Province of Rizal vs. Executive Secretary
At the height of the garbage crisis plaguing Metro Manila and its environs, parts of the
Marikina Watershed Reservation were set aside by the Office of the President [President
Ramos], through Proclamation No. 635, for use as a sanitary landfill and similar waste
disposal applications.
The petitioners opposed the implementation of said order since the creation of dump site
under the territorial jurisdiction would compromise the health of their constituents. More so,
the dump site is to be constructed in Watershed reservation. Through their concerted efforts
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of the officials and residents of Province of Rizal and Municipality of San Mateo, the dump
site was closed. However, during the term of President Estrada in 2003, the dumpsite was
re-opened. A temporary restraining order was then filed. Although petitioners did not raised
the question that the project was not consulted and approved by their appropriate
Sanggunian, the court take it into consideration since a mere MOA does not guarantee the
dump site’s permanent closure.
In analyzing the provisions of the Local Government Code, specifically Sections 26, 27 and
447, two requisites must be met before a national project that affects the environmental and
ecological balance of local communities can be implemented: prior consultation with the
affected local communities, and prior approval of the project by the appropriate sanggunian.
Absent either of these mandatory requirements, the project's implementation is illegal.
Republic vs. Sps Lazo
Sometime in 2006, the Spouses Lazo voluntarily sold to the National Irrigation
Administration (NIA) a portion of Monte Vista for the construction of an open irrigation canal
that is part of the Banaoang Pump Irrigation Project (BPIP). Afterwards, a Geohazard
Assessment Report was conducted on the said property and it was found that the ground
shaking and channel bank erosion are the possible hazards that could affect the NIA irrigation
canal. The Sangguniang Bayan of Bantay, Ilocos Sur approved Resolution No. 34, which
adopted the recommendations contained in the GAR. Respondent Rogelio Lazo brought to
NIA's attention Resolution No. 34 through letters. When respondents' demands were not
acted upon, they decided to file a complaint for just compensation with damages against NIA.
They also filed an Amended Complaint for the application of a TRO. In granting the TRO, the
trial court held that the project violates Section 26 and 27 of the LGC because no prior
consultation was made.
The Court dissolved the preliminary injunction because it was not founded upon a right
granted by law. Further, after a perusal of Section 26 and 27, it appears that the present case
does not fall under any of these instances; ergo, there is neither a need for prior consultations
of concerned sectors nor prior approval of the Sanggunian.
G. LGUs and National Agencies, offices and GOCCs (with field units in the LGU):
Consultation
The relevant provision is Section 25 (d) of the LGC which provides:
“National agencies and offices including government-owned or controlled corporations
with field units or branches in a province, city, or municipality shall furnish the local chief
executive concerned, for his information and guidance, monthly reports including duly
certified budgetary allocations and expenditures.”
H. LGUs and National agencies, offices and GOCCs (with environmental programs):
According to Section 26 of the LGC:
“It shall be the duty of every national agency or government-owned or controlled
corporation authorizing or involved in the planning and implementation of any project or
program that may cause pollution, climatic change, depletion of non- renewable
resources, loss of crop land, rangeland, or forest cover, and extinction of animal or
plant species, to consult with the local government units, nongovernmental organizations,
and other sectors concerned and explain the goals and objectives of the project or
program, its impact upon the people and the community in terms of environmental or
ecological balance, and the measures that will be undertaken to prevent or minimize the
adverse effects thereof.”
I. LGUs and the PNP, Fire Protection Unit and Jail Management Personnel:
Operational Supervision and Control by LGUs
LGU has no power in the selection of personnel. Only in the mobilization of the unit.
The extent of operational supervision and control of local chief executives over the police force,
fire protection unit, and jail management personnel assigned in their respective jurisdictions shall
be governed by the provisions of RA 6975.
Andaya vs. RTC
On January 3, 1996, the position of City Director of Cebu City Police Command became
vacant after P/Supt. Antonio Enteria was relieved of command. Petitioner Jose S. Andaya as
Regional Director of Regional Police Command No. 7 submitted to Cebu City Mayor Alvin B.
Garcia list of five eligibles from which the Mayor shall choose one for the stated position.
However, the Mayor did not choose anyone from the list because the name of P/Chief
Inspector Andres Sarmiento was not included therein. Instead, he requested Andaya to
include the name of Sarmiento. But Andaya refused the request on the ground that Sarmiento
was not qualified for the position pursuant to NAPOLCOM Memorandum Circular No. 95-04.
Subsequently, the City of Cebu filed with the Regional Trial Court, Branch 20, Cebu City, a
complaint for declaratory relief. Thereafter, the trial court rendered a decision in favor of
plaintiff, declaring Sarmiento as qualified to the position in question and his name was
ordered to be included in the list of five eligibles recommended to the position.
In setting aside the decision of the RTC, the Court held that under Republic Act No. 6975,
Section 51, the mayor of Cebu City shall be deputized as representative of the
Commission (National Police Commission) in his territorial jurisdiction and as such the
mayor shall have authority to choose the chief of police from a list of five (5) eligibles
recommended by the Police Regional Director. As deputy of the Commission, the authority
of the mayor is very limited. In reality, he has no power of appointment; he has only the
limited power of selecting one from among the list of five eligibles to be named the chief of
police.
Actually, the power to appoint the chief of police of Cebu City is vested in the Regional
Director, Regional Police Command No. 7. Much less may the mayor require the Regional
Director, Regional Police Command, to include the name of any officer, no matter how
qualified, in the list of five to be submitted to the mayor. The purpose is to enhance police
professionalism and to isolate the police service from political domination.
J. LGUs and NGOs: LGUs shall support, and may give assistance to NGOs
Under Section 34:
“Local government units shall promote the establishment and operation of people's and
non-governmental organizations to become active partners in the pursuit of local autonomy.”
Section 35 provides:
“Local government units may enter into joint ventures and such other cooperative
arrangements with people's and non-governmental organizations to engage in the delivery
of certain basic services, capability-building and livelihood projects, and to develop local
enterprises designed to improve productivity and income, diversity agriculture, spur rural
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industrialization, promote ecological balance, and enhance the economic and social well-
being of the people.”
Lastly, Section 36 says:
“A local government unit may, through its local chief executive and with the concurrence
of the sanggunian concerned, provide assistance, financial or otherwise, to such people's
and non-governmental organizations for economic, socially-oriented, environmental, or
cultural projects to be implemented within its territorial jurisdiction.”
Local Power of Taxation
Do LGUs have the inherent power to tax?
NO. LGUs do not possess the inherent power to tax in a unitary system. While the LGU’s general
power to tax is constitutionally guaranteed, such that no legislative act can take that power away
from them, their specific power to tax still remains a delegated power subject to the “guidelines
and limitations as Congress may provide.”
What is the extent of Congress’ power over LGUs power to tax?
The power of Congress relative to the fiscal powers of local governments has been reduced to the
authority to impose/set guidelines and limitations. Moreover, these limitations must be
“consistent with the basic policy of local autonomy.”
While the LGUs are being strengthened and made more autonomous, the legislature must still
see to it that:
a. the tax payer will not be over-burdened or saddled with multiple and unreasonable
impositions;
b. each LGU will have its fair share of available resources
c. the resources of the national government will not be unduly disturbed; and
d. local taxation will be fair, uniform and just.
What is local fiscal autonomy?
Pimentel vs Aguirre
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.
Local fiscal autonomy does not, however, rule out any manner of national government
intervention by way of supervision -- in order to ensure that local programs, fiscal and
otherwise, are consistent with national goals. Hence, there is a necessity of balancing
viewpoints and the harmonization of proposals from both local and national officials, who in
any case are partners in the attainment of national goals. Thus, Congress cannot pass a
law that mandates for the allocation of local taxes or local funds. It will violate local fiscal
autonomy.
SOURCES OF REVENUES OF LGUs:
1. Taxes, fees and charges (Sec 5, Art 10, 1987 Constitution)
2. Just share in the national taxes (Sec 6, Art 10, 1987 Constitution)
3. Equitable share in the proceeds of the utilization and development of the national wealth
within their respective areas (Sec 7, Art 10, 1987 Constitution)
A. Taxes, Fees, and Charges
Local Taxes: Community tax, transfer tax, income tax of banks and financial institutions,
professional tax, amusement tax
Fees: Library Fees, regulatory fees, business permits
Charges: For usage of government/public utilities (ex: basketball court, gymnasium)
Basco vs PAGCOR
In this case, it was contended that PD 1869, which exempts PAGCOR, a government owned
or controlled corporation, from paying any “tax of any kind or form, income or otherwise, as
well as fees, charges or levies of whatever nature, whether National or Local,” constitutes a
waiver of the right of the City of Manila to impose taxes and legal fees AND that the exemption
clause in PD 1869 is violative of the principle of local autonomy.
The Supreme Court found these contentions to be without merit for the following reasons:
a. The City of Manila, being a mere municipal corporation has no inherent right to impose
taxes. Its power to tax therefore must always yield to a legislative act which is superior
having been passed upon by the state itself which has the inherent power to tax.
b. The Charter of the City of Manila is subject to control by Congress. It should be stressed
that “municipal corporations are mere creatures of Congress” which has the power to
“create and abolish municipal corporations” due to its “general legislative powers”.
Congress, therefore, has the power of control over local governments. And if Congress
can grant the City of Manila the power to tax certain matters, it can also provide
for exemptions or even take back the power.
c. The City of Manila’s power to impose license fees on gambling has long been revoked.
Through PD 771 (enacted in 1975), the power of LGUs to regulate gambling thru the
grant of “franchise, licenses or permits” was withdrawn and was vested exclusively on
the national government.
d. Further, 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. In addition to its corporate powers, it also exercises regulatory powers.
e. PAGCOR is considered an instrumentality of the national government because
PAGCOR was given the power to regulate lawful games of chance. This is an exercise
of the regulatory power of the national government AND as such, it is part of police
power AND since it’s part of police power, to that extent, that is governmental, AND
because it’s governmental, PAGCOR, while a GOCC, becomes instrumentality of the
national government.
f. 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.
g. Further still, PD 1869 does not violate the Local Autonomy Clause. The power of LGUs
to “impose taxes and fees” is always subject to limitations which Congress may provide
by law. Since PD 1869 remains an operative law until amended, repealed or revoked,
its exemption clause remains as an exception to the exercise of the power of LGUs to
impose taxes and fees.
Q: Are GOCCs government instrumentalities?
Not all. Only those with governmental functions are considered government instrumentalities. This
doctrine emanates from the “supremacy” of the National Government over local governments.
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However, the SC took a different path on the same issue on whether or not a LGU may tax a
GOCC.
Mactan Cebu International Airport Authority (MIAA) vs Marcos
The issue here is whether or not the City of Cebu (an LGU) can tax a GOCC created by the
national government like the MCIAA (which was created by Congress through a special law.
The SC upheld this time local autonomy as the prevailing framework each time Congress
exercises its power to establish guidelines and limitations to local power to tax. SC refused
to apply Basco doctrine because the Basco case was decided before the effectivity of the
LGC of 1991 on January 1, 1992. (take note of this and ayaw gyud daw ni kalimti besh ingon
si Sir) The tax exemptions from real property tax granted to MCIAA under its charter had
been withdrawn upon the effectivity of the LGC of 1991 under Sec. 234. (Thus, there’s a
need for a new law granting tax exemption privilege in order to enjoy such privilege.)
Since taxes are what we pay for civilized society, or are the lifeblood of the nation, the law
frowns against exemptions from taxation and statutes granting tax exemptions are thus
construed strictissimi juris against the taxpayers and liberally in favor of the taxing authority.
A claim of exemption from tax payment must be clearly shown and based on language in the
law too plain to be mistaken. Elsewise stated, taxation is the rule, exemption therefrom is the
exception. However, if the grantee of the exemption is a political subdivision or
instrumentality, the rigid rule of construction does not apply because the practical effect of
the exemption is merely to reduce the amount of money that has to be handled by the
government in the course of its operations.
The power to tax is primarily vested in the Congress; however, in our jurisdiction, it may be
exercised by local legislative bodies, no longer merely by virtue of a valid delegation as
before, but pursuant to direct authority conferred by Section 5, Article X of the Constitution.
Under the latter, the exercise of the power may be subject to such guidelines and limitations
as the Congress may provide which, however, must be consistent with the basic policy of
local autonomy.
As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical
persons, including government-owned and controlled corporations, Section 193 of the LGC
prescribes the general rule: they are withdrawn upon the effectivity of the LGC, except those
granted to local water districts, cooperatives duly registered under R.A. No. 6938, non-stock
and non-profit hospitals and educational institutions, and unless otherwise provided in the
LGC. The latter proviso could refer to Section 234, which enumerates the properties exempt
from real property tax. But the last paragraph of Section 234 further qualifies the retention of
the exemption in so far as the real property taxes are concerned by limiting the retention only
to those enumerated there-in; all others not included in the enumeration lost the privilege
upon the effectivity of the LGC. Moreover, even as the real property is owned by the Republic
of the Philippines, or any of its political subdivisions covered by item (a) of the first paragraph
of Section 234, the exemption is withdrawn if the beneficial use of such property has been
granted to taxable person for consideration or otherwise.
Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity
of the LGC, exemptions from real property taxes granted to natural or juridical
persons, including government-owned or controlled corporations, except as provided
in the said section, and the petitioner is, undoubtedly, a government-owned
corporation, it necessarily follows that its exemption from such tax granted it in
Section 14 of its charter, R.A. No. 6958, has been withdrawn. Any claim to the contrary
can only be justified if the petitioner can seek refuge under any of the exceptions provided in
Section 234, but not under Section 133, as it now asserts, since, as shown above, the said
section is qualified by Section 232 and 234. In short, the petitioner can no longer invoke the
general rule in Section 133 that the taxing powers of the local government units cannot
extend to the levy of: (o) taxes, fees, or charges of any kind on the National Government, its
agencies, or instrumentalities, and local government units.
After ten long years and on exactly the same factual and legal issues, the Supreme Court reverted
back to the Basco doctrine.
MIAA vs CA
The Manila International Airport Authority (MIAA) operates the Ninoy Aquino International
Airport (NAIA) Complex in Parañaque City under Executive Order No. 903 (MIAA Charter),
as amended. As such operator, it administers the land, improvements and equipment within
the NAIA Complex. In March 1997, the Office of the Government Corporate Counsel (OGCC)
issued Opinion No. 061 to the effect that the Local Government Code of 1991 (LGC) withdrew
the exemption from real estate tax granted to MIAA under Section 21 of its Charter.
Thus, MIAA paid some of the real estate tax already due. In June 2001, it received Final
Notices of Real Estate Tax Delinquency from the City of Parañaque for the taxable years
1992 to 2001. The City Treasurer subsequently issued notices of levy and warrants of levy
on the airport lands and buildings. At the instance of MIAA, the OGCC issued Opinion No.
147 clarifying Opinion No. 061, pointing out that Sec. 206 of the LGC requires persons
exempt from real estate tax to show proof of exemption. According to the OGCC, Sec. 21 of
the MIAA Charter is the proof that MIAA is exempt from real estate tax. MIAA, thus, filed a
petition with the Court of Appeals seeking to restrain the City of Parañaque from imposing
real estate tax on, levying against, and auctioning for public sale the airport lands and
buildings, but this was dismissed for having been filed out of time.
Are the airport lands and buildings of MIAA are exempt from real estate tax?
The airport lands and buildings of MIAA are exempt from real estate tax imposed by local
governments. Sec. 243(a) of the LGC exempts from real estate tax any real property owned
by the Republic of the Philippines. This exemption should be read in relation with Sec. 133(o)
of the LGC, which provides that the exercise of the taxing powers of local governments shall
not extend to the levy of taxes, fees or charges of any kind on the National Government, its
agencies and instrumentalities.
These provisions recognize the basic principle that local governments cannot tax the national
government, which historically merely delegated to local governments the power to tax. The
rule is that a tax is never presumed and there must be clear language in the law imposing
the tax. This rule applies with greater force when local governments seek to tax national
government instrumentalities. Moreover, a tax exemption is construed liberally in favor of
national government instrumentalities.
MIAA is not a GOCC, but an instrumentality of the government. The Republic remains the
beneficial owner of the properties. MIAA itself is owned solely by the Republic. At any time,
the President can transfer back to the Republic title to the airport lands and buildings without
the Republic paying MIAA any consideration. As long as the airport lands and buildings are
reserved for public use, their ownership remains with the State. Unless the President issues
a proclamation withdrawing these properties from public use, they remain properties of public
dominion. As such, they are inalienable, hence, they are not subject to levy on execution or
foreclosure sale, and they are exempt from real estate tax.
However, portions of the airport lands and buildings that MIAA leases to private entities are
not exempt from real estate tax as provided in Sec. 234 (a) of the LGC. In such a case, MIAA
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has granted the beneficial use of such portions for a consideration to a taxable person. Thus,
only portions of the Airport Lands and Buildings leased to taxable persons like private parties
are subject to real estate tax by the City of Paranaque.
Can LGUs impose taxes on the instrumentalities of the National Government? NO.
Sec 234 (a) of the LGC exempts from real estate tax any “real property owned by the Republic of
the Philippines or any of its political subdivisions.” This exemption should be read in relation with
Section 133 (o), which prohibits LGUs from imposing “taxes, fees or charges of any kind on the
national government, its agencies and instrumentalities.”
The real properties owned by the Republic are titled either in the name of the Republic itself or in
the name of agencies or instrumentalities of the National Government (as allowed by the
Administrative Code). Such real properties remain owned by the republic and continue to be
exempt from real estate tax.
THUS, although Sec. 193 of the LGC says incentives and tax exemptions have been withdrawn
upon the effectivity of the code, insofar as real property taxes are concerned, the National
government and its political subdivisions are still exempt from taxes as provided in Sec. 234 of the
Code.
IN SUMMARY:
General Rule: LGUs have the power to impose real estate taxes.
Exception: LGUs have no power to tax the national government, its agencies and instrumentalities.
[Sec 133(o)]
Exception to the Exception: LGUs can impose real estate tax over real property owned by the
Republic of the Philippines or any of its political subdivisions, when the beneficial use thereof has
been granted, for consideration or otherwise, to a taxable entity.
Manila Electric Company vs Province of Laguna
After the enactment of the Code, franchise tax ordinance was enacted. On the basis of this
ordinance, respondent Provincial Treasurer sent a demand letter to MERALCO for the
corresponding tax payment. MERALCO paid the tax under protest. A formal claim for refund
was thereafter sent by MERALCO to the Provincial Treasurer of Laguna claiming that the
franchise tax it had paid and continued to pay to the National Government pursuant to P.D.
551 already included the franchise tax imposed by the Provincial Tax Ordinance. The claim
for refund of petitioner was denied. In denying the claim, respondents relied on a more recent
law, i.e., the Local Government Code, than the old decree invoked by petitioner. Petitioner
MERALCO filed with the Regional Trial Court of Sta. Cruz, Laguna, a complaint for refund.
The trial court dismissed the complaint. The Court also dismissed the petition.
A province, under the LGC, can impose a franchise tax notwithstanding any exemption
granted by any law or other special law. It might be well to recall that local governments do
not have the inherent power to tax except to the extent that such power might be delegated
to them either by the basic law or by statute. Presently, under Article X of the 1987
Constitution, a general delegation of that power has been given in favor of local government
units.
The 1991 Code explicitly authorizes provincial governments, notwithstanding “any exemption
granted by any law or other special law, x x x (to) impose a tax on businesses enjoying a
franchise.” (Sec. 137) The Local Government Code has effectively withdrawn under Section
193 thereof, tax exemptions or incentives theretofore enjoyed by certain entities.
Philippine Petroleum Corp. vs Mun. Of Pililla, Rizal
The crucial issue in this case is whether or not petitioner PPC whose oil products are subject
to specific tax under the NIRC, is still liable to pay (a) tax on business and (b) storage fees,
considering Provincial Circular No. 6-77; and mayor's permit and sanitary inspection fee unto
the respondent Municipality of Pililla, Rizal, based on Municipal Ordinance No. 1.
While Section 2 of P.D. 436 prohibits the imposition of local taxes on petroleum products,
said decree did not amend Sections 19 and 19(a) of P.D. 231 as amended by P.D. 426,
wherein the municipality is granted the right to levy taxes on business of manufacturers,
importers, producers of any article of commerce of whatever kind or nature. A tax on business
is distinct from a tax on the article itself.
Thus, if the imposition of tax on business of manufacturers, etc. in petroleum products
contravenes a declared national policy, it should have been expressly stated in P.D. No. 436.
The exercise by local governments of the power to tax is ordained by the present
Constitution. To allow the continuous effectivity of the prohibition set forth in PC No. 26-73
(1) would be tantamount to restricting their power to tax by mere administrative issuances.
Under Section 5, Article X of the 1987 Constitution, only guidelines and limitations that may
be established by Congress can define and limit such power of local governments. Thus:
Each local government unit shall have the power to create its own sources of revenues and
to levy taxes, fees, and charges subject to such guidelines and limitations as the Congress
may provide, consistent with the basic policy of local autonomy . . .
As to the authority of the mayor to waive payment of the mayor's permit and sanitary
inspection fees, the trial court did not err in holding that "since the power to tax includes the
power to exempt thereof which is essentially a legislative prerogative, it follows that a
municipal mayor who is an executive officer may not unilaterally withdraw such an expression
of a policy thru the enactment of a tax." The waiver partakes of the nature of an exemption.
It is an ancient rule that exemptions from taxation are construed in strictissimi juris against
the taxpayer and liberally in favor of the taxing authority. Tax exemptions are looked upon
with disfavour. Thus, in the absence of a clear and express exemption from the payment of
said fees, the waiver cannot be recognized. As already stated, it is the law-making body, and
not an executive like the mayor, who can make an exemption. Under Section 36 of the Code,
a permit fee like the mayor's permit, shall be required before any individual or juridical entity
shall engage in any business or occupation under the provisions of the Code.
The City Government of Quezon City, vs. Bayan Telecommunications, Inc.
Bayantel is a legislative franchise holder under R.A. No. 3259 to establish and operate radio
stations for domestic telecommunications, radiophone, broadcasting and telecasting. It was
exempted from real property taxes under its franchise. Rep. Act No. 7160, otherwise known
as the "Local Government Code of 1991" (LGC), took effect on 1992. Section 232 of the
Code grants local government units within the Metro Manila Area the power to levy tax on
real properties. Complementing the aforequoted provision is the second paragraph of Section
234 of the same Code which withdrew any exemption from realty tax heretofore granted to
or enjoyed by all persons, natural or juridical. Barely few months after the LGC took effect,
Congress enacted Rep. Act No. 7633, amending Bayantel’s original franchise. This
amendment in a way restored Bayantel’s exemption from real property taxes.
In 1993, the government of Quezon City enacted City Ordinance No. SP-91, S-93, otherwise
known as the Quezon City Revenue Code (QCRC), imposing, under Section 5 thereof, a real
property tax on all real properties in Quezon City, and, reiterating in its Section 6, the
withdrawal of exemption from real property tax under Section 234 of the LGC.
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Bayantel wrote the office of the City Assessor seeking the exclusion of its real properties in
the city from the roll of taxable real properties. With its request having been denied, Bayantel
interposed an appeal with the Local Board of Assessment Appeals.
Are Bayantel’s real properties in Quezon City are exempt from real property taxes under its
legislative franchise?
There seems to be no issue as to Bayantel’s exemption from real estate taxes by virtue of
the term "exclusive of the franchise" qualifying the phrase "same taxes on its real estate,
buildings and personal property," found in Section 14, of its original franchise, Rep. Act No.
3259. The legislative intent expressed in the phrase "exclusive of this franchise" cannot be
construed other than distinguishing between two (2) sets of properties, be they real or
personal, owned by the franchisee, namely, (a) those actually, directly and exclusively used
in its radio or telecommunications business, and (b) those properties which are not so used.
It is worthy to note that the properties subjects of the present controversy are only those
which are admittedly falling under the first category. Ultimately, therefore, the inevitable result
was that all realties which are actually, directly and exclusively used in the operation of its
franchise are "exempted" from any property tax. This was under its original franchise.
However, with the LGC’s taking effect on January 1, 1992, Bayantel’s "exemption" from real
estate taxes for properties of whatever kind located within the Metro Manila area was, by
force of Section 234 of the Code, supra, expressly withdrawn. But, not long thereafter,
however, or on July 20, 1992, Congress passed Rep. Act No. 7633 amending Bayantel’s
original franchise. Worthy of note is that Section 11 of Rep. Act No. 7633 is a virtual
reenactment of the tax provision, i.e., Section 14, of Bayantel’s original franchise under Rep.
Act No. 3259.
Stated otherwise, Section 14 of Rep. Act No. 3259 which was deemed impliedly repealed by
Section 234 of the LGC was expressly revived under Section 14 of Rep. Act No. 7633. In
concrete terms, the realty tax exemption heretofore enjoyed by Bayantel under its original
franchise, but subsequently withdrawn by force of Section 234 of the LGC, has been restored
by Section 14 of Rep. Act No. 7633.
Digital Telecom Phils. vs. Pangasinan,
On 13 November 1992, petitioner DIGITEL was granted, under Provincial Ordinance No. 18-
92, a provincial franchise to install, maintain and operate a telecommunications system within
the territorial jurisdiction of respondent Province of Pangasinan. Under the said provincial
franchise, the grantee is required to pay franchise and real property taxes.
Pursuant to the mandate of Sections 137 and 232 of the Local Government Code, the
Sangguniang Panlalawigan of respondent Province of Pangasinan enacted on 29 December
1992, Provincial Tax Ordinance No. 1, entitled "The Real Property Tax Ordinance of 1992."
Section 4 thereof imposed a real property tax on real properties located within the territorial
jurisdiction of the province. The particular provision, however, technically expanded the
application of Sec. 6 of the provincial franchise of petitioner DIGITEL to include machineries
and other improvements, not thereinafter exempted.
Thereafter, petitioner DIGITEL was granted by Republic Act No. 7678, a legislative franchise
authorizing the grantee to install, operate and maintain telecommunications systems, this
time, throughout the Philippines. Under its legislative franchise, particularly Sec. 5 thereof,
petitioner DIGITEL became liable for the payment of a franchise tax "as may be prescribed
by law of all gross receipts of the telephone or other telecommunications businesses
transacted under it by the grantee," as well as real property tax "on its real estate, and
buildings "exclusive of this franchise."
Later, respondent Province of Pangasinan, in its examination of its record found that
petitioner DIGITEL had a franchise tax deficiency for the years 1992, 1993 and 1994. On 16
March 1995, Congress passed Republic Act No. 7925, otherwise known as "The Public
Telecommunications Policy Act of the Philippines." Section 23 of this law entitled Equality of
Treatment in the Telecommunications Industry, provided for the ipso facto application to any
previously granted telecommunications franchises of any advantage, favor, privilege,
exemption or immunity granted under existing franchises, or those still to be granted, to be
accorded immediately and unconditionally to earlier grantees.
The issue is whether or not petitioner DIGITEL's real properties located within the territorial
jurisdiction of respondent Province of Pangasinan are exempt from real property taxes by
virtue of Section 5 of Republic Act No. 7678.
The court ruled in the affirmative. However, it is with the caveat that such exemption solely
applies to those real properties actually, directly and exclusively used by the grantee in its
franchise.
The present issue actually boils down to a dispute between the inherent taxing power of
Congress and the delegated authority to tax of the local government borne by the 1987
Constitution. In the case PLDT v. City of Davao, the Court already sustained the power of
Congress to grant exemptions over and above the power of the local government's delegated
taxing authority notwithstanding the source of such power. In view of the unequivocal intent
of Congress to exempt from real property tax those real properties actually, directly and
exclusively used by petitioner DIGITEL in the pursuit of its franchise, respondent Province of
Pangasinan can only levy real property tax on the remaining real properties of the grantee
located within its territorial jurisdiction not part of the above-stated classification. Said
exemption, however, merely applies from the time of the effectivity of petitioner DIGITEL's
legislative franchise and not a moment sooner.
City of Iloilo vs. Smart Communications
The City of Iloilo assessed SMART for deficiency local franchise and business taxes which it
incurred for the years 1997 to 2001. SMART protested and claimed that exemption from
payment of local franchise and business taxes based on Section 9 of its legislative franchise
under Republic Act (R.A.) No. 7294 (SMART’s franchise).
The City of Iloilo posits that SMART’s claim for exemption under its franchise is not equivocal
enough to prevail over the specific grant of power to local government units to exact taxes
from businesses operating within its territorial jurisdiction under Section 137 in relation to
Section 151 of the LGC. More importantly, it claimed that exemptions from taxation have
already been removed by Section 193 of the LGC.
The issue in this case is whether SMART is exempt from the payment of local franchise and
business taxes.
The Court has ruled that by virtue of Section 193 of the LGC, all tax exemption privileges
then enjoyed by all persons, save those expressly mentioned, have been withdrawn effective
January 1, 1992 – the date of effectivity of the LGC. The first clause of Section 137 of the
LGC states the same rule. However, the withdrawal of exemptions, whether under Section
193 or 137 of the LGC, pertains only to those already existing when the LGC was enacted.
The intention of the legislature was to remove all tax exemptions or incentives granted prior
to the LGC. As SMART’s franchise was made effective on March 27, 1992 – after the
effectivity of the LGC – Section 193 will therefore not apply in this case.
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But while Section 193 of the LGC will not affect the claimed tax exemption under SMART’s
franchise, we fail to find a categorical and encompassing grant of tax exemption to SMART
covering exemption from both national and local taxes.
R.A. No 7294 does not expressly provide what kind of taxes SMART is exempted from. It is
not clear whether the “in lieu of all taxes” provision in the franchise of SMART would include
exemption from local or national taxation. What is clear is that SMART shall pay franchise
tax equivalent to three percent (3%) of all gross receipts of the business transacted under its
franchise. But whether the franchise tax exemption would include exemption from exactions
by both the local and the national government is not unequivocal. The uncertainty in the “in
lieu of all taxes” clause in R.A. No. 7294 on whether SMART is exempted from both local
and national franchise tax must be construed strictly against SMART which claims the
exemption.
Nonetheless, even if Section 9 of SMART’s franchise can be construed as covering local
taxes as well, reliance thereon would now be unavailing. The “in lieu of all taxes” clause
basically exempts SMART from paying all other kinds of taxes for as long as it pays the 3%
franchise tax; it is the franchise tax that shall be in lieu of all taxes, and not any other form of
tax. Franchise taxes on telecommunications companies, however, have been abolished by
R.A. No. 7716 or the Expanded Value-Added Tax Law (E-VAT Law), which was enacted by
Congress on January 1, 1996. To replace the franchise tax, the E-VAT Law imposed a 10%
value-added tax on telecommunications companies under Section 108 of the National
Internal Revenue Code. The “in lieu of all taxes” clause in the legislative franchise of SMART
has thus become functus officio, made inoperative for lack of a franchise tax.
SMART’s claim for exemption from local business and franchise taxes based on Section 9
of its franchise is therefore unfounded.
GSIS vs City of Manila
GSIS owns two parcels of land. One was used by both GSIS and MeTC of Manila while the
other was on lease. The City of Manila sent a letter to GSIS informing them of unpaid real
property taxes on the property.
Upon the enactment of the Local Government Code, there is no serious doubt that Congress
intended to withdraw the exemptions granted to GSIS, subject to certain exceptions.
However, it was restored by the enactment of RA 8291 which amended the GSIS Charter.
The said proviso provides that GSIS is exempt from all forms of taxes. Further, the proviso
does not allow and implied repeal and provides that an express repeal should show that a) it
categorically, expressly and specifically repeals Sec. 39 and b) a provision is enacted to
substitute or replace the exemption.
In the said proviso as well, all the unpaid real property taxes of GSIS are deemed to have
been paid already. The Court also held that, like the MIAA, GSIS is an instrumentality of the
government. Firstly, while created under CA 186 as a non-stock corporation, GSIS is not, in
the context of the aforequoted Sec. 193 of the LGC, a GOCC following the teaching of Manila
International Airport Authority, for, like MIAA, GSIS’ capital is not divided into unit shares.
Also, GSIS has no members to speak of. And by members, the reference is to those who,
under Sec. 87 of the Corporation Code, make up the non-stock corporation, and not to the
compulsory members of the system who are government employees. Its management is
entrusted to a Board of Trustees whose members are appointed by the President. Secondly,
the properties of GSIS are owned by the Republic. Thirdly, GSIS performs a vital
governmental function which is to manage the funds for life insurance, retirement,
survivorship, and disability benefits to all government employees.
Still the other land that was leased (Katigbak Property) shall be taxable under the “beneficial
use” doctrine. But it was the lessee that was ordered to pay. However, the Katigbak Property
cannot in any event be subject of a public auction sale even there is a tax delinquency.
Mactan Int’l Airport vs. Lapu-Lapu City [G.R. No. 181756] – not in the syllabus
Petitioner, Mactan-Cebu International Airport Authority (MCIAA) was created by Congress
under Republic Act No. 6958. Upon its creation, petitioner enjoyed exemption from realty
taxes imposed by the National Government or any of its political subdivision. However, upon
the effectivity of the LGC the Supreme Court rendered a decision that the petitioner is no
longer exempt from realty estate taxes.
Respondent City issued to petitioner a Statement of Real Estate Tax assessing the lots
comprising the Mactan International Airport which included the airfield, runway, taxi way and
the lots on which these are built. Petitioner contends that these lots, and the lots to which
they are built, are utilized solely and exclusively for public purposes and are exempt from
real property tax. Petitioner based its claim for exemption on DOJ Opinion No.
50. Respondent issued notices of levy on 18 sets of real properties of petitioners. Petitioner
filed a petition for Prohibition, TRO, and a writ of preliminary injunction with RTC Lapulapu
which sought to enjoin respondent City from issuing the warrant of levy against petitioner’s
properties from selling them at public auction for delinquency in realty tax obligations.
The petition has merit. The petitioner is an instrumentality of the government; thus, its
properties actually, solely and exclusively used for public purposes, consisting of the airport
terminal building, airfield, runway, taxiway and the lots on which they are situated, are not
subject to real property tax and respondent City is not justified in collecting taxes from
petitioner over said properties.
The Court cited various government instrumentalities that are exempt from real property tax
such as GSIS and the Philippine Ports Authority. Petitioner MCIAA is vested with corporate
powers but it is not a stock or non-stock corporation, which is a necessary condition before
an agency or instrumentality is deemed a government-owned or controlled corporation. Like
MIAA and as seen in RA 6958, petitioner MCIAA has capital under its charter but it is not
divided into shares of stock. It also has no stockholders or voting shares.
The Court ruled that MCIAA’s properties that are actually, solely and exclusively used for
public purpose, consisting of the airport terminal building, airfield, runway, taxiway and the
lots on which they are situated, EXEMPT from real property tax imposed by the City of Lapu-
Lapu. It also declared VOID all the real property tax assessments, including the additional
tax for the special education fund and the penalty interest, as well as the final notices of real
property tax delinquencies, issued by the City of Lapu-Lapu on petitioner’s properties, except
the assessment covering the portions that petitioner has leased to private parties. Lastly, it
declared NULL and VOID the sale in public auction of 27 of petitioner’s properties and the
eventual forfeiture and purchase of the said properties by respondent City of Lapu-Lapu. We
likewise declare VOID the corresponding Certificates of Sale of Delinquent Property issued
to respondent City of Lapu-Lapu.
B. Just share in the National Taxes
Local government units shall have a just share, as determined by law, in the national taxes which
shall be automatically released to them. A basic feature of local fiscal autonomy is the automatic
release of shares of LGUs in the national internal revenue.
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Pimentel vs Aguirre
Sec 4 Of AO 372 which mandates that pending the assessment and evaluation by the Dev’t.
Budget Coordinating Committee of the emerging fiscal situation, the amount equivalent to
10% of the internal revenue allotment to LGUs shall be withheld contravenes the mandate of
Sec. 6 Art. X of the Consti and Art 286 of the LGC 1991 that the share of each LGU in the
national taxes (IRA) shall be “automatically released” to them and shall “not be subject to any
lien or holdback that may be imposed by the National Gov’t. for whatever purpose.
National Government Taxes: Value-added tax, sales tax, documentary stamp tax, capital gains
tax, inheritance tax, estate tax, donor’s tax
 It should not be subject to lien or holdback that may be impose by the National
Government.
2007 BAR Exam: The Provincial Gov. of Bataan requested the DBM to release its IRA of P100M
for the current budget year. However, the GAA provided that the IRA may be released only if the
province meets certain conditions as determined by an Oversight Council created by the
President. Is this requirement valid?
Answer: No. It shall be automatically released to the local treasurer - 286, LGC.
Allocation of IRA under Section 285:
→ Provinces - 23%
→ Cities - 23%
→ Mun. - 34%
→ Barangays - 20%
The share of each province is determined on the basis of the following formula:
(a) Population - Fifty percent (50%);
(b) Land Area - Twenty-five percent (25%); and
(c) Equal sharing - Twenty-five percent (25%)
Gov. Luis Raymund F. Villafuerte, et al. vs Hon. Jesse M. Robredo
In his capacity as DILG Secretary, Robredo issued three Memorandum Circulars pertaininto
the full disclosure of local budget and finances, including bids and public offerings, to the use
of the 20% component of the annual IRA and pertaining to the strict adherence to Section 90
of the GAA. This was pursuant to a COA finding that the LGUs have been charging expenses
that should be charged to the MOOE have been charged to the 20% development fund. It
was a clear violation of Section 287 of the LGC.
Are the assailed memorandum circulars violative of the principles of local and fiscal
autonomy enshrined in the Constitution and the LGC? No.
A reading of MC No. 2010-138 shows that it is a mere reiteration of an existing provision in
the LGC. It was plainly intended to remind LGUs to faithfully observe the directive stated in
Section 287 of the LGC to utilize the 20% portion of the IRA for development projects. It was,
at best, an advisory to LGUs to examine themselves if they have been complying with the
law. In 1995, the Commission on Audit (COA) conducted an examination and audit on the
manner the local government units utilized their Internal Revenue Allotment (IRA) for the
calendar years 1993-1994.
Contrary to the Villafuerte, et al.’s posturing, however, the enumeration in MC No. 2010-138
was not meant to restrict the discretion of the LGUs in the utilization of their funds. LGUs
remain at liberty to map out their respective development plans solely on the basis of their
own judgment and utilize their IRAs accordingly, with the only restriction that 20% thereof be
expended for development projects. They may even spend their IRAs for some of the
enumerated items should they partake of indirect costs of undertaking development projects.
Thus, notwithstanding the local fiscal autonomy being enjoyed by LGUs, they are still under
the supervision of the President and maybe held accountable for malfeasance or violations
of existing laws. "Supervision is not incompatible with discipline. And the power to discipline
and ensure that the laws be faithfully executed must be construed to authorize the President
to order an investigation of the act or conduct of local officials when in his opinion the good
of the public service so requires.” It is inconceivable, as well, how the publication of budgets,
expenditures, contracts and loans and procurement plans of LGUs required in the assailed
issuances could have infringed on the local fiscal autonomy of LGUs since a) the issuances
do not interfere with how the LGU will spend their development fund, b) the additional
requirements of posting of budgets, expenditures, contracts and loans, and procurement
plans are well within Sec. 352 of the LGC and c) the Court believes that the supervisory
powers of the President are broad enough to embrace the power to require the publication
of certain documents as a mechanism of transparency.
C. Equitable Share in the Proceeds of Utilization of Wealth in the locality
Local government units are entitled to an equitable share in the proceeds of the utilization and
development of the national wealth within their respective areas according to Section 7, Article X
of the 1987 Constitution and Section 289 of the LGC.
Amount of share
They shall have a share of 40% of the gross collection derived by the national government from
the preceding fiscal year from mining taxes, royalties, forestry and fishery charges, and such other
taxes, fees, or charges, including related surcharges, interests, or fines, and from its share in any
co-production, joint venture or production sharing agreement in the utilization and development of
the national wealth within their territorial jurisdiction.
Share of the Local Governments from GOCCs
The share is based on the following formula:
a. 1% of the gross sales or receipts of the preceding calendar year; or
b. 40% of the mining taxes, royalties, forestry and fishery charges and such other taxes,
fees or charges, including related surcharges, interests, or fines the government agency
or government -owned or - controlled corporation would have paid if it were not
otherwise exempt.
Under Section 295, the share will be distributed in the following manner:
a) Where the natural resources are located in the province (1) province - Twenty percent
(20%);
(1) Component city/municipality - Forty-five percent (45%); and
(2) Barangay - Thirty-five percent (35%)
Provided, however, That where the natural resources are located in two (2) or more provinces, or
in two (2) or more component cities or municipalities or in two (2) or more barangays, their
respective shares shall be computed on the basis of:
(1) Population - Seventy percent (70%); and
(2) Land area - Thirty percent (30%)
b) Where the natural resources are located in a highly urbanized or independent
component city:
(1) city - Sixty-five percent (65%); and
(2) barangay - Thirty-five percent (35%)
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Provided, however, That where the natural resources are located in such two (2) or more cities,
the allocation of shares shall be based on the formula on population and land area as specified in
paragraph (a) of this Section.
Remittance of Share
The share of local government units from the utilization and development of national wealth shall
be remitted in accordance with Section 286 of this Code: Provided, however, That in the case of
any government agency or government-owned or -controlled corporation engaged in the utilization
and development of the national wealth, such share shall be directly remitted to the provincial,
city, municipal or barangay treasurer concerned within five (5) days after the end of each quarter.
(Section 293)
Appropriation and Utilization of the Share by the Local Government
The proceeds from the share of local government units pursuant to this chapter shall be
appropriated by their respective sanggunian to finance local development and livelihood projects:
Provided, however, That at least eighty percent (80%) of the proceeds derived from the
development and utilization of hydrothermal, geothermal, and other sources of energy shall be
applied solely to lower the cost of electricity in the local government unit where such a source of
energy is located. (Section 294)
Requisites for validity of Local Police Power:
Local Police Power
LGC Section 16. General Welfare. - Every local government unit shall exercise the powers
expressly granted, those necessarily implied therefrom, as well as powers necessary, appropriate,
or incidental for its efficient and effective governance, and those which are essential to the
promotion of the general welfare. Within their respective territorial jurisdictions, local government
units shall ensure and support, among other things, the preservation and enrichment of culture,
promote health and safety, enhance the right of the people to a balanced ecology, encourage and
support the development of appropriate and self-reliant scientific and technological capabilities,
improve public morals, enhance economic prosperity and social justice, promote full employment
among their residents, maintain peace and order, and preserve the comfort and convenience of
their inhabitants.
Nature of Police Power
Basically a delegated power both in its general and specific sense, unlike in taxation power
where the general power to tax is constitutionally guaranteed. Hence, police power is still
under the control of Congress in all its respects, although under Sec. 5 of the Code, the general
welfare provision shall be liberally construed to give more powers to the LGUs.
How do you test the validity of the Local Police Power?
a. Lawful Subject - so long as the act affects the public, it can be regulated. The subject
must be regulated because the interest of the public as distinguished to the interest
of the private individual requires governmental interference.
b. Lawful Means - the means employed must be reasonably necessary to accomplish the
objective and not unduly oppressive upon the individuals
Tatel v Mun. of Virac
Petitioner Celestino Tatel owns a warehouse in barrio Sta. Elena, Municipality of Virac.
Complaints were received by the municipality concerning the disturbance caused by the
operation of the abaca bailing machine inside petitioner’s warehouse. A committee was then
appointed by the municipal council, and it noted from its investigation on the matter that an
accidental fire within the warehouse of the petitioner created a danger to the lives and
properties of the people in the neighborhood. Resolution No. 29 was then passed by the
Municipal council declaring said warehouse as a public nuisance within a purview of Article
694 of the New Civil Code. According to respondent municipal officials, petitioner’s
warehouse was constructed in violation of Ordinance No. 13, series of 1952, prohibiting the
construction of warehouses near a block of houses either in the poblacion or barrios without
maintaining the necessary distance of 200 meters from said block of houses to avoid loss of
lives and properties by accidental fire. On the other hand, petitioner contends that Ordinance
No. 13 is unconstitutional.
The storage of abaca and copra in petitioner’s warehouse is a nuisance under the provisions
of Article 694 of the Civil Code. At the same time, Ordinance No. 13 was passed by the
Municipal Council of Virac in the exercise of its police power. It is valid because it meets
the criteria for a valid municipal ordinance: 1) must not contravene the Constitution
or any statute, 2) must not be unfair or oppressive, 3) must not be partial or
discriminatory, 4) must not prohibit but may regulate trade, 5) must be general and
consistent with public policy, and 6) must not be unreasonable. The purpose of the said
ordinance is to avoid the loss of property and life in case of fire which is one of the primordial
obligation of government. The lower court did not err in its decision.
1. Must not contravene the Consti AND statute
2. Not unfair or oppressive [also a constitutional reqt.]
3. Not partial or discriminatory [also a constitutional reqt.]
4. Not prohibit, but only regulate lawful trade (see: De la Cruz vs Paras where an
ordinance prohibited the operation of night clubs)
5. Consistent with public policy [bec. Of the requirement of valid delegation of legislative
power] (see: Lim vs Pacquing) where it was found out that the national policy was for
national government, not for LGUs, to grant frachises for operation of jai-alai. LGUs can
only regulate but not grant franchise for operation of jai-alai.
6. Not reasonable [also a constitutional reqt.] (see: Balacuit case where an ordinance
penalized movie houses that charged full payment for admission of children between 7-
12)
Dela Cruz v Paras
Bocaue, Bulacan prohibited the operation of night clubs, and the pursuit of a lawful
occupation, such clubs employing hostesses pursuant to Ord 84 which is further in pursuant
to RA 938.
The SC ruled against Paras. If night clubs were merely then regulated and not prohibited,
certainly the assailed ordinance would pass the test of validity. SC had stressed
reasonableness, consonant with the general powers and purposes of municipal corporations,
as well as consistency with the laws or policy of the State. It cannot be said that such a
sweeping exercise of a lawmaking power by Bocaue could qualify under the term reasonable.
The objective of fostering public morals, a worthy and desirable end can be attained by a
measure that does not encompass too wide a field. Certainly the ordinance on its face is
characterized by overbreadth. The purpose sought to be achieved could have been attained
by reasonable restrictions rather than by an absolute prohibition. Pursuant to the title of the
Ordinance, Bocaue should and can only regulate not prohibit the business of cabarets.
Lim v Pacquing
Respondent judge in this case issued certain orders, which compelled then Mayor-petitioner
Alfredo Lim to furnish respondent company ADC a permit to operate jai-alai venue. The
antecedent facts are as follows:
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The Charter of the City of Manila was enacted by Congress on June 18, 1949 (R.A. No. 409).
On January 1,1951, Executive Order No. 392 was issued, transferring the authority to
regulate jai-alai from the local government to the Games and Amusements Board (GAB). On
September 7, 1971, however, the Municipal Board of Manila nonetheless passed Ordinance
No. 7065 entitled “An Ordinance Authorizing the Mayor To Allow And Permit The Associated
Development Corporation To Establish, Maintain And Operate A Jai-Alai In The City Of
Manila, Under Certain Terms And Conditions And For Other Purposes.” This Ordinance
essentially vested the local government of Manila to issue jai-alai permits. On August 20,
1975, Presidential Decree No. 771 was issued by then President Ferdinand Marcos. Said
decree, entitled “Revoking All Powers and Authority of Local Government(s) To Grant
Franchise, License or Permit And Regulate Wagers Or Betting By The Public On Horse And
Dog Races, Jai-Alai Or Basque Pelota, And Other Forms Of Gambling”, stated in Section 3
thereof that it expressly revoked all existing franchises and permits issued by local
governments. In May 1988, private respondent Associated Development Corporation (ADC)
tried to operate a jai-alai court. The government, through the Games and Amusement Board,
intervened and invoked Presidential Decree No. 771, which expressly revoked all existing
franchises and permits to operate all forms of gambling facilities (including jai-alai) by local
governments. ADC thus assails the constitutionality of P.D. No. 771, on the ground that it
violates the equal protection and non-impairment clauses of the Constitution, while it
contends that Ordinance No. 7065 was duly enacted due to the City of Manila’s delegated
powers under its charter. On the other hand, the government avers that the PD 771 is a valid
exercise of the State’s police power.
The Court held that there is nothing on record to show or even suggest that PD No. 771 has
been repealed, altered or amended by any subsequent law or presidential issuance. The PD
likewise deemed all franchises revoked, with ADC not being singled out. Neither can it be
tenably stated that the issue of the continued existence of ADC’s franchise by reason of the
unconstitutionality of PD No. 771 was already settled earlier, for the Decision of the Court’s
First Division held that the in said case, aside from not being final, cannot have the effect of
nullifying PD No. 771 due to its unconstitutionality, since only the Court En Banc has that
power under Article VIII, Section 4(2) of the Constitution to do so. Also, the Court stated that
franchises should not be construed as a simple contract, rather, as a privilege granted within
the regulatory and even prohibitory powers of the government through the exercise of police
power. Because of such, a gambling franchise is always subject to police power. Regarding
the question of whether or not the government is estopped from contesting ADC’s possession
of a valid franchise, the well-settled rule is, citing from Republic v. Intermediate Appellate
Court, that the State cannot be put in estoppel by the mistakes or errors, if any, of its officials
or agents.
Balacuit v CFI of Agusan del Norte
The petitioners in this case are theater owners and operators, who are assailing the
constitutionality of Ordinance No. 640 passed by public respondent Butuan City through their
Sangguniang Panlungsod. The said Ordinance decrees that theaters that charged full-price
admission to children between the ages of 7 and 12 was unlawful, and punishable. Pursuant
to the Ordinance, said children were to be granted half-price admission. The petitioners here
allege that said Ordinance is ultra vires, and an invalid exercise of police power on the part
of the respondent thus, is unconstitutional. The respondent court adjudged said Ordinance
to be constitutional, prompting the instant case.
Looking into American jurisprudence, which held that the city cannot interfere with pric es of
admission in general. With that said, the Court held that respondent City of Butuan had no
power to issue the Ordinance in question under the guise of regulation, but said respondent
invoked police power. Because of such, the Court looked into the intent and purpose of the
assailed Ordinance, and it was to relieve parents the ‘extra burden’ of having to pay full-price
admission when bringing their children to the movies. Consequently, the Court agreed with
the petitioners such that it ruled that the Ordinance was not anchored on any necessity
prompted by public interest, one of the requisites that police power must concur with in order
to be valid. The Court noted that the difficulty implementing the regulation, such that it was
also prone to abuse, was burdensome on the petitioners. In addition, the defraying of
expenses shifted from the parents to the petitioners, which the Court said was unnecessary.
Not to mention, the Court added that police power should not encroach on legitimate
businesses, which is a property right that is protected by the Due Process Clause. In sum,
Ordinance No. 640 clearly interfered with petitioners’ personal and property rights, rendering
it null and void for being in contravention to the Constitution.
Tano v Socrates
The Sangguniang panlungsod of Puerto Princesa City enacted an ordinance banning
shipment of all live fish and lobster outside the said city and prohibiting the catching,
gathering, possessing, buying, selling and shipment of live marine coral dwelling aquatic
organisms. Petitioners were charged criminally for violation of such ordinance. They invoke
the preferential right of marginal fishermen under Sec. 149 of the LGC.
The so-called “preferential right” of subsistence or marginal-fishermen to the use of marine
resources is not at all absolute. The LGC provisions invoked by public respondents seek to
give flesh and blood to the right of the people to a balanced and healthful ecology. In fact,
the general welfare clause, expressly mentions this right. The LGC explicitly mandates that
the general welfare provisions of the LGC shall be liberally interpreted to give more powers
to the LGUs in accelerating economic development and upgrading the quality of life for the
people of the community. One of the devolved powers enumerated in the LGC on devolution
is the enforcement of fishery laws in municipal waters including the conservation of
mangroves. This necessarily includes the enactment of ordinances to effectively carry out
such fishery laws within the municipal waters. In light then of the principles of decentralization
and devolution enshrined in the LGC, and the powers granted therein to LGUs under the
general welfare clause, which unquestionably involve the exercise of police power, the
validity of the questioned ordinance cannot be doubted.
As laws enjoy presumption of constitutionality except laws restricting freedom of expression,
so too are ordinance. Hence, there must be a clear and unequivocal breach of the
constitution, not merely doubtful or argumentative contradiction. The unconstitutionality must
be shown beyond reasonable doubt. Moreover, any doubt should be resolved in favour of
LGU’s power and in favour of devolution.
In what instances that this presumption of constitutionality will not apply?
> Those laws that infringe the preferred freedom rights, e.g. freedom of expression, under
the doctrine of strict scrutiny.
Is a zoning ordinance an exercise of police power?
Ortigas v Feati Bank
Ortigas bought two lots from the Padillas, which was later on conveyed to Chavez. Both the
agreements and the deeds of sale contained the stipulations or restrictions that: (1) the parcel
of land subject of this deed of sale shall be used by the buyer exclusively for residential
purposes, and she shall not be entitled to take or remove soil, stones or gravel from it or any
other lots belonging to the Seller (2) all buildings and other improvements (except the fence)
which may be constructed at any time in said lot must be, (a) of strong materials and properly
painted, (b) provided with modern sanitary installations connected either to the public sewer
or to an approved septic tank, and (c) shall not be at a distance of less than two (2) meters
from its boundary lines. The above restrictions were later annotated in TCT Nos. 101509 and
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101511 of the Register of Deeds of Rizal, covering the said lots and issued in the name of
Emma Chavez.
Eventually, FEATI Bank acquired the said lots and acquired title over the said lots with the
same annotations. Plaintiff claims that that the restrictions annotated were imposed as part
of its general building scheme designed for the beautification and development of the
Highway Hills Subdivision which forms part of the big landed estate of plaintiff where
commercial and industrial sites are also designated or established. However, appellee,
maintains that the area along the western part of Epifanio de los Santos Avenue (EDSA)
from Shaw Boulevard to Pasig River, has been declared a commercial and industrial zone,
per Resolution No. 27, dated February 4, 1960 of the Municipal Council of Mandaluyong,
Rizal. Pursuant to this action by the LGU, defendant began laying the foundation and
commenced the construction of a building on Lots Nos. 5 and 6, to be devoted to banking
purposes, but which defendant claims could also be devoted to, and used exclusively for,
residential purposes. Plaintiff wishes that FEATI comply with the annotation and that he not
be allowed to build the commercial building.
The issue is whether or not Resolution No. 27 is a valid exercise of police power.
Section 3 of the Local Autonomy Act, empowers a Municipal Council to adopt zoning and
subdivision ordinances or regulation for the municipality. Clearly, the law does not restrict the
exercise of the power through an ordinance. Therefore, granting that Resolution No. 27 is
not an ordinance, it certainly is a regulatory measure within the intendment or ambit of the
word regulation under the provision. An examination of Section 12 of the same law which
prescribes the rules for its interpretation likewise reveals that the implied power of a
municipality should be liberally construed in its favor and that any fair and reasonable doubt
as to the existence of the power should be interpreted in favor of the local government and it
shall be presumed to exist. The same section further mandates that the general welfare
clause be liberally interpreted in case of doubt, so as to give more power to local governments
in promoting the economic conditions, social welfare and material progress of the people in
the community. The only exceptions under Section 12 are existing vested rights arising out
of a contract between a province, city or municipality on one hand and a third party on the
other, in which case the original terms and provisions of the contract should govern. The
exceptions, clearly, do not apply in the case at bar.
It should be stressed, that while non- impairment of contracts is constitutionally guaranteed,
the rule is not absolute, since it has to be reconciled with the legitimate exercise of police
power.
Invariably described as the most essential, insistent, and illimitable of powers and in a sense,
the greatest and most powerful attribute of government, the exercise of the power may be
judicially inquired into and corrected only if it is capricious, whimsical, unjust or unreasonable,
there having been a denial of due process or a violation of any other applicable constitutional
guarantee. In the case at bar, Resolution No. 27, s-1960 declaring the western part of
Highway 54, now EDSA, from Shaw Boulevard to the Pasig River as an industrial and
commercial zone, was obviously passed by the Municipal Council of Mandaluyong, Rizal in
the exercise of police power to safeguard or promote the health, safety, peace, good order
and general welfare of the people in the locality.
The motives behind the passage of the questioned resolution being reasonable, and it being
a legitimate response to a felt public need, not whimsical or oppressive, the non-impairment
of contracts clause of the Constitution will not bar the municipality’s proper exercise of the
power. Thus, subject building restrictions were assumed by the defendant as vendee of Lots
Nos. 5 and 6, in the corresponding deeds of sale, and later, in Transfer Certificates of Title
Nos. 101613 and 106092, the contractual obligations so assumed cannot prevail over
Resolution No. 27, of the Municipality of Mandaluyong, which has validly exercised its police
power through the said resolution. Accordingly, the building restrictions, which declare Lots
Nos. 5 and 6 as residential, cannot be enforced.
Problem
An Ordinance of the City of Manila Provides: (Sec 1 Sec 3)
SECTION 1. For the purpose of promoting sound urban planning and ensuring health, public
safety, and general welfare of the residents of Pandacan and Sta. Ana as well as its adjoining
areas, the land use of [those] portions of land bounded by the Pasig River in the north, PNR
Railroad Track in the east, Beata St. in the south, Palumpong St. in the southwest, and Estero de
Pancacan in the west[,] PNR Railroad in the northwest area, Estero de Pandacan in the
[n]ortheast, Pasig River in the southeast and Dr. M.L. Carreon in the southwest. The area of Punta,
Sta. Ana bounded by the Pasig River, Marcelino Obrero St., Mayo 28 St., and F. Manalo Street,
are hereby reclassified from Industrial II to Commercial I.
SECTION 3. Owners or operators of industries and other businesses, the operation of which are
no longer permitted under Section 1 hereof, are hereby given a period of six (6) months from the
date of effectivity of this Ordinance within which to cease and desist from the operation of
businesses which are hereby in consequence, disallowed.
Answer
Social Justice Society v. Atienza [2008]
On November 20, 2001, the Sanggunian Panlungsod of Manila issued Ordinance No. 8027,
which provided, for in Sections 1 and 3 therein, that reclassified the area of Punta, Sta. Ana,
Manila from Industrial II to Commercial 2, and ordered those companies no longer permitted
under Section 1 to cease and desist operations with six months.
Among the affected businesses are the “Pandacan Terminals” of petroleum giants Caltex,
Petron and Shell. Despite this, the City of Manila and the DOE entered into a Memorandum
of Understanding with the oil companies, in which the latter agreed to scaling down the oil
deposits (28 tanks of LPG), the establishment of joint operations and management in the
area, and the establishment of green buffer zones. In addition, the City of Manila and DOE
agreed to indorse the MOU to the City Council, allowing the continued operation of the oil
companies but limited to within the area specified, the monitoring of the oil companies by the
City and the DOE, and to protect the green buffer zones from encroachment by illegal
settlers. The Sangguniang Panlungson then ratified the MOU in Resolution No. 97, but only
valid for a period of six months. The Sanggunian then extended the validity to April 20, 2003,
through Resolution No. 13, s. of 2003 with them ordering the respondent to issue new
business permits to the oil companies. Meanwhile, the petitioners filed a petition for
mandamus, praying that the respondent enforce Ordinance No. 8027, and order the
immediate removal of the Pandacan Terminals.
The Court stated that the Local Government Code requires the respondent to "enforce all
laws and ordinances relative to the governance of the city." Being the chief executive of the
city, his duty is to enforce ordinances such as Ordinance 8027, unless repealed by the
Sanggunian or nullified by the courts. Aside from that, he has no other choice but to comply.
Regarding the other issue which was whether the MOU can repeal the Ordinance, which
allegedly blurs the respondent’s duty to enforce the Ordinance, the Court elected not to delve
deeper into the issue. This is because the MOU was ratified, and was extended until April
20, 2003. Thus, the enforcement is not legally blocked by anything. As a last note, the Court
said that the Ordinance was enacted in response to the 9/11 attacks in New York City, and
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that the purpose of said Ordinance was to protect the people from the catastrophic effects of
a terrorist attack on the Pandacan Terminals. Thus, the enforcement of such cannot be
delayed.
As a result of the zoning, the continued operation of the businesses of the oil companies in
their present location will no longer be permitted. The power to establish zones for industrial,
commercial and residential uses is derived from the police power itself and is exercised for
the protection and benefit of the residents of a locality.
The depot is perceived, rightly or wrongly, as a representation of western interests which
means that it is a terrorist target. As long as it there is such a target in their midst, the
residents of Manila are not safe. It therefore became necessary to remove these terminals
to dissipate the threat.
Their contention has no merit. In the exercise of police power, there is a limitation on or
restriction of property interests to promote public welfare which involves no compensable
taking. Compensation is necessary only when the state's power of eminent domain is
exercised. In eminent domain, property is appropriated and applied to some public purpose.
Property condemned under the exercise of police power, on the other hand, is noxious or
intended for a noxious or forbidden purpose and, consequently, is not compensable. The
restriction imposed to protect lives, public health and safety from danger is not a taking. It is
merely the prohibition or abatement of a noxious use which interferes with paramount rights
of the public.
Property has not only an individual function, insofar as it has to provide for the needs of the
owner, but also a social function insofar as it has to provide for the needs of the other
members of society.
Social Justice Society Officers v Lim [ 2014]
Challenged in these consolidated petitions is the validity of Ordinance No. 8187 that
amended the Manila Comprehensive Land Use Plan and Zoning Ordinance of 2006.
The creation of a medium industrial zone (1-2) and heavy industrial zone (1-3) effectively
lifted the prohibition against owners and operators of businesses, including herein
intervenors Chevron Philippines, Inc. (Chevron), Pilipinas Shell Petroleum Corporation
(Shell), and Petron Corporation (Petron), collectively referred to as the oil companies, from
operating in the designated commercial zone.
These petitions are a sequel to the case of Social Justice Society v. Mayor Atienza, Jr. where
the Court found: (1) that the ordinance subject thereof – Ordinance No. 8027 – was enacted
"to safeguard the rights to life, security and safety of the inhabitants of Manila;"(2) that it had
passed the tests of a valid ordinance; and (3) that it is not superseded by Ordinance No.
8119. Declaring that it is constitutional and valid, the Court accordingly ordered its immediate
enforcement with a specific directive on the relocation and transfer of the Pandacan oil
terminals.
Highlighting that the Court has so ruled that the Pandacan oil depots should leave, herein
petitioners now seek the nullification of Ordinance No. 8187, which contains provisions
contrary to those embodied in Ordinance No. 8027. Allegations of violation of the right to
health and the right to a healthful and balanced environment are also included.
The Court held that this shows that its determination of the "general welfare" of the city does
not after all gear towards the protection of the people in its true sense and meaning, but is,
one way or another, dependent on the personal preference of the members who sit in the
council as to which particular sector among its constituents it wishes to favor.
Now that the City of Manila, through the mayor and the city councilors, has changed its view
on the matter, favoring the city's economic-related benefits, through the continued stay of the
oil terminals, over the protection of the very lives and safety of its constituents, it is imperative
for this Court to make a final determination on the basis of the facts on the table as to which
specific right of the inhabitants of Manila should prevail. For, in this present controversy,
history reveals that there is truly no such thing as "the will of Manila" insofar as the general
welfare of the people is concerned.
Problem
The City of Marikina passed an ordinance which regulates the construction of fence as follows:
The standard height of fences or walls allowed under this ordinance are as follows: 1) Fences on
the front yard – shall be no more than one (1) meter in height. Fences in excess of one (1) meter
shall be of an open fence type, at least eighty percent 80% see thru.
The Objective of the ordinance is “to discourage, suppress or prevent the concealment of
prohibited or unlawful acts.” Is the ordinance valid?
Answer
There is lawful subject because it is an issue that affects the public. However, the means employed
is not lawful applying the overbreadth doctrine.
Overbreadth doctrine – where the law seeks to accomplish a governmental purpose, it must
do so without unreasonably or unnecessarily invading some protected freedom and that it
must be the least intrusive to the rights of individuals.
Two tests are usually applied:
1. Rational Relationship Test - laws or ordinances are upheld if they rationally further
a legitimate governmental interest. Governmental interest is extensively examined
and the availability of less restrictive measures is considered.
2. Strict Scrutiny Test - the focus is on the presence of compelling, rather than
substantial, governmental interest and on the absence of less restrictive means for
achieving that interest.
Fernando vs. St. Scholastica College
SSC is the owner of four (4) parcels of land measuring a total of 56,306.80 square meters,
located in Marikina Heights. The property is enclosed by a tall concrete perimeter fence built
some thirty (30) years ago. Abutting the fence along the West Drive are buildings, facilities,
and other improvements. The petitioners are the officials of the City Government of Marikina.
On September 30, 1994, the Sangguniang Panlungsod of Marikina City enacted Ordinance
No. 192, entitled “Regulating the Construction of Fences and Walls in the Municipality of
Marikina.”
The City Government of Marikina sent a letter to the respondents ordering them to demolish
and replace the fence of their Marikina property to make it 80% see-thru, and, at the same
time, to move it back about six (6) meters to provide parking space for vehicles to park. On
April 26, 2000, the respondents requested for an extension of time to comply with the
directive. In response, the petitioners, through then City Mayor Bayani F. Fernando, insisted
on the enforcement of the subject ordinance.
Ordinance No. 192, series of 1994 must be struck down for not being reasonably necessary
to accomplish the City’s purpose. More importantly, it is oppressive of private rights. The
requisites of a valid exercise of police power are not met, therefore the police power measure
shall be struck down as an arbitrary intrusion into private rights and a violation of the due
process clause.
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On the 80% See-Thru Fence Requirement:
The petitioners have not adequately shown, and it does not appear obvious to this
Court, that an 80% see thru fence would provide better protection and a higher level of
security, or serve as a more satisfactory criminal deterrent, than a tall solid concrete
wall. It may even be argued that such exposed premises could entice and tempt would-
be criminals to the property, and that a see-thru fence would be easier to bypass and
breach. It also appears that the respondents’ concrete wall has served as more than
sufficient protection over the last 40 years
On the 6 meters setback requirement:
The Court joins the CA in finding that the real intent of the setback requirement was to
make the parking space free for use by the public, considering that it would no longer
be for the exclusive use of the respondents as it would also be available for use by the
general public. Section 9 of Article III of the 1987 Constitution, a provision on eminent
domain, provides that private property shall not be taken for public use without just
compensation.
Lucena Grand Central Terminal, Inc. v JAC Liner, Inc.
Respondent JAC Liner Inc. assailed the constitutionality of Ordinance Nos. 1631 and 1778.
Ordinance No 1631 granted petitioner Lucena Terminal as the only franchise that can
operate and maintain a central terminal that is allowed to operate inside the city. Ordinance
1778 prohibited the use of any other terminal in the city. Respondent maintained a terminal
within the city and claims that it is aggrieved by the Ordinances.
The exercise of police power by the local government should follow two requisites;
1. That the interest of the general public requires the interference of the state
2. The means employed are reasonably necessary and not unduly oppressive upon
individuals
In this case, the first requisite is complied with because traffic congestion is a concern for the
public. However, the second requisite is not met by the Ordinance because it only allowed
for the operation of one terminal. The means employed are not reasonably necessary. The
Court is not convinced that the terminals are the main contributors of traffic congestion.
Subjecting the other terminals to fines and other charges were held as oppressive. The
Ordinances should not oppress individual rights. As for petitioner’s claim that the challenged
ordinances have actually been proven effective in easing traffic congestion: Whether an
ordinance is effective is an issue different from whether it is reasonably necessary. It is its
reasonableness, not its effectiveness, which bears upon its constitutionality. If the
constitutionality of a law were measured by its effectiveness, then even tyrannical laws may
be justified whenever they happen to be effective.
White Light Corporation v City of Manila
City Mayor Alfredo S. Lim signed into law and ordinance entitled “An Ordinance Prohibiting
Short-time Admission, Short-time Admission Rates, and Wash-up Schemes in Hotels,
Motels, Inns, Lodging Houses, and Similar Establishments in the City of Manila.”
Malate Tourist and Development Corporation (MTDC) filed a complaint for declaratory relief
with prayer for a writ of preliminary injunction and/or temporary restraining order (TRO) with
the Regional Trial Court of Manila, Branch 9 and prayed that the Ordinance be declared
invalid and unconstitutional.
The Ordinance was declared unconstitutional.
The Ordinance prohibits two specific and distinct business practices, namely wash rate
admissions and renting out a room more than twice a day. The apparent goal of the
Ordinance is to minimize if not eliminate the use of the covered establishments for illicit sex,
prostitution, drug use and alike. These goals, by themselves, are unimpeachable and
certainly fall within the ambit of the police power of the State.
The police power of the State is put into question once more insofar as questioning its
pervasive character towards the private lives and liberties each individual so dearly enjoys.
In a long line of cases, the test of validity of ordinances is well established:
1. It must not contravene the Constitution or any statute;
2. Must not be unfair or oppressive;
3. Must not be partial or discriminatory;
4. Must not prohibit but may regulate trade;
5. Must be general and consistent with public policy; and
6. Must not be unreasonable.
It cannot discount other legitimate activities that the Ordinance would proscribe or impair.
There are very legitimate uses for a wash rate or renting the room out for more than twice a
day. Entire families are known to choose pass the time in a motel or hotel whilst the power
is momentarily out in their homes. In transit passengers who wish to wash up and rest
between trips have a legitimate purpose for abbreviated stays in motels or hotels. Indeed any
person or groups of persons in need of comfortable private spaces for a span of a few hours
with purposes other than having sex or using illegal drugs can legitimately look to staying in
a motel or hotel as a convenient alternative.
The Ordinance makes no distinction between places frequented by patrons engaged in illicit
activities and patrons engaged in legitimate actions. Thus it prevents legitimate use of places
where illicit activities are rare or even unheard of. A plain reading of section 3 of the
Ordinance shows it makes no classification of places of lodging, thus deems them all
susceptible to illicit patronage and subject them without exception to the unjustified
prohibition.
The behavior that the Ordinance seeks to curtail is in fact already prohibited and could in fact
be diminished simply by applying existing laws. Less intrusive measures such as curbing
the proliferation of prostitutes and drug dealers through active police work would be
more effective in easing the situation. So would the strict enforcement of existing laws
and regulations penalizing prostitution and drug use. These measures would have
minimal intrusion on the businesses of the petitioners and other legitimate merchants.
Further, it is apparent that the Ordinance can easily be circumvented by merely paying the
whole day rate without any hindrance to those engaged in illicit activities. Moreover, drug
dealers and prostitutes can in fact collect "wash rates" from their clientele by charging their
customers a portion of the rent for motel rooms and even apartments.
City of Manila v Laguio Jr.
Private respondent Malate Tourist Development Corporation (MTDC) is a corporation
engaged in the business of operating hotels, motels, hostels and lodging houses. They
assailed the constitutionality of the Ordinance for it supposedly violates substantive due
process. Section 1 the Ordinance provides that “Any provision of existing laws and
ordinances to the contrary notwithstanding, no person, partnership, corporation or entity
shall, in the Ermita-Malate area bounded by Teodoro M. Kalaw Sr. Street in the North, Taft
Avenue in the East, Vito Cruz Street in the South and Roxas Boulevard in the West, pursuant
to P.D. 499 be allowed or authorized to contract and engage in, any business providing
certain forms of amusement, entertainment, services and facilities where women are used
as tools in entertainment and which tend to disturb the community, annoy the inhabitants,
and adversely affect the social and moral welfare of the community, such as but not limited
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to; Sauna Parlors, Massage Parlors, Karaoke Bars, Beerhouses, Night Clubs, Day Clubs,
Super Clubs, Discotheques, Cabarets, Dance Halls, Motels, Inns.
The ordinance enacted is unconstitutional. It violates substantive due process as there is no
sufficient justification for the government’s claim. It fails to meet the requirements for an
ordinance to be valid.
The means employed were unreasonable and unduly oppressive. A section in the ordinance
provides that such businesses enumerated in Section 1 are given 3 months from the date of
the approval of the ordinance to wind up their business and to either transfer outside the
Ermita-Malate or convert their business to other kinds of business allowable within the area.
Furthermore, substantive due process asks whether the government has adequate reason
for taking away a person’s life, liberty or property. Although the purpose of the ordinance is
valid as it seeks to address the problem of prostitution, the means employed are
unreasonable as it prevents the business of institutions which provide relatively wholesome
services. Mere association with immoral acts such as prostitution does not automatically
mean that it is engaged in that form of business; it is still being used by customers for
wholesome purposes. Therefore, the purpose of fostering public morals can be achieved
through less restrictive means, by restrictions than prohibitions. Also, prostitution can happen
in any place, even in the institutions listed as valid in the ordinance. It is not necessarily
limited to motels, and thus does not merit its total ban. An ordinance which restricts the use
of property such that it can no longer be used for any reasonable purpose goes beyond
regulation and is recognized as a taking of the property without compensation. It is violative
of private property rights. It also violates equal protection clause as motels are prohibited but
not hotels and pensions houses which are of the same class.
Ermita-Malate Hotel and Motel Operators Association, Inc v City Mayor of Manila
Ermita-Malate et. al., filed a petition for prohibition regarding Ordinance No. 4760 against
respondent Mayor of Manila contending that the Ordinance is unconstitutional and void for
being unreasonable and violative of due process: Insofar as it would impose P6,000.00 fee
per annum for first class motels and P4,500.00 for second class motels; refusal to entertain
customers unless they have filled out a prescribed form in the lobby; police inspection not
only being arbitrary, unreasonable or oppressive but also vague, indefinite and uncertain,
and likewise for the alleged invasion of the right to privacy and the guaranty against self-
incrimination; prohibition of admitting customers who are less than 18 years old unless
accompanied by their parents or legal guardians; unlawful lease of any room or portion
thereof more than twice every 24 hours; and subsequent conviction would cause the
automatic cancellation of the license of the offended party, in effect causing the destruction
of the business and loss of its investments.
Ordinance No. 4760 is valid. There was absence of evidence to offset the presumption of
validity in the challenged statue or ordinance. As was expressed categorically by Justice
Malcolm: "The presumption is all in favor of validity x x x . The action of the elec ted
representatives of the people cannot be lightly set aside. The councilors must, in the very
nature of things, be familiar with the necessities of their particular municipality and with all
the facts and circumstances which surround the subject and necessitate action. The local
legislative body, by enacting the ordinance, has in effect given notice that the regulations are
essential to the well being of the people x x x . The Judiciary should not lightly set aside
legislative action when there is not a clear invasion of personal or property rights under the
guise of police regulation. It admits of no doubt therefore that there being a presumption of
validity, the necessity for evidence to rebut it is unavoidable, unless the statute or ordinance
is void on its face which is not the case here.
The Ordinance No. 4760 is not violative of the due process clause. The Supreme Court held
that, “the mantle of protection associated with the due process guaranty does not cover
petitioners. This particular manifestation of a police power measure being specifically aimed
to safeguard public morals is immune from such imputation of nullity resting purely on
conjecture and unsupported by anything of substance. To hold otherwise would be to unduly
restrict and narrow the scope of police power which has been properly characterized as the
most essential, insistent and the least limitable of powers, extending as it does "to all the
great public needs." It would be, to paraphrase another leading decision, to destroy the very
purpose of the state if it could be deprived or allowed itself to be deprived of its competence
to promote public health, public morals, public safety and the general welfare. Negatively put,
police power is "that inherent and plenary power in the State which enables it to prohibit all
that is hurt full to the comfort, safety, and welfare of society.”
There is no question but that the challenged ordinance was precisely enacted to minimize
certain practices hurtful to public morals. The explanatory note of the Councilor Herminio
Astorga included as annex to the stipulation of facts, speaks of the alarming increase in the
rate of prostitution, adultery and fornication in Manila traceable in great part to the existence
of motels, which "provide a necessary atmosphere for clandestine entry, presence and exit"
and thus, become the "ideal haven for prostitutes and thrill-seekers." The challenged
ordinance then proposes to check the clandestine harboring of transients and guests of these
establishments by requiring these transients and guests to fill up a registration form, prepared
for the purpose, in a lobby open to public view at all times, and by introducing several other
amendatory provisions calculated to shatter the privacy that characterizes the registration of
transients and guests." Moreover, the increase in the licensed fees was intended to
discourage "establishments of the kind from operating for purpose other than legal" and at
the same time, to increase "the income of the city government." It would appear therefore
that the stipulation of facts, far from sustaining any attack against the validity of the ordinance,
argues eloquently for it.”
Legaspi v City of Cebu
On January 27, 1997 the Sangguniang Panlungsod of the City of Cebu enacted Ordinance
No. 1664 to authorize the traffic enforcers of Cebu City to immobilize any motor vehicle
violating the parking restrictions and prohibitions defined in the Traffic Code of Cebu City.
Petitioners Jaban filed their complaint alleging that on June 23, 1997, Jaban Sr. had properly
parked his car in a paying parking area on Manalili Street, Cebu City to get certain records
and documents from his office and after less than 10 minutes, he had found his car being
immobilized by a steel clamp. In another occasion, Jaban Jr. complained that his car was
immobilized by CITOM operative despite it being parked in a very secluded place where
there was no sign prohibiting parking; and that he was compelled to pay a fine for the release
of the same. Petitioner Legaspi on the other hand, had his car towed while being parked
occupying a sidewalk outside his residence while making way for another car. Petitioners
contend that the city ordinance is violative of the due process clause.
Citing the case of City of Manila v. Laguio, Jr., the Court lays down the requisites of a valid
city ordinance. The city ordinance was an exercise of police power by the local government
unit of the City of Cebu. The reason behind the promulgation of Ordinance No. 1664 is to
ensure "a smooth flow of vehicular traffic in all the streets in the City of Cebu at all times."
The means employed clamping of the illegally parked vehicles was a fair and reasonable
way to enforce the ordinance against its violators, preventing the possibility of them violating
such by merely driving away from the authorities.
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May the exercise of police power be compelled through an action for mandamus?
Exercise of Police Power, discretionary
A mayor cannot be compelled by mandamus to issue a business permit since the exercise of the
same is a delegated police power hence, discretionary in nature. Roble Arrastre, Inc. v. Hon.
Villaflor (2006) where a determination was made on the nature of the power of a mayor to grant
business permits under the LGC.
Problem
Talisay City Vendors Assoc. filed a case for mandamus compelling the City Gov’t. of Talisay to
close a road near the Talisay City Public market from vehicular traffic contending that the road is
too small for vehicles, especially four-wheel vehicles, such that vehicular traffic prevents small
vendors from selling in the sidewalk. If you’re the judge, will you issue a writ of mandamus?
Answer
Mandamus is not proper. The closing and opening of roads is a police power which is discretionary
on the part of the authority who exercises such power.
Rimando v Naguilian Emission Testing Center
Respondent claimed that its business is being conducted on a parcel of land which formerly
belonged to the national government but later on certified by the Department of Environment
and Natural Resources (DENR) as an alienable and disposable land of the public domain.
The respondent had operated its business of emission testing on the land from 2005 to 2007.
On January 18, 2008, the respondent filed an application for the renewal of its business
permit and paid the corresponding fees therefor. The petitioner, however, refused to issue a
business permit unless and until the respondent executes a contract of lease with the
Municipality of Naguilian. The respondent wasamenable to signing such contract subject to
some proposed revisions, which, however, were not acceptable to the petitioner. The parties
did not reach a common ground hence, the petition for mandamus.
The petition for mandamus filed by the respondent is incompetent to compel the exercise of
a mayor's discretionary duty to issue business permits.
Problem
ABC operates an industrial waste processing plant within Laoag City. Occasionally, whenever fluid
substances are released thru a nearby creek, obnoxious odor is emitted causing dizziness among
residents in Barangay La Paz. On complaint of the punong barangay, the city mayor wrote ABC
demanding that it abate the nuisance. This was ignored. An invitation to attend a hearing called
by Sanggunian panglungsod was also declined by the pres. of ABC. The city gov’t. thereupon
issued a cease and desist order to stop the operations of the plant, prompting ABC to file a petition
for injunction before the RTC, arguing that the city gov’t did not have any power to abate the illegal
nuisance. Decide with reasons.
AC Enterprises Inc. vs Frabelle Properties
Under Sec 447 (a) (3) (i) of RA 7160, the Sanggunian panglungsod is empowered to enact
ordinances, declaring, preventing or abating noise and other forms of nuisance. It bears
stressing however that the Sanggunian cannot declare a particular thing as nuisance per se
and oder its condemnation. It doesn’t have the power to find, as a fact, that a particular thing
is nuisance when such thing is not a nuisance per se. nor can it authorize extrajudicial
condemnation and destruction of that as a nuisance which in its nature, situation or use is
not such.
Those things must be determined and resolved in the ordinary courts of law. If a thing be in
fact a nuisance die to the manner of its operation, that question cannot be determined by a
mere resolution of the Sanggunian bayan.
Note: Rule III Sec IV of PAB resolution 1-C S, 1997 as amended, which categorically states
that “except where such would constitute a pollution case, LGU shall have the power to abate
a nuisance within their respective areas.”
2010 Bar
The Sanggunian Panglungsod of Pasay passed an ordinance requiring all disco pub owners to
have all their hospitality girls tested for Aids virus. Both disco pub owners and thee hospitality girls
assailed the validity of the ordinance for being violative of their constitutional rights to privacy and
to freely choose a calling or business. Is the ordinace valid? Explain.
Answer:
Valid. It is not a prohibition but a mere regulation. A valid exercise of police power. (JMM
Production case)
Other cases on Police Power:
City of General Santos v COA
Ordinance No. 08, series of 2009, was passed together with its implementing rules and
regulations, designed "to entice those employees who were unproductive due to health
reasons to avail of the incentives being offered therein by way of early retirement package."
The ordinance, as amended, provides that qualified employees below sixty (60) years of age
but not less than fifty (50) years and sickly employees below fifty (50) years of age but not
less than forty (40) years may avail of the incentives under the program.7 In other words, the
ordinance "provides for separation benefits for sickly employees who have not yet reached
retirement age."
COA-LSS Opinion No. 2010-021 states that Ordinance No. 08, series of 2009, partakes of a
supplementary retirement benefit plan. In its view, Section 28, paragraph (b) of
Commonwealth Act No. 186, as amended, prohibits government agencies from establishing
supplementary retirement or pension plans from the time the Government Service Insurance
System charter took effect while those plans already existing when the charter was enacted
were declared abolished.
Since Ordinance No. 08 is in the nature of an ERP [Early Retirement Program] of the City
Government of General Santos, a law authorizing the same is a requisite for its validity. In
the absence, however, of such law, the nullity of Ordinance No. 08 becomes a necessary
consequence.
Ordinance No. 08, series of 2009, is invalid in the absence of a law passed by Congress
specifically authorizing the enactment of an ordinance granting an early retirement scheme.
According to respondent Commission on Audit, petitioner city failed to demonstrate
arbitrariness on its part as it merely observed the proscription under Section 28, paragraph
(b) of Commonwealth Act No. 186 when it found the ordinance a nullity.
The Court agrees with respondent Commission on Audit but only insofar as Section 5 of the
ordinance is concerned. We declare Section 6 on post-retirement incentives as valid.
US v Salaveria
The municipal council of Orion, Bataan enacted an ordinance which prohibited the playing of
panguingue on days not Sundays or legal holidays, and penalized the violation thereof. When
the ordinance took effect, the justice of the peace of Orion, Prudencio Salaveria, along with
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seven persons and his wife were surprised by the police while indulging in the game not on
a Sunday or legal holiday.
The general welfare clause has two branches. One branch attaches itself to the main trunk
of municipal authority, and relates to such ordinances and regulations as may be necessary
to carry into effect and discharge the powers and duties conferred upon the municipal council
by law. With this class we are not here directly concerned. The second branch of the clause
is much more independent of the specifc functions of the council which are enumerated by
law. It authorizes such ordinances as shall seem necessary and proper to provide for the
health and safety, promote the prosperity, improve the morals, peace, good order, comfort,
and convenience of the municipality and the inhabitants thereof, and for the protection of
property therein."
It is a general rule that ordinances passed by virtue of the implied power found in the general
welfare clause must be reasonable, consonant with the general powers and purposes of the
corporation, and not inconsistent with the laws or policy of the State. Panguingue is a proper
subject for regulation by municipal authorities acting under their delegated police power,
whose intention is to improve the public morals and promote the prosperity of their people.
The ordinance is valid and the defendants in the case are guilty for its violation.
Binay v Domingo
Municipality of Makati approved Resolution No. 60 which extends financial assistance of
P500.00 to bereaved families which would be taken out of the unappropriated available funds
existing in the municipal treasury. Metro Manila Commission approved the said resolution.
Thereafter, the municipal secretary certified a disbursement fund of P400, 000.00 for the
implementation of the Burial Assistance Program. Resolution No. 60 was referred to COA
for its expected allowance in audit which was disapproved and disallowed in audit the
disbursement of funds. Mayor Jejomar Binay filed two letters for reconsideration but they
were denied by COA.
Bent on pursuing the Burial Assistance Program the Municipality, through its Council, passed
Resolution No. 243, reaffirming Resolution No. 60. However, the Burial Assistance Program
has been stayed by the COA Decision. Petitioner, through Mayor Binay, filed a special civil
action of certiorari praying that the COA Decision be set aside as null and void.
The Court ruled that public purpose is not unconstitutional merely because it incidentally
benefits a limited number of persons. The care for the poor is generally recognized as a
public duty. The support for the poor has long been an accepted exercise of police power in
the promotion of the common good.
Zoomzat, Inc. v People
Petitioner Zoomzat, Inc. alleged that on December 20, 1991, the Sangguniang Panlungsod
of Gingoog City passed Resolution No. 261 which resolved “to express the willingness of the
City of Gingoog to allow Zoomzat to install and operate a cable TV system.” Thereupon,
petitioner applied for a mayor’s permit but the same was not acted upon by the mayor’s office.
On April 6, 1993, respondents enacted Ordinance No. 19 which granted a franchise to
Gingoog Spacelink Cable TV, Inc. to operate a cable television for a period of ten (10) years,
subject to automatic renewal. On July 30, 1993, Zoomzat filed a complaint with the Office of
the Ombudsman against respondents for violation of Section 3(e), R.A. No. 3019. The
complaint alleged that in enacting Ordinance No. 19, the respondents gave unwarranted
benefits, advantage or preference to Spacelink, to the prejudice of Zoomzat who was a prior
grantee-applicant by virtue of Resolution No. 261.
Executive Order No. 205 (REGULATING THE OPERATION OF CABLE ANTENNA
TELEVISION (CATV) SYSTEMS IN THE PHILIPPINES, AND FOR OTHER PURPOSES)
clearly provides that only the NTC could grant certificates of authority to cable television
operators and issue the necessary implementing rules and regulations. Likewise, Executive
Order No. 436 (PRESCRIBING POLICY GUIDELINES TO GOVERN THE OPERATIONS
OF CABLE TELEVISION IN THE PHILIPPINES) vests with the NTC the regulation and
supervision of cable television industry in the Philippines. It is clear that in the absence of
constitutional or legislative authorization, municipalities have no power to grant franchises.
Under the general welfare clause of the Local Government Code, the local government unit
can regulate the operation of cable television but only when it encroaches on public
properties, such as the use of public streets, rights of ways, the founding of structures, and
the parceling of large regions. Beyond these parameters, its acts, such as the grant of the
franchise to Spacelink, would be ultra vires. Plainly, the Sangguniang Panlungsod of Gingoog
City overstepped the bounds of its authority when it usurped the powers of the NTC with the
enactment of Ordinance No. 19. Being a void legislative act, Ordinance No. 19 did not confer
any right nor vest any privilege to Spacelink. As such, petitioner could not claim to have been
prejudiced or suffered injury thereby. Incidentally, petitioner’s claim of undue injury becomes
even more baseless with the finding that Spacelink did not commence to operate despite the
grant to it of a franchise under Ordinance No. 19.
Leonardo Tan v Perena
In 1974, P.D.No. 449, Cockfighting Law of 1974, Section 5(b) provided for limits on the
number of cockpits that may be established in cities and municipalities to one except that in
cities or municipalities with a population of over one hundred thousand, two cockpits may be
established, maintained and operated.
With the enactment of LGC of 1991, the municipal sangguniang bayan were empowered,
"[a]ny law to the contrary notwithstanding," to "authorize and license the establishment,
operation and maintenance of cockpits, and regulate cockfighting and commercial breeding
of gamecocks.”
In 1993, the Sangguniang Bayan of the municipality of Daanbantayan, Cebu Province,
enacted Municipal Ordinance No. 6, Series of 1993, In which Section 5 provides that “There
shall be allowed to operate in the Municipality of Daanbantayan, Province of Cebu, not more
than its equal number of cockpits based upon the population provided for in PD 449, provided
however, that this specific section can be amended for purposes of establishing additional
cockpits, if the Municipal population so warrants.” Shortly thereafter, the Sangguniang Bayan
passed an amendatory ordinance, Ordinance No. 7 which amended the aforequoted Section
5 providing that “[t]here shall be allowed to operate in the Municipality of Daanbantayan,
Province of Cebu, not more than three (3) cockpits.
On 8 November 1995, Tan applied with the Municipal Gamefowl Commission for the
issuance of a permit/license to establish and operate a cockpit in Sitio Combado, Bagay, in
Daanbantayan. At the time of his application, there was already another cockpit in operation
in Daanbantayan, operated by Pereña, who was the duly franchised and licensed cockpit
operator in the municipality since the 1970s. Pereña’s franchise, per records, was valid until
2002. Upon recommendation Mayor Te issued a mayor’s permit allowing Tan "to
establish/operate/conduct" the business of a cockpit in Combado, Bagay, Daanbantayan,
Cebu for the period from 20 January 1996 to 31 December 1996.
A municipal ordinance must not contravene the Constitution or any statute, otherwise it is
void. Ordinance No. 7 unmistakably contravenes the Cockfighting Law in allowing three
cockpits in Daanbantayan. Thus, no rights can be asserted by the petitioners arising from the
Ordinance.
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PRE-FINALS REVIEWER FOR PUBCORP | ATTY. LARGO
Local Eminent Domain
Scope and Limitations
SEC. 19 of the Local Government Code:
Eminent Domain - A local government unit may, through its chief executive and acting
pursuant to an ordinance, exercise the power of eminent domain for public use, or purpose,
or welfare for the benefit of the poor and the landless, upon payment of just compensation,
pursuant to the provisions of the Constitution and pertinent laws: Provided, however, That the
power of eminent domain may not be exercised unless a valid and definite offer has been
previously made to the owner, and such offer was not accepted: Provided, further, That the
local government unit may immediately take possession of the property upon the filing of the
expropriation proceedings and upon making a deposit with the proper court of at least fifteen
percent (15%) of the fair market value of the property based on the current tax declaration of the
property to be expropriated: Provided, finally, That, the amount to be paid for the expropriated
property shall be determined by the proper court, based on the fair market value at the time of
the taking of the property.
Problem
The City of Cebu intends to expropriate a 10-hectare lot of X located in Lahug for a low-cost
housing project intended for the urban poor. It als o wants to expropriate the property of Y
in Banilad-T alamban to us e as an acc es s road. As the city attorney of Cebu City, the City
Mayor is asking you to outline to him the legal requirements and procedure so that this project for
the urban poor can be completed before the end of his term in June of 2016 without legal
obstacle. The City Mayor wants to immediately take possession of the property of X so he
can immediately start the housing project even before the termination of the expropriation
proceeding in court. How will you advise the City Mayor? What will you allege in the complaint
for expropriation in case one is necessary?
Answer
Determine the requirements for each property to be expropriated. Since one is a housing project,
it must follow that the provisions of Section 9 and 10 of RA 7279 will apply. For the property to be
used as an access road, no need.
Who exercises the power of Eminent Domain?
- Generally, Congress
- LGUs
- Public Utilities like electric companies, telecommunications companies (MERALCO,
Globe, Smart, MCWD) – they are allowed to expropriate also, as authorized by law.
General Requirements:
1. Necessity
There is a difference in this requirement when expropriation is done by the national
government and the local government unit.
When it is the National government – The exercise of expropriation is done by
Congress. Being a co-equal branch of government, the exercise of such is a political
question.
When it is the Local government unit – It is a justiciable question and thus, may be
reviewed by the courts.
2. Private Property
3. Taking
4. Public Use
5. Just Compensation
6. Due Process
Specific Requirements:
1. It is exercised through its chief executive and acting pursuant to an ordinance;
2. It is for public use, or purpose, or welfare for the benefit of the poor and the landless;
3. Payment of just compensation, pursuant to the provisions of the Constitution and
pertinent laws,
4. A valid and definite offer has been previously made to the owner, and such offer was
not accepted.
And when it is for a housing project:
5. Private lands should be the last option (Section 9 of RA 7279)
6. There were no other modes of acquisition (Section 10 of RA 7279)
NECESSITY
- It means that there should be genuine necessity or the expropriation of the private
property
- Who determines genuine necessity? Courts, and only when it is the local government
unit that exercises this power of expropriation.
Hrs. of Alberto Suguitan v City of Mandaluyong
The Sangguniang Panlungsod of Mandaluyong City issued Resolution No. 396, S-1994
authorizing then Mayor Benjamin Abalos to institute expropriation proceedings over the
property of Alberto Suguitan located at Boni Avenue and Sto. Rosario streets in Mandaluyong
City with an area of 414 square meters. The intended purpose of the expropriation was the
expansion of the Mandaluyong Medical Center. Mayor Abalos wrote Suguitan a letter offering
to buy his property but Suiguitan refused to sell. The City of Mandaluyong then filed a
complaint for expropriation with the RTC of Pasig. The RTC issued an order allowing
Mandaluyong to take immediate possession of the property upon the deposit of 621,000
pesos (15% of the fair market value). The Respondents then assumed possession of the
said property.
The Court held that the power of eminent domain is legislative in nature. Such power may be
validly delegated to Local Government Units or other public entities and utilities, although the
scope of this delegated legislative power is narrower than that of the delegating authority and
may only be exercised in strict compliance with the terms of the delegating law. The basis
for the exercise of the power of eminent domain by LGU is section 19 of RA 7160 which
provides the requisites for a valid expropriation.
Requisites:
1. An ordinance is enacted by local legislative council authorizing the local chief executive,
in behalf of the local government unit, to exercise the power of eminent domain or
pursue expropriation proceedings over a particular private property.
2. The power of eminent domain is exercised for public use, purpose or welfare, or for the
benefit of the poor and the landless.
3. There is payment of just compensation, as required under Section 9, Article 3 of the
Constitution, and other pertinent laws.
4. A valid and definite offer has been previously made to the owner of the property sought
to be expropriated, but said offer was not accepted.
In the case at hand, it is clear to see that there is a contravention on the part of the
Respondent by not complying with the first requisite. An ordinance is necessary to authorize
the filing of a complaint with the proper court since, beginning at this point; the power of
eminent domain is already being exercised.
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City of Manila vs. Chinese Community
The City of Manila wanted to expropriate a Chinese cemetery for the making of the extension
of Rizal Avenue, Manila.
When a municipal corporation attempts to expropriate private property and an objection is
made thereto by the owner, the courts have ample authority, in this jurisdiction, to make
inquiry, and to hear proof upon an-issue properly presented, concerning the question whether
or not the purpose of the appropriation is, in fact, for some public use. The
right of expropriation is not inherent power in a municipal corporation and before it can
exercise the right some law must exist conferring the power upon it. A municipal corporation
in this jurisdiction cannot expropriate public property. The land to be expropriated must be
private, and the purpose of the expropriation must be public. If the court, upon trial, finds that
neither of said condition exists, or that either one of them fails, the right to expropriate does
not exist. If the property is taken in the ostensible behalf of a public improvement which it can
never by any possibility serve, it is being taken for a use not public, and the owner's
constitutional rights call for protection by the courts.
Lourdes de la Paz Masikip v City of Pasig
Petitioner Lourdes Masikip is the registered owner of a parcel of land located in Pag-asa,
Caniogan, Pasig City. The Municipality of Pasig sent a letter notifying petitioner of its intention
to expropriate a portion of her property to be used for the “sports development and
recreational property.” This was pursuant to Ordinance no. 43 series of 1993, enacted by the
then Sangguniang Bayan of Pasig
Court holds that the respondent City of Pasig has failed to establish that there is a genuine
necessity to expropriate petitioner’s property. The certification issued by the Canniogan
Barangay Council authorizing the expropriation indicates that the intended beneficiary is
the Melendres Compound Homeowners Association, a private, nonprofit organization, not
the residents of Canioga. It can be gleaned that the members of the said association are
desirous of having their own private playground and recreational facility. The purpose then
is not clearly and categorically public. The necessity has not been shown, especially
considering that there exists an alternative facility for sports development and c ommunity
recreation area, which is the Rainforest Park, available to all residents of Pasig City. The
right to own and possess property is one of the most cherished rights of men. It is
fundamental that it has been written into organic law of every nation where the rule of law
prevails. Unless the requisite of genuine necessity for the expropriation of ones’ property is
clearly established, it shall be the duty of the courts to protect the rights of individuals to their
private property. Important as the power of eminent domain may be, the inviolable sanctity
which the Constitution attaches to the property of the individual requires not only that the
purpose for the taking of private property be specified. The genuine necessity for the taking,
which must be of a public character, must also be shown to exist.
Where the taking by the State of private property is done for the benefit of a small community
which seeks to have its own sports and recreational facility, notwithstanding that there is such
a recreational facility only a short distance away, such taking cannot be considered to be for
public use. Its expropriation is not valid. In this case, the Court defines what constitutes a
genuine necessity for public use.
Judicial review of the exercise of eminent domain is limited to the following areas of concern:
a. Adequacy of the compensation
b. The necessity of the taking, and
c. The public use character of the purpose of the taking
2011 Bar
The city government filed a complaint for expropriation of 10 lots to build a recreational complex
for the members of the homeowners’ association of Sitio Sto. Tomas, the most populated
residential compound in the city. The lot owners challenged the purpose of the expropriation. Does
the expropriation have a valid purpose?
Answer.
The Masikit case is not in line because it was not established in the problem that there was another
facility near the intended area. However, the possible answer is to still apply the Dela Paz Masikit
case but to qualify.
PRIVATE PROPERTY
Can expropriation be made when the private property is already devoted to public use?
If the expropriator is the National Government – it is a plenary power. So Congress
can expropriate still.
If the expropriator is the Local Government Unit – there should be a law granting the
authority to expropriate private property already devoted to public use [like the Chinese
cemetery]
TAKING
Taking should not be interpreted literally that the private owner should be ousted from the property.
Taking simply means the deprivation of the beneficial use of the property.
PUBLIC USE
2 Concepts of Public Use:
a. Traditional - public use means that it can be availed by anyone (e.g. public plaza, roads,
etc.)
b. Modern - the government should delivered social justice as being mandated by the
Constitution, public use means the services that were originally undertaken by private
entities are now being undertaken by the government. Anything that will benefit or give
advantage to the public. Same as General Welfare. (e.g. Social Housing project)
JUST COMPENSATION
Fair Market Value of the property at the time of taking. Generally, FMV is the value of the property
given by a seller who is not compelled to sell and by the buyer who is not compelled to buy.
FMV, under Rule 67 of the Rules of Court, is determined at the time of the taking or at the
time of the filing of the complaint, whichever came first. But if the expropriator is the LGU, the
FMV is to be determined at the time of the taking.
When only a portion of the property is expropriated, t h e n Fair Market Value = consequential
damages – consequential benefits.
DUE PROCESS
This is always a requirement because the exercise of the power of eminent domain would be a
deprivation of property.
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SPECIFIC REQUIREMENTS WHEN AN LGU WILL EXERCISE LOCAL EMINENT DOMAIN
1. An ordinance enacted by the Local Government council authorizing the Local
Chief Executive, in behalf of the LGU, to exercise the power of eminent domain
or pursue expropriation proceedings over a particular private property.
Mun. of Paranaque v V.M. Realty Corp.
Pursuant to Sangguniang Bayan Resolution No. 93-95, Series of 1993, the Municipality of
Paranaque filed a complaint for expropriation against V.M. Realty Corp. over two parcels of
land for the purpose of alleviating the living conditions of the underprivileged by providing
homes for the homeless through a socialized housing project. Prior to this, an offer through
Resolution No. 577 was made to enter into a negotiated sale of the subject properties albeit
rejected.
Under Section 19, of the present Local Government Code (RA 7160), it is stated as the first
requisite that LGUs can exercise its power of eminent domain if there is an ordinance enacted
by its legislative body enabling the municipal chief executive.
A resolution is not an ordinance, the former is only an opinion of a law-making body, the latter
is a law. The case cited by Petitioner involves BP 337, which was the previous Local
Government Code, which is obviously no longer in effect. RA 7160 prevails over the
Implementing Rules, the former being the law itself and the latter only an administrative rule
which cannot amend the former. Resolution is just an expression of the sentiment of the local
legislative body while an ordinance has the force and effect of law, which is not the case of
a resolution.
We are not convinced by petitioner’s insistence that the terms “resolution” and “ordinance”
are synonymous. A municipal ordinance is different from a resolution. An ordinance is a law,
but a resolution is merely a declaration of the sentiment or opinion of a lawmaking body on
a specific matter. An ordinance possesses a general and permanent character, but a
resolution is temporary in nature. Additionally, the two are enacted differently – a third reading
is necessary for an ordinance, but not for a resolution, unless decided otherwise by a majority
of all the Sanggunian members.
Moday v CA
The Sangguniang Bayan of the Municipality of Bunawan in Agusan del Sur passed
Resolution No. 43-89, "Authorizing the Municipal Mayor to Initiate the Petition for
Expropriation of a One (1) Hectare Portion of Lot No. 6138-Pls-4 Along the National Highway
Owned by Percival Moday for the Site of Bunawan Farmers Center and Other Government
Sports Facilities." The Sangguniang Panlalawigan disapproved the said Resolution and
returned with the comment that "expropriation is unnecessary considering that there are still
available lots in Bunawan for the establishment of the government center." The Municipality
of Bunawan subsequently filed a petition for Eminent Domain against petitioner Percival
Moday.
Eminent domain, the power which the Municipality of Bunawan exercised in the instant case,
is a fundamental State power that is inseparable from sovereignty. It is government's right to
appropriate, in the nature of a compulsory sale to the State, private property for public use
or purpose. Inherently possessed by the national legislature, the power of eminent domain
may be validly delegated to local governments, other public entities and public utilities. For
the taking of private property by the government to be valid, the taking must be for public use
and there must be just compensation.
The Sangguniang Panlalawigan's disapproval of Municipal Resolution No. 43-89 is an infirm
action which does not render said resolution null and void. The law, as expressed in Section
153 of B.P. Blg. 337, grants the Sangguniang Panlalawigan the power to declare a municipal
resolution invalid on the sole ground that it is beyond the power of the Sangguniang Bayan
or the Mayor to issue.
Thus, the Sangguniang Panlalawigan was without the authority to disapprove Municipal
Resolution No. 43-89 for the Municipality of Bunawan clearly has the power to exercise the
right of eminent domain and its Sangguniang Bayan the capacity to promulgate said
resolution, pursuant to the earlier-quoted Section 9 of B.P. Blg. 337. Perforce, it follows that
Resolution No. 43-89 is valid and binding and could be used as lawful authority to petition for
the condemnation of petitioners' property.
Sps. Yusay v CA
The Sangguniang Panglungsod of Mandaluyong City adopted Resolution No. 552, Series of
1997, to authorize then City Mayor Benjamin S. Abalos, Sr. to take the necessary legal steps
for the expropriation of the land of the petitioners situated between Nueve de Febrero
Street and Fernandez Street in Barangay Mauway, MandaluyongCity for the purpose of
developing it for low cost housing for the less privileged but deserving city inhabitants.
Notwithstanding that the enactment of Resolution No. 552 was but the initial step in the Citys
exercise of its power of eminent domain granted under Section 19 of the Local Government
Code of 1991, the petitioners became alarmed, and filed a petition for certiorari and
prohibition in the RTC, praying for the annulment of Resolution No. 552 due to its being
unconstitutional, confiscatory, improper, and without force and effect. The City countered that
Resolution No. 552 was a mere authorization given to the City Mayor to initiate the legal
steps towards expropriation, which included making a definite offer to purchase the property
of the petitioners; hence, the suit of the petitioners was premature.
Among others, an ordinance is an essential requisites must concur before an LGU can
exercise the power of eminent domain. In the case at bar, the local chief executive sought to
exercise the power of eminent domain pursuant to a resolution of the municipal council. Thus,
there was no compliance with the first requisite that the mayor be authorized through an
ordinance. Petitioner cites Camarines Sur vs. Court of Appeals to show that a resolution may
suffice to support the exercise of eminent domain by an LGU. This case, however, is not in
point because the applicable law at that time was BP 337, the previous Local Government
Code, which had provided that a mere resolution would enable an LGU to exercise eminent
domain. In contrast, RA 7160, the present Local Government Code which was already in
force when the Complaint for expropriation was filed, explicitly required an ordinance for this
purpose.
The Local Government Code, Section 19 of RA 7160 categorically requires that the local
chief executive act pursuant to an ordinance. Indeed, legislative intent is determined
principally from the language of a statute. Where the language of a statute is clear and
unambiguous, the law is applied according to its express terms, and interpretation would be
resorted to only where a literal interpretation would be either impossible or absurd or would
lead to an injustice. In the instant case, there is no reason to depart from this rule, since the
law requiring an ordinance is not at all impossible, absurd, or unjust.
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2. For public use, purpose, or welfare, or for the benefit of the poor and the landless.
Do LGUs need to secure the approval of DAR for conversion of a land from agricultural to
non-agricultural before they can institute expropriation proceedings?
Province of Camarines Sur v CA
The Sangguniang Panlalawigan of the Province of Camarines Sur passed Resolution No.
129, Series of 1988, authorizing the Provincial Governor to purchase or expropriate property
contiguous to the provincial capitol site, in order to establish a pilot farm for non-food and
non-traditional agricultural crops and a housing project for provincial government employees.
Pursuant to the resolution, the province of Camarines Sur, through its Governor Luis
Villafuerte, filed two separate cases for expropriation against Ernesto San Joaquin and Efren
San Joaquin. The trial court authorized Cam Sur to take possession of the property upon the
deposit with the Clerk of Court of the amount of 5,714 pesos (the amount provisionally fixed
by the trial court to answer for damages that private respondents may suffer in the event the
that expropriation cases do not prosper. The trial court then issued a writ of possession.
The private respondents appealed that such order was void and should be nullified.
Petitioners then replied that it has the authority to initiate the expropriation proceedings under
Section 4 and 7 of the Local Government Code and that the expropriations are for a public
purpose.
The Court held that the expropriation of agricultural lands by local government units is not
subject to the prior approval of the Secretary of the Agrarian Reform, as the implementer of
the agrarian reform program.
Modernly, there has been a shift from the literal to a broader interpretation of “public purpose”
or “public use” for which the power of eminent domain may be exercised. The old concept
was that the condemned property must actually be used by the general public before the
taking thereof could satisfy the constitutional requirement if “public use”. Under the new
concept, “public use” means public advantage, convenience, or benefit, which tends to
contribute to the general welfare and prosperity of the community.
The expropriation of the property in this case is for a public purpose. The establishment if a
pilot development center would be to the direct benefit and advantage of the people of Cam
Sur. The court stresses that the power of expropriation is superior to the power to distribute
lands under the land reform program. Resolution 129 was promulgated pursuant to Section
9 of BP 337, the Local Government Code (LGC). The LGC does not intimate in the least that
local government units must first secure the approval of the Department of Land Reform for
the conversion of lands before they can institute the necessary expropriation proceedings.
There is also nothing in the Comprehensive Agrarian Reform Law which subjects
expropriation proceedings to the control of the Department of Agrarian Reform.
To sustain the court of appeals would mean that the LGUs can no longer expropriate
agricultural lands needed for the construction of roads, schools, etc. without first applying for
conversion of the use of the lands with the Department of Agrarian Reform, because all of
these projects would naturally involve a change in the land use. In effect, it would then be
the Department of Agrarian Reform to scrutinize whether the expropriation is for a public
purpose or public use. Ordinarily, it is the legislative branch of the LGU that shall determine
whether the use of property sought to be expropriated shall be public. The courts defer to
such legislative determination and will intervene only when a particular undertaking has no
real relation to public use.
What if the public use stated in the complaint for expropriation was not materialized, or the
public use actually done is not the one stated in the complaint?
Annunciacion Vda. De Ouano v Republic
As the landowners would later claim, the government negotiating team, as a sweetener,
assured them that they could repurchase their respective lands should the Lahug Airport
expansion project do not push through or once the Lahug Airport closes or its operations
transferred to Mactan-Cebu Airport. Some of the landowners accepted the assurance and
executed deeds of sale with a right of repurchase. Others, however, including the owners of
the aforementioned lots, refused to sell because the purchase price offered was viewed as
way below market, forcing the hand of the Republic to file a complaint for the expropriation
of the aforementioned properties. The trial court held in favor of the Republic stating that the
Republic was justified in and in lawful exercise of the right of eminent domain. In view of the
adverted buy-back assurance made by the government, the owners of the lots no longer
appealed the decision of the trial court. Soon after the transfer of the aforesaid lots to MCIAA,
Lahug Airport completely ceased operations, Mactan Airport having opened to accommodate
incoming and outgoing commercial flights. On the ground, the expropriated lots were never
utilized for the purpose they were taken as no expansion of Lahug Airport was undertaken.
This development prompted the former lot owners to formally demand from the government
that they be allowed to exercise their promised right to repurchase. The demands went
unheeded.
The abandonment of the public use for which the subject properties were expropriated
entitled the petitioners Ouanos, et al. and respondents Inocian, et al. to reacquire them. It is
well settled that the taking of private property by the Governments power of eminent domain
is subject to two mandatory requirements:
1. That it is for a particular public purpose; and
2. That just compensation be paid to the property owner.
These requirements partake of the nature of implied conditions that should be complied with
to enable the condemnor to keep the property expropriated.
More particularly, with respect to the element of public use, the expropriator should commit
to use the property pursuant to the purpose stated in the petition for expropriation filed, failing
which, it should file another petition for the new purpose. If not, it is then incumbent upon the
expropriator to return the said property to its private owner, if the latter desires to reacquire
the same. Otherwise, the judgment of expropriation suffers an intrinsic flaw, as it would lack
one indispensable element for the proper exercise of the power of eminent domain, namely,
the particular public purpose for which the property will be devoted. Accordingly, the private
property owner would be denied due process of law, and the judgment would violate the
property owner’s right to justice, fairness, and equity.
With these premises, we now expressly hold that the taking of private property, consequent
to the Governments exercise of its power of eminent domain, is always subject to the
condition that the property be devoted to the specific public purpose for which it was taken.
Corollary, if this particular purpose or intent is not initiated or not at all pursued, and is
peremptorily abandoned, then the former owners, if they so desire, may seek the reversion
of the property, subject to the return of the amount of just compensation received. In such a
case, the exercise of the power of eminent domain has become improper for lack of the
required factual justification.
MCIAA v Lozada
Subject of this case is Lot No. 88-SWO-25042 (Lot No. 88), with an area of 1,017 square
meters, more or less, located in Lahug, Cebu City. Its original owner was Anastacio Deiparine
when the same was subject to expropriation proceedings, initiated by the Republic of the
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Philippines (Republic), represented by the then Civil Aeronautics Administration (CAA), f or
the expansion and improvement of the Lahug Airport. The projected improvement and
expansion plan of the old Lahug Airport, however, was not pursued.
Lozada, with the other landowners, contacted then CAA Director Vicente Rivera, Jr.,
requesting to repurchase the lots, as per previous agreement. Then President Corazon C.
Aquino issued a Memorandum to the Department of Transportation, directing the transfer of
general aviation operations of the Lahug Airport to the Mactan International Airport before
the end of 1990 and, upon such transfer, the closure of the Lahug Airport.
From the date of the institution of the expropriation proceedings up to the present, the public
purpose of the said expropriation (expansion of the airport) was never actually initiated,
realized, or implemented. Instead, the old airport was converted into a commercial complex.
RTC ruled in favor of the respondents, asking for the conveyance of the property upon the
condition that it respondents reimburse the petitioners for the expropriation fee it paid. CA
affirmed the decision of the trial court.
The taking of private property, consequent to the Government’s exercise of its power of
eminent domain, is always subject to the condition that the property be devoted to the specific
public purpose for which it was taken. If this particular purpose or intent is not initiated or not
at all pursued, and is peremptorily abandon, then the former owners, if they so desire, may
seek the reversion of the property, subject to the return of the amount of just compensation
received. In such case the exercise of the power of eminent domain has become improper
for lack of the required factual justification.
In the case at bar, petitioners conveyed Lots No. 916 and 920 to the government with the
latter obliging itself to use the realties for the expansion of Lahug Airport; failing to keep its
bargain, the government can be compelled by petitioners to reconvey the parcels of land to
them, otherwise, petitioners would be denied the use of their properties upon a state of affairs
that was not conceived nor contemplated when the expropriation was authorized.
What is the remedy of the LGU if it wants to use expropriated land for another public
purpose?
File another expropriation proceeding.
3. There is payment of just compensation as required under Sec. 9, Article III of the
1987 Constitution and other pertinent laws.
City of Cebu v Dedamo
Petitioner questioned the land valuation asserting that just compensation should be
determined as of the date of the filing of the complaint, which in this case should be 17
September 1993, and not at the time the property was actually taken in 1994, pursuant to
the Court's decision in "National Power Corporation vs. Court of Appeals." In their Comment,
respondents maintained that the trial court decided the case on the basis of the agreement
of the parties that just compensation shall be fixed by commissioners appointed by the court;
that the petitioner did not interpose any serious objection to the commissioners' report;
hence, it was estopped from attacking the report on which the decision was based.
In denying the petition, the Court held that the applicable law as to the point of reckoning for
the determination of just compensation is Section 19 of Republic Act No. 7160, which
expressly provides that just compensation shall be determined as of the time of actual taking.
The petitioner had misread the Court's ruling in the above-mentioned case. The Court did
not categorically rule in that case that just compensation should be determined as of the filing
of the complaint. The Court explicitly stated therein that although the general rule in
determining just compensation in eminent domain is the value of the property as of the date
of the filing of the complaint, the rule "admits of an exception: where the Court fixed the value
of the property as of the date it was taken, and not at the date of the commencement of the
expropriation proceedings."
Moreover, it was too late for petitioner to question the valuation without violating the principle
of equitable estoppel. Records showed that petitioner consented to conform with the
valuation recommended by the commissioners. It cannot detract from its agreement now and
assail the correctness of the commissioners' assessment.
Henry Sy v Quezon City
On Nov. 7, 1996, Respondent filed a complaint for expropriation with the RTC for the
acquisition of a 1,000 sq. m. parcel of land, owned and registered under petitioner Henry Sy,
which was intended to be used as a site for a multipurpose barangay hall, day-care center,
playground and community activity center for the benefit of the residents of Barangay
Balingasa, Balintawak, QC. Before the institution of the complaint, it was found that
respondent has been using the subject property as Barangay day care and office since 1986.
In this regard, respondent enacted an ordinance on April 12, 1994 to undertake expropriation.
Respondent deposited the amount of P241,090 to the court, representing 15% of the fair
market value of the property. Petitioner Sy did not question the right to expropriate of
respondent but protested the amount of compensation. The RTC appointed an appraisal
committee to determine the proper amount of just compensation. The committee
recommended payment of P5,500.00 per sq. m., to be computed from the date of the
filing of the expropriation complaint, or on Nov 7, 1996
On the grant of 6% legal interest in favor of petitioner.
Taking into account existing jurisprudence, the Court held that the correct rate of legal interest
to be applied is 12% and not 6% per annum, owing to the nature of the City’s obligation as
an effective forbearance. As to the reckoning point on which the legal interest should accrue,
the same should be computed from the time of the taking of the subject property in 1986 and
not from the filing of the complaint for expropriation on Nov 7, 1996. This is based on the
principle that interest “runs as a matter of law and follows from the right of the landowner to
be placed in as good position as money can accomplish, as of the date of the taking.”
On the amount of just compensation at P5,500/sq. m.
It is well-settled that the amount of just compensation is to be ascertained as of the time of
the taking. The valuation arrived by the RTC and CA was based on the 1996 recommendation
of the City Appraisal Committee and Sy’s tax declaration in 1996. However, respondent has
been using the subject property as Barangay day care and office since 1986. Just
compensation must be then computed at the time of the taking in 1986 and not the institution
of proceedings in 1996. The Court remanded to the RTC in order to properly determine the
amount of just compensation during such time the subject property was actually taken.
May the property owner reconvey the land if just compensation has not been paid?
Republic vs. Lim
There is a recognized rule that title to the property expropriated shall pass from the owner
to the expropriator only upon full payment of the just compensation. So, how could the
Republic acquire ownership over Lot 932 when it has not paid its owner the just
compensation, required by law, for more than 50 years? Clearly, without full payment of just
compensation, there can be no transfer of title from the landowner to the expropriator.
SC ruled in earlier cases that expropriation of lands consists of two stages. First is concerned
with the determination of the authority of the plaintiff to exercise the power of eminent domain
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and the propriety of its exercise. The second is concerned with the determination by the court
of "the just compensation for the property sought to be taken." It is only upon the completion
of these two stages that expropriation is said to have been completed In Republic v. Salem
Investment Corporation, we ruled that, "the process is not completed until payment of just
compensation." Thus, here, the failure of the Republic to pay respondent and his
predecessors-in-interest for a period of 57 years rendered the expropriation process
incomplete.
Thus, SC ruled that the special circumstances prevailing in this case entitle respondent
to recover possession of the expropriated lot from the Republic. The landowner is entitled to
recover possession of the property expropriated if the gov’t fails to fully pay just
compensation to the owner within a period of 5 years from the finality of the judgment in an
expropriation proceeding.
SC defined just compensation as not only the correct determination of the amount to be paid
to the property owner but also the payment of the property within a reasonable time.
Without prompt payment, compensation cannot be considered "just."
4. A valid and definite offer has been previously made to the owner of the property
sought to be expropriated but said offer was not accepted.
Article 35 of the IRR provides:
Offer to Buy and Contract of Sale. — (a) The offer to buy private property for public use or purpose
shall be in writing. It shall specify the property sought to be acquired, the reasons for its acquisition,
and the price offered.
(b) If the owner or owners accept the offer in its entirety, a contract of sale shall be executed and
payment forthwith made.
(c) If the owner or owners are willing to sell their property but at a price higher than that offered to
them, the local chief executive shall call them to a conference for the purpose of reaching an
agreement on the selling price. The chairman of the appropriation or finance committee of the
sanggunian, or in his absence, any member of the sanggunian duly chosen as its representative,
shall participate in the conference. When an agreement is reached by the parties, a contract of
sale shall be drawn and executed.
(d) The contract of sale shall be supported by the following documents:
(1) Resolution of the sanggunian authorizing the local chief executive to enter into a
contract of sale. The resolution shall specify the terms and conditions to be embodied
in the contract;
(2) Ordinance appropriating the amount specified in the contract; and
(3) Certification of the local treasurer as to availability of funds together with a statement
that such fund shall not be disbursed or spent for any purpose other than to pay for the
purchase of the property involved.
Jesus is Lord Foundation v City of Pasig
A fire marshall testified that he had seen the new road and averred that a firetruck could pass
through it. He estimated that houses in area ranged from 300 to 400. He also testified that
Damayan Street is the only road in the area. Finally, BonifacioMaceda, Jr., Tax Mapper IV,
testified that, according to their records, JILCSFI became the owner of the property only on
January 13, 1994.
The plaintiff offered in evidence a photocopy of the letter of Engr. Jose Reyes addressed to
Lorenzo Ching Cuanco to prove that the plaintiff made a definite and valid offer to acquire
the property to the co-owners. However, the RTC rejected the same letter for being a mere
photocopy. Danilo Caballero averred that he had been a resident of Sto. Tomas Bukid for
seven years. From his house, he could use three streets to go to E. R. Santos Street, namely,
Catalina Street, Damayan Street and Bagong Taon Street. On cross- examination, he
admitted that no vehicle could enter Sto. Tomas Bukid except through the newly constructed
Damayan Street.
RTC Ruled that there was substantial compliance with the definite and valid offer requirement
of Section 19 of R.A. No. 7160, and that the expropriated portion is the most convenient
access to the interior of Sto. Tomas Bukid.
The exercise of the right of eminent domain, whether directly by the State or by its authorized
agents, is necessarily in derogation of private rights. It is one of the harshest proceedings
known to the law. Consequently, when the sovereign delegates the power to a political unit
or agency, a strict construction will be given against the agency asserting the power.
Corollarily, the respondent, which is the condemn or, has the burden of proving all the
essentials necessary to show the right of condemnation. It has the burden of proof to
establish that it has complied with all the requirements provided by law for the valid exercise
of the power of eminent domain.
Corollarily, the offer must be complete, indicating with sufficient clearness the kind of contract
intended and definitely stating the essential conditions of the proposed contract. An offer
would require, among other things, a clear certainty on both the object and the cause or
consideration of the envisioned contract. The purpose of the requirement of a valid and
definite offer to be first made to the owner is to encourage settlements and voluntary
acquisition of property needed for public purposes in order to avoid the expense and delay
of a court action.
The law is designed to give to the owner the opportunity to sell his land without the expense
and inconvenience of a protracted and expensive litigation. This is a substantial right which
should be protected in every instance. It encourages acquisition without litigation and spares
not only the landowner but also the condemnor, the expenses and delays of litigation. It
permits the landowner to receive full compensation, and the entity acquiring the property,
immediate use and enjoyment of the property.
A reasonable offer in good faith, not merely perfunctory or pro forma offer, to acquire the
property for a reasonable price must be made to the owner or his privy. A single bona fide
offer that is rejected by the owner will suffice.
In the present case, the respondent failed to prove that before it filed its complaint, it made a
written definite and valid offer to acquire the property for public use as an access road. The
only evidence adduced by the respondent to prove its compliance with Section 19 of the
Local Government Code is the photocopy of the letter purportedly bearing the signature of
Engr. Jose Reyes, to only one of the co-owners, Lorenzo Ching Cuanco.
Add the following when it is expropriation for urban development and housing:
5. Priorities in the acquisition of land shall be complied with as mandated by RA 7279
(Urban Devt. And Housing Act of 1992) (meaning: private lands should be last in
the selection of land! (Sec. 9 of RA 7279)
Section 9 of RA 7279 provides:
Priorities in the Acquisition of Land. — Lands for socialized housing shall be acquired in the
following order:
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(a) Those owned by the government or any of its subdivisions,

instrumentalities, or agencies, including government-owned or -
controlled corporations and their subsidiaries;
(b) Alienable lands of the public domain;
(c) Unregistered or abandoned and idle lands;
(d) Those within the declared Areas for Priority Development, Zonal
Improvement Program sites, and Slum Improvement and
Resettlement Program sites which have not yet been acquired;
(e) Bagong Lipunan Improvement of Sites and Services or BLISS sites
which have not yet been acquired; and
(f) Privately-owned lands.
Where on-site development is found more practicable and advantageous to the
beneficiaries, the priorities mentioned in this section shall not apply. The local government
units shall give budgetary priority to on-site development of government lands.

6. Expropriation shall be resorted to only when other modes of acquisition have been
exhausted. (Sec. 10, RA 7279)
Modes of Land Acquisition. — The modes of acquiring lands for purposes of this Act shall
include, among others, community mortgage, land swapping, land assembly or
consolidation, land banking, donation to the Government, joint-venture agreement,
negotiated purchase, and expropriation: Provided, however, That expropriation shall be
resorted to only when other modes of acquisition have been exhausted: Provided, further,
That where expropriation is resorted to, parcels of land owned by small property owners
shall be exempted for purposes of this Act: Provided, finally, That abandoned property, as
herein defined, shall be reverted and escheated to the State in a proceeding analogous to
the procedure laid down in Rule 91 of the Rules of Court.
For the purpose of socialized housing, government-owned and foreclosed properties shall
be acquired by the local government units, or by the National Housing Authority primary
through negotiated purchase: Provided, That qualified beneficiaries who are actual
occupants of the land shall be given the right of first refusal.

In cases of Immediate Possession

Francia v Mun. Meycauayan
A Complaint for expropriation was filed by respondent Municipality of Meycauayan, Bulacan
against the property of petitioners Amos Francia, Cecilia Francia and Benjamin Francia. The
Municipality of Meycauayan seeks to use the said property in order to establish a common
public terminal for all public utility vehicles. The Regional Trial Court (RTC) ruled that the
expropriation was for public purpose and issued an Order of Expropriation.

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

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