Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-5631             October 17, 1910

THE MUNICIPALITY OF CATBALOGAN, petitioner-appellee, vs.THE DIRECTOR OF LANDS, opponent-appellant.

Attorney-General Villamor, for appellant. Provincial fiscal Barrios, for appellee.

 

TORRES, J.:

On June 19, 1908, the municipal president of the pueblo of Catbalogan, Province of Samar, filed, in the name of the municipality, an application with the Court of Land Registration in which he asked for the registration, in conformity with the Land Registration Act, of a parcel of land of which the said municipality was the absolute owner, bounded on the north by calle Corto south of the church square, on the east by Second Avenue, on the south by land belonging to Smith, Bell & Co., and on the west by First Avenue; the application states that the said land has an area of 666.60 square meters and its description and boundaries are given in detail in the map attached to the application, which sets forth that the property described was appraised at the last assessment levied for the purpose of the payment of the land tax, and that there is no encumbrance on it; that no one other than the applicant, to the latter's best knowledge and belief, has any right or interest therein; that the said land was acquired by possession and material occupation for a large number of years and is at present occupied by the applicant as a municipal corporation duly organized; and that, in the unlikely event of the denial of the said application, made in accordance with the Land Registration Act, the applicant invokes the benefits of chapter 6 of Act No. 926, since the said corporation has been in poossession of the land mentioned, which is entirely surrounded by a fence, and has been cultivating it for a great many years.

On March 18, 1909, the Attorney-General, in representation of the Director of Lands, filed a writing opposing the registration solicited and alleged that the land in question belonged to the United States and was under the control of the Government of the Philippines Islands. He asked that the applicant's prayer be denied and that, in case the said property should be declared to belong to the Insular Government, the same be awarded to it, together with the issuance thereto of the proper certificate of registration.

The case having been heard on March 22, 23, and 24, 1909, and oral evidence adduced by both parties, the judge, on the 24th of the said month, overruled the opposition of the Director of Lands, and decreed, after a declaration of general default, that the property in question be awarded to the applicant, the municipality of Catbalogan, and be registered in its name. The Attorney-General, in representation of the Director of Lands, excepted to this ruling and announced his purpose of filing a bill of exceptions. He asked at the same time for a new trial on the grounds that the findings of fact of the court were openly and manifestly contrary to the weight of the evidence, and that the latter did not justify the said decision which, he alleged, was contrary to law. This motion was denied and exception was taken thereto by the Attorney-General, who duly presented the required bill of exceptions which was certified and forwarded to this court.

The question submitted to the decision of this court, through the appeal raised by the Attorney-General in representation of the Director of Lands, is whether the lot occupied by the court-house of the municipality of Catbalogan, of the Islands and Province of Samar, belongs to the said municipality or is state land under the control of the Insular Government.

In order to obtain a better understanding of the final conclusion to be established in this decision, it is meet to state: That for the purpose of the establishment of new pueblos in this Archipelago, at the beginning of its occupation by the Spaniards, an endeavor was always made to find, in favorable places, a nucleus of inhabitants and, later, near the pueblos already established, barrios, which ordinarily served as a basis for the formation of other new pueblos that became a populated as the centers on which they were dependent.

The executive authorities and other officials who then represented the Spanish Government in these Islands were obliged to adjust their procedure, in the fulfillment of their duties with regard to the establishment and laying out of new towns, to the Laws of the Indies, which determined the course that they were to pursue for such purposes, as may be seen by the following:

Law 6, title 5, book 4, of the Recompilation of the Laws of the Indies, provides, among other things:

That within the boundaries which may be assigned to it, there must be at least thirty residents, and each one of them must have a house, etc.

Law 7 of the same title and book contains this provision:

Whoever wishes to undertake to establish a new town in the manner provided for, of not more than thirty nor less than ten residents, shall be granted the time and territory necessary for the purpose and under the same conditions.

It may be affirmed that years afterwards all the modern pueblos of the Archipelago were formed by taking as a basis for their establishment the barrios already populated by a large number of residents who, under the agreement to build the church of the new pueblo, the court-house, and afterwards the schoolhouse, obtained from the General Government the administrative separation of their barrio from the pueblo on which it depended and in whose territory it was previously comprised. In such cases procedure analogous to that prescribed by the Laws of the Indies was observed.

For the establishment, then, of new pueblos, the administrative authority of the province, in representation of the Governor-General, designated the territory for their location and extension and the metes and bounds of the same; and before alloting the lands among the new settlers, a special demarcation was made of the places which were to serve as the public square of the pueblo, for the erection of the church, and as sites for the public buildings, among others, the municipal building or the casa real, as well as of the lands which were to constitute the commons, pastures, and propios of the municipality and the streets and roads which were to intersect the new town were laid out, as many be seen by the following laws:

Law 7, title 7, book 4, of the Recompilation of the Laws of the Indies, provides:

The district or territory to be given for settlement by composition shall be allotted in the following manner: There shall be first be set apart the portion required for the lots of the pueblo, the exido or public lands, and pastures amply sufficient for the stock which the residents may have, and as much more as propios del lugar or common lands of the locality; the rest of the territory and district shall be divided into four parts — one of them, of his choice, shall be for him who takes upon himself the obligation to fund the pueblo, and the other three shall be apportioned equally among the settlers.

Law 8, of the same title and book, prescribes, among other things:

That, between the main square and the church, there shall be constructed the casas reales or municipal buildings, the cabildo, concejo, customs buildings, etc.

Law 14 of the said title and book, also directs among other things:

That the viceroys shall set aside such lands as to them appear suitable as the common lands (propios) of the pueblos that have none, therewith to assist in the payment of the salaries of the corregidores, and sufficient public lands (exidos) and pasture lands as provided for and prescribed by law.

Law 1, title 13 of the aforesaid book, provides the following:

Such viceroys and governors as have due authority shall designate to each villa and lugar newly founded and settled the lands and lots which they may need and may be given to them, without detriment to a third party, as propios, and a statement shall be sent to us of what was designated and given to each, in order that we may have such action approved.

The municipality of Catbalogan, as the provincial seat of Samar, must have been the first and oldest pueblo established in the said province and has been occupying, if not since time immemorial, as affirmed in the application, at least for a long period of years, some forty or forty-five years according to the evidence given at trial, the lot in litigation on which it had built the successive court-house buildings constructed for the public service of the head municipality authority and his council. Some of these buildings were burned and others were ruined by typhoons. The court-house building aforesaid has been used and enjoyed quietly and peaceably and without any opposition up to the present time, wherefore it is to be presumed that, on founding the pueblo and on proceeding to designate and demarcate the area of land to be occupied by the town of Catbalogan, with its square, streets, church, and other public buildings, the said lot was also designated as a site for the municipal or court building, in accordance with the laws hereinbefore mentioned, and that the adjudication of the lot to the municipality for its court-house was duly confirmed

by the Spanish Government, as must be inferred, in view of the continuous possession for so long a time up to the present; nor does the record show that the court-house of the said pueblo was ever built on any other lot than the one in question.

It is to be noted that, in former times, the court-house buildings of the pueblos were called casas reales (royal buildings), undoubtedly for the purpose of giving greater dignity to the principle of authority represented in them and inculcating respect among the inhabitants of the pueblo toward the building where the chief local authority exercised his governmental duties and at the same time administered justice, for the old pedaneos or petty mayors, later called capitanes or gobernadorcillos, while they had governmental powers, at the same time administered justice as local judges.

In paragraph 92 of the royal ordinances of February 26, 1768, the following appears, among other things:

And because, while there is a notable excess of pomp in the buildings of the ministers and parish priests, there is, on the other hand, great abandonment of the casas reales which, as a general rule, are not habitable on account of their uncomfortable and ruinous conditions, etc., . . . it is ordered that in all the pueblos, and especially in those of the seats of government, the native inhabitants thereof shall erect decent and convenient municipal buildings modeled after the plans to be furnished by the central government, and that therein the gobernadorcillos shall have their court rooms and their jails for the security of prisoners, and all leaks and other damages shall be repaired in time in order that, through neglect they may not cause greater detriment and expense.

If the inhabitants of a pueblo, at the time of its foundation, were obliged to erect their casa real of municipal building, it is to be supposed that they built it on their own ground after a designation of the site had been made by the governmental authority of the province — a designation which had to be made, according to the Laws of the Indies, at the same time as that of the main plaza and of the site to be occupied by the temple of church, which latter building is so necessary and indispensable for every pueblo as well as the casa real or court-house, since in them, respectively, divine worship is had and the local authorities perform their duties. The land designated for the church is considered to belong thereto, and likewise the land intended for the court-house should be deemed to be the property of municipality, since no pueblo was able to exist administratively without having a church of its own and a court-house which should be the seat of its local authority and its municipal government.

It should be remembered that the court-house and the church of every pueblo were always built, in accordance with the provisions of the Laws of the Indies, on one of the sides of the plaza mayor or main square of the town, either together or the same side, or each buildings on an opposite side; but the said square nearly always occupies a central site within the territory of the pueblo, with the frequent exception of where the town has extended toward only one end or side of the territory, in which event its main square ceased to be in the center of the town. However, the said square was never located outside of the inhabited place, as were the commons and pasturages. (Law 13, title 7, book 4, Recompilation of the Laws of the Indies.)

It is of course to presumed, in accordance with the provisions of the laws aforementioned, that the main square of the pueblo of Catbalogan occupies nearly the central part of its territory, and that the lot on which were successively constructed the several court-houses which the said pueblo has and, in situated on one of the sides of the said square and consequently in a central point and not outside the town. It can not, however, on account of this circumstances, be concluded that the said lot formed a part of the commons, exido, or the pasturage lands of the said pueblo, but consisted of land which belonged to the pueblo and was legally acquired through the distribution and adjudication of lots made at the beginning of its foundation, as proved by the laws hereinbefore quoted.

In technical administrative terms bienes propios are: Cultivated real properties, pasturage, houses or any other property which a city, village, or hamlet has for the payment of the public expenses. The administration of this class of property lay with the municipalities, and they could be alienated after proper procedure and authorization of the competent superior authorities in accordance with the administrative laws.

It is therefore unquestionable that the assets of each pueblo comprised its bienes propios and the revenues or products derived therefrom, and this fact is recognized in the Ordenanza de Intendentes of 1786, the forty-seventh article of which reads:

The funds which any pueblo may have left over as an annual surplus from the products of its property and its taxes, after meeting the expenses specified in its own particular ordinance, shall be invested in the purchase of real estate and revenue-bearing investments, so that, having a sufficient income for the payment of its obligations and to aid in defraying its ordinary needs, the excise taxes, which are always a burden to the public, may be abolished; and in case it should have no such taxes, nor annuities to redeem on its common properties (propios), the said surplus shall be applied to promote establishments useful to the pueblo and to its province, or by investments to be previous proposed by the intendentes and approved by the junta superior.

From the foregoing it is concluded that the land in question is the common property of the pueblo and is comprised within the patrimonial property of the municipality of Catbalogan, to which it was awarded for the construction thereon of the court-house, on the demarcation and distribution being made of the lands which were to be occupied by the town in its development, in accordance with the provisions of the Laws of the Indies, and other complementary laws, at a time when there was an excess of land and a few inhabitants to occupy them. It was for this reason that the royal cedula of October 15, 1754, directed that neither the possessors of unappropriate crown lands, nor their successors in interest, should be disturbed or denounced, although they had no titles, it being sufficient for them to prove their prior possession to obtain a title by just prescription.

The said municipality is today in possession of the land in litigation, as the owner thereof, under the protection of the civil and administrative laws which guarantee the right of ownership of the corporations that are capable of contracting, acquiring, and possessing real and personal property.

Article 343 of the Civil Code reads:

The property of provinces an of towns is divided into property for public use and patrimonial property.

Article 344 of the same codes prescribes:

Property for public use in provinces and in towns comprises the provincial and town roads, the squares, streets, fountains, and public waters, the promenades, and public works of general services supported by the said towns or provinces.

All other property possessed by either is patrimonial, and shall be governed by the provisions of this code, unless otherwise prescribed in special laws.

Section 2 of Act No. 82, entitled "The Municipal Code," is as follows:

(a) Pueblos incorporated under this Act shall be designated as municipalities (municipios), and shall be known respectively by the names heretofore adopted. Under such names they may sue and be sued, contract and be contracted with, acquire and hold real and personal property for the general interest of the municipality, and exercise all the powers hereinafter conferred upon them.

(b) All property and property rights vested in any pueblo under its former organization shall continue to be vested in the same municipality after its incorporation under this Act.

By this last-cited administrative Act the rights of the old municipalities to acquire real and personal property, in accordance with their former organization, are recognized, and it is declared that the said property and rights shall continue to pertain to the municipalities created in harmony with the provisions of the Municipal Code, on account of such property being the patrimonial property of the municipalities.

Under these principles, perfectly in accord with both the old and the mother legislation of this country, the municipality of Catbalogan ought to be considered as the owner of the land in question, on account of the same having been awarded to it as its own, under its exclusive ownership, on the founding of the pueblo, for the erection of the courthouse, the record of the case showing no proof nor data to the contrary. As the plaintiff municipality, the applicant, has been occupying the property on which its court-house is situated during such a long space of time, much longer than that required for extraordinary prescription (art. 1959 of the Civil Code), it can not be denied that the presumption exists, in its favor, that it has been holding the land in its character of owner, since the trial record exhibits no proof that any other parcel of land, distinct from that in controversy, was awarded to the said municipality for the erection thereon of its court-house, a court-house and the land on which to build it being necessary and indispensable for the existence of the pueblo.

The title under which the municipality of Catbalogan holds and enjoys the said lot is the same as that under which it is recognized as a pueblo and under which the municipality is justified in its present occupancy of the territory where the town is established with its streets, squares, and common lands (terreno comunal), a title identical with that now held by the church, as a religious institution, to the land now occupied by the temple that exists in the said pueblo. 1awph!l.net

At the time of the beginning of the foundation of the pueblo mentioned and of the distribution or allotment of the lands among its first inhabitants, who, in accordance with the Laws of the Indies, must have numbered at least thirty men with their respective families, for the purpose of founding a pueblo, perhaps none of them was provided with any particular title to accredit the fact that this or that parcel of land had fallen to him in the allotment. Possibly the facts pertaining to the distribution of the lands were entered in the record kept of the organization of the pueblo, if one such was made, for it must be remembered that, in ancient times and up to the years immediately preceding the beginning

of the nineteenth century, fewer records were made than in modern times, and, besides, the Laws of the Indies themselves recommended that, in administrative proceeding, the institution of suits should be avoided in so far as possible where verbal information and investigations could be had to enable proper action to be taken.

Besides the reasons hereinabove noted, there is that of the continuous and constant renovation of the personnel which composed the officials of a municipality in the Philippines, for the pedaneo or gobernadorcillo, his tenientes, judges, and other subordinates were first chosen and appointed annually, and after every two years; and, though in the beginning the capitan pedaneo of the pueblo may have had in his possession the record of the necessary concession and award of the land on which the court-house was built, and that of the pueblo of Catbalogan was constructed of stone, it would in nowise be strange that, in spite of the zeal and diligence which may have been exercised by his many successors, the said record or title should have disappeared or been destroyed in the case of Catbalogan, during the lapse of so long a time; indeed, it would be marvelous and extraordinary that such a document should exist, intrusted to the more or less diligent care of so many municipal officials who, at the most, occupied their offices but two years. It is certain, however, that the successive court-houses which the said pueblo has had have occupied the land in question without opposition on the part of anyone, or of the state, and including the building which served as a court-house, together with the land on which it is built, as one of the properties which form the assets of the pueblo of Catbalogan, as they should be classed, it is incontrovertible that the right of the said municipality therein must be respected, as the right of ownership is consecrated and sanctioned by the laws of every civilized county in the interest and for the benefit of society, public order, and civilization itself.

As has been shown in the preceding paragraphs, the land in litigation, which is a lot occupied by the court-house, anciently termed the casa real, of the pueblo of Catbalogan, pertains to the said pueblo, awarded to the same, not gratuitously, but on account of the necessity arising from its organization, and forms a part, as a patrimonial property, of its municipal assets, and therefore it is not comprised within the common land (terreno comunal) which may have been granted to the said pueblo. Law 8, title 3, book 6 of the Recompilation of the Laws of the Indies, is not applicable to the question at issue with respect to the said land or lot, nor are the provisions of article 53 of the ordinances of good government, before cited, of February 26, 1768, nor the subsequent royal decrees of February 28, August 1, 1883, and of January 17, 1885, relative to the legua or terreno comunal; and, consequently, the doctrine laid down in the decision rendered in the case of The City of Manila vs. The Insular Government (10 Phil. Rep., 327) is likewise inapplicable, for the reason that the land in dispute is not that of a common, but of a building lot of which the pueblo of Catbalogan had absolute need at the beginning of its organization for the erection thereon of its court-house. This was duly proved at trial, without possible contradiction.

Notwithstanding the number of years during which the municipality of Catbalogan has been in possession of the lot, once it has been shown by unquestionable evidence that the property was assigned to it as its own, in order that it might erect its court-house thereon, as it did do at the beginning of its foundation, and its possession of the said land not being by mere unlawful occupation, the municipality has no need to rely upon the right of prescription, although, being entitled to acquire and possess property in the character of owner, according to its organic law, it is not understood why it could not acquire such right by prescription in accordance with law, it being, as it is, a juridical person susceptible of rights and duties.

The present case has nothing to do with any contract made by the old municipality of Catbalogan, nor administrative acts or procedure of the applicant herein, but relates to its right of ownership in a parcel of land vested with the character of bien propio of its own, or patrimonial property; for which reason the doctrine established in the decision rendered in the case of Aguado vs. The City of Manila (9 Phil. Rep., 513) is also inapplicable, inasmuch as the said municipality, in the exercise of the right of ownership in its own property, has an independent personality of its own, recognized by law, and does not act as a mere delegate of the central authority.

For the foregoing reasons, and considering that the municipality of Catbalogan is the owner of the land occupied by its court-house and that it is entitled to have the said property registered in its name in the Court of Land Registration, it is proper, in our opinion, to affirm and we hereby affirm the judgment appealed from in its present form.

Arellano, C.J., Moreland and Trent, JJ., concur.

VILAS v. CITY OF MANILA.; TRIGAS v. SAME.; AGUADO v. SAME.

Nos. 53, 54, 207.

SUPREME COURT OF THE UNITED STATES

220 U.S. 345; 31 S. Ct. 416; 55 L. Ed. 491; 1911 U.S. LEXIS 1683

Argued February 24, 27, 1911. April 3, 1911, Decided

SYLLABUS

Even if there is no remedy adequate to the collection of a claim against a governmental subdivision when reduced to judgment, a plaintiff having a valid claim is entitled to maintain an action thereon and reduce it to judgment.

Where the case turned below on the consequence of a change in sovereignty by reason of the cession of the Philippine Islands, the construction of the treaty with Spain of 1898 is involved, and this court has jurisdiction of an appeal from the Supreme Court of the Philippine Islands under § 10 of the act of July 1, 1902, c. 1369, 32 Stat. 691, 695.

While military occupation or territorial cession may work a suspension of the governmental functions of municipal corporations, such occupation or cession does not result in their dissolution.

While there is a total abrogation of the former political relations of inhabitants of ceded territory, and an abrogation of laws in conflict with the political character of the substituted sovereign, the great body of municipal law regulating private and domestic rights continues in force until abrogated or changed by the new ruler.

Although the United States might have extinguished every municipality in the territory ceded by Spain under the treaty of 1898, it will not, in view of the practice of nations to the contrary, be presumed to have done so.

The legal entity of the city of Manila survived both its military occupation by, and its cession to, the United States; and, as in law, the present city as the successor of the former city, is entitled to the property rights of its predecessor, it is also subject to its liabilities.

The cession in the treaty of 1898 of all the public property of Spain in the Philippine Islands did not include property belonging to municipalities, and the agreement against impairment of property and private property rights in that treaty applied to the property of municipalities and claims against municipalities.

One supplying goods to a municipality does so, in the absence of specific provision, on its general faith and credit, and not as against special funds in its possession; and even if such goods are supplied for a purpose for which the special funds are held no specific lien is created thereon.

COUNSEL: Mr. Frederic R. Coudert and Mr. Howard Thayer Kingsbury, with whom Mr. Paul Fuller and Mr. Harry Weston Van Dyke were on the brief, for plaintiff in error and appellants:

The outstanding obligations of the city of Manila were not impaired by the change of sovereignty, but were preserved by the treaty and expressly recognized by the United States Government.

A municipal corporation is not only a governmental subdivision but also an association of the members of a particular community for the administration of their local business and affairs in matters largely outside of the sphere of government as such.

As to the distinction between sovereign rights of government and corporate capacity, see South Carolina v. United States, 199 U.S. 437, 462; Lloyd v. Mayor, 5 N.Y. 369, 374; Western Fund Society v. Philadelphia, 31 Pa. St. 175.

A municipality is not a sovereignty. Metropolitan Ry. Co. v. District of Columbia, 132 U.S. 1, 9; Merryweather Claim, Magoon on the Law of Civil Government under Military Occupation, 407, 414; see also Magoon on Civil Government, 457-460; 22 Ops. Att. Gen. 526.

After the cession of California it was held by this court that the Pueblo of San Francisco which had existed as a municipal organization prior to the cession, continued to exist as such corporation in spite of the change of sovereignty and that such change of sovereignty left its property rights and obligations unimpaired.See Townsend v. Greeley, 5 Wall. 326; Merryman v. Bourne, 9 Wall. 592; Moore v. Steinbach, 127 U.S. 70; Los Angeles Milling Co. v. Los Angeles, 217 U.S. 217; Smith v. Morse, 2 California, 524; Cohas v. Raisin, 3 California, 443; Hart v. Burnett, 15 California, 530; and as to effect of Civil War, see New Orleans v. Steamship Co., 20 Wall. 387.

The city of Manila, as at present constituted, is the successor of the city of Manila as existing under Spanish sovereignty, in respect to both its rights and obligations, and is therefore liable for the debts of the municipality which were outstanding at the time of the cession. Mobile v. Watson, 116 U.S. 289; Shapleigh v. San Angelo, 167 U.S. 646; and see Broughton v. Pensacola, 93 U.S. 266; Mt. Pleasant v. Beckwith, 100 U.S. 514; Mobile v. Watson, 116 U.S. 289; Comanche County v. Lewis, 133 U.S. 198; Van Hoffman v. City of Quincy, 4 Wall. 535; Girard v. Philadelphia, 7 Wall. 1; Barnes v. District of Columbia, 91 U.S. 540; New Orleans v. Clark, 95 U.S. 644; Meriwether v. Garrett, 102 U.S. 472; New Orlenas v. Morris, 105 U.S. 600; Amy v. Watertown, 130 U.S. 301; Metropolitan Ry. Co. v. District of Columbia, 132 U.S. 1; District of Columbia v. Woodbury, 136 U.S. 450.

The municipality of Manila did not disappear as a municipal government entity upon the capture of the city, but continued to exist and was recognized as so continuing by the capitulation, the general orders of the military authorities, the treaty and the President's instructions to the commission. Gen. Orders No. 4 of August 15, 1898. The protocols of the treaty show that the distinction between sovereign indebtedness and local obligations was recognized throughout the negotiations. Sen. Doc. 62, 55th Cong., 3d Sess., p. 261.

The claims of its own citizens or subjects which each Government relinquished, were those "against the other Government." Treaty, Art. VIII; 23 Op. Atty. Gen. 181, 190; Taylor's Int. Pub. Law, §§ 165, 168.

Plaintiff's claims are "property" within the meaning of the treaty. Soulard v. United States, 4 Pet. 511; United States v. Reynes, 9 How. 127; O'Reilly v. Brooke, 209 U.S. 45, distinguished.

The juristic personality of municipal corporations and their liability to suit were recognized and established by the Roman law and the Spanish law, both ancient and modern. See Digest of Justinian, Lib. III, Tit. IV, 1, 7; Ulpian on the Edict, 10; Ibid., 1; 8 Javolenus, extracts from Cassius, 15; Monro's Translations, Vol. 1, p. 174; Savigny on Jural Relations, translated by Rattigan, §§ 86 et seq. The same doctrine is declared in the early Spanish codes. Partida Third, Title II, Law XIII; Novisima Recopilacion, Book VII, Title XX, Law II; Laws of the Indies, Book IV, Title XI, Law 1; Spanish Laws Codified in 1877, Arts. 1, 30; Alcubilla's Diccionario de la Administracion Espanola, Vol. 1, pp. 839-863, sub. tit. Ayuntamientos; Alcubilla, Vol. 1, p. 872; Vol. 3, pp. 1036-1038.

The plaintiffs are entitled to the remedies of judgment and execution for the enforcement of their claims. New Orleans v. Morris, 105 U.S. 600; Seibert v. Lewis, 122 U.S. 284; Memphis v. United States, 97 U.S. 293; Riggs v. Johnson County, 6 Wall. 193; Knox County v. Aspinwall, 24 How. 376; Workman v. New York, 179 U.S. 552, 565.

The city of Manila holds the Carriedo Fund as a trustee and such fund is liable for obligations incurred in the administration of the Carriedo Water Works. Rep. of Phil. Com. for 1900, Vol. 3, p. 49; 1 Ops. Atty. Gen. P.I. 319, 323, 450, 452, 543; Dillon's Mun. Corp., 4th ed. §§ 19-21; Vidal v. Girard, 2 How. 127; Girard v. Philadelphia, 7 Wall. 1; United States v. Railroad Co., 17 Wall. 322; Commissioners v. Lucas, 93 U.S. 108, 115; Hunter v. Pittsburgh, 207 U.S. 161, 179; Philadelphia v. Fox, 64 Pa. St. 169, 182; Peopel v. Hurlbut, 9 Am. Rep. 108.

A trustee may incur liabilities or make expenditures for the protection of the trustee estate, and, a fortiori, for the performance of the trust itself, and he may indemnify himself by recourse to the trust property, upon which he has a lien for this purpose. New v. Nicoll, 73 N.Y. 127; Noyes v. Blakeman, 6 N.Y. 567, 580, and cases cited; Van Slyke v. Bush, 123 N.Y. 47.

Mr. Paul Charlton, with whom Mr. Isaac Adams was on the brief, for defendant in error and appellees:

As to what constitutes "property," as that word was used in Art. VIII of the treaty of Paris, see O'Reilly v. Brooke, 209 U.S. 45.

A contract for furnishing coal, or for collecting taxes for one year, or for furnishing material or performing labor, all of which would be concluded, and all rights thereunder extinguished, by payment or by lapse of time, were clearly not such "property" as was in the mind of the commissioners who concluded the treaty of Paris. The treaty, especially as illuminated by the protocols, makes clear distinction between the relation which the United States was willing to assume toward the island of Cuba and its affairs, and that which it was willing to assume toward the Philippine Islands and their affairs.

The words "property" and "rights" there guaranteed were, specifically, those which related to the peaceful possession of property of all kinds.

The United States has scrupulously fulfilled the obligation it assumed in Arts. I and VII of the treaty with relation to its responsibility for obligations incurred during its occupation of Cuba, and in the settlement and adjudication of claims of its citizens for damages specified in said Art. VII.The Spanish Treaty Claims Commission was organized, has performed the functions of its creation, and has been dissolved; no claim which could rightfully arise under the obligation assumed in those articles of the treaty remains undetermined.

The city of Manila, as at present constituted, is not the successor of the city of Manila as existing under Spanish sovereignty in respect to both its rights and obligations, and is not liable for the debts of the municipality which were outstanding at the time of the cession.

At the time of the acquisition of sovereignty by the United States over the Philippine Islands, the inhabitants thereof had only such rights as were granted by the grace of the United States, and later, such as were secured to them under the treaty of Paris, and the Organic Act of July 1, 1902, and its amendments.

The juristic personality of municipal corporations and their liability to suit was not, as claimed by plaintiff, recognized and established by the Roman law and the Spanish law, both ancient and modern. See Dictionary of Alcubilla, supplement of 1894.

The plaintiffs are not entitled to the remedies of judgment and execution for the enforcement of their claims. Hoey v. Baldwin, 1 Phil. Rep. 551.

A municipality has only such implied powers as are necessary to effectuate the specific grants of its charter, and as the charter of the city of Manila neither contains any authority to assume the obligations of the Ayuntamiento of Manila, nor any words which, by necessary legal implication, could be held to include such authority or obligation, no right existed in favor of plaintiffs in error which the city of Manila had either authority or obligation to satisfy.

The city of Manila does not hold the Carriedo Fund as a trustee and such fund is liable for obligations incurred in the administration of the Carriedo Water Works.

Under the facts in this case and as it is impossible to separate the moneys or property captured into classes referable to their sources, there can be no specific responsive liability to the claims of plaintiffs.

OPINION BY: LURTON

OPINION

[*351] [**417] [***493] MR. JUSTICE LURTON delivered the opinion of the court.

The plaintiffs in error, who were plaintiffs [***494] below, are creditors of the city of Manila as it existed before the cession of the Philippine Islands to the United States by the treaty of Paris, December 10, 1898. Upon the theory that the city under its present charter from the government of the Philippine Islands is the same juristic person and liable upon the obligations of the old city, these actions were brought against it. The Supreme Court of the Philippine Islands denied relief, holding that the present municipality is a totally different corporate entity, and in no way liable for the debts of the Spanish municipality.

[*352] The fundamental question is whether, notwithstanding the cession of the Philippine Islands to the United States, followed by a reincorporation of the city, the present municipality is liable for the obligations of the city incurred prior to the cession to the United States.

We shall confine ourselves to the question whether the plaintiffs in error are entitled to judgments against the city upon their several claims. Whether there is a remedy adequate to the collection when reduced to judgment is not presented by the record. But whether there is or is not a remedy, affords no reason why the plaintiffs in error may not reduce their claims to judgment. Mt. Pleasant v. Beckwith, 100 U.S. 514, 530. The city confessedly may be sued under its existing charter, and that implies at least a right to judgment if they establish their demands.

The city as now incorporated has succeeded to all of the property rights of the old city and to the right to enforce all of its causes of action. There is identity of purpose between the Spanish and American charters and substantial identity of municipal powers. The area and the inhabitants incorporated are substantially the same. But for the change of sovereignty which has occurred under the treaty of Paris, the question of the liability of the city under its new charter for the debts of the old city would seem to be of easy solution. The principal question would therefore seem to be the legal consequence of the cession referred to upon the property rights and civil obligations of the city incurred before the cession. And so the question was made to turn in the court below upon the consequence of a change in soverreignty and a reincorporation of the city by the substituted sovereignty.

This disposes of the question of the jurisdiction of this court grounded upon the absence from the petition of the plaintiffs of any distinct claim under the treaty of Paris, since [HN1] under § 10 of the Philippine Organic Act [*353] of July 1, 1902, this court is given jurisdiction to review any final decree or judgment of the Supreme Court of the Philippine Islands where any treaty of the United States "is involved." That treaty was necessarily "involved," since neither the court below nor this court can determine the continuity of the municipality nor the liability of the city as it now exists for the obligation of the old city, without considering the effect of the change of sovereignty resulting from that treaty. See Reavis v. Fianza, 215 U.S. 16, 22.

The historical continuity of a municipality embracing the inhabitants of the territory now occupied by the city of Manila is impressive. Before the conquest of the Philippine Islands by Spain, Manila existed. The Spaniards found on the spot now occupied a populous and fortified community of Moros. In 1571 they occupied what was then and is now known as Manila, and established it as a municipal corporation.In 1574 there was conferred upon it the title of "Illustrious and ever loyal city of Manila." From time to time there occurred amendments, and, on January 19, 1894, there was a reorganization of the city government under a royal decree of that date. Under that charter there was power to incur debts for municipal purposes and power to sue and be sued. The obligations here in suit were incurred under the charter referred to, and are obviously obligations strictly within the provision of the municipal power. To pay judgments upon such debts it was the duty of the Ayuntamiento [**418] of Manila, which was the corporate name of the old city, to make provision in its budget.

The contention that the liability of the city upon such obligations was destroyed by a mere change of sovereignty is obviously one which is without a shadow of moral force, and, if true, must result from settled principles of rigid law. While the contracts from which the claims in suit resulted were in progress, war between the United [*354] States and Spain ensued. On August 13, 1898, the city was occupied by the forces of this Government and its affairs conducted by military authority. On July 31, 1901, the present incorporating act was passed, and the city since that time has been an autonomous municipality. [HN2] The charter in force is act 183 of the Philippine Commission and now may be found as chapters 68 to 75 of the Compiled Acts of the Philippine Commission. The first section of the charter of 1901 reads as follows:

"The inhabitants of the city of Manila, residing within the territory described in section 2 of this act, are hereby constituted a municipality, [***495] which shall be known as the city of Manila and by that name shall have perpetual succession, and shall possess all the rights of property herein granted or heretofore enjoyed and possessed by the city of Manila as organized under Spanish sovereignty."

The boundaries described in § 2 include substantially the area and inhabitants which had theretofore constituted the old city.

By § 4 of the same act the government of the city was invested in a municipal board.

Section 16 grants certain legislative powers to the board, and provides that it shall "take possession of all lands, buildings, offices, books, papers, records, moneys, credits, securities, assets, accounts, or other property or rights belonging to the former city of Manila or pertaining to the business or interests thereof, and, subject to the provisions herein set forth, shall have control of all its property except the building known as the Ayuntamiento, provision for the occupation and control of which is made in § 15 of this act; shall collect taxes and other revenues, and apply the same in accordance with appropriations, as hereinbefore provided, to the payment of the municipal expenses; shall supervise and control the discharge of official duties by subordinates; shall institute judicial proceedings to recover property and [*355] funds of the city wherever found or otherwise to protect the interests of the city, and shall defend all suits against the city," etc.

Section 69 of the charter expressly preserved "all city ordinances and orders in force at the time of the passage of this act and not inconsistent herewith," until modified or repealed by ordinances passed under this act.

Section 72 is the repealing clause, and provides for the repeal of "all acts, orders and regulations" which are inconsistent with the provisions of the act.

The charter contains no reference to the obligations or contracts of the old city.

If we understand the argument against the liability here asserted, it proceeds mainly upon the theory that inasmuch as the predecessor of the present city, the Ayuntamiento of Manila, was a corporate entity created by the Spanish government, when the sovereignty of Spain in the islands was terminated by the treaty of cession, if not by the capitulation of August 13, 1908, the municipality ipso facto disappeared for all purposes. This conclusion is reached upon the supposed analogy to the doctrine of principal and agent, the death of the principal ending the agency. So complete is the supposed death and annihilation of a municipal entity by extinction of sovereignty of the creating State that it was said in one of the opinions below that all of the public property of Manila passed to the United States, "for a consideration, which was paid," and that the United States was therefore justified in creating an absolutely new municipality and endowing it with all of the assets of the defunct city, free from any obligation to the creditors of that city. And so the matter was dismissed in the Trigas Case by the Court of First Instance, by the suggestion that "the plaintiff may have a claim against the crown of Spain, which has received from the United States payment for that done by the plaintiff."

[*356] We are unable to agree with the argument. It loses sight of [HN3] the dual character of municipal corporations. They exercise powers which are governmental and powers which are of a private or business character. In the one character a municipal corporation is a governmental subdivision, and for that purpose exercises by delegation a part of the sovereignty of the State. In the other character it is a mere legal entity or juristic person. In the latter character it stands for the community in the administration of local affairs wholly beyond the sphere of the public purposes for which its governmental powers are conferred.

The distinction is observed in South Carolina v. United States, 199 U.S. 437, 461, where Lloyd v. Mayor of New York, 5 N.Y. 369, 374, and Western Savings Society v. Philadelphia, 31 Pa. St. 175, are cited and approved. [**419] In Lloyd v. Mayor of New York, supra, it is said:

"The corporation of the city of New York possesses two kinds of power, one governmental and public, and, to the extent they are held and exercised, is clothed with sovereignty, the other private, and to the extent they are held and exercised, is a legal individual. The former are given and used for public purposes, the latter for private purposes. While in the exercise of the former, the corporation is a municipal government, and while in the exercise of the latter, is a corporate legal individual."

See also Dillon Mun. Corp. 66, 4th ed.; City of Petersburg v. Applegarth's Administrator, 26 Gratt. 321, 343; and Oliver v. Worcester, 102 Massachusetts, 489.

In view of the dual character of municipal corporations there is no public reason for presuming their total dissolution as a mere consequence of military occupation or territorial cession. The suspension of such governmental functions as are obviously incompatible with the new political relations thus brought about may be presumed. [*357] But no such implication may be reasonably indulged beyond that result.

Such a conclusion is in harmony with the [***496] settled principles of public law as declared by this and other courts and expounded by the text books upon the laws of war and international law. Taylor International Public Law, § 578.

That there is a total abrogation of the former political relations of the inhabitants of the ceded region is obvious. That all laws theretofore in force which are in conflict with the political character, constitution or institutions of the substituted sovereign lose their force, is also plain. Alvarez v. United States, 216 U.S. 167. But it is equally settled in the same public law that that great body of municipal law which regulates private and domestic rights continues in force until abrogated or changed by the new ruler.In Chicago, Rock Island & Pacific Railway Co. v. McGlinn, 114 U.S. 542, 546, it was said:

[HN4] "It is a general rule of public law, recognized and acted upon by the United States, that whenever political jurisdiction and legislative power over any territory are transferred from one nation or sovereign to another, the municipal laws of the country, that is, laws which are intended for the protection of private rights, continue in force until abrogated or changed by the new government or sovereign. By the cession public property passes from one government to the other, but private property remains as before, and with it those municipal laws which are designed to secure its peaceful use and enjoyment. As a matter of course, all laws, ordinances, and regulations in conflict with the political character, institutions and constitution of the new government are at once displaced. Thus, upon a cession of political jurisdiction and legislative power -- and the latter is involved in the former -- to the United States, the laws of the country in support of an established religion, or abridging the freedom of the [*358] press, or authorizing cruel and unusual punishments, and the like, would at once cease to be of obligatory force without any declaration to that effect; and the laws of the country on other subjects would necessarily be superseded by existing laws of the new government upon the same matters. But with respect to other laws affecting the possession, use and transfer of property, and designed to secure good order and peace in the community, and promote its health and prosperity, which are strictly of a municipal character, the rule is general, that a change of government leaves them in force until, by direct action of the new government, they are altered or repealed."

The above language was quoted with approval in Downes v. Bidwell, 182 U.S. 244, 298.

That the United States might, by virtue of its situation under a treaty ceding full title, have utterly extinguished every municipality which it found in existence in the Philippine Islands may be conceded. That it did so in view of the practice of nations to the contrary is not to be presumed and can only be established by cogent evidence.

That during military occupation the affairs of the city were in a large part administered by officials put in place by military order did not operate to dissolve the corporation or relieve it from liability upon obligations incurred before the occupation nor those created for municipal purposes by the administrators of its affairs while its old officials were displaced. New Orleans v. Steamship Co., 20 Wall. 387, 394. During that occupation and military administration the business of the city was carried on as usual. Taxes were assessed and taxes collected and expended for local purposes, and many of the officials carrying on the government were those found in office when the city was occupied. The continuity of the corporate city was not inconsistent with military occupation or the constitution or institutions of the occupying power. This [*359] is made evident by the occurrences at the time of capitulation. Thus the articles of capitulation concluded in these words: "This city, its inhabitants . . . and its private [**420] property of all descriptions are placed under the special safeguard of the faith and honor of the American Army." This was quoted in President McKinley's instructions of April 7, 1900, to the Philippine Commission, and touching this he said: "I believe that this pledge has been faithfully kept." And the commission was directed to labor for the full performance of this obligation. This instruction was in line with and in fulfillment of the eighth article of the treaty of Paris of December 10, 1898. Under the third article of that treaty the archipelago known s the Philippine Islands was ceded to the United States, the latter agreeing to pay to Spain the sum of twenty million dollars. Under the first paragraph of the eight article Spain relinquished to the United States "all buildings, wharves, barracks, forts, structures, public highways and other immovable property which, in conformity with law, belong to the public domain, and as such belong to the crown of Spain." It is under this clause, in connection with the clause agreement to pay to Spain twenty million dollars for the cession of the Philippine group, that he contention that all of the public rights of the city of Manila were acquired by the United States, which [***497] country was therefore justified, as absolute owner, in granting the property rights so acquired to what is called the "absolutely new corporation," created thereafter.But the qualifying words touching property rights relinquished by Spain limit the relinquishment to "property which, in conformity with law, belongs to the public domain, and as such belongs to the crown of Spain." It did not affect property which did not, in "conformity with law, belong to the crown of Spain." That it was not intended to apply to property which, "in conformity with law," belonged to the city of Manila as a municipal corporation [*360] is clear. This is demonstrated by the second

paragraph of the same article, which reads: And it is hereby declared that the relinquishment or cession, as the case may be, to which the preceding paragraph refers, cannot in any respect impair the property or rights which by law belong to the peaceful possession of property of all kinds, of provinces, municipalities, public or private establishments . . . . having legal capacity to acquire and possess property in the aforesaid territory renounced or ceded, or of private individuals. . . ." Thus the property and property rights of municipal corporations were protected and safeguarded precisely as were the property and property rights of individuals.

That the cession did not operate as an extinction or dissolution of corporations is herein recognized, for the stipulation against impairment of their property rights has this plain significance.

The conclusion we reach that the legal entity survived both the military occupation and the cession which followed finds support in the cases which hold that the Pueblos of San Francisco and Los Angeles, which existed as municipal organizations prior to the cession of California by Mexico, continued to exist with their community and property rights intact. Cohas v. Raisin, 3 California, 443; Hart v. Burnett, 15 California, 530; Townsend v. Greeley, 5 Wall. 326; Merryman v. Bourne, 9 Wall. 592, 602; More v. Steinbach, 127 U.S. 70; Los Angeles Milling Co. v. Los Angeles, 217 U.S. 217.

Was corporate identity and corporate liability extinguished as a necessary legal result of the new charter granted in 1901 by the Philippine Commission? The inhabitants of the old city are the incorporators of the new. There is substantially identity of area. There are some changes in the form of government and some changes in corporate powers and methods of administration. The new corporation is endowed with all of the property and [*361] property rights of the old. It has the same power to sue and be sued which the former corporation had. There is not the slightest suggestion that the new corporation shall not succeed to the contracts and obligations of the old corporation. Laying out of view any question of the constitutional guarantee against impairment of the obligation of contracts, there is, in the absence of express legislative declaration of a contrary purpose, no reason for supposing that the reincorporation of an old municipality is intended to permit an escape from the obligations of the old, to whose property and rights it has succeeded. The juristic identity of the corporation has been in no wise affected, and, in law, the present city is in every legal sense the successor of the old. As such it is entitled to the property and property rights of the predecessor corporation, and is, in law, subject to all of its liabilities. Broughton v. Pensacola, 93 U.S. 266; Mount Pleasant v. Beckwith, 100 U.S. 520; Mobile v. Watson, 116 U.S. 289; Shapleigh v. San Angelo, 167 U.S. 646, 655; O'Connor v. Memphis, 6 Lea, 730; Colchester v. Seaber, 3 Burrows, 1866, 1870, in which case, when a municipality became disabled to act and obtained a new charter, in an action upon an obligation of the old corporation, there was judgment for the creditor, Lord Mansfield saying:

" [**421] Many corporations, for want of legal magistrates, have lost their activity, and obtained new charters. Maidstone, Radnor, Carmartben, and many more are in the same case with Colchester. And yet it has never been disputed but that the new charters revive and give activity to the old corporation; except, perhaps, in that case in Levinz, where the corporation had a new name; and even there the court made no doubt. Where the question has arisen upon any remarkable metamorphosis, it has always been determined that they remain the same, as to debts and 'rights.'"

Morris & Cummings v. State, 63 Texas, 728, 730.

[*362] In Shapleigh v. San Angelo, supra, this court said in a similar case:

[HN5] "The State's plenary power over its municipal corporations to change their organization, to modify their method of internal government, or to abolish them altogether, is not restricted by contracts entered into by the municipality with its creditors or with private parties. An absolute repeal of a municipal charter is therefore effectual so far as it abolishes the old corporate organization; but when the same or substantially the same inhabitants are erected into a new corporation, whether with extended [***498] or restricted territorial limits, such new corporation is treated as in law the successor of the old one, entitled to its property rights, and subject to its liabilities."

The cases of Trigas and Vilas went off upon demurrers, and no question of remedy arises here.

The appeal of Aguado is from a decree upon a final hearing denying him all relief.

That all three of the plaintiffs in error are entitled to proceed to judgment when they shall establish their several claims is obvious from what we have said. But in the Aguado case it is sought to establish his claim as a charge against certain property and funds held by the city as trustee, known as the Carriedo fund. In 1734 one Don Francisco Carriedo y Perodo bequeathed to the city a fund for the establishment of waterworks, to be kept as a separate fund and devoted to the erection and maintenance of the works. This fund was loyally kept and greatly increased and was enlarged by a special tax upon meat, devoted to that purpose, The works were finally completed in 1878, and have been since operated by the city, the income and special tax going to maintenance. Certain securities belonging to the fund are now held by the city, the income being applied to the operation of the works. Aguado took a contract to supply coal for the use of the [*363] Carriedo works and made a deposit to guarantee the contract. When the city was occupied by the American army it was indebted to him for coal so supplied, as well as for the deposit so made. That the coal was bought for and used in the operation of the Carriedo works is not denied. But there is no evidence that the credit was given to the Carriedo Fund so held in trust under the will of Carriedo. The contract was made with the Ayuntamiento of Manila, just as all other contracts for city supplies or works were made. The contract not having been made with special reference to the liability of the fund held in trust by the city, but apparently upon the general credit of the city, we are not disposed to reverse the judgment of the court below, holding that the claim of Aguado did not constitute a charge upon the Carriedo fund.

Aguado is, nevertheless, entitled to a judgment. The designation of the city in the petition as trustee may be regarded as descriptive. The debt having been incurred by the city, it must be regarded as a city liability. Taylor v. Davis, 110 U.S. 330, 336.

Our conclusion is that the decree in the Aguado case must be reversed and the case remanded, with direction to render judgment and such other relief as may seem in conformity with law. The judgments in the Trigas and Vilas cases will be reversed and the cases remanded with direction to overrule the respective demurrers, and for such other action as may be consistent with law, and consistent with this opinion.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. 152774             May 27, 2004

THE PROVINCE OF BATANGAS, represented by its Governor, HERMILANDO I. MANDANAS, petitioner, vs.HON. ALBERTO G. ROMULO, Executive Secretary and Chairman of the Oversight Committee on Devolution; HON. EMILIA BONCODIN, Secretary, Department of Budget and Management; HON. JOSE D. LINA, JR., Secretary, Department of Interior and Local Government, respondents.

D E C I S I O N

CALLEJO, SR., J.:

The Province of Batangas, represented by its Governor, Hermilando I. Mandanas, filed the present petition for certiorari, prohibition and mandamus under Rule 65 of the Rules of Court, as amended, to declare as unconstitutional and void certain provisos contained in the General Appropriations Acts (GAA) of 1999, 2000 and 2001, insofar as they uniformly earmarked for each corresponding year the amount of five billion pesos (P5,000,000,000.00) of the Internal Revenue Allotment (IRA) for the Local Government Service Equalization Fund (LGSEF) and imposed conditions for the release thereof.

Named as respondents are Executive Secretary Alberto G. Romulo, in his capacity as Chairman of the Oversight Committee on Devolution, Secretary Emilia Boncodin of the Department of Budget and Management (DBM) and Secretary Jose Lina of the Department of Interior and Local Government (DILG).

Background

On December 7, 1998, then President Joseph Ejercito Estrada issued Executive Order (E.O.) No. 48 entitled "ESTABLISHING A PROGRAM FOR DEVOLUTION ADJUSTMENT AND EQUALIZATION." The program was established to "facilitate the process of enhancing the capacities of local government units (LGUs) in the discharge of the functions and services devolved to them by the National Government Agencies concerned pursuant to the Local Government Code."1 The Oversight Committee (referred to as the Devolution Committee in E.O. No. 48) constituted under Section 533(b) of Republic Act No. 7160 (The Local Government Code of 1991) has been tasked to formulate and issue the appropriate rules and regulations necessary for its effective implementation.2 Further, to address the funding shortfalls of functions and services devolved to the LGUs and other funding requirements of the program, the "Devolution Adjustment and Equalization Fund" was created.3 For 1998, the DBM was directed to set aside an amount to be determined by the Oversight Committee based on the devolution status appraisal surveys undertaken by the DILG.4 The initial fund was to be sourced from the available savings of the national government for CY 1998.5 For 1999 and the succeeding years, the corresponding amount required to sustain the program was to be incorporated in the annual GAA.6 The Oversight Committee has been authorized to issue the implementing rules and regulations governing the equitable allocation and distribution of said fund to the LGUs.7

The LGSEF in the GAA of 1999

In Republic Act No. 8745, otherwise known as the GAA of 1999, the program was renamed as the LOCAL GOVERNMENT SERVICE EQUALIZATION FUND (LGSEF). Under said appropriations law, the amount ofP96,780,000,000 was allotted as the share of the LGUs in the internal revenue taxes. Item No. 1, Special Provisions, Title XXXVI – A. Internal Revenue Allotment of Rep. Act No. 8745 contained the following proviso:

... PROVIDED, That the amount of FIVE BILLION PESOS (P5,000,000,000) shall be earmarked for the Local Government Service Equalization Fund for the funding requirements of projects and activities arising from the full and efficient implementation of devolved functions and services of local government units pursuant to R.A. No. 7160, otherwise known as the Local Government Code of 1991: PROVIDED, FURTHER, That such amount shall be released to the local government units subject to the implementing rules and regulations, including such mechanisms and guidelines for the equitable allocations and distribution of said fund among local government units subject to the guidelines that may be prescribed by the Oversight Committee on Devolution as constituted pursuant to Book IV, Title III, Section 533(b) of R.A. No. 7160. The Internal Revenue Allotment shall be released directly by the Department of Budget and Management to the Local Government Units concerned.

On July 28, 1999, the Oversight Committee (with then Executive Secretary Ronaldo B. Zamora as Chairman) passed Resolution Nos. OCD-99-003, OCD-99-005 and OCD-99-006 entitled as follows:

OCD-99-005

RESOLUTION ADOPTING THE ALLOCATION SCHEME FOR THE PhP5 BILLION CY 1999 LOCAL GOVERNMENT SERVICE EQUALIZATION FUND (LGSEF) AND REQUESTING HIS EXCELLENCY PRESIDENT JOSEPH EJERCITO ESTRADA TO APPROVE SAID ALLOCATION SCHEME.

OCD-99-006

RESOLUTION ADOPTING THE ALLOCATION SCHEME FOR THE PhP4.0 BILLION OF THE 1999 LOCAL GOVERNMENT SERVICE EQUALIZATION FUND AND ITS CONCOMITANT GENERAL FRAMEWORK, IMPLEMENTING GUIDELINES AND MECHANICS FOR ITS IMPLEMENTATION AND RELEASE, AS PROMULGATED BY THE OVERSIGHT COMMITTEE ON DEVOLUTION.

OCD-99-003

RESOLUTION REQUESTING HIS EXCELLENCY PRESIDENT JOSEPH EJERCITO ESTRADA TO APPROVE THE REQUEST OF THE OVERSIGHT COMMITTEE ON DEVOLUTION TO SET ASIDE TWENTY PERCENT (20%) OF THE LOCAL GOVERNMENT SERVICE EQUALIZATION FUND (LGSEF) FOR LOCAL AFFIRMATIVE ACTION PROJECTS AND OTHER PRIORITY INITIATIVES FOR LGUs INSTITUTIONAL AND CAPABILITY BUILDING IN ACCORDANCE WITH THE IMPLEMENTING GUIDELINES AND MECHANICS AS PROMULGATED BY THE COMMITTEE.

These OCD resolutions were approved by then President Estrada on October 6, 1999.

Under the allocation scheme adopted pursuant to Resolution No. OCD-99-005, the five billion pesos LGSEF was to be allocated as follows:

1. The PhP4 Billion of the LGSEF shall be allocated in accordance with the allocation scheme and implementing guidelines and mechanics promulgated and adopted by the OCD. To wit:

a. The first PhP2 Billion of the LGSEF shall be allocated in accordance with the codal formula sharing scheme as prescribed under the 1991 Local Government Code;

b. The second PhP2 Billion of the LGSEF shall be allocated in accordance with a modified 1992 cost of devolution fund (CODEF) sharing scheme, as recommended by the respective leagues of provinces, cities and municipalities to the OCD. The modified CODEF sharing formula is as follows:

Province : 40%

Cities : 20%

Municipalities : 40%

This is applied to the P2 Billion after the approved amounts granted to individual provinces, cities and municipalities as assistance to cover decrease in 1999 IRA share due to reduction in land area have been taken out.

2. The remaining PhP1 Billion of the LGSEF shall be earmarked to support local affirmative action projects and other priority initiatives submitted by LGUs to the Oversight Committee on Devolution for approval in accordance with its prescribed guidelines as promulgated and adopted by the OCD.

In Resolution No. OCD-99-003, the Oversight Committee set aside the one billion pesos or 20% of the LGSEF to support Local Affirmative Action Projects (LAAPs) of LGUs. This remaining amount was intended to "respond to the urgent need for additional funds assistance, otherwise not available within the parameters of other existing fund sources." For LGUs to be eligible for funding under the one-billion-peso portion of the LGSEF, the OCD promulgated the following:

III. CRITERIA FOR ELIGIBILITY:

1. LGUs (province, city, municipality, or barangay), individually or by group or 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% or 805,000,000

For Municipalities 35% or 1,225,000,000

For Barangays 16% or 560,000,000

Provided that the respective Leagues representing the provinces, cities, municipalities and barangays shall draw up and adopt the horizontal distribution/sharing schemes among the member LGUs whereby the Leagues concerned may opt to adopt direct financial assistance or project-based arrangement, such that the LGSEF allocation for individual LGU shall be released directly to the LGU concerned;

Provided further that the individual LGSEF shares to LGUs are used in accordance with the general purposes and guidelines promulgated by the OCD for the implementation of the LGSEF at the local levels pursuant to Res. No. OCD-99-006 dated October 7, 1999 and pursuant to the Leagues' guidelines and mechanism as approved by the OCD;

Provided further that each of the Leagues shall submit to the OCD for its approval their respective allocation scheme, the list of LGUs with the corresponding LGSEF shares and the corresponding project categories if project-based;

Provided further that upon approval by the OCD, the lists of LGUs shall be endorsed to the DBM as the basis for the preparation of the corresponding NCAs, SAROs, and related budget/release documents.

2. The remaining P1,500,000,000 of the CY 2000 LGSEF shall be earmarked to support the following initiatives and local affirmative action projects, to be endorsed to and approved by the Oversight Committee on Devolution in accordance with the OCD agreements, guidelines, procedures and documentary requirements:

On July 5, 2000, then President Estrada issued a Memorandum authorizing then Executive Secretary Zamora and the DBM to implement and release the 2.5 billion pesos LGSEF for 2000 in accordance with Resolution No. OCD-2000-023.

Thereafter, the Oversight Committee, now under the administration of President Gloria Macapagal-Arroyo, promulgated Resolution No. OCD-2001-29 entitled "ADOPTING RESOLUTION NO. OCD-2000-023 IN THE ALLOCATION, IMPLEMENTATION AND RELEASE OF THE REMAINING P2.5 BILLION LGSEF FOR CY 2000." Under this resolution, the amount of one billion pesos of the LGSEF was to be released in accordance with paragraph 1 of Resolution No. OCD-2000-23, to complete the 3.5 billion pesos allocated to the LGUs, while the amount of 1.5 billion pesos was allocated for the LAAP. However, out of the latter amount,P400,000,000 was to be allocated and released as follows: P50,000,000 as financial assistance to the LAAPs of LGUs; P275,360,227 as financial assistance to cover the decrease in the IRA of LGUs concerned due to reduction in land area; and P74,639,773 for the LGSEF Capability-Building Fund.

The LGSEF in the GAA of 2001

In view of the failure of Congress to enact the general appropriations law for 2001, the GAA of 2000 was deemed re-enacted, together with the IRA of the LGUs therein and the proviso earmarking five billion pesos thereof for the LGSEF.

On January 9, 2002, the Oversight Committee adopted Resolution No. OCD-2002-001 allocating the five billion pesos LGSEF for 2001 as follows:

Modified Codal Formula

P 3.000 billion

Priority Projects 1.900 billion

Capability Building Fund

.100 billion

P 5.000 billion

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

LGUsPercenta

geAmount

Provinces 25P 0.750 billion

Cities 25 0.750

Municipalities

35 1.050

Barangays 15 0.450

100P 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%.8 This formula has been improperly amended or modified, with respect to the five-billion-peso portion of the IRA allotted for the LGSEF, by the assailed OCD resolutions as they invariably provided for a different sharing scheme.

The modifications allegedly constitute an illegal amendment by the executive branch of a substantive law. Moreover, the petitioner mentions that in the Letter dated December 5, 2001 of respondent Executive Secretary Romulo addressed to respondent Secretary Boncodin, the former endorsed to the latter the release of funds to certain LGUs from the LGSEF in accordance with the handwritten instructions of President Arroyo. Thus, the LGUs are at a loss as to how a portion of the LGSEF is actually allocated. Further, there are still portions of the LGSEF that, to date, have not been received by the petitioner; hence, resulting in damage and injury to the petitioner.

The petitioner prays that the Court declare as unconstitutional and void the assailed provisos relating to the LGSEF in the GAAs of 1999, 2000 and 2001 and the assailed OCD resolutions (Resolutions Nos. OCD-99-003, OCD-99-005, OCD-99-006, OCD-2000-023, OCD-2001-029 and OCD-2002-001) issued by the Oversight Committee pursuant thereto. The petitioner, likewise, prays that the Court direct the respondents to rectify the unlawful and illegal distribution and releases of the LGSEF for the aforementioned years and release the same in accordance with the sharing formula under Section 285 of the Local Government Code of 1991. Finally, the petitioner urges the Court to declare that the

entire IRA should be released automatically without further action by the LGUs as required by the Constitution and the Local Government Code of 1991.

The Respondents' Arguments

The respondents, through the Office of the Solicitor General, urge the Court to dismiss the petition on procedural and substantive grounds. On the latter, the respondents contend that the assailed provisos in the GAAs of 1999, 2000 and 2001 and the assailed resolutions issued by the Oversight Committee are not constitutionally infirm. The respondents advance the view that Section 6, Article X of the Constitution does not specify that the "just share" of the LGUs shall be determined solely by the Local Government Code of 1991. Moreover, the phrase "as determined by law" in the same constitutional provision means that there exists no limitation on the power of Congress to determine what is the "just share" of the LGUs in the national taxes. In other words, Congress is the arbiter of what should be the "just share" of the LGUs in the national taxes.

The respondents further theorize that Section 285 of the Local Government Code of 1991, which provides for the percentage sharing of the IRA among the LGUs, was not intended to be a fixed determination of their "just share" in the national taxes. Congress may enact other laws, including appropriations laws such as the GAAs of 1999, 2000 and 2001, providing for a different sharing formula. Section 285 of the Local Government Code of 1991 was merely intended to be the "default share" of the LGUs to do away with the need to determine annually by law their "just share." However, the LGUs have no vested right in a permanent or fixed percentage as Congress may increase or decrease the "just share" of the LGUs in accordance with what it believes is appropriate for their operation. There is nothing in the Constitution which prohibits Congress from making such determination through the appropriations laws. If the provisions of a particular statute, the GAA in this case, are within the constitutional power of the legislature to enact, they should be sustained whether the courts agree or not in the wisdom of their enactment.

On procedural grounds, the respondents urge the Court to dismiss the petition outright as the same is defective. The petition allegedly raises factual issues which should be properly threshed out in the lower courts, not this Court, not being a trier of facts. Specifically, the petitioner's allegation that there are portions of the LGSEF that it has not, to date, received, thereby causing it (the petitioner) injury and damage, is subject to proof and must be substantiated in the proper venue, i.e., the lower courts.

Further, according to the respondents, the petition has already been rendered moot and academic as it no longer presents a justiciable controversy. The IRAs for the years 1999, 2000 and 2001, have already been released and the government is now operating under the 2003 budget. In support of this, the respondents submitted certifications issued by officers of the DBM attesting to the release of the allocation or shares of the petitioner in the LGSEF for 1999, 2000 and 2001. There is, therefore, nothing more to prohibit.

Finally, the petitioner allegedly has no legal standing to bring the suit because it has not suffered any injury. In fact, the petitioner's "just share" has even increased. Pursuant to Section 285 of the Local Government Code of 1991, the share of the provinces is 23%. OCD Nos. 99-005, 99-006 and 99-003 gave the provinces 40% of P2 billion of the LGSEF. OCD Nos. 2000-023 and 2001-029 apportioned 26% of P3.5 billion to the provinces. On the other hand, OCD No. 2001-001 allocated 25% of P3 billion to the provinces. Thus, the petitioner has not suffered any injury in the implementation of the assailed provisos in the GAAs of 1999, 2000 and 2001 and the OCD resolutions.

The Ruling of the Court Procedural Issues

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

The petitioner has locus standi to maintain the present suit

The gist of the question of standing is whether a party has "alleged such a personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination of difficult constitutional questions."9 Accordingly, it has been held that the interest of a party assailing the constitutionality of a statute must be direct and personal. Such party must be able to show, not only that the law or any government act is invalid, but also that he has sustained or is in imminent danger of sustaining some direct injury as a result of its enforcement, and not merely that he suffers thereby in some indefinite way. It must appear that the person complaining has been or is about to be denied some right or privilege to which he is lawfully entitled or that he is about to be subjected to some burdens or penalties by reason of the statute or act complained of.10

The Court holds that the petitioner possesses the requisite standing to maintain the present suit. The petitioner, a local government unit, seeks relief in order to protect or vindicate an interest of its own, and of the other LGUs. This interest pertains to the LGUs' share in the national taxes or the IRA. The petitioner's constitutional claim is, in substance, that the assailed provisos in the GAAs of 1999, 2000 and 2001, and the OCD resolutions contravene Section 6, Article X of the Constitution, mandating the "automatic release" to the LGUs of their share in the national taxes. Further, the injury that the petitioner claims to suffer is the diminution of its share in the IRA, as provided under Section 285 of the Local Government Code of 1991, occasioned by the implementation of the assailed measures. These allegations are sufficient to grant the petitioner standing to question the validity of the assailed provisos in the GAAs of 1999, 2000 and 2001, and the OCD resolutions as the petitioner clearly has "a plain, direct and adequate interest" in the manner and distribution of the IRA among the LGUs.

The petition involves a significant legal issue

The crux of the instant controversy is whether the assailed provisos contained in the GAAs of 1999, 2000 and 2001, and the OCD resolutions infringe the Constitution and the Local Government Code of 1991. This is undoubtedly a legal question. On the other hand, the following facts are not disputed:

1. The earmarking of five billion pesos of the IRA for the LGSEF in the assailed provisos in the GAAs of 1999, 2000 and re-enacted budget for 2001;

2. The promulgation of the assailed OCD resolutions providing for the allocation schemes covering the said five billion pesos and the implementing rules and regulations therefor; and

3. The release of the LGSEF to the LGUs only upon their compliance with the implementing rules and regulations, including the guidelines and mechanisms, prescribed by the Oversight Committee.

Considering that these facts, which are necessary to resolve the legal question now before this Court, are no longer in issue, the same need not be determined by a trial court.11 In any case, the rule on hierarchy of courts will not prevent this Court from assuming jurisdiction over the petition. The said rule may be relaxed when the redress desired cannot be obtained in the appropriate courts or where exceptional and compelling circumstances justify availment of a remedy within and calling for the exercise of this Court's primary jurisdiction.12

The crucial legal issue submitted for resolution of this Court entails the proper legal interpretation of constitutional and statutory provisions. Moreover, the "transcendental importance" of the case, as it necessarily involves the application of the constitutional principle on local autonomy, cannot be gainsaid. The nature of the present controversy, therefore, warrants the relaxation by this Court of procedural rules in order to resolve the case forthwith.

The substantive issue needs to be resolved notwithstanding the supervening events

Granting arguendo that, as contended by the respondents, the resolution of the case had already been overtaken by supervening events as the IRA, including the LGSEF, for 1999, 2000 and 2001, had already been released and the government is now operating under a new appropriations law, still, there is compelling reason for this Court to resolve the substantive issue raised by the instant petition. Supervening events, whether intended or accidental, cannot prevent the Court from rendering a decision if there is a grave violation of the Constitution.13 Even in cases where supervening events had made the cases moot, the Court did not hesitate to resolve the legal or constitutional issues raised to formulate controlling principles to guide the bench, bar and public.14

Another reason justifying the resolution by this Court of the substantive issue now before it is the rule that courts will decide a question otherwise moot and academic if it is "capable of repetition, yet evading review."15 For the GAAs in the coming years may contain provisos similar to those now being sought to be invalidated, and yet, the question may not be decided before another GAA is enacted. It, thus, behooves this Court to make a categorical ruling on the substantive issue now.

Substantive Issue

As earlier intimated, the resolution of the substantive legal issue in this case calls for the application of a most important constitutional policy and principle, that of local autonomy.16 In Article II of the Constitution, the State has expressly adopted as a policy that:

Section 25. The State shall ensure the autonomy of local governments.

An entire article (Article X) of the Constitution has been devoted to guaranteeing and promoting the autonomy of LGUs. Section 2 thereof reiterates the State policy in this wise:

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

Consistent with the principle of local autonomy, the Constitution confines the President's power over the LGUs to one of general supervision.17 This provision has been interpreted to exclude the power of control. The distinction between the two powers was enunciated in Drilon v. Lim:18

An officer in control lays down the rules in the doing of an act. If they are not followed, he may, in his discretion, order the act undone or re-done by his subordinate or he may even decide to do it himself. Supervision does not cover such authority. The supervisor or superintendent merely sees to it that the rules are followed, but he himself does not lay down such rules, nor does he have the discretion to modify or replace them. If the rules are not observed, he may order the work done or re-done but only to conform to the prescribed rules. He may not prescribe his own manner for doing the act. He has no judgment on this matter except to see to it that the rules are followed.19

The Local Government Code of 199120 was enacted to flesh out the mandate of the Constitution.21 The State policy on local autonomy is amplified in Section 2 thereof:

Sec. 2. Declaration of Policy. – (a) It is hereby declared the policy of the State that the territorial and political subdivisions of the State shall enjoy genuine and meaningful local autonomy to enable them to attain their fullest development as self-reliant communities and make them more effective partners in the attainment of national goals. Toward this end, the State shall provide for a more responsive and accountable local government structure instituted through a system of decentralization whereby local government units shall be given more powers, authority, responsibilities, and resources. The process of decentralization shall proceed from the National Government to the local government units.

Guided by these precepts, the Court shall now determine whether the assailed provisos in the GAAs of 1999, 2000 and 2001, earmarking for each corresponding year the amount of five billion pesos of the IRA for the LGSEF and the OCD resolutions promulgated pursuant thereto, transgress the Constitution and the Local Government Code of 1991.

The assailed provisos in the GAAs of 1999, 2000 and 2001 and the OCD resolutions violate the constitutional precept on local autonomy

Section 6, Article X of the Constitution reads:

Sec. 6. Local government units shall have a just share, as determined by law, in the national taxes which shall be automatically released to them.

When parsed, it would be readily seen that this provision mandates that (1) the LGUs shall have a "just share" in the national taxes; (2) the "just share" shall be determined by law; and (3) the "just share" shall be automatically released to the LGUs.

The Local Government Code of 1991, among its salient provisions, underscores the automatic release of the LGUs' "just share" in this wise:

Sec. 18. Power to Generate and Apply Resources. Local government units shall have the power and authority to establish an organization that shall be responsible for the efficient and effective implementation of their development plans, program objectives and priorities; to create their own sources of revenue and to levy taxes, fees, and charges which shall accrue exclusively for their use and disposition and which shall be retained by them; to have a just share in national taxes which shall be automatically and directly released to them without need of further action;

...

Sec. 286. Automatic Release of Shares. (a) The share of each local government unit shall be released, without need of any further action, directly to the provincial, city, municipal or barangay treasurer, as the case may be, on a quarterly basis within five (5) days after the end of each quarter, and which shall not be subject to any lien or holdback that may be imposed by the national government for whatever purpose.

(b) Nothing in this Chapter shall be understood to diminish the share of local government units under existing laws.

Webster's Third New International Dictionary defines "automatic" as "involuntary either wholly or to a major extent so that any activity of the will is largely negligible; of a reflex nature; without volition; mechanical; like or suggestive of an automaton." Further, the word "automatically" is defined as "in an automatic manner: without thought or conscious intention." Being "automatic," thus, connotes something mechanical, spontaneous and perfunctory. As such, the LGUs are not required to perform any act to receive the "just share" accruing to them from the national coffers. As

emphasized by the Local Government Code of 1991, the "just share" of the LGUs shall be released to them "without need of further action." Construing Section 286 of the LGC, we held in Pimentel, Jr. v. Aguirre,22 viz:

Section 4 of AO 372 cannot, however, be upheld. A basic feature of local fiscal autonomy is the automatic release of the shares of LGUs in the National internal revenue. This is mandated by no less than the Constitution. The Local Government Code specifies further that the release shall be made directly to the LGU concerned within five (5) days after every quarter of the year and "shall not be subject to any lien or holdback that may be imposed by the national government for whatever purpose." As a rule, the term "SHALL" is a word of command that must be given a compulsory meaning. The provision is, therefore, IMPERATIVE.

Section 4 of AO 372, however, orders the withholding, effective January 1, 1998, of 10 percent of the LGUs' IRA "pending the assessment and evaluation by the Development Budget Coordinating Committee of the emerging fiscal situation" in the country. Such withholding clearly contravenes the Constitution and the law. Although temporary, it is equivalent to a holdback, which means "something held back or withheld, often temporarily." Hence, the "temporary" nature of the retention by the national government does not matter. Any retention is prohibited.

In sum, while Section 1 of AO 372 may be upheld as an advisory effected in times of national crisis, Section 4 thereof has no color of validity at all. The latter provision effectively encroaches on the fiscal autonomy of local governments. Concededly, the President was well-intentioned in issuing his Order to withhold the LGUs' IRA, but the rule of law requires that even the best intentions must be carried out within the parameters of the Constitution and the law. Verily, laudable purposes must be carried out by legal methods.23

The "just share" of the LGUs is incorporated as the IRA in the appropriations law or GAA enacted by Congress annually. Under the assailed provisos in the GAAs of 1999, 2000 and 2001, a portion of the IRA in the amount of five billion pesos was earmarked for the LGSEF, and these provisos imposed the condition that "such amount shall be released to the local government units subject to the implementing rules and regulations, including such mechanisms and guidelines for the equitable allocations and distribution of said fund among local government units subject to the guidelines that may be prescribed by the Oversight Committee on Devolution." Pursuant thereto, the Oversight Committee, through the assailed OCD resolutions, apportioned the five billion pesos LGSEF such that:

For 1999

P2 billion - allocated according to Sec. 285 LGC

P2 billion - Modified Sharing Formula (Provinces – 40%;

Cities – 20%; Municipalities – 40%)

P1 billion – projects (LAAP) approved by OCD.24

For 2000

P3.5 billion – Modified Sharing Formula (Provinces – 26%;

Cities – 23%; Municipalities – 35%; Barangays – 16%);

P1.5 billion – projects (LAAP) approved by the OCD.25

For 2001

P3 billion – Modified Sharing Formula (Provinces – 25%;

Cities – 25%; Municipalities – 35%; Barangays – 15%)

P1.9 billion – priority projects

P100 million – capability building fund.26

Significantly, the LGSEF could not be released to the LGUs without the Oversight Committee's prior approval. Further, with respect to the portion of the LGSEF allocated for various projects of the LGUs (P1 billion for 1999; P1.5 billion for 2000 and P2 billion for 2001), the Oversight Committee, through the assailed OCD resolutions, laid down guidelines and mechanisms that the LGUs had to comply with before they could avail of funds from this portion of the LGSEF. The

guidelines required (a) the LGUs to identify the projects eligible for funding based on the criteria laid down by the Oversight Committee; (b) the LGUs to submit their project proposals to the DILG for appraisal; (c) the project proposals that passed the appraisal of the DILG to be submitted to the Oversight Committee for review, evaluation and approval. It was only upon approval thereof that the Oversight Committee would direct the DBM to release the funds for the projects.

To the Court's mind, the entire process involving the distribution and release of the LGSEF is constitutionally impermissible. The LGSEF is part of the IRA or "just share" of the LGUs in the national taxes. To subject its distribution and release to the vagaries of the implementing rules and regulations, including the guidelines and mechanisms unilaterally prescribed by the Oversight Committee from time to time, as sanctioned by the assailed provisos in the GAAs of 1999, 2000 and 2001 and the OCD resolutions, makes the release not automatic, a flagrant violation of the constitutional and statutory mandate that the "just share" of the LGUs "shall be automatically released to them." The LGUs are, thus, placed at the mercy of the Oversight Committee.

Where the law, the Constitution in this case, is clear and unambiguous, it must be taken to mean exactly what it says, and courts have no choice but to see to it that the mandate is obeyed.27 Moreover, as correctly posited by the petitioner, the use of the word "shall" connotes a mandatory order. Its use in a statute denotes an imperative obligation and is inconsistent with the idea of discretion.28

Indeed, the Oversight Committee exercising discretion, even control, over the distribution and release of a portion of the IRA, the LGSEF, is an anathema to and subversive of the principle of local autonomy as embodied in the Constitution. Moreover, it finds no statutory basis at all as the Oversight Committee was created merely to formulate the rules and regulations for the efficient and effective implementation of the Local Government Code of 1991 to ensure "compliance with the principles of local autonomy as defined under the Constitution."29 In fact, its creation was placed under the title of "Transitory Provisions," signifying its ad hoc character. According to Senator Aquilino Q. Pimentel, the principal author and sponsor of the bill that eventually became Rep. Act No. 7160, the Committee's work was supposed to be done a year from the approval of the Code, or on October 10, 1992.30 The Oversight Committee's authority is undoubtedly limited to the implementation of the Local Government Code of 1991, not to supplant or subvert the same. Neither can it exercise control over the IRA, or even a portion thereof, of the LGUs.

That the automatic release of the IRA was precisely intended to guarantee and promote local autonomy can be gleaned from the discussion below between Messrs. Jose N. Nolledo and Regalado M. Maambong, then members of the 1986 Constitutional Commission, to wit:

MR. MAAMBONG. Unfortunately, under Section 198 of the Local Government Code, the existence of subprovinces is still acknowledged by the law, but the statement of the Gentleman on this point will have to be taken up probably by the Committee on Legislation. A second point, Mr. Presiding Officer, is that under Article 2, Section 10 of the 1973 Constitution, we have a provision which states:

The State shall guarantee and promote the autonomy of local government units, especially the barrio, to insure their fullest development as self-reliant communities.

This provision no longer appears in the present configuration; does this mean that the concept of giving local autonomy to local governments is no longer adopted as far as this Article is concerned?

MR. NOLLEDO. No. In the report of the Committee on Preamble, National Territory, and Declaration of Principles, that concept is included and widened upon the initiative of Commissioner Bennagen.

MR. MAAMBONG. Thank you for that.

With regard to Section 6, sources of revenue, the creation of sources as provided by previous law was "subject to limitations as may be provided by law," but now, we are using the term "subject to such guidelines as may be fixed by law." In Section 7, mention is made about the "unique, distinct and exclusive charges and contributions," and in Section 8, we talk about "exclusivity of local taxes and the share in the national wealth." Incidentally, I was one of the authors of this provision, and I am very thankful. Does this indicate local autonomy, or was the wording of the law changed to give more autonomy to the local government units?31

MR. NOLLEDO. Yes. In effect, those words indicate also "decentralization" because local political units can collect taxes, fees and charges subject merely to guidelines, as recommended by the league of governors and city mayors, with whom I had a dialogue for almost two hours. They told me that limitations may be questionable in the sense that Congress may limit and in effect deny the right later on.

MR. MAAMBONG. Also, this provision on "automatic release of national tax share" points to more local autonomy. Is this the intention?

MR. NOLLEDO. Yes, the Commissioner is perfectly right.32

The concept of local autonomy was explained in Ganzon v. Court of Appeals33 in this wise:

As the Constitution itself declares, local autonomy 'means a more responsive and accountable local government structure instituted through a system of decentralization.' The Constitution, as we observed, does nothing more than to break up the monopoly of the national government over the affairs of local governments and as put by political adherents, to "liberate the local governments from the imperialism of Manila." Autonomy, however, is not meant to end the relation of partnership and interdependence between the central administration and local government units, or otherwise, to usher in a regime of federalism. The Charter has not taken such a radical step. Local governments, under the Constitution, are subject to regulation, however limited, and for no other purpose than precisely, albeit paradoxically, to enhance self-government.

As we observed in one case, decentralization means devolution of national administration – but not power – to the local levels. Thus:

Now, autonomy is either decentralization of administration or decentralization of power. There is decentralization of administration when the central government delegates administrative powers to political subdivisions in order to broaden the base of government power and in the process to make local governments 'more responsive and accountable' and 'ensure their fullest development as self-reliant communities and make them more effective partners in the pursuit of national development and social progress.' At the same time, it relieves the central government of the burden of managing local affairs and enables it to concentrate on national concerns. The President exercises 'general supervision' over them, but only to 'ensure that local affairs are administered according to law.' He has no control over their acts in the sense that he can substitute their judgments with his own.

Decentralization of power, on the other hand, involves an abdication of political power in the [sic] favor of local governments [sic] units declared to be autonomous. In that case, the autonomous government is free to chart its own destiny and shape its future with minimum intervention from central authorities. According to a constitutional author, decentralization of power amounts to 'self-immolation,' since in that event, the autonomous government becomes accountable not to the central authorities but to its constituency.34

Local autonomy includes both administrative and fiscal autonomy. The fairly recent case of Pimentel v. Aguirre35 is particularly instructive. The Court declared therein that local fiscal autonomy includes the power of the LGUs to, inter alia, allocate their resources in accordance with their own priorities:

Under existing law, local government units, in addition to having administrative autonomy in the exercise of their functions, enjoy fiscal autonomy as well. Fiscal autonomy means that local governments have the power to create their own sources of revenue in addition to their equitable share in the national taxes released by the national government, as well as the power to allocate their resources in accordance with their own priorities. It extends to the preparation of their budgets, and local officials in turn have to work within the constraints thereof. They are not formulated at the national level and imposed on local governments, whether they are relevant to local needs and resources or not ...36

Further, a basic feature of local fiscal autonomy is the constitutionally mandated automatic release of the shares of LGUs in the national internal revenue.37

Following this ratiocination, the Court in Pimentel struck down as unconstitutional Section 4 of Administrative Order (A.O.) No. 372 which ordered the withholding, effective January 1, 1998, of ten percent of the LGUs' IRA "pending the assessment and evaluation by the Development Budget Coordinating Committee of the emerging fiscal situation."

In like manner, the assailed provisos in the GAAs of 1999, 2000 and 2001, and the OCD resolutions constitute a "withholding" of a portion of the IRA. They put on hold the distribution and release of the five billion pesos LGSEF and subject the same to the implementing rules and regulations, including the guidelines and mechanisms prescribed by the Oversight Committee from time to time. Like Section 4 of A.O. 372, the assailed provisos in the GAAs of 1999, 2000 and 2001 and the OCD resolutions effectively encroach on the fiscal autonomy enjoyed by the LGUs and must be struck down. They cannot, therefore, be upheld.

The assailed provisos in the GAAs of 1999, 2000

and 2001 and the OCD resolutions cannot amend

Section 285 of the Local Government Code of 1991

Section 28438 of the Local Government Code provides that, beginning the third year of its effectivity, the LGUs' share in the national internal revenue taxes shall be 40%. This percentage is fixed and may not be reduced except "in the event the national government incurs an unmanageable public sector deficit" and only upon compliance with stringent requirements set forth in the same section:

Sec. 284. ...

Provided, That in the event that the national government incurs an unmanageable public sector deficit, the President of the Philippines is hereby authorized, upon recommendation of Secretary of Finance, Secretary of Interior and Local Government and Secretary of Budget and Management, and subject to consultation with the presiding officers of both Houses of Congress and the presidents of the liga, to make the necessary adjustments in the internal revenue allotment of local government units but in no case shall the allotment be less than thirty percent (30%) of the collection of the national internal revenue taxes of the third fiscal year preceding the current fiscal year; Provided, further That in the first year of the effectivity of this Code, the local government units shall, in addition to the thirty percent (30%) internal revenue allotment which shall include the cost of devolved functions for essential public services, be entitled to receive the amount equivalent to the cost of devolved personnel services.

Thus, from the above provision, the only possible exception to the mandatory automatic release of the LGUs' IRA is if the national internal revenue collections for the current fiscal year is less than 40 percent of the collections of the preceding third fiscal year, in which case what should be automatically released shall be a proportionate amount of the collections for the current fiscal year. The adjustment may even be made on a quarterly basis depending on the actual collections of national internal revenue taxes for the quarter of the current fiscal year. In the instant case, however, there is no allegation that the national internal revenue tax collections for the fiscal years 1999, 2000 and 2001 have fallen compared to the preceding three fiscal years.

Section 285 then specifies how the IRA shall be allocated among the LGUs:

Sec. 285. Allocation to Local Government Units. – The share of local government units in the internal revenue allotment shall be allocated in the following manner:

(a) Provinces – Twenty-three (23%)

(b) Cities – Twenty-three percent (23%);

(c) Municipalities – Thirty-four (34%); and

(d) Barangays – Twenty percent (20%).

However, this percentage sharing is not followed with respect to the five billion pesos LGSEF as the assailed OCD resolutions, implementing the assailed provisos in the GAAs of 1999, 2000 and 2001, provided for a different sharing scheme. For example, for 1999, P2 billion of the LGSEF was allocated as follows: Provinces – 40%; Cities – 20%; Municipalities – 40%.39 For 2000, P3.5 billion of the LGSEF was allocated in this manner: Provinces – 26%; Cities – 23%; Municipalities – 35%; Barangays – 26%.40 For 2001, P3 billion of the LGSEF was allocated, thus: Provinces – 25%; Cities – 25%; Municipalities – 35%; Barangays – 15%.41

The respondents argue that this modification is allowed since the Constitution does not specify that the "just share" of the LGUs shall only be determined by the Local Government Code of 1991. That it is within the power of Congress to enact other laws, including the GAAs, to increase or decrease the "just share" of the LGUs. This contention is untenable. The Local Government Code of 1991 is a substantive law. And while it is conceded that Congress may amend any of the provisions therein, it may not do so through appropriations laws or GAAs. Any amendment to the Local Government Code of 1991 should be done in a separate law, not in the appropriations law, because Congress cannot include in a general appropriation bill matters that should be more properly enacted in a separate legislation.42

A general appropriations bill is a special type of legislation, whose content is limited to specified sums of money dedicated to a specific purpose or a separate fiscal unit.43 Any provision therein which is intended to amend another law is considered an "inappropriate provision." The category of "inappropriate provisions" includes unconstitutional provisions and provisions which are intended to amend other laws, because clearly these kinds of laws have no place in an appropriations bill.44

Increasing or decreasing the IRA of the LGUs or modifying their percentage sharing therein, which are fixed in the Local Government Code of 1991, are matters of general and substantive law. To permit Congress to undertake these amendments through the GAAs, as the respondents contend, would be to give Congress the unbridled authority to unduly infringe the fiscal autonomy of the LGUs, and thus put the same in jeopardy every year. This, the Court cannot sanction.

It is relevant to point out at this juncture that, unlike those of 1999, 2000 and 2001, the GAAs of 2002 and 2003 do not contain provisos similar to the herein assailed provisos. In other words, the GAAs of 2002 and 2003 have not earmarked any amount of the IRA for the LGSEF. Congress had perhaps seen fit to discontinue the practice as it recognizes its infirmity. Nonetheless, as earlier mentioned, this Court has deemed it necessary to make a definitive ruling on the matter in order to prevent its recurrence in future appropriations laws and that the principles enunciated herein would serve to guide the bench, bar and public.

Conclusion

In closing, it is well to note that the principle of local autonomy, while concededly expounded in greater detail in the present Constitution, dates back to the turn of the century when President William McKinley, in his Instructions to the Second Philippine Commission dated April 7, 1900, ordered the new Government "to devote their attention in the first instance to the establishment of municipal governments in which the natives of the Islands, both in the cities and in the rural communities, shall be afforded the opportunity to manage their own affairs to the fullest extent of which they are capable, and subject to the least degree of supervision and control in which a careful study of their capacities and observation of the workings of native control show to be consistent with the maintenance of law, order and loyalty."45 While the 1935 Constitution had no specific article on local autonomy, nonetheless, it limited the executive power over local governments to "general supervision ... as may be provided by law."46 Subsequently, the 1973 Constitution explicitly stated that "[t]he State shall guarantee and promote the autonomy of local government units, especially the barangay to ensure their fullest development as self-reliant communities."47 An entire article on Local Government was incorporated therein. The present Constitution, as earlier opined, has broadened the principle of local autonomy. The 14 sections in Article X thereof markedly increased the powers of the local governments in order to accomplish the goal of a more meaningful local autonomy.

Indeed, the value of local governments as institutions of democracy is measured by the degree of autonomy that they enjoy.48 As eloquently put by

M. De Tocqueville, a distinguished French political writer, "[l]ocal assemblies of citizens constitute the strength of free nations. Township meetings are to liberty what primary schools are to science; they bring it within the people's reach; they teach men how to use and enjoy it. A nation may establish a system of free governments but without the spirit of municipal institutions, it cannot have the spirit of liberty."49

Our national officials should not only comply with the constitutional provisions on local autonomy but should also appreciate the spirit and liberty upon which these provisions are based.50

WHEREFORE, the petition is GRANTED. The assailed provisos in the General Appropriations Acts of 1999, 2000 and 2001, and the assailed OCD Resolutions, are declared UNCONSTITUTIONAL.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. 130775             September 27, 2004

THE NATIONAL LIGA NG MGA BARANGAY, represented by ALEX L. DAVID in his capacity as National President and for his own Person, President ALEX L. DAVID, petitioners, vs.HON. VICTORIA ISABEL A. PAREDES, Presiding Judge, Regional Trial Court, Branch 124, Caloocan City, and THE DEPARTMENT OF INTERIOR and LOCAL GOVERNMENT, represented the HON. SECRETARY ROBERT Z. BARBERS and MANUEL A. RAYOS, respondents.

x--------------------------------------------------------------------------x

G.R. No. 131939             September 27, 2004

LEANDRO YANGOT, BONIFACIO LACWASAN and BONY TACIO, petitioners, vs.DILG Secretary ROBERT Z. BARBERS and DILG Undersecretary MANUEL SANCHEZ, respondents.

D E C I S I O N

TINGA, J.:

At bottom, the present petition inquires into the essential nature of the Liga ng mga Barangay and questions the extent of the power of Secretary of the Department of Interior and Local Government (DILG), as alter ego of the President. More immediately, the petition disputes the validity of the appointment of the DILG as the interim caretaker of the Liga ng mga Barangay.

On 11 June 1997, private respondent Manuel A. Rayos [as petitioner therein], Punong Barangay of Barangay 52, District II, Zone 5, District II, Caloocan City, filed a petition for prohibition and mandamus, with prayer for a writ of preliminary injunction and/or temporary restraining order and damages before the Regional Trial Court (RTC) of Caloocan,1 alleging that respondent therein Alex L. David [now petitioner], Punong Barangay of Barangay 77, Zone 7, Caloocan City and then president of the Liga Chapter of Caloocan City and of the Liga ng mga Barangay National Chapter, committed certain irregularities in the notice, venue and conduct of the proposed synchronized Liga ng mga Barangay elections in 1997. According to the petition, the irregularities consisted of the following: (1) the publication of the notice in the Manila Bulletin but without notifying in writing the individual punong barangays of Caloocan City;2 (2) the Notice of Meeting dated 08 June 1997 for the Liga Chapter of Caloocan City did not specify whether the meeting scheduled on 14 June 1997 was to be held at 8:00 a.m. or 8:00 p.m., and worse, the meeting was to be held in Lingayen, Pangasinan;3 and (3) the deadline for the filing of the Certificates of Candidacy having been set at 5:00 p.m. of the third "day prior to the above election day", or on 11 June 1997,4 Rayos failed to meet said deadline since he was not able to obtain a certified true copy of the COMELEC Certificate of Canvas and Proclamation of Winning Candidate, which were needed to be a delegate, to vote and be voted for in the Ligaelection. On 13 June 1997, the Executive Judge issued a temporary restraining order (TRO), effective for seventy-two (72) hours, enjoining the holding of the general membership and election meeting of Liga Chapter of Caloocan City on 14 June 1975.5

However, the TRO was allegedly not properly served on herein petitioner David, and so the election for the officers of the Liga-Caloocan was held as scheduled.6 Petitioner David was proclaimed President of the Liga-Caloocan, and thereafter took his oath and assumed the position of ex-officio member of the Sangguniang Panlungsod of Caloocan.

On 17 July 1997, respondent Rayos filed a second petition, this time for quo warranto, mandamus and prohibition, with prayer for a writ of preliminary injunction and/or temporary restraining order and damages, against David, Nancy Quimpo, Presiding Officer of the Sangguniang Panlungsod of Caloocan City, and Secretary Barbers.7 Rayos alleged that he was elected President of the Liga Caloocan Chapter in the elections held on 14 June 1997 by the members of the Caloocan Chapter pursuant to their Resolution/Petition No. 001-97.8 On 18 July 1997, the presiding judge granted the TRO, enjoining therein respondents David, Quimpo and Secretary Barbers from proceeding with the synchronized elections for the Provincial and Metropolitan Chapters of the Liga scheduled on 19 July 1997, but only for the purpose of maintaining the status quo and effective for a period not exceeding seventy-two (72) hours.9

Eventually, on 18 July 1997, at petitioner David’s instance, Special Civil Action (SCA) No. C-512 pending before Branch 126 was consolidated with SCA No. C-508 pending before Branch 124.10

Before the consolidation of the cases, on 25 July 1997, the DILG through respondent Secretary Barbers, filed in SCA No. C-512 an Urgent Motion,11 invoking the President’s power of general supervision over all local government units and seeking the following reliefs:

WHEREFORE, in the interest of the much-needed delivery of basic services to the people, the maintenance of public order and to further protect the interests of the forty-one thousand barangays all over the country, herein respondent respectfully prays:

a) That the Department of the Interior and Local Government (DILG), pursuant to its delegated power of general supervision, be appointed as the Interim Caretaker to manage and administer the affairs of the Liga, until such time that the new set of National Liga Officers shall have been duly elected and assumed office; ...12

The prayer for injunctive reliefs was anchored on the following grounds: (1) the DILG Secretary exercises the power of general supervision over all government units by virtue of Administrative Order No. 267 dated 18 February 1992; (2) the Liga ng mga Barangay is a government organization; (3) undue interference by some local elective officials during the Municipal and City Chapter elections of the Liga ng mga Barangay; (4) improper issuance of confirmations of the elected Liga Chapter officers by petitioner David and the National Liga Board; (5) the need for the DILG to provide

remedies measured in view of the confusion and chaos sweeping the Liga ng mga Barangayand the incapacity of the National Liga Board to address the problems properly.

On 31 July 1997, petitioner David opposed the DILG’s Urgent Motion, claiming that the DILG, being a respondent in the case, is not allowed to seek any sanction against a co-respondent like David, such as by filing a cross-claim, without first seeking leave of court.13 He also alleged that the DILG’s request to be appointed interim caretaker constitutes undue interference in the internal affairs of the Liga, since the Liga is not subject to DILG control and supervision.14

Three (3) days after filing its Urgent Motion, on 28 July 1997, and before it was acted upon by the lower court, the DILG through then Undersecretary Manuel Sanchez, issued Memorandum Circular No. 97-176.15 It cited the reported violations of the Liga ng mga Barangay Constitution and By-Laws by David and "widespread chaos and confusion" among local government officials as to who were the qualified ex-officio Liga members in their respectivesangunians.16 Pending the appointment of the DILG "as the Interim Caretaker of the Liga ng mga Barangay by the court and until the officers and board members of the national Liga Chapter have been elected and have assumed office," the Memorandum Circular directed all provincial governors, vice governors, city mayors, city vice mayors, members of the sangguniang panlalawigan and panlungsod, DILG regional directors and other concerned officers, as follows:

1. All concerned are directed not to recognize and/or honor any Liga Presidents of the Provincial and Metropolitan Chapters as ex-officio members of the sanggunian concerned until further notice from the Courts or this Department;

2. All concerned are directed to disregard any pronouncement and/or directive issued by Mr. Alex David on any issue or matter relating to the affairs of the Liga ng mga Barangay until further notice from the Courts or this Department.17

On 04 August 1997, public respondent Judge Victoria Isabel A. Paredes issued the assailed order,18 the pertinent portions of which read, thus:

The authority of the DILG to exercise general supervisory jurisdiction over local government units, including the different leagues created under the Local Government Code of 1991 (RA 7160) finds basis in Administrative Order No. 267 dated February 18, 1992. Specifically, Section 1 (a) of the said Administrative Order provides a broad premise for the supervisory power of the DILG. Administratively, the DILG’s supervision has been tacitly recognized by the local barangays, municipalities, cities and provinces as shown by the evidences presented by respondent David himself (See Annexes "A" to "C"). The fact that the DILG has sought to refer the matters therein to the National Liga Board/Directorate does not ipso facto mean that it has lost jurisdiction to act directly therein. Jurisdiction is conferred by law and cannot be claimed or lost through agreements or inaction by individuals. What respondent David may term as "interference" should caretakership be allowed, this Court would rather view as a necessary and desirable corollary to the exercise of supervision.19

Political motivations must not preclude, hamper, or obstruct the delivery of basic services and the perquisites of public service. In this case, the fact of confusion arising from conflicting appointments, non-action, and uninformed or wavering decisions of the incumbent National Liga Board/Directorate, having been satisfactorily established, cannot simply be brushed aside as being politically motivated or arising therefrom. It is incumbent, therefore, that the DILG exercise a more active role in the supervision of the affairs and operations of the National Liga Board/ Directorate at least until such time that the regular National Liga Board/Directorate may have been elected, qualified and assumed office.20

xxx

WHEREFORE, premises considered, the Urgent Motion of the DILG for appointment as interim caretaker, until such time that the regularly elected National Liga Board of Directors shall have qualified and assumed office, to manage and administer the affairs of the National Liga Board, is hereby GRANTED.21

On 11 August 1997, petitioner David filed an urgent motion for the reconsideration of the assailed order and to declare respondent Secretary Barbers in contempt of Court.22 David claimed that the 04 August 1997 order divested the duly elected members of the Board of Directors of the Liga National Directorate of their positions without due process of law. He also wanted Secretary Barbers declared in contempt for having issued, through his Undersecretary, Memorandum Circular No. 97-176, even before respondent judge issued the questioned order, in mockery of the justice system. He implied that Secretary Barbers knew about respondent judge’s questioned order even before it was promulgated.23

On 11 August 1997, the DILG issued Memorandum Circular No. 97-193,24 providing supplemental guidelines for the 1997 synchronized elections of the provincial and metropolitan chapters and for the election of the national chapter of the Liga ng mga Barangay. The Memorandum Circular set the synchronized elections for the provincial and metropolitan chapters on 23 August 1997 and for the national chapter on 06 September 1997.

On 12 August 1997, the DILG issued a Certificate of Appointment25 in favor of respondent Rayos as president of the Liga ng mga Barangay of Caloocan City. The appointment purportedly served as Rayos’s "legal basis for ex-officio membership in the Sangguniang Panlungsod of Caloocan City" and "to qualify and participate in the forthcoming National Chapter Election of the Liga ng mga Barangay."26

On 23 August 1997, the DILG conducted the synchronized elections of Provincial and Metropolitan Liga Chapters. Thereafter, on 06 September 1997, the National Liga Chapter held its election of officers and board of directors, wherein James Marty L. Lim was elected as President of the National Liga.27

On 01 October 1997, public respondent judge denied David’s motion for reconsideration,28 ruling that there was no factual or legal basis to reconsider the appointment of the DILG as interim caretaker of the National Liga Board and to cite Secretary Barbers in contempt of court.29

On 10 October 1997, petitioners filed the instant Petition for Certiorari30 under Rule 65 of the Rules of Court, seeking to annul public respondent judge’s orders of 04 August 1997 and 01 October 1997. They dispute the latter’s opinion on the power of supervision of the President under the Constitution, through the DILG over local governments, which is the same as that of the DILG’s as shown by its application of the power on the Liga ng mga Barangay. Specifically, they claim that the public respondent judge’s designation of the DILG as interim caretaker and the acts which the DILG sought to implement pursuant to its designation as such are beyond the scope of the Chief Executive’s power of supervision.

To support the petition, petitioners argue that under Administrative Order No. 267, Series of 1992, the power of general supervision of the President over local government units does not apply to the Liga and its various chapters precisely because the Liga is not a local government unit, contrary to the stance of the respondents.31

Section 507 of the Local Government Code (Republic Act No. 7160)32 provides that the Liga shall be governed by its own Constitution and By-laws. Petitioners posit that the duly elected officers and directors of the National Ligaelected in 1994 had a vested right to their positions and could only be removed therefrom for cause by affirmative vote of two-thirds (2/3) of the entire membership pursuant to the Liga Constitution and By-Laws, and not by mere issuances of the DILG, even if bolstered by the dubious authorization of respondent judge.33 Thus, petitioners claim that the questioned order divested the then incumbent officers and directors of the Liga of their right to their respective offices without due process of law.

Assuming the Liga could be subsumed under the term "local governments," over which the President, through the DILG Secretary, has the power of supervision,34 petitioners point out that still there is no legal or constitutional basis for the appointment of the DILG as interim caretaker.35 They stress that the actions contemplated by the DILG as interim caretaker go beyond supervision, as what it had sought and obtained was authority to alter, modify, nullify or set aside the actions of the Liga Board of Directors and even to substitute its judgment over that of the latter — which are all clearly one of control.36 Petitioners question the appointment of Rayos as Liga-Caloocan President since at that time petitioner David was occupying that position which was still the subject of the quo warrantoproceedings Rayos himself had instituted.37 Petitioners likewise claim that DILG Memorandum Circular No. 97-193, providing supplemental guidelines for the synchronized elections of the Liga, replaced the implementing rules adopted by the Liga pursuant to its Constitution and By-laws.38 In fact, even before its appointment as interim caretaker, DILG specifically enjoined all heads of government units from recognizing petitioner David and/or honoring any of his pronouncements relating to the Liga.39

Petitioners rely on decision in Taule v. Santos,40 which, they claim, already passed upon the "extent of authority of the then Secretary of Local Government over the katipunan ng mga barangay or the barangay councils," as it specifically ruled that the "Secretary [of Local Government] has no authority to pass upon the validity or regularity of the election of officers of the katipunan."41

For his part, respondent Rayos avers that since the Secretary of the DILG supervises the acts of local officials by ensuring that they act within the scope of their prescribed powers and functions and since members of the various leagues, such as the Liga in this case, are themselves officials of local government units, it follows that the Ligamembers are subject to the power of supervision of the DILG.42 He adds that as the DILG’s management and administration of the Liga affairs was limited only to the conduct of the elections, its actions were consistent with its rule-making power and power of supervision under existing laws.43 He asserts that in assailing the appointment of the DILG as interim caretaker, petitioners failed to cite any provision of positive law in support of their stance. Thus, he adds, "if a law is silent, obscure or insufficient, a judge may apply a rule he sees fit to resolve the issue, as long as the

rule chosen is in harmony with general interest, order, morals and public policy,"44 in consonance with Article 9 of the Civil Code.45

On the other hand, it is quite significant that the Solicitor General has shared petitioners’ position. He states that the DILG’s act of managing and administering the affairs of the National Liga Board are not merely acts of supervision but plain manifestations of control and direct takeover of the functions of the National Liga Board,46 going beyond the limits of the power of general supervision of the President over local governments.47 Moreover, while the Ligamay be deemed a government organization, it is not strictly a local government unit over which the DILG has supervisory power.48

Meanwhile, on 24 September 1998, James Marty L. Lim, the newly elected President of the National Liga, filed aMotion for Leave to File Comment in Intervention,49 with his Comment in Intervention attached,50 invoking the validity of the DILG’s actions relative to the conduct of the Liga elections.51 In addition, he sought the dismissal of the instant petition on the following grounds: (1) the issue of validity or invalidity of the questioned order has been rendered moot and academic by the election of Liga officers; (2) the turn-over of the administration and management of Liga affairs to the Liga officers; and (3) the recognition and acceptance by the members of the Liganationwide.52

In the interim, another petition, this time for Prohibition with Prayer for a Temporary Restraining Order,53 was filed by several presidents of Liga Chapters, praying that this Court declare the DILG Secretary and Undersecretary are not vested with any constitutional or legal power to exercise control or even supervision over the National Liga ng mga Barangay, nor to take over the functions of its officers or suspend its constitution; and declare void any and all acts committed by respondents therein in connection with their caretakership of the Liga.54 The petition was consolidated with G.R. No. 130775, but it was eventually dismissed because the petitioners failed to submit an affidavit of service and proof of service of the petition.55

Meanwhile, on 01 December 1998, petitioner David died and was substituted by his legal representatives.56

Petitioners have raised a number of issues.57 Integrated and simplified, these issues boil down to the question of whether or not respondent Judge acted with grave abuse of discretion in appointing the DILG as interim caretaker to administer and manage the affairs of the National Liga Board, per its order dated 04 August 1997.58 In turn, the resolution of the question of grave abuse of discretion entails a couple of definitive issues, namely: (1) whether theLiga ng mga Barangay is a government organization that is subject to the DILG Secretary’s power of supervision over local governments as the alter ego of the President, and (2) whether the respondent Judge’s designation of the DILG as interim caretaker of the Liga has invested the DILG with control over the Liga and whether DILG Memorandum Circular No. 97-176, issued before it was designated as such interim caretaker, and DILG Memorandum Circular No. 97-193 and other acts which the DILG made in its capacity as interim caretaker of theLiga, involve supervision or control of the Liga.

However, the Court should first address the question of mootness which intervenor Lim raised because, according to him, during the pendency of the present petition a general election was held; the new set of officers and directors had assumed their positions; and that supervening events the DILG had turned-over the management and administration of the Liga to new Liga officers and directors.59 Respondent Rayos has joined him in this regard.60Forthwith, the Court declares that these supervening events have not rendered the instant petition moot, nor removed it from the jurisdiction of this Court.

This case transcends the elections ordered and conducted by the DILG as interim caretaker of the Liga and the Ligaofficers and directors who were elected to replace petitioner David and the former officers. At the core of the petition is the validity of the DILG’s "caretakership" of the Liga and the official acts of the DILG as such caretaker which exceeded the bounds of supervision and were exercise of control. At stake in this case is the realization of the constitutionally ensconced principle of local government autonomy;61 the statutory objective to enhance the capabilities of barangays and municipalities "by providing them opportunities to participate actively in the implementation of national programs and projects;"62 and the promotion of the avowed aim to ensure the independence and non-partisanship of the Liga ng mga Barangay. The mantle of local autonomy would be eviscerated and remain an empty buzzword if unconstitutional, illegal and unwarranted intrusions in the affairs of the local governments are tolerated and left unchecked.

Indeed, it is the declared policy of the State that its territorial and political subdivisions should enjoy genuine 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.63 In the case of De Leon v. Esguerra,64 the Court ruled that even barangays are meant to possess genuine and meaningful local autonomy so that they may develop fully as self-reliant communities.65

Furthermore, well-entrenched is the rule that courts will decide a question otherwise moot and academic if it is "capable of repetition, yet evading review."66 For the question of whether the DILG may validly be appointed as interim

caretaker, or assume a similar position and perform acts pursuant thereto, is likely to resurrect again, and yet the question may not be decided before the actual assumption, or the termination of said assumption even.

So too, dismissing the petition on the ground of mootness could lead to the wrong impression that the challenged order and issuances are valid. Verily, that does not appear to be the correct conclusion to make since by applying opposite precedents to the issues the outcome points to invalidating the assailed order and memorandum circulars.

The resolution of the issues of whether the Liga ng mga Barangay is subject to DILG supervision, and whether the questioned "caretakership" order of the respondent judge and the challenged issuances and acts of the DILG constitute control in derogation of the Constitution, necessitates a brief overview of the barangay, as the lowest LGU, and the Liga, as a vehicle of governance and coordination.

As the basic political unit, the barangay serves as the primary planning and implementing unit of government policies, plans, programs, projects and activities in the community, and as a forum wherein the collective views of the people may be expressed, crystallized and considered, and where disputes may be amicably settled.67

On the other hand, the Liga ng mga Barangay68 is the organization of all barangays, the primary purpose of which is the determination of the representation of the Liga in the sanggunians, and the ventilation, articulation, and crystallization of issues affecting barangay government administration and securing solutions thereto, through proper and legal means.69 The Liga ng mga Barangay shall have chapters at the municipal, city and provincial and metropolitan political subdivision levels.70 The municipal and city chapters of the Liga are composed of thebarangay representatives from the municipality or city concerned. The presidents of the municipal and city chapters of the Liga form the provincial or metropolitan political subdivision chapters of the Liga. The presidents of the chapters of the Liga in highly urbanized cities, provinces and the Metro Manila area and other metropolitan political subdivisions constitute the National Liga ng mga Barangay.71

As conceptualized in the Local Government Code, the barangay is positioned to influence and direct the development of the entire country. This was heralded by the adoption of the bottom-to-top approach process of development which requires the development plans of the barangay to be considered in the development plans of the municipality, city or province,72 whose plans in turn are to be taken into account by the central government73 in its plans for the development of the entire country.74 The Liga is the vehicle assigned to make this new development approach materialize and produce results.

The presidents of the Liga at the municipal, city and provincial levels, automatically become ex-officio members of the Sangguniang Bayan, Sangguniang Panlungsod and Sangguniang Panlalawigan, respectively. They shall serve as such only during their term of office as presidents of the Liga chapters, which in no case shall be beyond the term of office of the sanggunian concerned.75

The Liga ng mga Barangay has one principal aim, namely: to promote the development of barangays and secure the general welfare of their inhabitants.76 In line with this, the Liga is granted the following functions and duties:

a) Give priority to programs designed for the total development of the barangays and in consonance with the policies, programs and projects of the national government;

b) Assist in the education of barangay residents for people’s participation in local government administration in order to promote untied and concerted action to achieve country-wide development goals;

c) Supplement the efforts of government in creating gainful employment within the barangay;

d) Adopt measures to promote the welfare of barangay officials;

e) Serve as forum of the barangays in order to forge linkages with government and non-governmental organizations and thereby promote the social, economic and political well-being of the barangays; and

f) Exercise such other powers and perform such other duties and functions which will bring about stronger ties between barangays and promote the welfare of the barangay inhabitants.77

The Ligas are primarily governed by the provisions of the Local Government Code. However, they are empowered to make their own constitution and by-laws to govern their operations. Sec. 507 of the Code provides:

Sec. 507. Constitution and By-Laws of the Liga and the Leagues. - All other matters not herein otherwise provided for affecting the internal organization of the leagues of local government units shall be governed by their respective constitution and by-laws which are hereby made suppletory to the provision of this

Chapter:Provided, That said Constitution and By-laws shall always conform to the provision of the Constitution and existing laws.

Pursuant to the Local Government Code, the Liga ng mga Barangay adopted its own Constitution and By-Laws. It provides that the corporate powers of the Liga, expressed or implied, shall be vested in the board of directors of each level of the Liga which shall:

a) Have jurisdiction over all officers, directors and committees of the said Liga; including the power of appointment, assignment and delegation;

b) Have general management of the business, property, and funds of said Liga;

c) Prepare and approve a budget showing anticipated receipts and expenditures for the year, including the plans or schemes for funding purposes; and

d) Have the power to suspend or remove from office any officer or member of the said board on grounds cited and in the manner provided in hereinunder provisions.78

The National Liga Board of Directors promulgated the rules for the conduct of its Liga’s general elections.79 And, as early as 28 April 1997, the Liga National Chapter had already scheduled its general elections on 14 June 1997.80

The controlling provision on the issues at hand is Section 4, Article X of the Constitution, which reads in part:

Sec. The President of the Philippines shall exercise general supervision over local governments.

The 1935, 1973 and 1987 Constitutions uniformly differentiate the President’s power of supervision over local governments and his power of control of the executive departments bureaus and offices.81 Similar to the counterpart provisions in the earlier Constitutions, the provision in the 1987 Constitution provision has been interpreted to exclude the power of control.82

In the early case of Mondano v. Silvosa, et al.,83 this Court defined supervision as "overseeing, or the power or authority of an officer to see that subordinate officers perform their duties, and to take such action as prescribed by law to compel his subordinates to 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 had done in the performance of his duties and to substitute the judgment of the former for that of the latter.84 In Taule v. Santos,85 the Court held that the Constitution permits the President to wield no more authority than that of checking whether a local government or its officers perform their duties as provided by statutory enactments.86 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.87

The case of Drilon v. Lim88 clearly defined the extent of supervisory power, thus:

…The supervisor or superintendent merely sees to it that the rules are followed, but he himself does not lay down such rules, nor does he have the discretion to modify or replace them. If the rules are not observed, he may order the work done or re-done but only to conform to the prescribed rules. He may not prescribe his own manner for the doing of the act. He has no judgment on this matter except to see that the rules are followed…89

In Section 4, Article X of the Constitution applicable to the Liga ng mga Barangay? Otherwise put, is the Liga legally susceptible to DILG suspension?

This question was resolved in Bito-Onon v. Fernandez,90 where the Court ruled that the President’s power of the general supervision, as exercised therein by the DILG Secretary as his alter ego, extends to the Liga ng mga Barangay.

Does the President’s power of general supervision extend to the liga ng mga barangay, which is not a local government unit?

We rule in the affirmative. In Opinion No. 41, Series of 1995, the Department of Justice ruled that the liga ng mga barangay is a government organization, being an association, federation, league or union created by law or by authority of law, whose members are either appointed or elected government officials. The Local Government Code defines the liga ng mga barangay as an organization of all barangays for the primary purpose of determining the representation of the liga in the sanggunians, and for ventilating, articulating and crystallizing issues affecting barangay government administration and securing, through proper and legal means, solutions thereto.91

The rationale for making the Liga subject to DILG supervision is quite evident, whether from the perspectives of logic or of practicality. The Liga is an aggroupment of barangays which are in turn represented therein by their respective punong barangays. The representatives of the Liga sit in an ex officio capacity at the municipal, city and provincial sanggunians. As such, they enjoy all the powers and discharge all the functions of regular municipal councilors, city councilors or provincial board members, as the case may be. Thus, the Liga is the vehicle through which the barangay participates in the enactment of ordinances and formulation of policies at all the legislative local levels higher than the sangguniang barangay, at the same time serving as the mechanism for the bottom-to-top approach of development.

In the case at bar, even before the respondent Judge designated the DILG as interim caretaker of the Liga, on 28 July 1997, it issued Memorandum Circular No. 97-176, directing local government officials not to recognize David as the National Liga President and his pronouncements relating to the affairs of the Liga. Not only was the action premature, it even smacked of superciliousness and injudiciousness. The DILG is the topmost government agency which maintains coordination with, and exercises supervision over local government units and its multi-level leagues. As such, it should be forthright, circumspect and supportive in its dealings with the Ligas especially theLiga ng mga Barangay. The indispensable role played by the latter in the development of the barangays and the promotion of the welfare of the inhabitants thereof deserve no less than the full support and respect of the other agencies of government. As the Court held in the case of San Juan v. Civil Service Commission,92 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.93

When the respondent judge eventually appointed the DILG as interim caretaker to manage and administer the affairs of the Liga, she effectively removed the management from the National Liga Board and vested control of theLiga on the DILG. Even a cursory glance at the DILG’s prayer for appointment as interim caretaker of the Liga "tomanage and administer the affairs of the Liga, until such time that the new set of National Liga officers shall have been duly elected and assumed office" reveals that what the DILG wanted was to take control over the Liga. Even if said "caretakership" was contemplated to last for a limited time, or only until a new set of officers assume office, the fact remains that it was a conferment of control in derogation of the Constitution.

With his Department already appointed as interim caretaker of the Liga, Secretary Barbers nullified the results of theLiga elections and promulgated DILG Memorandum Circular No. 97-193 dated 11 August 1997, where he laid down the supplemental guidelines for the 1997 synchronized elections of the provincial and metropolitan chapters and for the election of the national chapter of the Liga ng mga Barangay; scheduled dates for the new provincial, metropolitan and national chapter elections; and appointed respondent Rayos as president of Liga-Caloocan Chapter.

These acts of the DILG went beyond the sphere of general supervision and constituted direct interference with the political affairs, not only of the Liga, but more importantly, of the barangay as an institution. The election of Ligaofficers is part of the Liga’s internal organization, for which the latter has already provided guidelines. In succession, the DILG assumed stewardship and jurisdiction over the Liga affairs, issued supplemental guidelines for the election, and nullified the effects of the Liga-conducted elections. Clearly, what the DILG wielded was the power of control which even the President does not have.

Furthermore, the DILG assumed control when it appointed respondent Rayos as president of the Liga-Caloocan Chapter prior to the newly scheduled general Liga elections, although petitioner David’s term had not yet expired. The DILG substituted its choice, who was Rayos, over the choice of majority of the punong barangay of Caloocan, who was the incumbent President, petitioner David. The latter was elected and had in fact been sitting as an ex-officio member of the sangguniang panlungsod in accordance with the Liga Constitution and By-Laws. Yet, the DILG extended the appointment to respondent Rayos although it was aware that the position was the subject of a quo warranto proceeding instituted by Rayos himself, thereby preempting the outcome of that case. It was bad enough that the DILG assumed the power of control, it was worse when it made use of the power with evident bias and partiality.

As the entity exercising supervision over the Liga ng mga Barangay, the DILG’s authority over the Liga is limited to seeing to it that the rules are followed, but it cannot lay down such rules itself, nor does it have the discretion to modify or replace them. In this particular case, the most that the DILG could do was review the acts of the incumbent officers of the Liga in the conduct of the elections to determine if they committed any violation of theLiga’s Constitution and By-laws and its implementing rules. If the National Liga Board and its officers had violatedLiga rules, the DILG should have ordered the Liga to conduct another election in accordance with the Liga’s own rules, but not in obeisance to DILG-dictated guidelines. Neither had the DILG the authority to remove the incumbent officers of the Liga and replace them, even temporarily, with unelected Liga officers.

Like the local government units, the Liga ng mga Barangay is not subject to control by the Chief Executive or hisalter ego.

In the Bito-Onon94 case, this Court held that DILG Memorandum Circular No. 97-193, insofar as it authorized the filing of a petition for review of the decision of the Board of Election Supervisors (BES) with the regular courts in a post-

proclamation electoral protest, involved the exercise of control as it in effect amended the guidelines already promulgated by the Liga. The decision reads in part:

xxx. Officers in control, lay down the rules in the doing of an act. If they are not followed, it is discretionary on his part to order the act undone or redone by his subordinate or he may even decide to do it himself. Supervision does not cover such authority. Supervising officers merely see 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 to conform for to the prescribed rules. He cannot prescribe his own manner the doing of the act.

x x x

xxx. The amendment of the GUIDELINES is more than an exercise of the power of supervision but is an exercise of the power of control, which the President does not have over the LIGA. Although the DILG is given the power to prescribe rules, regulations and other issuances, the Administrative Code limits its authority to merely "monitoring compliance by local government units of such issuances. To monitor means to "watch, observe or check" and is compatible with the power of supervision of the DILG Secretary over local governments, which is limited to checking whether the local government unit concerned or the officers thereof perform their duties as per statutory enactments. Besides, any doubt as to the power of the DILG Secretary to interfere with local affairs should be resolved in favor of the greater autonomy of the local government.95

In Taule,96 the Court ruled that the Secretary of Local Government had no authority to pass upon the validity or regularity of the election of officers of katipunan ng mga barangay or barangay councils. In that case, a protest was lodged before the Secretary of Local Government regarding several irregularities in, and seeking the nullification of, the election of officers of the Federation of Associations of Barangay Councils (FABC) of Catanduanes. Then Local Government Secretary Luis Santos issued a resolution nullifying the election of officers and ordered a new one to be conducted. The Court ruled:

Construing the constitutional limitation on the power of general supervision of the President over local governments, We hold that respondent Secretary has no authority to pass upon the validity or regularity of the officers of the katipunan. To allow respondent Secretary to do so will give him more power than the law or the Constitution grants. It will in effect give him control over local government officials for it will permit him to interfere in a purely democratic and non-partisan activity aimed at strengthening the barangay as the basic component of local governments so that the ultimate goal of fullest autonomy may be achieved. In fact, his order that the new elections to be conducted be presided by the Regional Director is a clear and direct interference by the Department with the political affairs of the barangays which is not permitted by the limitation of presidential power to general supervision over local governments.97

All given, the Court is convinced that the assailed order was issued with grave abuse of discretion while the acts of the respondent Secretary, including DILG Memorandum Circulars No. 97-176 and No. 97-193, are unconstitutional and ultra vires, as they all entailed the conferment or exercise of control — a power which is denied by the Constitution even to the President.

WHEREFORE, the Petition is GRANTED. The Order of the Regional Trial Court dated 04 August 1997 is SET ASIDE for having been issued with grave abuse of discretion amounting to lack or excess of jurisdiction.

DILG Memorandum Circulars No. 97-176 and No. 97-193, are declared VOID for being unconstitutional and ultra vires.

No pronouncements as to costs.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

Manila

EN BANC

G.R. No. L-28089            October 25, 1967

BARA LIDASAN, petitioner, vs.COMMISSION ON ELECTIONS, respondent.

Suntay for petitioner. Barrios and Fule for respondent.

SANCHEZ, J.:

The question initially presented to the Commission on Elections,1 is this: Is Republic Act 4790, which is entitled "An Act Creating the Municipality of Dianaton in the Province of Lanao del Sur", but which includes barrios located in another province — Cotabato — to be spared from attack planted upon the constitutional mandate that "No bill which may be enacted into law shall embrace more than one subject which shall be expressed in the title of the bill"? Comelec's answer is in the affirmative. Offshoot is the present original petition for certiorari and prohibition.

On June 18, 1966, the Chief Executive signed into law House Bill 1247, known as Republic Act 4790, now in dispute. The body of the statute, reproduced in haec verba, reads:

Sec. 1. Barrios Togaig, Madalum, Bayanga, Langkong, Sarakan, Kat-bo, Digakapan, Magabo, Tabangao, Tiongko, Colodan, Kabamakawan, Kapatagan, Bongabong, Aipang, Dagowan, Bakikis, Bungabung, Losain, Matimos and Magolatung, in the Municipalities of Butig and Balabagan, Province of Lanao del Sur, are separated from said municipalities and constituted into a distinct and independent municipality of the same province to be known as the Municipality of Dianaton, Province of Lanao del Sur. The seat of government of the municipality shall be in Togaig.

Sec. 2. The first mayor, vice-mayor and councilors of the new municipality shall be elected in the nineteen hundred sixty-seven general elections for local officials.

Sec. 3. This Act shall take effect upon its approval.

It came to light later that barrios Togaig and Madalum just mentioned are within the municipality of Buldon, Province of Cotabato, and that Bayanga, Langkong, Sarakan, Kat-bo, Digakapan, Magabo, Tabangao, Tiongko, Colodan and Kabamakawan are parts and parcel of another municipality, the municipality of Parang, also in the Province of Cotabato and not of Lanao del Sur.

Prompted by the coming elections, Comelec adopted its resolution of August 15, 1967, the pertinent portions of which are:

For purposes of establishment of precincts, registration of voters and for other election purposes, the Commission RESOLVED that pursuant to RA 4790, the new municipality of Dianaton, Lanao del Sur shall comprise the barrios of Kapatagan, Bongabong, Aipang, Dagowan, Bakikis, Bungabung, Losain, Matimos, and Magolatung situated in the municipality of Balabagan, Lanao del Sur, the barrios of Togaig and Madalum situated in the municipality of Buldon, Cotabato, the barrios of Bayanga, Langkong, Sarakan, Kat-bo,

Digakapan, Magabo, Tabangao, Tiongko, Colodan and Kabamakawan situated in the municipality of Parang, also of Cotabato.

Doubtless, as the statute stands, twelve barrios — in two municipalities in the province of Cotabato — are transferred to the province of Lanao del Sur. This brought about a change in the boundaries of the two provinces.

Apprised of this development, on September 7, 1967, the Office of the President, through the Assistant Executive Secretary, recommended to Comelec that the operation of the statute be suspended until "clarified by correcting legislation."

Comelec, by resolution of September 20, 1967, stood by its own interpretation, declared that the statute "should be implemented unless declared unconstitutional by the Supreme Court."

This triggered the present original action for certiorari and prohibition by Bara Lidasan, a resident and taxpayer of the detached portion of Parang, Cotabato, and a qualified voter for the 1967 elections. He prays that Republic Act 4790 be declared unconstitutional; and that Comelec's resolutions of August 15, 1967 and September 20, 1967 implementing the same for electoral purposes, be nullified.

1. Petitioner relies upon the constitutional requirement aforestated, that "[n]o bill which may be enacted into law shall embrace more than one subject which shall be expressed in the title of the bill."2

It may be well to state, right at the outset, that the constitutional provision contains dual limitations upon legislative power. First. Congress is to refrain from conglomeration, under one statute, of heterogeneous subjects. Second. The title of the bill is to be couched in a language sufficient to notify the legislators and the public and those concerned of the import of the single subject thereof.

Of relevance here is the second directive. The subject of the statute must be "expressed in the title" of the bill. This constitutional requirement "breathes the spirit of command."3 Compliance is imperative, given the fact that the Constitution does not exact of Congress the obligation to read during its deliberations the entire text of the bill. In fact, in the case of House Bill 1247, which became Republic Act 4790, only its title was read from its introduction to its final approval in the House of Representatives4 where the bill, being of local application, originated.5

Of course, the Constitution does not require Congress to employ in the title of an enactment, language of such precision as to mirror, fully index or catalogue all the contents and the minute details therein. It suffices if the title should serve the purpose of the constitutional demand that it inform the legislators, the persons interested in the subject of the bill, and the public, of the nature, scope and consequences of the proposed law and its operation. And this, to lead them to inquire into the body of the bill, study and discuss the same, take appropriate action thereon, and, thus, prevent surprise or fraud upon the legislators.6

In our task of ascertaining whether or not the title of a statute conforms with the constitutional requirement, the following, we believe, may be taken as guidelines:

The test of the sufficiency of a title is whether or not it is misleading; and, which technical accuracy is not essential, and the subject need not be stated in express terms where it is clearly inferable from the details set forth, a title which is so uncertain that the average person reading it would not be informed of the purpose of the enactment or put on inquiry as to its contents, or which is misleading, either in referring to or indicating one subject where another or different one is really embraced in the act, or in omitting any expression or indication of the real subject or scope of the act, is bad.

xxx           xxx           xxx

In determining sufficiency of particular title its substance rather than its form should be considered, and the purpose of the constitutional requirement, of giving notice to all persons interested, should be kept in mind by the court.7

With the foregoing principles at hand, we take a hard look at the disputed statute. The title — "An Act Creating the Municipality of Dianaton, in the Province of Lanao del Sur"8 — projects the impression that solely the province of Lanao del Sur is affected by the creation of Dianaton. Not the slightest intimation is there that communities in the adjacent province of Cotabato are incorporated in this new Lanao del Sur town. The phrase "in the Province of Lanao del Sur," read without subtlety or contortion, makes the title misleading, deceptive. For, the known fact is that the legislation has a two-pronged purpose combined in one statute: (1) it creates the municipality of Dianaton purportedly from twenty-one barrios in the towns of Butig and Balabagan, both in the province of Lanao del Sur; and (2) it also dismembers two municipalities in Cotabato, a province different from Lanao del Sur.

The baneful effect of the defective title here presented is not so difficult to perceive. Such title did not inform the members of Congress as to the full impact of the law; it did not apprise the people in the towns of Buldon and Parang in Cotabato and in the province of Cotabato itself that part of their territory is being taken away from their towns and province and added to the adjacent Province of Lanao del Sur; it kept the public in the dark as to what towns and provinces were actually affected by the bill. These are the pressures which heavily weigh against the constitutionality of Republic Act 4790.

Respondent's stance is that the change in boundaries of the two provinces resulting in "the substantial diminution of territorial limits" of Cotabato province is "merely the incidental legal results of the definition of the boundary" of the municipality of Dianaton and that, therefore, reference to the fact that portions in Cotabato are taken away "need not be expressed in the title of the law." This posture — we must say — but emphasizes the error of constitutional dimensions in writing down the title of the bill. Transfer of a sizeable portion of territory from one province to another of necessity involves reduction of area, population and income of the first and the corresponding increase of those of the other. This is as important as the creation of a municipality. And yet, the title did not reflect this fact.

Respondent asks us to read Felwa vs. Salas, L-16511, October 29, 1966, as controlling here. The Felwa case is not in focus. For there, the title of the Act (Republic Act 4695) reads: "An Act Creating the Provinces of Benguet, Mountain Province, Ifugao, and Kalinga-Apayao." That title was assailed as unconstitutional upon the averment that the provisions of the law (Section, 8 thereof) in reference to the elective officials of the provinces thus created, were not set forth in the title of the bill. We there ruled that this pretense is devoid of merit "for, surely, an Act creating said provinces must be expected to provide for the officers who shall run the affairs thereof" — which is "manifestly germane to the subject" of the legislation, as set forth in its title. The statute now before us stands altogether on a different footing. The lumping together of barrios in adjacent but separate provinces under one statute is neither a natural nor logical consequence of the creation of the new municipality of Dianaton. A change of boundaries of the two provinces may be made without necessarily creating a new municipality and vice versa.

As we canvass the authorities on this point, our attention is drawn to Hume vs. Village of Fruitport, 219 NW 648, 649. There, the statute in controversy bears the title "An Act to Incorporate the Village of Fruitport, in the County of Muskegon." The statute, however, in its section 1 reads: "The people of the state of Michigan enact, that the following described territory in the counties of Muskegon and Ottawa Michigan, to wit: . . . be, and the same is hereby constituted a village corporate, by the name of the Village of Fruitport." This statute was challenged as void by plaintiff, a resident of Ottawa county, in an action to restraint the Village from exercising jurisdiction and control, including taxing his lands. Plaintiff based his claim on Section 20, Article IV of the Michigan State Constitution, which reads: "No law shall embrace more than one object, which shall be expressed in its title." The Circuit Court decree voided the statute and defendant appealed. The Supreme Court of Michigan voted to uphold the decree of nullity. The following, said in Hume, may well apply to this case:

It may be that words, "An act to incorporate the village of Fruitport," would have been a sufficient title, and that the words, "in the county of Muskegon" were unnecessary; but we do not agree with appellant that the words last quoted may, for that reason, be disregarded as surplusage.

. . . Under the guise of discarding surplusage, a court cannot reject a part of the title of an act for the purpose of saving the act. Schmalz vs. Woody, 56 N.J. Eq. 649, 39 A. 539.

A purpose of the provision of the Constitution is to "challenge the attention of those affected by the act to its provisions." Savings Bank vs. State of Michigan, 228 Mich. 316, 200 NW 262.

The title here is restrictive. It restricts the operation of the act of Muskegon county. The act goes beyond the restriction. As was said in Schmalz vs. Wooly, supra: "The title is erroneous in the worst degree, for it is misleading."9

Similar statutes aimed at changing boundaries of political subdivisions, which legislative purpose is not expressed in the title, were likewise declared unconstitutional."10

We rule that Republic Act 4790 is null and void.

2. Suggestion was made that Republic Act 4790 may still be salvaged with reference to the nine barrios in the municipalities of Butig and Balabagan in Lanao del Sur, with the mere nullification of the portion thereof which took away the twelve barrios in the municipalities of Buldon and Parang in the other province of Cotabato. The reasoning advocated is that the limited title of the Act still covers those barrios actually in the province of Lanao del Sur.

We are not unmindful of the rule, buttressed on reason and of long standing, that where a portion of a statute is rendered unconstitutional and the remainder valid, the parts will be separated, and the constitutional portion upheld. Black, however, gives the exception to this rule, thus:

. . . But when the parts of the statute are so mutually dependent and connected, as conditions, considerations, inducements, or compensations for each other, as to warrant a belief that the legislature intended them as a whole, and that if all could not be carried into effect, the legislature would not pass the residue independently, then, if some parts are unconstitutional, all the provisions which are thus dependent, conditional, or connected, must fall with them,11

In substantially similar language, the same exception is recognized in the jurisprudence of this Court, thus:

The general rule is that where part of a statute is void, as repugnant to the Organic Law, while another part is valid, the valid portion if separable from the invalid, may stand and be enforced. But in order to do this, the valid portion must be so far independent of the invalid portion that it is fair to presume that the Legislature would have enacted it by itself if they had supposed that they could not constitutionally enact the other. . . Enough must remain to make a complete, intelligible, and valid statute, which carries out the legislative intent. . . . The language used in the invalid part of the statute can have no legal force or efficacy for any purpose whatever, and what remains must express the legislative will independently of the void part, since the court has no power to legislate, . . . .12

Could we indulge in the assumption that Congress still intended, by the Act, to create the restricted area of nine barrios in the towns of Butig and Balabagan in Lanao del Sur into the town of Dianaton, if the twelve barrios in the towns of Buldon and Parang, Cotabato were to be excluded therefrom? The answer must be in the negative.

Municipal corporations perform twin functions. Firstly. They serve as an instrumentality of the State in carrying out the functions of government. Secondly. They act as an agency of the community in the administration of local affairs. It is in the latter character that they are a separate entity acting for their own purposes and not a subdivision of the State.13

Consequently, several factors come to the fore in the consideration of whether a group of barrios is capable of maintaining itself as an independent municipality. Amongst these are population, territory, and income. It was apparently these same factors which induced the writing out of House Bill 1247 creating the town of Dianaton. Speaking of the original twenty-one barrios which comprise the new municipality, the explanatory note to House Bill 1247, now Republic Act 4790, reads:

The territory is now a progressive community; the aggregate population is large; and the collective income is sufficient to maintain an independent municipality.

This bill, if enacted into law, will enable the inhabitants concerned to govern themselves and enjoy the blessings of municipal autonomy.

When the foregoing bill was presented in Congress, unquestionably, the totality of the twenty-one barrios — not nine barrios — was in the mind of the proponent thereof. That this is so, is plainly evident by the fact that the bill itself, thereafter enacted into law, states that the seat of the government is in Togaig, which is a barrio in the municipality of Buldon in Cotabato. And then the reduced area poses a number of questions, thus: Could the observations as to progressive community, large aggregate population, collective income sufficient to maintain an independent municipality, still apply to a motley group of only nine barrios out of the twenty-one? Is it fair to assume that the inhabitants of the said remaining barrios would have agreed that they be formed into a municipality, what with the consequent duties and liabilities of an independent municipal corporation? Could they stand on their own feet with the income to be derived in their community? How about the peace and order, sanitation, and other corporate obligations? This Court may not supply the answer to any of these disturbing questions. And yet, to remain deaf to these problems, or to answer them in the negative and still cling to the rule on separability, we are afraid, is to impute to Congress an undeclared will. With the known premise that Dianaton was created upon the basic considerations of progressive community, large aggregate population and sufficient income, we may not now say that Congress intended to create Dianaton with only nine — of the original twenty-one — barrios, with a seat of government still left to be conjectured. For, this unduly stretches judicial interpretation of congressional intent beyond credibility point. To do so, indeed, is to pass the line which circumscribes the judiciary and tread on legislative premises. Paying due respect to the traditional separation of powers, we may not now melt and recast Republic Act 4790 to read a Dianaton town of nine instead of the originally intended twenty-one barrios. Really, if these nine barrios are to constitute a town at all, it is the function of Congress, not of this Court, to spell out that congressional will.

Republic Act 4790 is thus indivisible, and it is accordingly null and void in its totality.14

3. There remains for consideration the issue raised by respondent, namely, that petitioner has no substantial legal interest adversely affected by the implementation of Republic Act 4790. Stated differently, respondent's pose is that petitioner is not the real party in interest.

Here the validity of a statute is challenged on the ground that it violates the constitutional requirement that the subject of the bill be expressed in its title. Capacity to sue, therefore, hinges on whether petitioner's substantial rights or interests are impaired by lack of notification in the title that the barrio in Parang, Cotabato, where he is residing has been transferred to a different provincial hegemony.

The right of every citizen, taxpayer and voter of a community affected by legislation creating a town to ascertain that the law so created is not dismembering his place of residence "in accordance with the Constitution" is recognized in this jurisdiction.15

Petitioner is a qualified voter. He expects to vote in the 1967 elections. His right to vote in his own barrio before it was annexed to a new town is affected. He may not want, as is the case here, to vote in a town different from his actual residence. He may not desire to be considered a part of hitherto different communities which are fanned into the new town; he may prefer to remain in the place where he is and as it was constituted, and continue to enjoy the rights and benefits he acquired therein. He may not even know the candidates of the new town; he may express a lack of desire to vote for anyone of them; he may feel that his vote should be cast for the officials in the town before dismemberment. Since by constitutional direction the purpose of a bill must be shown in its title for the benefit, amongst others, of the community affected thereby,16 it stands to reason to say that when the constitutional right to vote on the part of any citizen of that community is affected, he may become a suitor to challenge the constitutionality of the Act as passed by Congress.

For the reasons given, we vote to declare Republic Act 4790 null and void, and to prohibit respondent Commission from implementing the same for electoral purposes.

No costs allowed. So ordered.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar, Castro and Angeles, JJ., concur.

Separate Opinions

FERNANDO, J., dissenting:

With regret and with due recognition of the merit of the opinion of the Court, I find myself unable to give my assent. Hence these few words to express my stand.

Republic Act No. 4790 deals with one subject matter, the creation of the municipality of Dianaton in the province of Lanao del Sur. The title makes evident what is the subject matter of such an enactment. The mere fact that in the body of such statute barrios found in two other municipalities of another province were included does not of itself suffice for a finding of nullity by virtue of the constitutional provision invoked. At the most, the statute to be free from the insubstantial doubts about its validity must be construed as not including the barrios, located not in the municipalities of Butig and Balabagan, Lanao del Sur, but in Parang and Baldon, Cotabato.

The constitutional requirement is that no bill which may be enacted into law shall embrace more than one subject which shall be expressed in the title of the bill.1 This provision is similar to those found in the Constitution of many American States. It is aimed against the evils, of the so-called omnibus bills, and log-rolling legislation, and against surreptitious or unconsidered enactments.2 Where the subject of a bill is limited to a particular matter, the members of the legislature as well as the people should be informed of the subject of proposed legislative measures. This constitutional provision thus precludes the insertion of riders in legislation, a rider being a provision not germane to the subject matter of the bill.

It is not to be narrowly construed though as to cripple or impede proper legislation. The construction must be reasonable and not technical. It is sufficient if the title be comprehensive enough reasonably to include the general object which the statute seeks to effect without expressing each and every end and means necessary for the accomplishment of that object. Mere details need not be set forth. The legislature is not required to make the title of the act a complete index of its contents. The constitutional provision is satisfied if all parts of an act which relates to its subject find expression in its title.3

The first decision of this Court, after the establishment of the Commonwealth of the Philippines, in 1938, construing a provision of this nature, Government v. Hongkong & Shanghai Bank,4 held that the inclusion of Section 11 of Act No. 4007, the Reorganization Law, providing for the mode in which the total annual expenses of the Bureau of Banking may be reimbursed through assessment levied upon all banking institutions subject to inspection by the Bank

Commissioner was not violative of such a requirement in the Jones Law, the previous organic act. Justice Laurel, however, vigorously dissented, his view being that while the main subject of the act was reorganization, the provision assailed did not deal with reorganization but with taxation. While the case of Government vs. Hongkong & Shanghai Bank was decided by a bare majority of four justices against three, the present trend seems to be that the constitutional requirement is to be given the liberal test as indicated in the majority opinion penned by Justice Abad Santos, and not the strict test as desired by the majority headed by Justice Laurel.

Such a trend has been reflected in subsequent decisions beginning with Sumulong v. Commission on Elections,5 up to and including Felwa vs. Salas, a 1966 decision,6 the opinion coming from Justice Concepcion.

It is true of course that in Philconsa v. Gimenez,7 one of the grounds on which the invalidity of Republic Act No. 3836 was predicated was the violation of the above constitutional provision. This Retirement Act for senators and representatives was entitled "AN ACT AMENDING SUB-SECTION (c), SECTION TWELVE OF COMMONWEALTH ACT NUMBERED ONE HUNDRED EIGHTY-SIX, AS AMENDED BY REPUBLIC ACT NUMBERED THIRTY HUNDRED NINETY-SIX." As we noted, the paragraph in Republic Act No. 3836 deemed objectionable "refers to members of Congress and to elective officers thereof who are not members of the Government Service Insurance System. To provide retirement benefits, therefore, for these officials, would relate to a subject matter which is not germane to Commonwealth Act No. 186. In other words, this portion of the amendment ( re retirement benefits for Members of Congress and appointive officers, such as the Secretary and Sergeants-at-arms for each house) is not related in any manner to the subject of Commonwealth Act No. 186 establishing the Government Service Insurance System and which provides for both retirement and insurance benefits to its members." Nonetheless our opinion was careful to note that there was no abandonment of the principle of liberality. Thus: "we are not unmindful of the fact that there has been a general disposition in all courts to construe the constitutional provision with reference to the subject and title of the Act, liberally."

It would follow therefore that the challenged legislation Republic Act No. 4790 is not susceptible to the indictment that the constitutional requirement as to legislation having only one subject which should be expressed in his title was not met. The subject was the creation of the municipality of Dianaton. That was embodied in the title.

It is in the light of the aforementioned judicial decisions of this Court, some of the opinions coming from jurists illustrious for their mastery of constitutional law and their acknowledged erudition, that, with all due respect, I find the citation from Corpus Juris Secundum, unnecessary and far from persuasive. The State decisions cited, I do not deem controlling, as the freedom of this Court to accept or reject doctrines therein announced cannot be doubted.

Wherein does the weakness of the statute lie then? To repeat, several barrios of two municipalities outside Lanao del Sur were included in the municipality of Dianaton of that province. That itself would not have given rise to a constitutional question considering the broad, well-high plenary powers possessed by Congress to alter provincial and municipal boundaries. What justified resort to this Court was the congressional failure to make explicit that such barrios in two municipalities located in Cotabato would thereafter form part of the newly created municipality of Dianaton, Lanao del Sur.

To avoid any doubt as to the validity of such statute, it must be construed as to exclude from Dianaton all of such barrios mentioned in Republic Act No. 4790 found in municipalities outside Lanao del Sur. As thus interpreted, the statute can meet the test of the most rigid scrutiny. Nor is this to do violence to the legislative intent. What was created was a new municipality from barrios named as found in Lanao del Sur. This construction assures precisely that.

This mode of interpreting Republic Act No. 4790 finds support in basic principles underlying precedents, which if not precisely controlling, have a persuasive ring. In Radiowealth v. Agregado,8 certain provisions of the Administrative Code were interpreted and given a "construction which would be more in harmony with the tenets of the fundamental law." In Sanchez v. Lyon Construction,9 this Court had a similar ruling: "Article 302 of the Code of Commerce must be applied in consonance with [the relevant] provisions of our Constitution." The above principle gained acceptance at a much earlier period in our constitutional history. Thus in a 1913 decision, In re Guariña:10"In construing a statute enacted by the Philippine Commission we deem it our duty not to give it a construction which would be repugnant to an Act of Congress, if the language of the statute is fairly susceptible of another construction not in conflict with the higher law. In doing so, we think we should not hesitate to disregard contentions touching the apparent intention of the legislator which would lead to the conclusion that the Commission intended to enact a law in violation of the Act of Congress. However specious the argument may be in favor of one of two possible constructions, it must be disregarded if on examination it is found to rest on the contention that the legislator designed an attempt to transcend the rightful limits of his authority, and that his apparent intention was to enact an invalid law."

American Supreme Court decisions are equally explicit. The then Justice, later Chief Justice, Stone, construed statutes "with an eye to possible constitutional limitations so as to avoid doubts as to [their] validity."11 From the pen of the articulate jurist, Frankfurter:12 "Accordingly, the phrase "lobbying activities" in the resolution must be given the meaning that may fairly be attributed to it, having special regard for the principle of constitutional adjudication which

makes it decisive in the choice of fair alternatives that one construction may raise serious constitutional questions avoided by another." His opinion in the Rumely case continues with the above pronouncement of Stone and two other former Chief Justices: "In the words of Mr. Chief Justice Taft, '(i)t is our duty in the interpretation of federal statutes to reach conclusion which will avoid serious doubt of their constitutionality', Richmond Screw Anchor Co. v. United States, 275 US 331, 346, 48 S. Ct. 194, 198, 72 L. ed. 303. . . . As phrased by Mr. Chief Justice Hughes, "if a serious doubt of constitutionality is raised, it is a cardinal principle that this Court will first ascertain whether a construction of the statute is fairly possible by which the question may be avoided.' Crowell v. Benson, 285, 296, 76 L. ed. 598, and cases cited." The prevailing doctrine then as set forth by Justice Clark in a 1963 decision,13 is that courts "have consistently sought an interpretation which supports the constitutionality of legislation." Phrased differently by Justice Douglas, the judiciary favors "that interpretation of legislation which gives it the greater change of surviving the test of constitutionality."14

It would follow then that both Philippine and American decisions unite in the view that a legislative measure, in the language of Van Devanter "should not be given a construction which will imperil its validity where it is reasonably open to construction free from such peril."15 Republic Act No. 4790 as above construed incurs no such risk and is free from the peril of nullity.

So I would view the matter, with all due acknowledgment of the practical considerations clearly brought to light in the opinion of the Court.

FIRST DIVISION

[G.R. No. 148622.  September 12, 2002]

REPUBLIC OF THE PHILIPPINES, represented by HON. HEHERSON T. ALVAREZ, in his capacity as Secretary of the DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES (DENR), CLARENCE L. BAGUILAT, in his capacity as the Regional Executive Director of DENR-Region XI and ENGR. BIENVENIDO L. LIPAYON, in his capacity as the Regional Director of the DENR-ENVIRONMENTAL MANAGEMENT BUREAU (DENR-EMB), Region XI,petitioners, vs. THE CITY OF DAVAO, represented by BENJAMIN C. DE GUZMAN, City Mayor, respondent.

D E C I S I O N

YNARES-SANTIAGO, J.:

Before us is a petition for review[1] on certiorari assailing the decision[2] dated May 28, 2001 of the Regional Trial Court of Davao City, Branch 33, which granted the writ of mandamus and injunction in favor of respondent, the City of Davao, and against petitioner, the Republic, represented by the Department of Environment and Natural Resources (DENR).  The trial court also directed petitioner to issue a Certificate of Non-Coverage in favor of respondent.

The antecedent facts of the case are as follows:

On August 11, 2000, respondent filed an application for a Certificate of Non-Coverage (CNC) for its proposed project, the Davao City Artica Sports Dome, with the Environmental Management Bureau (EMB), Region XI.  Attached to the application were the required documents for its issuance, namely, a) detailed location map of the project site; b) brief project description; and c) a certification from the City Planning and Development Office that the project is not located in an environmentally critical area (ECA).  The EMB Region XI denied the application after finding that the proposed project was within an environmentally critical area and ruled that, pursuant to Section 2, Presidential Decree No. 1586, otherwise known as the Environmental Impact Statement System, in relation to Section 4 of Presidential

Decree No, 1151, also known as the Philippine Environment Policy, the City of Davao must undergo the environmental impact assessment (EIA) process to secure an Environmental Compliance Certificate (ECC), before it can proceed with the construction of its project.

Believing that it was entitled to a Certificate of Non-Coverage, respondent filed a petition for mandamus and injunction with the Regional Trial Court of Davao, docketed as Civil Case No. 28,133-2000.  It alleged that its proposed project was neither an environmentally critical project nor within an environmentally critical area; thus it was outside the scope of the EIS system.  Hence, it was the ministerial duty of the DENR, through the EMB-Region XI, to issue a CNC in favor of respondent upon submission of the required documents.

The Regional Trial Court rendered judgment in favor of respondent, the dispositive portion of which reads as follows:

WHEREFORE, finding the petition to be meritorious, judgment granting the writ of mandamus and injunction is hereby rendered in favor of the petitioner City of Davao and against respondents Department of Environment and Natural Resources and the other respondents by:

1)             directing the respondents to issue in favor of the petitioner City of Davao a Certificate of Non-Coverage, pursuant to Presidential Decree No. 1586 and related laws, in connection with the construction by the City of Davao of the Artica Sports Dome;

2)             making the preliminary injunction issued on December 12, 2000 permanent.

Costs de oficio.

SO ORDERED.[3]

The trial court ratiocinated that there is nothing in PD 1586, in relation to PD 1151 and Letter of Instruction No. 1179 (prescribing guidelines for compliance with the EIA system), which requires local government units (LGUs) to comply with the EIS law.  Only agencies and instrumentalities of the national government, including government owned or controlled corporations, as well as private corporations, firms and entities are mandated to go through the EIA process for their proposed projects which have significant effect on the quality of the environment.   A local government unit, not being an agency or instrumentality of the National Government, is deemed excluded under the principle of expressio unius est exclusio alterius.

The trial court also declared, based on the certifications of the DENR-Community Environment and Natural Resources Office (CENRO)-West, and the data gathered from the Philippine Institute of Volcanology and Seismology (PHIVOLCS), that the site for the Artica Sports Dome was not within an environmentally critical area.    Neither was the project an environmentally critical one.  It therefore becomes mandatory for the DENR, through the EMB Region XI, to approve respondent’s application for CNC after it has satisfied all the requirements for its issuance.   Accordingly, petitioner can be compelled by a writ of mandamus to issue the CNC, if it refuses to do so.

Petitioner filed a motion for reconsideration, however, the same was denied.  Hence, the instant petition for review.

With the supervening change of administration, respondent, in lieu of a comment, filed a manifestation expressing its agreement with petitioner that, indeed, it needs to secure an ECC for its proposed project.  It thus rendered the instant petition moot and academic.  However, for the guidance of the implementors of the EIS law and pursuant to our symbolic function to educate the bench and bar,[4] we are inclined to address the issue raised in this petition.

Section 15 of Republic Act 7160,[5] otherwise known as the Local Government Code, defines a local government unit as a body politic and corporate endowed with powers to be exercised by it in conformity with law.  As such, it performs dual functions, governmental and proprietary. Governmental functions are those that concern the health, safety and  the advancement of the public good or welfare as affecting the public generally. [6] Proprietary functions are those that seek to obtain special corporate benefits or earn pecuniary profit and intended for private advantage and benefit.[7]When exercising governmental powers and performing governmental duties, an LGU is an agency of the national government.[8] When engaged in corporate activities, it acts as an agent of the community in the administration of local affairs.[9]

Found in Section 16 of the Local Government Code is the duty of the LGUs to promote the people’s right to a balanced ecology.[10] Pursuant to this, an LGU, like the City of Davao, can not claim exemption from the coverage of PD 1586. As a body politic endowed with governmental functions, an LGU has the duty to ensure the quality of the environment, which is the very same objective of PD 1586.

Further, it is a rule of statutory construction that every part of a statute must be interpreted with reference to the context, i.e., that every part must be considered with other parts, and kept subservient to the general intent of the enactment.[11] The trial court, in declaring local government units as exempt from the coverage of the EIS law, failed to relate Section 2 of PD 1586[12] to the following provisions of the same law:

WHEREAS, the pursuit of a comprehensive and integrated environmental protection program necessitates the establishment and institutionalization of a system whereby the exigencies of socio-economic undertakings can be reconciled with the requirements of environmental quality; x x x.

Section 1. Policy. – It is hereby declared the policy of the State to attain and maintain a rational and orderly balance between socio-economic growth and environmental protection.

x x x                              x x x                                 x x x

Section 4. – Presidential Proclamation of Environmentally Critical Areas and Projects. – The President of the Philippines may, on his own initiative or upon recommendation of the National Environmental Protection Council, by proclamation declare certain projects, undertakings or areas in the country as environmentally critical. No person, partnership or corporation shall undertake or operate any such declared environmentally critical project or area without first securing an Environmental Compliance Certificate issued by the President or his duly authorized representative. For the proper management of said critical project or area, the President may by his proclamation reorganize such government offices, agencies, institutions, corporations or instrumentalities including the realignment of government personnel, and their specific functions and responsibilities.

Section 4 of PD 1586 clearly states that “no person, partnership or corporation shall undertake or operate any such declared environmentally critical project or area without first securing an Environmental Compliance Certificate issued by the President or his duly authorized representative.” [13] The Civil Code defines a person as either natural or juridical. The state and its political subdivisions, i.e., the local government units [14] are juridical persons.[15] Undoubtedly therefore, local government units are not excluded from the coverage of PD 1586.

Lastly, very clear in Section 1 of PD 1586 that said law intends to implement the policy of the state to achieve a balance between socio-economic development and environmental protection, which are the twin goals of sustainable development. The above-quoted first paragraph of the Whereas clause stresses that this can only be possible if we adopt a comprehensive and  integrated environmental  protection  program  where all the sectors of the community are involved, i.e., the government and the private sectors. The local government units, as part of the machinery of the government, cannot therefore be deemed as outside the scope of the EIS system.[16]

The foregoing arguments, however, presuppose that a project, for which an Environmental Compliance Certificate is necessary, is environmentally critical or within an environmentally critical area.  In the case at bar, respondent has sufficiently shown that the Artica Sports Dome will not have a significant negative environmental impact because it is not an environmentally critical project and it is not located in an environmentally critical area.  In support of this contention, respondent submitted the following:

1.       Certification from the City Planning and Development Office that the project is not located in an environmentally critical area;

2.       Certification from the Community Environment and Natural Resources Office (CENRO-West) that the project area is within the 18-30% slope, is outside the scope of the NIPAS (R.A. 7586), and not within a declared watershed area; and

3.       Certification from PHILVOCS that the project site is thirty-seven (37) kilometers southeast of the southernmost extension of the Davao River Fault and forty-five (45) kilometers west of the Eastern Mindanao Fault; and is outside the required minimum buffer zone of five (5) meters from a fault zone.

The trial court, after a consideration of the evidence, found that the Artica Sports Dome is not within an environmentally critical area.  Neither is it an environmentally critical project.  It is axiomatic that factual findings of the trial court, when fully supported by the evidence on record, are binding upon this Court and will not be disturbed on appeal.[17] This Court is not a trier of facts.[18]

There are exceptional instances when this Court may disregard factual findings of the trial court, namely: a) when the conclusion is a finding grounded entirely on speculations, surmises, or conjectures; b) when the inference made is manifestly mistaken, absurd, or impossible; c) where there is a grave abuse of discretion; d) when the judgment is based on a misapprehension of facts; e) when the findings of fact are conflicting; f) when the Court of Appeals, in making its findings, went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee; g) when the findings of the Court of Appeals are contrary to those of the trial court; h) when the findings of fact are conclusions without citation of specific evidence on which they are based; i) when the finding of fact of the Court of Appeals is premised on the supposed absence of evidence but is contradicted by the evidence on record; and j) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties and which, if properly considered, would justify a different conclusion.[19] None of these exceptions, however, obtain in this case.

The Environmental Impact Statement System, which ensures environmental protection and regulates certain government activities affecting the environment, was established by Presidential Decree No. 1586.  Section 2 thereof states:

There is hereby established an Environmental Impact Statement System founded and based on the environmental impact statement required under Section 4 of Presidential Decree No. 1151, of all agencies and instrumentalities of the national government, including government-owned or controlled corporations, as well as private corporations, firms and entities, for every proposed project and undertaking which significantly affect the quality of the environment.

Section 4 of PD 1151, on the other hand, provides:

Environmental Impact Statements. – Pursuant to the above enunciated policies and goals, all agencies and instrumentalities of the national government, including government-owned or controlled corporations, as well as private corporations, firms and entities shall prepare, file and include in every action, project or undertaking which significantly affects the quality of the environment a detailed statement on–

(a)           the environmental impact of the proposed action, project or undertaking 

(b)           any adverse environmental effect which cannot be avoided should the proposal be implemented

(c)            alternative to the proposed action

(d)           a determination that the short-term uses of the resources of the environment are consistent with the maintenance and enhancement of the long-term productivity of the same; and

(e)           whenever a proposal involves the use of depletable or nonrenewable resources, a finding must be made that such use and commitment are warranted.

Before an environmental impact statement is issued by a lead agency, all agencies having jurisdiction over, or special expertise on, the subject matter involved shall comment on the draft environmental impact statement made by the lead agency within thirty (30) days from receipt of the same.

Under Article II, Section 1, of the Rules and Regulations Implementing PD 1586, the declaration of certain projects or areas as environmentally critical, and which shall fall within the scope of the Environmental Impact Statement System, shall be by Presidential Proclamation, in accordance with Section 4 of PD 1586 quoted above.

Pursuant thereto, Proclamation No. 2146 was issued on December 14, 1981, proclaiming the following areas and types of projects as environmentally critical and within the scope of the Environmental Impact Statement System established under PD 1586:

A.       Environmentally Critical Projects

I.         Heavy Industries

a.             Non-ferrous metal industriesb.             Iron and steel millsc.             Petroleum and petro-chemical industries including oil and gas

d.             Smelting plants

II.        Resource Extractive Industries

a.             Major mining and quarrying projectsb.             Forestry projects

1.     Logging2.     Major wood processing projects3.     Introduction of fauna (exotic-animals) in public/private forests4.     Forest occupancy5.     Extraction of mangrove products

6.     Grazing

c.             Fishery Projects

1.     Dikes for/and fishpond development projects

III.       Infrastructure Projects

a.             Major damsb.             Major power plants (fossil-fueled, nuclear fueled, hydroelectric or geothermal)

c.             Major reclamation projectsd.             Major roads and bridges

B.       Environmentally Critical Areas

1.       All areas declared by law as national parks, watershed reserves, wildlife preserves  and sanctuaries;

2.       Areas set aside as aesthetic potential tourist spots;3.       Areas which constitute the habitat for any endangered or threatened species of indigenous

Philippine Wildlife (flora and fauna);4.       Areas of unique historic, archaeological, or scientific interests;5.       Areas which are traditionally occupied by cultural communities or tribes;

6.       Areas frequently visited and/or hard-hit by natural calamities (geologic hazards, floods, typhoons, volcanic activity, etc.);

7.       Areas with critical slopes;8.       Areas classified as prime agricultural lands;9.       Recharged areas of aquifers;

10.     Water bodies characterized by one or any combination of the following conditions;

a.             tapped for domestic purposesb.             within the controlled and/or protected areas declared by appropriate authorities

c.             which support wildlife and fishery activities

11.     Mangrove areas characterized by one or any combination of the following conditions:

a.             with primary pristine and dense young growth;b.             adjoining mouth of major river systems;c.             near or adjacent to traditional productive fry or fishing grounds;

d.             which act as natural buffers against shore erosion, strong winds and storm floods;e.             on which people are dependent for their livelihood.

12.     Coral reefs, characterized by one or any combinations of the following conditions:

a.             with 50% and above live coralline cover;b.             spawning and nursery grounds for fish;

c.             which act as natural breakwater of coastlines.

In this connection, Section 5 of PD 1586 expressly states:

Environmentally Non-Critical Projects. — All other projects, undertakings and areas not declared by the President as environmentally critical shall be considered as non-critical and shall not be required to submit an environmental impact statement.  The National Environmental Protection Council, thru the Ministry of Human Settlements may however require non-critical projects and undertakings to provide additional environmental safeguards as it may deem necessary.

The Artica Sports Dome in Langub does not come close to any of the projects or areas enumerated above.  Neither is it analogous to any of them. It is clear, therefore, that the said project is not classified as environmentally critical, or within an environmentally critical area.  Consequently, the DENR has no choice but to issue the Certificate of Non-Coverage.  It becomes its ministerial duty, the performance of which can be compelled by writ of mandamus, such as that issued by the trial court in the case at bar.

WHEREFORE, in view of the foregoing, the instant petition is DENIED.  The decision of the Regional Trial Court of Davao City, Branch 33, in Civil Case No. 28,133-2000, granting the writ of mandamus and directing the Department of Environment and Natural Resources to issue in favor of the City of Davao a Certificate of Non-Coverage, pursuant to Presidential Decree No. 1586 and related laws, in connection with the construction of the Artica Sports Dome, is AFFIRMED.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Vitug, and Carpio, JJ., concur.