CASE 1

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 89651 November 10, 1989
DATU FIRDAUSI I.Y. ABBAS, DATU BLO UMPAR ADIONG, DATU MACALIMPOWAC
DELANGALEN, CELSO PALMA, ALI MONTANA BABAO, JULMUNIR JANNARAL, RASHID SABER,
and DATU JAMAL ASHLEY ABBAS, representing the other taxpayers of Mindanao, petitioners,
vs.
COMMISSION ON ELECTIONS, and HONORABLE GUILLERMO C. CARAGUE, DEPARTMENT
SECRETARY OF BUDGET AND MANAGEMENT, respondents.
G.R. No. 89965 November 10, 1989
ATTY. ABDULLAH D. MAMA-O, petitioner,
vs.
HON. GUILLERMO CARAGUE, in his capacity as the Secretary of the Budget, and the
COMMISSION ON ELECTIONS, respondents.
Abbas, Abbas, Amora, Alejandro-Abbas & Associates for petitioners in G.R. Nos. 89651 and
89965.
Abdullah D. Mama-o for and in his own behalf in 89965.

CORTES, J.:
The present controversy relates to the plebiscite in thirteen (13) provinces and nine (9) cities in
Mindanao and Palawan, 1 scheduled for November 19, 1989, in implementation of Republic Act
No. 6734, entitled "An Act Providing for an Organic Act for the Autonomous Region in Muslim
Mindanao."
These consolidated petitions pray that the Court: (1) enjoin the Commission on Elections
(COMELEC) from conducting the plebiscite and the Secretary of Budget and Management from
releasing funds to the COMELEC for that purpose; and (2) declare R.A. No. 6734, or parts
thereof, unconstitutional .

After a consolidated comment was filed by Solicitor General for the respondents, which the
Court considered as the answer, the case was deemed submitted for decision, the issues having
been joined. Subsequently, petitioner Mama-o filed a "Manifestation with Motion for Leave to
File Reply on Respondents' Comment and to Open Oral Arguments," which the Court noted.
The arguments against R.A. 6734 raised by petitioners may generally be categorized into either
of the following:
(a) that R.A. 6734, or parts thereof, violates the Constitution, and
(b) that certain provisions of R.A. No. 6734 conflict with the Tripoli Agreement.
The Tripoli Agreement, more specifically, the Agreement Between the government of the
Republic of the Philippines of the Philippines and Moro National Liberation Front with the
Participation of the Quadripartie Ministerial Commission Members of the Islamic Conference
and the Secretary General of the Organization of Islamic Conference" took effect on December
23, 1976. It provided for "[t]he establishment of Autonomy in the southern Philippines within
the realm of the sovereignty and territorial integrity of the Republic of the Philippines" and
enumerated the thirteen (13) provinces comprising the "areas of autonomy." 2
In 1987, a new Constitution was ratified, which the for the first time provided for regional
autonomy, Article X, section 15 of the charter provides that "[t]here shall be created
autonomous regions in Muslim Mindanao and in the Cordilleras consisting of provinces, cities,
municipalities, and geographical areas sharing common and distinctive historical and cultural
heritage, economic and social structures, and other relevant characteristics within the
framework of this Constitution and the national sovereignty as well as territorial integrity of the
Republic of the Philippines."
To effectuate this mandate, the Constitution further provides:
Sec. 16. The President shall exercise general supervision over autonomous
regions to ensure that the laws are faithfully executed.
Sec. 17. All powers, functions, and responsibilities not granted by this
Constitution or by law to the autonomous regions shall be vested in the National
Government.
Sec. 18. The Congress shall enact an organic act for each autonomous region
with the assistance and participation of the regional consultative commission
composed of representatives appointed by the President from a list of nominees
from multisectoral bodies. The organic act shall define the basic structure of
government for the region consisting of the executive and representative of the
constituent political units. The organic acts shall likewise provide for special

courts with personal, family, and property law jurisdiction consistent with the
provisions of this Constitution and national laws.
The creation of the autonomous region shall be effective when approved by
majority of the votes cast by the constituent units in a plebiscite called for the
purpose, provided that only the provinces, cities, and geographic areas voting
favorably in such plebiscite shall be included in the autonomous region.
Sec. 19 The first Congress elected under this Constitution shall, within eighteen
months from the time of organization of both Houses, pass the organic acts for
the autonomous regions in Muslim Mindanao and the Cordilleras.
Sec. 20. Within its territorial jurisdiction and subject to the provisions of this
Constitution and national laws, the organic act of autonomous regions shall
provide for legislative powers over:
(1) Administrative organization;
(2) Creation of sources of revenues;
(3) Ancestral domain and natural resources;
(4) Personal, family, and property relations;
(5) Regional urban and rural planning development;
(6) Economic, social and tourism development;
(7) Educational policies;
(8) Preservation and development of the cultural heritage; and
(9) Such other matters as may be authorized by law for the
promotion of the general welfare of the people of the region.
Sec. 21. The preservation of peace and order within the regions shall be the
responsibility of the local police agencies which shall be organized, maintained,
supervised, and utilized in accordance with applicable laws. The defense and
security of the region shall be the responsibility of the National Government.
Pursuant to the constitutional mandate, R.A. No. 6734 was enacted and signed into law on
August 1, 1989.

1. The Court shall dispose first of the second category of arguments raised by petitioners, i.e.
that certain provisions of R.A. No. 6734 conflict with the provisions of the Tripoli Agreement.
Petitioners premise their arguments on the assumption that the Tripoli Agreement is part of the
law of the land, being a binding international agreement . The Solicitor General asserts that the
Tripoli Agreement is neither a binding treaty, not having been entered into by the Republic of
the Philippines with a sovereign state and ratified according to the provisions of the 1973 or
1987 Constitutions, nor a binding international agreement.
We find it neither necessary nor determinative of the case to rule on the nature of the Tripoli
Agreement and its binding effect on the Philippine Government whether under public
international or internal Philippine law. In the first place, it is now the Constitution itself that
provides for the creation of an autonomous region in Muslim Mindanao. The standard for any
inquiry into the validity of R.A. No. 6734 would therefore be what is so provided in the
Constitution. Thus, any conflict between the provisions of R.A. No. 6734 and the provisions of
the Tripoli Agreement will not have the effect of enjoining the implementation of the Organic
Act. Assuming for the sake of argument that the Tripoli Agreement is a binding treaty or
international agreement, it would then constitute part of the law of the land. But as internal
law it would not be superior to R.A. No. 6734, an enactment of the Congress of the Philippines,
rather it would be in the same class as the latter [SALONGA, PUBLIC INTERNATIONAL LAW 320
(4th ed., 1974), citing Head Money Cases, 112 U.S. 580 (1884) and Foster v. Nelson, 2 Pet. 253
(1829)]. Thus, if at all, R.A. No. 6734 would be amendatory of the Tripoli Agreement, being a
subsequent law. Only a determination by this Court that R.A. No. 6734 contravened the
Constitution would result in the granting of the reliefs sought. 3
2. The Court shall therefore only pass upon the constitutional questions which have been raised
by petitioners.
Petitioner Abbas argues that R.A. No. 6734 unconditionally creates an autonomous region in
Mindanao, contrary to the aforequoted provisions of the Constitution on the autonomous
region which make the creation of such region dependent upon the outcome of the plebiscite.
In support of his argument, petitioner cites Article II, section 1(1) of R.A. No. 6734 which
declares that "[t]here is hereby created the Autonomous Region in Muslim Mindanao, to be
composed of provinces and cities voting favorably in the plebiscite called for the purpose, in
accordance with Section 18, Article X of the Constitution." Petitioner contends that the tenor of
the above provision makes the creation of an autonomous region absolute, such that even if
only two provinces vote in favor of autonomy, an autonomous region would still be created
composed of the two provinces where the favorable votes were obtained.
The matter of the creation of the autonomous region and its composition needs to be clarified.
Firs, the questioned provision itself in R.A. No. 6734 refers to Section 18, Article X of the
Constitution which sets forth the conditions necessary for the creation of the autonomous

region. The reference to the constitutional provision cannot be glossed over for it clearly
indicates that the creation of the autonomous region shall take place only in accord with the
constitutional requirements. Second, there is a specific provision in the Transitory Provisions
(Article XIX) of the Organic Act, which incorporates substantially the same requirements
embodied in the Constitution and fills in the details, thus:
SEC. 13. The creation of the Autonomous Region in Muslim Mindanao shall take
effect when approved by a majority of the votes cast by the constituent units
provided in paragraph (2) of Sec. 1 of Article II of this Act in a plebiscite which
shall be held not earlier than ninety (90) days or later than one hundred twenty
(120) days after the approval of this Act: Provided, That only the provinces and
cities voting favorably in such plebiscite shall be included in the Autonomous
Region in Muslim Mindanao. The provinces and cities which in the plebiscite do
not vote for inclusion in the Autonomous Region shall remain the existing
administrative determination, merge the existing regions.
Thus, under the Constitution and R.A. No 6734, the creation of the autonomous region shall
take effect only when approved by a majority of the votes cast by the constituent units in a
plebiscite, and only those provinces and cities where a majority vote in favor of the Organic Act
shall be included in the autonomous region. The provinces and cities wherein such a majority is
not attained shall not be included in the autonomous region. It may be that even if an
autonomous region is created, not all of the thirteen (13) provinces and nine (9) cities
mentioned in Article II, section 1 (2) of R.A. No. 6734 shall be included therein. The single
plebiscite contemplated by the Constitution and R.A. No. 6734 will therefore be determinative
of (1) whether there shall be an autonomous region in Muslim Mindanao and (2) which
provinces and cities, among those enumerated in R.A. No. 6734, shall compromise it. [See III
RECORD OF THE CONSTITUTIONAL COMMISSION 482-492 (1986)].
As provided in the Constitution, the creation of the Autonomous region in Muslim Mindanao is
made effective upon the approval "by majority of the votes cast by the constituent units in a
plebiscite called for the purpose" [Art. X, sec. 18]. The question has been raised as to what this
majority means. Does it refer to a majority of the total votes cast in the plebiscite in all the
constituent units, or a majority in each of the constituent units, or both?
We need not go beyond the Constitution to resolve this question.
If the framers of the Constitution intended to require approval by a majority of all the votes
cast in the plebiscite they would have so indicated. Thus, in Article XVIII, section 27, it is
provided that "[t]his Constitution shall take effect immediately upon its ratification by a
majority of the votes cast in a plebiscite held for the purpose ... Comparing this with the
provision on the creation of the autonomous region, which reads:
The creation of the autonomous region shall be effective when approved by
majority of the votes cast by the constituent units in a plebiscite called for the

purpose, provided that only provinces, cities and geographic areas voting
favorably in such plebiscite shall be included in the autonomous region. [Art. X,
sec, 18, para, 2].
it will readily be seen that the creation of the autonomous region is made to depend, not on
the total majority vote in the plebiscite, but on the will of the majority in each of the
constituent units and the proviso underscores this. for if the intention of the framers of the
Constitution was to get the majority of the totality of the votes cast, they could have simply
adopted the same phraseology as that used for the ratification of the Constitution, i.e. "the
creation of the autonomous region shall be effective when approved by a majority of the votes
cast in a plebiscite called for the purpose."
It is thus clear that what is required by the Constitution is a simple majority of votes approving
the organic Act in individual constituent units and not a double majority of the votes in all
constituent units put together, as well as in the individual constituent units.
More importantly, because of its categorical language, this is also the sense in which the vote
requirement in the plebiscite provided under Article X, section 18 must have been understood
by the people when they ratified the Constitution.
Invoking the earlier cited constitutional provisions, petitioner Mama-o, on the other hand,
maintains that only those areas which, to his view, share common and distinctive historical and
cultural heritage, economic and social structures, and other relevant characteristics should be
properly included within the coverage of the autonomous region. He insists that R.A. No. 6734
is unconstitutional because only the provinces of Basilan, Sulu, Tawi-Tawi, Lanao del Sur, Lanao
del Norte and Maguindanao and the cities of Marawi and Cotabato, and not all of the thirteen
(13) provinces and nine (9) cities included in the Organic Act, possess such concurrence in
historical and cultural heritage and other relevant characteristics. By including areas which do
not strictly share the same characteristics. By including areas which do not strictly share the
same characteristic as the others, petitioner claims that Congress has expanded the scope of
the autonomous region which the constitution itself has prescribed to be limited.
Petitioner's argument is not tenable. The Constitution lays down the standards by which
Congress shall determine which areas should constitute the autonomous region. Guided by
these constitutional criteria, the ascertainment by Congress of the areas that share common
attributes is within the exclusive realm of the legislature's discretion. Any review of this
ascertainment would have to go into the wisdom of the law. This the Court cannot do without
doing violence to the separation of governmental powers. [Angara v. Electoral Commission, 63
Phil 139 (1936); Morfe v. Mutuc, G.R. No. L-20387, January 31, 1968, 22 SCRA 424].
After assailing the inclusion of non-Muslim areas in the Organic Act for lack of basis, petitioner
Mama-o would then adopt the extreme view that other non-Muslim areas in Mindanao should
likewise be covered. He argues that since the Organic Act covers several non-Muslim areas, its
scope should be further broadened to include the rest of the non-Muslim areas in Mindanao in

order for the other non-Muslim areas denies said areas equal protection of the law, and
therefore is violative of the Constitution.
Petitioner's contention runs counter to the very same constitutional provision he had earlier
invoked. Any determination by Congress of what areas in Mindanao should compromise the
autonomous region, taking into account shared historical and cultural heritage, economic and
social structures, and other relevant characteristics, would necessarily carry with it the
exclusion of other areas. As earlier stated, such determination by Congress of which areas
should be covered by the organic act for the autonomous region constitutes a recognized
legislative prerogative, whose wisdom may not be inquired into by this Court.
Moreover, equal protection permits of reasonable classification [People v. Vera, 65 Phil. 56
(1963); Laurel v. Misa, 76 Phil. 372 (1946); J.M. Tuason and Co. v. Land tenure Administration,
G.R. No. L-21064, February 18, 1970, 31 SCRA 413]. In Dumlao v. Commission on Elections G.R.
No. 52245, January 22, 1980, 95 SCRA 392], the Court ruled that once class may be treated
differently from another where the groupings are based on reasonable and real distinctions.
The guarantee of equal protection is thus not infringed in this case, the classification having
been made by Congress on the basis of substantial distinctions as set forth by the Constitution
itself.
Both petitions also question the validity of R.A. No. 6734 on the ground that it violates the
constitutional guarantee on free exercise of religion [Art. III, sec. 5]. The objection centers on a
provision in the Organic Act which mandates that should there be any conflict between the
Muslim Code [P.D. No. 1083] and the Tribal Code (still be enacted) on the one had, and the
national law on the other hand, the Shari'ah courts created under the same Act should apply
national law. Petitioners maintain that the islamic law (Shari'ah) is derived from the Koran,
which makes it part of divine law. Thus it may not be subjected to any "man-made" national
law. Petitioner Abbas supports this objection by enumerating possible instances of conflict
between provisions of the Muslim Code and national law, wherein an application of national
law might be offensive to a Muslim's religious convictions.
As enshrined in the Constitution, judicial power includes the duty to settle actual controversies
involving rights which are legally demandable and enforceable. [Art. VIII, Sec. 11. As a condition
precedent for the power to be exercised, an actual controversy between litigants must first
exist [Angara v. Electoral Commission, supra; Tan v. Macapagal, G.R. No. L-34161, February 29,
1972, 43 SCRA 677]. In the present case, no actual controversy between real litigants exists.
There are no conflicting claims involving the application of national law resulting in an alleged
violation of religious freedom. This being so, the Court in this case may not be called upon to
resolve what is merely a perceived potential conflict between the provisions the Muslim Code
and national law.
Petitioners also impugn the constitutionality of Article XIX, section 13 of R.A. No. 6734 which,
among others, states:

. . . Provided, That only the provinces and cities voting favorably in such
plebiscite shall be included in the Autonomous Region in Muslim Mindanao. The
provinces and cities which in the plebiscite do not vote for inclusion in the
Autonomous Region shall remain in the existing administrative regions:Provided,
however, that the President may, by administrative determination, merge the
existing regions.
According to petitioners, said provision grants the President the power to merge regions, a
power which is not conferred by the Constitution upon the President. That the President may
choose to merge existing regions pursuant to the Organic Act is challenged as being in conflict
with Article X, Section 10 of the Constitution which provides:
No province, city, municipality, or barangay may be created, divided, merged,
abolished, or its boundary substantially altered, except in accordance with the
criteria established in the local government code and subject to approval by a
majority of the votes cast in a plebiscite in the political units directly affected.
It must be pointed out that what is referred to in R.A. No. 6734 is the merger of administrative
regions, i.e. Regions I to XII and the National Capital Region, which are mere groupings of
contiguous provinces for administrative purposes [Integrated Reorganization Plan (1972), which
was made as part of the law of the land by Pres. dec. No. 1, Pres. Dec. No. 742]. Administrative
regions are not territorial and political subdivisions like provinces, cities, municipalities and
barangays [see Art. X, sec. 1 of the Constitution]. While the power to merge administrative
regions is not expressly provided for in the Constitution, it is a power which has traditionally
been lodged with the President to facilitate the exercise of the power of general supervision
over local governments [see Art. X, sec. 4 of the Constitution]. There is no conflict between the
power of the President to merge administrative regions with the constitutional provision
requiring a plebiscite in the merger of local government units because the requirement of a
plebiscite in a merger expressly applies only to provinces, cities, municipalities or barangays,
not to administrative regions.
Petitioners likewise question the validity of provisions in the Organic Act which create an
Oversight Committee to supervise the transfer to the autonomous region of the powers,
appropriations, and properties vested upon the regional government by the organic Act [Art.
XIX, Secs. 3 and 4]. Said provisions mandate that the transfer of certain national government
offices and their properties to the regional government shall be made pursuant to a schedule
prescribed by the Oversight Committee, and that such transfer should be accomplished within
six (6) years from the organization of the regional government.
It is asserted by petitioners that such provisions are unconstitutional because while the
Constitution states that the creation of the autonomous region shall take effect upon approval
in a plebiscite, the requirement of organizing an Oversight committee tasked with supervising
the transfer of powers and properties to the regional government would in effect delay the
creation of the autonomous region.

Under the Constitution, the creation of the autonomous region hinges only on the result of the
plebiscite. if the Organic Act is approved by majority of the votes cast by constituent units in
the scheduled plebiscite, the creation of the autonomous region immediately takes effect delay
the creation of the autonomous region.
Under the constitution, the creation of the autonomous region hinges only on the result of the
plebiscite. if the Organic Act is approved by majority of the votes cast by constituent units in
the scheduled plebiscite, the creation of the autonomous region immediately takes effect. The
questioned provisions in R.A. No. 6734 requiring an oversight Committee to supervise the
transfer do not provide for a different date of effectivity. Much less would the organization of
the Oversight Committee cause an impediment to the operation of the Organic Act, for such is
evidently aimed at effecting a smooth transition period for the regional government. The
constitutional objection on this point thus cannot be sustained as there is no bases therefor.
Every law has in its favor the presumption of constitutionality [Yu Cong Eng v. Trinidad, 47 Phil.
387 (1925); Salas v. Jarencio, G.R. No. L-29788, August 30, 1979, 46 SCRA 734; Morfe v.
Mutuc, supra; Peralta v. COMELEC, G.R. No. L-47771, March 11, 1978, 82 SCRA 30]. Those who
petition this Court to declare a law, or parts thereof, unconstitutional must clearly establish the
basis for such a declaration. otherwise, their petition must fail. Based on the grounds raised by
petitioners to challenge the constitutionality of R.A. No. 6734, the Court finds that petitioners
have failed to overcome the presumption. The dismissal of these two petitions is, therefore,
inevitable.
WHEREFORE, the petitions are DISMISSED for lack of merit.
SO ORDERED.

CASE 2

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 91023 July 13, 1990
METROPOLITAN TRAFFIC COMMAND WEST TRAFFIC DISTRICT, petitioner,
vs.
HON. ARSENIO M. GONONG, in his capacity as Presiding Judge of the Regional Trial Court,
Branch 8 at Manila, and DANTE S. DAVID, respondents.
Dante S. David for and in his own behalf as private respondent.

CRUZ, J.:
We deal here with a practice known to many motorists in Metro Manila: the removal of the
license plates of illegally parked vehicles. This was challenged by the private respondent in the
regional trial court of Manila, which held the practice unlawful. The petitioner is now before us,
urging reversal of the decision for grave abuse of discretion.
The original complaint was filed with the said court on August 10, 1989, by Dante S. David, a
lawyer, who claimed that the rear license plate, of his car was removed by the Metropolitan
Traffic Command while the vehicle was parked on Escolta. He questioned the petitioner's act on
the ground not only that the car was not illegally parked but, more importantly, that there was
no ordinance or law authorizing such removal. He asked that the practice be permanently
enjoined and that in the meantime a temporary restraining order or a writ of preliminary
injunction be issued.
Judge Arsenio M. Gonong issued a temporary restraining order on August 14, 1989, and
hearings on the writ of preliminary injunction were held on August 18, 23, and 25, 1989. The
writ was granted on this last date. The parties also agreed to submit the case for resolution on
the sole issue of whether there was a law or ordinance authorizing the removal of the license
plates of illegally parked vehicles. The parties then submitted simultaneous memoranda in
support of their respective positions, following which the respondent judge rendered the
assailed decision.

In ruling for the complainant, Judge Gonong held that LOI 43, which the defendant had invoked,
did not empower it "to detach, remove and confiscate vehicle plates of motor vehicles illegally
parked and unattended as in the case at bar. It merely authorizes the removal of said vehicles
when they are obstacles to free passage or continued flow of traffic on streets and highways."
At any rate, he said, the LOI had been repealed by PD 1605. Moreover, the defendant had not
been able to point to any MMC rule or regulation or to any city ordinance to justify the
questioned act. On the allegation that the practice was "the root cause of graft and corruption
or at the very least the equivalent of street racket among defendant's deployed agents," His
Honor made the following pointed observations:
At this juncture, it may not be amiss to say, that if the arbitrary and capricious
detachment and confiscation of vehicles plates illegally parked and unattended
as in the act complained of in the instant case, the image of the man clothed in a
traffic or police uniform will be greatly impaired if not cursed with disrespect on
the part of those who have suffered at his hands. Worse, he will cease (if he had
not already ceased) to be the law-abiding, courageous and valiant protector of a
citizen of the Republic that he is meant to be, and instead his real oppressor and
enemy, thereby fortifying the contemporaneous public perception that he is a
dyed-in-the-wool extortionist if not an unmitigated chiseler. 1
It bears noting that this petition should have been filed first with the Court of Appeals, which
has concurrent jurisdiction with this Court on decisions of the regional trial courts involving
questions of law. However, in view of the importance of the issue raised, we have decided to
take cognizance thereof under Rule 65 of the Rules of Court so we can address and resolve the
question directly.
Upon the filing of this petition, we issued a temporary restraining order dated February 6, 1990,
to prevent enforcement of the said decision until further orders from this Court. Thereafter, we
required a comment from the private respondent, to which the petitioner filed a reply as also
directed.
The petitioner reiterates and reinforces its argument in the court below and insists that LOI 43
remains in force despite the issuance of PD 1605. It contends that there is no inconsistency
between the two measures because the former deals with illegally parked vehicles anywhere in
the Philippines whereas the latter deals with the regulation of the flow of traffic in the Metro
Manila area only. The two measures may be enforced together because implied repeals are not
favored and, furthermore, to look at them another way, LOI 43 is the special law dealing only
with illegal parking while PD 1605 is the general law dealing with all other kinds of traffic
violations. The special law must of course prevail over the general law. The petitioner also
deplores the above-quoted remarks of the trial judge, pointing out that the parties had agreed
to limit the issue to whether there was a statutory basis for the act complained of. And even
assuming that abuses have been committed in the enforcement of LOI 43, the remedy is not to
disregard it or consider it revoked but to prosecute the guilty parties.

In his comment, the private respondent argues that LOI 43 has been repealed by PD 1605,
which specifies all the sanctions available against the various traffic violations, including illegal
parking. He stresses that removal and confiscation of the license plates of illegally parked
vehicles is not one of them, the penalties being limited in the decree to imposition of fine and
suspension or revocation of driver's licenses or certificates of public convenience, etc. Expressio
unius est exclusio alterius. He agrees that the special law prevails over the general law but
maintains it is PD 1605 that is the special law because it is applicable only on Metro Manila and
LOI 43 that is the general law because it was intended to operate throughout the country. As
for his allegation that the challenged practice is a source of graft, he maintains that it was not
improper to discuss it in his memorandum because it was pertinent to the central issue under
consideration. Finally, he claims that removal and confiscation of the license plate without
notice and hearing violates due process because such license plate is a form of property
protected by the Bill of Rights against unlawful deprivation.
In its reply, the petitioner faults the private respondent for belatedly raising the
constitutionality of LOI 43, suggesting faintly that this should not be permitted. In any case, it
maintains, the license plate is not property in the constitutional sense, being merely the
identification of the vehicle, and its "temporary confiscation" does not deprive the owner of the
use of the vehicle itself. Hence, there is no unlawful taking under the due process clause. The
petitioner also takes issue with the contention that it is PD 1605 that should be considered the
special law because of its limited territorial application. Repeal of LOI 43 on that ground would
run counter to the legislative intention as it is in fact in Metro Manila that the problem of illegal
parking is most acute.
LOI 43, entitled Measures to Effect a Continuing Flow of Transportation on Streets and
Highways, was issued on November 28, 1972, with the following pertinent provisions:
Motor vehicles that stall on the streets and highways, streets and sidewalks,
shall immediately be removed by their owners/users; otherwise said vehicles
shall be dealt with and disposed in the manner stated hereunder;
1. For the first offense the stalled or illegally parked vehicle shall be removed,
towed and impounded at the expense of the owner, user or claimant;
2. For the second and subsequent offenses, the registry plates of the vehicles
shall be confiscated and the owner's certificate of registration cancelled.
(Emphasis supplied).
PD 1605 (Granting the Metropolitan Manila Commission Central Powers Related to Traffic
Management, Providing Penalties, and for Other Purposes) was issued, also by President
Marcos, on November 21, 1978, and pertinently provides:
Section 1. The Metropolitan Manila Commission shall have the power to impose
fines and otherwise discipline drivers and operators of motor vehicles for

violations of traffic laws, ordinances, rules and regulations in Metropolitan

Manila in such amounts and under such penalties as are herein prescribed. For
his purpose, the powers of the Land Transportation Commission and the Board
of Transportation under existing laws over such violations and punishment
thereof are hereby transferred to the Metropolitan Manila Commission. When
the proper penalty to be imposed is suspension or revocation of driver's license
or certificate of public convenience, the Metropolitan Manila Commission or its
representatives shall suspend or revoke such license or certificate. The
suspended or revoked driver's license or the report of suspension or revocation
of the certificate of public convenience shall be sent to the Land Transportation
Commission or the Board of Transportation, as the case may be, for their records
update.
xxx xxx xxx
Section 3. Violations of traffic laws, ordinances, rules and regulations, committed
within a twelve-month period, reckoned from the date of birth of the licensee,
shall subject the violator to graduated fines as follows: P10.00 for the first
offense, P20.00 for the second offense, P50.00 for the third offense, a one-year
suspension of driver's license for the fourth offense, and a revocation of the
driver' license for the fifth offense: Provided, That the Metropolitan Manila
Commission may impose higher penalties as it may deem proper for violations of
its ordinances prohibiting or regulating the use of certain public roads, streets or
thoroughfares in Metropolitan Manila.
xxx xxx xxx
Section 5. In case of traffic violations, the driver's license shall not be
confiscated but the erring driver shall be immediately issued a traffic citation
ticket prescribed by the Metropolitan Manila Commission which shall state the
violation committed, the amount of fine imposed for the violation and an advice
that he can make payment to the city or municipal treasurer where the violation
was committed or to the Philippine National Bank or Philippine Veterans Bank or
their branches within seven days from the date of issuance of the citation ticket.
If the offender fails to pay the fine imposed within the period herein prescribed,
the Metropolitan Manila Commission or the law enforcement agency concerned
shall endorse the case to the proper fiscal for appropriate proceedings
preparatory to the filing of the case with the competent traffic court, city or
municipal court.
If at the time a driver renews his driver's license and records show that he has an
unpaid fine, his driver's license shall not be renewed until he has paid the fine
and corresponding surcharges.

xxx xxx xxx

Section 8. Insofar as the Metropolitan Manila area is concerned, all laws,
decrees, orders, ordinances, rules and regulations, or parts thereof inconsistent
herewith are hereby repealed or modified accordingly. (Emphasis supplied).
A careful reading of the above decree will show that removal and confiscation of the license
plate of any illegally parked vehicle is not among the specified penalties. Moreover, although
the Metropolitan Manila Commission is authorized by the decree to "otherwise discipline" and
"impose higher penalties" on traffic violators, whatever sanctions it may impose must be "in
such amounts and under such penalties as are herein prescribed." The petitioner has not
pointed to any such additional sanctions, relying instead on its argument that the applicable
authority for the questioned act is LOI 43.
The petitioner stresses that under the decree, "the powers of the Land Transportation
Commission and the Board of Transportation over such violations and punishment thereof are
(hereby) transferred to the Metropolitan Manila Commission," and one of such laws is LOI 43.
The penalties prescribed by the LOI are therefore deemed incorporated in PD 1605 as
additional to the other penalties therein specified.
It would appear that what the LOI punishes is not a traffic violation but a traffic obstruction,
which is an altogether different offense. A violation imports an intentional breach or disregard
of a rule, as where a driver leaves his vehicle in a no-parking area against a known and usually
visible prohibition. Contrary to the common impression, LOI 43 does not punish illegal
parking per se but parking of stalled vehicles, i.e., those that involuntarily stop on the road due
to some unexpected trouble such as engine defect, lack of gasoline, punctured tires, or other
similar cause. The vehicle is deemed illegally parked because it obstructs the flow of traffic, but
only because it has stalled. The obstruction is not deliberate. In fact, even the petitioner
recognizes that "there is a world of difference between a stalled vehicle and an illegally parked
and unattended one" and suggests a different treatment for either. "The first means one which
stopped unnecessarily or broke down while the second means one which stopped to
accomplish something, including temporary rest. 2
LOI 43 deals with motor vehicles "that stall on the streets and highways' and not those that are
intentionally parked in a public place in violation of a traffic law or regulation. The purpose of
the LOI evidently is to discipline the motorist into keeping his vehicle in good condition before
going out into the streets so as not to cause inconvenience to the public when the car breaks
down and blocks other vehicles. That is why, for the first offense, the stalled vehicle is
immediately towed at the owner's expense to clear the street of the traffic obstruction. Where
it appears that the owner has not learned from his first experience because the vehicle has
stalled again, presumably due to his failure to repair it, the penalty shall be confiscation of the
license plate and cancellation of the certificate of registration petition.

It is worth noting that it is not the driver's license that is confiscated and canceled when the
vehicle stalls on a public street. The LOI goes against the vehicle itself. The object of the
measure is to ensure that only motor vehicles in good condition may use the public streets, and
this is effected by confiscating the license plates and canceling the certificates of registration of
those vehicles that are not roadworthy.
In the case of the private respondent, it is not alleged or shown that his vehicle stalled on a
public thoroughfare and obstructed the flow of traffic. The charge against him is that
he purposely parked his vehicle in a no parking area (although this is disputed by him).itcasl The act, if true, is a traffic violation that may not be punished under LOI 43. The applicable
law is PD 1605, which does not include removal and confiscation of the license plate of the
vehicle among the imposable penalties.
Indeed, even if LOI 43 were applicable, the penalty of confiscation would still not be justified as
it has not been alleged, much less shown, that the illegal parking was a second or subsequent
offense. That circumstance must be established at a trial before a court of justice where the
vehicle owner shall have a right to be heard in his defense. The second or subsequent offense
cannot be simply pronounced by the traffic authorities without hearing and without proof.
Confiscation of the registry plate without a judicial finding that the offense charge is a second
or subsequent one would, unless the owner concedes this point, be invalid.
While it is true that the license plate is strictly speaking not a property right, it does not follow
that it may be removed or confiscated without lawful cause. Due process is a guaranty against
all forms of official arbitrariness. Under the principle that ours is a government of laws and not
of men, every official must act by and within the authority of a valid law and cannot justify the
lack of it on the pretext alone of good intentions. It is recalled that more than seventy years
ago, the mayor of Manila deported one hundred seventy prostitutes to Davao for the
protection of the morals and health of the city. This Court acknowledged his praiseworthy
purpose but just the same annulled his unauthorized act, holding that no one could take the
law into his own hands. 3 We can rule no less in the case before us.
We find that there is no inconsistency between LOI 43 and PD 1605, whichever is considered
the special law either because of its subject or its territorial application. The former deals with
motor vehicles that have stalled on a public road while the latter deals with motor vehicles that
have been deliberately parked in a no-parking area; and while both cover illegal parking of
motor vehicles, the offense is accidental under the first measure and intentional under the
second. This explains why the sanctions are different. The purpose of the LOI is to discourage
the use of the public streets by motor vehicles that are likely to break down while that of the
decree is to penalize the driver for his defiance of the traffic laws.
As it has not been shown that the private respondent's motor vehicle had stalled because of an
engine defect or some other accidental cause and, no less importantly, that it had stalled on the
road for a second or subsequent time, confiscation of the license plate cannot be justified
under LOI 43. And neither can that sanction be sustained under PD 1605, which clearly provides

that "in case of traffic violations, (even) the driver's license shall not be confiscated," let alone
the license plate of the motor vehicle. If at all, the private respondent may be held liable for
illegal parking only and subjected to any of the specific penalties mentioned in Section 3 of the
decree.
We recognize the problem of the traffic policeman who comes upon an illegally parked and
unattended vehicle and is unable to serve a citation on the offending driver who is nowhere in
sight. But that problem is not addressed to the courts; it is for the legislative and administrative
authorities to solve. What is clear to the Court is that the difficulty cannot be avoided by the
removal of the license plate of the offending vehicle because the petitioner has not shown that
this penalty is authorized by a valid law or ordinance.
The petitioner complains that the respondent judge did not confine himself to the issue agreed
upon by the parties and made gratuitous accusations that were not only irrelevant but virtually
condemned the whole traffic force as corrupt. Assuming that this issue was indeed not properly
raised at the trial, the Court is nevertheless not inhibited from considering it in this proceeding,
on the basis of its own impressions on the matter.
This Court is not isolated from the mainstream of society and secluded in a world of its own,
unconcerned with the daily lives of the rest of the nation. On the contrary, the members of this
Court mix with the people and know their problems and complaints. And among these are the
alleged abuses of the police in connection with the issue now before us.
It is claimed that the removal of the license plates of illegally parked motor vehicles in Metro
Manila has become a veritable gold mine for some police officers. To be sure, we do not have
hard, provable facts at hand but only vague and unsubstantiated rumors that could be no more
than malicious and invented charges. Nevertheless, these accusations have become too
prevalent and apparently too persuasive that they cannot be simply swept under the rug.
The widespread report is that civilian "agents," mostly street urchins under the control and
direction of certain policemen, remove these license plates from illegally parked vehicles and
later discreetly suggest to the owners that these may be retrieved for an unofficial fee. This
ranges from P50.00 to P200.00, depending on the type of vehicle. If the owner agrees, payment
is usually made and the license plate returned at a private rendezvous. No official receipt is
issued. Everything is done quietly. The owners, it is said, prefer this kind of fast settlement to
the inconvenience of an official proceeding that may entail not only the payment of a higher
fine but also other administrative impositions, like attendance at a traffic seminar.
The Court is not saying that these reports are true nor is it stigmatizing the entire police force
on the basis of these unsubstantiated charges. But it does believe and stress that the proper
authorities should take official notice of these reports instead of blandly dismissing them as
mere canards that do not deserve their attention and concern. An inquiry is in our view
indicated. The old adage that where there's smoke there's fire is not necessarily true and can
hardly be the rationale of a judicial conclusion; but the Court feels just the same that serious

steps should be taken, especially because of the persistence of these charges, to determine the
source of the smoke.
We realize the seriousness of our traffic problems, particularly in Metro Manila, and commend
the earnest efforts of the police to effect a smoother flow of vehicles in the public
thoroughfares for the comfort and convenience of the people. But we must add, as a reminder
that must be made, that such efforts must be authorized by a valid law, which must clearly
define the offenses proscribed and as clearly specify the penalties prescribed.
WHEREFORE, the petition is DISMISSED. The Court holds that LOI 43 is valid but may be applied
only against motor vehicles that have stalled in the public streets due to some involuntary
cause and not those that have been intentionally parked in violation of the traffic laws. The
challenged decision of the trial court is AFFIRMED in so far as it enjoins confiscation of the
private respondent's license plate for alleged deliberate illegal parking, which is subject to a
different penalty. The temporary restraining order dated February 6, 1990, is LIFTED.
SO ORDERED.

CASE 3

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 152774

May 27, 2004

THE PROVINCE OF BATANGAS, represented by its Governor, HERMILANDO I.

MANDANAS, petitioner,
vs.
HON. ALBERTO G. ROMULO, Executive Secretary and Chairman of the Oversight Committee
on Devolution; HON. EMILIA BONCODIN, Secretary, Department of Budget and Management;
HON. JOSE D. LINA, JR., Secretary, Department of Interior and Local
Government, respondents.
DECISION
CALLEJO, SR., J.:
The Province of Batangas, represented by its Governor, Hermilando I. Mandanas, filed the
present petition for certiorari, prohibition and mandamus under Rule 65 of the Rules of Court,
as amended, to declare as unconstitutional and void certain provisos contained in the General
Appropriations Acts (GAA) of 1999, 2000 and 2001, insofar as they uniformly earmarked for
each corresponding year the amount of five billion pesos (P5,000,000,000.00) of the Internal
Revenue Allotment (IRA) for the Local Government Service Equalization Fund (LGSEF) and
imposed conditions for the release thereof.
Named as respondents are Executive Secretary Alberto G. Romulo, in his capacity as Chairman
of the Oversight Committee on Devolution, Secretary Emilia Boncodin of the Department of
Budget and Management (DBM) and Secretary Jose Lina of the Department of Interior and
Local Government (DILG).
Background
On December 7, 1998, then President Joseph Ejercito Estrada issued Executive Order (E.O.) No.
48 entitled "ESTABLISHING A PROGRAM FOR DEVOLUTION ADJUSTMENT AND EQUALIZATION."
The program was established to "facilitate the process of enhancing the capacities of local
government units (LGUs) in the discharge of the functions and services devolved to them by the
National Government Agencies concerned pursuant to the Local Government Code." 1 The

Oversight Committee (referred to as the Devolution Committee in E.O. No. 48) constituted
under Section 533(b) of Republic Act No. 7160 (The Local Government Code of 1991) has been
tasked to formulate and issue the appropriate rules and regulations necessary for its effective
implementation.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 multiLGUs or leagues of LGUs, especially those belonging to the 5th and 6th class, may access
the fund to support any projects or activities that satisfy any of the aforecited purposes.
A barangay may also access this fund directly or through their respective municipality or
city.
2. The proposed project/activity should be need-based, a local priority, with high
development impact and are congruent with the socio-cultural, economic and
development agenda of the Estrada Administration, such as food security, poverty
alleviation, electrification, and peace and order, among others.
3. Eligible for funding under this fund are projects arising from, but not limited to, the
following areas of concern:
a. delivery of local health and sanitation services, hospital services and other
tertiary services;
b. delivery of social welfare services;
c. provision of socio-cultural services and facilities for youth and community
development;
d. provision of agricultural and on-site related research;
e. improvement of community-based forestry projects and other local projects
on environment and natural resources protection and conservation;

f. improvement of tourism facilities and promotion of tourism;

g. peace and order and public safety;
h. construction, repair and maintenance of public works and infrastructure,
including public buildings and facilities for public use, especially those destroyed
or damaged by man-made or natural calamities and disaster as well as facilities
for water supply, flood control and river dikes;
i. provision of local electrification facilities;
j. livelihood and food production services, facilities and equipment;
k. other projects that may be authorized by the OCD consistent with the
aforementioned objectives and guidelines;
4. Except on extremely meritorious cases, as may be determined by the Oversight
Committee on Devolution, this portion of the LGSEF shall not be used in expenditures
for personal costs or benefits under existing laws applicable to governments. Generally,
this fund shall cover the following objects of expenditures for programs, projects and
activities arising from the implementation of devolved and regular functions and
services:
a. acquisition/procurement of supplies and materials critical to the full and
effective implementation of devolved programs, projects and activities;
b. repair and/or improvement of facilities;
c. repair and/or upgrading of equipment;
d. acquisition of basic equipment;
e. construction of additional or new facilities;
f. counterpart contribution to joint arrangements or collective projects among
groups of municipalities, cities and/or provinces related to devolution and
delivery of basic services.
5. To be eligible for funding, an LGU or group of LGU shall submit to the Oversight
Committee on Devolution through the Department of Interior and Local Governments,
within the prescribed schedule and timeframe, a Letter Request for Funding Support
from the Affirmative Action Program under the LGSEF, duly signed by the concerned
LGU(s) and endorsed by cooperators and/or beneficiaries, as well as the duly signed
Resolution of Endorsement by the respective Sanggunian(s) of the LGUs concerned. The

LGU-proponent shall also be required to submit the Project Request (PR), using OCD
Project Request Form No. 99-02, that details the following:
(a) general description or brief of the project;
(b) objectives and justifications for undertaking the project, which should
highlight the benefits to the locality and the expected impact to the local
program/project arising from the full and efficient implementation of social
services and facilities, at the local levels;
(c) target outputs or key result areas;
(d) schedule of activities and details of requirements;
(e) total cost requirement of the project;
(f) proponent's counterpart funding share, if any, and identified source(s) of
counterpart funds for the full implementation of the project;
(g) requested amount of project cost to be covered by the LGSEF.
Further, under the guidelines formulated by the Oversight Committee as contained in
Attachment - Resolution No. OCD-99-003, the LGUs were required to identify the projects
eligible for funding under the one-billion-peso portion of the LGSEF and submit the project
proposals thereof and other documentary requirements to the DILG for appraisal. The project
proposals that passed the DILG's appraisal would then be submitted to the Oversight
Committee for review, evaluation and approval. Upon its approval, the Oversight Committee
would then serve notice to the DBM for the preparation of the Special Allotment Release Order
(SARO) and Notice of Cash Allocation (NCA) to effect the release of funds to the said LGUs.
The LGSEF in the GAA of 2000
Under Rep. Act No. 8760, otherwise known as the GAA of 2000, the amount
of P111,778,000,000 was allotted as the share of the LGUs in the internal revenue taxes. As in
the GAA of 1999, the GAA of 2000 contained a proviso earmarking five billion pesos of the IRA
for the LGSEF. This proviso, found in Item No. 1, Special Provisions, Title XXXVII A. Internal
Revenue Allotment, was similarly worded as that contained in the GAA of 1999.
The Oversight Committee, in its Resolution No. OCD-2000-023 dated June 22, 2000, adopted
the following allocation scheme governing the five billion pesos LGSEF for 2000:
1. The PhP3.5 Billion of the CY 2000 LGSEF shall be allocated to and shared by the four
levels of LGUs, i.e., provinces, cities, municipalities, and barangays, using the following

percentage-sharing formula agreed upon and jointly endorsed by the various Leagues of
LGUs:
For Provinces 26% or P 910,000,000
For Cities 23% or 805,000,000
For Municipalities 35% or 1,225,000,000
For Barangays 16% or 560,000,000
Provided that the respective Leagues representing the provinces, cities, municipalities
and barangays shall draw up and adopt the horizontal distribution/sharing schemes
among the member LGUs whereby the Leagues concerned may opt to adopt direct
financial assistance or project-based arrangement, such that the LGSEF allocation for
individual LGU shall be released directly to the LGU concerned;
Provided further that the individual LGSEF shares to LGUs are used in accordance with
the general purposes and guidelines promulgated by the OCD for the implementation of
the LGSEF at the local levels pursuant to Res. No. OCD-99-006 dated October 7, 1999
and pursuant to the Leagues' guidelines and mechanism as approved by the OCD;
Provided further that each of the Leagues shall submit to the OCD for its approval their
respective allocation scheme, the list of LGUs with the corresponding LGSEF shares and
the corresponding project categories if project-based;
Provided further that upon approval by the OCD, the lists of LGUs shall be endorsed to
the DBM as the basis for the preparation of the corresponding NCAs, SAROs, and related
budget/release documents.
2. The remaining P1,500,000,000 of the CY 2000 LGSEF shall be earmarked to support
the following initiatives and local affirmative action projects, to be endorsed to and
approved by the Oversight Committee on Devolution in accordance with the OCD
agreements, guidelines, procedures and documentary requirements:
On July 5, 2000, then President Estrada issued a Memorandum authorizing then
Executive Secretary Zamora and the DBM to implement and release the 2.5 billion pesos
LGSEF for 2000 in accordance with Resolution No. OCD-2000-023.
Thereafter, the Oversight Committee, now under the administration of President Gloria
Macapagal-Arroyo, promulgated Resolution No. OCD-2001-29 entitled "ADOPTING
RESOLUTION NO. OCD-2000-023 IN THE ALLOCATION, IMPLEMENTATION AND RELEASE
OF THE REMAINING P2.5 BILLION LGSEF FOR CY 2000." Under this resolution, the
amount of one billion pesos of the LGSEF was to be released in accordance with

paragraph 1 of Resolution No. OCD-2000-23, to complete the 3.5 billion pesos allocated
to the LGUs, while the amount of 1.5 billion pesos was allocated for the LAAP. However,
out of the latter amount, P400,000,000 was to be allocated and released as
follows: P50,000,000 as financial assistance to the LAAPs of LGUs; P275,360,227 as
financial assistance to cover the decrease in the IRA of LGUs concerned due to reduction
in land area; and P74,639,773 for the LGSEF Capability-Building Fund.
The LGSEF in the GAA of 2001
In view of the failure of Congress to enact the general appropriations law for 2001, the
GAA of 2000 was deemed re-enacted, together with the IRA of the LGUs therein and the
proviso earmarking five billion pesos thereof for the LGSEF.
On January 9, 2002, the Oversight Committee adopted Resolution No. OCD-2002-001
allocating the five billion pesos LGSEF for 2001 as follows:
Modified Codal Formula P 3.000 billion
Priority Projects

1.900 billion

Capability Building Fund .100 billion

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

Percentage

Amount

Provinces

25

P 0.750 billion

Cities

25

0.750

Municipalities 35

1.050

Barangays

15

0.450

100

P 3.000 billion

RESOLVED FURTHER, that the P1.9 B earmarked for priority projects shall be distributed
according to the following criteria:
1.0 For projects of the 4th, 5th and 6th class LGUs; or
2.0 Projects in consonance with the President's State of the Nation Address
(SONA)/summit commitments.

RESOLVED FURTHER, that the remaining P100 million LGSEF capability building fund shall be
distributed in accordance with the recommendation of the Leagues of Provinces, Cities,
Municipalities and Barangays, and approved by the OCD.
Upon receipt of a copy of the above resolution, Gov. Mandanas wrote to the individual
members of the Oversight Committee seeking the reconsideration of Resolution No. OCD-2002001. 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, OCD2001-029 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. 2001001 allocated 25% of P3 billion to the provinces. Thus, the petitioner has not suffered any injury
in the implementation of the assailed provisos in the GAAs of 1999, 2000 and 2001 and the OCD
resolutions.
The Ruling of the Court Procedural Issues
Before resolving the petition on its merits, the Court shall first rule on the following procedural
issues raised by the respondents: (1) whether the petitioner has legal standing or locus standi
to file the present suit; (2) whether the petition involves factual questions that are properly
cognizable by the lower courts; and (3) whether the issue had been rendered moot and
academic.
The petitioner has locus standi to maintain the present suit

The gist of the question of standing is whether a party has "alleged such a personal stake in the
outcome of the controversy as to assure that concrete adverseness which sharpens the
presentation of issues upon which the court so largely depends for illumination of difficult
constitutional questions."9 Accordingly, it has been held that the interest of a party assailing the
constitutionality of a statute must be direct and personal. Such party must be able to show, not
only that the law or any government act is invalid, but also that he has sustained or is in
imminent danger of sustaining some direct injury as a result of its enforcement, and not merely
that he suffers thereby in some indefinite way. It must appear that the person complaining has
been or is about to be denied some right or privilege to which he is lawfully entitled or that he
is about to be subjected to some burdens or penalties by reason of the statute or act
complained of.10
The Court holds that the petitioner possesses the requisite standing to maintain the present
suit. The petitioner, a local government unit, seeks relief in order to protect or vindicate an
interest of its own, and of the other LGUs. This interest pertains to the LGUs' share in the
national taxes or the IRA. The petitioner's constitutional claim is, in substance, that the assailed
provisos in the GAAs of 1999, 2000 and 2001, and the OCD resolutions contravene Section 6,
Article X of the Constitution, mandating the "automatic release" to the LGUs of their share in
the national taxes. Further, the injury that the petitioner claims to suffer is the diminution of its
share in the IRA, as provided under Section 285 of the Local Government Code of 1991,
occasioned by the implementation of the assailed measures. These allegations are sufficient to
grant the petitioner standing to question the validity of the assailed provisos in the GAAs of
1999, 2000 and 2001, and the OCD resolutions as the petitioner clearly has "a plain, direct and
adequate interest" in the manner and distribution of the IRA among the LGUs.
The petition involves a significant legal issue
The crux of the instant controversy is whether the assailed provisos contained in the GAAs of
1999, 2000 and 2001, and the OCD resolutions infringe the Constitution and the Local
Government Code of 1991. This is undoubtedly a legal question. On the other hand, the
following facts are not disputed:
1. The earmarking of five billion pesos of the IRA for the LGSEF in the assailed provisos in
the GAAs of 1999, 2000 and re-enacted budget for 2001;
2. The promulgation of the assailed OCD resolutions providing for the allocation
schemes covering the said five billion pesos and the implementing rules and regulations
therefor; and
3. The release of the LGSEF to the LGUs only upon their compliance with the
implementing rules and regulations, including the guidelines and mechanisms,
prescribed by the Oversight Committee.

Considering that these facts, which are necessary to resolve the legal question now before this
Court, are no longer in issue, the same need not be determined by a trial court. 11 In any case,
the rule on hierarchy of courts will not prevent this Court from assuming jurisdiction over the
petition. The said rule may be relaxed when the redress desired cannot be obtained in the
appropriate courts or where exceptional and compelling circumstances justify availment of a
remedy within and calling for the exercise of this Court's primary jurisdiction.12
The crucial legal issue submitted for resolution of this Court entails the proper legal
interpretation of constitutional and statutory provisions. Moreover, the "transcendental
importance" of the case, as it necessarily involves the application of the constitutional principle
on local autonomy, cannot be gainsaid. The nature of the present controversy, therefore,
warrants the relaxation by this Court of procedural rules in order to resolve the case forthwith.
The substantive issue needs to be resolved notwithstanding the supervening events
Granting arguendo that, as contended by the respondents, the resolution of the case had
already been overtaken by supervening events as the IRA, including the LGSEF, for 1999, 2000
and 2001, had already been released and the government is now operating under a new
appropriations law, still, there is compelling reason for this Court to resolve the substantive
issue raised by the instant petition. Supervening events, whether intended or accidental,
cannot prevent the Court from rendering a decision if there is a grave violation of the
Constitution.13Even in cases where supervening events had made the cases moot, the Court did
not hesitate to resolve the legal or constitutional issues raised to formulate controlling
principles to guide the bench, bar and public.14
Another reason justifying the resolution by this Court of the substantive issue now before it is
the rule that courts will decide a question otherwise moot and academic if it is "capable of
repetition, yet evading review."15 For the GAAs in the coming years may contain provisos
similar to those now being sought to be invalidated, and yet, the question may not be decided
before another GAA is enacted. It, thus, behooves this Court to make a categorical ruling on the
substantive issue now.
Substantive Issue
As earlier intimated, the resolution of the substantive legal issue in this case calls for the
application of a most important constitutional policy and principle, that of local autonomy. 16 In
Article II of the Constitution, the State has expressly adopted as a policy that:
Section 25. The State shall ensure the autonomy of local governments.
An entire article (Article X) of the Constitution has been devoted to guaranteeing and
promoting the autonomy of LGUs. Section 2 thereof reiterates the State policy in this wise:
Section 2. The territorial and political subdivisions shall enjoy local autonomy.

Consistent with the principle of local autonomy, the Constitution confines the President's
power over the LGUs to one of general supervision.17 This provision has been interpreted to
exclude the power of control. The distinction between the two powers was enunciated in Drilon
v. Lim:18
An officer in control lays down the rules in the doing of an act. If they are not followed, he may,
in his discretion, order the act undone or re-done by his subordinate or he may even decide to
do it himself. Supervision does not cover such authority. The supervisor or superintendent
merely sees to it that the rules are followed, but he himself does not lay down such rules, nor
does he have the discretion to modify or replace them. If the rules are not observed, he may
order the work done or re-done but only to conform to the prescribed rules. He may not
prescribe his own manner for doing the act. He has no judgment on this matter except to see to
it that the rules are followed.19
The Local Government Code of 199120 was enacted to flesh out the mandate of the
Constitution.21 The State policy on local autonomy is amplified in Section 2 thereof:
Sec. 2. Declaration of Policy. (a) It is hereby declared the policy of the State that the territorial
and political subdivisions of the State shall enjoy genuine and meaningful local autonomy to
enable them to attain their fullest development as self-reliant communities and make them
more effective partners in the attainment of national goals. Toward this end, the State shall
provide for a more responsive and accountable local government structure instituted through a
system of decentralization whereby local government units shall be given more powers,
authority, responsibilities, and resources. The process of decentralization shall proceed from
the National Government to the local government units.
Guided by these precepts, the Court shall now determine whether the assailed provisos in the
GAAs of 1999, 2000 and 2001, earmarking for each corresponding year the amount of five
billion pesos of the IRA for the LGSEF and the OCD resolutions promulgated pursuant thereto,
transgress the Constitution and the Local Government Code of 1991.
The assailed provisos in the GAAs of 1999, 2000 and 2001 and the OCD resolutions violate the
constitutional precept on local autonomy
Section 6, Article X of the Constitution reads:
Sec. 6. Local government units shall have a just share, as determined by law, in the national
taxes which shall be automatically released to them.
When parsed, it would be readily seen that this provision mandates that (1) the LGUs shall have
a "just share" in the national taxes; (2) the "just share" shall be determined by law; and (3) the
"just share" shall be automatically released to the LGUs.

The Local Government Code of 1991, among its salient provisions, underscores the automatic
release of the LGUs' "just share" in this wise:
Sec. 18. Power to Generate and Apply Resources. Local government units shall have the power
and authority to establish an organization that shall be responsible for the efficient and
effective implementation of their development plans, program objectives and priorities; to
create their own sources of revenue and to levy taxes, fees, and charges which shall accrue
exclusively for their use and disposition and which shall be retained by them; to have a just
share in national taxes which shall be automatically and directly released to them without need
of further action;
...
Sec. 286. Automatic Release of Shares. (a) The share of each local government unit shall be
released, without need of any further action, directly to the provincial, city, municipal or
barangay treasurer, as the case may be, on a quarterly basis within five (5) days after the end of
each quarter, and which shall not be subject to any lien or holdback that may be imposed by
the national government for whatever purpose.
(b) Nothing in this Chapter shall be understood to diminish the share of local government units
under existing laws.
Webster's Third New International Dictionary defines "automatic" as "involuntary either wholly
or to a major extent so that any activity of the will is largely negligible; of a reflex nature;
without volition; mechanical; like or suggestive of an automaton." Further, the word
"automatically" is defined as "in an automatic manner: without thought or conscious
intention." Being "automatic," thus, connotes something mechanical, spontaneous and
perfunctory. As such, the LGUs are not required to perform any act to receive the "just share"
accruing to them from the national coffers. As emphasized by the Local Government Code of
1991, the "just share" of the LGUs shall be released to them "without need of further action."
Construing Section 286 of the LGC, we held in Pimentel, Jr. v. Aguirre,22viz:
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, 1992.30The 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 Appeals 33 in this wise:
As the Constitution itself declares, local autonomy 'means a more responsive and accountable
local government structure instituted through a system of decentralization.' The Constitution,
as we observed, does nothing more than to break up the monopoly of the national government
over the affairs of local governments and as put by political adherents, to "liberate the local
governments from the imperialism of Manila." Autonomy, however, is not meant to end the
relation of partnership and interdependence between the central administration and local
government units, or otherwise, to usher in a regime of federalism. The Charter has not taken
such a radical step. Local governments, under the Constitution, are subject to regulation,
however limited, and for no other purpose than precisely, albeit paradoxically, to enhance selfgovernment.
As we observed in one case, decentralization means devolution of national administration but
not power to the local levels. Thus:
Now, autonomy is either decentralization of administration or decentralization of power. There
is decentralization of administration when the central government delegates administrative
powers to political subdivisions in order to broaden the base of government power and in the
process to make local governments 'more responsive and accountable' and 'ensure their fullest
development as self-reliant communities and make them more effective partners in the pursuit
of national development and social progress.' At the same time, it relieves the central
government of the burden of managing local affairs and enables it to concentrate on national
concerns. The President exercises 'general supervision' over them, but only to 'ensure that local
affairs are administered according to law.' He has no control over their acts in the sense that he
can substitute their judgments with his own.
Decentralization of power, on the other hand, involves an abdication of political power in the
[sic] favor of local governments [sic] units declared to be autonomous. In that case, the
autonomous government is free to chart its own destiny and shape its future with minimum
intervention from central authorities. According to a constitutional author, decentralization of
power amounts to 'self-immolation,' since in that event, the autonomous government becomes
accountable not to the central authorities but to its constituency.34
Local autonomy includes both administrative and fiscal autonomy. The fairly recent case of
Pimentel v. Aguirre35is particularly instructive. The Court declared therein that local fiscal
autonomy includes the power of the LGUs to, inter alia, allocate their resources in accordance
with their own priorities:
Under existing law, local government units, in addition to having administrative autonomy in
the exercise of their functions, enjoy fiscal autonomy as well. Fiscal autonomy means that local
governments have the power to create their own sources of revenue in addition to their
equitable share in the national taxes released by the national government, as well as the power
to allocate their resources in accordance with their own priorities. It extends to the preparation

of their budgets, and local officials in turn have to work within the constraints thereof. They are
not formulated at the national level and imposed on local governments, whether they are
relevant to local needs and resources or not ...36
Further, a basic feature of local fiscal autonomy is the constitutionally mandated automatic
release of the shares of LGUs in the national internal revenue.37
Following this ratiocination, the Court in Pimentel struck down as unconstitutional Section 4 of
Administrative Order (A.O.) No. 372 which ordered the withholding, effective January 1, 1998,
of ten percent of the LGUs' IRA "pending the assessment and evaluation by the Development
Budget Coordinating Committee of the emerging fiscal situation."
In like manner, the assailed provisos in the GAAs of 1999, 2000 and 2001, and the OCD
resolutions constitute a "withholding" of a portion of the IRA. They put on hold the distribution
and release of the five billion pesos LGSEF and subject the same to the implementing rules and
regulations, including the guidelines and mechanisms prescribed by the Oversight Committee
from time to time. Like Section 4 of A.O. 372, the assailed provisos in the GAAs of 1999, 2000
and 2001 and the OCD resolutions effectively encroach on the fiscal autonomy enjoyed by the
LGUs and must be struck down. They cannot, therefore, be upheld.
The assailed provisos in the GAAs of 1999, 2000
and 2001 and the OCD resolutions cannot amend
Section 285 of the Local Government Code of 1991
Section 28438 of the Local Government Code provides that, beginning the third year of its
effectivity, the LGUs' share in the national internal revenue taxes shall be 40%. This percentage
is fixed and may not be reduced except "in the event the national government incurs an
unmanageable public sector deficit" and only upon compliance with stringent requirements set
forth in the same section:
Sec. 284. ...
Provided, That in the event that the national government incurs an unmanageable public sector
deficit, the President of the Philippines is hereby authorized, upon recommendation of
Secretary of Finance, Secretary of Interior and Local Government and Secretary of Budget and
Management, and subject to consultation with the presiding officers of both Houses of
Congress and the presidents of the liga, to make the necessary adjustments in the internal
revenue allotment of local government units but in no case shall the allotment be less than
thirty percent (30%) of the collection of the national internal revenue taxes of the third fiscal
year preceding the current fiscal year; Provided, further That in the first year of the effectivity
of this Code, the local government units shall, in addition to the thirty percent (30%) internal
revenue allotment which shall include the cost of devolved functions for essential public

services, be entitled to receive the amount equivalent to the cost of devolved personnel
services.
Thus, from the above provision, the only possible exception to the mandatory automatic
release of the LGUs' IRA is if the national internal revenue collections for the current fiscal year
is less than 40 percent of the collections of the preceding third fiscal year, in which case what
should be automatically released shall be a proportionate amount of the collections for the
current fiscal year. The adjustment may even be made on a quarterly basis depending on the
actual collections of national internal revenue taxes for the quarter of the current fiscal year. In
the instant case, however, there is no allegation that the national internal revenue tax
collections for the fiscal years 1999, 2000 and 2001 have fallen compared to the preceding
three fiscal years.
Section 285 then specifies how the IRA shall be allocated among the LGUs:
Sec. 285. Allocation to Local Government Units. The share of local government units in the
internal revenue allotment shall be allocated in the following manner:
(a) Provinces Twenty-three (23%)
(b) Cities Twenty-three percent (23%);
(c) Municipalities Thirty-four (34%); and
(d) Barangays Twenty percent (20%).
However, this percentage sharing is not followed with respect to the five billion pesos LGSEF as
the assailed OCD resolutions, implementing the assailed provisos in the GAAs of 1999, 2000 and
2001, provided for a different sharing scheme. For example, for 1999, P2 billion of the LGSEF
was allocated as follows: Provinces 40%; Cities 20%; Municipalities 40%.39 For 2000, P3.5
billion of the LGSEF was allocated in this manner: Provinces 26%; Cities 23%; Municipalities
35%; Barangays 26%.40 For 2001, P3 billion of the LGSEF was allocated, thus: Provinces
25%; Cities 25%; Municipalities 35%; Barangays 15%.41
The respondents argue that this modification is allowed since the Constitution does not specify
that the "just share" of the LGUs shall only be determined by the Local Government Code of
1991. That it is within the power of Congress to enact other laws, including the GAAs, to
increase or decrease the "just share" of the LGUs. This contention is untenable. The Local
Government Code of 1991 is a substantive law. And while it is conceded that Congress may
amend any of the provisions therein, it may not do so through appropriations laws or GAAs.
Any amendment to the Local Government Code of 1991 should be done in a separate law, not
in the appropriations law, because Congress cannot include in a general appropriation bill
matters that should be more properly enacted in a separate legislation.42

A general appropriations bill is a special type of legislation, whose content is limited to specified
sums of money dedicated to a specific purpose or a separate fiscal unit. 43 Any provision therein
which is intended to amend another law is considered an "inappropriate provision." The
category of "inappropriate provisions" includes unconstitutional provisions and provisions
which are intended to amend other laws, because clearly these kinds of laws have no place in
an appropriations bill.44
Increasing or decreasing the IRA of the LGUs or modifying their percentage sharing therein,
which are fixed in the Local Government Code of 1991, are matters of general and substantive
law. To permit Congress to undertake these amendments through the GAAs, as the
respondents contend, would be to give Congress the unbridled authority to unduly infringe the
fiscal autonomy of the LGUs, and thus put the same in jeopardy every year. This, the Court
cannot sanction.
It is relevant to point out at this juncture that, unlike those of 1999, 2000 and 2001, the GAAs of
2002 and 2003 do not contain provisos similar to the herein assailed provisos. In other words,
the GAAs of 2002 and 2003 have not earmarked any amount of the IRA for the LGSEF. Congress
had perhaps seen fit to discontinue the practice as it recognizes its infirmity. Nonetheless, as
earlier mentioned, this Court has deemed it necessary to make a definitive ruling on the matter
in order to prevent its recurrence in future appropriations laws and that the principles
enunciated herein would serve to guide the bench, bar and public.
Conclusion
In closing, it is well to note that the principle of local autonomy, while concededly expounded in
greater detail in the present Constitution, dates back to the turn of the century when President
William McKinley, in his Instructions to the Second Philippine Commission dated April 7, 1900,
ordered the new Government "to devote their attention in the first instance to the
establishment of municipal governments in which the natives of the Islands, both in the cities
and in the rural communities, shall be afforded the opportunity to manage their own affairs to
the fullest extent of which they are capable, and subject to the least degree of supervision and
control in which a careful study of their capacities and observation of the workings of native
control show to be consistent with the maintenance of law, order and loyalty." 45 While the
1935 Constitution had no specific article on local autonomy, nonetheless, it limited the
executive power over local governments to "general supervision ... as may be provided by
law."46 Subsequently, the 1973 Constitution explicitly stated that "[t]he State shall guarantee
and promote the autonomy of local government units, especially the barangay to ensure their
fullest development as self-reliant communities."47 An entire article on Local Government was
incorporated therein. The present Constitution, as earlier opined, has broadened the principle
of local autonomy. The 14 sections in Article X thereof markedly increased the powers of the
local governments in order to accomplish the goal of a more meaningful local autonomy.
Indeed, the value of local governments as institutions of democracy is measured by the degree
of autonomy that they enjoy.48 As eloquently put by

M. De Tocqueville, a distinguished French political writer, "[l]ocal assemblies of citizens

constitute the strength of free nations. Township meetings are to liberty what primary schools
are to science; they bring it within the people's reach; they teach men how to use and enjoy it.
A nation may establish a system of free governments but without the spirit of municipal
institutions, it cannot have the spirit of liberty."49
Our national officials should not only comply with the constitutional provisions on local
autonomy but should also appreciate the spirit and liberty upon which these provisions are
based.50
WHEREFORE, the petition is GRANTED. The assailed provisos in the General Appropriations Acts
of 1999, 2000 and 2001, and the assailed OCD Resolutions, are declared UNCONSTITUTIONAL.
SO ORDERED.