G.R. No. 152774. May 27, 2004. proper legal interpretation of constitutional and statutory provisions.
Moreover, the
THE PROVINCE OF BATANGAS, represented by its Governor, HERMILANDO I.
MANDANAS, petitioner, vs. HON. ALBERTO G. ROMULO, Executive Secretary and
Chairman of the Oversight Committee on Devolution; HON. EMILIA BONCODIN,
Secretary, Department of Budget and Management; HON. JOSE D. LINA, JR.,
Secretary, Department of Interior and Local Government, respondents.
Actions; Parties; Locus Standi; The gist of the question of standing is whether a party has
“alleged such a personal stake in the outcome of the controversy as to assure that concrete
adverseness which sharpens the presentation of issues upon which the court so largely depends
for illumination of difficult constitutional questions.”—The gist of the question of standing is
whether a party has “alleged such a personal stake in the outcome of the controversy as to
assure that concrete adverseness which sharpens the presentation of issues upon which the
court so largely depends for illumination of difficult constitutional questions.” Accordingly, it has
been held that the interest of a party assailing the constitutionality of a statute must be direct and
personal. Such party must be able to show, not only that the law or any government act is
invalid, but also that he has sustained or is in imminent danger of sustaining some direct injury
as a result of its enforcement, and not merely that he suffers thereby in some indefinite way. It
must appear that the person complaining has been or is about to be denied some right or
privilege to which he is lawfully entitled or that he is about to be subjected to some burdens or
penalties by reason of the statute or act complained of.
Same; Same; Same; Local Autonomy; Local Government Code; A local government unit
(LGU), seeking relief in order to protect or vindicate an interest of its own, and of the other
LGUs, pertaining to their interest in their share in the national taxes or the Internal Revenue
Allotment (IRA), has the requisite standing to bring suit.—The Court holds that the petitioner
possesses the requisite standing to maintain the present suit. The petitioner, a local government
unit, seeks relief in order to protect or vindicate an interest of its own, and of the other LGUs.
This interest pertains to the LGUs’ share in the national taxes or the IRA. The petitioner’s
constitutional claim is, in substance, that the assailed provisos in the GAAs of 1999, 2000 and
2001, and the OCD resolutions contravene Section 6, Article X of the Constitution, mandating
the “automatic release” to the LGUs of their share in the national taxes. Further, the injury that
the petitioner claims to suffer is the diminution of its share in the IRA, as provided under Section
285 of the Local Government Code of 1991, occasioned by the implementation of the assailed
measures. These allegations are sufficient to grant the petitioner standing to question the validity
of the assailed provisos in the GAAs of 1999, 2000 and 2001, and the OCD resolutions as the
petitioner clearly has “a plain, direct and adequate interest” in the manner and distribution of the
IRA among the LGUs.
Same; Hierarchy of Courts; The rule on hierarchy of courts may be relaxed when the
redress desired cannot be obtained in the appropriate courts or where exceptional and
compelling circumstances justify availment of a remedy within and calling for the exercise of the
Supreme Court’s primary jurisdiction.—Considering that these facts, which are necessary to
resolve the legal question now before this Court, are no longer in issue, the same need not be
determined by a trial court. In any case, the rule on hierarchy of courts will not prevent this Court
from assuming jurisdiction over the petition. The said rule may be relaxed when the redress
desired cannot be obtained in the appropriate courts or where exceptional and compelling
circumstances justify availment of a remedy within and calling for the exercise of this Court’s
primary jurisdiction. The crucial legal issue submitted for resolution of this Court entails the
“transcendental importance” of the case, as it necessarily involves the application of the
constitutional principle on local autonomy, cannot be gainsaid. The nature of the present
controversy, therefore, warrants the relaxation by this Court of procedural rules in order to
resolve the case forthwith.
Same; Moot and Academic Questions; Supervening events, whether intended or
accidental, cannot prevent the Court from rendering a decision if there is a grave violation of the
Constitution; Another reason justifying the resolution by the Court of the substantive issue now
before it is the rule that courts will decide a question otherwise moot and academic if it is
“capable of repetition, yet evading review.”—Granting arguendo that, as contended by the
respondents, the resolution of the case had already been overtaken by supervening events as
the IRA, including the LGSEF, for 1999, 2000 and 2001, had already been released and the
government is now operating under a new appropriations law, still, there is compelling reason for
this Court to resolve the substantive issue raised by the instant petition. Supervening events,
whether intended or accidental, cannot prevent the Court from rendering a decision if there is a
grave violation of the Constitution. Even in cases where supervening events had made the
cases moot, the Court did not hesitate to resolve the legal or constitutional issues raised to
formulate controlling principles to guide the bench, bar and public. Another reason justifying the
resolution by this Court of the substantive issue now before it is the rule that courts will decide a
question otherwise moot and academic if it is “capable of repetition, yet evading review.” For the
GAAs in the coming years may contain provisos similar to those now being sought to be
invalidated, and yet, the question may not be decided before another GAA is enacted. It, thus,
behooves this Court to make a categorical ruling on the substantive issue now.
Municipal Corporations; Local Autonomy; Local Government Code;Consistent with the
principle of local autonomy, the Constitution confines the President’s power over the LGUs to
one of general supervision, which provision has been interpreted to exclude the power of
control.—Consistent with the principle of local autonomy, the Constitution confines the
President’s power over the LGUs to one of general supervision. This provision has been
interpreted to exclude the power of control. The distinction between the two powers was
enunciated in Drilon v. Lim: An officer in control lays down the rules in the doing of an act. If they
are not followed, he may, in his discretion, order the act undone or redone by his subordinate or
he may even decide to do it himself. Supervision does not cover such authority. The supervisor
or superintendent merely sees to it that the rules are followed, but he himself does not lay down
such rules, nor does he have the discretion to modify or replace them. If the rules are not
observed, he may order the work done or re-done but only to conform to the prescribed rules.
He may not prescribe his own manner for doing the act. He has no judgment on this matter
except to see to it that the rules are followed.
Same; Same; Same; When parsed, it would be readily seen that Section 6, Article X of
the Constitution readily mandates that (1) the LGUs shall have a “just share” in the national
taxes, (2) the “just share” shall be determined by law, and (3) the “just share” shall be
automatically released to the LGUs.—Section 6, Article X of the Constitution reads: Sec. 6. Local
government units shall have a just share, as determined by law, in the national taxes which shall
be automatically released to them. When parsed, it would be readily seen that this provision
mandates that (1) the LGUs shall have a “just share” in the national taxes; (2) the “just share”
shall be determined by law; and (3) the “just share” shall be automatically released to the LGUs.
Same; Same; Same; Words and Phrases; The LGUs are not required to perform any act
to receive the “just share” accruing to them from the national coffers—the “just share” of the
LGUs shall be released to them “without need of further action”; “Automatic” means “involuntary
either wholly or to a major extent so that any activity of the will is largely negligible; of a reflex
nature; without volition; mechanical; like or suggestive of an automation.”—Webster’s Third New
International Dictionary defines “automatic” as “involuntary either wholly or to a major extent so
that any activity of the will is largely negligible; of a reflex nature; without volition; mechanical;
like or suggestive of an automaton.” Further, the word “automatically” is defined as “in an
automatic manner: without thought or conscious intention.” Being “automatic,” thus, connotes
something mechanical, spontaneous and perfunctory. As such, the LGUs are not required to
perform any act to receive the “just share” accruing to them from the national coffers. As
emphasized by the Local Government Code of 1991, the “just share” of the LGUs shall be
released to them “without need of further action.”
Same; Same; Same; Internal Revenue Allotments; Local Government Service
Equalization Fund (LGSEF); Statutory Construction; The entire process involving the distribution
and release of the LGSEF is constitutionally impermissible—to subject its distribution and
release to the vagaries of the implementing rules and regulations, including the guidelines and
mechanisms unilaterally prescribed by the Oversight Committee from time to time, makes the
release not automatic; Where the law, the Constitution in this case, is clear and unambiguous, it
must be taken to mean exactly what it says, and courts have no choice but to see to it that the
mandate is obeyed.—To the Court’s mind, the entire process involving the distribution and
release of the LGSEF is constitutionally impermissible. The LGSEF is part of the IRA or “just
share” of the LGUs in the national taxes. To subject its distribution and release to the vagaries of
the implementing rules and regulations, including the guidelines and mechanisms unilaterally
prescribed by the Oversight Committee from time to time, as sanctioned by the assailed provisos
in the GAAs of 1999, 2000 and 2001 and the OCD resolutions, makes the release not automatic,
a flagrant violation of the constitutional and statutory mandate that the “just share” of the LGUs
“shall be automatically released to them.” The LGUs are, thus, placed at the mercy of the
Oversight Committee. Where the law, the Constitution in this case, is clear and unambiguous, it
must be taken to mean exactly what it says, and courts have no choice but to see to it that the
mandate is obeyed. Moreover, as correctly posited by the petitioner, the use of the word “shall”
connotes a mandatory order. Its use in a statute denotes an imperative obligation and is
inconsistent with the idea of discretion.
Same; Same; Same; Same; Same; The Oversight Committee exercising discretion, even
control, over the distribution and release of a portion of the IRA, the LGSEF, is an anathema to
and subversive of the principle of local autonomy as embodied in the Constitution; The Oversight
Committee’s authority is undoubtedly limited to the implementation of the Local Government
Code of 1991, not to supplant or subvert the same, and neither can it exercise control over the
IRA, or even a portion thereof, of the LGUs.—Indeed, the Oversight Committee exercising
discretion, even control, over the distribution and release of a portion of the IRA, the LGSEF, is
an anathema to and subversive of the principle of local autonomy as embodied in the
Constitution. Moreover, it finds no statutory basis at all as the Oversight Committee was created
merely to formulate the rules and regulations for the efficient and effective implementation of the
Local Government Code of 1991 to ensure “compliance with the principles of local autonomy as
defined under the Constitution.” In fact, its creation was placed under the title of “Transitory
Provisions,” signifying its ad hoccharacter. According to Senator Aquilino Q. Pimentel, the
principal author and sponsor of the bill that eventually became Rep. Act No. 7160, the
Committee’s work was supposed to be done a year from the approval of the Code, or on
October 10, 1992. The Oversight Committee’s authority is undoubtedly limited to the
implementation of the Local Government Code of 1991, not to supplant or subvert the same.
Neither can it exercise control over the IRA, or even a portion thereof, of the LGUs.
Same; Same; Same; Same; Same; The assailed provisos in the Gen-eral Appropriations
Acts (GAAs) of 1999, 2000 and 2001, and the Oversight Committee on Devolution (OCD)
resolutions constitute a “withholding” of a portion of the IRA—they effectively encroach on the
fiscal autonomy enjoyed by the LGUs and must be struck down.—In like manner, the assailed
provisos in the GAAs of 1999, 2000 and 2001, and the OCD resolutions constitute a
“withholding” of a portion of the IRA. They put on hold the distribution and release of the five
billion pesos LGSEF and subject the same to the implementing rules and regulations, including
the guidelines and mechanisms prescribed by the Oversight Committee from time to time. Like
Section 4 of A.O. 372, the assailed provisos in the GAAs of 1999, 2000 and 2001 and the OCD
resolutions effectively encroach on the fiscal autonomy enjoyed by the LGUs and must be struck
down. They cannot, therefore, be upheld.
Same; Same; Same; Same; Same; The only possible exception to the mandatory
automatic release of the LGUs’ IRA is if the national internal revenue collections for the current
fiscal year is less than 40 percent of the collections of the preceding third fiscal year, in which
case what should be automatically released shall be a proportionate amount of the collections
for the current fiscal year.—Thus, from the above provision, the only possible exception to the
mandatory automatic release of the LGUs’ IRA is if the national internal revenue collections for
the current fiscal year is less than 40 percent of the collections of the preceding third fiscal year,
in which case what should be automatically released shall be a proportionate amount of the
collections for the current fiscal year. The adjustment may even be made on a quarterly basis
depending on the actual collections of national internal revenue taxes for the quarter of the
current fiscal year. In the instant case, however, there is no allegation that the national internal
revenue tax collections for the fiscal years 1999, 2000 and 2001 have fallen compared to the
preceding three fiscal years.
Same; Same; Same; Same; Same; Statutes; Appropriations Bills;Amendments and
Repeals of Laws; While it is conceded that Congress may amend any of the provisions of the
Local Government Code, a substantive law, it may not do so through appropriations laws or
GAAs—any amendment to the Local Government Code should be done in a separate law, not in
the appropriations law, because Congress cannot include in a general appropriations bill matters
that should be more properly enacted in a separate legislation.—The respondents argue that this
modification is allowed since the Constitution does not specify that the “just share” of the LGUs
shall only be determined by the Local Government Code of 1991. That it is within the power of
Congress to enact other laws, including the GAAs, to increase or decrease the “just share” of the
LGUs. This contention is untenable. The Local Government Code of 1991 is a substantive law.
And while it is conceded that Congress may amend any of the provisions therein, it may not do
so through appropriations laws or GAAs. Any amendment to the Local Government Code of
1991 should be done in a separate law, not in the appropriations law, because Congress cannot
include in a general appropriation bill matters that should be more properly enacted in a
separate legislation.
Same; Same; Same; Same; Same; Same; Same; Doctrine of Inappropriate
Provisions; Words and Phrases; A general appropriations bill is a special type of legislation,
whose content is limited to specified sums of money dedicated to a specific purpose or a
separate fiscal unit—any provision therein which is intended to amend another law is considered
an “inappropriate provision.”—A general appropriations bill is a special type of legislation, whose
content is limited to specified sums of money dedicated to a specific purpose or a separate fiscal
unit. Any provision therein which is intended to amend another law is considered an
“inappropriate provision.” The category of “inappropriate provisions” includes unconstitutional
provisions and provisions which are intended to amend other laws, because clearly these kinds
of laws have no place in an appropriations bill. Increasing or decreasing the IRA of the LGUs or
modifying their percentage sharing therein, which are fixed in the Local Government Code of
1991, are matters of general and substantive law. To permit Congress to undertake these
amendments through the GAAs, as the respondents contend, would be to give Congress the
unbridled authority to unduly infringe the fiscal autonomy of the LGUs, and thus put the same in
jeopardy every year. This, the Court cannot sanction.
Same; Same; It is well to note that the principle of local autonomy, while concededly
expounded in greater detail in the present Constitution, dates back to the turn of the century
when President William McKinley, in his Instructions to the Second Philippine Commission dated
7 April 1900, ordered the new Government “to devote their attention in the first instance to the
establishment of municipal governments in which the natives of the Islands, both in the cities
and in the rural communities, shall be afforded the opportunity to manage their own affairs to the
fullest extent of which they are capable, and subject to the least degree of supervision and
control in which a careful study of their capacities and observation of the workings of native
control show to be consistent with the maintenance of law, order and loyalty.”—In closing, it is
well to note that the principle of local autonomy, while concededly expounded in greater detail in
the present Constitution, dates back to the turn of the century when President William McKinley,
in his Instructions to the Second Philippine Commission dated April 7, 1900, ordered the new
Government “to devote their attention in the first instance to the establishment of municipal
governments in which the natives of the Islands, both in the cities and in the rural communities,
shall be afforded the opportunity to manage their own affairs to the fullest extent of which they
are capable, and subject to the least degree of supervision and control in which a careful study
of their capacities and observation of the workings of native control show to be consistent with
the maintenance of law, order and loyalty.” While the 1935 Constitution had no specific article on
local autonomy, nonetheless, it limited the executive power over local governments to “general
supervision . . . as may be provided by law.” Subsequently, the 1973 Constitution explicitly
stated that “[t]he State shall guarantee and promote the autonomy of local government units,
especially the barangay to ensure their fullest development as self-reliant communities.” An
entire article on Local Government was incorporated therein. The present Constitution, as earlier
opined, has broadened the principle of local autonomy. The 14 sections in Article X thereof
markedly increased the powers of the local governments in order to accomplish the goal of a
more meaningful local autonomy.
Same; Same; The value of local governments as institutions of democracy is measured
by the degree of autonomy that they enjoy—our national officials should not only comply with the
constitutional provisions on local autonomy but should also appreciate the spirit and liberty upon
which these provisions are based.—Indeed, the value of local governments as institutions of
democracy is measured by the degree of autonomy that they enjoy. As eloquently put by M. De
Tocqueville, a distinguished French political writer, “[l]ocal assemblies of citizens constitute the
strength of free nations. Township meetings are to liberty what primary schools are to science;
they bring it within the people’s reach; they teach men how to use and enjoy it. A nation may
establish a system of free governments but without the spirit of municipal institutions, it cannot
have the spirit of liberty.” Our national officials should not only comply with the constitutional
provisions on local autonomy but should also appreciate the spirit and liberty upon which these
provisions are based.
CALLEJO, SR., J.:
The Province of Batangas, represented by its Governor, Hermilando I. Mandanas,
filed the present petition for certiorari, prohibition and mandamus under Rule 65 of the
Rules of Court, as amended, to declare as unconstitutional and void certain provisos
contained in the General Appropriations Acts (GAA) of 1999, 2000 and 2001, insofar
as they uniformly earmarked for each corresponding year the amount of five billion
pesos (P5,000,000,000.00) of the Internal Revenue Allotment (IRA) for the Local
Government Service Equalization Fund (LGSEF) and imposed conditions for the
release thereof.
Named as respondents are Executive Secretary Alberto G. Romulo, in his
capacity as Chairman of the Oversight Committee on Devolution, Secretary Emilia
Boncodin of the Department of Budget and Management (DBM) and Secretary Jose
Lina of the Department of Interior and Local Government (DILG).
Background
On December 7, 1998, then President Joseph Ejercito Estrada issued Executive
Order (E.O.) No. 48 entitled “ESTABLISHING A PROGRAM FOR DEVOLUTION
ADJUSTMENT AND EQUALIZATION.” The program was established to “facilitate the
process of enhancing the capacities of local government units (LGUs) in the
discharge of the functions and services devolved to them by the National Government
Agencies concerned pursuant to the Local Government Code.” The Oversight
Committee (referred to as the Devolution Committee in E.O. No. 48) constituted
under Section 533(b) of Republic Act No. 7160 (The Local Government Code of
1991) has been tasked to formulate and issue the appropriate rules and regulations
necessary for its effective implementation. Further, to address the funding shortfalls of
functions and services devolved to the LGUs and other funding requirements of the
program, the “Devolution Adjustment and Equalization Fund” was created. For 1998,
the DBM was directed to set aside an amount to be determined by the Oversight
Committee based on the devolution status appraisal surveys undertaken by the DILG.
The initial fund was to be sourced from the available savings of the national
government for CY 1998. For 1999 and the succeeding years, the corresponding
amount required to sustain the program was to be incorporated in the annual GAA.
The Oversight Committee has been authorized to issue the implementing rules and
regulations governing the equitable allocation and distribution of said fund to the
LGUs.
The LGSEF in the GAA of 1999
In Republic Act No. 8745, otherwise known as the GAA of 1999, the program was
renamed as the LOCAL GOVERNMENT SERVICE EQUALIZATION FUND (LGSEF).
Under said appropriations law, the amount of P96,780,000,000 was allotted as the
share of the LGUs in the internal revenue taxes. Item No. 1, Special Provisions, Title
XXXVI—A. Internal Revenue Allotment of Rep. Act No. 8745 contained the following
proviso:
 . . . PROVIDED, That the amount of FIVE BILLION PESOS (P5,000,000,000) shall
be earmarked for the Local Government Service Equalization Fund for the funding
requirements of projects and activities arising from the full and efficient
implementation of devolved functions and services of local government units
pursuant to R.A. No. 7160, otherwise known as the Local Government Code of
1991: PROVIDED, FURTHER, That such amount shall be released to the local
government units subject to the implementing rules and regulations, including such
mechanisms and guidelines for the equitable allocations and distribution of said
fund among local government units subject to the guidelines that may be
prescribed by the Oversight Committee on Devolution as constituted pursuant to
Book IV, Title III, Section 533(b) of R.A. No. 7160. The Internal Revenue Allotment
shall be released directly by the Department of Budget and Management to the
Local Government Units concerned.
On July 28, 1999, the Oversight Committee (with then Executive Secretary Ronaldo
B. Zamora as Chairman) passed Resolution Nos. OCD-99-003, OCD-99-005 and
OCD-99-006 entitled as follows:
OCD-99-005
RESOLUTION ADOPTING THE ALLOCATION SCHEME FOR THE PhP5
BILLION CY 1999 LOCAL GOVERNMENT SERVICE EQUALIZATION FUND
(LGSEF) AND REQUESTING HIS EXCELLENCY PRESIDENT JOSEPH
EJERCITO ESTRADA TO APPROVE SAID ALLOCATION SCHEME.
OCD-99-006
RESOLUTION ADOPTING THE ALLOCATION SCHEME FOR THE PhP4.0
BILLION OF THE 1999 LOCAL GOVERNMENT SERVICE EQUALIZATION
FUND AND ITS CONCOMITANT GENERAL FRAMEWORK, IMPLEMENTING
GUIDELINES AND MECHANICS FOR ITS IMPLEMENTATION AND RELEASE,
AS PROMULGATED BY THE OVERSIGHT COMMITTEE ON DEVOLUTION.
OCD-99-003
RESOLUTION REQUESTING HIS EXCELLENCY PRESIDENT JOSEPH
EJERCITO ESTRADA TO APPROVE THE REQUEST OF THE OVERSIGHT
COMMITTEE ON DEVOLUTION TO SET ASIDE TWENTY PERCENT (20%) OF
THE LOCAL GOVERNMENT SERVICE EQUALIZATION FUND (LGSEF) FOR
LOCAL AFFIRMATIVE ACTION PROJECTS AND OTHER PRIORITY
INITIATIVES FOR LGUs INSTITUTIONAL AND CAPABILITY BUILDING IN
ACCORDANCE WITH THE IMPLEMENTING GUIDELINES AND MECHANICS
AS PROMULGATED BY THE COMMITTEE.
These OCD resolutions were approved by then President Estrada on October 6,
1999.
Under the allocation scheme adopted pursuant to Resolution No. OCD-99-005,
the five billion pesos LGSEF was to be allocated as follows:
1.The PhP4 Billion of the LGSEF shall be allocated in accordance with the
allocation scheme and implementing guidelines and mechanics promulgated and
adopted by the OCD. To wit:
a.The first PhP2 Billion of the LGSEF shall be allocated in accordance with the
codal formula sharing scheme as prescribed under the 1991 Local Government
Code;
b.The second PhP2 Billion of the LGSEF shall be allocated, in accordance with a
modified 1992 cost of devolution fund (CODEF) sharing scheme, as recommended
by the respective leagues of provinces, cities and municipalities to the OCD. The
modified CODEF sharing formula is as follows:
Province 40%
Cities 20%
Municipalities 40%
This is applied to the P2 Billion after the approved amounts granted to individual
provinces, cities and municipalities as assistance to cover decrease in 1999 IRA
share due to reduction in land area have been taken out.
2.The remaining PhP1 Billion of the LGSEF shall be earmarked to support local
affirmative action projects and other priority initiatives submitted by LGUs to the
Oversight Committee on Devolution for approval in accordance with its prescribed
guidelines as promulgated and adopted by the OCD.
In Resolution No. OCD-99-003, the Oversight Committee set aside the one billion
pesos or 20% of the LGSEF to support Local Affirmative Action Projects (LAAPs) of
LGUs. This remaining amount was intended to “respond to the urgent need for
additional funds assistance, otherwise not available within the parameters of other
existing fund sources.” For LGUs to be eligible for funding under the one-billion-peso
portion of the LGSEF, the OCD promulgated the following:
III. CRITERIA FOR ELIGIBILITY:
1.LGUs (province, city, municipality, or barangay), individually or by group or multi-
LGUs or leagues of LGUs, especially those belonging to the 5th and 6th class,
may access the fund to support any projects or activities that satisfy any of the
aforecited purposes. A barangay may also access this fund directly or through their
respective municipality or city.
2.The proposed project/activity should be need-based, a local priority, with high
development impact and are congruent with the socio cultural, economic and
development agenda of the Estrada Administration, such as food security, poverty
alleviation, electrification, and peace and order, among others.
3.Eligible for funding under this fund are projects arising from, but not limited to,
the following areas of concern:
a.delivery of local health and sanitation services, hospital services and
other tertiary services;
b.delivery of social welfare services;
c.provision of socio-cultural services and facilities for youth and community
development;
d.provision of agricultural and on-site related research;
e.improvement of community-based forestry projects and other local
projects on environment and natural resources protection and
conservation;
f.improvement of tourism facilities and promotion of tourism;
g.peace and order and public safety;
h.construction, repair and maintenance of public works and infrastructure,
including public buildings and facilities for public use, especially those
destroyed or damaged by man-made or natural calamities and disaster as
well as facilities for water supply, flood control and river dikes;
i.provision of local electrification facilities;
j.livelihood and food production services, facilities and equipment;
 k.other projects that may be authorized by the OCD consistent with the
aforementioned objectives and guidelines;
4.Except on extremely meritorious cases, as may be determined by the Oversight
Committee on Devolution, this portion of the LGSEF shall not be used in
expenditures for personal costs or benefits under existing laws applicable to
governments. Generally, this fund shall cover the following objects of expenditures
for programs, projects and activities arising from the implementation of devolved
and regular functions and services:
a.acquisition/procurement of supplies and materials critical to the full and
effective implementation of devolved programs, projects and activities;
b.repair and/or improvement of facilities;
c. repair and/or upgrading of equipment;
d.acquisition of basic equipment;
e.construction of additional or new facilities;
f.counterpart contribution to joint arrangements or collective projects
among groups of municipalities, cities and/or provinces related to
devolution and delivery of basic services.
5.To be eligible for funding, an LGU or group of LGU shall submit to the Oversight
Committee on Devolution through the Department of Interior and Local
Governments, within the prescribed schedule and timeframe, a Letter Request for
Funding Support from the Affirmative Action Program under the LGSEF, duly
signed by the concerned LGU(s) and endorsed by cooperators and/or
beneficiaries, as well as the duly signed Resolution of Endorsement by the
respective Sanggunian(s) of the LGUs concerned. The LGU-proponent shall also
be required to submit the Project Request (PR), using OCD Project Request Form
No. 99-02, that details the following:
(a)general description or brief of the project;
(b)objectives and justifications for undertaking the project, which should
highlight the benefits to the locality and the expected impact to the local
program/project arising from the full and efficient implementation of social
services and facilities, at the local levels;
(c)target outputs or key result areas;
(d)schedule of activities and details of requirements;
(e)total cost requirement of the project;
(f)proponent’s counterpart funding share, if any, and identified source(s) of
counterpart funds for the full implementation of the project;
(g)requested amount of project cost to be covered by the LGSEF.
Further, under the guidelines formulated by the Oversight Committee as contained in
Attachment-Resolution No. OCD-99-003, the LGUs were required to identify the
projects eligible for funding under the one-billion-peso portion of the LGSEF and
submit the project proposals thereof and other documentary requirements to the DILG
for appraisal. The project proposals that passed the DILG’s appraisal would then be
submitted to the Oversight Committee for review, evaluation and approval. Upon its
approval, the Oversight Committee would then serve notice to the DBM for the
preparation of the Special Allotment Release Order (SARO) and Notice of Cash
Allocation (NCA) to effect the release of funds to the said LGUs.
The LGSEF in the GAA of 2000
Under Rep. Act No. 8760, otherwise known as the GAA of 2000, the amount of
P111,778,000,000 was allotted as the share of the LGUs in the internal revenue
taxes. As in the GAA of 1999, the GAA of 2000 contained a proviso earmarking five
billion pesos of the IRA for the LGSEF. This proviso, found in Item No. 1, Special
Provisions, Title XXXVII—A. Internal Revenue Allotment, was similarly worded as that
contained in the GAA of 1999.
The Oversight Committee, in its Resolution No. OCD-2000-023 dated June 22,
2000, adopted the following allocation scheme governing the five billion pesos
LGSEF for 2000:
1.The PhP3.5 Billion of the CY 2000 LGSEF shall be allocated to and shared by
the four levels of LGUs, i.e., provinces, cities, municipalities, and barangays, using
the following percentage-sharing formula agreed upon and jointly endorsed by the
various Leagues of LGUs:
For Provinces 26% or P 910,000,000
For Cities 23% 805,000,000
or
For 35% 1,225,000,000
Municipalities or
For Barangays 16% 560,000,000
or
Provided that the respective Leagues representing the provinces, cities,
municipalities and barangays shall draw up and adopt the horizontal
distribution/sharing schemes among the member LGUs whereby the Leagues
concerned may opt to adopt direct financial assistance or projectbased
arrangement, such that the LGSEF allocation for individual LGU shall be released
directly to the LGU concerned;
Provided further that the individual LGSEF shares to LGUs are used in accordance
with the general purposes and guidelines promulgated by the OCD for the
implementation of the LGSEF at the local levels pursuant to Res. No. OCD-99-006
dated October 7, 1999 and pursuant to the Leagues’ guidelines and mechanism
as approved by the OCD;
Provided further that each of the Leagues shall submit to the OCD for its
approval their respective allocation scheme, the list of LGUs with the
corresponding LGSEF shares and the corresponding project categories if project-
based;
Provided further that upon approval by the OCD, the lists of LGUs shall be
endorsed to the DBM as the basis for the preparation of the corresponding NCAs,
SAROs, and related budget/release documents.
2.The remaining P1,500,000,000 of the CY 2000 LGSEF shall be earmarked to
support the following initiatives and local affirmative action projects, to be endorsed
to and approved by the Oversight Committee on Devolution in accordance with the
OCD agreements, guidelines, procedures and documentary requirements
On July 5, 2000, then President Estrada issued a Memorandum authorizing then
Executive Secretary Zamora and the DBM to implement and release the 2.5 billion
pesos LGSEF for 2000 in accordance with Resolution No. OCD-2000-023.
 Thereafter, the Oversight Committee, now under the administration of President
Gloria Macapagal-Arroyo, promulgated Resolution No. OCD-2001-29 entitled
“ADOPTING RESOLUTION NO. OCD-2000-023 IN THE ALLOCATION,
IMPLEMENTATION AND RELEASE OF THE REMAINING P2.5 BILLION LGSEF
FOR CY 2000.” Under this resolution, the amount of one billion pesos of the LGSEF
was to be released in accordance with paragraph 1 of Resolution No. OCD-2000-23,
to complete the 3.5 billion pesos allocated to the LGUs, while the amount of 1.5 billion
pesos was allocated for the LAAP. However, out of the latter amount, P400,000,000
was to be allocated and released as follows: P50,000,000 as financial assistance to
the LAAPs of LGUs; P275,360,227 as financial assistance to cover the decrease in
the IRA of LGUs concerned due to reduction in land area; and P74,639,773 for the
LGSEF Capability-Building Fund.
The LGSEF in the GAA of 2001
In view of the failure of Congress to enact the general appropriations law for 2001, the
GAA of 2000 was deemed re-enacted, together with the IRA of the LGUs therein and
the proviso earmarking five billion pesos thereof for the LGSEF.
On January 9, 2002, the Oversight Committee adopted Resolution No. OCD-
2002-001 allocating the five billion pesos LGSEF for 2001 as follows:
Modified Codal Formula P 3.000 billion
Priority Projects 1.900 billion
Capability Building Fund .100 billion
P 5.000 billion
RESOLVED FURTHER, that the P3.0 B of the CY 2001 LGSEF which is to be
allocated according to the modified codal formula shall be released to the four
levels of LGUs, i.e., provinces, cities, municipalities and barangays, as follows:
LGUs Percentage Amount
Provinces 25 P 0.750 billion
Cities 25 0.750
Municipalities 35 1.050
Barangays 15 0.450
100 P 3.000 billion
RESOLVED FURTHER, that the P1.9 B earmarked for priority projects shall
be distributed according to the following criteria:
1.0 For projects of the 4th, 5th and 6th class LGUs; or
2.0 Projects in consonance with the President’s State of the Nation Address
(SONA)/summit commitments.
RESOLVED FURTHER, that the remaining P100 million LGSEF capability
building fund shall be distributed in accordance with the recommendation of the
Leagues of Provinces, Cities, Municipalities and Barangays, and approved by the
OCD.
Upon receipt of a copy of the above resolution, Gov. Mandanas wrote to the individual
members of the Oversight Committee seeking the reconsideration of Resolution No.
OCD-2002-001. He also wrote to Pres. Macapagal-Arroyo urging her to disapprove
said resolution as it violates the Constitution and the Local Government Code of
1991.
On January 25, 2002, Pres. Macapagal-Arroyo approved Resolution No. OCD-
2002-001.
The Petitioner’s Case
The petitioner now comes to this Court assailing as unconstitutional and void the
provisos in the GAAs of 1999, 2000 and 2001, relating to the LGSEF. Similarly
assailed are the Oversight Committee’s Resolutions Nos. OCD-99-003, OCD-99-005,
OCD-99-006, OCD-2000-023, OCD-2001-029 and OCD-2002-001 issued pursuant
thereto. The petitioner submits that the assailed provisos in the GAAs and the OCD
resolutions, insofar as they earmarked the amount of five billion pesos of the IRA of
the LGUs for 1999, 2000 and 2001 for the LGSEF and imposed conditions for the
release thereof, violate the Constitution and the Local Government Code of 1991.
Section 6, Article X of the Constitution is invoked as it mandates that the “just
share” of the LGUs shall be automatically released to them. Sections 18 and 286 of
the Local Government Code of 1991, which enjoin that the “just share” of the LGUs
shall be “automatically and directly” released to them “without need of further action”
are, likewise, cited.
The petitioner posits that to subject the distribution and release of the five-billion-
peso portion of the IRA, classified as the LGSEF, to compliance by the LGUs with the
implementing rules and regulations, including the mechanisms and guidelines
prescribed by the Oversight Committee, contravenes the explicit directive of the
Constitution that the LGUs’ share in the national taxes “shall be automatically
released to them.” The petitioner maintains that the use of the word “shall” must be
given a compulsory meaning.
To further buttress this argument, the petitioner contends that to vest the
Oversight Committee with the authority to determine the distribution and release of
the LGSEF, which is a part of the IRA of the LGUs, is an anathema to the principle of
local autonomy as embodied in the Constitution and the Local Government Code of
1991. The petitioner cites as an example the experience in 2001 when the release of
the LGSEF was long delayed because the Oversight Committee was not able to
convene that year and no guidelines were issued therefor. Further, the possible
disapproval by the Oversight Committee of the project proposals of the LGUs would
result in the diminution of the latter’s share in the IRA.
Another infringement alleged to be occasioned by the assailed OCD resolutions is
the improper amendment to Section 285 of the Local Government Code of 1991 on
the percentage sharing of the IRA among the LGUs. Said provision allocates the IRA
as follows: Provinces—23%; Cities—23%; Municipalities—34%; and Barangays—
20%. This formula has been improperly amended or modified, with respect to the five-
billion-peso portion of the IRA allotted for the LGSEF, by the assailed OCD
resolutions as they invariably provided for a different sharing scheme.

The modifications allegedly constitute an illegal amendment by the executive
branch of a substantive law. Moreover, the petitioner mentions that in the Letter dated
December 5, 2001 of respondent Executive Secretary Romulo addressed to
respondent Secretary Boncodin, the former endorsed to the latter the release of funds
to certain LGUs from the LGSEF in accordance with the handwritten instructions of
President Arroyo. Thus, the LGUs are at a loss as to how a portion of the LGSEF is
actually allocated. Further, there are still portions of the LGSEF that, to date, have not
been received by the petitioner; hence, resulting in damage and injury to the
petitioner.
The petitioner prays that the Court declare as unconstitutional and void the
assailed provisos relating to the LGSEF in the GAAs of 1999, 2000 and 2001 and the
assailed OCD resolutions (Resolutions Nos. OCD-99-003, OCD-99-005, OCD-99-
006, OCD-2000-023, OCD-2001-029 and OCD-2002-001) issued by the Oversight
Committee pursuant thereto. The petitioner, likewise, prays that the Court direct the
respondents to rectify the unlawful and illegal distribution and releases of the LGSEF
for the aforementioned years and release the same in accordance with the sharing
formula under Section 285 of the Local Government Code of 1991. Finally, the
petitioner urges the Court to declare that the entire IRA should be released
automatically without further action by the LGUs as required by the Constitution and
the Local Government Code of 1991.
The Respondents’ Arguments
The respondents, through the Office of the Solicitor General, urge the Court to
dismiss the petition on procedural and substantive grounds. On the latter, the
respondents contend that the assailed provisos in the GAAs of 1999, 2000 and 2001
and the assailed resolutions issued by the Oversight Committee are not
constitutionally infirm. The respondents advance the view that Section 6, Article X of
the Constitution does not specify that the “just share” of the LGUs shall be determined
solely by the Local Government Code of 1991. Moreover, the phrase “as determined
by law” in the same constitutional provision means that there exists no limitation on
the power of Congress to determine what is the “just share” of the LGUs in the
national taxes. In other words, Congress is the arbiter of what should be the “just
share” of the LGUs in the national taxes.
The respondents further theorize that Section 285 of the Local Government Code
of 1991, which provides for the percentage sharing of the IRA among the LGUs, was
not intended to be a fixed determination of their “just share” in the national taxes.
Congress may enact other laws, including appropriations laws such as the GAAs of
1999, 2000 and 2001, providing for a different sharing formula. Section 285 of the
Local Government Code of 1991 was merely intended to be the “default share” of the
LGUs to do away with the need to determine annually by law their “just share.”
However, the LGUs have no vested right in a permanent or fixed percentage as
Congress may increase or decrease the “just share” of the LGUs in accordance with
what it believes is appropriate for their operation. There is nothing in the Constitution
which prohibits Congress from making such determination through the appropriations
laws. If the provisions of a particular statute, the GAA in this case, are within the
constitutional power of the legislature to enact, they should be sustained whether the
courts agree or not in the wisdom of their enactment.
On procedural grounds, the respondents urge the Court to dismiss the petition
outright as the same is defective. The petition allegedly raises factual issues which
should be properly threshed out in the lower courts, not this Court, not being a trier of
facts. Specifically, the petitioner’s allegation that there are portions of the LGSEF that
it has not, to date, received, thereby causing it (the petitioner) injury and damage, is
subject to proof and must be substantiated in the proper venue, i.e., the lower courts.
Further, according to the respondents, the petition has already been rendered
moot and academic as it no longer presents a justiciable controversy. The IRAs for
the years 1999, 2000 and 2001, have already been released and the government is
now operating under the 2003 budget. In support of this, the respondents submitted
certifications issued by officers of the DBM attesting to the release of the allocation or
shares of the petitioner in the LGSEF for 1999, 2000 and 2001. There is, therefore,
nothing more to prohibit.
Finally, the petitioner allegedly has no legal standing to bring the suit because it
has not suffered any injury. In fact, the petitioner’s “just share” has even increased.
Pursuant to Section 285 of the Local Government Code of 1991, the share of the
provinces is 23%. OCD Nos. 99-005, 99-006 and 99-003 gave the provinces 40% of
P2 billion of the LGSEF. OCD Nos. 2000-023 and 2001-029 apportioned 26% of P3.5
billion to the provinces. On the other hand, OCD No. 2001-001 allocated 25% of P3
billion to the provinces. Thus, the petitioner has not suffered any injury in the
implementation of the assailed provisos in the GAAs of 1999, 2000 and 2001 and the
OCD resolutions.
The Ruling of the Court Procedural Issues
Before resolving the petition on its merits, the Court shall first rule on the following
procedural issues raised by the respondents: (1) whether the petitioner has legal
standing or locus standi to file the present suit; (2) whether the petition involves
factual questions that are properly cognizable by the lower courts; and (3) whether
the issue had been rendered moot and academic.
The petitioner has locus standi to maintain the present suit
The gist of the question of standing is whether a party has “alleged such a personal
stake in the outcome of the controversy as to assure that concrete adverseness
which sharpens the presentation of issues upon which the court so largely depends
for illumination of difficult constitutional questions.” Accordingly, it has been held that
the interest of a party assailing the constitutionality of a statute must be direct and
personal. Such party must be able to show, not only that the law or any government
act is invalid, but also that he has sustained or is in imminent danger of sustaining
some direct injury as a result of its enforcement, and not merely that he suffers
thereby in some indefinite way. It must appear that the person complaining has been
or is about to be denied some right or privilege to which he is lawfully entitled or that
he is about to be subjected to some burdens or penalties by reason of the statute or
act complained of.
The Court holds that the petitioner possesses the requisite standing to maintain
the present suit. The petitioner, a local government unit, seeks relief in order to
protect or vindicate an interest of its own, and of the other LGUs. This interest
pertains to the LGUs’ share in the national taxes or the IRA. The petitioner’s
constitutional claim is, in substance, that the assailed provisos in the GAAs of 1999,
2000 and 2001, and the OCD resolutions contravene Section 6, Article X of the
Constitution, mandating the “automatic release” to the LGUs of their share in the
national taxes. Further, the injury that the petitioner claims to suffer is the diminution
of its share in the IRA, as provided under Section 285 of the Local Government Code
of 1991, occasioned by the implementation of the assailed measures. These
allegations are sufficient to grant the petitioner standing to question the validity of the
assailed provisos in the GAAs of 1999, 2000 and 2001, and the OCD resolutions as
the petitioner clearly has “a plain, direct and adequate interest” in the manner and
distribution of the IRA among the LGUs.
The petition involves a significant legal issue
The crux of the instant controversy is whether the assailed provisos contained in the
GAAs of 1999, 2000 and 2001, and the OCD resolutions infringe the Constitution and
the Local Government Code of 1991. This is undoubtedly a legal question. On the
other hand, the following facts are not disputed:
1.The earmarking of five billion pesos of the IRA for the LGSEF in the assailed
provisos in the GAAs of 1999, 2000 and re-enacted budget for 2001;
2.The promulgation of the assailed OCD resolutions providing for the allocation
schemes covering the said five billion pesos and the implementing rules and
regulations therefor; and
3. The release of the LGSEF to the LGUs only upon their compliance with the
implementing rules and regulations, including the guidelines and mechanisms,
prescribed by the Oversight Committee.
Considering that these facts, which are necessary to resolve the legal question now
before this Court, are no longer in issue, the same need not be determined by a trial
court. In any case, the rule on hierarchy of courts will not prevent this Court from
assuming jurisdiction over the petition. The said rule may be relaxed when the
redress desired cannot be obtained in the appropriate courts or where exceptional
and compelling circumstances justify availment of a remedy within and calling for the
exercise of this Court’s primary jurisdiction.
The crucial legal issue submitted for resolution of this Court entails the proper
legal interpretation of constitutional and statutory provisions. Moreover, the
“transcendental importance” of the case, as it necessarily involves the application of
the constitutional principle on local autonomy, cannot be gainsaid. The nature of the
present controversy, therefore, warrants the relaxation by this Court of procedural
rules in order to resolve the case forthwith.
The substantive issue needs to be resolved notwithstanding the supervening events
Granting arguendo that, as contended by the respondents, the resolution of the case
had already been overtaken by supervening events as the IRA, including the LGSEF,
for 1999, 2000 and 2001, had already been released and the government is now
operating under a new appropriations law, still, there is compelling reason for this
Court to resolve the substantive issue raised by the instant petition. Supervening
events, whether intended or accidental, cannot prevent the Court from rendering a
decision if there is a grave violation of the Constitution. Even in cases where
supervening events had made the cases moot, the Court did not hesitate to resolve
the legal or constitutional issues raised to formulate controlling principles to guide the
bench, bar and public.
Another reason justifying the resolution by this Court of the substantive issue now
before it is the rule that courts will decide a question otherwise moot and academic if
it is “capable of repetition, yet evading review.” For the GAAs in the coming years may
contain provisos similar to those now being sought to be invalidated, and yet, the
question may not be decided before another GAA is enacted. It, thus, behooves this
Court to make a categorical ruling on the substantive issue now.
Substantive Issue
As earlier intimated, the resolution of the substantive legal issue in this case calls for
the application of a most important constitutional policy and principle, that of local
autonomy. In Article II of the Constitution, the State has expressly adopted as a policy
that:
Section 25. The State shall ensure the autonomy of local governments.
An entire article (Article X) of the Constitution has been devoted to guaranteeing and
promoting the autonomy of LGUs. Section 2 thereof reiterates the State policy in this
wise:
Section 2. The territorial and political subdivisions shall enjoy local autonomy.
Consistent with the principle of local autonomy, the Constitution confines the
President’s power over the LGUs to one of general supervision. This provision has
been interpreted to exclude the power of control. The distinction between the two
powers was enunciated in Drilon v. Lim:
An officer in control lays down the rules in the doing of an act. If they are not
followed, he may, in his discretion, order the act undone or redone by his
subordinate or he may even decide to do it himself. Supervision does not cover
such authority. The supervisor or superintendent merely sees to it that the rules
are followed, but he himself does not lay down such rules, nor does he have the
discretion to modify or replace them. If the rules are not observed, he may order
 the work done or re-done but only to conform to the prescribed rules. He may not
prescribe his own manner for doing the act. He has no judgment on this matter
except to see to it that the rules are followed.
The Local Government Code of 1991 was enacted to flesh out the mandate of the
Constitution. The State policy on local autonomy is amplified in Section 2 thereof:
Sec. 2. Declaration of Policy.—(a) It is hereby declared the policy of the State that
the territorial and political subdivisions of the State shall enjoy genuine and
meaningful local autonomy to enable them to attain their fullest development as
self-reliant communities and make them more effective partners in the attainment
of national goals. Toward this end, the State shall provide for a more responsive
and accountable local government structure instituted through a system of
decentralization whereby local government units shall be given more powers,
authority, responsibilities, and resources. The process of decentralization shall
proceed from the National Government to the local government units.
Guided by these precepts, the Court shall now determine whether the assailed
provisos in the GAAs of 1999, 2000 and 2001, earmarking for each corresponding
year the amount of five billion pesos of the IRA for the LGSEF and the OCD
resolutions promulgated pursuant thereto, transgress the Constitution and the Local
Government Code of 1991.
The assailed provisos in the GAAs of 1999, 2000 and 2001 and the OCD resolutions
violate the constitutional precept on local autonomy
Section 6, Article X of the Constitution reads:
Sec. 6. Local government units shall have a just share, as determined by law, in
the national taxes which shall be automatically released to them.
When parsed, it would be readily seen that this provision mandates that (1) the LGUs
shall have a “just share” in the national taxes; (2) the “just share” shall be determined
by law; and (3) the “just share” shall be automatically released to the LGUs.
The Local Government Code of 1991, among its salient provisions, underscores
the automatic release of the LGUs’ “just share” in this wise:
Sec. 18. Power to Generate and Apply Resources.—Local government units shall
have the power and authority to establish an organization that shall be responsible
for the efficient and effective implementation of their development plans, program
objectives and priorities; to create their own sources of revenue and to levy taxes,
fees, and charges which shall accrue exclusively for their use and disposition and
which shall be retained by them; to have a just share in national taxes which shall
be automatically and directly released to them without need of further action;
...
Sec. 286. Automatic Release of Shares—(a) The share of each local
government unit shall be released, without need of any further action, directly to
the provincial, city, municipal or barangay treasurer, as the case may be, on a
quarterly basis within five (5) days after the end of each quarter, and which shall
not be subject to any lien or holdback that may be imposed by the national
government for whatever purpose.
(b) Nothing in this Chapter shall be understood to diminish the share of local
government units under existing laws.
Webster’s Third New International Dictionary defines “automatic” as “involuntary
either wholly or to a major extent so that any activity of the will is largely negligible; of
a reflex nature; without volition; mechanical; like or suggestive of an automaton.”
Further, the word “automatically” is defined as “in an automatic manner: without
thought or conscious intention.” Being “automatic,” thus, connotes something
mechanical, spontaneous and perfunctory. As such, the LGUs are not required to
perform any act to receive the “just share” accruing to them from the national coffers.
As emphasized by the Local Government Code of 1991, the “just share” of the LGUs
shall be released to them “without need of further action.” Construing Section 286 of
the LGC, we held in Pimentel, Jr. v. Aguirre, viz.:
Section 4 of AO 372 cannot, however, be upheld. A basic feature of local fiscal
autonomy is the automatic release of the shares of LGUs in the National internal
revenue. This is mandated by no less than the Constitution. The Local Government
Code specifies further that the release shall be made directly to the LGU
concerned within five (5) days after every quarter of the year and “shall not be
subject to any lien or holdback that may be imposed by the national government
for whatever purpose.” As a rule, the term “SHALL” is a word of command that
must be given a compulsory meaning. The provision is, therefore, IMPERATIVE.
Section 4 of AO 372, however, orders the withholding, effective January 1,
1998, of 10 percent of the LGUs’ IRA “pending the assessment and evaluation by
the Development Budget Coordinating Committee of the emerging fiscal situation”
in the country. Such withholding clearly contravenes the Constitution and the law.
Although temporary, it is equivalent to a holdback, which means “something held
back or withheld, often temporarily.” Hence, the “temporary” nature of the retention
by the national government does not matter. Any retention is prohibited.
In sum, while Section 1 of AO 372 may be upheld as an advisory effected in
times of national crisis, Section 4 thereof has no color of validity at all. The latter
provision effectively encroaches on the fiscal autonomy of local governments.
Concededly, the President was well-intentioned in issuing his Order to withhold the
LGUs’ IRA, but the rule of law requires that even the best intentions must be carried
out within the parameters of the Constitution and the law. Verily, laudable purposes
must be carried out by legal methods.
The “just share” of the LGUs is incorporated as the IRA in the appropriations law or
GAA enacted by Congress annually. Under the assailed provisos in the GAAs of
1999, 2000 and 2001, a portion of the IRA in the amount of five billion pesos was
earmarked for the LGSEF, and these provisos imposed the condition that “such
amount shall be released to the local government units subject to the implementing
rules and regulations, including such mechanisms and guidelines for the equitable
allocations and distribution of said fund among local government units subject to the
guidelines that may be prescribed by the Oversight Committee on Devolution.”
Pursuant thereto, the Oversight Committee, through the assailed OCD resolutions,
apportioned the five billion pesos LGSEF such that:
For 1999
P2 billion—allocated according to Sec. 285 LGC
 P2 billion—Modified Sharing Formula (Provinces—40%;
Cities—20%; Municipalities—40%)
P1 billion—projects (LAAP) approved by OCD.
For 2000
P3.5 billion—Modified Sharing Formula (Provinces—26%;
Cities—23%; Municipalities—35%; Barangays—16%);
P1.5 billion—projects (LAAP) approved by the OCD.
For 2001
P3 billion—Modified Sharing Formula (Provinces—25%;
Cities—25%; Municipalities—35%; Barangays—15%)
P1.9 billion—priority projects
P100 million—capability building fund.
Significantly, the LGSEF could not be released to the LGUs without the Oversight
Committee’s prior approval. Further, with respect to the portion of the LGSEF
allocated for various projects of the LGUs (P1 billion for 1999; P1.5 billion for 2000
and P2 billion for 2001), the Oversight Committee, through the assailed OCD
resolutions, laid down guidelines and mechanisms that the LGUs had to comply with
before they could avail of funds from this portion of the LGSEF. The guidelines
required (a) the LGUs to identify the projects eligible for funding based on the criteria
laid down by the Oversight Committee; (b) the LGUs to submit their project proposal’s
to the DILG for appraisal; (c) the project proposals that passed the appraisal of the
DILG to be submitted to the Oversight Committee for review, evaluation and approval.
It was only upon approval thereof that the Oversight Committee would direct the DBM
to release the funds for the projects.
To the Court’s mind, the entire process involving the distribution and release of the
LGSEF is constitutionally impermissible. The LGSEF is part of the IRA or “just share”
of the LGUs in the national taxes. To subject its distribution and release to the
vagaries of the implementing rules and regulations, including the guidelines and
mechanisms unilaterally prescribed by the Oversight Committee from time to time, as
sanctioned by the assailed provisos in the GAAs of 1999, 2000 and 2001 and the
OCD resolutions, makes the release not automatic, a flagrant violation of the
constitutional and statutory mandate that the “just share” of the LGUs “shall be
automatically released to them.” The LGUs are, thus, placed at the mercy of the
Oversight Committee.
Where the law, the Constitution in this case, is clear and unambiguous, it must be
taken to mean exactly what it says, and courts have no choice but to see to it that the
mandate is obeyed. Moreover, as correctly posited by the petitioner, the use of the
word “shall” connotes a mandatory order. Its use in a statute denotes an imperative
obligation and is inconsistent with the idea of discretion.
Indeed, the Oversight Committee exercising discretion, even control, over the
distribution and release of a portion of the IRA, the LGSEF, is an anathema to and
subversive of the principle of local autonomy as embodied in the Constitution.
Moreover, it finds no statutory basis at all as the Oversight Committee was created
merely to formulate the rules and regulations for the efficient and effective
implementation of the Local Government Code of 1991 to ensure “compliance with
the principles of local autonomy as defined under the Constitution.” In fact, its creation
was placed under the title of “Transitory Provisions,” signifying its ad hoccharacter.
According to Senator Aquilino Q. Pimentel, the principal author and sponsor of the bill
that eventually became Rep. Act No. 7160, the Committee’s work was supposed to
be done a year from the approval of the Code, or on October 10, 1992. The Oversight
Committee’s authority is undoubtedly limited to the implementation of the Local
Government Code of 1991, not to supplant or subvert the same. Neither can it
exercise control over the IRA, or even a portion thereof, of the LGUs.
That the automatic release of the IRA was precisely intended to guarantee and
promote local autonomy can be gleaned from the discussion below between Messrs.
Jose N. Nolledo and Regalado M. Maambong, then members of the 1986
Constitutional Commission, to wit:
MR. MAAMBONG. Unfortunately, under Section 198 of the Local Government
Code, the existence of subprovinces is still acknowledged by the law, but the
statement of the Gentleman on this point will have to be taken up probably by
the Committee on Legislation. A second point, Mr. Presiding Officer, is that
under Article 2, Section 10 of the 1973 Constitution, we have a provision which
states:
The State shall guarantee and promote the autonomy of local government
units, especially the barrio, to insure their fullest development as self-reliant
communities.
This provision no longer appears in the present configuration; does this
mean that the concept of giving local autonomy to local governments is no
longer adopted as far as this Article is concerned?
MR. NOLLEDO. No. In the report of the Committee on Preamble, National
Territory, and Declaration of Principles, that concept is included and widened
upon the initiative of Commissioner Bennagen.
MR. MAAMBONG. Thank you for that.
With regard to Section 6, sources of revenue, the creation of sources as
provided by previous law was, “subject to limitations as may be provided by
law,” but now, we are using the term “subject to such guidelines as may be
fixed by law.” In Section 7, mention is made about the “unique, distinct and
exclusive charges and contributions,” and in Section 8, we talk about
“exclusivity of local taxes and the share in the national wealth.” Incidentally, I
was one of the authors of this provision, and I am very thankful. Does this
indicate local autonomy, or was the wording of the law changed to give more
autonomy to the local government units?
MR. NOLLEDO. Yes. In effect, those words indicate also “decentralization”
because local political units can collect taxes, fees and charges subject merely
to guidelines, as recommended by the league of governors and city mayors,
with whom I had a dialogue for almost two hours. They told me that limitations
may be questionable in the sense that Congress may limit and in effect deny
the right later on.
MR. MAAMBONG. Also, this provision on “automatic release of national tax share”
points to more local autonomy. Is this the intention?
 MR. NOLLEDO. Yes, the Commissioner is perfectly right.
The concept of local autonomy was explained in Ganzon v. Court of Appeals in this
wise:
As the Constitution itself declares, local autonomy ‘means a more responsive and
accountable local government structure instituted through a system of
decentralization.’ The Constitution, as we observed, does nothing more than to
break up the monopoly of the national government over the affairs of local
governments and as put by political adherents, to “liberate the local governments
from the imperialism of Manila.” Autonomy, however, is not meant to end the
relation of partnership and interdependence between the central administration
and local government units, or otherwise, to usher in a regime of federalism. The
Charter has not taken such a radical step. Local governments, under the
Constitution, are subject to regulation, however limited, and for no other purpose
than precisely, albeit paradoxically, to enhance self-government.
As we observed in one case, decentralization means devolution of national
administration—but not power—to the local levels. Thus:
Now, autonomy is either decentralization of administration or decentralization
of power. There is decentralization of administration when the central government
delegates administrative powers to political subdivisions in order to broaden the
base of government power and in the process to make local governments ‘more
responsive and accountable’ and ‘ensure their fullest development as self-reliant
communities and make them more effective partners in the pursuit of national
development and social progress.’ At the same time, it relieves the central
government of the burden of managing local affairs and enables it to concentrate
on national concerns. The President exercises ‘general supervision’ over them, but
only to ‘ensure that local affairs are administered according to law.’ He has no
control over their acts in the sense that he can substitute their judgments with his
own.
Decentralization of power, on the other hand, involves an abdication of political
power in the [sic] favor of local governments [sic] units declared to be autonomous.
In that case, the autonomous government is free to chart its own destiny and shape
its future with minimum intervention from central authorities. According to a
constitutional author, decentralization of power amounts to ‘self-immolation,’ since
in that event, the autonomous government becomes accountable not to the central
authorities but to its constituency.
Local autonomy includes both administrative and fiscal autonomy. The fairly recent
case of Pimentel v. Aguirre is particularly instructive. The Court declared therein that
local fiscal autonomy includes the power of the LGUs to, inter alia, allocate their
resources in accordance with their own priorities:
Under existing law, local government units, in addition to having administrative
autonomy in the exercise of their functions, enjoy fiscal autonomy as well. Fiscal
autonomy means that local governments have the power to create their own
sources of revenue in addition to their equitable share in the national taxes
released by the national government, as well as the power to allocate their
resources in accordance with their own priorities. It extends to the preparation of
their budgets, and local officials in turn have to work within the constraints thereof.
They are not formulated at the national level and imposed on local governments,
whether they are relevant to local needs and resources or not . . .
Further, a basic feature of local fiscal autonomy is the constitutionally
mandated automatic release of the shares of LGUs in the national internal revenue.
Following this ratiocination, the Court in Pimentel struck down as unconstitutional
Section 4 of Administrative Order (A.O.) No. 372 which ordered the withholding,
effective January 1, 1998, of ten percent of the LGUs’ IRA “pending the assessment
and evaluation by the Development Budget Coordinating Committee of the emerging
fiscal situation.”
In like manner, the assailed provisos in the GAAs of 1999, 2000 and 2001, and
the OCD resolutions constitute a “withholding” of a portion of the IRA. They put on
hold the distribution and release of the five billion pesos LGSEF and subject the same
to the implementing rules and regulations, including the guidelines and mechanisms
prescribed by the Oversight Committee from time to time. Like Section 4 of A.O. 372,
the assailed provisos in the GAAs of 1999, 2000 and 2001 and the OCD resolutions
effectively encroach on the fiscal autonomy enjoyed by the LGUs and must be struck
down. They cannot, therefore, be upheld.
The assailed provisos in the GAAs of 1999, 2000 and 2001 and the OCD resolutions
cannot amend Section 285 of the Local Government Code of 1991
Section 284 of the Local Government Code provides that, beginning the third year of
its effectivity, the LGUs’ share in the national internal revenue taxes shall be 40%.
This percentage is fixed and may not be reduced except “in the event the national
government incurs an unmanageable public sector deficit” and only upon compliance
with stringent requirements set forth in the same section:
Sec. 284.
...
Provided, That in the event that the national government incurs an
unmanageable public sector deficit, the President of the Philippines is hereby
authorized, upon recommendation of Secretary of Finance, Secretary of Interior
and Local Government and Secretary of Budget and Management, and subject to
consultation with the presiding officers of both Houses of Congress and the
presidents of the liga, to make the necessary adjustments in the internal revenue
allotment of local government units but in no case shall the allotment be less than
thirty percent (30%) of the collection of the national internal revenue taxes of the
third fiscal year preceding the current fiscal year; Provided, further That in the first
year of the effectivity of this Code, the local government units shall, in addition to
the thirty percent (30%) internal revenue allotment which shall include the cost of
devolved functions for essential public services, be entitled to receive the amount
equivalent to the cost of devolved personnel services.
Thus, from the above provision, the only possible exception to the mandatory
automatic release of the LGUs’ IRA is if the national internal revenue collections for
the current fiscal year is less than 40 percent of the collections of the preceding third
fiscal year, in which case what should be automatically released shall be a
proportionate amount of the collections for the current fiscal year. The adjustment
may even be made on a quarterly basis depending on the actual collections of
national internal revenue taxes for the quarter of the current fiscal year. In the instant
case, however, there is no allegation that the national internal revenue tax collections
for the fiscal years 1999, 2000 and 2001 have fallen compared to the preceding three
fiscal years.
Section 285 then specifies how the IRA shall be allocated among the LGUs:
Sec. 285. Allocation to Local Government Units.—The share of local government
units in the internal revenue allotment shall be allocated in the following manner:
(a)Provinces—Twenty-three (23 %)
(b)Cities—Twenty-three percent (23%);
(c)Municipalities—Thirty-four (34%); and
(d)Barangays—Twenty percent (20%).
However, this percentage sharing is not followed with respect to the five billion pesos
LGSEF as the assailed OCD resolutions, implementing the assailed provisos in the
GAAs of 1999, 2000 and 2001, provided for a different sharing scheme. For example,
for 1999, P2 billion of the LGSEF was allocated as follows: Provinces—40%; Cities—
20%; Municipalities—40%. For 2000, P3.5 billion of the LGSEF was allocated in this
manner: Prov-inces—26%; Cities—23%; Municipalities—35%; Barangays—26%. For
2001, P3 billion of the LGSEF was allocated, thus: Prov-inces—25%; Cities—25%;
Municipalities—35%; Barangays—15%.
The respondents argue that this modification is allowed since the Constitution
does not specify that the “just share” of the LGUs shall only be determined by the
Local Government Code of 1991. That it is within the power of Congress to enact
other laws, including the GAAs, to increase or decrease the “just share” of the LGUs.
This contention is untenable. The Local Government Code of 1991 is a substantive
law. And while it is conceded that Congress may amend any of the provisions therein,
it may not do so through appropriations laws or GAAs. Any amendment to the Local
Government Code of 1991 should be done in a separate law, not in the
appropriations law, because Congress cannot include in a general appropriation bill
matters that should be more properly enacted in a separate legislation.
A general appropriations bill is a special type of legislation, whose content is
limited to specified sums of money dedicated to a specific purpose or a separate
fiscal unit. Any provision therein which is intended to amend another law is considered
an “inappropriate provision.” The category of “inappropriate provisions” includes
unconstitutional provisions and provisions which are intended to amend other laws,
because clearly these kinds of laws have no place in an appropriations bill.
Increasing or decreasing the IRA of the LGUs or modifying their percentage
sharing therein, which are fixed in the Local Government Code of 1991, are matters
of general and substantive law. To permit Congress to undertake these amendments
through the GAAs, as the respondents contend, would be to give Congress the
unbridled authority to unduly infringe the fiscal autonomy of the LGUs, and thus put
the same in jeopardy every year. This, the Court cannot sanction.
It is relevant to point out at this juncture that, unlike those of 1999, 2000 and
2001, the GAAs of 2002 and 2003 do not contain provisos similar to the herein
assailed provisos. In other words, the GAAs of 2002 and 2003 have not earmarked
any amount of the IRA for the LGSEF. Congress had perhaps seen fit to discontinue
the practice as it recognizes its infirmity. Nonetheless, as earlier mentioned, this Court
has deemed it necessary to make a definitive ruling on the matter in order to prevent
its recurrence in future appropriations laws and that the principles enunciated herein
would serve to guide the bench, bar and public.
Conclusion
In closing, it is well to note that the principle of local autonomy, while concededly
expounded in greater detail in the present Constitution, dates back to the turn of the
century when President William McKinley, in his Instructions to the Second Philippine
Commission dated April 7, 1900, ordered the new Government “to devote their
attention in the first instance to the establishment of municipal governments in which
the natives of the Islands, both in the cities and in the rural communities, shall be
afforded the opportunity to manage their own affairs to the fullest extent of which they
are capable, and subject to the least degree of supervision and control in which a
careful study of their capacities and observation of the workings of native control
show to be consistent with the maintenance of law, order and loyalty.” While the 1935
Constitution had no specific article on local autonomy, nonetheless, it limited the
executive power over local governments to “general supervision . . . as may be
provided by law.” Subsequently, the 1973 Constitution explicitly stated that “[t]he State
shall guarantee and promote the autonomy of local government units, especially the
barangay to ensure their fullest development as self-reliant communities.” An entire
article on Local Government was incorporated therein. The present Constitution, as
earlier opined, has broadened the principle of local autonomy. The 14 sections in
Article X thereof markedly increased the powers of the local governments in order to
accomplish the goal of a more meaningful local autonomy.
Indeed, the value of local governments as institutions of democracy is measured
by the degree of autonomy that they enjoy. As eloquently put by M. De Tocqueville, a
distinguished French political writer, “[l]ocal assemblies of citizens constitute the
strength of free nations. Township meetings are to liberty what primary schools are to
science; they bring it within the people’s reach; they teach men how to use and enjoy
it. A nation may establish a system of free governments but without the spirit of
municipal institutions, it cannot have the spirit of liberty.”
Our national officials should not only comply with the constitutional provisions on
local autonomy but should also appreciate the spirit and liberty upon which these
provisions are based.
 WHEREFORE, the petition is GRANTED. The assailed provisos in the General
Appropriations Acts of 1999, 2000 and 2001, and the assailed OCD Resolutions, are
declared UNCONSTITUTIONAL.
SO ORDERED.

Notes.—Under the Philippine concept of local autonomy, the national government

has not completely relinquished all its powers over local governments, including
autonomous regions—municipal governments are still agents of the national
government. (Pimentel, Jr. vs. Aguirre, 336 SCRA 201 [2000])

By upholding the power of LGUs to grant allowances to judges and leaving to

their discretion the amount of allowances they may want to grant, depending on the
availability of local funds, the genuine and meaningful local autonomy of the LGUs is
ensured. (Leynes vs. Commission on Audit, 418 SCRA 180 (2003).

——o0o——
 G.R. No. 132988. July 19, 2000.
AQUILINO Q. PIMENTEL, JR., petitioner, vs. Hon. ALEXANDER AGUIRRE in his
capacity as Executive Secretary, Hon. EMILIA BONCODIN in her capacity as
Secretary of the Department of Budget and Management, respondents. ROBERTO
PAGDANGANAN, intervenor.
Presidency; Administrative Law; Municipal Corporations; Local Governments; Power of
Control and Supervision; In administrative law, supervision means overseeing or the power or
authority of an officer to see that subordinate officers perform their duties, and 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; Supervisory power, when contrasted with control, is the power of
mere oversight over an inferior body—it does not include any restraining authority over such
body.—This provision has been interpreted to exclude the power of control. In Mondano v.
Silvosa, the Court contrasted the President’s power of supervision over local government
officials with that of his power of control over executive officials of the national government. It
was emphasized that the two terms—supervision and control—differed in meaning and extent.
The Court distinguished them as follows: “x x x In administrative law, supervision means
overseeing or the power or authority of an officer to see that subordinate officers perform their
duties. If the latter fail or neglect to fulfill them, the former may take such action or step as
prescribed by law to make them perform their duties. Control, on the other hand, means the
power of an officer to alter or modify or nullify or set aside what a subordinate officer ha[s] done
in the performance of his duties and to substitute the judgment of the former for that of the
latter.” In Taule v. Santos, we further stated that the Chief Executive wielded no more authority
than that of checking whether local governments or their officials were performing their duties as
provided by the fundamental law and by statutes. He cannot interfere with local governments, so
long as they act within the scope of their authority. “Supervisory power, when contrasted with
control, is the power of mere oversight over an inferior body; it does not include any restraining
authority over such body,” we said.
Same; Same; Same; Same; Same; By constitutional fiat, the heads of political
subdivisions are subject to the President’s supervision only, not control, so long as their acts are
exercised within the sphere of their legitimate powers, and by the same token, the President
may not withhold or alter any authority or power given them by the Constitution and the law.—
Under our present system of government, executive power is vested in the President. The
members of the Cabinet and other executive officials are merely alter egos. As such, they are
subject to the power of control of the President, at whose will and behest they can be removed
from office; or their actions and decisions changed, suspended or reversed. In contrast, the
heads of political subdivisions are elected by the people. Their sovereign powers emanate from
the electorate, to whom they are directly accountable. By constitutional fiat, they are subject to
the President’s supervision only, not control, so long as their acts are exercised within the
sphere of their legitimate powers. By the same token, the President may not withhold or alter
any authority or power given them by the Constitution and the law.
Municipal Corporations; Local Autonomy; Decentralization; Decentralization simply
means the devolution of national administration, not power, to local governments.—
Decentralization simply means the devolution of national administration, not power, to local
governments. Local officials remain accountable to the central government as the law may
provide. The difference between decentralization of administration and that of power was
explained in detail in Limbona v. Mangelin as follows: “Now, autonomy is either decentralization
of administration or decentralization of power. There is decentralization of administration when
the central government delegates administrative powers to political subdivisions in order to
broaden the base of government power and in the process to make local governments ‘more
responsive and accountable,’ and ‘ensure their fullest development as self-reliant communities
and make them more effective partners in the pursuit of national development and social
progress.’ At the same time, it relieves the central government of the burden of managing local
affairs and enables it to concentrate on national concerns. The President exercises ‘general
supervision’ over them, but only to ‘ensure that local affairs are administered according to law.’
He has no control over their acts in the sense that he can substitute their judgments with his
own. Decentralization of power, on the other hand, involves an abdication of political power in
the favor of local government units declared to be autonomous. In that case, the autonomous
government is free to chart its own destiny and shape its future with minimum intervention from
central authorities. According to a constitutional author, decentralization of power amounts to
‘self-immolation,’ since in that event, the autonomous government becomes accountable not to
the central authorities but to its constituency.”
Same; Same; Same; Under the Philippine concept of local autonomy, the national
government has not completely relinquished all its powers over local governments, including
autonomous regions—municipal governments are still agents of the national government.—
Under the Philippine concept of local autonomy, the national government has not completely
relinquished all its powers over local governments, including autonomous regions. Only
administrative powers over local affairs are delegated to political subdivisions. The purpose of
the delegation is to make governance more directly responsive and effective at the local levels.
In turn, economic, political and social development at the smaller political units are expected to
propel social and economic growth and development. But to enable the country to develop as a
whole, the programs and policies effected locally must be integrated and coordinated towards a
common national goal. Thus, policy-setting for the entire country still lies in the President and
Congress. As we stated in Magtajas v. Pryce Properties Corp., Inc., municipal governments are
still agents of the national government.
Same; Same; Same; Fiscal Autonomy; Words and Phrases; 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.—Under existing law,
Local government units, in addition to having administrative autonomy in the exercise of their
functions, enjoy fiscal autonomy as well. Fiscal autonomy means that local governments have
the power to create their own sources of revenue in addition to their equitable share in the
national taxes released by the national government, as well as the power to allocate their
resources in accordance with their own priorities. It extends to the preparation of their budgets,
and local officials in turn have to work within the constraints thereof. They are not formulated at
the national level and imposed on local governments, whether they are relevant to local needs
and resources or not. Hence, the necessity of a balancing of viewpoints and the harmonization
of proposals from both local and national officials, who in any case are partners in the attainment
of national goals.
Same; Same; Same; Same; 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.—Local fiscal autonomy does
not, however, rule out any manner of national government intervention by way of supervision, in
order to ensure that local programs, fiscal and otherwise, are consistent with national goals.
Significantly, the President, by constitutional fiat, is the head of the economic and planning
agency of the government, primarily responsible for formulating and implementing continuing,
coordinated and integrated social and economic policies, plans and programs for the entire
country. However, under the Constitution, the formulation and the implementation of such
policies and programs are subject to “consultations with the appropriate public agencies, various
private sectors, and local government units.” The President cannot do so unilaterally.
Same; Same; AO 372; The directive to “identify and implement measures x x x that will
reduce total expenditures x x x by at least 25% of authorized regular appropriation” is merely
advisory in character—no legal sanction, however, may be imposed upon LGUs and their
officials who do not follow such advise.—While the wordings of Section 1 of AO 372 have a
rather commanding tone, and while we agree with petitioner that the requirements of Section
284 of the Local Government Code have not been satisfied, we are prepared to accept the
solicitor general’s assurance that the directive to “identify and implement measures x x x that will
reduce total expenditures x x x by at least 25% of authorized regular appropriation” is merely
advisory in character, and does not constitute a mandatory or binding order that interferes with
local autonomy. The language used, while authoritative, does not amount to a command that
emanates from a boss to a subaltern. Rather, the provision is merely an advisory to prevail upon
local executives to recognize the need for fiscal restraint in a period of economic difficulty.
Indeed, all concerned would do well to heed the President’s call to unity, solidarity and teamwork
to help alleviate the crisis. It is understood, however, that no legal sanction may be imposed
upon LGUs and their officials who do not follow such advice. It is in this light that we sustain the
solicitor general’s contention in regard to Section 1.
Same; Same; Statutory Construction; A basic feature of local fiscal autonomy is the
automatic release of the shares of LGUs in the national internal revenue—the provision in the
Local Government Code providing for such release uses the word “shall” and as a rule, the term
“shall” is a word of command that must be given compulsory meaning.—Section 4 of AO 372
cannot, however, be upheld. A basic feature of local fiscal autonomy is the automatic release of
the shares of LGUs in the national internal revenue. This is mandated by no less than the
Constitution. The Local Government Code specifies further that the release shall be made
directly to the LGU concerned within five (5) days after every quarter of the year and “shall not
be subject to any lien or holdback that may be imposed by the national government for whatever
purpose.” As a rule, the term “shall” is a word of command that must be given a compulsory
meaning. The provision is, therefore, imperative.
Same; Same; The withholding of 10% of the LGUs’ IRA pending the assessment and
evaluation by the Development Budget Coordinating Committee, pursuant to Section 4 of AO
372, although temporary, is equivalent to a holdback, which means “something held back or
withheld, often temporarily,” and contravenes the Constitution.—Section 4 of AO 372, however,
orders the withholding, effective January 1, 1998, of 10 percent of the LGUs’ IRA “pending the
assessment and evaluation by the Development Budget Coordinating Committee of the
emerging fiscal situation” in the country. Such withholding clearly contravenes the Constitution
and the law. Although temporary, it is equivalent to a holdback, which means “something held
back or withheld, often temporarily.” Hence, the “temporary” nature of the retention by the
national government does not matter. Any retention is prohibited.
Same; Same; Rule of Law; Although the President was well-intentioned in issuing AO 372
withholding the LGUs’ IRA, the rule of law requires that even the best intentions must be carried
out within the parameters of the Constitution and the law.—While Section 1 of AO 372 may be
upheld as an advisory effected in times of national crisis, Section 4 thereof has no color of
validity at all. The latter provision effectively encroaches on the fiscal autonomy of local
governments. Concededly, the President was well-intentioned in issuing his Order to withhold
the LGUs’ IRA, but the rule of law requires that even the best intentions must be carried out
within the parameters of the Constitution and the law. Verily, laudable purposes must be carried
out by legal methods.
Judicial Review; By the mere enactment of the questioned law or the approval of the
challenged action, the dispute is said to have ripened into a judicial controversy even without
any other overt act—indeed, even a singular violation of the Constitution and/or the law is
enough to awaken judicial duty.—This is a rather novel theory—that people should await the
implementing evil to befall on them before they can question acts that are illegal or
unconstitutional. Be it remembered that the real issue here is whether the Constitution and the
law are contravened by Section 4 of AO 372, not whether they are violated by the acts
implementing it. In the unanimous en banc case Tañada v. Angara, this Court held that when an
act of the legislative department is seriously alleged to have infringed the Constitution, settling
the controversy becomes the duty of this Court. By the mere enactment of the questioned law or
the approval of the challenged action, the dispute is said to have ripened into a judicial
controversy even without any other overt act. Indeed, even a singular violation of the
Constitution and/or the law is enough to awaken judicial duty.
Same; When an act of the President, who in our constitutional scheme is a co-equal of
Congress, is seriously alleged to have infringed the Constitution and the laws, settling the
dispute becomes the duty and the responsibility of the courts.—By the same token, when an act
of the President, who in our constitutional scheme is a coequal of Congress, is seriously alleged
to have infringed the Constitution and the laws, as in the present case, settling the dispute
becomes the duty and the responsibility of the courts.
Same; Due Process; Considerations of due process prevents the use of an issue against
a party that has not given sufficient notice of its presentation, and thus has not been given the
opportunity to refute it.—The issue that the Petition is premature has not been raised by the
parties; hence it is deemed waived. Considerations of due process really prevents its use
against a party that has not been given sufficient notice of its presentation, and thus has not
been given the opportunity to refute it.
PANGANIBAN, J.:
The Constitution vests the President with the power of supervision, not control, over
local government units (LGUs). Such power enables him to see to it that LGUs and
their officials execute their tasks in accordance with law. While he may issue
advisories and seek their cooperation in solving economic difficulties, he cannot
prevent them from performing their tasks and using available resources to achieve
their goals. He may not withhold or alter any authority or power given them by the
law. Thus, the withholding of a portion of internal revenue allotments legally due them
cannot be directed by administrative fiat.
The Case
Before us is an original Petition for Certiorari and Prohibition seeking (1) to annul
Section 1 of Administrative Order (AO) No. 372, insofar as it requires local
government units to reduce their expenditures by 25 percent of their authorized
regular appropriations for non-personal services; and (2) to enjoin respondents from
implementing Section 4 of the Order, which withholds a portion of their internal
revenue allotments.
On November 17, 1998, Roberto Pagdanganan, through Counsel Alberto C.
Agra, filed a Motion for Intervention/Motion to Admit Petition for Intervention, attaching
thereto his Petition in Interventionjoining petitioner in the reliefs sought. At the time,
intervenor was the provincial governor of Bulacan, national president of the League of
Provinces of the Philippines and chairman of the League of Leagues of Local
Governments. In a Resolution dated December 15, 1998, the Court noted said Motion
and Petition.
The Facts and the Arguments
On December 27, 1997, the President of the Philippines issued AO 372. Its full text,
with emphasis on the assailed provisions, is as follows:
“ADMINISTRATIVE ORDER NO. 372
ADOPTION OF ECONOMY MEASURES
IN GOVERNMENT FOR FY 1998
WHEREAS, the current economic difficulties brought about by the peso
depreciation requires continued prudence in government fiscal management to
maintain economic stability and sustain the country’s growth momentum;
WHEREAS, it is imperative that all government agencies adopt cash
management measures to match expenditures with available resources;
NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the
Philippines, by virtue of the powers vested in me by the Constitution, do hereby
order and direct:
SECTION 1. All government departments and agencies, including state
universities and colleges, government-owned and controlled corporations and
local governments units will identify and implement measures in FY 1998 that will
reduce total expenditures for the year by at least 25% of authorized regular
appropriations for non-personal services items, along the following suggested
areas:
1.Continued implementation of the streamlining policy on organization and staffing
by deferring action on the following:
a.Operationalization of new agencies;
b.Expansion of organizational units and/or creation of positions;
c.Filling of positions; and
d.Hiring of additional/new consultants, contractual and casual personnel,
regardless of funding source.
2.Suspension of the following activities:
a.Implementation of new capital/infrastructure projects, except those which have
already been contracted out;
b.Acquisition of new equipment and motor vehicles;
c.All foreign travels of government personnel, except those associated with
scholarships and trainings funded by grants;
d.Attendance in conferences abroad where the cost is charged to the government
except those clearly essential to Philippine commitments in the international field
as may be determined by the Cabinet;
e.Conduct of trainings/workshops/seminars, except those conducted by
government training institutions and agencies in the performance of their regular
functions and those that are funded by grants;
f.Conduct of cultural and social celebrations and sports activities, except those
associated with the Philippine Centennial celebration and those involving regular
competitions/events;
g.Grant of honoraria, except in cases where it constitutes the only source of
compensation from government received by the person concerned;
h.Publications, media advertisements and related items, except those required by
law or those already being undertaken on a regular basis;
i.Grant of new/additional benefits to employees, except those expressly and
specifically authorized by law; and
j.Donations, contributions, grants and gifts, except those given by institutions to
victims of calamities.
3.Suspension of all tax expenditure subsidies to all GOCCs and LGUs
4.Reduction in the volume of consumption of fuel, water, office supplies, electricity
and other utilities
5.Deferment of projects that are encountering significant implementation problems
6.Suspension of all realignment of funds and the use of savings and reserves
SECTION 2. Agencies are given the flexibility to identify the specific sources
of cost-savings, provided the 25% minimum savings under Section 1 is complied
with.
SECTION 3. A report on the estimated savings generated from these
measures shall be submitted to the Office of the President, through the Department
of Budget and Management, on a quarterly basis using the attached format.
SECTION 4. Pending the assessment and evaluation by the Development
Budget Coordinating Committee of the emerging fiscal situation, the amount
equivalent to 10% of the internal revenue allotment to local government units shall
be withheld.
SECTION 5. The Development Budget Coordination Committee shall conduct
a monthly review of the fiscal position of the National Government and if
necessary, shall recommend to the President the imposition of additional reserves
or the lifting of previously imposed reserves.
SECTION 6. This Administrative Order shall take effect January 1, 1998 and
shall remain valid for the entire year unless otherwise lifted. DONE in the City of
Manila, this 27th day of December, in the year of our Lord, nineteen hundred and
ninety-seven.”
Subsequently, on December 10, 1998, President Joseph E. Estrada issued AO 43,
amending Section 4 of AO 372, by reducing to five percent (5%) the amount of
internal revenue allotment (IRA) to be withheld from the LGUs.
Petitioner contends that the President, in issuing AO 372, was in effect exercising
the power of control over LGUs. The Constitution vests in the President, however,
only the power of general supervision over LGUs, consistent with the principle of local
autonomy. Petitioner further argues that the directive to withhold ten percent (10%) of
their IRA is in contravention of Section 286 of the Local Government Code and of
Section 6, Article X of the Constitution, providing for the automatic release to each of
these units its share in the national internal revenue.
 The solicitor general, on behalf of the respondents, claims on the other hand that
AO 372 was issued to alleviate the “economic difficulties brought about by the peso
devaluation” and constituted merely an exercise of the President’s power of
supervision over LGUs. It allegedly does not violate local fiscal autonomy, because it
merely directs local governments to identify measures that will reduce their total
expenditures for non-personal services by at least 25 percent. Likewise, the
withholding of 10 percent of he LGUs’ IRA does not violate the statutory prohibition on
the imposition of any lien or holdback on their revenue shares, because such
withholding is “temporary in nature pending the assessment and evaluation by the
Development Coordination Committee of the emerging fiscal situation.”
The Issues
The Petition submits the following issues for the Court’s resolution:
“A.Whether or not the president committed grave abuse of discretion [in] ordering
all LGUS to adopt a 25% cost reduction program in violation of the LGU[‘]S fiscal
autonomy
“B.Whether or not the president committed grave abuse of discretion in ordering
the withholding of 10% of the LGU[‘]S IRA”
In sum, the main issue is whether (a) Section 1 of AO 372, insofar as it “directs” LGUs
to reduce their expenditures by 25 percent; and (b) Section 4 of the same issuance,
which withholds 10 percent of their internal revenue allotments, are valid exercises of
the President’s power of general supervision over local governments. Additionally, the
Court deliberated on the question whether petitioner had the locus standi to bring this
suit, despite respondents’ failure to raise the issue. However, the intervention of
Roberto Pagdanganan has rendered academic any further discussion on this matter.
The Court’s Ruling
The Petition is partly meritorious.
Main Issue: Validity of AO 372 Insofar as LGUs Are Concerned
Before resolving the main issue, we deem it important and appropriate to define
certain crucial concepts: (1) the scope of the President’s power of general supervision
over local governments and (2) the extent of the local governments’ autonomy.
Scope of President’s Power of
Supervision Over LGUs
Section 4 of Article X of the Constitution confines the President’s power over local
governments to one of general supervision. It reads as follows:
“Sec. 4. The President of the Philippines shall exercise general supervision over
local governments, x x x”
This provision has been interpreted to exclude the power of control. In Mondano v.
Silvosa, the Court contrasted the President’s power of supervision over local
government officials with that of his power of control over executive officials of the
national government. It was emphasized that the two terms—supervision and
control—differed in meaning and extent. The Court distinguished them as follows:
“x x x In administrative law, supervision means overseeing or the power or
authority of an officer to see that subordinate officers perform their duties. If the
latter fail or neglect to fulfill them, the former may take such action or step as
prescribed by law to make them perform their duties. Control, on the other hand,
means the power of an officer to alter or modify or nullify or set aside what a
subordinate officer ha[s] done in the performance of his duties and to substitute
the judgment of the former for that of the latter.”
In Taule v. Santos, we further stated that the Chief Executive wielded no more
authority than that of checking whether local governments or their officials were
performing their duties as provided by the fundamental law and by statutes. He
cannot interfere with local governments, so long as they act within the scope of their
authority. “Supervisory power, when contrasted with control, is the power of mere
oversight over an inferior body; it does not include any restraining authority over such
body,” we said.
In a more recent case, Drilon v. Lim, the difference between control and
supervision was further delineated. Officers in control lay down the rules in the
performance or accomplishment of an act. If these rules are not followed, they may, in
their discretion, order the act undone or redone by their subordinates or even decide
to do it themselves. On the other hand, supervision does not cover such authority.
Supervising officials merely see to it that the rules are followed, but they themselves
do not lay down such rules, nor do they have the discretion to modify or replace them.
If the rules are not observed, they may order the work done or redone, but only to
conform to such rules. They may not prescribe their own manner of execution of the
act. They have no discretion on this matter except to see to it that the rules are
followed.
Under our present system of government, executive power is vested in the
President. The members of the Cabinet and other executive officials are merely alter
egos. As such, they are subject to the power of control of the President, at whose will
and behest they can be removed from office; or their actions and decisions changed,
suspended or reversed. In contrast, the heads of political subdivisions are elected by
the people. Their sovereign powers emanate from the electorate, to whom they are
directly accountable. By constitutional fiat, they are subject to the President’s
supervision only, not control, so long as their acts are exercised within the sphere of
their legitimate powers. By the same token, the President may not withhold or alter
any authority or power given them by the Constitution and the law.
Extent of Local Autonomy
Hand in hand with the constitutional restraint on the President’s power over local
governments is the state policy of ensuring local autonomy. In Ganzon v. Court of
Appeals, we said that local autonomy signified “a more responsive and accountable
local government structure instituted through a system of decentralization.” The grant
of autonomy is intended to “break up the monopoly of the national government over
the affairs of local governments, x x x not x x x to end the relation of partnership and
interdependence between the central administration and local government units x x
x.” Paradoxically, local governments are still subject to regulation, however limited, for
the purpose of enhancing self-government.
Decentralization simply means the devolution of national administration, not
power, to local governments. Local officials remain accountable to the central
government as the law may provide. The difference between decentralization of
administration and that of power was explained in detail in Limbona v. Mangelin as
follows:
“Now, autonomy is either decentralization of administration or decentralization of
power. There is decentralization of administration when the central government
delegates administrative powers to political subdivisions in order to broaden the
base of government power and in the process to make local governments ‘more
responsive and accountable,’ and ‘ensure their fullest development as self-reliant
communities and make them more effective partners in the pursuit of national
development and social progress.’ At the same time, it relieves the central
government of the burden of managing local affairs and enables it to concentrate
on national concerns. The President exercises ‘general supervision’ over them, but
only to ‘ensure that local affairs are administered according to law.’ He has no
control over their acts in the sense that he can substitute their judgments with his
own.
Decentralization of power, on the other hand, involves an abdication of political
power in the favor of local government units declared to be autonomous. In that
case, the autonomous government is free to chart its own destiny and shape its
future with minimum intervention from central authorities. According to a
constitutional author, decentralization of power amounts to ‘self-immolation,’ since
in that event, the autonomous government becomes accountable not to the central
authorities but to its constituency.”
Under the Philippine concept of local autonomy, the national government has not
completely relinquished all its powers over local governments, including autonomous
regions. Only administrative powers over local affairs are delegated to political
subdivisions. The purpose of the delegation is to make governance more directly
responsive and effective at the local levels. In turn, economic, political and social
development at the smaller political units are expected to propel social and economic
growth and development. But to enable the country to develop as a whole, the
programs and policies effected locally must be integrated and coordinated towards a
common national goal. Thus, policy-setting for the entire country still lies in the
President and Congress. As we stated in Magtajas v. Pryce Properties Corp.,
Inc., municipal governments are still agents of the national government.
The Nature of AO 372
Consistent with the foregoing jurisprudential precepts, let us now look into the nature
of AO 372. As its preambular clauses declare, the Order was a “cash management
measure” adopted by the government “to match expenditures with available
resources,” which were presumably depleted at the time due to “economic difficulties
brought about by the peso depreciation.” Because of a looming financial crisis, the
President deemed it necessary to “direct all government agencies, state universities
and colleges, government-owned and controlled corporations as well as local
governments to reduce their total expenditures by at least 25 percent along
suggested areas mentioned in AO 372.
Under existing law, local government units, in addition to having administrative
autonomy in the exercise of their functions, enjoy fiscal autonomy as well. Fiscal
autonomy means that local governments have the power to create their own sources
of revenue in addition to their equitable share in the national taxes released by the
national government, as well as the power to allocate their resources in accordance
with their own priorities. It extends to the preparation of their budgets, and local
officials in turn have to work within the constraints thereof. They are not formulated at
the national level and imposed on local governments, whether they are relevant to
local needs and resources or not. Hence, the necessity of a balancing of viewpoints
and the harmonization of proposals from both local and national officials, who in any
case are partners in the attainment of national goals.
Local fiscal autonomy does not, however, rule out any manner of national
government intervention by way of supervision, in order to ensure that local
programs, fiscal and otherwise, are consistent with national goals. Significantly, the
President, by constitutional fiat, is the head of the economic and planning agency of
the government, primarily responsible for formulating and implementing continuing,
coordinated and integrated social and economic policies, plans and programs for the
entire country. However, under the Constitution, the formulation and the
implementation of such policies and programs are subject to “consultations with the
appropriate public agencies, various private sectors, and local government units.” The
President cannot do so unilaterally.
Consequently, the Local Government Code provides:
“x x x [I]n the event the national government incurs an unmanaged public sector
deficit, the President of the Philippines is hereby authorized, upon the
recommendation of [the] Secretary of Finance, Secretary of the Interior and Local
Government and Secretary of Budget and Management, and subject to
consultation with the presiding officers of both Houses of Congress and the
presidents of the liga, to make the necessary adjustments in the internal revenue
allotment of local government units but in no case shall the allotment be less than
thirty percent (30%) of the collection of national internal revenue taxes of the third
fiscal year preceding the current fiscal year x x x.”
There are therefore several requisites before the President may interfere in local
fiscal matters: (1) an unmanaged public sector deficit of the national government; (2)
consultations with the presiding officers of the Senate and the House of
Representatives and the presidents of the various local leagues; and (3) the
corresponding recommendation of the secretaries of the Department of Finance,
Interior and Local Government, and Budget and Management. Furthermore, any
adjustment in the allotment shall in no case be less than thirty percent (30%) of the
collection of national internal revenue taxes of the third fiscal year preceding the
current one.
Petitioner points out that respondents failed to comply with these requisites before
the issuance and the implementation of AO 372. At the very least, they did not even
try to show that the national government was suffering from an unmanageable public
sector deficit. Neither did they claim having conducted consultations with the different
leagues of local governments. Without these requisites, the President has no
authority to adjust, much less to reduce, unilaterally the LGU’s internal revenue
allotment.
The solicitor general insists, however, that AO 372 is merely directory and has
been issued by the President consistent with his power of supervision over local
governments. It is intended only to advise all government agencies and
instrumentalities to undertake cost-reduction measures that will help maintain
economic stability in the country, which is facing economic difficulties. Besides, it
does not contain any sanction in case of noncompliance. Being merely an advisory,
therefore, Section 1 of AO 372 is well within the powers of the President. Since it is
not a mandatory imposition, the directive cannot be characterized as an exercise of
the power of control.
While the wordings of Section 1 of AO 372 have a rather commanding tone, and
while we agree with petitioner that the requirements of Section 284 of the Local
Government Code have not been satisfied, we are prepared to accept the solicitor
general’s assurance that the directive to “identify and implement measures x x x that
will reduce total expenditures x x x by at least 25% of authorized regular
appropriation” is merely advisory in character, and does not constitute a mandatory or
binding order that interferes with local autonomy. The language used, while
authoritative, does not amount to a command that emanates from a boss to a
subaltern.
Rather, the provision is merely an advisory to prevail upon local executives to
recognize the need for fiscal restraint in a period of economic difficulty. Indeed, all
concerned would do well to heed the President’s call to unity, solidarity and teamwork
to help alleviate the crisis. It is understood, however, that no legal sanction may be
imposed upon LGUs and their officials who do not follow such advice. It is in this light
that we sustain the solicitor general’s contention in regard” to Section 1.
Withholding a Part of LGU’s IRA
Section 4 of AO 372 cannot, however, be upheld. A basic feature of local fiscal
autonomy is the automatic release of the shares of LGUs in the National internal
revenue. This is mandated by no less than the Constitution. The Local Government
Code specifies further that the release shall be made directly to the LGU concerned
within five (5) days after every quarter of the year and “shall not be subject to any lien
or holdback that may be imposed by the national government for whatever purpose.”
As a rule, the term “shall” is a word of command that must be given a compulsory
meaning. The provision is, therefore, imperative. Section 4 of AO 372, however,
orders the withholding, effective January 1, 1998, of 10 percent of the LGUs’ IRA
“pending the assessment and evaluation by the Development Budget Coordinating
Committee of the emerging fiscal situation” in the country. Such withholding clearly
contravenes the Constitution and the law. Although temporary, it is equivalent to a
holdback, which means “something held back or withheld, often temporarily.” Hence,
the “temporary” nature of the retention by the national government does not matter.
Any retention is prohibited.
In sum, while Section 1 of AO 372 may be upheld as an advisory effected in times
of national crisis, Section 4 thereof has no color of validity at all. The latter provision
effectively encroaches on the fiscal autonomy of local governments. Concededly, the
President was well-intentioned in issuing his Order to withhold the LGUs’ IRA, but the
rule of law requires that even the best intentions must be carried out within the
parameters of the Constitution and the law. Verily, laudable purposes must be carried
out by legal methods.
Refutation of Justice Kapunan’s Dissent
Mr. Justice Santiago M. Kapunan dissents from our Decision on the grounds that,
allegedly, (1) the Petition is premature; (2) AO 372 falls within the powers of the
President as chief fiscal officer; and (3) the withholding of the LGUs’ IRA is implied in
the President’s authority to adjust it in case of an unmanageable public sector deficit.
First, on prematurity. According to the Dissent, when “the conduct has not yet
occurred and the challenged construction has not yet been adopted by the agency
charged with administering the administrative order, the determination of the scope
and constitutionality of the executive action in advance of its immediate adverse effect
involves too remote and abstract an inquiry for the proper exercise of judicial
function.”
This is a rather novel theory—that people should await the implementing evil to
befall on them before they can question acts that are illegal or unconstitutional. Be it
remembered that the real issue here is whether the Constitution and the law are
contravened by Section 4 of AO 372, not whether they are violated by the acts
implementing it. In the unanimous en banc case Tañada v. Angara, this Court held
that when an act of the legislative department is seriously alleged to have infringed
the Constitution, settling the controversy becomes the duty of this Court. By the mere
enactment of the questioned law or the approval of the challenged action, the dispute
is said to have ripened into a judicial controversy even without any other overt act.
Indeed, even a singular violation of the Constitution and/or the law is enough to
awaken judicial duty. Said the Court:
 “In seeking to nullify an act of the Philippine Senate on the ground that it
contravenes the Constitution, the petition no doubt raises a justiciable controversy.
Where an action of the legislative branch is seriously alleged to have infringed the
Constitution, it becomes not only the right but in fact the duty of the judiciary to
settle the dispute. The question thus posed is judicial rather than political. The duty
(to adjudicate) remains to assure that the supremacy of the Constitution is upheld.’
Once a ‘controversy as to the application or interpretation of a constitutional
provision is raised before this Court x x x , it becomes a legal issue which the Court
is bound by constitutional mandate to decide.’
xxx xxx xxx
“As this Court has repeatedly and firmly emphasized in many cases, it will not
shirk, digress from or abandon its sacred duty and authority to uphold the
Constitution in matters that involve grave abuse of discretion brought before it in
appropriate cases, committed by any officer, agency, instrumentality or
department of the government.”
In the same vein, the Court also held in Tatad v. Secretary of the Department of
Energy:
“x x x Judicial power includes not only the duty of the courts to settle actual
controversies involving rights which are legally demandable and enforceable, but
also the duty to determine whether or not there has been grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of government. The courts, as guardians of the Constitution, have
the inherent authority to determine whether a statute enacted by the legislature
transcends the limit imposed by the fundamental law. Where the statute violates
the Constitution, it is not only the right but the duty of the judiciary to declare such
act unconstitutional and void.”
By the same token, when an act of the President, who in our constitutional scheme is
a coequal of Congress, is seriously alleged to have infringed the Constitution and the
laws, as in the present case, settling the dispute becomes the duty and the
responsibility of the courts.
Besides, the issue that the Petition is premature has not been raised by the
parties; hence it is deemed waived. Considerations of due process really prevents its
use against a party that has not been given sufficient notice of its presentation, and
thus has not been given the opportunity to refute it.
Second, on the President’s power as chief fiscal officer of the country. Justice
Kapunan posits that Section 4 of AO 372 conforms with the President’s role as chief
fiscal officer, who allegedly “is clothed by law with certain powers to ensure the
observance of safeguards and auditing requirements, as well as the legal
prerequisites in the release and use of IRAs, taking into account the constitutional
and statutory mandates.” He cites instances when the President may lawfully
intervene in the fiscal affairs of LGUs.
Precisely, such powers referred to in the Dissent have specifically been
authorized by law and have not been challenged as violative of the Constitution. On
the other hand, Section 4 of AO 372, as explained earlier, contravenes explicit
provisions of the Local Government Code (LGC) and the Constitution. In other words,
the acts alluded to in the Dissent are indeed authorized by law; but, quite the
opposite, Section 4 of AO 372 is bereft of any legal or constitutional basis.
Third, on the President’s authority to adjust the IRA of LGUs in case of an
unmanageable public sector deficit. It must be emphasized that in striking down
Section 4 of AO 372, this Court is not ruling out any form of reduction in the IRAs of
LGUs. Indeed, the President may make necessary adjustments in case of an
unmanageable public sector deficit, as stated in the main part of this Decision, and in
line with Section 234 of the LGC which Justice Kapunan cites. He, however, merely
glances over a specific requirement in the same provision—that such reduction is
subject to consultation with the presiding officers of both Houses of Congress and,
more importantly, with the presidents of the leagues of local governments.
Notably, Justice Kapunan recognizes the need for “interaction between the
national government and the LGUs at the planning level,” in order to ensure that
“local development plans x x x hew to national policies and standards.” The problem
is that no such interaction or consultation was ever held prior to the issuance of AO
372. This is why the petitioner and the intervenor (who was a provincial governor and
at the same time president of the League of Provinces of the Philippines and
chairman of the League of Leagues of Local Governments) have protested and
instituted this action. Significantly, respondents do not deny the lack of consultation.
In addition, Justice Kapunan cites Section 287 of the LGC as impliedly authorizing
the President to withhold the IRA of an LGU, pending its compliance with certain
requirements. Even a cursory reading of the provision reveals that it is totally
inapplicable to the issue at bar. It directs LGUs to appropriate in their annual budgets
20 percent of their respective IRAs for development projects. It speaks of no positive
power granted the President to priorly withhold any amount. Not at all.
WHEREFORE, the Petition is GRANTED. Respondents and their successors are
hereby permanently PROHIBITED from implementing Administrative Order Nos. 372
and 43, respectively dated December 27, 1997 and December 10, 1998, insofar as
local government units are concerned.
SO ORDERED.
Notes.—Where the Secretary of Justice reviews, pursuant to law, a tax measure enacted
by a local government unit to determine if the officials performed their functions in accordance
with law, that is, with the prescribed procedure for the enactment of tax ordinances and the grant
of powers under the Local Government Code, the same is an act of mere supervision, not
control. (Drilon vs. Lim, 235 SCRA 135 [1994])
A final resolution or decision of an administrative agency also binds the Office of the
President even if such agency is under the administrative supervision and control of the latter.
(Camarines Norte Electric Cooperative, Inc. (CANORECO) vs. Torres, 286 SCRA 666 [1998])
 The President can, by virtue of his power of control, review, modify, alter or nullify any
action, or decision, of his subordinate in the executive departments, bureaus, or offices under
him, and he can exercise this power motu proprio without need of any appeal from any party.
(Blaquera vs. Alcala, 295 SCRA 366 [1998])

——o0o——
 G.R. No. 93252. August 5, 1991.
RODOLFO T. GANZON, petitioner, vs. THE HONORABLE COURT OF APPEALS,
and LUIS T. SANTOS, respondents.
G.R. No. 93746. August 5, 1991.
MARY ANN RIVERA ARTIEDA, petitioner, vs. HON. LUIS SANTOS, in his capacity
as Secretary of the Department of Local Government, NICANOR M. PATRICIO, in
his capacity as Chief, Legal Service of the Department of Local Government, and
SALVADOR CABALUNA, JR., respondents.
G.R. No. 95245. August 5, 1991.
RODOLFO T. GANZON, petitioner, vs. THE HONORABLE COURT OF APPEALS,
and LUIS T. SANTOS, in his capacity as the Secretary of the Department of Local
Government, respondents.
Local Governments; Power to discipline local officials.—It is the considered
opinion of the Court that notwithstanding the change in the constitutional language,
the charter did not intend to divest the legislature of its right—or the President of her
prerogative as conferred by existing legislation to provide administrative sanctions
against local officials. It is our opinion that the omission (of “as may be provided by
law”) signifies nothing more than to underscore local governments ‘autonomy from
congress and to break Congress’ “control” over local governments affairs. The
Constitution did not, however, intend, for the sake of local autonomy, to deprive the
legislature of all authority over municipal corporations, in particular, concerning
discipline.
Same; Same; Local autonomy explained.—It is noteworthy that under the
Charter, “local autonomy” is not instantly self-executing, but subject to, among other
things, the passage of a local government code, a local tax law, income distribution
legislation, and a national representation law, and measures designed to realize
autonomy at the local level. It is also noteworthy that in spite of autonomy, the
Constitution places the local governments under the general supervision of the
Executive. It is noteworthy finally, that the Charter allows Congress to include in the
local government code provisions for removal of local officials, which suggest that
Congress may exercise removal powers, and as the existing Local Government Code
has done, delegate its exercise to the President.
Same; Same; Supervision and control, meaning of.—The petitioners are under
the impression that the Constitution has left the President mere supervisory powers,
which supposedly excludes the power of investigation, and denied her control, which
allegedly embraces disciplinary authority. It is a mistaken impression because legally,
“supervision” is not incompatible with disciplinary authority. x x x “Control” has been
defined as “the power of an officer to alter or modify or nullify or set aside what a
subordinate officer had done in the performance of his duties and to substitute the
judgment of the former for test of the latter.” “Supervision” on the other hand means
“overseeing or the power or authority of an officer to see that subordinate officers
perform their duties.”
Same; Same; Suspension.—The successive sixty-day suspensions imposed on
Mayor Rodolfo Ganzon is albeit another matter. What bothers the Court, and what
indeed looms very large, is the fact that since the Mayor is facing ten administrative
charges, the Mayor is in fact facing the possibility of 600 days of suspension, in the
event that all ten cases yield prima facie findings. The Court is not of course tolerating
misfeasance in public office (assuming that Mayor Ganzon is guilty of misfeasance)
but it is certainly another question to make him serve 600 days of suspension, which
is effectively, to suspend him out of office. x x x.
Same; Same; Same.—The plain truth is that this Court has been ill at ease with
suspensions, x x x because it is out of the ordinary to have a vacancy in local
government. The sole objective of a suspension, x x x is simply “to prevent the
accused from hampering the normal cause of the investigation with his influence and
authority over possible witnesses” or to keep him off “the records and other
evidence.” It is a means, and no more, to assist prosecutors in firming up a case, if
any, against an erring local official. Under the Local Government Code, it can not
exceed sixty days, which is to say that it need not be exactly sixty days long if a
shorter period is otherwise sufficient, and which is also to say that it ought to be lifted
if prosecutors have achieved their purpose in a shorter span.
SARMIENTO, J.:
The petitioners take common issue on the power of the President (acting through the
Secretary of Local Government), to suspend and/or remove local officials.
The petitioners are the Mayor of Iloilo City (G.R. Nos. 93252 and 95245) and a
member of the Sangguniang Panglunsod thereof (G.R. No. 93746), respectively.
The petitions of Mayor Ganzon originated from a series of administrative
complaints, ten in number, filed against him by various city officials sometime in 1988,
on various charges, among them, abuse of authority, oppression, grave misconduct,
disgraceful and immoral conduct, intimidation, culpable violation of the Constitution,
and arbitrary detention. The personalities involved are Joceleehn Cabaluna, a clerk at
the city health office; Salvador Cabaluna, her husband; Dr. Felicidad Ortigoza,
Assistant City Health Officer; Mansueto Malabor, Vice-Mayor; Rolando Dabao, Dan
Dalido, German Gonzales, Larry Ong, and Eduardo Peña Redondo, members of the
Sangguniang Panglunsod; and Pancho Erbite, a barangay tanod. The complaints
against the Mayor are set forth in the opinion of the respondent Court of Appeals. We
quote:
xxx xxx xxx
In her verified complaint (Annex A), Mrs. Cabaluna, a clerk assigned to the
City Health, Office of Iloilo City charged that due to political reasons, having
supported the rival candidate, Mrs. Rosa O. Caram, the petitioner City Mayor,
using as an excuse the exigency of the service and the interest of the public, pulled
her out from rightful office where her qualifications are best suited and assigned
her to a work that should be the function of a non-career service employee. To
make matters worse, a utility worker in the office of the Public Services, whose
duties are alien to the complainant’s duties and functions, has been detailed to
take her place. The petitioner’s act are pure harassments aimed at luring her away
from her permanent position or force her to resign.
In the case of Dra. Felicidad Ortigoza, she claims that the petitioner
handpicked her to perform task not befitting her position as Assistant City Health
Officer of Iloilo City; that her office was padlocked without any explanation or
justification; that her salary was withheld without cause since April 1, 1988; that
when she filed her vacation leave, she was given the run-around treatment in the
approval of her leave in connivance with Dr. Rodolfo Villegas and that she was the
object of a well-engineered trumped-up charge in an administrative complaint filed
by Dr. Rodolfo Villegas (Annex B).
On the other hand, Mansuelo Malabor is the duty elected ViceMayor of Iloilo
City and complainants Rolando Dabao, Dan Dalido, German Gonzales, Larry Ong
and Eduardo Peña Redondo are members of the Sangguniang Panglunsod of the
City of Iloilo. Their complaint arose out from the case where Councilor Larry Ong,
whose key to his office was unceremoniously and without previous notice, taken
by petitioner. Without an office, Councilor Ong had to hold office at Plaza Libertad.
The Vice-Mayor and the other complainants sympathized with him and decided to
do the same. However, the petitioner, together with his fully-armed security men,
forcefully drove them away from Plaza Libertad. Councilor Ong denounced the
petitioner’s actuations the following day in the radio station and decided to hold
office at the Freedom Grandstand at Iloilo City and there were so many people
who gathered to witness the incident. However, before the group could reach the
area, the petitioner, together with his security men, led the firemen using a firetruck
in dozing water to the people and the bystanders.
Another administrative case was filed by Pancho Erbite, a barangay tanod,
appointed by former mayor Rosa O. Caram. On March 13, 1988, without the
benefit of charges filed against him and no warrant of arrest was issued, Erbite
was arrested and detained at the City Jail of Iloilo City upon orders of petitioner. In
jail, he was allegedly mauled by other detainees thereby causing injuries. He was
released only the following day.
The Mayor thereafter answered, and the cases were shortly set for hearing. The
opinion of the Court of Appeals also set forth the succeeding events:
xxx xxx xxx
The initial hearing in the Cabaluna and Ortigoza cases were set for hearing
on June 20-21, 1988 at the Regional Office of the Department of Local
Government in Iloilo City. Notices, through telegrams, were sent to the parties
(Annex L) and the parties received them, including the petitioner. The petitioner
asked for a postponement before the scheduled date of hearing and was
represented by counsel, Atty. Samuel Castro. The hearing officers, Atty. Salvador
Quebral and Atty. Marino Bermudez had to come all the way from Manila for the
two-day hearings but was actually held only on June 20, 1988 in view of the inability
and unpreparedness of petitioner’s counsel.
The next hearings were re-set to July 25, 26, 27, 1988 in the same venue—
Iloilo City. Again, the petitioner attempted to delay the proceedings and moved for
a postponement under the excuse that he had just hired his counsel. Nonetheless,
the hearing officers denied the motion to postpone, in view of the fact that the
parties were notified by telegrams of the scheduled hearings (Annex M).
In the said hearings, petitioner’s counsel cross-examined the complainants
and their witnesses.
Finding probable grounds and reasons, the respondent issued a preventive
suspension order on August 11, 1988 to last until October 11, 1988 for a period of
sixty (60) days.
Then the next investigation was set on September 21, 1988 and the petitioner
again asked for a postponement to September 26, 1988. On September 26, 1988,
the complainants and petitioner were present, together with their respective
counsel. The petitioner sought for a postponement which was denied. In these
hearings which were held in Manila, the petitioner testified in Adm. Case No. C-
10298 and 10299.
The investigation was continued regarding the Malabor case and the
complainants testified including their witnesses.
On October 10, 1988, petitioner’s counsel, Atty. Original moved for a
postponement of the October 24, 1988 hearing to November 7 to 11, 1988 which
was granted. However, the motion for change of venue was denied due to lack of
funds. At the hearing on November 7, 1988, the parties and counsel were present.
Petitioner reiterated his motion to change venue and moved for postponement
anew. The counsel discussed a proposal to take the deposition of witnesses in
Iloilo City so the hearing was indefinitely postponed. However, the parties failed to
come to terms and after the parties were notified of the hearing, the investigation
was set to December 13 to 15, 1988. The petitioner sought for another
postponement on the ground that his witnesses were sick or cannot attend the
investigation due to lack of transportation. The motion was denied and the
petitioner was given up to December 14, 1988 to present his evidence.
On December 14, 1988, petitioner’s counsel insisted on his motion for
postponement and the hearing officers gave petitioner up to December 15, 1988
to present his evidence. On December 15, 1988, the petitioner failed to present
evidence and the cases were considered submitted for resolution.
In the meantime, a prima facie evidence was found to exist in the arbitrary
detention case filed by Pancho Erbite so the respondent ordered the petitioner’s
second preventive suspension dated October 11, 1988 for another sixty (60) days.
The petitioner was able to obtain a restraining order and a writ of preliminary
injunction in the Regional Trial Court, Branch 33 of Iloilo City. The second
preventive suspension was not enforced.
Amidst the two successive suspensions, Mayor Ganzon instituted an action for
prohibition against the respondent Secretary of Local Government (now, Interior) in
the Regional Trial Court, Iloilo City, where he succeeded in obtaining a writ of
preliminary injunction. Presently, he instituted CA-G.R. SP No. 16417, an action for
prohibition, in the respondent Court of Appeals.

Meanwhile, on May 3, 1990, the respondent Secretary issued another order,
preventively suspending Mayor Ganzon for another sixty days, the third time in twenty
months, and designating meantime Vice-Mayor Mansueto Malabor as acting mayor.
Undaunted, Mayor Ganzon commenced CA-G.R. SP No. 20736 of the Court of
Appeals, a petition for prohibition, (Malabor, it is to be noted, is one of the
complainants, and hence, he is interested in seeing Mayor Ganzon ousted.)
On September 7, 1989, the Court of Appeals rendered judgment, dismissing CA-
G.R. SP No. 16417. On July 5, 1990, it likewise promulgated a decision,
dismissing CA-G.R. SP No. 20736. In a Resolution dated January 24, 1990, it issued
a Resolution certifying the petition of Mary Ann Artieda, who had been similary
charged by the respondent Secretary, to this Court.
On June 26, 1990, we issued a Temporary Restraining Order, barring the
respondent Secretary from implementing the suspension orders, and restraining the
enforcement of the Court of Appeals’ two decisions.
In our Resolution of November 29, 1990, we consolidated all three cases. In our
Resolutions of January 15, 1991, we gave due course thereto.
Mayor Ganzon claims as a preliminary (G.R. No. 93252), that the Department of
Local Government in hearing the ten cases against him, had denied him due process
of law and that the respondent Secretary had been “biased, prejudicial and hostile”
towards him arising from his (Mayor Ganzon’s) alleged refusal to join the Laban ng
Demokratikong Pilipino party and the running political rivalry they maintained in the
last congressional and local elections; and his alleged refusal to operate a lottery in
Iloilo City. He also alleges that he requested the Secretary to life his suspension since
it had come ninety days prior to an election (the barangay elections of November 14,
1988), notwithstanding which, the latter proceeded with the hearing—and meted out
two more suspension orders—of the aforementioned cases. He likewise contends
that he sought to bring the cases to Iloilo City (they were held in Manila) in order to
reduce the costs of proceeding, but the Secretary rejected his request. He states that
he asked for postponement on “valid and justifiable” grounds, among them, that he
was suffering from a heart ailment which required confinement; that his “vital” witness
was also hospitalized but that the latter unduly denied his request.
Mayor Ganzon’s primary argument (G.R. Nos. 93252 and 95245) is that the
Secretary of Local Government is devoid, in any event, of any authority to suspend
and remove local officials, an argument reiterated by the petitioner Mary Ann Rivera
Artieda (G.R. No. 93746).
As to Mayor Ganzon’s charges of denial of due process, the records do not show
very clearly in what manner the Mayor might have been deprived of his rights by the
respondent Secretary. His claims that he and Secretary Luis Santos were (are)
political rivals and that his “persecution” was politically motivated are pure speculation
and although the latter does not appear to have denied these contentions (as he,
Mayor Ganzon, claims), we cannot take his word for it the way we would have under
less political circumstances, considering furthermore that “political feud” has often
been a good excuse in contesting complaints.
The Mayor has failed furthermore to substantiate his say-so’s that Secretary
Santos had attempted to seduce him to join the administration party and to operate a
lottery in Iloilo City. Again, although the Secretary failed to rebut his allegations, we
can not accept them at face value, much more, as judicial admissions as he would
have us accept them, for the same reasons above-stated and furthermore, because
his say-so’s were never corroborated by independent testimonies. As a responsible
public official, Secretary Santos, in pursuing an official function, is presumed to be
performing his duties regularly and in the absence of contrary evidence, no ill motive
can be ascribed to him.
As to Mayor Ganzon’s contention that he had requested the respondent Secretary
to defer the hearing on account of the ninety-day ban prescribed by Section 62 of
Batas Blg. 337, the Court finds the question to be moot and academic since we have
in fact restrained the Secretary from further hearing the complaints against the
petitioners.
As to his request, finally, for postponements, the Court is afraid that he has not given
any compelling reason why we should overturn the Court of Appeals, which found no
convincing reason to overrule Secretary Santos in denying his requests. Besides,
postponements are a matter of discretion on the part of the hearing officer, and based
on Mayor Ganzon’s above story, we are not convinced that the Secretary has been
guilty of a grave abuse of discretion.
The Court can not say, under these circumstances, that Secretary Santos’
actuations deprived Mayor Ganzon of due process of law.
We come to the core question: Whether or not the Secretary of Local
Government, as the President’s alter ego, can suspend and/or remove local officials.
It is the petitioners’ argument that the 1987 Constitution no longer allows the
President, as the 1935 and 1973 Constitutions did, to exercise the power of
suspension and/or removal over local officials. According to both petitioners, the
Constitution is meant, first, to strengthen self-rule by local government units and
second, by deleting the phrase “as may be provided by law,” to strip the President of
the power of control over local governments. It is a view, so they contend, that finds
support in the debates of the Constitutional Commission.
The provision in question reads as follows:
 Sec. 4. The President of the Philippines shall exercise general supervision over
local governments. Provinces with respect to component cities and municipalities,
and cities and municipalities with respect to component barangays shall ensure
that the acts of their component units are within the scope of their prescribed
powers and functions.
It modifies a counterpart provision appearing in the 1935 Constitution, which we
quote:
Sec. 10. The President shall have control of all the executive departments,
bureaus, or offices, exercise general supervision over all local governments as
may be provided by law, and take care that the laws be faithfully executed.
The petitioners submit that the deletion (of “as may be provided by law”) is significant,
as their argument goes, since: (1) the power of the President is “provided by law” and
(2) hence, no law may provide for it any longer. It is to be noted that in meting out the
suspensions under question, the Secretary of Local Government acted in consonance
with the specific legal provisions of Batas Blg. 337, the Local Government Code, we
quote:
Sec. 62. Notice of Hearing.—Within seven days after the complaint is filed, the
Minister of Local Government, or the sanggunian concerned, as the case may be,
shall require the respondent to submit his verified answer within seven days from
receipt of said complaint, and commence the hearing and investigation of the case
within ten days after receipt of such answer of the respondent. No investigation
shall be held within ninety days immediately prior to an election, and no preventive
suspension shall be imposed within the said period. If preventive suspension has
been imposed prior to the aforesaid period, the preventive suspension shall be
lifted.
Sec. 63. Preventive Suspension.—(1) Preventive suspension may be
imposed by the Minister of Local Government if the respondent is a provincial or
city official, by the provincial governor if the respondent is an elective municipal
official, or by the city or municipal mayor if the respondent is an elective barangay
official.
(2) Preventive suspension may be imposed at any time after the issues are
joined, when there is reasonable ground to believe that the respondent has
committed the act or acts complained of, when the evidence of culpability is strong,
when the gravity of the offense so warrants, or when the continuance in office of
the respondent could influence the witnesses or pose a threat to the safety and
integrity of the records and other evidence. In all cases, preventive suspension
shall not extend beyond sixty days after the start of said suspension.
(3) At the expiration of sixty days, the suspended official shall be deemed
reinstated in office without prejudice to the continuation of the proceedings against
him until its termination. However, if the delay in the proceedings of the case is
due to his fault, neglect or request, the time of the delay shall not be counted in
computing the time of suspension.
The issue, as the Court understands it, consists of three questions: (1) Did the 1987
Constitution, in deleting the phrase “as may be provided by law” intend to divest the
President of the power to investigate, suspend, discipline, and/or remove local
officials? (2) Has the Constitution repealed Sections 62 and 63 of the Local
Government Code? (3) What is the significance of the change in the constitutional
language?
It is the considered opinion of the Court that notwithstanding the change in the
constitutional language, the charter did not intend to divest the legislature of its right—
or the President of her prerogative as conferred by existing legislation to provide
administrative sanctions against local officials. It is our opinion that the omission (of
“as may be provided by law”) signifies nothing more than to underscore local
governments’ autonomy from congress and to break Congress’ “control” over local
government affairs. The Constitution did not, however, intend, for the sake of local
autonomy, to deprive the legislature of all authority over municipal corporations, in
particular, concerning discipline.
Autonomy does not, after all, contemplate making mini-states out of local
government units, as in the federal governments of the United States of America (or
Brazil or Germany), although Jefferson is said to have compared municipal
corporations euphemistically to “small republics”. Autonomy, in the constitutional
sense, is subject to the guiding star, though not control, of the legislature, albeit the
legislative responsibility under the Constitution—and as the “supervision clause” itself
suggest—is to wean local government units from overdependence on the central
government.
It is noteworthy that under the Charter, “local autonomy” is not instantly self-
executing, but subject to, among other things, the passage of a local government
code, a local tax law, income distribution legislation, and a national representation law,
and measures designed to realize autonomy at the local level. It is also noteworthy
that in spite of autonomy, the Constitution places the local government under the
general supervision of the Executive. It is noteworthy finally, that the Charter allows
Congress to include in the local government code provisions for removal of local
officials, which suggest that Congress may exercise removal powers, and as the
existing Local Government Code has done, delegate its exercise to the President.
Thus:
Sec. 3. The Congress shall enact a local government code which shall provide for
a more responsive and accountable local government structure instituted through
a system of decentralization with effective mechanisms of recall, initiative, and
referendum, allocate among the different local government units their powers,
responsibilities and resources, and provide for the qualifications, election,
appointment and removal, term, salaries, powers and functions and duties of local
officials, and all other matters relating to the organization and operation of the local
units.
As hereinabove indicated, the deletion of “as may be provided by law” was meant to
stress, sub silencio, the objective of the framers to strengthen local autonomy by
severing congressional control of its affairs, as observed by the Court of Appeals, like
the power of local legislation. The Constitution did nothing more, however, and insofar
as existing legislation authorizes the President (through the Secretary of Local
Government) to proceed against local officials administratively, the Constitution
contains no prohibition.
The petitioners are under the impression that the Constitution has left the President
mere supervisory powers, which supposedly excludes the power of investigation, and
denied her control, which allegedly embraces disciplinary authority. It is a mistaken
impression because legally, “supervision” is not incompatible with disciplinary
authority as this Court has held, thus:
xxx xxx xxx
It is true that in the case of Mondano vs. Silvosa, 51 Off. Gaz., No. 6 p. 2884,
this Court had occasion to discuss the scope and extent of the power of supervision
by the President over local government officials in contrast to the power of control
given to him over executive officials of our government wherein it was emphasized
that the two terms, control and supervision, are two different things which differ
one from the other in meaning and extent. Thus in that case the Court has made
the following digression: “In administration law supervision means overseeing or
the power or authority of an officer to see that subordinate officers perform their
duties. If the latter fail or neglect to fulfill them the former may take such action or
step as prescribed by law to make them perform their duties. Control, on the other
hand, means the power of an officer to alter or modify or nullify of set aside what
a subordinate officer had done in the performance of his duties and to substitute
the judgment of the former for that of the latter.” But from this pronouncement it
cannot be reasonably inferred that the power of supervision of the President over
local government officials does not include the power of investigation when in his
opinion the good of the public service so requires, as postulated in Section 64(c)
of the Revised Administrative Code. xxx
xxx xxx xxx
“Control” has been defined as “the power of an officer to alter or modify or nullify or
set aside what a subordinate officer had done in the performance of his duties and to
substitute the judgment of the former for test of the latter.” “Supervision” on the other
hand means “overseeing or the power or authority of an officer to see that
subordinate officers perform their duties.” As we held, however, “investigating” is not
inconsistent with “overseeing”, although it is a lesser power than “altering”.
The impression is apparently exacerbated by the Court’s pronouncements in at
least three cases, Lacson v. Roque, Hebron v. Reyes, and Mondano v. Silvosa, and
possibly, a fourth one, Pelaez v. Auditor General. In Lacson, this Court said that the
President enjoyed no control powers but only supervision “as may be provided by
law,” a rule we reiterated in Hebron, and Mondano. In Pelaez,we stated that the
President “may not . . . suspend an elective official of a regular municipality or take
any disciplinary action against him, except on appeal from a decision of the
corresponding provincial board.” However, neither Lacson nor Hebron nor Mondano
categorically banned the Chief Executive from exercising acts of disciplinary authority
because she did not exercise control powers, but because no law allowed her to
exercise disciplinary authority. Thus, according to Lacson:
The contention that the President has inherent power to remove or suspend
municipal officers is without doubt not well taken. Removal and suspension of
public officers are always controlled by the particular law applicable and its proper
construction subject to constitutional limitations.
In Hebron, we stated:
Accordingly, when the procedure for the suspension of an officer is specified by
law, the same must be deemed mandatory and adhered to strictly, in the absence
of express or clear provision to the contrary—which does not exist with respect to
municipal officers ...
In Mondano, the Court held:
x x x The Congress has expressly and specifically lodged the provincial
supervision over municipal officials in the provincial governor who is authorized to
“receive and investigate complaints made under oath against municipal officers for
neglect of duty, oppression, corruption or other form of maladministration of office,
and conviction by final judgment of any crime involving moral turpitude.” And if the
charges are serious, “he shall submit written charges touching the matter to the
provincial board, furnishing a copy of such charges to the accused either
personally or by registered mail, and he may in such case suspend the officer (not
being the municipal treasurer) pending action by the board, if in his opinion the
charge by one affecting the official integrity of the officer in question.” Section 86
of the Revised Administration Code adds nothing to the power of supervision to be
exercised by the Department Head over the administration of x x x municipalities
x x x. If it be construed that it does and such additional power is the same authority
as that vested in the Department Head by section 79(c) of the Revised
Administrative Code, then such additional power must be deemed to have been
abrogated by Section 110(1), Article VII, of the Constitution.
xxx xxx xxx
In Pelaez, we stated that the President can not impose disciplinary measures on local
officials except on appeal from the provincial board pursuant to the Administrative
Code.
Thus, in those case that this Court denied the President the power (to
suspend/remove) it was not because we did not think that the President can not
exercise it on account of his limited power, but because the law lodged the power
elsewhere. But in those cases in which the law gave him the power, the Court, as
in Ganzon v. Kayanan, found little difficulty in sustaining him.
The Court does not believe that the petitioners can rightfully point to the debates of
the Constitutional Commission to defeat the President’s powers. The Court believes
that the deliberations are by themselves inconclusive, because although
Commissioner Jose Nolledo would exclude the power of removal from the President,
Commissioner Blas Ople would not.
The Court is consequently reluctant to say that the new Constitution has repealed
the Local Government Code, Batas Blg. 37. As we said, “supervision” and “removal”
are not incompatible terms and one may stand with the other notwithstanding the
stronger expression of local autonomy under the new Charter. We have indeed held
that in spite of the approval of the Charter, Batas Blg. 337 is still in force and effect.
As the Constitution itself declares, local autonomy means “a more responsive and
accountable local government structure instituted through a system of
decentralization.” The Constitution, as we observed, does nothing more than to break
up the monopoly of the national government over the affairs of local governments and
as put by political adherents, to “liberate the local governments from the imperialism
of Manila.” Autonomy, however, is not meant to end the relation of partnership and
interdependence between the central administration and local government units, or
otherwise, to usher in a regime of federalism. The Charter has not taken such a
radical step. Local governments, under the Constitution, are subject to regulation,
however limited, and for no other purpose than precisely, albeit paradoxically, to
enhance self-government.
As we observed in one case, decentralization means devolution of national
administration—but not power—to the local levels. Thus:
Now, autonomy is either decentralization of administration or decentralization of
power. There is decentralization of administration when the central government
delegates administrative powers to political subdivisions in order to broaden the
base of government power and in the process to make local governments “more
responsive and accountable,” and “ensure their fullest development as self-reliant
communities and make them more effective partners in the pursuit of national
development and social progress.” At the same time, it relieves the central
government of the burden of managing local affairs and enables it to concentrate
on national concerns. The President exercises “general supervision” over them,
but only to “ensure that local affairs are administered according to law.” He has no
control over their acts in the sense that he can substitute their judgments with his
own.
Decentralization of power, on the other hand, involves an abdication of political
power in the favor of local governments units declared to be autonomous, In that
case, the autonomous government is free to chart its own destiny and shape its
future with minimum intervention from central authorities. According to a
constitutional author, decentralization of power amounts to “self-immolation,” since
in that event, the autonomous government becomes accountable not to the central
authorities but to its constituency.
The successive sixty-day suspensions imposed on Mayor Rodolfo Ganzon is albeit
another matter. What bothers the Court, and what indeed looms very large, is the fact
that since the Mayor is facing ten administrative charges, the Mayor is in fact facing
the possibility of 600 days of suspension, in the event that all ten cases yield prima
facie findings. The Court is not of course tolerating misfeasance in public office
(assuming that Mayor Ganzon is guilty of misfeasance) but it is certainly another
question to make him serve 600 days of suspension, which is effectively, to suspend
him out of office. As we held:
2. Petitioner is a duly elected municipal mayor of Lianga, Surigao del Sur. His term
of office does not expire until 1986. Were it not for this information and the
suspension decreed by the Sandiganbayan according to the Anti-Graft and Corrupt
Practices Act, he would have been all this while in the full discharge of his functions
as such municipal mayor. He was elected precisely to do so. As of October 26,
1983, he has been unable to. It is a basic assumption of the electoral process
implicit in the right of suffrage that the people are entitled to the services of elective
officials of their choice. For misfeasance or malfeasance, any of them could, of
course, be proceeded against administratively or, as in this instance, criminally. In
either case, his culpability must be established. Moreover, if there be a criminal
action, he is entitled to the constitutional presumption of innocence. A preventive
suspension may be justified. Its continuance, however, for an unreasonable length
of time raises a due process question. For even if thereafter he were acquitted, in
the meanwhile his right to hold office had been nullified. Clearly, there would be in
such a case an injustice suffered by him. Nor is he the only victim. There is injustice
inflicted likewise on the people of Lianga. They were deprived of the services of
the man they had elected to serve as mayor. In that sense, to paraphrase Justice
Cardozo, the protracted continuance of this preventive suspension had outrun the
bounds of reason and resulted in sheer oppression. A denial of due process is thus
quite manifest. It is to avoid such an unconstitutional application that the order of
suspension should be lifted.
The plain truth is that this Court has been ill at ease with suspensions, for the above
reasons, and so also, because it is out of the ordinary to have a vacancy in local
government. The sole objective of a suspension, as we have held, is simply “to
prevent the accused from hampering the normal cause of the investigation with his
influence and authority over possible witnesses” or to keep him off “the records and
other evidence.” It is a means, and no more, to assist prosecutors in firming up a
case, if any, against an erring local official. Under the Local Government Code, it can
not exceed sixty days, which is to say that it need not be exactly sixty days long if a
shorter period is otherwise sufficient, and which is also to say that it ought to be lifted
if prosecutors have achieved their purpose in a shorter span.
Suspension is not a penalty and is not unlike preventive imprisonment in which the
accused is held to insure his presence at the trial. In both cases, the accused (the
respondent) enjoys a presumption of innocence unless and until found guilty.
Suspension finally is temporary, and as the Local Government Code provides, it
may be imposed for no more than sixty days. As we held, a longer suspension is
unjust and unreasonable, and we might add, nothing less than tyranny.
As we observed earlier, imposing 600 days of suspension—which is not a remote
possibility—on Mayor Ganzon is to all intents and purposes, to make him spend the
rest of his term in inactivity. It is also to make, to all intents and purposes, his
suspension permanent.
It is also, in fact, to mete out punishment in spite of the fact that the Mayor’s guilt
has not been proven. Worse, any absolution will be for naught because needless to
say, the length of his suspension would have, by the time he is reinstated, wiped out
his tenure considerably.
 5.“Supervision” and “investigation” are not inconsistent terms; “investigation” does
The Court is not to be mistaken for obstructing the efforts of the respondent not signify “control” (which the President does not have);
Secretary to see that justice is done in Iloilo City, yet it is hardly any argument to inflict 6.The petitioner, Mayor Rodolfo Ganzon, may serve the suspension so far ordered,
but may no longer be suspended for the offenses he was charged originally;
on Mayor Ganzon successive suspensions when apparently, the respondent
provided:
Secretary has had sufficient time to gather the necessary evidence to build a case a)that delays in the investigation of those charges “due to his fault, neglect or
against the Mayor-without suspending him a day longer. What is intriguing is that the request, (the time of the delay) shall not be counted in computing the time of
respondent Secretary has been cracking down, so to speak, on the Mayor suspension.” [Supra, sec. 63(3)]
piecemeal—apparently, to pin him down ten times the pain, when he, the respondent b)that if during, or after the expiration of, his preventive suspension, the petitioner
Secretary, could have pursued a consolidated effort. commits another or other crimes and abuses for which proper charges are filed
against him by the aggrieved party or parties, his previous suspension shall not be
We reiterate that we are not precluding the President, through the Secretary of a bar to his being preventively suspended again, if warranted under subpar. (2),
Section 63 of the Local Government Code.
Interior from exercising a legal power, yet we are of the opinion that the Secretary of
Interior is exercising that power oppressively, and needless to say, with a grave
WHEREFORE, premises considered, the petitions are DISMISSED. The
abuse of discretion.
Temporary Restraining Order issued is LIFTED. The suspensions of the petitioners
are AFFIRMED, provided that the petitioner, Mayor Rodolfo Ganzon, may not be
The Court is aware that only the third suspension is under questions, and that any
made to serve future suspensions on account of any of the remaining administrative
talk of future suspensions is in fact premature. The fact remains, however, that Mayor
charges pending against him for acts committed prior to August 11, 1988. The
Ganzon has been made to serve a total of 120 days of suspension and the possibility
Secretary of Interior is ORDERED to consolidate all such administrative cases
of sixty days more is arguably around the corner (which amounts to a violation of the
pending against Mayor Ganzon.
Local Government Code)—which brings to light a pattern of suspensions intended to
suspend the Mayor the rest of his natural tenure. The Court is simply foreclosing what
The sixty-day suspension against the petitioner, Mary Ann Rivera Artieda, is
appears to us as a concerted effort of the State to perpetuate an arbitrary act.
AFFIRMED. No costs.
SO ORDERED.
As we said, we can not tolerate such a state of affairs. We are therefore allowing
Mayor Rodolfo Ganzon to suffer the duration of his third suspension and lifting, for the
Note.—Complaints against elective provincial or city officials should be filed
purpose, the Temporary Restraining Order earlier issued. Insofar as the seven
before the Minister of Local Government. (Regidor, Jr. vs. Chiongbian, 173 SCRA
remaining charges are concerned, we are urging the Department of Local
507.)
Government, upon the finality of this Decision, to undertake steps to expedite the
same, subject to Mayor Ganzon’s usual remedies of appeal, judicial or administrative,
or certiorari, if warranted, and meanwhile, we are precluding the Secretary from ——o0o——
meting out further suspensions based on those remaining complaints,
notwithstanding findings of prima facie evidence.

In resumé, the Court is laying down the following rules:

1.Local autonomy, under the Constitution, involves a mere decentralization of
administration, not of power, in which local officials remain accountable to the
central government in the manner the law may provide;
2.The new Constitution does not prescribe federalism;
3.The change in constitutional language (with respect to the supervision clause)
was meant but to deny legislative control over local governments; it did not exempt
the latter from legislative regulations provided regulation is consistent with the
fundamental premise of autonomy;
4.Since local governments remain accountable to the national authority, the latter
may, by law, and in the manner set forth therein, impose disciplinary action against
local officials;
 G.R. No. 92299. April 19, 1991.
REYNALDO R. SAN JUAN, petitioner, vs. CIVIL SERVICE COMMISSION,
DEPARTMENT OF BUDGET AND MANAGEMENT and CECILIA ALMAJOSE,
respondents.
Local Governments; Municipal Corporations; Civil Service; Appointments; The
Department of Budget and Management may appoint provincial budget officers, only from the list
of qualified recommendees nominated by the Governor.—When the Civil Service Commission
interpreted the recommending power of the Provincial Governor as purely directory, it went
against the letter and spirit of the constitutional provisions on local autonomy. If the DBM
Secretary jealously hoards the entirety of budgetary powers and ignores the right of local
governments to develop self-reliance and resoluteness in the handling of their own funds, the
goal of meaningful local autonomy is frustrated and set back. The right given by Local Budget
Circular No. 31 which states: “SEC. 6.0—The DBM reserves the right to fill up any existing
vacancy where none of the nominees of the local chief executive meet the prescribed
requirements.” is ultra vires and is, accordingly, set aside. The DBM may appoint only from the
list of qualified recommendees nominated by the Governor. If none is qualified, he must return
the list of nominees to the Governor explaining why no one meets the legal requirements and
ask for new recommendees who have the necessary eligibilities and qualifications. The PBO is
expected to synchronize his work with DBM. More important, however, is the proper
administration of fiscal affairs at the local level. Provincial and municipal budgets are prepared at
the local level and after completion are forwarded to the national officials for review. They are
prepared by the local officials who must work within the constraints of those budgets. They are
not formulated in the inner sanctums of an all-knowing DBM and unilaterally imposed on local
governments whether or not they are relevant to local needs and resources. It is for this reason
that there should be a genuine interplay, a balancing of viewpoints, and a harmonization of
proposals from both the local and national officials. It is for this reason that the nomination and
appointment process involves a sharing of power between the two levels of government.
Same; Same; Same; Same; National officials should not only comply with the
constitutional provisions on local autonomy but should also appreciate the spirit of liberty upon
which these provisions are based.—In his classic work “Philippine Political Law” Dean Vicente
G. Sinco stated that the value of local governments as institutions of democracy is measured by
the degree of autonomy that they enjoy. Citing Tocqueville, he stated that “local assemblies of
citizens constitute the strength of free nations. x x x A people may establish a system of free
government but without the spirit of municipal institutions, it cannot have the spirit of liberty.”
(Sinco, Philippine Political Law, Eleventh Edition, pp. 705-706). Our national officials should not
only comply with the constitutional provisions on local autonomy but should also appreciate the
spirit of liberty upon which these provisions are based.
GUTIERREZ, JR., J.:
In this petition for certiorari pursuant to Section 7, Article IX (A) of the present
Constitution, the petitioner Governor of the Province of Rizal, prays for the nullification
of Resolution No. 89-868 of the Civil Service Commission (CSC) dated November 21,
1989 and its Resolution No. 90-150 dated February 9, 1990. The dispositive portion
of the questioned Resolution reads:
“WHEREFORE, foregoing premises considered, the Commission resolved to
dismiss, as it hereby dismisses the appeal of Governor Reynaldo San Juan of
Rizal. Accordingly, the approved appointment of Ms. Cecilia Almajose as
Provincial Budget Officer of Rizal, is up-held.” (Rollo, p. 32)
The subsequent Resolution No. 90-150 reiterates CSC’s position upholding the
private respondent’s appointment by denying the petitioner’s motion for
reconsideration for lack of merit.
The antecedent facts of the case are as follows:
On March 22, 1988, the position of Provincial Budget Officer (PBO) for the
province of Rizal was left vacant by its former holder, a certain Henedima del Rosario.
In a letter dated April 18, 1988, the petitioner informed Director Reynaldo Abella
of the Department of Budget and Management (DBM) Region IV that Ms. Dalisay
Santos assumed office as Acting PBO since March 22, 1988 pursuant to a
Memorandum issued by the petitioner who further requested Director Abella to
endorse the appointment of the said Ms. Dalisay Santos to the contested position of
PBO of Rizal. Ms. Dalisay Santos was then Municipal Budget Officer of Taytay, Rizal
before she discharged the functions of acting PBO.
In a Memorandum dated July 26, 1988 addressed to the DBM Secretary, then
Director Abella of Region IV recommended the appointment of the private respondent
as PBO of Rizal on the basis of a comparative study of all Municipal Budget Officers
of the said province which included three nominees of the petitioner. According to
Abella, the private respondent was the most qualified since she was the only Certified
Public Accountant among the contenders.
On August 1, 1988, DBM Undersecretary Nazario S. Cabuquit, Jr. signed the
appointment papers of the private respondent as PBO of Rizal upon the aforestated
recommendation of Abella.
In a letter dated August 3, 1988 addressed to Secretary Carague, the petitioner
reiterated his request for the appointment of Dalisay Santos to the contested position
unaware of the earlier appointment made by Undersecretary Cabuquit.
On August 31, 1988, DBM Regional Director Agripino G. Galvez wrote the
petitioner that Dalisay Santos and his other recommendees did not meet the
minimum requirements under Local Budget Circular No. 31 for the position of a local
budget officer. Director Galvez whether or not through oversight further required the
petitioner to submit at least three other qualified nominees who are qualified for the
position of PBO of Rizal for evaluation and processing.
On November 2, 1988, the petitioner after having been informed of the private
respondent’s appointment wrote Secretary Carague protesting against the said
appointment on the grounds that Cabuquit as DBM Undersecretary is not legally
authorized to appoint the PBO; that the private respondent lacks the required three
years work experience as provided in Local Budget Circular No. 31; and that under
Executive Order No. 112, it is the Provincial Governor, not the Regional Director or a
Congressman, who has the power to recommend nominees for the position of PBO.
On January 9, 1989 respondent DBM, through its Director of the Bureau of Legal
& Legislative Affairs (BLLA) Virgilio A. Afurung, issued a Memorandum ruling that the
petitioner’s letter-protest is not meritorious considering that public respondent DBM
validly exercised its prerogative in filling-up the contested position since none of the
petitioner’s nominees met the prescribed requirements.
On January 27, 1989, the petitioner moved for a reconsideration of the BLLA
ruling.
On February 28, 1989, the DBM Secretary denied the petitioner’s motion for
reconsideration.
On March 27, 1989, the petitioner wrote public respondent CSC protesting
against the appointment of the private respondent and reiterating his position
regarding the matter. Subsequently, public respondent CSC issued the questioned
resolutions which prompted the petitioner to submit before us the following
assignment of errors:
“A. THE CSC ERRED IN UPHOLDING THE APPOINTMENT BY DBM
ASSISTANT SECRETARY CABUQUIT OF CECILIA ALMAJOSE AS PBO OF
RIZAL.
B. THE CSC ERRED IN HOLDING THAT CECILIA ALMAJOSE POSSESSES
ALL THE REQUIRED QUALIFICATIONS. C. THE CSC ERRED IN DECLARING
THAT PETITIONER’S NOMINEES ARE NOT QUALIFIED TO THE SUBJECT
POSITION. D. THE CSC AND THE DBM GRAVELY ABUSED THEIR
DISCRETION IN NOT ALLOWING PETITIONER TO SUBMIT NEW NOMINEES
WHO COULD MEET THE REQUIRED QUALIFICATIONS.” (Petition, pp. 7-8,
Rollo, pp. 15-16)
All the assigned errors relate to the issue of whether or not the private respondent is
lawfully entitled to discharge the functions of PBO of Rizal pursuant to the
appointment made by public respondent DBM’s Undersecretary upon the
recommendation of then Director Abella of DBM Region IV.
The petitioner’s arguments rest on his contention that he has the sole right and
privilege to recommend the nominees to the position of PBO and that the appointee
should come only from his nominees. In support thereof, he invokes Section 1 of
Executive Order No. 112 which provides that:
“SECTION 1. All budget officers of provinces, cities and municipalities shall be
appointed henceforth by the Minister of Budget and Management upon
recommendation of the local chief executive concerned, subject to civil service law,
rules and regulations, and they shall be placed under the administrative control
and technical supervision of the Ministry of Budget and Management.”
The petitioner maintains that the appointment of the private respondent to the
contested position was made in derogation of the provision so that both the public
respondents committed grave abuse of discretion in upholding Almajose’s
appointment.
There is no question that under Section 1 of Executive Order No. 112 the
petitioner’s power to recommend is subject to the qualifications prescribed by existing
laws for the position of PBO. Consequently, in the event that the recommendations
made by the petitioner fall short of the required standards, the appointing authority,
the Minister (now Secretary) of public respondent DBM is expected to reject the
same.
In the event that the Governor recommends an unqualified person, is the
Department Head free to appoint anyone he fancies? This is the issue before us.
Before the promulgation of Executive Order No. 112 on December 24, 1986,
Batas Pambansa Blg. 337, otherwise known as the Local Government Code vested
upon the Governor, subject to civil service rules and regulations, the power to appoint
the PBO (Sec. 216, subparagraph (1), BP 337). The Code further enumerated the
qualifications for the position of PBO. Thus, Section 216, subparagraph (2) of the
same code states that:
“(2) No person shall be appointed provincial budget officer unless he is a citizen of
the Philippines, of good moral character, a holder of a degree preferably in law,
commerce, public administration or any related course from a recognized college
or university, a first grade civil service eligibility or its equivalent, and has acquired
at least five years experience in budgeting or in any related field.”
The petitioner contends that since the appointing authority with respect to the
Provincial Budget Officer of Rizal was vested in him before, then, the real intent
behind Executive Order No. 112 in empowering him to recommend nominees to the
position of Provincial Budget Officer is to make his recommendation part and parcel
of the appointment process. He states that the phrase “upon recommendation of the
local chief executive concerned” must be given mandatory application in consonance
with the state policy of local autonomy as guaranteed by the 1987 Constitution under
Art. II, Sec. 25 and Art. X, Sec. 2 thereof. He further argues that his power to
recommend cannot validly be defeated by a mere administrative issuance of public
respondent DBM reserving to itself the right to fill-up any existing vacancy in case the
petitioner’s nominees do not meet the qualification requirements as embodied in
public respondent DBM’s Local Budget Circular No. 31 dated February 9, 1988.
The questioned ruling is justified by the public respondent CSC as follows:
“As required by said E.O. No. 112, the DBM Secretary may choose from among
the recommendees of the Provincial Governor who are thus qualified and eligible
 for appointment to the position of the PBO of Rizal. Notwithstanding, the
recommendation of the local chief executive is merely directory and not a
condition sine qua non to the exercise by the Secretary of DBM of his appointing
prerogative. To rule otherwise would in effect give the law or E.O. No. 112 a
different interpretation or construction not intended therein, taking into
consideration that said officer has been nationalized and is directly under the
control and supervision of the DBM Secretary or through his duly authorized
representative. It cannot be gainsaid that said national officer has a similar role in
the local government unit, only on another area or concern, to that of a Commission
on Audit resident auditor. Hence, to preserve and maintain the independence of
said officer from the local government unit, he must be primarily the choice of the
national appointing official, and the exercise thereof must not be unduly hampered
or interfered with, provided the appointee finally selected meets the requirements
for the position in accordance with prescribed Civil Service Law, Rules and
Regulations. In other words, the appointing official is not restricted or
circumscribed to the list submitted or recommended by the local chief executive in
the final selection of an appointee for the position. He may consider other
nominees for the position vis a vis the nominees of the local chief executive.” (CSC
Resolution No. 89-868, p. 2; Rollo, p. 31)
The issue before the Court is not limited to the validity of the appointment of one
Provincial Budget Officer. The tug of war between the Secretary of Budget and
Management and the Governor of the premier province of Rizal over a seemingly
innocuous position involves the application of a most important constitutional policy
and principle, that of local autonomy. We have to obey the clear mandate on local
autonomy. Where a law is capable of two interpretations, one in favor of centralized
power in Malacañang and the other beneficial to local autonomy, the scales must be
weighed in favor of autonomy.
The exercise by local governments of meaningful power has been a national goal
since the turn of the century. And yet, inspite of constitutional provisions and, as in
this case, legislation mandating greater autonomy for local officials, national officers
cannot seem to let go of centralized powers. They deny or water down what little
grants of autonomy have so far been given to municipal corporations.
President McKinley’s Instructions dated April 7, 1900 to the Second Philippine
Commission ordered the new Government “to devote their attention in the first
instance to the establishment of municipal governments in which natives of the
Islands, both in the cities and rural communities, shall be afforded the opportunity to
manage their own local officers to the fullest extent of which they are capable and
subject to the least degree of supervision and control which a careful study of their
capacities and observation of the workings of native control show to be consistent
with the maintenance of law, order and loyalty.”
In this initial organic act for the Philippines, the Commission which combined both
executive and legislative powers was directed to give top priority to making local
autonomy effective.
The 1935 Constitution had no specific article on local autonomy. However, in
distinguishing between presidential control and supervision as follows:
“The President shall have control of all the executive departments, bureaus, or
offices, exercise general supervision over all local governments as may be
provided by law, and take care that the laws be faithfully executed.” (Sec. 11,
Article VII, 1935 Constitution)
the Constitution clearly limited the executive power over local governments to
“general supervision xxx as may be provided by law.” The President controls the
executive departments. He has no such power over local governments. He has
only supervision and that supervision is both general and circumscribed by statute.
In Tecson v. Salas, 34 SCRA 275, 282 (1970), this Court stated:
“xxx Hebron v. Reyes, (104 Phil. 175 [1958]) with the then Justice, now Chief
Justice, Concepcion as the ponente, clarified matters. As was pointed out, the
presidential competence is not even supervision in general, but general
supervision as may be provided by law. He could not thus go beyond the applicable
statutory provisions, which bind and fetter his discretion on the matter. Moreover,
as had been earlier ruled in an opinion penned by Justice Padilla in Mondano v.
Silvosa, (97 Phil. 143 [1955]) referred to by the present Chief Justice in his opinion
in the Hebron case, supervision goes no further than ‘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.’ (Ibid, pp. 147-148) Control,
on the other hand, ‘means the power of an officer to alter or modify or nullify or set
aside what a subordinate had done in the performance of their duties and to
substitute the judgment of the former for that of the latter.’ It would follow then,
according to the present Chief Justice, to go back to the Hebron opinion, that the
President had to abide by the then provisions of the Revised Administrative Code
on suspension and removal of municipal officials, there being no power of control
that he could rightfully exercise, the law clearly specifying the procedure by which
such disciplinary action would be taken.”
Pursuant to this principle under the 1935 Constitution, legislation implementing local
autonomy was enacted. In 1959, Republic Act No. 2264, “An Act Amending the Law
Governing Local Governments by Increasing Their Autonomy and Reorganizing Local
Governments” was passed. It was followed in 1967 when Republic Act No. 5185, the
Decentralization Law was enacted, giving “further autonomous powers to local
governments.”
The provisions of the 1973 Constitution moved the country further, at least insofar
as legal provisions are concerned, towards greater autonomy. It provided under
Article II as a basic principle of government:
“SEC. 10. The State shall guarantee and promote the autonomy of local
government units, especially the barangay to ensure their fullest development as
self-reliant communities.”
An entire article on Local Government was incorporated into the Constitution. It called
for a local government code defining more responsive and accountable local
government structures. Any creation, merger, abolition, or substantial boundary
alteration cannot be done except in accordance with the local government code and
upon approval by a plebiscite. The power to create sources of revenue and to levy
taxes was specifically settled upon local governments.
The exercise of greater local autonomy is even more marked in the present
Constitution.
Article II, Section 25 on State Policies provides:
“SEC. 25. The State shall ensure the autonomy of local governments.”
The 14 sections in Article X on Local Government not only reiterate earlier doctrines
but give in greater detail the provisions making local autonomy more meaningful.
Thus, Sections 2 and 3 of Article X provide:
“SEC. 2. The territorial and political subdivisions shall enjoy local autonomy.
SEC. 3. The Congress shall enact a local government code which shall
provide for a more responsive and accountable local government structure
instituted through a system of decentralization with effective mechanisms of recall,
initiative, and referendum, allocate among the different local government units their
powers, responsibilities, and resources, and provide for the qualifications, election,
appointment and removal, term, salaries, powers and functions and duties of local
officials, and all other matters relating to the organization and operation of the local
units.”
When the Civil Service Commission interpreted the recommending power of the
Provincial Governor as purely directory, it went against the letter and spirit of the
constitutional provisions on local autonomy. If the DBM Secretary jealously hoards
the entirety of budgetary powers and ignores the right of local governments to
develop self-reliance and resoluteness in the handling of their own funds, the goal of
meaningful local autonomy is frustrated and set back.
The right given by Local Budget Circular No. 31 which states:
“SEC. 6.0—The DBM reserves the right to fill up any existing vacancy where none
of the nominees of the local chief executive meet the prescribed requirements.”
is ultra vires and is, accordingly, set aside. The DBM mayappoint only from the list of
qualified recommendees nominatedby the Governor. If none is qualified, he must
return the list ofnominees to the Governor explaining why no one meets thelegal
requirements and ask for new recommendees who havethe necessary eligibilities and
qualifications.
The PBO is expected to synchronize his work with DBM. More important, however, is
the proper administration of fiscal affairs at the local level. Provincial and municipal
budgets are prepared at the local level and after completion are forwarded to the
national officials for review. They are prepared by the local officials who must work
within the constraints of those budgets. They are not formulated in the inner sanctums
of an all-knowing DBM and unilaterally imposed on local governments whether or not
they are relevant to local needs and resources. It is for this reason that there should
be a genuine interplay, a balancing of viewpoints, and a harmonization of proposals
from both the local and national officials. It is for this reason that the nomination and
appointment process involves a sharing of power between the two levels of
government.
It may not be amiss to give by way of analogy the procedure followed in the
appointments of Justices and Judges. Under Article VIII of the Constitution,
nominations for judicial positions are made by the Judicial and Bar Council. The
President makes the appointments from the list of nominees submitted to her by the
Council. She cannot apply the DBM procedure, reject all the Council nominees, and
appoint another person whom she feels is better qualified. There can be no
reservation of the right to fill up a position with a person of the appointing power’s
personal choice.
The public respondent’s grave abuse of discretion is aggravated by the fact that
Director Galvez required the Provincial Governor to submit at least three other names
of nominees better qualified than his earlier recommendation. It was a meaningless
exercise. The appointment of the private respondent was formalized before the
Governor was extended the courtesy of being informed that his nominee had been
rejected. The complete disregard of the local government’s prerogative and the smug
belief that the DBM has absolute wisdom, authority, and discretion are manifest.
In his classic work “Philippine Political Law” Dean Vicente G. Sinco stated that the
value of local governments as institutions of democracy is measured by the degree of
autonomy that they enjoy. Citing Tocqueville, he stated that “local assemblies of
citizens constitute the strength of free nations. x x x A people may establish a system
of free government but without the spirit of municipal institutions, it cannot have the
spirit of liberty.” (Sinco, Philippine Political Law, Eleventh Edition, pp. 705-706).
Our national officials should not only comply with the constitutional provisions on
local autonomy but should also appreciate the spirit of liberty upon which these
provisions are based.
WHEREFORE, the petition is hereby GRANTED. The questioned resolutions of
the Civil Service Commission are SET ASIDE. The appointment of respondent Cecilia
Almajose is nullified. The Department of Budget and Management is ordered to
appoint the Provincial Budget Officer of Rizal from among qualified nominees
submitted by the Provincial Governor.
SO ORDERED.
 Note.—The constitutional provision guaranteeing the autonomy of local
governments compel the conclusion that only voters of the barangays wishing to be
segregated from a parent municipality should be allowed to vote on such an issue.
(Paredes vs. Executive Secretary, 128 SCRA 6.)

——o0o——
 G.R. No. 199752. February 17, 2015.*
LUCENA D. DEMAALA, petitioner, vs. COMMISSION ON AUDIT, represented
by its Chairperson MA. GRACIA M. PULIDO-TAN, respondent.
Taxation; Local Taxation; Power to Tax; Local Government Units; The power to tax is an
attribute of sovereignty. It is inherent in the state. Provinces, cities, municipalities, and
barangays are mere territorial and political subdivisions of the state. They act only as part of the
sovereign. Thus, they do not have the inherent power to tax. Their power to tax must be
prescribed by law.—The power to tax is an attribute of sovereignty. It is inherent in the state.
Provinces, cities, municipalities, and barangays are mere territorial and political subdivisions of
the state. They act only as part of the sovereign. Thus, they do not have the inherent power to
tax. Their power to tax must be prescribed by law. Consistent with the view that the power to tax
does not inhere in local government units, this court has held that a reserved temperament must
be adhered to in construing the extent of a local government unit’s power to tax. As explained
in Icard v. City Council of Baguio, 83 Phil. 870 (1949): It is settled that a municipal corporation
unlike a sovereign state is clothed with no inherent power of taxation. The charter or statute
must plainly show an intent to confer that power or the municipality, cannot assume it. And the
power when granted is to be construed in strictissimi juris. Any doubt or ambiguity arising out of
the term used in granting that power must be resolved against the municipality. Inferences,
implications, deductions — all these — have no place in the interpretation of the taxing power of
a municipal corporation.
Same; Same; In addition to stating that local government units (LGUs) have the power to
tax (subject to Congressional guidelines and limitations), Article X, Section 5 of the 1987
Constitution adds the phrase “consistent with the basic policy of local autonomy.”—Article X,
Section 5 of the 1987 Constitution is more emphatic in empowering local government units in the
matter of taxation compared with Article XI, Section 5 of the 1973 Constitution. In addition to
stating that local government units have the power to tax (subject to Congressional guidelines
and limitations), Article X, Section 5 of the 1987 Constitution adds the phrase “consistent with
the basic policy of local autonomy.” Further, it is definite with the use of funds generated by local
government units through the exercise of their taxing powers, providing that “[s]uch taxes, fees,
and charges shall accrue exclusively to the local governments.”
Same; Same; Consistent with the 1987 Constitution’s declared preference, the taxing
powers of local government units (LGUs) must be resolved in favor of their local fiscal
autonomy.—Consistent with the 1987 Constitution’s declared preference, the taxing powers of
local government units must be resolved in favor of their local fiscal autonomy.
Same; Same; Special Education Fund; Section 235 of the Local Government Code (LGC)
allows provinces and cities, as well as municipalities in Metro Manila, to collect, on top of the
basic annual real property tax, an additional levy which shall exclusively accrue to the special
education fund.—Section 235 of the Local Government Code allows provinces and cities, as well
as municipalities in Metro Manila, to collect, on top of the basic annual real property tax, an
additional levy which shall exclusively accrue to the special education fund: Section
235. Additional Levy on Real Property for the Special
Education Fund.—A province or city, or a municipality within the Metropolitan Manila
Area, may levy and collect an annual tax of one percent (1%) on the assessed value of real
property which shall be in addition to the basic real property tax. The proceeds thereof shall
exclusively accrue to the Special Education Fund (SEF).
Same; Same; Fiscal Autonomy; Fiscal autonomy entails “the power to create . . . own
sources of revenue.”—Fiscal autonomy entails “the power to create . . . own sources of
revenue.” In turn, this power necessarily entails enabling local government units with the
capacity to create revenue sources in accordance with the realities and contingencies present in
their specific contexts. The power to create must mean the local government units’ power to
create what is most appropriate and optimal for them; otherwise, they would be mere
automatons that are turned on and off to perform prearranged operations.
Statutes; It is basic that laws and local ordinances are “presumed to be valid unless and
until the courts declare the contrary in clear and unequivocal terms.”—It is basic that laws and
local ordinances are “presumed to be valid unless and until the courts declare the contrary in
clear and unequivocal terms.” Thus, the concerned officials of the Municipality of Narra, Palawan
must be deemed to have conducted themselves in good faith and with regularity when they
acted pursuant to Chapter 5, Section 48 of Provincial Ordinance No. 332-A, Series of 1995, and
collected the additional levy for the special education fund at the rate of 0.5%. Accordingly, it
was improper for respondent to attribute personal liability to petitioner and to require her to
personally answer to the deficiency in special education fund collections.
LEONEN, J.:
Through this Petition for Certiorari, Lucena D. Demaala (Demaala) prays that the
September 22, 2008 Decision (Decision No. 2008-087) and the November 16, 2011
Resolution (Decision No. 2011-083) of the Commission on Audit be reversed and set
aside.
The Commission on Audit’s Decision No. 2008-087 denied Demaala’s appeal and
affirmed with modification Local Decision No. 2006-056 dated April 19, 2006 of the
Commission on Audit’s Legal and Adjudication Office (LAO). LAO Local Decision No.
2006-056, in turn, affirmed Notice of Charge (NC) No. 2004-04-101. NC No. 2004-04-
101 was dated August 30, 2004 and issued by Rodolfo C. Sy (Regional Cluster
Director Sy), Regional Cluster Director of the Legal Adjudication Sector, Commission
on Audit Regional Office No. IV, Quezon City.
The Commission on Audit’s Decision No. 2011-083 denied the Motion for
Reconsideration filed by Demaala.
I
The Sangguniang Panlalawigan of Palawan enacted Provincial Ordinance No.
332-A, Series of 1995, entitled “An Ordinance Approving and Adopting the Code
Governing the Revision of Assessments, Classification and Valuation of Real
Properties in the Province of Palawan” (Ordinance). Chapter 5, Section 48 of the
Ordinance provides for an additional levy on real property tax for the special
education fund at the rate of one-half percent or 0.5% as follows:
Section 48 – Additional Levy on Real Property Tax for Special Education
Fund. There is hereby levied an annual tax at the rate of one-half percent (1/2%)
of the assessed value property tax. The proceeds thereof shall exclusively accrue
to the Special Education Fund (SEF).

In conformity with Section 48 of the Ordinance, the Municipality of Narra,

Palawan, with Demaala as mayor, collected from owners of real properties located
within its territory an annual tax as special education fund at the rate of 0.5% of the
assessed value of the property subject to tax. This collection was effected through the
municipal treasurer.
Charge not appealed within six (6) months as prescribed under Sections 49,
On post-audit, Audit Team Leader Juanito A. Nostratis issued Audit Observation 50 and 51 of PD No. 1445 shall become final and executory.
Memorandum (AOM) No. 03-005 dated August 7, 2003 in which he noted supposed
deficiencies in the special education fund collected by the Municipality of Narra. He RODOLFY C. SY (sgd.)
questioned the levy of the special education fund at the rate of only 0.5% rather than Regional Cluster Director
at 1%, the rate stated in Section 235 of Republic Act No. 7160, otherwise known as
the Local Government Code of 1991 (Local Government Code).
The Municipality of Narra, through Demaala, filed the Motion for Reconsideration
After evaluating AOM No. 03-005, Regional Cluster Director Sy issued NC No. dated December 2, 2004. It stressed that the collection of the special education fund
2004-04-101 dated August 30, 2004 in the amount of P1,125,416.56. He held at the rate of 0.5% was merely in accordance with the Ordinance. On March 9, 2005,
Demaala, the municipal treasurer of Narra, and all special education fund payors Regional Cluster Director Sy issued an Indorsement denying this Motion for
liable for the deficiency in special education fund collections. Reconsideration.

This Notice of Charge reads: Following this, the Municipality of Narra, through Demaala, filed an appeal with
NC No. 2004-04-101 the Commission on Audit’s Legal and Adjudication Office. In Local Decision No. 2006-
Date: August 30, 2004 056 dated April 19, 2006, this appeal was denied.

NOTICE OF CHARGE
The Municipality of Narra, through Demaala, then filed a Petition for Review with
the Commission on Audit.
The Municipal Mayor
Narra, Palawan
In Decision No. 2008-087 dated September 22, 2008, the Commission on Audit
Attention: Municipal Accountant ruled against Demaala and affirmed LAO Local Decision No. 2006-056 with the
modification that former Palawan Vice Governor Joel T. Reyes and the other
We have reviewed and evaluated Audit Observation Memorandum (AOM) No. members of the Sangguniang Panlalawigan of Palawan who enacted the
03-005 dated August 7, 2003 and noted the following deficiencies: Ordinance21 were held jointly and severally liable with Demaala, the municipal
treasurer of Narra, and the special education fund payors.

The dispositive portion of this Decision reads:

WHEREFORE, premises considered, the instant appeal is
hereby DENIED for lack of merit. Accordingly, LAO Local Decision No. 2006-056
is AFFIRMED with modification, to include Former Vice Governor and Presiding
Officer Joel T. Reyes, Chairman Pro Tempore Rosalino R. Acosta, Majority Floor
Leader Ernesto A. Llacuna, Asst. Majority Floor Leader Antonio C. Alvarez, Asst.
Minority Floor Leader Haide B. Barroma, Hon. Leoncio N. Ola, Hon. Ramon A.
 Zabala, Hon. Belen B. Abordo, Hon. Valentin A. Baaco, Hon. Claro Ordinario, Hon.
Derrick R. Pablico, Hon. Laine C. Abogado and Hon. Joel B. Bitongon among the
persons liable in the Notice of Charge. They shall be jointly and severally liable
with Mayor Lucena D. Demaala, together with the Municipal Treasurer and all the
payors of the under-collected real property tax in the total amount of
P1,125,416.56.
The Audit Team Leader is directed to issue a Supplemental Notice of Charge
to include the members of the Sangguniang Panlalawigan as among the persons
liable.
Thereafter, Demaala, who was no longer the mayor of the Municipality of Narra,
filed a Motion for Reconsideration. Former Vice Governor Joel T. Reyes and the other
members of the Sangguniang Panlalawigan of Palawan who were held liable under
Decision No. 2008-087 filed a separate Motion for Reconsideration. The Commission
on Audit’s Decision No. 2011-083 dated November 16, 2011 affirmed its September
22, 2008 Decision.
Demaala then filed with this court the present Petition for Certiorari.
Respondent Commission on Audit, through the Office of the Solicitor General,
filed its Comment on April 20, 2012. Petitioner Demaala filed her Reply on September
6, 2012. Thereafter, the parties filed their respective Memoranda.
II
For resolution in this case are the following issues:
First, whether respondent committed grave abuse of discretion amounting to lack
or excess of jurisdiction in holding that there was a deficiency in the Municipality of
Narra’s collection of the additional levy for the special education fund. Subsumed in
this issue is the matter of whether a municipality within the Metropolitan Manila Area,
a city, or a province may have an additional levy on real property for the special
education fund at the rate of less than 1%.
Second, assuming that respondent correctly held that there was a deficiency,
whether respondent committed grave abuse of discretion amounting to lack or excess
or jurisdiction in holding petitioner personally liable for the deficiency.
We find for petitioner.
Setting the rate of the additional levy for the special education fund at less than
1% is within the taxing power of local government units. It is consistent with the
guiding constitutional principle of local autonomy.
III
The power to tax is an attribute of sovereignty. It is inherent in the state.
Provinces, cities, municipalities, and barangays are mere territorial and political
subdivisions of the state. They act only as part of the sovereign. Thus, they do not
have the inherent power to tax. Their power to tax must be prescribed by law.
Consistent with the view that the power to tax does not inhere in local government
units, this court has held that a reserved temperament must be adhered to in
construing the extent of a local government unit’s power to tax. As explained in Icard
v. City Council of Baguio:
It is settled that a municipal corporation unlike a sovereign state is clothed with
no inherent power of taxation. The charter or statute must plainly show an intent
to confer that power or the municipality, cannot assume it. And the power when
granted is to be construed in strictissimi juris. Any doubt or ambiguity arising out
of the term used in granting that power must be resolved against the municipality.
Inferences, implications, deductions — all these — have no place in the
interpretation of the taxing power of a municipal corporation. (Emphasis supplied)
Article X, Section 5 of the 1987 Constitution is the basis of the taxing power of
local government units:
Section 5. Each local government unit shall have the power to create its own
sources of revenues and to levy taxes, fees and charges subject to such guidelines
and limitations as the Congress may provide, consistent with the basic policy of
local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local
governments. (Emphasis supplied)
The taxing power granted by constitutional fiat to local government units exists in
the wider context to “ensure the autonomy of local governments.” As Article II, Section
25 of the 1987 Constitution unequivocally provides:
Section 25. The State shall ensure the autonomy of local governments.
Article II, Section 25 is complemented by Article X, Section 2:
Section 2. The territorial and political subdivisions shall enjoy local
autonomy.
The 1935 Constitution was entirely silent on local autonomy, albeit making a
distinction between executive departments, bureaus, and offices on the one hand,
and local governments on the other. It provided that the President had control over
the former but merely “exercise[d] general supervision” over the latter. Article VII,
Section 11(1) of the 1935 Constitution provided:
SEC. 11. (1) The President shall have control of all the executive
departments, bureaus, or offices, exercise general supervision over all local
governments as may be provided by law,
Similarly, the 1935 Constitution was silent on the taxing power of local
government units.
 The 1973 Constitution provided for local autonomy. Article II, Section 10 of the
1973 Constitution read:
SEC. 10. The State shall guarantee and promote the autonomy of local
government units, especially the [barangays], to ensure their fullest development
as self-reliant communities.
Any trend in the 1973 Constitution towards greater autonomy for local
government units “was aborted in 1972 when Ferdinand Marcos placed the entire
country under martial law [thereby] stunt[ing] the development of local governments
by centralizing the government in Manila.” While local autonomy was provided for in
the 1973 Constitution, its existence was confined to principle and theory. Practice
neutered all of Article XI of the 1973 Constitution (on local government), including
Section 5 which provided for the taxing power of local government units. Article XI,
Section 5 reads:
SEC. 5. Each local government unit shall have the power to create its own
sources of revenue and to levy taxes, subject to such limitations as may be
provided by law.
Article X, Section 5 of the 1987 Constitution is more emphatic in empowering
local government units in the matter of taxation compared with Article XI, Section 5 of
the 1973 Constitution. In addition to stating that local government units have the
power to tax (subject to Congressional guidelines and limitations), Article X, Section 5
of the 1987 Constitution adds the phrase “consistent with the basic policy of local
autonomy.” Further, it is definite with the use of funds generated by local government
units through the exercise of their taxing powers, providing that “[s]uch taxes, fees,
and charges shall accrue exclusively to the local governments.”
Apart from administrative autonomy, an equally vital facet of local governance
under the 1987 Constitution is fiscal autonomy. In Pimentel v. Aguirre:
Under existing law, local government units, in addition to having administrative
autonomy in the exercise of their functions, enjoy fiscal autonomy as well. Fiscal
autonomy means that local governments have the power to create their own
sources of revenue in addition to their equitable share in the national taxes
released by the national government, as well as the power to allocate their
resources in accordance with their own priorities. It extends to the preparation of
their budgets, and local officials in turn have to work within the constraints thereof.
They are not formulated at the national level and imposed on local governments,
whether they are relevant to local needs and resources or not. Hence, the
necessity of a balancing of viewpoints and the harmonization of proposals from
both local and national officials, who in any case are partners in the attainment of
national goals.
IV
The taxing powers of local government units must be read in relation to their
power to effect their basic autonomy.
Consistent with the 1987 Constitution’s declared preference, the taxing powers of
local government units must be resolved in favor of their local fiscal autonomy. In City
Government of San Pablo v. Reyes:
The power to tax is primarily vested in Congress. However, in our jurisdiction,
it may be exercised by local legislative bodies, no longer merely by virtue of a valid
delegation as before, but pursuant to direct authority conferred by Section 5, Article
X of the Constitution. Thus Article X, Section 5 of the Constitution reads:
Sec. 5. Each Local Government unit shall have the power to create its own
sources of revenue and to levy taxes, fees and charges subject to such guidelines
and limitations as the Congress may provide, consistent with the basic policy of
local autonomy. Such taxes, fees and charges shall accrue exclusively to the Local
Governments.
The important legal effect of Section 5 is that henceforth, in interpreting
statutory provision on municipal fiscal powers, doubts will have to be resolved in
favor of municipal corporations. (Emphasis supplied)
Similarly, in San Juan v. Civil Service Commission, this court stated:
We have to obey the clear mandate on local autonomy. Where a law is
capable of two interpretations, one in favor of centralized power in Malacañan and
the other beneficial to local autonomy, the scales must be weighed in favor of
autonomy.
The Local Government Code was enacted pursuant to the specific mandate of
Article X, Section 3 of the 1987 Constitution and its requirements of decentralization.
Its provisions, including those on local taxation, must be read in light of the
jurisprudentially settled preference for local autonomy.
V
The limits on the level of additional levy for the special education fund under
Section 235 of the Local Government Code should be read as granting fiscal flexibility
to local government units.
Book II of the Local Government Code governs local taxation and fiscal matters.
Title II of Book II governs real property taxation.
Section 235 of the Local Government Code allows provinces and cities, as well as
municipalities in Metro Manila, to collect, on top of the basic annual real property tax,
an additional levy which shall exclusively accrue to the special education fund:
Section 235. Additional Levy on Real Property for the Special Education
Fund.—A province or city, or a municipality within the Metropolitan Manila
Area, may levy and collect an annual tax of one percent (1%) on the assessed
value of real property which shall be in addition to the basic real property tax. The
proceeds thereof shall exclusively accrue to the Special Education Fund (SEF).
(Emphasis supplied)
 The special education fund is not an original creation of the Local Government
Code. It was initially devised by Republic Act No. 5447. The rate of 1% is also not a
detail that is original to the Local Government Code. As discussed in Commission on
Audit v. Province of Cebu:
The Special Education Fund was created by virtue of R.A. No. 5447, which is
[a]n act creating a special education fund to be constituted from the proceeds of
an additional real property tax and a certain portion of the taxes on Virginia-type
cigarettes and duties on imported leaf tobacco, defining the activities to be
financed, creating school boards for the purpose, and appropriating funds
therefrom, which took effect on January 1, 1969. Pursuant thereto, P.D. No. 464,
also known as the Real Property Tax Code of the Philippines, imposed an annual
tax of 1% on real property which shall accrue to the SEF. (Citations omitted)
The operative phrase in Section 235’s grant to municipalities in Metro Manila,
cities, and provinces of the power to impose an additional levy for the special
education fund is prefixed with “may,” thus, “may levy and collect an annual tax of one
percent (1%).”
In Buklod nang Magbubukid sa Lupaing Ramos, Inc. v. E.M. Ramos and Sons,
Inc. the meaning of “may” was discussed as follows:
Where the provision reads “may,” this word shows that it is not mandatory but
discretionary. It is an auxiliary verb indicating liberty, opportunity, permission and
possibility. The use of the word “may” in a statute denotes that it is directory in
nature and generally permissive only.
Respondent concedes that Section 235’s grant to municipalities in Metro Manila,
to cities, and to provinces of the power to impose an additional levy for the special
education fund makes its collection optional. It is not mandatory that the levy be
imposed and collected. The controversy which the Commission on Audit created is
not whether these local government units have discretion to collect but whether they
have discretion on the rate at which they are to collect.
It is respondent’s position that the option granted to a local government unit is
limited to the matter of whether it shall actually collect, and that the rate at which it
shall collect (should it choose to do so) is fixed by Section 235. In contrast, it is
petitioner’s contention that the option given to a local government unit extends not
only to the matter of whether to collect but also to the rate at which collection is to be
made.
We sustain the position of petitioner.
Section 235’s permissive language is unqualified. Moreover, there is no limiting
qualifier to the articulated rate of 1% which unequivocally indicates that any and all
special education fund collections must be at such rate.
At most, there is a seeming ambiguity in Section 235. Consistent with what has
earlier been discussed however, any such ambiguity must be read in favor of local
fiscal autonomy. As in San Juan v. Civil Service Commission, the scales must weigh
in favor of the local government unit.
Fiscal autonomy entails “the power to create . . . own sources of revenue.” In turn,
this power necessarily entails enabling local government units with the capacity to
create revenue sources in accordance with the realities and contingencies present in
their specific contexts. The power to create must mean the local government units’
power to create what is most appropriate and optimal for them; otherwise, they would
be mere automatons that are turned on and off to perform prearranged operations.
Devolving power but denying its necessary incidents and accessories is
tantamount to not devolving power at all. A local government unit with a more affluent
constituency may thus realize that it can levy taxes at rates greater than those which
local government units with more austere constituencies can collect. For the latter,
collecting taxes at prohibitive rates may be counterproductive. High tax rates can be a
disincentive for doing business, rendering it unattractive to commerce and thereby
stunting, rather than facilitating, their development. In this sense, insisting on
uniformity would be a disservice to certain local government units and would
ultimately undermine the aims of local autonomy and decentralization.
VI
Of course, fiscal autonomy entails “working within the constraints.” To echo the
language of Article X, Section 5 of the 1987 Constitution, this is to say that the taxing
power of local government units is “subject to such guidelines and limitations as the
Congress may provide.” It is the 1% as a constraint on which the respondent
Commission on Audit is insisting.
There are, in this case, three (3) considerations that illumine our task of
interpretation: (1) the text of Section 235, which, to reiterate, is cast in permissive
language; (2) the seminal purpose of fiscal autonomy; and (3) the jurisprudentially
established preference for weighing the scales in favor of autonomy of local
government units. We find it to be in keeping with harmonizing these considerations
to conclude that Section 235’s specified rate of 1% is a maximum rate rather than an
immutable edict. Accordingly, it was well within the power of the Sangguniang
Panlalawigan of Palawan to enact an ordinance providing for additional levy on real
property tax for the special education fund at the rate of 0.5% rather than at 1%.
VII
It was an error amounting to grave abuse of discretion for respondent to hold
petitioner personally liable for the supposed deficiency.
 Having established the propriety of imposing an additional levy for the special
education fund at the rate of 0.5%, it follows that there was nothing erroneous in the
Municipality of Narra’s having acted pursuant to Section 48 of the Ordinance. It could
thus not be faulted for collecting from owners of real properties located within its
territory an annual tax as special education fund at the rate of 0.5% of the assessed
value subject to tax of the property. Likewise, it follows that it was an error for
respondent to hold petitioner personally liable for the supposed deficiency in
collections.
Even if a contrary ruling were to be had on the propriety of collecting at a rate less
than 1%, it would still not follow that petitioner is personally liable for deficiencies.
In its Memorandum, respondent cited the 1996 case of Salalima v. Guingona as a
precedent for finding local officials liable for violations that have to do with the special
education fund.
Moreover, in Decision No. 2008-087, respondent asserted that there was “no
cogent reason to exclude [petitioner] from liability since her participation as one of the
local officials who implemented the collection of the reduced levy rate. . . led to the
loss on reduction [sic] of government income.” It added that, “[c]orollary thereto, the
government can also go against the officials who are responsible for the passage of
[the Ordinance],” i.e., the members of the Sangguniang Panlalawigan of the Province
of Palawan.
Respondent’s reliance on Salalima and on petitioner’s having
been incidentally the mayor of Narra, Palawan when supposedly deficient collections
were undertaken is misguided.
Per respondent’s own summation of Salalima, in that case, this court:
held that the governor, vice governor and members of the Sangguniang
Panlalawigan are collectively responsible with other provincial officials in the
administration of fiscal and financial transactions of the province pursuant to
Sections 304 and 305 of RA 7160 for denying the other beneficiaries of their
share of the SEF. These local officials cannot claim ignorance of the law as to the
sharing scheme of the real property tax and the SEF as the same is clearly
provided in RA 7160. (Emphasis supplied)
Salalima involved several administrative Complaints filed before the Office of the
President against the elective officials of the Province of Albay. One of these — OP
Case No. 5470 — was a Complaint for malversation, and “consistent [and] habitual
violation of pars. (c) and (d) of Section 60 of [the Local Government Code]” which was
filed by Tiwi, Albay Mayor Naomi Corral against Albay Governor Romeo Salalima,
Vice Governor Danilo Azaña, and other Sangguniang Panlalawigan members.
This Complaint was precipitated by the refusal of the provincial officials of Albay
to make available to the Municipality of Tiwi, Albay its share in the collections of the
special education fund. This was contrary to Section 272 of the Local Government
Code59 which requires equal sharing between provincial and municipal school boards.
Specifically, it was found that the Sangguniang Panlalawigan passed Ordinance No.
09-92, which declared as forfeited in favor of the Province of Albay (and to the
exclusion of the municipalities in Albay) all payments made by the National Power
Corporation to the former pursuant to a memorandum of agreement through which
the National Power Corporation settled its real property tax obligations.
As regards the personal liability of the respondents in that case, the Office of the
President was quoted to have anchored on the following disquisition its imposition of
the penalty of suspension on the respondent provincial officials:
It cannot be denied that the Sangguniang Panlalawigan has control over the
Province’s ‘purse’ as it may approve or not resolutions or ordinances generating
revenue or imposing taxes as well as appropriating and authorizing the
disbursement of funds to meet operational requirements or for the prosecution of
projects.
Being entrusted with such responsibility, the provincial governor, vice
governor and the members of the Sangguniang Panlalawigan, must always be
guided by the so-called ‘fundamental’ principles enunciated under the Local
Government Code[.] . . .
All the respondents could not claim ignorance of the law especially with
respect to the provisions of P.D. No. 464 that lay down the sharing scheme among
local government units concerned and the national government, for both the basic
real property tax and additional tax pertaining to the Special Education Fund. Nor
can they claim that the Province could validly forfeit the P40,724,471.74 paid by
NPC considering that the Province is only entitled to a portion thereof and that the
balance was merely being held in trust for the other beneficiaries.
As a public officer, respondent Azaña (and the other respondents as well) has
a duty to protect the interests not only of the Province but also of the municipalities
of Tiwi and Daraga and even the national government. When the passage of an
illegal or unlawful ordinance by the Sangguniang Panlalawigan is imminent, the
presiding officer has a duty to act accordingly, but actively opposing the same by
temporarily relinquishing his chair and participating in the deliberations. If his
colleagues insist on its passage, he should make known his opposition thereto by
placing the same on record. No evidence of any sort was shown in this regard by
respondent Azaña.
Clearly, all the respondents have, whether by act or omission, denied the other
beneficiaries of their rightful shares in the tax delinquency payments made by the
NPC and caused the illegal forfeiture, appropriation and disbursement of funds not
belonging to the Province, through the passage and approval of Ordinance No. 09-
92 and Resolution Nos. 178-92 and 204-92.
The foregoing factual setting shows a wanton disregard of law on the part of
the respondents tantamount to abuse of authority. Moreover, the illegal
disbursements made can qualify as technical malversation.
It is evident that the circumstances in Salalima are not analogous to the
circumstances pertinent to petitioner.
 While Salalima involved the mishandling of proceeds which was “tantamount to
abuse of authority” and which “can qualify as technical malversation,” this case
involves the collection of the additional levy for the special education fund at a rate
which, at the time of the collection, was pursuant to an ordinance that was yet to be
invalidated.
Likewise, Salalima involved the liability of the provincial officials who were
themselves the authors of an invalid ordinance. In this case, the Municipality of Narra
— as subordinate to the Province of Palawan — merely enforced a provincial
ordinance. Respondent, in its own Memorandum, acknowledged that it was not even
petitioner but the municipal treasurer who actually effected the collection at a
supposedly erroneous rate.
Also, Salalima entailed the imposition of the administrative penalty of suspension.
In this case, respondent is not concerned with the imposition of administrative
penalties but insists that petitioner must herself (jointly and severally with the other
persons named) pay for the deficiency in collections.
We find it improper to hold petitioner personally liable for the uncollected amount
on account of the sheer happenstance that she was the mayor of Narra, Palawan,
when the Ordinance was enforced.
and to require her to personally answer to the deficiency in special education fund
collections.
WHEREFORE, the Petition is GRANTED. Decision No. 2008-087 dated
September 22, 2008 and Decision No. 2011-083 dated November 16, 2011 of
respondent Commission on Audit are ANNULLED and SET ASIDE.
SO ORDERED.
Notes.—The power of the local government units to impose and collect taxes is
derived from the Constitution itself which grants them “the power to create its own
sources of revenues and to levy taxes, fees and charges subject to such guidelines
and limitation as the Congress may provide.” (City of Iriga vs. Camarines Sur III
Electric Cooperative, Inc. [CASURECO III], 680 SCRA 236 [2012])
In Bengzon v. Drilon, 208 SCRA 133 (1992), involving the fiscal autonomy of the
Judiciary, the Supreme Court ruled against the interference that the President may
bring and maintained that the independence and the flexibility of the Judiciary, the
Constitutional Commissions and the Office of the Ombudsman are crucial to our legal
system. (Gonzales III vs. Office of the President of the Philippines, 714 SCRA 611
[2014])

VIII ——o0o——

The actions of the officials of the Municipality of Narra are consistent with the rule
that ordinances are presumed valid. In finding liability, respondent suggests that
officers of the Municipality should not comply with an ordinance duly passed by
the Sangguniang Panlalawigan.

It is true that petitioner, as the local chief executive, was charged with fidelity to
our laws. However, it would be grossly unfair to sustain respondent’s position. It
implacably dwells on supposed noncompliance with Section 235 but turns a blind eye
on the context which precipitated the collection made by the Municipality of Narra at
the reduced rate of 0.5%.

The mayor’s actions were done pursuant to an ordinance which, at the time of the
collection, was yet to be invalidated.

It is basic that laws and local ordinances are “presumed to be valid unless and
until the courts declare the contrary in clear and unequivocal terms.”62 Thus, the
concerned officials of the Municipality of Narra, Palawan must be deemed to have
conducted themselves in good faith and with regularity when they acted pursuant to
Chapter 5, Section 48 of Provincial Ordinance No. 332-A, Series of 1995, and
collected the additional levy for the special education fund at the rate of 0.5%.
Accordingly, it was improper for respondent to attribute personal liability to petitioner
 UPDATES ON LOCAL AUTONOMY
CITY OF GENERAL SANTOS, represented by its Mayor, HON. DARLENE
MAGNOLIA R. ANTONINO-CUSTODIO, petitioner, vs. COMMISSION ON AUDIT,
respondent.
Remedial Law; Special Civil Actions; Certiorari; Grave Abuse of Discretion; Not every
error in the proceedings, or every erroneous conclusion of law or fact, constitutes grave abuse of
discretion.—We have ruled that “not every error in the proceedings, or every erroneous
conclusion of law or fact, constitutes grave abuse of discretion.” Grave abuse of discretion has
been defined as follows: By grave abuse of discretion is meant such capricious and whimsical
exercise of judgment as is equivalent to lack of jurisdiction. Mere abuse of discretion is not
enough. It must be grave abuse of discretion as when the power is exercised in an arbitrary or
despotic manner by reason of passion or personal hostility, and must be so patent and so gross
as to amount to an evasion of a positive duty or to a virtual refusal to perform the duty enjoined
or to act at all in contemplation of law.
Same; Same; Same; Constitutional Commissions; Unless otherwise provided by the
Constitution or by law, any decision, order, or ruling of each Commission may be brought to the
Supreme Court on certiorari by the aggrieved party within thirty days from receipt of a copy
thereof.—Article IX-A, Section 7 of the Constitution provides that “unless otherwise provided by
this Constitution or by law, any decision, order, or ruling of each Commission may be brought to
the Supreme Court on certiorari by the aggrieved party within thirty days from receipt of a copy
thereof.” Rule 64, Section 2 of the Revised Rules of Civil Procedure also provides that “a
judgment or final order or resolution of the Commission on Elections and the Commission on
Audit may be brought by the aggrieved party to the Supreme Court on certiorari under Rule 65,
except as hereinafter provided.”
Local Government Units; Designing and implementing a local government unit’s own
“organizational structure and staffing pattern” also implies the power to revise and reorganize.—
Section 5, paragraph (a) of the Local Government Code states that “any provision on a power of
a local government unit shall be liberally interpreted in its favor, and in case of doubt, any
question thereon shall be resolved in favor or devolution of powers x x x.” Section 5, paragraph
(c) also provides that “the general welfare provisions in this Code shall be liberally interpreted to
give more powers to local government units in accelerating economic development and
upgrading the quality of life for the people in the community.” These rules of interpretation
emphasize the policy of local autonomy and the devolution of powers to the local government
units. Designing and implementing a local government unit’s own “organizational structure and
staffing pattern” also implies the power to revise and reorganize. Without such power, local
governments will lose the ability to adjust to the needs of its constituents. Effective and efficient
governmental services especially at the local government level require rational and deliberate
changes planned and executed in good faith from time to time.
LEONEN, J.:
In order to be able to deliver more effective and efficient services, the law allows
local government units the power to reorganize. In doing so, they should be given
leeway to entice their employees to avail of severance benefits that the local
government can afford. However, local government units may not provide such when
it amounts to a supplementary retirement benefit scheme.
In this special civil action for certiorari, the city of General Santos asks us to find
grave abuse of discretion on the part of the Commission on Audit (COA). On January
20, 2011, respondent Commission on Audit affirmed the findings of its Legal Services
Sector in its Opinion No. 2010-021 declaring Ordinance No. 08, Series of 2009, as
illegal. This was reiterated in respondent Commission’s resolution denying the motion
for reconsideration dated October 17, 2011.
Ordinance No. 08, Series of 2009, was enacted by the city of General Santos on
August 13, 2009. It is entitled An Ordinance Establishing the GenSan Scheme on
Early Retirement for Valued Employees Security (GenSan SERVES).
It is important to view this ordinance in its proper context.
Then mayor of General Santos City, Pedro B. Acharon, Jr., issued Executive
Order No. 40, Series of 2008, creating management teams pursuant to its
organization development program. This was patterned after Executive Order No. 366
dated October 4, 2004 entitled Directing a Strategic Review of the Operations and
Organizations of the Executive Branch and Providing Options and Incentives for
Government Employees who may be Affected by the Rationalization of the Functions
and Agencies of the Executive Branch and its implementing rules and regulations.
Mayor Pedro B. Acharon, Jr. declared the city’s byword of “Total Quality Service”
in his state of the city address in 2005. This was followed by the conduct of a process
and practice review for each department, section, and unit of the local government.
The product was an organization development masterplan adopted as Executive
Order No. 13, Series of 2009. This was followed by Resolution No. 004, Series of
2009, requesting for the mayor’s support for GenSan SERVES, an early retirement
program to be proposed to the Sangguniang Panlungsod.
Consequently, Ordinance No. 08, series of 2009, was passed together with its
implementing rules and 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.”
This contextual background in the passing of Ordinance No. 08, Series of 2009,
was not contested by respondent Commission on Audit.
The ordinance, as amended, provides that qualified employees below sixty (60)
years of age but not less than fifty (50) years and sickly employees below fifty (50)
years of age but not less than forty (40) years may avail of the incentivesmunder the
program. In other words, the ordinance “provides for separation benefits for sickly
employees who have not yet reached retirement age.” Section 5 of the ordinance
states:
Section 5. GenSan SERVES Program Incentives On Top of Government
Service Insurance System (GSIS) and PAG-IBIG Benefits.—Any personnel
qualified and approved to receive the incentives of this program shall be entitled
to whatever retirement benefits the GSIS or PAG-IBIG is granting to a retiring
government employee.
Moreover, an eligible employee shall receive an early retirement incentive provided
under this program at the rate of one and one-half (1 ½) months of the employee’s
latest basic salary for every year of service in the City Government.
Also, the ordinance provides:
Section 6. GenSan SERVES Post-Retirement Incentives.—Upon availment
of early retirement, a qualified employee shall enjoy the following in addition to the
above incentives:
(a) Cash gift of Fifty Thousand Pesos (P50,000.00) for the sickly employees;
(b) Lifetime free medical consultation at General Santos City Hospital;
(c) Annual aid in the maximum amount of Five Thousand Pesos (P5,000.00),
if admitted at General Santos City Hospital; and
(d) 14 karat gold ring as a token.
As provided, payment would be made in two tranches: 50% paid in January 2010
and the remainder in July 2010. Petitioner city alleged that out of its 1,361 regular
employees, 50 employees applied, from which 39 employees qualified to avail of the
incentives provided by the ordinance. The first tranche of benefits was released in
January 2010.
In a letter dated February 10, 2010, the city’s audit team leader, through its
supervising auditor, sent a query on the legality of the ordinance to respondent
Commission on Audit’s director for Regional Office No. XII, Cotabato City.
In his second indorsement dated March 15, 2010, respondent Commission’s
regional director agreed that the grant lacked legal basis and was contrary to the
Government Service Insurance System (GSIS) Act. He forwarded the matter to
respondent Commission’s Office of General Counsel, Legal Services Sector, for a
more authoritative opinion.
The Office of General Counsel issued COA-LSS Opinion No. 2010-021 on March
25, 2010. The opinion explained that Ordinance No. 08, series of 2009, partakes of a
supplementary retirement benefit plan. In its view, Section 28, paragraph (b) of
Commonwealth Act No. 186, as amended, prohibits government agencies from
establishing supplementary retirement or pension plans from the time the
Government Service Insurance System charter took effect while those plans already
existing when the charter was enacted were declared abolished.
The opinion discussed that this prohibition was reiterated in Conte v. Commission
on Audit. Laraño v. Commission on Audit, on the other hand, ruled that an early
retirement program should be by virtue of a valid reorganization pursuant to law in
order to be valid. The opinion concludes as follows:
In fine, since Ordinance No. 08 is in the nature of an ERP [Early Retirement
Program] of the City Government of General Santos, a law authorizing the same
is a requisite for its validity. In the absence, however, of such law, the nullity of
Ordinance No. 08 becomes a necessary consequence.
It is hoped that the foregoing sufficiently answers the instant query.
Petitioner city, through then mayor, Pedro B. Acharon, Jr., filed a letter-
reconsideration dated June 7, 2010. They followed through with two letters addressed
to respondent Commission’s chairman dated July 26, 2010 and October 6, 2010,
respectively, for the reconsideration of COA-LSS Opinion No. 2010-021.
Respondent Commission on Audit treated these letters as an appeal. On January
20, 2011, it rendered its decision denying the appeal and affirming COA-LSS Opinion
No. 2010-021. It also denied reconsideration by resolution dated October 17, 2011.
The dispositive portion of its decision reads:
WHEREFORE, premises considered, the instant appeal is
hereby DENIED for lack of merit and COA-LSS Opinion No. 2010-021 dated
March 25, 2010 of the OGC, this Commission is hereby AFFIRMED. Accordingly,
the ATL of General Santos City is hereby directed to issue a Notice of Disallowance
on the illegal disbursements made under the Gen[S]san SERVES.
Respondent Commission on Audit agreed that Ordinance No. 08, Series of 2009,
partakes of the nature of a supplementary retirement benefit plan proscribed by
Section 28, paragraph (b) of Commonwealth Act No. 186 as amended. It also
cited Conte v. Commission on Audit and Laraño v. Commission on Audit.
In its opinion, respondent Commission on Audit observed that GenSan SERVES
was not based on a law passed by Congress but on ordinances and resolutions
passed and approved by the Sangguniang Panlungsod and Executive Orders by the
city mayor. Moreover, nowhere in Section 76 of Republic Act No. 7160, otherwise
known as the Local Government Code, does it provide a specific power for local
government units to establish an early retirement program.
Mayor Acharon, Jr. submitted that other local government units such as Cebu in
2005 and 2008 have adopted their own early retirement programs. The resolutions of
the Sangguniang Panlungsod of Cebuinvoked Republic Act No. 6683 dated
December 2, 1988, which provided for early retirement and voluntary separation. The
questioned decision mentioned that respondent Commission on Audit would look into
this program supposedly adopted by Cebu. Assuming Cebu’s invocation of Republic
Act No. 6683 was proper, respondent Commission on Audit explained that this has
already been amended by Republic Act No. 8291, otherwise known as the GSIS Act
of 1997. Moreover, Section 9 of Republic Act No. 6683 provides for limited
application.
 The present petition raises this sole issue:
WHETHER RESPONDENT COMMISSION ON AUDIT COMMITTED GRAVE
ABUSE OF DISCRETION WHEN IT CONSIDERED ORDINANCE NO. 08,
SERIES OF 2009, IN THE NATURE OF AN EARLY RETIREMENT PROGRAM
REQUIRING A LAW AUTHORIZING IT FOR ITS VALIDITY.
I aggrieved party within thirty days from receipt of a copy thereof.” Rule 64, Section 2
This court has consistently held that findings of administrative agencies are
generally respected, unless found to have been tainted with unfairness that amounted
to grave abuse of discretion:
It is the general policy of the Court to sustain the decisions of administrative
authorities, especially one which is constitutionally-created not only on the basis
of the doctrine of separation of powers but also for their presumed expertise in the
laws they are entrusted to enforce. Findings of administrative agencies are
accorded not only respect but also finality when the decision and order are not
tainted with unfairness or arbitrariness that would amount to grave abuse of
discretion. It is only when the COA has acted without or in excess of jurisdiction,
or with grave abuse of discretion amounting to lack or excess of jurisdiction, that
this Court entertains a petition questioning its rulings. There is grave abuse of
discretion when there is an evasion of a positive duty or a virtual refusal to
perform a duty enjoined by law or to act in contemplation of law as when the
judgment rendered is not based on law and evidence but on caprice, whim and
despotism.
(Emphasis supplied, citations omitted)
We have ruled that “not every error in the proceedings, or every erroneous
conclusion of law or fact, constitutes grave abuse of discretion.” Grave abuse of
discretion has been defined as follows:
By grave abuse of discretion is meant such capricious and whimsical
exercise of judgment as is equivalent to lack of jurisdiction. Mere abuse
of discretion is not enough. It must be grave abuse of discretion as when
the power is exercised in an arbitrary or despotic manner by reason of
passion or personal hostility, and must be so patent and so gross as to
amount to an evasion of a positive duty or to a virtual refusal to perform
the duty enjoined or to act at all in contemplation of law. x x x.
In Yap v. Commission on Audit, this court explained that the Commission on Audit
has the duty to make its own assessment of the merits of the disallowance and need
not be limited to a review of the grounds relied upon by the auditor of the agency
concerned:
x x x we rule that, in resolving cases brought before it on appeal, respondent
COA is not required to limit its review only to the grounds relied upon by a
government agency’s auditor with respect to disallowing certain disbursements of
public funds. In consonance with its general audit power, respondent COA is not
merely legally permitted, but is also duty-bound to make its own assessment of the
merits of the disallowed disbursement and not simply restrict itself to reviewing the
validity of the ground relied upon by the auditor of the government agency
concerned. To hold otherwise would render COA’s vital constitutional power
unduly limited and thereby useless and ineffective.
Moreover, Article IX-A, Section 7 of the Constitution provides that “unless
otherwise provided by this Constitution or by law, any decision, order, or ruling of
each Commission may be brought to the Supreme Court on certiorari by the
of the Revised Rules of Civil Procedure also provides that “a judgment or final order
or resolution of the Commission on Elections and the Commission on Audit may be
brought by the aggrieved party to the Supreme Court on certiorari under Rule 65,
except as hereinafter provided.”
Thus, we proceed to determine whether respondent Commission on Audit acted
with grave abuse of discretion in affirming the opinion of its Legal Services Sector and
finding that the entire Ordinance No. 08, Series of 2009, partakes of the nature of a
proscribed supplementary retirement benefit plan.
II
According to petitioner city, GenSan SERVES does not provide for supplementary
retirement benefits, and Conte does not apply.
Petitioner city explains that unlike the facts in Conte, Ordinance No. 08, Series of
2009, was designed to entice employees who are unproductive due to health reasons
to avail of the incentives by way of an early retirement package. In essence, the
incentives are severance pay. Those who have reached retirement age are
disqualified.
Petitioner city adds that GenSan SERVES is a one-time offer. It is available only
to qualified employees who applied within two months from the ordinance’s effectivity.
In fact, out of its 1,361 regular employees, 50 employees applied. Out of all that
applied, only 39 employees qualified to avail of the incentives provided by the
ordinance.
These incentives are independent and distinct from the Government Service
Insurance System retirement package.
Section 5 of Ordinance No. 08, Series of 2009, was amended by Ordinance No.
11, Series of 2009, “to exclude those GSIS and PAG-IBIG benefits the payment[s] of
which are passed on [to] the employer.” This was to remove any doubt as to its
coverage and applicability and to ensure that no employee will be paid twice. The
amended provision reads:
Section 5. Gen[S]an SERVES Program Incentives On Top of Government
Service Insurance System (GSIS) and PAG-IBIG Benefits.—Any personnel
qualified and approved to receive the incentives of this program shall be entitled
to whatever retirement benefits the GSIS or PAG-IBIG is granting to a retiring
government employee, except those benefits the payment of which are passed
 on to the employer. In which case, the benefits granted under this ordinance shall
only be considered as one of the options available to a retiring city employee.
Moreover, an eligible employee shall receive an early retirement incentive provided
under this program at the rate of one and one-half (1 ½) months of the employee’s
latest basic salary for every year of service in the City Government. (Emphasis
supplied)
According to petitioner city, GenSan SERVES is an initial step pursuant to its
organization development masterplan, which began with the city mayor’s issuance of
Executive Order No. 40, series of 2008, creating change management teams.
Petitioner city cites Sections 16 and 76 of the Local Government Code as its
authority to reorganize. It argues that these provisions necessarily imply the authority
of petitioner city to provide retirement benefits, separation pay, and other incentives to
those affected by the reorganization.
Petitioner city also cites Republic Act No. 6656, otherwise known as An Act to
Protect the Security of Tenure of Civil Service Officers and Employees in the
Implementation of Government Reorganization. According to petitioner city, this not
only requires good faith in the implementation of reorganization but mandates the
payment of appropriate separation pay, retirement, and other benefits under existing
laws within 90 days from effectivity date of separation.
Even President Gloria Macapagal-Arroyo issued Executive Order No. 184
entitled Directing the Reorganization and Streamlining of the National Development
Company on March 10, 2003. In Section 4, it provides for a separation package
anchored on Republic Act No. 6656. Petitioner city submits that if the President can
reorganize in the absence of any law authorizing her to do so and provide
compensation based on Republic Act No. 6656, with more reason that a local
government unit can reorganize as its power to reorganize is expressly provided in
the Local Government Code.
Respondent Commission on Audit counters that it correctly found Ordinance No.
08, Series of 2009, as invalid in the absence of a law passed by Congress specifically
authorizing the enactment of an ordinance granting an early retirement scheme.
Respondent Commission on Audit contends that Sections 16 and 76 of the Local
Government Code do not confer authority upon any local government unit to create a
separate or supplementary retirement benefit plan. As for Republic Act No. 6656, this
contemplates situations where a government position has been abolished, or
rendered redundant, or a need to merge, divide or consolidate positions for lawful
causes allowed by the Civil Service Law exists.
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.
We agree with respondent Commission on Audit but only insofar as Section 5 of
the ordinance is concerned. We declare Section 6 on post-retirement incentives as
valid.
III
The constitutional mandate for local autonomy supports petitioner city’s issuance
of Executive Order No. 40, series of 2008, creating change management teams as an
initial step for its organization development masterplan.
Local autonomy also grants local governments the power to streamline and
reorganize. This power is inferred from Section 76 of the Local Government Code on
organizational structure and staffing pattern, and Section 16 otherwise known as the
general welfare clause:
Section 76. Organizational Structure and Staffing Pattern.—Every local
government unit shall design and implement its own organizational structure and
staffing pattern taking into consideration its service requirements and financial
capability, subject to the minimum standards and guidelines prescribed by the Civil
Service Commission.
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.
Section 5, paragraph (a) of the Local Government Code states that “any provision
on a power of a local government unit shall be liberally interpreted in its favor, and in
case of doubt, any question thereon shall be resolved in favor or devolution of powers
x x x.”
Section 5, paragraph (c) also provides that “the general welfare provisions in this
Code shall be liberally interpreted to give more powers to local government units in
accelerating economic development and upgrading the quality of life for the people in
the community.” These rules of interpretation emphasize the policy of local autonomy
and the devolution of powers to the local government units.
Designing and implementing a local government unit’s own “organizational
structure and staffing pattern” also implies the power to revise and reorganize.
Without such power, local governments will lose the ability to adjust to the needs of its
constituents. Effective and efficient governmental services especially at the local
government level require rational and deliberate changes planned and executed in
good faith from time to time.
This was implied in Province of Negros Occidental v. Commissioners,
Commission on Audit. In that case, this court declared as valid the ordinance passed
by the province granting and releasing hospitalization and health care insurance
benefits to its officials and employees. This court held that Section 2 of Administrative
Order No. 103 requiring the President’s prior approval before the grant of any
allowance or benefit is applicable only to offices under the executive branch. Section
2 does not mention local government units, thus, the prohibition does not apply to
them. This court then referred to the policy of local autonomy as follows:
Thus, consistent with the state policy of local autonomy as guaranteed by the
1987 Constitution, under Section 25, Article II and Section 2, Article X, and the
Local Government Code of 1991, we declare that the grant and release of the
hospitalization and health care insurance benefits given to petitioner’s officials and
employees were validly enacted through an ordinance passed by
petitioner’s Sangguniang Panlalawigan.
Local autonomy allows an interpretation of Sections 76 and 16 as granting
petitioner city the authority to create its organization development program.
Petitioner city’s vision in 2005 of “Total Quality Service” for “the improvement of
the quality of services delivered by the city to the delight of its internal and external
customers” is a matter within its discretion. It then conducted a process and practice
review for each and every unit within the city, resulting in the formulation of an
organization development masterplan adopted as Executive Order No. 13, series of
2009.
Resolution No. 004, Series of 2009, was later passed requesting for the mayor’s
support for GenSan SERVES. The third preambular clause states that in order “to
transform the bureaucracy into [an] effective and result[s]-oriented structure,
redounding to improved governance, there is a need to entice employees aged 50-59
years old, to retire earlier than [age] 65 for them to enjoy their retirement while they
are still healthy.” Consequently, Ordinance No. 08, Series of 2009, was passed
creating the GenSan SERVES program.
In Betoy v. The Board of Directors, NAPOCOR, this court explained that a
streamlining of organization for a more efficient system must pass the test of good
faith in order to be valid:
A reorganization involves the reduction of personnel, consolidation of offices,
or abolition thereof by reason of economy or redundancy of functions. It could result
in the loss of one’s position through removal or abolition of an office. However, for
a reorganization for the purpose of economy or to make the bureaucracy more
efficient to be valid, it must pass the test of good faith; otherwise, it is void
ab initio. (Emphasis supplied)
There are indicia of bad faith, none of which are present in this case.
Republic Act No. 6656 invoked by petitioner city as authority for the creation of
GenSan SERVES, for example, enumerates situations considered as bad faith when
employees are removed as a result of any reorganization:
SECTION 2. No officer or employee in the career service shall be removed
except for a valid cause and after due notice and hearing. A valid cause for
removal exists when, pursuant to a bona fide reorganization, a position has
been abolished or rendered redundant or there is a need to merge, divide, or
consolidate positions in order to meet the exigencies of the service, or other
lawful causes allowed by the Civil Service Law. The existence of any or some
of the following circumstances may be considered as evidence of bad faith
in the removals made as a result of reorganization, giving rise to a claim for
reinstatement or reappointment by an aggrieved party:
a) Where there is a significant increase in the number of positions in the
new staffing pattern of the department or agency concerned;
b) Where an office is abolished and another performing substantially the same
functions in created;
c) Where incumbents are replaced by those less qualified in terms of
status of appointment, performance and merit;
d) Where there is a reclassification of offices in the department or agency
concerned and the reclassified offices perform substantially the same functions as
the original offices; and
e) Where the removal violates the order of separation provided in Section
3 hereof. (Emphasis supplied)
None of these badges of bad faith exist in this case.
Petitioner city followed the order of priority under Section 4 of its ordinance. It
required applicants to undergo medical examination with the local hospital and
considered the hospital chief’s recommendations.
Unfortunately, these allegations showing good faith is not enough to declare the
program created by petitioner city as a reorganization that justifies the creation of a
retirement benefit plan.
Petitioner city alleged that the positions occupied by those who qualified for
GenSan SERVES remained vacant, and it would neither hire replacements nor
promote employees earlier than June 30, 2011. This means the positions left by those
who availed of the program will eventually be filled up by others. Their positions were
not abolished or merged with other positions for streamlining in the service.
IV
The assailed decision by respondent Commission on Audit was anchored on
Section 28, paragraph (b) of Commonwealth Act No. 186, otherwise known as the
Government Service Insurance Act, as amended by Republic Act No. 4968. This
proscribes all supplementary retirement or pension plans for government employees:
 (b) Hereafter no insurance or retirement plan for officers or employees shall be
created by any employer. All supplementary retirement or pension plans heretofore
in force in any government office, agency, or instrumentality or corporation owned
and controlled by the government, are hereby declared inoperative or
abolished: Provided, That the rights of those who are already eligible to retire
thereunder shall not be affected.
Jurisprudence has discussed the nature and purpose of retirement benefits and
pension plans as follows:
Retirement benefits are, after all, a form of reward for an employee’s loyalty and
service to the employer, and are intended to help the employee enjoy the
remaining years of his life, lessening the burden of worrying about his financial
support or upkeep. On the other hand, a pension partakes of the nature of
“retained wages” of the retiree for a dual purpose: to entice competent people to
enter the government service, and to permit them to retire from the service with
relative security, not only for those who have retained their vigor, but more so for
those who have been incapacitated by illness or accident. (Emphasis supplied)
In Conte v. Commission on Audit, this court discussed the purpose behind the
proscription found in Section 28, paragraph (b), as amended. It was to address the
need to prevent the proliferation of inequitous plans:
x x x Sec. 28 (b) as amended by RA 4968 in no uncertain terms bars the
creation of any insurance or retirement plan — other than the GSIS — for
government officers and employees, in order to prevent the undue and inequitous
proliferation of such plans. x x x. To ignore this and rule otherwise would be
tantamount to permitting every other government office or agency to put up its own
supplementary retirement benefit plan under the guise of such “financial
assistance.
Section 2 of the ordinance, as amended, defined “applicants” as referring to
“qualified employees below sixty (60) years of age but not less than fifty (50) years
and sickly employees below fifty (50) years of age but not less than forty (40) years
old from the effectivity of this Ordinance and shall have rendered service in the City
government for at least 15 years.”
This means that even employees other than those who are unproductive due to
health reasons may apply under the ordinance. Albeit last in priority, they may still
qualify to avail of the incentives pursuant to Section 4, paragraph (d), as amended:
Section 4. Prioritization.—The following applicants shall be prioritized in availing
the program:
a) First — Employees below sixty (60) years of age but not less than fifty (50) years
who are determined by the Chief of General Santos City Hospital to be qualified to
avail of the program;
b) Second — Employees below sixty (60) years of age but not less than fifty (50) years
who are under continuous medication as determined by the Chief of General
Santos City Hospital;
c) Third — Employees below fifty (50) years of age but not less than forty (40) years
who are determined by the Chief of General Santos City Hospital to be physically
or mentally incapacitated to further continue rendering service with the City
Government and recommended to avail of the program; and
d) Fourth — Employees below sixty (60) years of age but not less than fifty (50) years
who are desirous to avail of the program.
Moreover, Section 3 of the ordinance, as amended, enumerates those who are
covered by the program and may thus apply under the ordinance:
Section 3. Coverage.—GenSan SERVES program covers the following
employees of the City Government:
(a) personnel occupying permanent positions;
(b) those who are below sixty (60) years of age but not less than fifty (50) years on the
date of application;
(c) those who are below fifty (50) years of age but not less than forty (40) years on
the date of application but confirmed by the Chief of General Santos City Hospital
to be sickly and recommended to avail early retirement; and
(d) those who must have served the City Government of General Santos a
minimum of fifteen (15) continuous years.
Under paragraph (d), employees should have served for a minimum of 15 years
to qualify. This requirement is consistent with the definition of a retirement plan as a
form of reward for an employee’s loyalty and service to the employer. Moreover,
pension plans as defined permit employees to retire with relative security, especially
for those who have been incapacitated by illness.
Section 5 states that “an eligible employee shall receive an early retirement
incentive provided under this program at the rate of 1 ½ months of the employee’s
latest basic salary for every year of service in the City Government.” This may be
more than the amount of annuity provided in Section 11, paragraph (a) of
Commonwealth Act No. 186 as amended, considering that an applicant must have
rendered at least 15 years of service in the city government to qualify.
Section 5 refers to an “early retirement incentive,” the amount of which is pegged
on the beneficiary’s years of service in the city government. The ordinance provides
that only those who have rendered service to the city government for at least 15 years
may apply. Consequently, this provision falls under the definition of a retirement
benefit. Applying the definition in Conte, it is a form of reward for an employee’s
loyalty and service to the city government, and it is intended to help the employee
enjoy the remaining years of his or her life by lessening his or her financial worries.
V
In any case, those who availed of the GenSan SERVES were separated from the
service. Those who are separated from the service, whether compulsorily for lawful
cause, or voluntarily when incentivized to retire early for streamlining
purposes, should consequently be entitled to a form of separation or severance pay.
 Petitioner city invoked Republic Act No. 6656, which provides that employees
separated from the service as a result of any reorganization shall be entitled to
separation pay, retirement, and other benefits:
Section 9. All officers and employees who are found by the Civil Service
Commission to have been separated in violation of the provisions of this Act, shall
be ordered reinstated or reappointed as the case may be without loss of seniority
and shall be entitled to full pay for the period of separation. Unless also separated
for cause, all officers and employees, who have been separated pursuant to
reorganization shall, if entitled thereto, be paid the appropriate separation
pay and retirement and other benefits under existing laws within ninety (90)
days from the date of the effectivity of their separation or from the date of
the receipt of the resolution of their appeals as the case may be: Provided,
That application for clearance has been filed and no action thereon has been
made by the corresponding department or agency. Those who are not entitled
to said benefits shall be paid a separation gratuity in the amount equivalent to one
(1) month salary for every year of service. Such separation pay and retirement
benefits shall have priority of payment out of the savings of the department or
agency concerned. (Emphasis supplied)
Separation or severance pay has been defined as “an allowance usually based
on length of service that is payable to an employee on severance x x x, or as
compensation due an employee upon the severance of his employment status with
the employer.”
Section 6 of the ordinance on post-retirement incentives provides for benefits that
are not computed based on years of service. They are lump sum amounts and
healthcare benefits:
Section 6. GenSan SERVES Post-Retirement Incentives.—Upon availment of
early retirement, a qualified employee shall enjoy the following in addition to the
above incentives:
(a) Cash gift of Fifty Thousand Pesos (P50,000.00) for the sickly employees;
(b) Lifetime free medical consultation at General Santos City Hospital;
(c) Annual aid in the maximum amount of Five Thousand Pesos (P5,000.00),
if admitted at General Santos City Hospital; and
(d) 14 karat gold ring as token.
The text of the ordinance indicates its purpose of encouraging employees,
especially those who are unproductive due to health reasons, to avail of the program
even before they reach the compulsory retirement age. Section 6 provides for a form
of severance pay to those who availed of GenSan SERVES, which was executed in
good faith.
We should not be misled by the use of the term “retirement” in Section 6 in
determining the nature of the benefits it provides. Labels are not determinative of
substantive content. It is the purpose behind these incentives, as read from the text of
the ordinance and as inferred from the effect of the ordinance as applied, which must
govern.
The purpose of Section 6 is also different from the benefits proscribed in Conte v.
Commission on Audit, and the nature of its benefits must be taken in the context of its
rationale. The benefits provided in Section 6 serve its purpose of inducing petitioner
city’s employees, who are unproductive due to health reasons, to retire early.
Respondent Commission on Audit’s observation that the benefit provided is broader
than that provided in Conte v. Commission on Audit fails to take this rationale into
consideration. Furthermore, the benefits under GenSan SERVES were only given to
a select few — the sickly and unproductive due to health reasons. Certainly, this
negates the position that the benefits provide for supplementary retirement benefits
that augment existing retirement laws.
In Conte v. Commission on Audit, cited by respondent Commission on Audit, this
court held that the “financial assistance” option for the difference of benefits under
Republic Act No. 660 and Republic Act No. 1616 violated Section 28, paragraph (b)
as amended. Social Security System (SSS) Resolution No. 56 subject of that case
provides in part:
NOW, THEREFORE, BE IT RESOLVED, That all the SSS employees who
are simultaneously qualified for compulsory retirement at age 65 or for optional
retirement at a lower age be encouraged to avail for themselves the life annuity
under R.A. 660, as amended; x x x.
The fifth preambular clause of Resolution No. 56 also states that “it is the policy of
the Social Security Commission to promote and to protect the interest of all SSS
employees, with a view to providing for their well-being during both their working and
retirement years.” The financial assistance provides benefits to all Social Security
System employees who are retirable under existing laws and who are qualified to
apply. It is available to all present and future Social Security System employees upon
reaching retirement age.
Without doubt, this financial assistance of Conte augments the retirement benefits
provided under existing laws, in violation of Section 28, paragraph (b), as amended.
On the other hand, Section 3 of Ordinance No. 08, Series of 2009 limits its
coverage. Only qualified employees below sixty (60) years of age but not less than
fifty (50) years and sickly employees below fifty (50) years of age but not less than
forty (40) years from the effectivity of the ordinance, with at least 15 years of service,
are considered. Out of 1,361 regular employees of petitioner city, only 50 employees
applied, from which only 39 employees qualified to avail of the ordinance benefits.
Petitioner city alleged that there was one more applicant who was supposed to
qualify, but she had died of acute renal failure secondary to diabetes nephropathy
before her application was acted upon.
 Furthermore, unlike in Conte, Ordinance No. 08, Series of 2009, was a one-time Series of 2009, as amended by Ordinance No. 11, Series of 2009, is declared
limited offer. The availment period was only within two months from the ordinance’s as VALID.
effectivity. SO ORDERED.

In any case, petitioner city is authorized by the Local Government Code to Notes.—As an interim measure, the President appoints officials holding elective offices
approve ordinances to provide for the care of the sick: upon the creation of new local government units. (Kida vs. Senate of the Philippines, 667 SCRA
SECTION 458. Powers, Duties, Functions and Compensation.—(a) 200 [2012])
The Sangguniang Panlungsod, as the legislative body of the city, shall enact
ordinances, approve resolutions and appropriate funds for the general welfare of Section 7, Article IX of the 1987 Constitution in part substantially provides that any decision,
the city and its inhabitants pursuant to Section 16 of this Code and in the proper order or ruling of any of the Constitutional Commissions may be brought for review to the
exercise of the corporate powers of the city as provided for under Section 22 of Supreme Court on certiorari within 30 days from receipt of a copy thereof. (Ibrahim vs.
this Code, and shall: Commission on Elections, 688 SCRA 129 [2013])
xxxx
(5) Approve ordinances which shall ensure the efficient and effective delivery of
the basic services and facilities as provided for under Section 17 of this Code, and ——o0o——
in addition to said services and facilities, shall:
xxxx
(xiv) Provide for the care of disabled persons, paupers, the aged, the sick,
persons of unsound mind, abandoned minors, juvenile delinquents, drug
dependents, abused children and other needy and disadvantaged persons,
particularly children and youth below eighteen (18) years of age; and, subject to
availability of funds, establish and provide for the operation of centers and facilities
for said needy and disadvantaged persons[.] (Emphasis supplied)

This is also consistent with the constitutional mandate for a comprehensive

approach to health development, with priority for the needs of the sick:
ARTICLE XIII
Social Justice and Human Rights
HEALTH
Section 11. The State shall adopt an integrated and comprehensive approach
to health development which shall endeavor to make essential goods, health and
other social services available to all the people at affordable cost. There shall be
priority for the needs of the underprivileged, sick, elderly, disabled, women, and
children. The State shall endeavor to provide free medical care to paupers.

Thus, the cash gift for the sickly employees, lifetime free medical consultation in
petitioner city’s hospital, and other similar benefits under Section 6 of the ordinance
are valid.

The proscription under Section 28, paragraph (b) of Commonwealth Act No. 186,
as amended, does not apply to Section 6 of the ordinance. Consequently, the
Commission on Audit acted with grave abuse of discretion when it declared the entire
ordinance void and of no effect.

WHEREFORE, the petition is PARTIALLY GRANTED. The assailed Commission

on Audit decision dated January 20, 2011 and resolution dated October 17, 2011
are AFFIRMED with MODIFICATION insofar as Section 6 of Ordinance No. 08,
 G.R. No. 182574. September 28, 2010.
THE PROVINCE OF NEGROS OCCIDENTAL, represented by its Governor ISIDRO
P. ZAYCO, petitioner, vs. THE COMMISSIONERS, COMMISSION ON AUDIT; THE
DIRECTOR, CLUSTER IV-VISAYAS; THE REGIONAL CLUSTER DIRECTORS;
and THE PROVINCIAL AUDITOR, NEGROS OCCIDENTAL, respondents.
Local Government Units; Productivity Incentive Benefit; Administrative Order No. 103; In
Section 2 of Administrative Order No. 103, the President enjoined all heads of government
offices and agencies from granting productivity incentive benefits or any and all similar forms of
allowances and benefits without the President’s prior approval.—It is clear from Section 1 of AO
103 that the President authorized all agencies of the national government as well as LGUs to
grant the maximum amount of P2,000 productivity incentive benefit to each employee who has
rendered at least one year of service as of 31 December 1993. In Section 2, the President
enjoined all heads of government offices and agencies from granting productivity incentive
benefits or any and all similar forms of allowances and benefits without the President’s prior
approval.
Same; Same; Same; Control and Supervision; The requirement then of prior approval
from the President under Administrative Order No. 103 is applicable only to departments,
bureaus, offices and government-owned and controlled corporations under the Executive
branch.—In the present case, petitioner, through an approved Sangguniang Panlalawigan
resolution, granted and released the disbursement for the hospitalization and health care
insurance benefits of the province’s officials and employees without any prior approval from the
President. The COA disallowed the premium payment for such benefits since petitioner
disregarded AO 103 and RA 6758. We disagree with the COA. From a close reading of the
provisions of AO 103, petitioner did not violate the rule of prior approval from the President since
Section 2 states that the prohibition applies only to “government offices/agencies, including
government-owned and/or controlled corporations, as well as their respective governing boards.”
Nowhere is it indicated in Section 2 that the prohibition also applies to LGUs. The requirement
then of prior approval from the President under AO 103 is applicable only to departments,
bureaus, offices and government-owned and controlled corporations under the Executive
branch. In other words, AO 103 must be observed by government offices under the President’s
control as mandated by Section 17, Article VII of the Constitution which states: “Section 17. The
President shall have control of all executive departments, bureaus and offices. He shall ensure
that the laws be faithfully executed.” (Emphasis supplied) Being an LGU, petitioner is merely
under the President’s general supervision pursuant to Section 4, Article X of the Constitution.
Same; Same; Same; Same; Since Local Government Units (LGUs) are subject only to the
power of general supervision of the President, the President’s authority is limited to seeing to it
that rules are followed and laws are faithfully executed; The grant by a Local Government Unit
(LGU) of additional compensation like hospitalization and health care insurance benefits in the
present case does not need the approval of the President to be valid.—The President’s power of
general supervision means the power of a superior officer to see to it that subordinates perform
their functions according to law. This is distinguished from the President’s power of control which
is the power to alter or modify or set aside what a subordinate officer had done in the
performance of his duties and to substitute the judgment of the President over that of the
subordinate officer. The power of control gives the President the power to revise or reverse the
acts or decisions of a subordinate officer involving the exercise of discretion. Since LGUs are
subject only to the power of general supervision of the President, the President’s authority is
limited to seeing to it that rules are followed and laws are faithfully executed. The President may
only point out that rules have not been followed but the President cannot lay down the rules,
neither does he have the discretion to modify or replace the rules. Thus, the grant of additional
compensation like hospitalization and health care insurance benefits in the present case does
not need the approval of the President to be valid.
Same; Same; Same; Same; Local Autonomy; Consistent with the state policy of local
autonomy as guaranteed by the 1987 Constitution, under Section 25, Article II and Section 2,
Article X, and the Local Government Code of 1991, the Court declares that the grant and release
of the hospitalization and health care insurance benefits given to petitioner’s officials and
employees were validly enacted through an ordinance passed by petitioner’s Sangguniang
Panlalawigan.—The CSC, through CSC MC No. 33, as well as the President, through AO 402,
recognized the deficiency of the state of health care and medical services implemented at the
time. Republic Act No. 7875 or the National Health Insurance Act of 1995 instituting a National
Health Insurance Program (NHIP) for all Filipinos was only approved on 14 February 1995 or
about two months after petitioner’s Sangguniang Panlalawigan passed Resolution No. 720-A.
Even with the establishment of the NHIP, AO 402 was still issued three years later addressing a
primary concern that basic health services under the NHIP either are still inadequate or have not
reached geographic areas like that of petitioner. Thus, consistent with the state policy of local
autonomy as guaranteed by the 1987 Constitution, under Section 25, Article II and Section 2,
Article X, and the Local Government Code of 1991, we declare that the grant and release of the
hospitalization and health care insurance benefits given to petitioner’s officials and employees
were validly enacted through an ordinance passed by petitioner’s Sangguniang Panlalawigan.
CARPIO, J.:
The Case
Before the Court is a petition for certiorari assailing Decision No. 2006-044 dated
14 July 2006 and Decision No. 2008-010 dated 30 January 2008 of the Commission
on Audit (COA) disallowing premium payment for the hospitalization and health care
insurance benefits of 1,949 officials and employees of the Province of Negros
Occidental.
The Facts
On 21 December 1994, the Sangguniang Panlalawigan of Negros Occidental
passed Resolution No. 720-A4 allocating P4,000,000 of its retained earnings for the
hospitalization and health care insurance benefits of 1,949 officials and employees of
the province. After a public bidding, the Committee on Awards granted the insurance
coverage to Philam Care Health System Incorporated (Philam Care).
Petitioner Province of Negros Occidental, represented by its then Governor
Rafael L. Coscolluela, and Philam Care entered into a Group Health Care Agreement
involving a total payment of P3,760,000 representing the insurance premiums of its
officials and employees. The total premium amount was paid on 25 January 1996.
On 23 January 1997, after a post-audit investigation, the Provincial Auditor issued
Notice of Suspension No. 97-001-1015 suspending the premium payment because of
lack of approval from the Office of the President (OP) as provided under
Administrative Order No. 1036 (AO 103) dated 14 January 1994. The Provincial
Auditor explained that the premium payment for health care benefits violated Republic
Act No.6758 (RA 6758), otherwise known as the Salary Standardization Law.
Petitioner complied with the directive post-facto and sent a letter-request dated 12
January 1999 to the OP. In a Memorandum dated 26 January 1999, then President
Joseph E. Estrada directed the COA to lift the suspension but only in the amount of
P100,000. The Provincial Auditor ignored the directive of the President and instead
issued Notice of Disallowance No. 99-005-101(96) dated 10 September 1999 stating
similar grounds as mentioned in Notice of Suspension No. 97-001-101.
Petitioner appealed the disallowance to the COA. In a Decision dated 14 July
2006, the COA affirmed the Provincial Auditor’s Notice of Disallowance dated 10
September 1999. The COA ruled that under AO 103, no government entity, including
a local government unit, is exempt from securing prior approval from the President
granting additional benefits to its personnel. This is in conformity with the policy of
standardization of compensation laid down in RA 6758. The COA added that Section
468(a)(1)(viii) of Republic Act No. 7160 (RA 7160) or the Local Government Code of
1991 relied upon by petitioner does not stand on its own but has to be harmonized
with Section 12 of RA 6758.
Further, the COA stated that the insurance benefits from Philam Care, a private
insurance company, was a duplication of the benefits provided to employees under
the Medicare program which is mandated by law. Being merely a creation of a local
legislative body, the provincial health care program should not contravene but instead
be consistent with national laws enacted by Congress from where local legislative
bodies draw their authority.
The COA held the following persons liable: (1) all the 1,949 officials and
employees of the province who benefited from the hospitalization and health care
insurance benefits with regard to their proportionate shares; (2) former Governor
Rafael L. Coscolluela, being the person who signed the contract on behalf of
petitioner as well as the person who approved the disbursement voucher; and (3)
the Sangguniang Panlalawigan members who passed Resolution No. 720-A. The
COA did not hold Philam Care and Provincial Accountant Merly P. Fortu liable for the
disallowed disbursement. The COA explained that it was unjust to require Philam
Care to refund the amount received for services it had duly rendered since insurance
law prohibits the refund of premiums after risks had already attached to the policy
contract. As for the Provincial Accountant, the COA declared that the Sangguniang
Panlalawiganresolution was sufficient basis for the accountant to sign the
disbursement voucher since there were adequate funds available for the purpose.
However, being one of the officials who benefited from the subject disallowance, the
inclusion of the accountant’s name in the persons liable was proper with regard to her
proportionate share of the premium.
The dispositive portion of the COA’s 14 July 2006 decision states:
“WHEREFORE, premises considered, and finding no substantial ground or
cogent reason to disturb the subject disallowance, the instant appeal is hereby
denied for lack of merit. Accordingly, Notice of Disallowance No. 99-005-101(96)
dated 10 September 1999 in the total amount of P3,760,000.00 representing the
hospitalization and insurance benefits of the officials and employees of the
Province of Negros Occidental is hereby AFFIRMED and the refund thereof is
hereby ordered. The Cluster Director, Cluster IV-Visayas, COA Regional Office
No. VII, Cebu City shall ensure the proper implementation of this decision.”
Petitioner filed a Motion for Reconsideration dated 23 October 2006 which the
COA denied in a Resolution dated 30 January 2008.
Hence, the instant petition.
The Issue
The main issue is whether COA committed grave abuse of discretion in affirming
the disallowance of P3,760,000 for premium paid for the hospitalization and health
care insurance benefits granted by the Province of Negros Occidental to its 1,949
officials and employees.
The Court’s Ruling
Petitioner insists that the payment of the insurance premium for the health
benefits of its officers and employees was not unlawful and improper since it was paid
from an allocation of its retained earnings pursuant to a valid appropriation ordinance.
Petitioner states that such enactment was a clear exercise of its express powers
under the principle of local fiscal autonomy which includes the power of Local
Government Units (LGUs) to allocate their resources in accordance with their own
priorities. Petitioner adds that while it is true that LGUs are only agents of the national
government and local autonomy simply means decentralization, it is equally true that
an LGU has fiscal control over its own revenues derived solely from its own tax base.
Respondents, on the other hand, maintain that although LGUs are afforded local
fiscal autonomy, LGUs are still bound by RA 6758 and their actions are subject to the
scrutiny of the Department of Budget and Management (DBM) and applicable
auditing rules and regulations enforced by the COA. Respondents add that the grant
of additional compensation, like the hospitalization and health care insurance benefits
in the present case, must have prior Presidential approval to conform with the state
policy on salary standardization for government workers.
AO 103 took effect on 14 January 1994 or eleven months before
the Sangguniang Panlalawigan of the Province of Negros Occidental passed
Resolution No. 720-A. The main purpose of AO 103 is to prevent discontentment,
dissatisfaction and demoralization among government personnel, national or local,
who do not receive, or who receive less, productivity incentive benefits or other forms
of allowances or benefits. This is clear in the Whereas Clauses of AO 103 which
state:
“WHEREAS, the faithful implementation of statutes, including the
Administrative Code of 1987 and all laws governing all forms of additional
compensation and personnel benefits is a Constitutional prerogative vested in the
President of the Philippines under Section 17, Article VII of the 1987 Constitution;
WHEREAS, the Constitutional prerogative includes the determination of the
rates, the timing and schedule of payment, and final authority to commit limited
resources of government for the payment of personal incentives, cash awards,
productivity bonus, and other forms of additional compensation and fringe benefits;
WHEREAS, the unilateral and uncoordinated grant of productivity
incentive benefits in the past gave rise to discontentment, dissatisfaction
and demoralization among government personnel who have received less or
have not received at all such benefits;
NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the
Philippines, by virtue of the powers vested in me by law and in order to forestall
further demoralization of government personnel do hereby direct: x x x”
(Emphasis supplied)
Sections 1 and 2 of AO 103 state:
“SECTION 1. All agencies of the National Government including
government-owned and/or -controlled corporations and government
financial institutions, and local government units, are hereby authorized to
grant productivity incentive benefit in the maximum amount of TWO THOUSAND
PESOS (P2,000.00) each to their permanent and full-time temporary and casual
employees, including contractual personnel with employment in the nature of a
regular employee, who have rendered at least one (1) year of service in the
Government as of December 31, 1993.
SECTION 2. All heads of government offices/agencies, including
government owned and/or controlled corporations, as well as their
respective governing boards are hereby enjoined and prohibited from
authorizing/granting Productivity Incentive Benefits or any and all forms of
allowances/benefits without prior approval and authorization viaAdministrative
Order by the Office of the President. Henceforth, anyone found violating any of the
mandates in this Order, including all officials/agency found to have taken part
thereof, shall be accordingly and severely dealt with in accordance with the
applicable provisions of existing administrative and penal laws.
Consequently, all administrative authorizations to grant any form of
allowances/benefits and all forms of additional compensation usually paid outside
of the prescribed basic salary under R.A. 6758, the Salary Standardization Law,
that are inconsistent with the legislated policy on the matter or are not covered by
any legislative action are hereby revoked.” (Emphasis supplied)
It is clear from Section 1 of AO 103 that the President authorized all agencies of
the national government as well as LGUs to grant the maximum amount of P2,000
productivity incentive benefit to each employee who has rendered at least one year of
service as of 31 December 1993. In Section 2, the President enjoined all heads of
government offices and agencies from granting productivity incentive benefits or any
and all similar forms of allowances and benefits without the President’s prior approval.
In the present case, petitioner, through an approved Sangguniang
Panlalawigan resolution, granted and released the disbursement for the
hospitalization and health care insurance benefits of the province’s officials and
employees without any prior approval from the President. The COA disallowed the
premium payment for such benefits since petitioner disregarded AO 103 and RA
6758.
We disagree with the COA. From a close reading of the provisions of AO 103,
petitioner did not violate the rule of prior approval from the President since Section 2
states that the prohibition applies only to “government offices/agencies, including
government-owned and/or controlled corporations, as well as their respective
governing boards.” Nowhere is it indicated in Section 2 that the prohibition also
applies to LGUs. The requirement then of prior approval from the President under AO
103 is applicable only to departments, bureaus, offices and government-owned and
controlled corporations under the Executive branch. In other words, AO 103 must be
observed by government offices under the President’s control as mandated by
Section 17, Article VII of the Constitution which states:
“Section 17. The President shall have control of all executivedepartments,
bureaus and offices. He shall ensure that the laws be faithfully executed.”
(Emphasis supplied)
Being an LGU, petitioner is merely under the President’s general supervision
pursuant to Section 4, Article X of the Constitution:
“Sec. 4. The President of the Philippines shall exercise general
supervision over local governments. Provinces with respect to component
cities and municipalities, and cities and municipalities with respect to component
barangays shall ensure that the acts of their component units are within the scope
of their prescribed powers and functions.” (Emphasis supplied)
The President’s power of general supervision means the power of a superior
officer to see to it that subordinates perform their functions according to law. This is
distinguished from the President’s power of control which is the power to alter or
modify or set aside what a subordinate officer had done in the performance of his
duties and to substitute the judgment of the President over that of the subordinate
officer. The power of control gives the President the power to revise or reverse the
acts or decisions of a subordinate officer involving the exercise of discretion.
Since LGUs are subject only to the power of general supervision of the President,
the President’s authority is limited to seeing to it that rules are followed and laws are
faithfully executed. The President may only point out that rules have not been
followed but the President cannot lay down the rules, neither does he have the
discretion to modify or replace the rules. Thus, the grant of additional compensation
like hospitalization and health care insurance benefits in the present case does not
need the approval of the President to be valid.
 Also, while it is true that LGUs are still bound by RA 6758, the COA did not clearly
establish that the medical care benefits given by the government at the time under
Presidential Decree No. 1519 were sufficient to cover the needs of government
employees especially those employed by LGUs.
Petitioner correctly relied on the Civil Service Commission’s (CSC) Memorandum
Circular No. 33 (CSC MC No. 33), series of 1997, issued on 22 December 1997
which provided the policy framework for working conditions at the workplace.
In this circular, the CSC pursuant to CSC Resolution No. 97-4684 dated 18
December 1997 took note of the inadequate policy on basic health and safety
conditions of work experienced by government personnel. Thus, under CSC MC No.
33, all government offices including LGUs were directed to provide a health program
for government employees which included hospitalization services and annual
mental, medical-physical examinations.
In sum, since petitioner’s grant and release of the questioned disbursement
without the President’s approval did not violate the President’s directive in AO 103,
the COA then gravely abused its discretion in applying AO 103 to disallow the
premium payment for the hospitalization and health care insurance benefits of
petitioner’s officials and employees.
WHEREFORE, we GRANT the petition. We REVERSE AND SET ASIDE
Decision No. 2006-044 dated 14 July 2006 and Decision No. 2008-010 dated 30
January 2008 of the Commission on Audit.
SO ORDERED.
——o0o——

Later, CSC MC No. 33 was further reiterated in Administrative Order No. 402 (AO
402) which took effect on 2 June 1998. Sections 1, 2, and 4 of AO 402 state:
“Section 1. Establishment of the Annual Medical Check-up Program.—An
annual medical check-up for government of officials and employees is hereby
authorized to be established starting this year, in the meantime that this benefit is
not yet integrated under the National Health Insurance Program being
administered by the Philippine Health Insurance Corporation (PHIC).
Section 2. Coverage.—x x x Local Government Units are also
encouraged to establish a similar program for their personnel.
Section 4. Funding.—x x x Local Government Units, which may establish a
similar medical program for their personnel, shall utilize local funds for the
purpose.” (Emphasis supplied)

The CSC, through CSC MC No. 33, as well as the President, through AO 402,
recognized the deficiency of the state of health care and medical services
implemented at the time. Republic Act No. 7875 or the National Health Insurance Act
of 1995 instituting a National Health Insurance Program (NHIP) for all Filipinos was
only approved on 14 February 1995 or about two months after
petitioner’s Sangguniang Panlalawigan passed Resolution No. 720-A. Even with the
establishment of the NHIP, AO 402 was still issued three years later addressing a
primary concern that basic health services under the NHIP either are still inadequate
or have not reached geographic areas like that of petitioner.

Thus, consistent with the state policy of local autonomy as guaranteed by the
1987 Constitution, under Section 25, Article II and Section 2, Article X, and the Local
Government Code of 1991, we declare that the grant and release of the
hospitalization and health care insurance benefits given to petitioner’s officials and
employees were validly enacted through an ordinance passed by
petitioner’s Sangguniang Panlalawigan.
 G.R. No. 195390. December 10, 2014
GOV. LUIS RAYMUND F. VILLAFUERTE, JR., and the PROVINCE OF
CAMARINES SUR, petitioners, vs. HON. JESSE M. ROBREDO, in his capacity as
Secretary of the Department of the Interior and Local Government, respondent.
Remedial Law; Civil Procedure; Courts; Judicial Review; Elements of.—It is well-settled
that the Court’s exercise of the power of judicial review requires the concurrence of the following
elements: (1) there must be an actual case or controversy calling for the exercise of judicial
power; (2) the person challenging the act must have the standing to question the validity of the
subject act or issuance; otherwise stated, he must have a personal and substantial interest in
the case such that he has sustained, or will sustain, direct injury as a result of its enforcement;
(3) the question of constitutionality must be raised at the earliest opportunity; and (4) the issue of
constitutionality must be the very lis mota of the case.
Same; Same; Same; Same; Actual Case or Controversy; Words and Phrases; An actual
case or controversy means an existing case or controversy that is appropriate or ripe for
determination, not conjectural or anticipatory, lest the decision of the court would amount to an
advisory opinion.—In La Bugal-B’laan Tribal Association, Inc. v. Ramos, 421 SCRA 148 (2004),
the Court characterized an actual case or controversy, viz.: An actual case or controversy
means an existing case or controversy that is appropriate or ripe for determination, not
conjectural or anticipatory, lest the decision of the court would amount to an advisory opinion.
The power does not extend to hypothetical questions since any attempt at abstraction could only
lead to dialectics and barren legal questions and to sterile conclusions unrelated to actualities.
(Citations omitted) The existence of an actual controversy in the instant case cannot be
overemphasized. At the time of filing of the instant petition, the respondent had already
implemented the assailed memorandum circulars. In fact, on May 26, 2011, Villafuerte received
Audit Observation Memorandum (AOM) No. 2011-009 dated May 10, 2011 from the Office of the
Provincial Auditor of Camarines Sur, requiring him to comment on the observation of the audit
team.
Same; Same; Exhaustion of Administrative Remedies; In challenging the validity of an
administrative issuance carried out pursuant to the agency’s rule-making power, the doctrine of
exhaustion of administrative remedies does not stand as a bar in promptly resorting to the filing
of a case in court.—There is likewise no merit in the respondent’s claim that the petitioners’
failure to exhaust administrative remedies warrants the dismissal of the petition. It bears
emphasizing that the assailed issuances were issued pursuant to the rule-making or quasi-
legislative power of the DILG. This pertains to “the power to make rules and regulations which
results in delegated legislation that is within the confines of the granting statute.” Not to be
confused with the quasi-legislative or rule-making power of an administrative agency is its quasi-
judicial or administrative adjudicatory power. This is the power to hear and determine questions
of fact to which the legislative policy is to apply and to decide in accordance with the standards
laid down by the law itself in enforcing and administering the same law. In challenging the
validity of an administrative issuance carried out pursuant to the agency’s rule-making power,
the doctrine of exhaustion of administrative remedies does not stand as a bar in promptly
resorting to the filing of a case in court.
Constitutional Law; Local Autonomy; The Constitution has expressly adopted the policy of
ensuring the autonomy of Local Government Units (LGUs).—The Constitution has expressly
adopted the policy of ensuring the autonomy of LGUs. To highlight its significance, the entire
Article X of the Constitution was devoted to laying down the bedrock upon which this policy is
anchored. It is also pursuant to the mandate of the Constitution of enhancing local autonomy
that the LGC was enacted.
Same; Same; Words and Phrases; Local autonomy means a more responsive and
accountable local government structure instituted through a system of decentralization.—Verily,
local autonomy means a more responsive and accountable local government structure instituted
through a system of decentralization. In Limbona v. Mangelin, 170 SCRA 786 (1989), the Court
elaborated on the concept of decentralization, thus: [A]utonomy is either decentralization of
administration or decentralization of power. There is decentralization of administration when the
central government delegates administrative powers to political subdivisions in order to broaden
the base of government power and in the process to make local governments “more responsive
and accountable,” and “ensure their fullest development as self-reliant communities and make
them more effective partners in the pursuit of national development and social progress.” At the
same time, it relieves the central government of the burden of managing local affairs and
enables it to concentrate on national concerns. x x x. Decentralization of power, on the other
hand, involves an abdication of political power in the favor of local governments [sic] units
declared to be autonomous. In that case, the autonomous government is free to chart its own
destiny and shape its future with minimum intervention from central authorities.
Same; Same; To safeguard the state policy on local autonomy, the Constitution confines
the power of the President over Local Government Units (LGUs) to mere supervision.—To
safeguard the state policy on local autonomy, the Constitution confines the power of the
President over LGUs to mere supervision. “The President exercises ‘general supervision’ over
them, but only to ‘ensure that local affairs are administered according to law.’ He has no control
over their acts in the sense that he can substitute their judgments with his own.” Thus, Section 4,
Article X of the Constitution, states: Section 4. The President of the Philippines shall exercise
general supervision over local governments. Provinces with respect to component cities and
municipalities, and cities and municipalities with respect to component barangays, shall ensure
that the acts of their component units are within the scope of their prescribed powers and
functions.
Same; Same; Notwithstanding the local fiscal autonomy being enjoyed by Local
Government Units (LGUs), they are still under the supervision of the President and maybe held
accountable for malfeasance or violations of existing laws.—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.”
Bids and Bidding; Republic Act (RA) No. 9184 requires the posting of the invitation to bid,
notice of award, notice to proceed, and approved contract in the procuring entity’s premises, in
newspapers of general circulation, and the website of the procuring entity.—R.A. No. 9184, on
the other hand, requires the posting of the invitation to bid, notice of award, notice to proceed,
and approved contract in the procuring entity’s premises, in newspapers of general circulation,
and the website of the procuring entity. It is well to remember that fiscal autonomy does not
leave LGUs with unbridled discretion in the disbursement of public funds. They remain
accountable to their constituency. For, public office was created for the benefit of the people and
not the person who holds office.
 Constitutional Law; Local Autonomy; Fiscal Autonomy; Words and Phrases; To be clear,
[f]iscal autonomy means that local governments have the power to create their own sources of
revenue in addition to their equitable share in the national taxes released by the national
government, as well as the power to allocate their resources in accordance with their own
priorities.—A scrutiny of the contents of the mentioned issuances shows that they do not, in any
manner, violate the fiscal autonomy of LGUs. To be clear, “[f]iscal autonomy means that local
governments have the power to create their own sources of revenue in addition to their equitable
share in the national taxes released by the national government, as well as the power to allocate
their resources in accordance with their own priorities. It extends to the preparation of their
budgets, and local officials in turn have to work within the constraints thereof.”
Same; Transparency; The Constitution commands the strict adherence to full disclosure
of information on all matters relating to official transactions and those involving public interest.—
The Constitution, which was drafted after long years of dictatorship and abuse of power, is now
replete with numerous provisions directing the adoption of measures to uphold transparency and
accountability in government, with a view of protecting the nation from repeating its atrocious
past. In particular, the Constitution commands the strict adherence to full disclosure of
information on all matters relating to official transactions and those involving public interest.
REYES, J.:
This is a petition for certiorari and prohibition under Rule 65 of the 1997 Revised
Rules of Court filed by former Governor Luis Raymund F. Villafuerte, Jr. (Villafuerte)
and the Province of Camarines Sur (petitioners), seeking to annul and set aside the
following issuances of the late Honorable Jesse M. Robredo (respondent), in his
capacity as then Secretary of the Department of the Interior and Local Government
(DILG), to wit:
(a) Memorandum Circular (MC) No. 2010-83 dated August 31, 2010,
pertaining to the full disclosure of local budget and finances, and bids and public
offerings;
(b) MC No. 2010-138 dated December 2, 2010, pertaining to the use of the
20% component of the annual internal revenue allotment shares; and
(c) MC No. 2011-08 dated January 13, 2011, pertaining to the strict adherence
to Section 90 of Republic Act (R.A.) No. 10147 or the General Appropriations Act
of 2011.
The petitioners seek the nullification of the foregoing issuances on the ground of
unconstitutionality and for having been issued with grave abuse of discretion
amounting to lack or excess of jurisdiction.
The Facts
In 1995, the Commission on Audit (COA) conducted an examination and audit on
the manner the local government units (LGUs) utilized their Internal Revenue
Allotment (IRA) for the calendar years 1993-1994. The examination yielded an official
report, showing that a substantial portion of the 20% development fund of some LGUs
was not actually utilized for development projects but was diverted to expenses
properly chargeable against the Maintenance and Other Operating Expenses
(MOOE), in stark violation of Section 287 of R.A. No. 7160, otherwise known as the
Local Government Code of 1991 (LGC). Thus, on December 14, 1995, the DILG
issued MC No. 95-216, enumerating the policies and guidelines on the utilization of
the development fund component of the IRA. It likewise carried a reminder to LGUs of
the strict mandate to ensure that public funds, like the 20% development fund, “shall
be spent judiciously and only for the very purpose or purposes for which such funds
are intended.”
On September 20, 2005, then DILG Secretary Angelo T. Reyes and Department
of Budget and Management Secretary Romulo L. Neri issued Joint MC No. 1, Series
of 2005, pertaining to the guidelines on the appropriation and utilization of the 20% of
the IRA for development projects, which aims to enhance accountability of the LGUs
in undertaking development projects. The said memorandum circular underscored
that the 20% of the IRA intended for development projects should be utilized for social
development, economic development and environmental management.
On August 31, 2010, the respondent, in his capacity as DILG Secretary, issued
the assailed MC No. 2010-83, entitled “Full Disclosure of Local Budget and Finances,
and Bids and Public Offerings,” which aims to promote good governance through
enhanced transparency and accountability of LGUs.
The pertinent portion of the issuance reads:
Legal and Administrative Authority
Section 352 of the Local Government Code of 1991 requires the posting within
30 days from the end of each fiscal year in at least three (3) publicly accessible
and conspicuous places in the local government unit a summary of all revenues
collected and funds received including the appropriations and disbursements of
such funds during the preceding fiscal year.
On the other hand, Republic Act No. 9184, known as the Government
Procurement Reform Act, calls for the posting of the Invitation to Bid, Notice of
Award, Notice to Proceed and Approved Contract in the procuring entity’s
premises, in newspapers of general circulation, the Philippine Government
Electronic Procurement System (PhilGEPS) and the website of the procuring
entity.
The declared policy of the State to promote good local governance also calls
for the posting of budgets, expenditures, contracts and loans, and procurement
plans of local government units in conspicuous places within public buildings in the
locality, in the web, and in print media of community or general circulation.
Furthermore, the President, in his first State of the Nation Address, directed
all government agencies and entities to bring to an end luxurious spending and
misappropriation of public funds and to expunge mendacious and erroneous
projects, and adhere to the zero-based approach budgetary principle.
Responsibility of the Local Chief Executive
All Provincial Governors, City Mayors and Municipal Mayors, are directed to
faithfully comply with the above cited [sic] provisions of laws, and existing national
policy, by posting in conspicuous places within public buildings in the locality, or in
print media of community or general circulation, and in their websites, the following:
1. CY 2010 Annual Budget, information detail to the level of particulars of
personal services, maintenance and other operating expenses and capital outlay
per individual offices (Source Document – Local Budget Preparation Form No. 3,
titled, Program Appropriation and Obligation by Object of Expenditure, limited to
PS, MOOE and CO. For sample form, please visit www.naga.gov.ph);
2. Quarterly Statement of Cash Flows, information detail to the level of
particulars of cash flows from operating activities (e.g., cash inflows, total cash
inflows, total cash outflows), cash flows from investing activities (e.g., cash
outflows), net increase in cash and cash at the beginning of the period (Source
Document – Statement of Cash Flows Form);
3. CY 2009 Statement of Receipts and Expenditures, information detail to the
level of particulars of beginning cash balance, receipts or income on local sources
(e.g., tax revenue, non-tax revenue), external sources, and receipts from loans and
borrowings, surplus of prior years, expenditures on general services, economic
services, social services and debt services, and total expenditures (Source
Document – Local Budget Preparation Form No. 2, titled, Statement of Receipts
and Expenditures);
4. CY 2010 Trust Fund (PDAF) Utilization, information detail to the level of
particulars of object expenditures (Source Document – Local Budget Preparation
Form No. 3, titled, Program Appropriation and Obligation by Object of Expenditure,
limited to PDAF Utilization);
5. CY 2010 Special Education Fund Utilization, information detail to the level
of particulars of object expenditures (Source Document – Local Budget
Preparation Form No. 3, titled, Program Appropriation and Obligation by Object of
Expenditure, limited to Special Education Fund);
6. CY 2010 20% Component of the IRA Utilization, information detail to the
level of particulars of objects of expenditure on social development, economic
development and environmental management (Source Document – Local Budget
Preparation Form No. 3, titled, Program Appropriation and Obligation by Object of
Expenditure, limited to 20% Component of the Internal Revenue Allotment);
7. CY 2010 Gender and Development Fund Utilization, information detail to
the level of particulars of object expenditures (Source Document – Local Budget
Preparation Form No. 3, titled, Program Appropriation and Obligation by Object of
Expenditure, limited to Gender and Development Fund);
8. CY 2010 Statement of Debt Service, information detail to the level of name
of creditor, purpose of loan, date contracted, term, principal amount, previous
payment made on the principal and interest, amount due for the budget year and
balance of the principal (Source Document – Local Budget Preparation Form No.
6, titled, Statement of Debt Service);
9. CY 2010 Annual Procurement Plan or Procurement List, information detail
to the level of name of project, individual item or article and specification or
description of goods and services, procurement method, procuring office or fund
source, unit price or estimated cost or approved budget for the contract and
procurement schedule (Source Document – LGU Form No. 02, Makati City. For
sample form, please visit www.makati.gov.ph.)[;]
10. Items to Bid, information detail to the level of individual Invitation to Bid,
containing information as prescribed in Section 21.1 of Republic Act No. 9184, or
The Government Procurement Reform Act, to be updated quarterly (Source
Document – Invitation to Apply for Eligibility and to Bid, as prescribed in Section
21.1 of R.A. No. 9184. For sample form, please visit www.naga.gov.ph);
11. Bid Results on Civil Works, and Goods and Services, information detail to
the level of project reference number, name and location of project, name
(company and proprietor) and address of winning bidder, bid amount, approved
budget for the contract, bidding date, and contract duration, to be updated
quarterly (Source Document – Infrastructure Projects/Goods and Services Bid-Out
[2010], Naga City. For sample form, please visit www.naga.gov.ph); and
12. Abstract of Bids as Calculated, information detail to the level of project
name, location, implementing office, approved budget for the contract, quantity and
items subject for bidding, and bids of competing bidders, to be updated quarterly
(Source Document – Standard Form No. SF-GOOD-40, Revised May 24, 2004,
Naga City. For sample form, please visit www.naga.gov.ph).
The foregoing circular also states that noncompliance will be meted sanctions in
accordance with pertinent laws, rules and regulations.
On December 2, 2010, the respondent issued MC No. 2010-138, reiterating that
20% component of the IRA shall be utilized for desirable social, economic and
environmental outcomes essential to the attainment of the constitutional objective of a
quality of life for all. It also listed the following enumeration of expenses for which the
fund must not be utilized, viz.:
1. Administrative expenses such as cash gifts, bonuses, food allowance,
medical assistance, uniforms, supplies, meetings, communication, water and light,
petroleum products, and the like;
2. Salaries, wages or overtime pay;
3. Travelling expenses, whether domestic or foreign;
4. Registration or participation fees in training, seminars, conferences or
conventions;
5. Construction, repair or refinishing of administrative offices;
6. Purchase of administrative office furniture, fixtures, equipment or
appliances; and
7. Purchase, maintenance or repair of motor vehicles or motorcycles, except
ambulances.
On January 13, 2011, the respondent issued MC No. 2011-08, directing for the strict
adherence to Section 90 of R.A. No. 10147 or the General Appropriations Act of 2011.
The pertinent portion of the issuance reads as follows:
Legal and Administrative Authority
 Section 90 of Republic Act No. 10147 (General Appropriations Act) FY
2011 re “Use and Disbursement of Internal Revenue Allotment of LGUs”, [sic]
stipulates: The amount appropriated for the LGU’s share in the Internal Revenue
Allotment shall be used in accordance with Sections 17(g) and 287 of R.A. No
7160. The annual budgets of LGUs shall be prepared in accordance with the forms,
procedures, and schedules prescribed by the Department of Budget and
Management and those jointly issued with the Commission on Audit. Strict
compliance with Sections 288 and 354 of R.A. No. 7160 and DILG Memorandum
Circular No. 2010-83, entitled “Full Disclosure of Local Budget and Finances, and
Bids and Public offering” is hereby mandated; PROVIDED, That in addition to the
 publication or posting requirement under Section 352 of R.A. No. 7160 in three (3)
publicly accessible and conspicuous places in the local government unit, the LGUs
shall also post the detailed information on the use and disbursement, and status
of programs and projects in the LGUS websites. Failure to comply with these
requirements shall subject the responsible officials to disciplinary actions in
accordance with existing laws. x x x14
xxxx
Sanctions
Noncompliance with the foregoing shall be dealt with in accordance with
pertinent laws, rules and regulations. In particular, attention is invited to the
provision of the Local Government Code of 1991, quoted as follows:
Section 60. Grounds for Disciplinary Actions.—An elective local official may
be disciplined, suspended, or removed from office on: (c) Dishonesty, oppression,
misconduct in office, gross negligence, or dereliction of duty. x x x (Emphasis
and underscoring in the original)
On February 21, 2011, Villafuerte, then Governor of Camarines Sur, joined by the
Provincial Government of Camarines Sur, filed the instant petition for certiorari,
seeking to nullify the assailed issuances of the respondent for being unconstitutional
and having been issued with grave abuse of discretion.
On June 2, 2011, the respondent filed his Comment on the petition. Then, on
June 22, 2011, the petitioners filed their Reply (With Urgent Prayer for the Issuance of
a Writ of Preliminary Injunction and/or Temporary Restraining Order). In the
Resolution dated October 11, 2011, the Court gave due course to the petition and
directed the parties to file their respective memorandum. In compliance therewith, the
respondent and the petitioners filed their Memorandum on January 19, 2012 and on
February 8, 2012 respectively.
The petitioners raised the following issues:
Issues
I actual case or controversy, viz.:
THE HON. SECRETARY OF THE INTERIOR AND LOCAL GOVERNMENT
COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION WHEN HE ISSUED THE ASSAILED
MEMORANDUM CIRCULARS IN VIOLATION OF THE PRINCIPLES OF LOCAL
AUTONOMY AND FISCAL AUTONOMY ENSHRINED IN THE 1987
CONSTITUTION AND THE LOCAL GOVERNMENT CODE OF 1991[.]
II
THE HON. SECRETARY OF THE INTERIOR AND LOCAL GOVERNMENT
COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION WHEN HE INVALIDLY ASSUMED LEGISLATIVE
POWERS IN PROMULGATING THE ASSAILED MEMORANDUM CIRCULARS
WHICH WENT BEYOND THE CLEAR AND MANIFEST INTENT OF THE 1987
CONSTITUTION AND THE LOCAL GOVERNMENT CODE OF 1991[.]
Ruling of the Court
The present petition revolves around the main issue: Whether or not the assailed
memorandum circulars violate the principles of local and fiscal autonomy enshrined in
the Constitution and the LGC.
The present petition is ripe forjudicial review.
At the outset, the respondent is questioning the propriety of the exercise of the
Court’s power of judicial review over the instant case. He argues that the petition is
premature since there is yet any actual controversy that is ripe for judicial
determination. He points out the lack of allegation in the petition that the assailed
issuances had been fully implemented and that the petitioners had already exhausted
administrative remedies under Section 25 of the Revised Administrative Code before
filing the same in court.
It is well-settled that the Court’s exercise of the power of judicial review requires
the concurrence of the following elements: (1) there must be an actual case or
controversy calling for the exercise of judicial power; (2) the person challenging the
act must have the standing to question the validity of the subject act or issuance;
otherwise stated, he must have a personal and substantial interest in the case such
that he has sustained, or will sustain, direct injury as a result of its enforcement; (3)
the question of constitutionality must be raised at the earliest opportunity; and (4) the
issue of constitutionality must be the very lis mota of the case.
The respondent claims that there is yet any actual case or controversy that calls
for the exercise of judicial review. He contends that the mere expectation of an
administrative sanction does not give rise to a justiciable controversy especially, in
this case, that the petitioners have yet to exhaust administrative remedies available.
The Court disagrees.
In La Bugal-B’laan Tribal Association, Inc. v. Ramos, the Court characterized an
An actual case or controversy means an existing case or controversy that is
appropriate or ripe for determination, not conjectural or anticipatory, lest the
decision of the court would amount to an advisory opinion. The power does not
extend to hypothetical questions since any attempt at abstraction could only lead
to dialectics and barren legal questions and to sterile conclusions unrelated to
actualities. (Citations omitted)
The existence of an actual controversy in the instant case cannot be
overemphasized. At the time of filing of the instant petition, the respondent had
already implemented the assailed memorandum circulars. In fact, on May 26, 2011,
Villafuerte received Audit Observation Memorandum (AOM) No. 2011-009 dated May
10, 2011 from the Office of the Provincial Auditor of Camarines Sur, requiring him to
comment on the observation of the audit team, which states:
The Province failed to post the transactions and documents required under
Department of the Interior and Local Government (DILG) Memorandum Circular
 No. 2010-83, thereby violating the mandate of full disclosure of Local Budget and
Finances, and Bids and Public Offering.
xxxx
The local officials concerned are reminded of the sanctions mentioned in the
circular which is quoted hereunder, thus:
“Noncompliance with the foregoing shall be dealt with in accordance with
pertinent laws, rules and regulations. In particular, attention is invited to the
provision of Local Government Code of 1991, quoted as follows:
Section 60. Grounds for Disciplinary Actions.—An elective local official may
be disciplined, suspended or removed from office on: (c) Dishonesty, oppression,
misconduct in office, gross negligence or dereliction of duty.”
The issuance of AOM No. 2011-009 to Villafuerte is a clear indication that the
assailed issuances of the respondent are already in the full course of implementation.
The audit memorandum specifically mentioned of Villafuerte’s alleged noncompliance
with MC No. 2010-83 regarding the posting requirements stated in the circular and
reiterated the sanctions that may be imposed for the omission. The fact that
Villafuerte is being required to comment on the contents of AOM No. 2011-009
signifies that the process of investigation for his alleged violation has already begun.
Ultimately, the investigation is expected to end in a resolution on whether a violation
has indeed been committed, together with the appropriate sanctions that come with it.
Clearly, Villafuerte’s apprehension is real and well-founded as he stands to be
sanctioned for noncompliance with the issuances.
There is likewise no merit in the respondent’s claim that the petitioners’ failure to
exhaust administrative remedies warrants the dismissal of the petition. It bears
emphasizing that the assailed issuances were issued pursuant to the rule-making or
quasi-legislative power of the DILG. This pertains to “the power to make rules and
regulations which results in delegated legislation that is within the confines of the
granting statute.” Not to be confused with the quasi-legislative or rule-making power of
an administrative agency is its quasi-judicial or administrative adjudicatory power.
This is the power to hear and determine questions of fact to which the legislative
policy is to apply and to decide in accordance with the standards laid down by the law
itself in enforcing and administering the same law. In challenging the validity of an
administrative issuance carried out pursuant to the agency’s rule-making power, the
doctrine of exhaustion of administrative remedies does not stand as a bar in promptly
resorting to the filing of a case in court. This was made clear by the Court in Smart
Communications, Inc. (SMART) v. National Telecommunications Commission (NTC),
where it was ruled, thus:
In questioning the validity or constitutionality of a rule or regulation issued by
an administrative agency, a party need not exhaust administrative remedies before
going to court. This principle applies only where the act of the administrative
agency concerned was performed pursuant to its quasi-judicial function, and not
when the assailed act pertained to its rule-making or quasi-legislative power. x x x.
Considering the foregoing clarification, there is thus no bar for the Court to
resolve the substantive issues raised in the petition.
The assailed memorandum circulars do not transgress the local and fiscal
autonomy granted to LGUs.
The petitioners argue that the assailed issuances of the respondent interfere with
the local and fiscal autonomy of LGUs embodied in the Constitution and the LGC. In
particular, they claim that MC No. 2010-138 transgressed these constitutionally-
protected liberties when it restricted the meaning of “development” and enumerated
activities which the local government must finance from the 20% development fund
component of the IRA and provided sanctions for local authorities who shall use the
said component of the fund for the excluded purposes stated therein. They argue that
the respondent cannot substitute his own discretion with that of the local legislative
council in enacting its annual budget and specifying the development projects that the
20% component of its IRA should fund.
The argument fails to persuade.
The Constitution has expressly adopted the policy of ensuring the autonomy of
LGUs. To highlight its significance, the entire Article X of the Constitution was devoted
to laying down the bedrock upon which this policy is anchored.
It is also pursuant to the mandate of the Constitution of enhancing local autonomy
that the LGC was enacted. Section 2 thereof was a reiteration of the state policy. It
reads, thus:
Sec. 2. Declaration of Policy.—(a) It is hereby declared the policy of the
State that the territorial and political subdivisions of the State shall enjoy genuine
and meaningful local autonomy to enable them to attain their fullest development
as self-reliant communities and make them more effective partners in the
attainment of national goals. Toward this end, the State shall provide for a more
responsive and accountable local government structure instituted through a
system of decentralization whereby local government units shall be given more
powers, authority, responsibilities, and resources. The process of decentralization
shall proceed from the national government to the local government units.
Verily, local autonomy means a more responsive and accountable local
government structure instituted through a system of decentralization. In Limbona
v. Mangelin, the Court elaborated on the concept of decentralization, thus:
[A]utonomy is either decentralization of administration or decentralization of
power. There is decentralization of administration when the central government
delegates administrative powers to political subdivisions in order to broaden the
base of government power and in the process to make local governments “more
responsive and accountable,” and “ensure their fullest development as self-reliant
communities and make them more effective partners in the pursuit of national
development and social progress.” At the same time, it relieves the central
government of the burden of managing local affairs and enables it to concentrate
on national concerns. x x x.
Decentralization of power, on the other hand, involves an abdication of political
power in the favor of local governments [sic] units declared to be autonomous. In
 that case, the autonomous government is free to chart its own destiny and shape
its future with minimum intervention from central authorities. x x x. (Citations
omitted)
To safeguard the state policy on local autonomy, the Constitution confines the
power of the President over LGUs to mere supervision. “The President exercises
‘general supervision’ over them, but only to ‘ensure that local affairs are administered
according to law.’ He has no control over their acts in the sense that he can substitute
their judgments with his own.” Thus, Section 4, Article X of the Constitution, states:
Section 4. The President of the Philippines shall exercise general
supervision over local governments. Provinces with respect to component cities
and municipalities, and cities and municipalities with respect to
component barangays, shall ensure that the acts of their component units are
within the scope of their prescribed powers and functions.
In Province of Negros Occidental v. Commissioners, Commission on Audit, the
Court distinguished general supervision from executive control in the following
manner:
The President’s power of general supervision means the power of a superior
officer to see to it that subordinates perform their functions according to law. This
is distinguished from the President’s power of control which is the power to alter or
modify or set aside what a subordinate officer had done in the performance of his
duties and to substitute the judgment of the President over that of the subordinate
officer. The power of control gives the President the power to revise or reverse the
acts or decisions of a subordinate officer involving the exercise of discretion.
(Citations omitted)
It is the petitioners’ contention that the respondent went beyond the confines of
his supervisory powers, as alter ego of the President, when he issued MC No. 2010-
138. They argue that the mandatory nature of the circular, with the threat of
imposition of sanctions for noncompliance, evinces a clear desire to exercise control
over LGUs.
The Court, however, perceives otherwise.
A reading of MC No. 2010-138 shows that it is a mere reiteration of an existing
provision in the LGC. It was plainly intended to remind LGUs to faithfully observe the
directive stated in Section 287 of the LGC to utilize the 20% portion of the IRA for
development projects. It was, at best, an advisory to LGUs to examine themselves if
they have been complying with the law. It must be recalled that the assailed circular
was issued in response to the report of the COA that a substantial portion of the 20%
development fund of some LGUs was not actually utilized for development projects
but was diverted to expenses more properly categorized as MOOE, in violation of
Section 287 of the LGC. This intention was highlighted in the very first paragraph of
MC No. 2010-138, which reads:
Section 287 of the Local Government Code mandates every local government
to appropriate in its annual budget no less than 20% of its annual revenue allotment
for development projects. In common understanding, development means the
realization of desirable social, economic and environmental outcomes essential in
the attainment of the constitutional objective of a desired quality of life for
all. (Underscoring in the original)
That the term development was characterized as the “realization of desirable
social, economic and environmental outcome” does not operate as a restriction of the
term so as to exclude some other activities that may bring about the same result. The
definition was a plain characterization of the concept of development as it is
commonly understood. The statement of a general definition was only necessary to
illustrate among LGUs the nature of expenses that are properly chargeable against
the development fund component of the IRA. It is expected to guide them and aid
them in rethinking their ways so that they may be able to rectify lapses in judgment,
should there be any, or it may simply stand as a reaffirmation of an already proper
administration of expenses.
The same clarification may be said of the enumeration of expenses in MC No.
2010-138. To begin with, it is erroneous to call them exclusions because such a term
signifies compulsory disallowance of a particular item or activity. This is not the
contemplation of the enumeration. Again, it is helpful to retrace the very reason for
the issuance of the assailed circular for a better understanding. The petitioners should
be reminded that the issuance of MC No. 2010-138 was brought about by the report
of the COA that the development fund was not being utilized accordingly. To curb the
alleged misuse of the development fund, the respondent deemed it proper to remind
LGUs of the nature and purpose of the provision for the IRA through MC No. 2010-
138. To illustrate his point, he included the contested enumeration of the items for
which the development fund must generally not be used. The enumerated items
comprised the expenses which the COA perceived to have been improperly
earmarked or charged against the development fund based on the audit it conducted.
Contrary to the petitioners’ posturing, however, the enumeration was not meant to
restrict the discretion of the LGUs in the utilization of their funds. It was meant to
enlighten LGUs as to the nature of the development fund by delineating it from other
types of expenses. It was incorporated in the assailed circular in order to guide them
in the proper disposition of the IRA and avert further misuse of the fund by citing
current practices which seemed to be incompatible with the purpose of the fund. Even
then, LGUs remain at liberty to map out their respective development plans solely on
the basis of their own judgment and utilize their IRAs accordingly, with the only
restriction that 20% thereof be expended for development projects. They may even
spend their IRAs for some of the enumerated items should they partake of indirect
costs of undertaking development projects. In such case, however, the concerned
LGU must ascertain that applicable rules and regulations on budgetary allocation
have been observed lest it be inviting an administrative probe.
 The petitioners likewise misread the issuance by claiming that the provision of
sanctions therein is a clear indication of the President’s interference in the fiscal
autonomy of LGUs. The relevant portion of the assailed issuance reads, thus:
All local authorities are further reminded that utilizing the 20% component of
the Internal Revenue Allotment, whether willfully or through negligence, for any
purpose beyond those expressly prescribed by law or public policy shall be subject
to the sanctions provided under the Local Government Code and under such other
applicable laws.
Significantly, the issuance itself did not provide for sanctions. It did not particularly
establish a new set of acts or omissions which are deemed violations and provide the
corresponding penalties therefor. It simply stated a reminder to LGUs that there are
existing rules to consider in the disbursement of the 20% development fund and that
noncompliance therewith may render them liable to sanctions which are provided in
the LGC and other applicable laws. Nonetheless, this warning for possible imposition
of sanctions did not alter the advisory nature of the issuance.
At any rate, LGUs must be reminded that the local autonomy granted to them
does not completely severe them from the national government or turn them into
impenetrable states. Autonomy does not make local governments sovereign within
the state. In Ganzon v. Court of Appeals,47 the Court reiterated:
Autonomy, however, is not meant to end the relation of partnership and
interdependence between the central administration and local government units,
or otherwise, to usher in a regime of federalism. The Charter has not taken such a
radical step. Local governments, under the Constitution, are subject to regulation,
however limited, and for no other purpose than precisely, albeit paradoxically, to
enhance self-government.
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.”
Clearly then, the President’s power of supervision is not antithetical to
investigation and imposition of sanctions. In Hon. Joson v. Exec. Sec. Torres,50 the
Court pointed out, thus:
Independently of any statutory provision authorizing the President to conduct
an investigation of the nature involved in this proceeding, and in view of the nature
and character of the executive authority with which the President of the Philippines
is invested, the constitutional grant to him of power to exercise general supervision
over all local governments and to take care that the laws be faithfully executed
must be construed to authorize him to order an investigation of the act or conduct
of the petitioner herein. Supervision is not a meaningless thing. It is an active
power. It is certainly not without limitation, but it at least implies authority to inquire
into facts and conditions in order to render the power real and effective. x x x.”
(Emphasis ours and italics in the original)
As in MC No. 2010-138, the Court finds nothing in two other questioned
issuances of the respondent, i.e., MC Nos. 2010-83 and 2011-08, that can be
construed as infringing on the fiscal autonomy of LGUs. The petitioners claim that the
requirement to post other documents in the mentioned issuances went beyond the
letter and spirit of Section 352 of the LGC and R.A. No. 9184, otherwise known as the
Government Procurement Reform Act, by requiring that budgets, expenditures,
contracts and loans, and procurement plans of LGUs be publicly posted as well.
Pertinently, Section 352 of the LGC reads:
Section 352. Posting of the Summary of Income and Expenditures.—Local
treasurers, accountants, budget officers, and other accountable officers shall,
within thirty (30) days from the end of the fiscal year, post in at least three (3)
publicly accessible and conspicuous places in the local government unit a
summary of all revenues collected and funds received including the appropriations
and disbursements of such funds during the preceding fiscal year.
R.A. No. 9184, on the other hand, requires the posting of the invitation to bid,
notice of award, notice to proceed, and approved contract in the procuring entity’s
premises, in newspapers of general circulation, and the website of the procuring
entity.
It is well to remember that fiscal autonomy does not leave LGUs with unbridled
discretion in the disbursement of public funds. They remain accountable to their
constituency. For, public office was created for the benefit of the people and not the
person who holds office.
The Court strongly enunciated in ABAKADA GURO Party List (formerly AASJS),
et al. v. Hon. Purisima, et al., thus:
Public office is a public trust. It must be discharged by its holder not for his
own personal gain but for the benefit of the public for whom he holds it in trust. By
demanding accountability and service with responsibility, integrity, loyalty,
efficiency, patriotism and justice, all government officials and employees have the
duty to be responsive to the needs of the people they are called upon to serve.
Thus, the Constitution strongly summoned the State to adopt and implement a
policy of full disclosure of all transactions involving public interest and provide the
people with the right to access public information.56 Section 352 of the LGC is a
response to this call for transparency. It is a mechanism of transparency and
accountability of local government officials and is in fact incorporated under Chapter
IV of the LGC which deals with “Expenditures, Disbursements, Accounting and
Accountability.”
 In the same manner, R.A. No. 9184 established a system of transparency in the
procurement process and in the implementation of procurement contracts in
government agencies. It is the public monitoring of the procurement process and the
implementation of awarded contracts with the end in view of guaranteeing that these
contracts are awarded pursuant to the provisions of the law and its implementing
rules and regulations, and that all these contracts are performed strictly according to
specifications.
The assailed issuances of the respondent, MC Nos. 2010-83 and 2011-08, are
but implementation of this avowed policy of the State to make public officials
accountable to the people. They are amalgamations of existing laws, rules and
regulation designed to give teeth to the constitutional mandate of transparency and
accountability.
A scrutiny of the contents of the mentioned issuances shows that they do not, in
any manner, violate the fiscal autonomy of LGUs. To be clear, “[f]iscal autonomy
means that local governments have the power to create their own sources of revenue
in addition to their equitable share in the national taxes released by the national
government, as well as the power to allocate their resources in accordance with their
own priorities. It extends to the preparation of their budgets, and local officials in turn
have to work within the constraints thereof.”
It is inconceivable, however, how the publication of budgets, expenditures,
contracts and loans and procurement plans of LGUs required in the assailed
issuances could have infringed on the local fiscal autonomy of LGUs. Firstly, the
issuances do not interfere with the discretion of the LGUs in the specification of their
priority projects and the allocation of their budgets. The posting requirements are
mere transparency measures which do not at all hurt the manner by which LGUs
decide the utilization and allocation of their funds.
Secondly, it appears that even Section 352 of the LGC that is being invoked by
the petitioners does not exclude the requirement for the posting of the additional
documents stated in MC Nos. 2010-83 and 2011-08. Apparently, the mentioned
provision requires the publication of “a summary of revenues collected and funds
received, including the appropriations and disbursements of such funds.” The
additional requirement for the posting of budgets, expenditures, contracts and loans,
and procurement plans are well-within the contemplation of Section 352 of the LGC
considering they are documents necessary for an accurate presentation of a
summary of appropriations and disbursements that an LGU is required to publish.
Finally, the Court believes that the supervisory powers of the President are broad
enough to embrace the power to require the publication of certain documents as a
mechanism of transparency. In Pimentel, Jr. v. Hon. Aguirre, the Court reminded that
local fiscal autonomy does not rule out any manner of national government
intervention by way of supervision, in order to ensure that local programs, fiscal and
otherwise, are consistent with national goals. The President, by constitutional fiat, is
the head of the economic and planning agency of the government, primarily
responsible for formulating and implementing continuing, coordinated and integrated
social and economic policies, plans and programs for the entire country.
Moreover, the Constitution, which was drafted after long years of dictatorship and
abuse of power, is now replete with numerous provisions directing the adoption of
measures to uphold transparency and accountability in government, with a view of
protecting the nation from repeating its atrocious past. In particular, the Constitution
commands the strict adherence to full disclosure of information on all matters relating
to official transactions and those involving public interest. Pertinently, Section 28,
Article II and Section 7, Article III of the Constitution, provide:
Article II
Declaration of Principles and State Policies Principles
Section 28. Subject to reasonable conditions prescribed by law, the State
adopts and implements a policy of full public disclosure of all its transactions
involving public interest.
Article III
Bill of Rights
Section 7. The right of the people to information on matters of public
concern shall be recognized. Access to official records, and to documents and
papers pertaining to official acts, transactions, or decisions, as well as to
government research data used as basis for policy development, shall be afforded
the citizen, subject to such limitations as may be provided by law.
In the instant case, the assailed issuances were issued pursuant to the policy of
promoting good governance through transparency, accountability and participation.
The action of the respondent is certainly within the constitutional bounds of his power
as alter ego of the President.
It is needless to say that the power to govern is a delegated authority from the
people who hailed the public official to office through the democratic process of
election. His stay in office remains a privilege which may be withdrawn by the people
should he betray his oath of office. Thus, he must not frown upon accountability
checks which aim to show how well he is performing his delegated power. For, it is
through these mechanisms of transparency and accountability that he is able to prove
to his constituency that he is worthy of the continued privilege.
WHEREFORE, in view of the foregoing considerations, the petition
is DISMISSED for lack of merit.
SO ORDERED.
Notes.—It is axiomatic that organic acts of autonomous regions cannot prevail
over the constitution. (Sema vs. Commission on Elections, 558 SCRA 700 [2008])
 Consistent with the declared policy to provide local government units genuine and
meaningful local autonomy, contiguity and minimum land area requirements for
prospective local government units should be liberally construed in order to achieve
the desired results; The land area requirement should be read together with territorial
contiguity. (Navarro vs. Ermita, 648 SCRA 400 [2011])

——o0o——
 G.R. No. 175368. April 11, 2013.
LEAGUE OF PROVINCES OF THE PHILIPPINES, petitioner, vs. DEPARTMENT OF
ENVIRONMENT and NATURAL RESOURCES and HON. ANGELO T. REYES, in
his capacity as Secretary of DENR, respondents.
Constitutional Law; National Economy and Patrimony; Mines and Mining; Paragraph 1 of
Section 2, Article XII (National Economy and Patrimony) of the Constitution provides that the
exploration, development and utilization of natural resources shall be under the full control and
supervision of the State; Pursuant to Section 2, Article XII of the Constitution, R.A. No. 7076 or
the People’s Small-Scale Mining Act of 1991, was enacted, establishing under Section 4 thereof
a People’s Small-Scale Mining Program to be implemented by the Department of Environment
and Natural Resources (DENR) Secretary in coordination with other concerned government
agencies.—Paragraph 1 of Section 2, Article XII (National Economy and Patrimony) of the
Constitution provides that “[t]he exploration, development and utilization of natural resources
shall be under the full control and supervision of the State.” Moreover, paragraph 3 of Section 2,
Article XII of the Constitution provides that “[t]he Congress may, by law, allow small-scale
utilization of natural resources by Filipino citizens x x x.” Pursuant to Section 2, Article XII of the
Constitution, R.A. No. 7076 or the People’s Small-Scale Mining Act of 1991, was enacted,
establishing under Section 4 thereof a People’s Small-Scale Mining Program to be implemented
by the DENR Secretary in coordination with other concerned government agencies.
Same; Same; Same; The People’s Small-Scale Mining Act of 1991 (R.A. No. 7076);
Small-Scale Mining; Words and Phrases; The People’s Small-Scale Mining Act of 1991 defines
“small-scale mining” as referring to mining activities, which rely heavily on manual labor using
simple implement and methods and do not use explosives or heavy mining equipment.—The
People’s Small-Scale Mining Act of 1991 defines “small-scale mining” as “refer[ring] to mining
activities, which rely heavily on manual labor using simple implement and methods and do not
use explosives or heavy mining equipment.” It should be pointed out that the Administrative
Code of 1987 provides that the DENR is, subject to law and higher authority, in charge of
carrying out the State’s constitutional mandate, under Section 2, Article XII of the Constitution, to
control and supervise the exploration, development, utilization and conservation of the country’s
natural resources. Hence, the enforcement of small-scale mining law in the provinces is made
subject to the supervision, control and review of the DENR under the Local Government Code of
1991, while the People’s Small-Scale Mining Act of 1991 provides that the People’s Small-Scale
Mining Program is to be implemented by the DENR Secretary in coordination with other
concerned local government agencies.
Same; Local Government Units; Administrative Autonomy; Administrative autonomy may
involve devolution of powers, but subject to limitations like following national policies or
standards, and those provided by the Local Government Code, as the structuring of local
governments and the allocation of powers, responsibilities, and resources among the different
local government units and local officials have been placed by the Constitution in the hands of
Congress under Section 3, Article X of the Constitution.—Indeed, Section 4, Article X (Local
Government) of the Constitution states that “[t]he President of the Philippines shall exercise
general supervision over local governments,” and Section 25 of the Local Government Code
reiterates the same. General supervision by the President means no more than seeing to it that
laws are faithfully executed or that subordinate officers act within the law. The Court has clarified
that the constitutional guarantee of local autonomy in the Constitution [Art.X, Sec. 2] refers to the
administrative autonomy of local government units or, cast in more technical language, the
decentralization of government authority. It does not make local governments sovereign within
the State. Administrative autonomy may involve devolution of powers, but subject to limitations
like following national policies or standards, and those provided by the Local Government Code,
as the structuring of local governments and the allocation of powers, responsibilities, and
resources among the different local government units and local officials have been placed by the
Constitution in the hands of Congress under Section 3, Article X of the Constitution.
Same; Same; Same; National Economy and Patrimony; Mines and Mining; The People’s
Small-Scale Mining Act of 1991 (R.A. No. 7076); Small-Scale Mining; The Local Government
Code did not fully devolve the enforcement of the small-scale mining law to the provincial
government, as its enforcement is subject to the supervision, control and review of the
Department of Environment and Natural Resources (DENR), which is in charge, subject to law
and higher authority, of carrying out the State’s constitutional mandate to control and supervise
the exploration, development, utilization of the country’s natural resources.—Clearly, the Local
Government Code did not fully devolve the enforcement of the small-scale mining law to the
provincial government, as its enforcement is subject to the supervision, control and review of the
DENR, which is in charge, subject to law and higher authority, of carrying out the State’s
constitutional mandate to control and supervise the exploration, development, utilization of the
country’s natural resources. Section 17 (b)(3)(iii) of the Local Government Code of 1991 is in
harmony with R.A. No. 7076 or the People’s Small-Scale Mining Act of 1991, which established
a People’s Small-Scale Mining Program to be implemented by the Secretary of the DENR.
Same; National Economy and Patrimony; Mines and Mining; The People’s Small-Scale
Mining Act of 1991 (R.A. No. 7076); Small-Scale Mining; The settlement of disputes over
conflicting claims in small-scale mining is provided for in Section 24 of R.A. No. 7076.—The
settlement of disputes over conflicting claims in small-scale mining is provided for in Section 24
of R.A. No. 7076, thus: Sec. 24. Provincial/City Mining Regulatory Board.—There is hereby
created under the direct supervision and control of the Secretary a provincial/city mining
regulatory board, herein called the Board, which shall be the implementing agency of the
Department, and shall exercise the following powers and functions, subject to review by the
Secretary: x x x x (e) Settle disputes, conflicts or litigations over conflicting claims within a
people’s small-scale mining area, an area that is declared a small mining area; x x x Section 24,
paragraph (e) of R.A. No. 7076 cited above is reflected in Section 22, paragraph 22.5 of the
Implementing Rules and Regulations of R.A. No. 7076, to wit: SEC. 22. Provincial/City Mining
Regulatory Board.—The Provincial/City Mining Regulatory Board created under R.A. No. 7076
shall exercise the following powers and functions, subject to review by the Secretary: x x x x
22.5 Settles disputes, conflicts or litigations over conflicting claims within ninety (90) days upon
filing of protests or complaints; Provided, That any aggrieved party may appeal within five (5)
days from the Board’s decision to the Secretary for final resolution otherwise the same is
considered final and executory.
Same; Same; Same; Same; The Department of Environment and Natural Resources
(DENR) Secretary’s power to review and, therefore, decide the issue on the validity of the
issuance of the Small-Scale Mining Permits by the Provincial Governor as recommended by the
Provincial Mining Regulatory Board (PMRB), is a quasi-judicial function, which involves the
determination of what the law is, and what the legal rights of the contending parties are, with
respect to the matter in controversy and, on the basis thereof and the facts obtaining, the
adjudication of their respective rights.—The decision of the DENR Secretary, declaring that the
Application for Exploration Permit of AMTC was valid and may be given due course, and
canceling the Small-Scale Mining Permits issued by the Provincial Governor, emanated from the
power of review granted to the DENR Secretary under R.A. No. 7076 and its Implementing
Rules and Regulations. The DENR Secretary’s power to review and, therefore, decide, in this
case, the issue on the validity of the issuance of the Small-Scale Mining Permits by the
Provincial Governor as recommended by the PMRB, is a quasi-judicial function, which involves
the determination of what the law is, and what the legal rights of the contending parties are, with
respect to the matter in controversy and, on the basis thereof and the facts obtaining, the
adjudication of their respective rights. The DENR Secretary exercises quasi-judicial function
under R.A. No. 7076 and its Implementing Rules and Regulations to the extent necessary in
settling disputes, conflicts or litigations over conflicting claims. This quasi-judicial function of the
DENR Secretary can neither be equated with “substitution of judgment” of the Provincial
Governor in issuing Small-Scale Mining Permits nor “control” over the said act of the Provincial
Governor as it is a determination of the rights of AMTC over conflicting claims based on the law.
Same; Statutes; The fundamental criterion is that all reasonable doubts should be
resolved in favor of the constitutionality of a statute. Every law has in its favor the presumption of
constitutionality.—In determining whether Section 17 (b)(3)(iii) of the Local Government Code of
1991 and Section 24 of R.A. No. 7076 are unconstitutional, the Court has been guided
by Beltran v. The Secretary of Health, 476 SCRA 168 (2005), which held: The fundamental
criterion is that all reasonable doubts should be resolved in favor of the constitutionality of a
statute. Every law has in its favor the presumption of constitutionality. For a law to be nullified, it
must be shown that there is a clear and unequivocal breach of the Constitution. The ground for
nullity must be clear and beyond reasonable doubt. Those who petition this Court to declare a
law, or parts thereof, unconstitutional must clearly establish the basis therefor. Otherwise, the
petition must fail. In this case, the Court finds that the grounds raised by petitioner to challenge
the constitutionality of Section 17 (b)(3)(iii) of the Local Government Code of 1991 and Section
24 of R.A. No. 7076 failed to overcome the constitutionality of the said provisions of law.
PERALTA, J.:
This is a petition for certiorari, prohibition and mandamus, praying that this Court
order the following: (1) declare as unconstitutional Section 17(b)(3)(iii) of Republic Act
(R.A.) No. 7160, otherwise known as The Local Government Code of 1991 and
Section 24 of Republic Act (R.A.) No. 7076, otherwise known as the People’s Small-
Scale Mining Act of 1991; (2) prohibit and bar respondents from exercising control
over provinces; and (3) declare as illegal the respondent Secretary of the Department
of Environment and Natural Resources’ (DENR) nullification, voiding and cancellation
of the Small-Scale Mining permits issued by the Provincial Governor of Bulacan.
The facts are as follows:
On March 28, 1996, Golden Falcon Mineral Exploration Corporation (Golden
Falcon) filed with the DENR Mines and Geosciences Bureau Regional Office No. III
(MGB R-III) an Application for Financial and Technical Assistance Agreement (FTAA)
covering an area of 61,136 hectares situated in the Municipalities of San Miguel, San
Ildefonso, Norzagaray and San Jose del Monte, Bulacan.
On April 29, 1998, the MGB R-III issued an Order denying Golden Falcon’s
Application for Financial and Technical Assistance Agreement for failure to secure
area clearances from the Forest Management Sector and Lands Management Sector
of the DENR Regional Office No. III.
On November 11, 1998, Golden Falcon filed an appeal with the DENR Mines and
Geosciences Bureau Central Office (MGB-Central Office), and sought reconsideration
of the Order dated April 29, 1998.
On February 10, 2004, while Golden Falcon’s appeal was pending, Eduardo D.
Mercado, Benedicto S. Cruz, Gerardo R. Cruz and Liberato Sembrano filed with the
Provincial Environment and Natural Resources Office (PENRO) of Bulacan their
respective Applications for Quarry Permit (AQP), which covered the same area
subject of Golden Falcon’s Application for Financial and Technical Assistance
Agreement.
On July 16, 2004, the MGB-Central Office issued an Order denying Golden
Falcon’s appeal and affirming the MGB R-III’s Order dated April 29, 1998.
On September 13, 2004, Atlantic Mines and Trading Corporation (AMTC) filed
with the PENRO of Bulacan an Application for Exploration Permit (AEP) covering
5,281 hectares of the area covered by Golden Falcon’s Application for Financial and
Technical Assistance Agreement.
On October 19, 2004, DENR-MGB Director Horacio C. Ramos, in response to
MGB R-III Director Arnulfo V. Cabantog’s memorandum query dated September 8,
2004, categorically stated that the MGB-Central Office’s Order dated July 16, 2004
became final on August 11, 2004, fifteen (15) days after Golden Falcon received the
said Order, per the Certification dated October 8, 2004 issued by the Postmaster II of
the Philippine Postal Corporation of Cainta, Rizal.
Through letters dated May 5 and May 10, 2005, AMTC notified the PENRO of
Bulacan and the MGB R-III Director, respectively, that the subject Applications for
Quarry Permit fell within its (AMTC’s) existing valid and prior Application for
Exploration Permit, and the former area of Golden Falcon was open to mining
location only on August 11, 2004 per the Memorandum dated October 19, 2004 of the
MGB Director, Central Office.
On June 24, 2005, Ricardo Medina, Jr., PENRO of Bulacan, indorsed AMTC’s
letter to the Provincial Legal Officer, Atty. Eugenio F. Resurreccion, for his legal
opinion on which date of denial of Golden Falcon’s application/appeal—April 29, 1998
or July 16, 2004—is to be considered in the deliberation of the Provincial Mining
Regulatory Board (PMRB) for the purpose of determining when the land subject of the
Applications for Quarry Permit could be considered open for application.
On June 28, 2005, Provincial Legal Officer Eugenio Resurreccion issued a legal
opinion stating that the Order dated July 16, 2004 of the MGB-Central Office was a
mere reaffirmation of the Order dated April 29, 1998 of the MGB R-III; hence, the
Order dated April 29, 1998 should be the reckoning period of the denial of the
application of Golden Falcon.
On July 22, 2005, AMTC filed with the PMRB of Bulacan a formal protest against
the aforesaid Applications for Quarry Permit on the ground that the subject area was
already covered by its Application for Exploration Permit.
On August 8, 2005, MGB R-III Director Cabantog, who was the concurrent
Chairman of the PMRB, endorsed to the Provincial Governor of Bulacan, Governor
Josefina M. dela Cruz, the aforesaid Applications for Quarry Permit that had
apparently been converted to Applications for Small-Scale Mining Permit of Eduardo
D. Mercado, Benedicto S. Cruz, Gerardo R. Cruz and Lucila S. Valdez (formerly
Liberato Sembrano).
On August 9, 2005, the PENRO of Bulacan issued four memoranda
recommending to Governor Dela Cruz the approval of the aforesaid Applications for
Small-Scale Mining Permit.
On August 10, 2005, Governor Dela Cruz issued the corresponding Small-Scale
Mining Permits in favor of Eduardo D. Mercado, Benedicto S. Cruz, Gerardo R. Cruz
and Lucila S. Valdez.
Subsequently, AMTC appealed to respondent DENR Secretary the grant of the
aforesaid Small-Scale Mining Permits, arguing that: (1) The PMRB of Bulacan erred
in giving due course to the Applications for Small-Scale Mining Permit without first
resolving its formal protest; (2) The areas covered by the Small-Scale Mining Permits
fall within the area covered by AMTC’s valid prior Application for Exploration Permit;
(3) The Applications for Quarry Permit were illegally converted to Applications for
Small-Scale Mining Permit; (4) DENR-MGB Director Horacio C. Ramos’ ruling that
the subject areas became open for mining location only on August 11, 2004 was
controlling; (5) The Small-Scale Mining Permits were null and void because they
covered areas that were never declared People’s Small-Scale Mining Program sites
as mandated by Section 4 of the People’s Small-Scale Mining Act of 1991; and (6)
Iron ore is not considered as one of the quarry resources, as defined by Section 43 of
the Philippine Mining Act of 1995, which could be subjects of an Application for
Quarry Permit.
On August 8, 2006, respondent DENR Secretary rendered a Decision in favor of
AMTC. The DENR Secretary agreed with MGB Director Horacio C. Ramos that the
area was open to mining location only on August 11, 2004, fifteen (15) days after the
receipt by Golden Falcon on July 27, 2004 of a copy of the MGB-Central Office’s
Order dated July 16, 2004, which Order denied Golden Falcon’s appeal. According to
the DENR Secretary, the filing by Golden Falcon of the letter-appeal suspended the
finality of the Order of denial issued on April 29, 1998 by the Regional Director until
the resolution of the appeal on July 16, 2004 by the MGB Central Office. He stated
that the Applications for Quarry Permit were filed on February 10, 2004 when the area
was still closed to mining location; hence, the Small-Scale Mining Permits granted by
the PMRB and the Governor were null and void. On the other hand, the DENR
Secretary declared that AMTC filed its Application for Exploration Permit when the
area was already open to other mining applicants; thus, AMTC’s Application for
Exploration Permit was valid. Moreover, the DENR Secretary held that the questioned
Small-Scale Mining Permits were issued in violation of Section 4 of R.A. No. 7076
and beyond the authority of the Provincial Governor pursuant to Section 43 of R.A.
No. 7942, because the area was never proclaimed to be under the People’s Small-
Scale Mining Program. Further, the DENR Secretary stated that iron ore mineral is
not considered among the quarry resources.
The dispositive portion of the DENR Secretary’s Decision reads:
WHEREFORE, the Application for Exploration Permit, AEP-III-02-04 of
Atlantic Mines and Trading Corp. is declared valid and may now be given due
course. The Small-Scale Mining Permits, SSMP-B-002-05 of Gerardo Cruz,
SSMP-B-003-05 of Eduardo D. Mercado, SSMP-B-004-05 of Benedicto S. Cruz
and SSMP-B-005-05 of Lucila S. Valdez are declared NULL AND VOID.
Consequently, the said permits are hereby CANCELLED.
Hence, petitioner League of Provinces filed this petition.
Petitioner is a duly organized league of local governments incorporated under
R.A. No. 7160. Petitioner declares that it is composed of 81 provincial governments,
including the Province of Bulacan. It states that this is not an action of one province
alone, but the collective action of all provinces through the League, as a favorable
ruling will not only benefit one province, but all provinces and all local governments.
Petitioner raises these issues:
I
WHETHER OR NOT SECTION 17(B)(3)(III) OF THE, 1991 LOCAL
GOVERNMENT CODE AND SECTION 24 OF THE PEOPLE’S SMALL-SCALE
MINING ACT OF 1991 ARE UNCONSTITUTIONAL FOR PROVIDING FOR
EXECUTIVE CONTROL AND INFRINGING UPON THE LOCAL AUTONOMY OF
PROVINCES.
II
WHETHER OR NOT THE ACT OF RESPONDENT [DENR] IN NULLIFYING,
VOIDING AND CANCELLING THE SMALL-SCALE MINING PERMITS
AMOUNTS TO EXECUTIVE CONTROL, NOT MERELY SUPERVISION AND
USURPS THE DEVOLVED POWERS OF ALL PROVINCES.
To start, the Court finds that petitioner has legal standing to file this petition
because it is tasked under Section 504 of the Local Government Code of 1991 to
promote local autonomy at the provincial level; adopt measures for the promotion of
the welfare of all provinces and its officials and employees; and exercise such other
powers and perform such other duties and functions as the league may prescribe for
the welfare of the provinces.

Before this Court determines the validity of an act of a co-equal and coordinate
branch of the Government, it bears emphasis that ingrained in our jurisprudence is
the time-honored principle that a statute is presumed to be valid. This presumption is
rooted in the doctrine of separation of powers which enjoins upon the three
coordinate departments of the Government a becoming courtesy for each other’s
acts. This Court, however, may declare a law, or portions thereof, unconstitutional
where a petitioner has shown a clear and unequivocal breach of the Constitution,
leaving no doubt or hesitation in the mind of the Court.
In this case, petitioner admits that respondent DENR Secretary had the authority
to nullify the Small-Scale Mining Permits issued by the Provincial Governor of
Bulacan, as the DENR Secretary has control over the PMRB, and the implementation
of the Small-Scale Mining Program is subject to control by respondent DENR.
Control of the DENR/DENR Secretary over small-scale mining in the provinces is
granted by three statutes: (1) R.A. No. 7061 or The Local Government Code of 1991;
(2) R.A. No. 7076 or the People’s Small Scale Mining Act of 1991; and (3) R.A. No.
7942, otherwise known as the Philippine Mining Act of 1995. The pertinent provisions
of law sought to be declared as unconstitutional by petitioner are as follows:
R.A. No. 7061 (The Local Government Code of 1991)
SEC. 17. Basic Services and Facilities.—(a) Local government units shall
endeavor to be self-reliant and shall continue exercising the powers and
discharging the duties and functions currently vested upon them. They shall also
discharge the functions and responsibilities of national agencies and offices
devolved to them pursuant to this Code. Local government units shall likewise
exercise such other powers and discharge such other functions and
responsibilities as are necessary, appropriate, or incidental to efficient and
effective provision of the basic services and facilities enumerated herein.
(b) Such basic services and facilities include, but are not limited to, the
following:
xxxx
(3) For a Province:
xxxx
(iii) Pursuant to national policies and subject
supervision, control and review of the DENR, enforcement of forestry laws
limited to community-based forestry projects, pollution control law, small-scale
mining law, and other laws on the protection of the environment; and mini-hydro
electric projects for local purposes; x x x
R.A. No. 7076 (People’s Small-Scale Mining Act of 1991)
Sec. 24. Provincial/City Mining Regulatory Board.—There is hereby
created under the direct supervision and control of the Secretary a
provincial/city mining regulatory board, herein called the Board, which shall be the
implementing agency of the Department, and shall exercise the following powers
and functions, subject to review by the Secretary:
(a) Declare and segregate existing gold-rush areas for small-scale mining;
(b) Reserve future gold and other mining areas for small-scale mining;
(c) Award contracts to small-scale miners;
(d) Formulate and implement rules and regulations related to small-scale mining;
(e) Settle disputes, conflicts or litigations over conflicting claims within a people’s
small-scale mining area, an area that is declared a small-mining; and
(f) Perform such other functions as may be necessary to achieve the goals and
objectives of this Act.
Petitioner contends that the aforecited laws and DENR Administrative Order No.
9640 (the Implementing Rules and Regulations of the Philippine Mining Act of 1995)
did not explicitly confer upon respondents DENR and the DENR Secretary the power
to reverse, abrogate, nullify, void, or cancel the permits issued by the Provincial
Governor or small-scale mining contracts entered into by the PMRB. The statutes are
also silent as to the power of respondent DENR Secretary to substitute his own
judgment over that of the Provincial Governor and the PMRB.
Moreover, petitioner contends that Section 17 (b)(3)(iii) of the Local Government
Code of 1991 and Section 24 of R.A. No. 7076, which confer upon respondents
DENR and the DENR Secretary the power of control are unconstitutional, as the
Constitution states that the President (and Executive Departments and her alter-egos)
has the power of supervision only, not control, over acts of the local government
units, and grants the local government units autonomy, thus:
The 1987 Constitution:
Article X, Section 4. The President of the Philippines shall
exercise general supervision over local governments. Provinces with respect
to component cities and municipalities, and cities and municipalities with respect
to component barangays, shall ensure that the acts of their component units are
within the scope of their prescribed powers and functions.
Petitioner contends that the policy in the above-cited constitutional provision is
mirrored in the Local Government Code, which states:
SEC. 25. National Supervision over Local Government Units.—(a)
Consistent with the basic policy on local autonomy, the President shall exercise
general supervision over local government units to ensure that their acts are
within the scope of their prescribed powers and functions.
The President shall exercise supervisory authority directly over provinces,
to highly urbanized cities, and independent component cities; through the province
with respect to component cities and municipalities; and through the city and
municipality with respect to barangays.
Petitioner contends that the foregoing provisions of the Constitution and the Local
Government Code of 1991 show that the relationship between the President and the
Provinces or respondent DENR, as the alter ego of the President, and the Province of
Bulacan is one of executive supervision, not one of executive control. The term
“control” has been defined as the power of an officer to alter or modify or set aside
what a subordinate officer had done in the performance of his/her duties and to
substitute the judgment of the former for the latter, while the term “supervision” is the
power of a superior officer to see to it that lower officers perform their function in
accordance with law.
 Petitioner argues that respondent DENR Secretary went beyond mere executive
supervision and exercised control when he nullified the small-scale mining permits
granted by the Provincial Governor of Bulacan, as the former substituted the
judgment of the latter.
Petitioner asserts that what is involved here is a devolved power. Under the Local
Government Code of 1991, the power to regulate small-scale mining has been
devolved to all provinces. In the exercise of devolved powers, departmental approval
is not necessary.
Petitioner contends that if the provisions in Section 24 of R.A. No. 7076 and
Section 17 (b)(3)(iii) of the Local Government Code of 1991 granting the power of
control to the DENR/DENR Secretary are not nullified, nothing would stop the DENR
Secretary from nullifying, voiding and canceling the small-scale mining permits that
have been issued by a Provincial Governor.
Petitioner submits that the statutory grant of power of control to respondents is
unconstitutional, as the Constitution only allows supervision over local governments
and proscribes control by the executive departments.
In its Comment, respondents, represented by the Office of the Solicitor General,
stated that contrary to the assertion of petitioner, the power to implement the small-
scale mining law is expressly limited in Section 17 (b)(3)(iii) of the Local Government
Code, which provides that it must be carried out “pursuant to national policies and
subject to supervision, control and review of the DENR.” Moreover, the fact that the
power to implement the small-scale mining law has not been fully devolved to
provinces is further amplified by Section 4 of the People’s Small-Scale Mining Act of
1991, which provides, among others, that the People’s Small-Scale Mining Program
shall be implemented by the DENR Secretary.
The petition lacks merit.
Paragraph 1 of Section 2, Article XII (National Economy and Patrimony) of the
Constitution provides that “[t]he exploration, development and utilization of natural
resources shall be under the full control and supervision of the State.”
Moreover, paragraph 3 of Section 2, Article XII of the Constitution provides that
“[t]he Congress may, by law, allow small-scale utilization of natural resources by
Filipino citizens x x x.”
Pursuant to Section 2, Article XII of the Constitution, R.A. No. 7076 or
the People’s Small-Scale Mining Act of 1991, was enacted, establishing under
Section 4 thereof a People’s Small-Scale Mining Program to be implemented by the
DENR Secretary in coordination with other concerned government agencies.
The People’s Small-Scale Mining Act of 1991 defines “small-scale mining” as
“refer[ring] to mining activities, which rely heavily on manual labor using simple
implement and methods and do not use explosives or heavy mining equipment.”
It should be pointed out that the Administrative Code of 1987 provides that the
DENR is, subject to law and higher authority, in charge of carrying out the State’s
constitutional mandate, under Section 2, Article XII of the Constitution, to control and
supervise the exploration, development, utilization and conservation of the country’s
natural resources. Hence, the enforcement of small-scale mining law in the provinces
is made subject to the supervision, control and review of the DENR under the Local
Government Code of 1991, while the People’s Small-Scale Mining Act of 1991
provides that the People’s Small-Scale Mining Program is to be implemented by the
DENR Secretary in coordination with other concerned local government agencies.
Indeed, Section 4, Article X (Local Government) of the Constitution states that
“[t]he President of the Philippines shall exercise general supervision over local
governments,” and Section 25 of the Local Government Code reiterates the same.
General supervision by the President means no more than seeing to it that laws are
faithfully executed or that subordinate officers act within the law.
The Court has clarified that the constitutional guarantee of local autonomy in the
Constitution [Art. X, Sec. 2] refers to the administrative autonomy of local government
units or, cast in more technical language, the decentralization of government
authority. It does not make local governments sovereign within the State.
Administrative autonomy may involve devolution of powers, but subject to limitations
like following national policies or standards, and those provided by the Local
Government Code, as the structuring of local governments and the allocation of
powers, responsibilities, and resources among the different local government units
and local officials have been placed by the Constitution in the hands of Congress
under Section 3, Article X of the Constitution.
Section 3, Article X of the Constitution mandated Congress to “enact a local
government code which shall provide for a more responsive and accountable
local government structure instituted through a system of decentralization with
effective mechanisms of recall, initiative, and referendum, allocate among the
different local government units their powers, responsibilities, and
resources, and provide for the qualifications, election, appointment and removal,
term, salaries, powers and functions and duties of local officials, and all other
matters relating to the organization and operation of the local units.”
In connection with the enforcement of the small-scale mining law in the province,
Section 17 of the Local Government Code provides:
SEC. 17. Basic Services and Facilities.—(a) Local government units shall
endeavor to be self-reliant and shall continue exercising the powers and
 discharging the duties and functions currently vested upon them. They shall also
discharge the functions and responsibilities of national agencies and offices
devolved to them pursuant to this Code. Local government units shall
likewise exercise such other powers and discharge such other functions and
responsibilities as are necessary, appropriate, or incidental to efficient and
effective provision of the basic services and facilities enumerated herein.
(b) Such basic services and facilities include, but are not limited to, the
following:
xxxx
(3) For a Province:
xxxx
(iii) Pursuant to national policies and subject to
supervision, control and review of the DENR, enforcement of forestry laws
limited to community-based forestry projects, pollution control law, small-scale
mining law, and other laws on the protection of the environment; and mini-hydro
electric projects for local purposes;
Clearly, the Local Government Code did not fully devolve the enforcement of the
small-scale mining law to the provincial government, as its enforcement is subject to
the supervision, control and review of the DENR, which is in charge, subject to law
and higher authority, of carrying out the State’s constitutional mandate to control and
supervise the exploration, development, utilization of the country’s natural resources.
Section 17 (b)(3)(iii) of the Local Government Code of 1991 is in harmony with
R.A. No. 7076 or the People’s Small-Scale Mining Act of 1991, which established a
People’s Small-Scale Mining Program to be implemented by the Secretary of the
DENR, thus:
Sec. 2. Declaration of Policy.—It is hereby declared of the State to
promote, develop, protect and rationalize viable small-scale mining activities in
order to generate more employment opportunities and provide an equitable
sharing of the nation’s wealth and natural resources, giving due regard to existing
rights as herein provided.
xxxx
Sec. 4. People’s Small-Scale Mining Program.—For the purpose of
carrying out the declared policy provided in Section 2 hereof, there is hereby
established a People’s Small-Scale Mining Program to be implemented by
the Secretary of the Department of Environment and Natural Resources,
hereinafter called the Department, in coordination with other concerned
government agencies, designed to achieve an orderly, systematic and rational
scheme for the small-scale development and utilization of mineral resources in
certain mineral areas in order to address the social, economic, technical, and
environmental problems connected with small-scale mining activities.
xxxx
Sec. 24. Provincial/City Mining Regulatory Board.—There is hereby
created under the direct supervision and control of the Secretary a
provincial/city mining regulatory board, herein called the Board, which shall be the
implementing agency of the Department, and shall exercise the following powers
and functions, subject to review by the Secretary:
(a) Declare and segregate existing gold-rush areas for small-scale mining;
(b) Reserve future gold and other mining areas for small-scale mining;
(c) Award contracts to small-scale miners;
(d) Formulate and implement rules and regulations related to small-scale mining;
(e) Settle disputes, conflicts or litigations over conflicting claims within a people’s
small-scale mining area, an area that is declared a small-mining; and
(f) Perform such other functions as may be necessary to achieve the goals and
objectives of this Act.
DENR Administrative Order No. 34, series of 1992, containing the Rules and
Regulations to implement R.A. No. 7076, provides:
SEC. 21. Administrative Supervision over the People’s Small-Scale
Mining Program.—The following DENR officials shall exercise the following
supervisory functions in the implementation of the Program:
21.1 DENR Secretrary – direct supervision and control over the
program and activities of the small-scale miners within the people’s small-scale
mining area;
21.2 Director − the Director shall:
a. Recommend the depth or length of the tunnel or adit taking into account
the: (1) size of membership and capitalization of the cooperative; (2) size of
mineralized areas; (3) quantity of mineral deposits; (4) safety of miners; and
(5) environmental impact and other considerations;
b. Determine the right of small-scale miners to existing facilities in
consultation with the operator, claim-owner, landowner or lessor of an
affected area upon declaration of a small-scale mining area;
c. Recommend to the Secretary the withdrawal of the status of the people’s
small-scale mining area when it can no longer be feasibly operated on a
small-scale basis; and
d. See to it that the small-scale mining contractors abide by small-scale
mines safety rules and regulations.
xxxx
SEC. 22. Provincial/City Mining Regulatory Board.—The Provincial/City
Mining Regulatory Board created under R.A. 7076 shall exercise the following
powers and functions, subject to review by the Secretary:
22.1 Declares and segregates existing gold rush area for small-scale
mining;
22.2 Reserves for the future, mineralized areas/mineral lands for people’s
small-scale mining;
22.3 Awards contracts to small-scale miners’ cooperative;
22.4 Formulates and implements rules and regulations related to R.A. 7076;
22.5 Settles disputes, conflicts or litigations over conflicting claims within
ninety (90) days upon filing of protests or complaints; Provided, That any
aggrieved party may appeal within five (5) days from the Board’s decision to
the Secretary for final resolution otherwise the same is considered final and
executory; and
22.6 Performs such other functions as may be necessary to achieve the
goals and objectives of R.A. 7076.
SEC. 6. Declaration of People’s Small-Scale Mining Areas.—The Board
created under R.A. 7076 shall have the authority to declare and set aside People’s
Small-Scale Mining Areas in sites onshore suitable for small-scale mining
operations subject to review by the DENR Secretary thru the Director.
 DENR Administrative Order No. 23, otherwise known as the Implementing Rules
and Regulations of R.A. No. 7942, otherwise known as the Philippine Mining Act of
1995, adopted on August 15, 1995, provides under Section 123 thereof that small-
scale mining applications should be filed with the PMRB and the corresponding
permits shall be issued by the Provincial Governor, except small-scale mining
applications within the mineral reservations.
Thereafter, DENR Administrative Order No. 96-40, otherwise known as
the Revised Implementing Rules and Regulations of R.A. No. 7942, otherwise known
as the Philippine Mining Act of 1995, adopted on December 19, 1996, provides that
applications for Small-Scale Mining Permits shall be filed with the Provincial
Governor/City Mayor through the concerned Provincial/City Mining Regulatory Board
for areas outside the Mineral Reservations and with the Director though the Bureau
for areas within the Mineral Reservations. Moreover, it provides that Local
Government Units shall, in coordination with the Bureau/ Regional Office(s) and
subject to valid and existing mining rights, “approve applications for small-scale
mining, sand and gravel, quarry x x x and gravel permits not exceeding five (5)
hectares.”
Petitioner contends that the Local Government Code of 1991, R.A. No. 7076,
DENR Administrative Orders Nos. 95-23 and 96-40 granted the DENR Secretary the
broad statutory power of control, but did not confer upon the respondents DENR and
DENR Secretary the power to reverse, abrogate, nullify, void, cancel the permits
issued by the Provincial Governor or small-scale mining contracts entered into by the
Board.
The contention does not persuade.
The settlement of disputes over conflicting claims in small-scale mining is
provided for in Section 24 of R.A. No. 7076, thus:
Sec. 24. Provincial/City Mining Regulatory Board.—There is hereby created under the
direct supervision and control of the Secretary a provincial/city mining regulatory board, herein
called the Board, which shall be the implementing agency of the Department, and shall exercise
the following powers and functions, subject to review by the Secretary:
xxxx
(e) Settle disputes, conflicts or litigations over conflicting claims within a people’s
small-scale mining area, an area that is declared a small mining area; x x x
Section 24, paragraph (e) of R.A. No. 7076 cited above is reflected in
Section 22, paragraph 22.5 of the Implementing Rules and Regulations of
R.A. No. 7076, to wit:
SEC. 22. Provincial/City Mining Regulatory Board.—The
Provincial/City Mining Regulatory Board created under R.A. No. 7076 shall
exercise the following powers and functions, subject to review by the
Secretary:
xxxx
22.5 Settles disputes, conflicts or litigations over conflicting claims
within ninety (90) days upon filing of protests or complaints; Provided, That
any aggrieved party may appeal within five (5) days from the Board’s decision
to the Secretary for final resolution otherwise the same is considered final and
executory; x x x
In this case, in accordance with Section 22, paragraph 22.5 of the Implementing
Rules and Regulations of R.A. No. 7076, the AMTC filed on July 22, 2005 with the
PMRB of Bulacan a formal protest against the Applications for Quarry Permits of
Eduardo Mercado, Benedicto Cruz, Liberato Sembrano (replaced by Lucila Valdez)
and Gerardo Cruz on the ground that the subject area was already covered by its
Application for Exploration Permit. However, on August 8, 2005, the PMRB issued
Resolution Nos. 05-8, 05-9, 05-10 and 05-11, resolving to submit to the Provincial
Governor of Bulacan the Applications for Small-Scale Mining Permits of Eduardo
Mercado, Benedicto Cruz, Lucila Valdez and Gerardo Cruz for the granting/issuance
of the said permits. On August 10, 2005, the Provincial Governor of Bulacan issued
the Small-Scale Mining Permits to Eduardo Mercado, Benedicto Cruz, Lucila Valdez
and Gerardo Cruz based on the legal opinion of the Provincial Legal Officer and the
Resolutions of the PMRB of Bulacan.
Hence, AMTC filed an appeal with respondent DENR Secretary, appealing from
Letter-Resolution No. 05-1317 and Resolution Nos. 05-08, 05-09, 05-10 and 05-11,
all dated August 8, 2005, of the PMRB of Bulacan, which resolutions gave due course
and granted, on August 10, 2005, Small-Scale Mining Permits to Eduardo D.
Mercado, Benedicto S. Cruz, Lucila Valdez and Gerardo Cruz involving parcels of
mineral land situated at Camachin, Doña Remedios Trinidad, Bulacan.
The PMRB of Bulacan filed its Answer, stating that it is an administrative body,
created under R.A. No. 7076, which cannot be equated with the court wherein a full-
blown hearing could be conducted, but it is enough that the parties were given the
opportunity to present evidence. It asserted that the questioned resolutions it issued
were in accordance with the mining laws and that the Small-Scale Mining Permits
granted were registered ahead of AMTC’s Application for Exploration Permit. Further,
the Board stated that the Governor of Bulacan had the power to approve the Small-
Scale Mining Permits under R.A. No. 7160.
The DENR Secretary found the appeal meritorious, and resolved these pivotal
issues: (1) when is the subject mining area open for mining location by other
applicants; and (2) who among the applicants have valid applications. The pertinent
portion of the decision of the DENR Secretary reads:
We agree with the ruling of the MGB Director that the area is [open only] to
mining location on August 11, 2004, fifteen (15) days after the receipt by Golden
Falcon on July 27, 2004 of a copy of the subject Order of July 16, 2004. The filing
by Golden Falcon of the letter-appeal suspended the finality of the Order of Denial
issued on April 29, 1998 by the Regional Director until the Resolution thereof on
July 16, 2004.
Although the subject AQPs/SSMPs were processed in accordance with the
procedures of the PMRB, however, the AQPs were filed on February 10, 2004
 when the area is still closed to mining location. Consequently, the SSMPs granted Provincial Governor as it is a determination of the rights of AMTC over conflicting
by the PMRB and the Governor are null and void making thereby AEP No. III-02- claims based on the law.
04 of the AMTC valid, it having been filed when the area is already open to other
mining applicants.
In determining whether Section 17 (b)(3)(iii) of the Local Government Code of
Records also show that the AQPs were converted into SSMPs. These are two
(2) different applications. The questioned SSMPs were issued in violation of
1991 and Section 24 of R.A. No. 7076 are unconstitutional, the Court has been
Section 4 of RA 7076 and beyond the authority of the Provincial Governor pursuant guided by Beltran v. The Secretary of Health, which held:
to Section 43 of RA 7942 because the area was never proclaimed as “People’s The fundamental criterion is that all reasonable doubts should be resolved in
Small-Scale Mining Program.” Moreover, iron ore mineral is not considered among favor of the constitutionality of a statute. Every law has in its favor the presumption
the quarry resources. of constitutionality. For a law to be nullified, it must be shown that there is a clear
xxxx and unequivocal breach of the Constitution. The ground for nullity must be clear
WHEREFORE, the Application for Exploration Permit, AEP-III-02-04 of and beyond reasonable doubt. Those who petition this Court to declare a law, or
Atlantic Mines and Trading Corp. is declared valid and may now be given due parts thereof, unconstitutional must clearly establish the basis therefor. Otherwise,
course. The Small-Scale Mining Permits, SSMP-B-002-05 of Gerardo Cruz, the petition must fail.
SSMP-B-003-05 of Eduardo D. Mercado, SSMP-B-004-05 of Benedicto S. Cruz
and SSMP-B-005-05 of Lucila S. Valdez are declared NULL AND VOID. In this case, the Court finds that the grounds raised by petitioner to challenge the
Consequently, the said permits are hereby CANCELLED. constitutionality of Section 17 (b)(3)(iii) of the Local Government Code of 1991 and
Section 24 of R.A. No.7076 failed to overcome the constitutionality of the said
The Court finds that the decision of the DENR Secretary was rendered in provisions of law.
accordance with the power of review granted to the DENR Secretary in the resolution
of disputes, which is provided for in Section 24 of R.A. No. 7076 and Section 22 of its WHEREFORE, the petition is DISMISSED for lack of merit.
Implementing Rules and Regulations. It is noted that although AMTC filed a protest No costs.
with the PMRB regarding its superior and prior Application for Exploration Permit over SO ORDERED.
the Applications for Quarry Permit, which were converted to Small-Scale Mining
Permits, the PMRB did not resolve the same, but issued Resolution Nos. 05-08 to 05- Notes.—No adverse claim, protest or opposition involving mining rights shall be
11 on August 8, 2005, resolving to submit to the Provincial Governor of Bulacan the accepted for filing unless verified and accompanied by the prescribed docket fee and
Applications for Small-Scale Mining Permits of Eduardo Mercado, Benedicto Cruz, proof of services to the respondent(s) either personally or by registered mail. (Pyro
Lucila Valdez and Gerardo Cruz for the granting of the said permits. After the Copper Mining Corporation vs. Mines Adjudication Board-Department of Environment
Provincial Governor of Bulacan issued the Small-Scale Mining Permits on August 10, and Natural Resources, 594 SCRA 195 [2009])
2005, AMTC appealed the Resolutions of the PMRB giving due course to the granting
of the Small-Scale Mining Permits by the Provincial Governor. Issues relating to the validity of mining agreements; their unilateral termination by
one party for alleged violation thereof; and their interpretation, are issues that pertain
Hence, the decision of the DENR Secretary, declaring that the Application for to the courts. (Olympic Mines and Development Corp. vs. Platinum Group Metals
Exploration Permit of AMTC was valid and may be given due course, and canceling Corporation, 596 SCRA 314 [2009])
the Small-Scale Mining Permits issued by the Provincial Governor, emanated from
the power of review granted to the DENR Secretary under R.A. No. 7076 and its
Implementing Rules and Regulations. The DENR Secretary’s power to review and, ——o0o——
therefore, decide, in this case, the issue on the validity of the issuance of the Small-
Scale Mining Permits by the Provincial Governor as recommended by the PMRB, is a
quasi-judicial function, which involves the determination of what the law is, and what
the legal rights of the contending parties are, with respect to the matter in controversy
and, on the basis thereof and the facts obtaining, the adjudication of their respective
rights. The DENR Secretary exercises quasi-judicial function under R.A. No. 7076 and
its Implementing Rules and Regulations to the extent necessary in settling disputes,
conflicts or litigations over conflicting claims. This quasi-judicial function of the DENR
Secretary can neither be equated with “substitution of judgment” of the Provincial
Governor in issuing Small-Scale Mining Permits nor “control” over the said act of the