G.R. No. 199802 accordance with their own priorities.
accordance with their own priorities.1 Such autonomy is as indispensable
CONGRESSMAN HERMILANDO I. MANDANAS; MAYOR
EFREN B. DIONA; MAYOR ANTONINO A. AURELIO; KAGA
WAD MARIOILAGAN;BARANGAY CHAIR PERLITO
MANALO; BARANGA Y CHAIR MEDEL
MEDRANO;BARANGAY KAGA WAD CRIS RAMOS;
BARANGA Y KAGA WAD ELISA D. BALBAGO, and ATTY.
JOSE MALVAR VILLEGAS, Petitioners
vs.
EXECUTIVE SECRETARY PAQUITO N. OCHOA, JR.;
SECRETARY CESAR PURISIMA, Department of Finance;
SECRETARY FLORENCIO H. ABAD, Department of Budget and
Management; COMMISSIONER KIM JACINTO-HENARES,
Bureau of Internal Revenue; and NATIONAL TREASURER
ROBERTO TAN, Bureau of the Treasury, Respondents
G.R. No. 208488
HONORABLE ENRIQUE T. GARCIA, JR., in his personal and
official capacity as Representative of the 2nd District of the Province
of Bataan, Petitioner
vs.
HONORABLE [PAQUITO) N. OCHOA, JR., Executive Secretary;
HONORABLE CESAR V. PURISIMA, Secretary, Department of
Finance; HONORABLE FLORENCIO H. ABAD, Secretary,
Department of Budget and Management; HONORABLE KIM S.
JACINTO-HENARES, Commissioner, Bureau of Internal Revenue;
and HONORABLE ROZZANO RUFINO B. BIAZON,
Commissioner, Bureau of Customs, Respondents
DECISION
BERSAMIN, J.:
The petitioners hereby challenge the manner in which the just share in
the national taxes of the local government units (LGUs) has been
computed.
Antecedents
One of the key features of the 1987 Constitution is its push towards
decentralization of government and local autonomy. Local autonomy has
two facets, the administrative and the fiscal. 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
(VATs) and documentary stamp taxes (DSTs) - have not been included
to the viability of the policy of decentralization as the other.
Implementing the constitutional mandate for decentralization and local
autonomy, Congress enacted Republic Act No. 7160, otherwise known
as the Local Government Code (LGC), in order to guarantee the fiscal
autonomy of the LGUs by specifically providing that:
SECTION 284. Allotment of Internal Revenue Taxes. - Local
government units shall have a share in the national internal revenue taxes
based on the collection of the third fiscal year preceding the current
fiscal year as follows:
(a) On the first year of the effectivity of this Code, thirty percent (30%);
(b) On the second year, thirty-five percent (35%); and
(c) On the third year and thereafter, forty percent (40%).
Provided, That in the event that the National Government incurs an
unmanageable public sector deficit, the President of the Philippines is
hereby authorized, upon the 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 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 personal services.
The share of the LGUs, heretofore known as the Internal Revenue
Allotment (IRA), has been regularly released to the LGUs. According to
the implementing rules and regulations of the LGC, the IRA is
determined on the basis of the actual collections of the National Internal
Revenue Taxes (NIRTs) as certified by the Bureau of Internal Revenue
(BIR).2
G.R. No. 199802 (Mandanas, et al.) is a special civil action
for certiorari, prohibition and mandamus assailing the manner the
General Appropriations Act (GAA) for FY 2012 computed the IRA for
the LGUs.
Mandanas, et al. allege herein that certain collections of NIR Ts by the
Bureau of Customs (BOC) - specifically: excise taxes, value added taxes
in the base amounts for the computation of the IRA; that such taxes,
albeit collected by the BOC, should form part of the base from which the
IRA should be computed because they constituted NIRTs; that,
consequently, the release of the additional amount of
₱60,750,000,000.00 to the LGUs as their IRA for FY 2012 should be
ordered; and that for the same reason the LGUs should also be released
their unpaid IRA for FY 1992 to FY 2011, inclusive, totaling
₱438,103,906,675.73.
In G.R. No. 208488, Congressman Enrique Garcia, Jr., the lone
petitioner, seeks the writ of mandamus to compel the respondents thereat
to compute the just share of the LGUs on the basis of all national
taxes. His petition insists on a literal reading of Section 6, Article X of
the 1987 Constitution. He avers that the insertion by Congress of the
words internal revenue in the phrase national taxes found in Section 284
of the LGC caused the diminution of the base for determining the just
share of the LGUs, and should be declared unconstitutional; that,
moreover, the exclusion of certain taxes and accounts pursuant to or in
accordance with special laws was similarly constitutionally untenable;
that the VA Ts and excise taxes collected by the BOC should be
included in the computation of the IRA; and that the respondents should
compute the IRA on the basis of all national tax collections, and
thereafter distribute any shortfall to the LGUs.
It is noted that named as common respondents were the then incumbent
Executive Secretary, Secretary of Finance, the Secretary of the
Department of Budget and Management (DBM), and the Commissioner
of Internal Revenue. In addition, Mandanas, et al. impleaded the
National Treasurer, while Garcia added the Commissioner of Customs.
The cases were consolidated on October 22, 2013. 3 In the meanwhile,
Congressman Garcia, Jr. passed away. Jose Enrique Garcia III, who was
subsequently elected to the same congressional post, was substituted for
Congressman Garcia, Jr. as the petitioner in G.R. No. 208488 under the
resolution promulgated on August 23, 2016.4
In response to the petitions, the several respondents, represented by the
Office of the Solicitor General (OSG), urged the dismissal of the
petitions upon procedural and substantive considerations.
Anent the procedural considerations, the OSG argues that the petitions
are procedurally defective because, firstly, mandamus does not lie in
order to achieve the reliefs sought because Congress may not be
compelled to appropriate the sums allegedly illegally withheld for to do
so will violate the doctrine of separation of powers; and,
secondly, mandamus does not also lie to compel the DBM to release the
amounts to the LGUs because such disbursements will be contrary to the
purposes specified in the GAA; that Garcia has no clear legal right to
sustain his suit for mandamus; that the filing of Garcia's suit violates the
doctrine of hierarchy of courts; and that Garcia's petition seeks
declaratory relief but the Court cannot grant such relief in the exercise of
its original jurisdiction.
On the substantive considerations, the OSG avers that Article 284 of the
LGC is consistent with the mandate of Section 6, Article X of the 1987
Constitution to the effect that the LGUs shall have a just share in the
national taxes; that the determination of the just share is within the
discretion of Congress; that the limitation under the LGC of the basis for
the just share in the NIRTs was within the powers granted to Congress
by the 1987 Constitution; that the LGUs have been receiving their just
share in the national taxes based on the correct base amount; that
Congress has the authority to exclude certain taxes from the base amount
in computing the IRA; that there is a distinction between the VA Ts,
excise taxes and DSTs collected by the BIR, on one hand, and the VA
Ts, excise taxes and DSTs collected by the BOC, on the other, thereby
warranting their different treatment; and that Development Budget
Coordination Committee (DBCC) Resolution No. 2003-02 dated
September 4, 2003 has limited the base amount for the computation of
the IRA to the "cash collections based on the BIR data as reconciled with
the Bureau of Treasury;" and that the collection of such national taxes by
the BOC should be excluded.
Issues
The issues for resolution are limited to the following, namely:
I.
Whether or not Mandamus is the proper vehicle to assail the
constitutionality of the relevant provisions of the GAA and the LGC;
II.
Whether or not Section 284 of the LGC is unconstitutional for being
repugnant to Section 6, Article X of the 1987 Constitution;
III.
Whether or not the existing shares given to the LGUs by virtue of the
GAA is consistent with the constitutional mandate to give LGUs a 'just
share" to national taxes following Article X, Section 6 of the 1987
Constitution;
IV.
Whether or not the petitioners are entitled to the reliefs prayed for.
Simply stated, the petitioners raise the novel question of whether or not
the exclusion of certain national taxes from the base amount for the
computation of the just share of the LGUs in the national taxes is
constitutional.
Ruling of the Court
The petitions are partly meritorious.
I instead of including therein all national taxes, but also by excluding
Mandamus is an improper remedy
Mandanas, et al. seek the writs of certiorari, prohibition
and mandamus, while Garcia prays for the writ of mandamus. Both
groups of petitioners impugn the validity of Section 284 of the LGC.
The remedy of mandamus is defined in Section 3, Rule 65 of the Rules
of Court, which provides:
Section 3. Petition for mandamus. - When any tribunal, corporation,
board, officer or person unlawfully neglects the performance of an act
which the law specifically enjoins as a duty resulting from an office,
trust, or station, or unlawfully excludes another from the use and
enjoyment of a right or office to which such other is entitled, and there is
no other plain, speedy and adequate remedy in the ordinary course of
law, the person aggrieved thereby may file a verified petition in the
proper court, alleging the facts with certainty and praying that judgment
be rendered commanding the respondent, immediately or at some other
time to be specified by the court, to do the act required to be done to
protect the rights of the petitioner, and to pay the damages sustained by
the petitioner by reason of the wrongful acts of the respondent.
The petition shall also contain a sworn certification of non-forum
shopping as provided in the third paragraph of section 3, Rule 46.
For the writ of mandamus to issue, the petitioner must show that the act
sought to be performed or compelled is ministerial on the part of the
respondent. An act is ministerial when it does not require the exercise of
judgment and the act is performed pursuant to a legal mandate. The
burden of proof is on the mandamus petitioner to show that he is entitled
to the performance of a legal right, and that the respondent has a
corresponding duty to perform the act. The writ of mandamus may not
issue to compel an official to do anything that is not his duty to do, or
that is his duty not to do, or to obtain for the petitioner anything to which
he is not entitled by law. 5
Considering that its determination of what constitutes the just share of
the LGUs in the national taxes under the 1987 Constitution is an entirely
discretionary power, Congress cannot be compelled by writ
of mandamus to act either way. The discretion of Congress thereon,
being exclusive, is not subject to external direction; otherwise, the
delicate balance underlying our system of government may be unduly
disturbed. This conclusion should at once then demand the dismissal of
the Garcia petition in G.R. No. 208488, but we do not dismiss it. Garcia
has attributed the non-release of some portions of their IRA balances to
an alleged congressional indiscretion - the diminution of the base amount
for computing the LGU's just share. He has asserted that Congress
altered the constitutional base not only by limiting the base to the NIRTs
some national taxes and revenues that only benefitted a few LGUs to the
detriment of the rest of the LGUs.
Garcia's petition, while dubbed as a petition for mandamus, is also a
petition for certiorari because it alleges that Congress thereby
committed grave abuse of discretion amounting to lack or excess of
jurisdiction. It is worth reminding that the actual nature of every action is
determined by the allegations in the body of the pleading or the
complaint itself, not by the nomenclature used to designate the
same. 6 Moreover, neither should the prayer for relief be controlling;
hence, the courts may still grant the proper relief as the facts alleged in
the pleadings and the evidence introduced may warrant even without a
prayer for specific remedy.7
In this regard, Garcia's allegation of the unconstitutionality of the
insertion by Congress of the words internal revenue in the
phrase national taxes justifies treating his petition as one
for certiorari. It becomes our duty, then, to assume jurisdiction over his
petition. In Araullo v. Aquino III,8 the Court has emphatically opined that
the Court's certiorari jurisdiction under the expanded judicial power as
stated in the second paragraph of Section 1, Article VIII of the
Constitution can be asserted:
xxxx to set right and undo any act of grave abuse of discretion
amounting to lack or excess of jurisdiction by any branch or
instrumentality of the Government, the Court is not at all precluded from
making the inquiry provided the challenge was properly brought by
interested or affected parties. The Court has been thereby entrusted
expressly or by necessary implication with both the duty and the
obligation of determining, in appropriate cases, the validity of any
assailed legislative or executive action. This entrustment is consistent
with the republican system of checks and balances. 9
Further, observing that one of the reliefs being sought by Garcia is
identical to the main relief sought by Mandanas, et al., the Court should
rightly dwell on the substantive arguments posited by Garcia to the
extent that they are relevant to the ultimate resolution of these
consolidated suits.
II.
Municipal corporations and their relationship with Congress
The correct resolution and fair disposition of the issues interposed for
our consideration require a review of the basic principles underlying our
system of local governments, and of the extent of the autonomy granted
to the LGUs by the 1987 Constitution.
Municipal corporations are now commonly known as local governments.
They are the bodies politic established by law partly as agencies of the
State to assist in the civil governance of the country. Their chief purpose
has been to regulate and administer the local and internal affairs of the
cities, municipalities or districts. They are legal institutions formed by
charters from the sovereign power, whereby the populations within
communities living within prescribed areas have formed themselves into
bodies politic and corporate, and assumed their corporate names with the
right of continuous succession and for the purposes and with the
authority of subordinate self-government and improvement and the local
administration of the affairs of the State. 10
Municipal corporations, being the mere creatures of the State, are subject
to the will of Congress, their creator. Their continued existence and the
grant of their powers are dependent on the discretion of Congress. On
this matter, Judge John F. Dillon of the State of Iowa in the United States
of America enunciated in Merriam v. Moody's Executors11 the rule of
statutory construction that came to be oft-mentioned as Dillon's Rule, to
wit:
[A] municipal corporation possesses and can exercise the following
powers and no others: First, those granted in express words; second,
those necessarily implied or necessarily incident to the powers expressly
granted; third, those absolutely essential to the declared objects and
purposes of the corporation-not simply convenient but indispensible;
fourth, any fair doubt as to the existence of a power is resolved by the
courts against the corporation-against the existence of the powers. 12
The formulation of Dillon's Rule has since undergone slight
modifications. Judge Dillon himself introduced some of the
modifications through his post-Merriam writings with the objective of
alleviating the original formulation's harshness. The word fairly was
added to the second proviso; the word absolutely was deleted from the
third proviso; and the words reasonable and substantial were added to
the fourth proviso, thusly:
x x x second, those necessarily or fairly implied in or incident to the
powers expressly granted; third, those essential to x x x. Any fair,
reasonable, doubt. 13
The modified Dillon's Rule has been followed in this jurisdiction, and
has remained despite both the 1973 Constitution and the 1987
Constitution mandating autonomy for local governments. This has been
made evident in several rulings of the Court, one of which was that
handed down in Magtajas v. Pryce Properties Corporation, lnc.: 14
In light of all the above considerations, we see no way of arriving at the
conclusion urged on us by the petitioners that the ordinances in question
are valid. On the contrary, we find that the ordinances violate P.D. 1869,
which has the character and force of a statute, as well as the public
policy expressed in the decree allowing the playing of certain games of
chance despite the prohibition of gambling in general.
The rationale of the requirement that the ordinances should not
contravene a statute is obvious. Municipal governments are only
agents of the national government. Local councils exercise only
delegated legislative powers conferred on them by Congress as the
national lawmaking body. The delegate cannot be superior to the
principal or exercise powers higher than those of the latter. It is a
heresy to suggest that the local government units can undo the acts
of Congress, from which they have derived their power in the first
place, and negate by mere ordinance the mandate of the statute.
Municipal corporations owe their origin to, and derive their powers
and rights wholly from the legislature. It breathes into them the
breath of life, without which they cannot exist. As it creates, so it
may destroy. As it may destroy, it may abridge and control. Unless
there is some constitutional limitation on the right, the legislature
might, by a single act, and if we can suppose it capable of so great a
folly and so great a wrong, sweep from existence all of the municipal
corporations in the State, and the corporation could not prevent it.
We know of no limitation on the right so far as to the corporation
themselves are concerned. They are, so to phrase it, the mere tenants
at will of the legislature.
This basic relationship between the national legislature and the local
government units has not been enfeebled by the new provisions in
the Constitution strengthening the policy of local autonomy.
Without meaning to detract from that policy, we here confirm that
Congress retains control of the local government units although in
significantly reduced degree now than under our previous
Constitutions. The power to create still includes the power to
destroy. The power to grant still includes the power to withhold or
recall.
True, there are certain notable innovations in the Constitution, like
the direct conferment on the local government units of the power to
tax, which cannot now be withdrawn by mere statute. By and large,
however, the national legislature is still the principal of the local
government units, which cannot defy its will or modify or violate
it. [Bold underscoring supplied for emphasis]
Also, in the earlier ruling in Ganzon v. Court of Appeals, 15 the Court has
pointed out that the 1987 Constitution, in mandating autonomy for the
LGUs, did not intend to deprive Congress of its authority and
prerogatives over the LGUs.
Nonetheless, the LGC has tempered the application of Dillon's Rule in
the Philippines by providing a norm of interpretation in favor of the
LGUs in its Section 5(a), to wit:
xxxx
(a) Any provision on a power of a local government unit shall be
liberally interpreted in its favor, and in case of doubt, any question
thereon shall be resolved in favor of devolution of powers and of the
local government unit. Any fair and reasonable doubt as to the
existence of the power shall be interpreted in favor of the local
government unit concerned; [Bold underscoring supplied for
emphasis]
xxxx
III.
The extent of local autonomy in the Philippines
Regardless, there remains no question that Congress possesses and
wields plenary power to control and direct the destiny of the LGUs,
subject only to the Constitution itself, for Congress, just like any branch
of the Government, should bow down to the majesty of the Constitution,
which is always supreme.
The 1987 Constitution limits Congress' control over the LGUs by
ordaining in Section 25 of its Article II that: "The State shall ensure the
autonomy of local governments." The autonomy of the LGUs as thereby
ensured does not contemplate the fragmentation of the Philippines into a
collection of mini-states, 16 or the creation of imperium in imperio. 17 The
grant of autonomy simply means that Congress will allow the LGUs to
perform certain functions and exercise certain powers in order not for
them to be overly dependent on the National Government subject to the
limitations that the 1987 Constitution or Congress may impose. 18 Local
autonomy recognizes the wholeness of the Philippine society in its
ethnolinguistic, cultural, and even religious diversities.19
The constitutional mandate to ensure local autonomy refers to
decentralization.20 In its broad or general sense, decentralization has two
forms in the Philippine setting, namely: the decentralization of power
and the decentralization of administration. The decentralization of power
involves the abdication of political power in favor of the autonomous
LGUs as to grant them the freedom to chart their own destinies and to
shape their futures with minimum intervention from the central
government. This amounts to self-immolation because the autonomous
LGUs thereby become accountable not to the central authorities but to
their constituencies. On the other hand, the decentralization of
administration occurs when the central government delegates
administrative powers to the LGUs as the means of broadening the base
of governmental powers and of making the LGUs more responsive and
accountable in the process, and thereby ensure their fullest development
as self-reliant communities and more effective partners in the pursuit of
the goals of national development and social progress. This form of
decentralization further relieves the central government of the burden of
managing local affairs so that it can concentrate on national concerns.21
Two groups of LGUs enjoy decentralization in distinct ways. The
decentralization of power has been given to the regional units (namely,
the Autonomous Region for Muslim Mindanao [ARMM] and the
constitutionally-mandated Cordillera Autonomous Region [CAR]). The
other group of LGUs (i.e., provinces, cities, municipalities and
barangays) enjoy the decentralization of administration.22 The distinction
can be reasonably understood. The provinces, cities, municipalities and
barangays are given decentralized administration to make governance at
the local levels more directly responsive and effective. In turn, the
economic, political and social developments of the smaller political units
are expected to propel social and economic growth and
development. 23 In contrast, the regional autonomy of the ARMM and
the CAR aims to permit determinate groups with common traditions and
shared social-cultural characteristics to freely develop their ways of life
and heritage, to exercise their rights, and to be in charge of their own
affairs through the establishment of a special governance regime for
certain member communities who choose their own authorities from
within themselves, and exercise the jurisdictional authority legally
accorded to them to decide their internal community affairs. 24
It is to be underscored, however, that the decentralization of power in
favor of the regional units is not unlimited but involves only the powers
enumerated by Section 20, Article X of the 1987 Constitution and by the
acts of Congress. For, with various powers being devolved to the
regional units, the grant and exercise of such powers should always be
consistent with and limited by the 1987 Constitution and the national
laws. 25 In other words, the powers are guardedly, not absolutely,
abdicated by the National Government.
Illustrative of the limitation is what transpired in Serna v. Commission
on Elections,26 where the Court struck down Section 19, Article VI of
Republic Act No. 9054 (An Act to Strengthen and Expand the Organic
Act for the Autonomous Region in Muslim Mindanao, Amending for the
Purpose Republic Act No. 6734, entitled "An Act Providing for the
Autonomous Region in Muslim Mindanao," as Amended) insofar as the
provision granted to the ARMM the power to create provinces and cities,
and consequently declared as void Muslim Mindanao Autonomy Act No.
201 creating the Province of Shariff Kabunsuan for being contrary to
Section 5, Article VI and Section 20, Article X of the 1987 Constitution,
as well as Section 3 of the Ordinance appended to the 1987 Constitution.
The Court clarified therein that only Congress could create provinces
and cities. This was because the creation of provinces and cities
necessarily entailed the creation of legislative districts, a power that only
Congress could exercise pursuant to Section 5, Article VI of the 1987
Constitution and Section 3 of the Ordinance appended to the
Constitution; as such, the ARMM would be thereby usurping the power
of Congress to create legislative districts and national offices.27
The 1987 Constitution has surely encouraged decentralization by
mandating that a system of decentralization be instituted through the
LGC in order to enable a more responsive and accountable local
government structure.28 It has also delegated the power to tax to the
LGUs by authorizing them to create their own sources of income that
would make them self-reliant.29 It further ensures that each and every
LGU will have a just share in national taxes as well in the development
of the national wealth.30
The LGC has further delineated in its Section 3 the different operative
principles of decentralization to be adhered to consistently with the
constitutional policy on local autonomy, viz.:
Sec. 3. Operative Principles of Decentralization-
The formulation and implementation of policies and measures on local
autonomy shall be guided by the following operative principles:
(a) There shall be an effective allocation among the
different local government units of their respective
powers, functions, responsibilities, and resources;
(b) There shall be established in every local
government unit an accountable, efficient, and
dynamic organizational structure and operating
mechanism that will meet the priority needs and
service requirements of its communities;
(c) Subject to civil service law, rules and regulations,
local officials and employees paid wholly or mainly
from local funds shall be appointed or removed,
according to merit and fitness, by the appropriate
appointing authority;
(d) The vesting of duty, responsibility, and
accountability in local government units shall be
accompanied with provision for reasonably adequate
resources to discharge their powers and effectively
carry out their functions: hence, they shall have the
power to create and broaden their own sources of
revenue and the right to a just share in national taxes
and an equitable share in the proceeds of the
utilization and development of the national wealth
within their respective areas;
(e) Provinces with respect to component cities and
municipalities, and cities and municipalities with
respect to component barangays, shall ensure that the
acts of their component units are within the scope of
their prescribed powers and functions;
(f) Local government units may group themselves,
consolidate or coordinate their efforts, services, and
resources commonly beneficial to them;
(g) The capabilities of local government units,
especially the municipalities and barangays, shall be
enhanced by providing them with opportunities to
participate actively in the implementation of national
programs and projects;
(h) There shall be a continuing mechanism to
enhance local autonomy not only by legislative
enabling acts but also by administrative and
organizational reforms;
(i) Local government units shall share with the
national government the responsibility in the
management and maintenance of ecological balance
within their territorial jurisdiction, subject to the
provisions of this Code and national policies;
 (j) Effective mechanisms for ensuring the
accountability of local government units to their
respective constituents shall be strengthened in order
to upgrade continually the quality of local
leadership;
(k) The realization of local autonomy shall be
facilitated through improved coordination of national
government policies and programs an extension of
adequate technical and material assistance to less
developed and deserving local government units;
(l) The participation of the private sector in local
governance, particularly in the delivery of basic
services, shall be encouraged to ensure the viability
of local autonomy as an alternative strategy for
sustainable development; and
(m) The national government shall ensure that
decentralization contributes to the continuing
improvement of the performance of local
government units and the quality of community life.
Based on the foregoing delineation, decentralization can be considered
as the decision by the central government to empower its subordinates,
whether geographically or functionally constituted, to exercise authority
in certain areas. It involves decision-making by subnational units, and is
typically a delegated power, whereby a larger government chooses to
delegate authority to more local governments.31 It is also a process, being
the set of policies, electoral or constitutional reforms that transfer
responsibilities, resources or authority from the higher to the lower
levels of government.32 It is often viewed as a shift of authority towards
local governments and away from the central government, with total
government authority over society and economy imagined as fixed.33
As a system of transferring authority and power from the National
Government to the LGUs, decentralization in the Philippines may be
categorized into four, namely: (1) political decentralization or
devolution; (2) administrative decentralization or deconcentration; (3)
fiscal decentralization; and (4) policy or decision-making
decentralization.
Political decentralization or devolution occurs when there is a transfer of
powers, responsibilities, and resources from the central government to
the LOU s for the performance of certain functions. It is a more liberal
form of decentralization because there is an actual transfer of powers and
responsibilities. It aims to grant greater autonomy to the LGUs in
cognizance of their right to self-government, to make them self-reliant,
and to improve their administrative and technical capabilities.34 It is an
act by which the National Government confers power and authority upon
the various LGUs to perform specific functions and responsibilities.35 It
encompasses reforms to open sub-national representation and policies to
"devolve political authority or electoral capacities to sub-national actors.
"36 Section 16 to Section 19 of the LGC characterize political
decentralization in the LGC as different LGUs empowered to address the
different needs of their constituents. In contrast, devolution in favor of
the regional units is more expansive because they are given the authority
to regulate a wider array of subjects, including personal, family and
property relations.
Administrative decentralization or deconcentration involves the transfer
of functions or the delegation of authority and responsibility from the
national office to the regional and local offices. 37 Consistent with this
concept, the LGC has created the Local School Boards,38 the Local
Health Boards39 and the Local Development Councils,40 and has
transferred some of the authority from the agencies of the National
Government, like the Department of Education and the Department of
Health, to such bodies to better cope up with the needs of particular
localities.
Fiscal decentralization means that the LGUs have the power to create
their own sources of revenue in addition to their just share in the national
taxes released by the National Government. It includes the power to
allocate their resources in accordance with their own priorities. It thus
extends to the preparation of their budgets, so that the local officials
have to work within the constraints of their budgets. The budgets are not
formulated at the national level and imposed on local governments,
without regard as to whether or not they are relevant to local needs and
resources. Hence, the necessity of a balancing of viewpoints and the
harmonization of proposals from both local and national officials, who in
any case are partners in the attainment of national goals, is recognized
and addressed.41
Fiscal decentralization emanates from a specific constitutional mandate
that is expressed in several provisions of Article X (Local
Government) of the 1987 Constitution, specifically: Section 5;42 Section
6;43 and Section 7.44
The constitutional authority extended to each and every LGU to create
its own sources of income and revenue has been formalized from Section
128 to Section 133 of the LGC. To implement the LGUs' entitlement to
the just share in the national taxes, Congress has enacted Section 284 to
Section 288 of the LGC. Congress has further enacted Section 289 to
Section 294 of the LGC to define the share of the LGUs in the national
wealth. Indeed, the requirement for the automatic release to the LGUs of
their just share in the national taxes is but the consequence of the
constitutional mandate for fiscal decentralization. 45
For sure, fiscal decentralization does not signify the absolute freedom of
the LGUs to create their own sources of revenue and to spend their
revenues unrestrictedly or upon their individual whims and caprices.
Congress has subjected the LGUs' power to tax to the guidelines set in
Section 130 of the LGC and to the limitations stated in Section 133 of
the LGC. The concept of local fiscal autonomy does not exclude any
manner of intervention by the National Government in the form of
supervision if only to ensure that the local programs, fiscal and
otherwise, are consistent with the national goals.46
Lastly, policy- or decision-making decentralization exists if at least one
sub-national tier of government has exclusive authority to make
decisions on at least one policy issue.47
In fine, certain limitations are and can be imposed by Congress in all the
forms of decentralization, for local autonomy, whether as to power or as
to administration, is not absolute. The LGUs remain to be the tenants of
the will of Congress subject to the guarantees that the Constitution itself
imposes.
IV.
Section 284 of the LGC deviates from the plain language
of Section 6 of Article X of the 1987 Constitution
Section 6, Article X the 1987 Constitution textually commands the
allocation to the LGUs of a just share in the national taxes, viz.:
Section 6. Local government units shall have a just share, as determined
by law, in the national taxes which shall be automatically released to
them.
Section 6, when parsed, embodies three mandates, namely: (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.48
Congress has sought to carry out the second mandate of Section 6 by
enacting Section 284, Title III (Shares of Local Government Units in the
Proceeds of National Taxes), of the LGC, which is again quoted for
ready reference:
Section 284. Allotment of Internal Revenue Taxes. - Local government
units shall have a share in the national internal revenue taxes based on
the collection of the third fiscal year preceding the current fiscal year as
follows:
 (a) On the first year of the effectivity of this Code,
thirty percent (30%);
(b) On the second year, thirty-five percent (35%);
and
(c) On the third year and thereafter, forty percent
(40%).
Provided, That in the event that the national government incurs an
unmanageable public sector deficit, the President of the Philippines is
hereby authorized, upon the 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 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 personal services.
There is no issue as to what constitutes the LGUs' just share expressed in
percentages of the national taxes (i.e., 30%, 35% and 40% stipulated in
subparagraphs (a), (b), and (c) of Section 284 ). Yet, Section
6, supra, mentions national taxes as the source of the just share of the
LGUs while Section 284 ordains that the share of the LG Us be taken
from national internal revenue taxes instead.
Has not Congress thereby infringed the constitutional provision?
Garcia contends that Congress has exceeded its constitutional boundary
by limiting to the NIRTs the base from which to compute the just
share of the LGUs.
We agree with Garcia's contention.
Although the power of Congress to make laws is plenary in nature,
congressional lawmaking remains subject to the limitations stated in the
1987 Constitution.49 The phrase national internal revenue
taxes engrafted in Section 284 is undoubtedly more restrictive than the
term national taxes written in Section 6. As such, Congress has actually
departed from the letter of the 1987 Constitution stating that national
taxes should be the base from which the just share of the LGU comes.
Such departure is impermissible. Verba legis non est recedendum (from
the words of a statute there should be no departure). 50 Equally
impermissible is that Congress has also thereby curtailed the guarantee
of fiscal autonomy in favor of the LGUs under the 1987 Constitution.
Taxes are the enforced proportional contributions exacted by the State
from persons and properties pursuant to its sovereignty in order to
support the Gove1nment and to defray all the public needs. Every tax
has three elements, namely: (a) it is an enforced proportional
contribution from persons and properties; (b) it is imposed by the State
by virtue of its sovereignty; and (c) it is levied for the support of the
Government.51 Taxes are classified into national and local. National
taxes are those levied by the National Government, while local taxes are
those levied by the LGUs.52
What the phrase national internal revenue taxes as used in Section 284
included are all the taxes enumerated in Section 21 of the National
Internal Revenue Code (NIRC), as amended by R.A. No. 8424, viz.:
Section 21. Sources of Revenue. - The following taxes, fees and charges
are deemed to be national internal revenue taxes:
(a) Income tax;
(b) Estate and donor's taxes;
(c) Value-added tax;
(d) Other percentage taxes;
(e) Excise taxes;
(f) Documentary stan1p taxes; and
(g) Such other taxes as arc or hereafter may be
imposed and collected by the Bureau of Internal
Revenue.
In view of the foregoing enumeration of what are the national internal
revenue taxes, Section 284 has effectively deprived the LGUs from
deriving their just share from other national taxes, like the customs
duties.
Strictly speaking, customs duties are also taxes because they are
exactions whose proceeds become public funds. According to Garcia v.
Executive Secretary,53 customs duties is the nomenclature given to taxes
imposed on the importation and exportation of commodities and
merchandise to or from a foreign country. Although customs duties have
either or both the generation of revenue and the regulation of economic
or social activity as their moving purposes, it is often difficult to say
which of the two is the principal objective in a particular instance, for,
verily, customs duties, much like internal revenue taxes, are rarely
designed to achieve only one policy objective.54 We further note that
Section 102(00) of R.A. No. 10863 (Customs Modernization and Tariff
Act) expressly includes all fees and charges imposed under the Act under
the blanket term of taxes.
It is clear from the foregoing clarification that the exclusion
of other national taxes like customs duties from the base for determining
the just share of the LG Us contravened the express constitutional edict
in Section 6, Article X the 1987 Constitution.
Still, the OSG posits that Congress can manipulate, by law, the base of
the allocation of the just share in the national taxes of the LGUs.
The position of the OSG cannot be sustained. Although it has the
primary discretion to determine and fix the just share of the LGUs in the
national taxes (e.g., Section 284 of the LGC), Congress cannot disobey
the express mandate of Section 6, Article X of the 1987 Constitution for
the just share of the LGUs to be derived from the national taxes. The
phrase as determined by law in Section 6 follows and qualifies the
phrase just share, and cannot be construed as qualifying the succeeding
phrase in the national taxes. The intent of the people in respect of
Section 6 is really that the base for reckoning the just share of the LGUs
should includes all national taxes. To read Section 6 differently as
requiring that the just share of LGUs in the national taxes shall be
determined by law is tantamount to the unauthorized revision of the 1987
Constitution.
V.
Congress can validly exclude taxes that will constitute the base
amount for
the computation of the IRA only if a Constitutional provision allows
such exclusion
Garcia submits that even assuming that the present version of Section
284 of the LGC is constitutionally valid, the implementation thereof has
been erroneous because Section 284 does not authorize any exclusion or
deduction from the collections of the NIRTs for purposes of the
computation of the allocations to the LGUs. He further submits that the
exclusion of certain NIRTs diminishes the fiscal autonomy granted to the
LGUs. He claims that the following NIRTs have been illegally excluded
from the base for determining the fair share of the LGUs in the IRA, to
wit:
(1) NIRTs collected by the cities and provinces and divided
exclusively among the LGUs of the Autonomous Region for
Muslim Mindanao (ARMM), the regional government and the
central government, pursuant to Section 1555 in relation to
Section 9,56 Article IX of R.A. No. 9054 (An Act to Strengthen
and Expand the Organic Act for the Autonomous Region in
Muslim Mindanao, amending for the purpose Republic Act No.
6734, entitled An Act providing for an Organic Act for the
Autonomous Region in Muslim Mindanao);
(2) The shares in the excise taxes on mineral products of the
different LG Us, as provided in Section 287 of the NIRC57 in
relation to Section 290 of the LGC;58
(3) The shares of the relevant LGUs in the franchise taxes paid
by Manila Jockey Club, Inc.59 and Philippine Racing Club,
Inc.;60
(4) The shares of various municipalities in VAT collections
under R.A. No. 7643 (An Act to Empower the Commissioner
of Internal Revenue to Require the Payment of the Value
Added Tax Every Month and to Allow Local Government
Units to Share in VAT Revenue, Amending for this Purpose
Certain Sections of the National Internal Revenue Code) as
embodied in Section 283 of the NIRC;61
(5) The shares of relevant LGUs in the proceeds of the sale and
conversion of former military bases in accordance with R.A.
No. 7227 (Bases Conversion and Development Act of 1992);62
(6) The shares of different LGUs in the excise taxes imposed
on locally manufactured Virginia tobacco products as provided
in Section 3 of R.A. No. 7171 (An Act to Promote the
Development of the Farmers in the Virginia Tobacco
Producing Provinces), and as now provided in Section 289 of
the NIRC;63
(7) The shares of different LGUs in the incremental revenues
from Burley and native tobacco products under Section 8 of
R.A. No. 8240 (An Act Amending Sections 138, 140 and 142
of the National Internal Revenue Code as Amended and for
Other Purposes) and as now provided in Section 288 of the
NIRC;64 and
(8) The share of the Commission of Audit (COA) in the NIRTs
as provided in Section 24p) of P.D. No. 1445 (Government
Auditing Code of the Philippines) 65 in relation to Section 284
of the NIRC.66
Garcia insists that the foregoing taxes and revenues should have been
included by Congress and, by extension, the BIR in the base for
computing the IRA on the strength of the cited provisions; that the LGC
did not authorize such exclusion; and that the continued exclusion has
undermined the fiscal autonomy guaranteed by the 1987 Constitution.
The insistence of Garcia is valid to an extent.
An examination of the above-enumerated laws confirms that the
following have been excluded from the base for reckoning the just share
of the LGUs as required by Section 6, Article X of the 1987
Constitution, namely:
(a) The share of the affected LGUs in the proceeds of the sale and
conversion of former military bases in accordance with R.A. No. 7227;
(b) The share of the different LGUs in the excise taxes imposed on
locally manufactured Virginia tobacco products as provided for in
Section 3, R.A. No. 7171, and as now provided in Section 289 of the
NIRC;
(c) The share of the different LGU s in incremental revenues from
Burley and native tobacco products under Section 8 of R.A. No. 8240,
and as now provided for in Section 288 of the NIRC;
(d) The share of the COA in the NIRTs as provided in Section 24(3) of
P.D. No. 144567 in relation to Section 284 of the NIRC;
(e) The shares of the different LGUs in the excise taxes on mineral
products, as provided in Section 287 of the NIRC in relation to Section
290 of the LGC;
(f) The NIRTs collected by the cities and provinces and divided
exclusively among the LGUs of the ARMM, the regional government
and the central government, pursuant to Section 1568 in relation to
Section 9,69 Article IX of R. A. No. 9054; and
(g) The shares of the relevant LG Us in the franchise taxes paid by
Manila Jockey Club, Inc., and the Philippine Racing Club, Inc.
Anent the share of the affected LG Us in the proceeds of the sale and
conversion of the former military bases pursuant to R.A. No. 7227, the
exclusion is warranted for the reason that such proceeds do not come
from a tax, fee or exaction imposed on the sale and conversion.
As to the share of the affected LGUs in the excise taxes imposed on
locally manufactured Virginia tobacco products under R.A. No. 7171
(now Section 289 of the NIRC); the share of the affected LGUs in
incremental revenues from Burley and native tobacco products under
Section 8, R.A. No. 8240 (now Section 288 of the NIRC); the share of
the COA in the NIRTs pursuant to Section 24(3) of P.D. No. 1445 in
relation to Section 284 of the NIRC; and the share of the host LGUs in
the franchise taxes paid by the Manila Jockey Club, Inc., and Philippine
Racing Club, Inc., under Section 6 of R.A. No. 6631 and Section 8 of
R:A. No. 6632, respectively, the exclusion is also justified. Although
such shares involved national taxes as defined under the NIRC, Congress
had the authority to exclude them by virtue of their being taxes imposed
for special purposes. A reading of Section 288 and Section 289 of the
NIRC and Section 24(3) of P.D. No. 1445 in relation to Section 284 of
the NIRC reveals that all such taxes are levied and collected for a special
purpose. 70 The same is true for the franchise taxes paid under Section 6
of R.A. No. 6631 and Section 8 of R.A. No. 6632, inasmuch as certain
percentages of the franchise taxes go to different beneficiaries. The
exclusion conforms to Section 29(3), Article VI of the 1987
Constitution, which states:
Section 29. x x x
xxxx
(3) All money collected on any tax levied for a special purpose shall
be treated as a special fund and paid out for such purpose only. If
the purpose for which a special fund was created has been fulfilled or
abandoned, the balance, if any, shall be transferred to the general funds
of the Government. [Bold emphasis supplied]
The exclusion of the share of the different LGUs in the excise taxes
imposed on mineral products pursuant to Section 287 of the NIRC in
relation to Section 290 of the LGC is premised on a different
constitutional provision. Section 7, Article X of the 1987 Constitution
allows affected LGUs to have an equitable share in the proceeds of the
utilization of the nation's national wealth "within their respective areas,"
to wit:
Section 7. Local governments shall be entitled to an equitable share in
the proceeds of the utilization and development of the national wealth
within their respective areas, in the manner provided by law, including
sharing the same with the inhabitants by way of direct benefits.
This constitutional provision is implemented by Section 287 of the NIRC
and Section 290 of the LGC thusly:
SEC. 287. Shares of Local Government Units in the Proceeds from the
Development and Utilization of the National Wealth. - Local
Government units shall have an equitable share in the proceeds derived
from the utilization and development of the national wealth, within their
respective areas, including sharing the same with the inhabitants by way
of direct benefits.
(A) Amount of Share of Local Government Units. - Local government
units shall, in addition to the internal revenue allotment, have a share of
forty percent (40'Yo) of the gross collection derived by the national
government from the preceding fiscal year from excise taxes on mineral
products, royalties, and such other taxes, fees or charges, including
related surcharges, interests or fines, and from its share in any co-
production, joint venture or production sharing agreement in the
utilization and development of the national wealth within their territorial
jurisdiction.
(B) Share of the Local Governments from Any Government Agency or
Government-owned or - Controlled Corporation. - Local Government
Units shall have a share, based on the preceding fiscal year, from the
proceeds derived by any government agency or government-owned or
controlled corporation engaged in the utilization and development of the
national wealth based on the following formula, whichever will produce
a higher share for the local government unit:
(1) One percent (l %) of the gross sales or receipts of the preceding
calendar year, or
(2) Forty percent (40%) of the excise taxes on mineral products,
royalties, and such other taxes, fees or charges, including related
surcharges, interests or fines the government agency or government-
owned or -controlled corporations would have paid if it were not
otherwise exempt. [Bold emphasis supplied]
SEC. 290. Amount of Share of Local Government Units. - Local
government units shall, in addition to the internal revenue allotment,
have a share of forty percent ( 40%) of the gross collection derived by
the national government from the preceding fiscal year from mining
taxes, royalties, forestry and fishery charges, and such other taxes, fees,
or charges, including related surcharges, interests, or fines, and from its
share in any co-production, joint venture or production sharing
agreement in the utilization and development of the national wealth
within their territorial jurisdiction. [Bold emphasis supplied]
Lastly, the NIRTs collected by the provinces and cities within the
ARMM whose portions are distributed to the ARMM's provincial, city
and regional governments are also properly excluded for such taxes are
intended to truly enable a sustainable and feasible autonomous region as
guaranteed by the 1987 Constitution. The mandate under Section 15 to
Section 21, Article X of the 1987 Constitution is to allow the separate
development of peoples with distinctive cultures and traditions in the
autonomous areas.71 The grant of autonomy to the autonomous regions
includes the right of self-determination-which in turn ensures the right of
the peoples residing therein to the necessary level of autonomy that will
guarantee the support of their own cultural identities, the establishment
of priorities by their respective communities' internal decision-making
processes and the management of collective matters by themselves.72 As
such, the NIRTs collected by the provinces and cities within the ARMM
will ensure local autonomy and their very existence with a continuous
supply of funding sourced from their very own areas. The ARMM will
become self-reliant and dynamic consistent with the dictates of the 1987
Constitution.
The shares of the municipalities in the VATs collected pursuant to R.A.
No. 7643 should be included in determining the base for computing
the just share because such VATs are national taxes, and nothing can
validly justify their exclusion.
In recapitulation, the national taxes to be included in the base for
computing the just share the LGUs shall henceforth be, but shall not be
limited to, the following:
1. The NIRTs enumerated in Section 21 of the NIRC, as amended, to be
inclusive of the VA Ts, excise taxes, and DSTs collected by the BIR and
the BOC, and their deputized agents;
2. Tariff and customs duties collected by the BOC;
3. 50% of the VATs collected in the ARMM, and 30% of all other
national taxes collected in the ARMM; the remaining 50% of the VA Ts
and 70% of the collections of the other national taxes in the ARMM
shall be the exclusive share of the ARMM pursuant to Section 9 and
Section 15 of R.A. No. 9054;
4. 60% of the national taxes collected from the exploitation and
development of the national wealth; the remaining 40% will exclusively
accrue to the host LGUs pursuant to Section 290 of the LGC;
5. 85% of the excise taxes collected from locally manufactured Virginia
and other tobacco products; the remaining 15% shall accrue to the
special purpose funds pursuant created in R.A. No. 7171 and R.A. No.
7227;
6. The entire 50% of the national taxes collected under Section 106,
Section 108 and Section 116 of the NIRC in excess of the increase in
collections for the immediately preceding year; and
7. 5% of the franchise taxes in favor of the national government paid by
franchise holders in accordance with Section 6 of R.A. No. 6631 and
Section 8 of R.A. No. 6632.
VI.
Entitlement to the reliefs sought
The petitioners' prayer for the payment of the arrears of the LGUs' just
share on the theory that the computation of the base amount had been
unconstitutional all along cannot be granted.
It is true that with our declaration today that the IRA is not in accordance
with the constitutional determination of the just share of the LGUs in the
national taxes, logic demands that the LGUs should receive the
difference between the just share they should have received had the
LGC properly reckoned such just share from all national taxes, on the
one hand, and the share - represented by the IRA- the LGUs have
actually received since the effectivity of the IRA under the LGC, on the
other. This puts the National Government in arrears as to the just
share of the LGUs. A legislative or executive act declared void for being
unconstitutional cannot give rise to any right or obligation. 73
Yet, the Court has conceded in Arau/lo v. Aquino III74that:
x x x the generality of the rule makes us ponder whether rigidly
applying the rule may at times be impracticable or wasteful. Should
we not recognize the need to except from the rigid application of the
rule the instances in which the void law or executive act produced an
almost irreversible result?
The need is answered by the doctrine of operative fact. The doctrine,
definitely not a novel one, has been exhaustively explained in De
Agbayani v. Philippine National Bank:
The decision now on appeal reflects the orthodox view that an
unconstitutional act, for that matter an executive order or a municipal
ordinance likewise suffering from that infirmity, cannot be the source of
any legal rights or duties. Nor can it justify any official act taken under
it. Its repugnancy to the fundamental law once judicially declared results
in its being to all intents and purposes a mere scrap of paper. As the new
Civil Code puts it: 'When the courts declare a law to be inconsistent with
the Constitution, the former shall be void and the latter shall govern.'
Administrative or executive acts, orders and regulations shall be valid
only when they are not contrary to the laws of the Constitution. It is
understandable why it should be so, the Constitution being supreme and
paramount. Any legislative or executive act contrary to its terms cannot
survive.
Such a view has support in logic and possesses the merit of
simplicity. It may not however be sufficiently realistic. It does not
admit of doubt that prior to the declaration of nullity such
challenged legislative or executive act must have been in force and
had to be complied with. This is so as until after the judiciary, in an
appropriate case, declares its invalidity, it is entitled to obedience
and respect. Parties may have acted under it and may have changed
their positions. What could be more fitting than that in a subsequent
litigation regard be had to what has been done while such legislative
or executive act was in operation and presumed to be valid in all
respects. It is now accepted as a doctrine that prior to its being
nullified, its existence as a fact must be reckoned with. This is merely
to reflect awareness that precisely because the judiciary is the
governmental organ which has the final say on whether or not a
legislative or executive measure is valid, a period of time may have
elapsed before it can exercise the power of judicial review that may
lead to a declaration of nullity. It would be to deprive the law of its
quality of fairness and justice then, if there be no recognition of
what had transpired prior to such adjudication.
In the language of an American Supreme Court decision: ‘The actual
existence of a statute, prior to such a determination [of
unconstitutionality], is an operative fact and may have consequences
which cannot justly be ignored. The past cannot always be erased by a
new judicial declaration. The effect of the subsequent ruling as to
invalidity may have to be considered in various aspects, with respect to
particular relations, individual and corporate, and particular conduct,
private and official.'
The doctrine of operative fact recognizes the existence of the law or
executive act prior to the determination of its unconstitutionality as an
operative fact that produced consequences that cannot always be erased,
ignored or disregarded. In short, it nullifies the void law or executive act
but sustains its effects. It provides an exception to the general rule that a
void or unconstitutional law produces no effect.75 But its use must be
subjected to great scrutiny and circumspection, and it cannot be invoked
to validate an unconstitutional law or executive act, but is resorted to
only as a matter of equity and fair play. 76 It applies only to cases where
extraordinary circumstances exist, and only when the extraordinary
circumstances have met the stringent conditions that will permit its
application.
Conformably with the foregoing pronouncements in Araullo v. Aquino
III, the effect of our declaration through this decision of the
unconstitutionality of Section 284 of the LGC and its related laws as far
as they limited the source of the just share of the LGUs to the NIRTs is
prospective. It cannot be otherwise.
VII.
Automatic release of the LGUs' just share in the National Taxes
Section 6, Article X of the 1987 Constitution commands that the just
share of the LGUs in national taxes shall be automatically released to
them. The term automatic connotes something mechanical, spontaneous
and perfunctory; and, in the context of this case, the LGUs are not
required to perform any act or thing in order to receive their just share in
the national taxes.77
Before anything, we must highlight that the 1987 Constitution includes
several provisions that actually deal with and authorize the automatic
release of funds by the National Government.
To begin with, Section 3 of Article VIII favors the Judiciary with the
automatic and regular release of its appropriations:
Section 3. The Judiciary shall enjoy fiscal autonomy. Appropriations for
the Judiciary may not be reduced by the legislature below the amount
appropriated for the previous year and, after approval, shall be
automatically and regularly released.
Then there is Section 5 of Article IX(A), which contains the common
provision in favor of the Constitutional Commissions:
Section 5. The Commission shall enjoy fiscal autonomy. Their approved
annual appropriations shall be automatically and regularly released.
Section 14 of Article XI extends to the Office of the Ombudsman a
similar privilege:
Section 14. The Office of the Ombudsman shall enjoy fiscal autonomy.
Its approved annual appropriations shall be automatically and regularly
released.
Section 17(4) of Article XIII replicates the privilege in favour of the
Commission on Human Rights:
Section 17(4) The approved annual appropriations of the Commission
shall be automatically and regularly released.
The foregoing constitutional provisions share two aspects. The first
relates to the grant of fiscal autonomy, and the second concerns
the automatic release of funds. 78 The common denominator of the
provisions is that the automatic release of the appropriated amounts is
predicated on the approval of the annual appropriations of the offices or
agencies concerned.
Directly contrasting with the foregoing provisions is Section 6, Article X
of the 1987 Constitution because the latter provision forthrightly ordains
that the "(l)ocal government units shall have a just share, as determined
by law, in the national taxes which shall be automatically released to
them." Section 6 does not mention of appropriation as a condition for
the automatic release of the just share to the LGUs. This is because
Congress not only already determined the just share through the LGC's
fixing the percentage of the collections of the NIRTs to constitute
such fair share subject to the power of the President to adjust the same in
order to manage public sector deficits subject to limitations on the
adjustments, but also explicitly authorized such just share to
be "automatically released" to the LGUs in the proportions and
regularity set under Section 28579 of the LGC without need of annual
appropriation. To operationalize the automatic release without need of
appropriation, Section 286 of the LGC clearly provides that the
automatic release of the just share directly to the provincial, city,
municipal or barangay treasurer, as the case may be, shall be "without
need of any further action," viz.:
Section 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. x x x (Bold emphasis supplied)
The 1987 Constitution is forthright and unequivocal in ordering that
the just share of the LGUs in the national taxes shall be automatically
released to them. With Congress having established the just
share through the LGC, it seems to be beyond debate that the inclusion
of the just share of the LGUs in the annual GAAs is unnecessary, if not
superfluous. Hence, the just share of the LGUs in the national taxes shall
be released to them without need of yearly appropriation.
1. DECLARES the phrase "internal revenue" appearing in Section 284
of Republic Act No. 7160 (Local Government
Code) UNCONSTITUTIONAL, and DELETES the phrase from
Section 284.
Section 284, as hereby modified, shall henceforth read as follows:
Section 284. Allotment of Taxes. - Local government units shall have a
share in the national taxes based on the collection of the third fiscal year
preceding the current fiscal year as follows:
 (a) On the first year of the effectivity of this Code,
thirty percent (30%);
(b) On the second year, thirty-five percent (35%);
and
(c) On the third year and thereafter, forty percent
(40%).
Provided, That in the event that the national government incurs an
unmanageable public sector deficit, the President of the Philippines is
hereby authorized, upon the 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 allotment of local government units but in
no case shall the allotment be less than thirty percent (30%) of the
collection of national 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%) 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 personal services.
The phrase "internal revenue" is likewise hereby DELETED from the
related sections of Republic Act No. 7160 (Local Government
Code), specifically Section 285, Section 287, and Section 290, which
provisions shall henceforth read as follows:
Section 285. Allocation to Local Government Units. - The share of local
government units in the allotment shall be collected in the following
manner:
(a) Provinces - Twenty-three percent (23%);
(b) Cities - Twenty-three percent (23%);
(c) Municipalities - Thirty-four percent (34%); and
(d) Barangays - Twenty percent (20%)
Provided, however, That the share of each province, city, and
municipality shall be determined on the basis of the following formula:
(a) Population -- Fifty percent (50%);
(b) Land Area-· Twenty-five percent (25%); and
(c) Equal sharing--Twenty-five percent (25%)
Provided, further. That the share of each barangay with a population of
not less than one hundred (100) inhabitants shall not be less than Eighty
thousand (₱80,000.00) per annum chargeable against the twenty percent
(20%) share of the barangay from the allotment, and the balance to be
allocated on the basis of the following formula:
(a) On the first year of the effoctivity of this Code:
(1) Population - Forty percent (40%); and
(2) Equal sharing - Sixty percent (50%)
(b) On the second year:
(1) Population - Fifty percent (50%); and
(2) Equal sharing - Fifty percent (50%)
(c) On the third year and thereafter.
(1) Population - Sixty percent (60%); and
(2) Equal sharing - Forty percent (40%).
Provided, finally, That the financial requirements of barangays created
by local government units after the effectivity of this Code shall be the
responsibility of the local government unit concerned.
xxxx
Sectfon 287. Local Development Projects. - Each local government unit
shall appropriate in its annual budget no less than twenty percent (20%)
of its annual allotment for development projects. Copies of the
development plans of local government units shall be furnished the
Department of Interior and Local Government.
xxxx
Section 290. Amount of Share of Local Government Units. - Local
government units shall, in addition to the allotment, have a share of forty
percent (40%) of the gross collection derived by the national government
from the preceding fiscal year from mining taxes, royalties, forestry and
fishery charges, and such other taxes, fees, or charges, including related
surcharges, interests, or fines, and from its share in any co-production,
joint venture or production sharing agreement in the utilization and
development of the national wealth within their territorial jurisdiction.
Article 378, Article 379, Article 380, Article 382, Article 409, Article
461, and related provisions of the Implementing Rules and Regulations
of R.A. No. 7160 are hereby MODIFIED to reflect the deletion of the
phrase "internal revenue" as directed herein.
Henceforth, any mention of "Internal Revenue Allotment" or "IRA" in
Republic Act No. 7160 (Local Government Code) and its Implementing
Rules and Regulations shall be understood as pertaining to the allotment
of the Local Government Units derived from the national taxes;
2. ORDERS the SECRETARY OF THE DEPARTMENT OF
FINANCE; the SECRETARY OF THE DEPARTMENT OF
BUDGET AND MANAGEMENT; the COMMISSIONER OF
INTERNAL REVENUE; the COMMISSIONER OF CUSTOMS;
and the NATIONAL TREASURER to include ALL
COLLECTIONS OF NATIONAL TAXES in the computation of the
base of the just share of the Local Government Units according to the
ratio provided in the now-modified Section 284 of Republic Act No.
7160 (Local Government Code) except those accruing to special purpose
funds and special allotments for the utilization and development of the
national wealth.
For this purpose, the collections of national taxes for inclusion in the
base of the just share the Local Government Units shall include, but shall
not be limited to, the following:
(a) The national internal revenue taxes enumerated in Section
21 of the National Internal Revenue Code, as amended,
collected by the Bureau of Internal Revenue and the Bureau of
Customs;
(b) Tariff and customs duties collected by the Bureau of
Customs;
(c) 50% of the value-added taxes collected in the Autonomous
Region in Muslim Mindanao, and 30% of all other national tax
collected in the Autonomous Region in Muslim Mindanao.
The remaining 50% of the collections of value-added taxes and
70% of the collections of the other national taxes in the
Autonomous Region in Muslim Mindanao shall be the
exclusive share of the Autonomous Region in Muslim
 Mindanao pursuant to Section 9 and Section 15 of Republic collections as the auditing fee of the Commission on Audit
Act No. 9054. is VALID;

(d) 60% of the national taxes collected from the exploitation
and development of the national wealth.
The remaining 401% of the national taxes collected from the
exploitation and development of the national wealth shall
exclusively accrue to the host Local Government Units
pursuant to Section 290 of Republic Act No. 7160 (Local
Government Code);
(e) 85% of the excise taxes collected from locally
manufactured Virginia and other tobacco products.
The remaining 15% shall accrue to the special purpose funds
created by Republic Act No. 7171 and Republic Act No. 7227;
(f) The entire 50% of the national taxes collected under
Sections 106, 108 and 116 of the NIRC as provided under
Section 283 of the NIRC; and
4. DIRECTS the Bureau of Internal Revenue and the Bureau of
Customs and their deputized collecting agents to certify all national tax
collections, pursuant to Article 3 78 of the Implementing Rules and
Regulations of R.A. No. 7160;
5. DISMISSES the claims of the Local Government Units for the
settlement by the National Government of arrears in the just share on the
ground that this decision shall have PROSPECTIVE
APPLICATION; and
6. COMMANDS the AUTOMATIC RELEASE WITHOUT NEED
OF FURTHER ACTION of the just shares of the Local Government
Units in the national taxes, through their respective provincial, city,
municipal, or barangay treasurers, as the case may be, on a quarterly
basis but not beyond five (5) days from the end of each quarter, as
directed in Section 6, Article X of the 1987 Constitution and Section 286
of Republic Act No. 7160 (Local Government Code), and
operationalized by Article 383 of the Implementing Rules and
Regulations of RA 7160.

(g) 5% of the 25% franchise taxes given to the National Let a copy of this decision be furnished to the President of the Republic
Government under Section 6 of Republic Act No. 6631 and of the Philippines, the President of the Senate, and the Speaker of the
Section 8 of Republic Act No. 6632. House of Representatives for their information and guidance.

3. DECLARES that: SO ORDERED.

(a) The apportionment of the 25% of the franchise taxes

collected from the Manila Jockey Club and Philippine Racing
Club, Inc. - that is, five percent (5%) to the National
Government; five percent (5%) to the host municipality or
city; seven percent (7%) to the Philippine Charity Sweepstakes
Office; six percent (6%) to the Anti-Tuberculosis Society; and
two percent (2%) to the White Cross pursuant to Section 6 of
Republic Act No. 6631 and Section 8 of Republic Act No.
6632 - is VALID;

(b) Section 8 and Section 12 of Republic Act No. 7227

are VALID; and, ACCORDINGLY, the proceeds from the
sale of the former military bases converted to alienable lands
thereunder are EXCLUDED from the computation of the
national tax allocations of the Local Government Units; and

(c) Section 24(3) of Presidential Decree No. 1445, in relation

to Section 284 of the National Internal Revenue Code,
apportioning one-half of one percent (1/2of1%) of national tax

G.R. No. 195770               July 17, 2012
AQUILINO Q. PIMENTEL, JR., SERGIO TADEO and NELSON
ALCANTARA, Petitioners,
vs.
EXECUTIVE SECRETARY PAQUITO N. OCHOA and
SECRETARY CORAZON JULIANO-SOLIMAN OF THE
DEPARTMENT OF SOCIAL WELFARE and DEVELOPMENT
(DSWD), Respondents.
DECISION
PERLAS-BERNABE, J.:
The Case
For the Court’s consideration in this Petition for Certiorari and
Prohibition is the constitutionality of certain provisions of Republic Act
No. 10147 or the General Appropriations Act (GAA) of 20111 which
provides a P21 Billion budget allocation for the Conditional Cash
Transfer Program (CCTP) headed by the Department of Social Welfare
& Development (DSWD). Petitioners seek to enjoin respondents
Executive Secretary Paquito N. Ochoa and DSWD Secretary Corazon
Juliano-Soliman from implementing the said program on the ground that
it amounts to a "recentralization" of government functions that have
already been devolved from the national government to the local
government units.
The Facts
In 2007, the DSWD embarked on a poverty reduction strategy with the
poorest of the poor as target beneficiaries.2 Dubbed "Ahon Pamilyang
Pilipino," it was pre-pilot tested in the municipalities of Sibagat and
Esperanza in Agusan del Sur; the municipalities of Lopez Jaena and
Bonifacio in Misamis Occidental, the Caraga Region; and the cities of
Pasay and Caloocan3 upon the release of the amount of P50 Million
Pesos under a Special Allotment Release Order (SARO) issued by the
Department of Budget and Management.4
On July 16, 2008, the DSWD issued Administrative Order No. 16, series
of 2008 (A.O. No. 16, s. 2008),5 setting the implementing guidelines for
the project renamed "Pantawid Pamilyang Pilipino Program" (4Ps), upon
the following stated objectives, to wit:
1. To improve preventive health care of pregnant women and
young children
2. To increase enrollment/attendance of children at elementary
level
3. To reduce incidence of child labor
4. To raise consumption of poor households on nutrient dense
foods
5. To encourage parents to invest in their children's (and their
own) future
6. To encourage parent's participation in the growth and
development of young children, as well as involvement in the
community.6
This government intervention scheme, also conveniently referred to as
CCTP, "provides cash grant to extreme poor households to allow the
members of the families to meet certain human development goals."7
Eligible households that are selected from priority target areas consisting
of the poorest provinces classified by the National Statistical
Coordination Board (NCSB)8 are granted a health assistance of
P500.00/month, or P6,000.00/year, and an educational assistance of
P300.00/month for 10 months, or a total of P3,000.00/year, for each
child but up to a maximum of three children per family.9 Thus, after an
assessment on the appropriate assistance package, a household
beneficiary could receive from the government an annual subsidy for its
basic needs up to an amount of P15,000.00, under the following
conditionalities:
a) Pregnant women must get pre natal care starting from the
1st trimester, child birth is attended by skilled/trained
professional, get post natal care thereafter
b) Parents/guardians must attend family planning
sessions/mother's class, Parent Effectiveness Service and
others
c) Children 0-5 years of age get regular preventive health
check-ups and vaccines
d) Children 3-5 years old must attend day care program/pre-
school
 e) Children 6-14 years of age are enrolled in schools and
attend at least 85% of the time10
Under A.O. No. 16, s. 2008, the DSWD also institutionalized a
coordinated inter-agency network among the Department of Education
(DepEd), Department of Health (DOH), Department of Interior and
Local Government (DILG), the National Anti-Poverty Commission
(NAPC) and the local government units (LGUs), identifying specific
roles and functions in order to ensure effective and efficient
implementation of the CCTP. As the DSWD takes on the role of lead
implementing agency that must "oversee and coordinate the
implementation, monitoring and evaluation of the program," the
concerned LGU as partner agency is particularly tasked to –
a. Ensure availability of the supply side on health and
education in the target areas.
b. Provide necessary technical assistance for Program
implementation
c. Coordinate the implementation/operationalization of sectoral
activities at the City/Municipal level to better execute Program
objectives and functions
d. Coordinate with various concerned government agencies at
the local level, sectoral representatives and NGO to ensure
effective Program implementation
e. Prepare reports on issues and concerns regarding Program
implementation and submit to the Regional Advisory
Committee, and
f. Hold monthly committee meetings11
A Memorandum of Agreement (MOA)12 executed by the DSWD with
each participating LGU outlines in detail the obligation of both parties
during the intended five-year implementation of the CCTP.
Congress, for its part, sought to ensure the success of the CCTP by
providing it with funding under the GAA of 2008 in the amount of Two
Hundred Ninety-Eight Million Five Hundred Fifty Thousand Pesos
(P298,550,000.00). This budget allocation increased tremendously to P5
Billion Pesos in 2009, with the amount doubling to P10 Billion Pesos in
2010. But the biggest allotment given to the CCTP was in the GAA of
2011 at Twenty One Billion One Hundred Ninety-Four Million One
Hundred Seventeen Thousand Pesos (P21,194,117,000.00).13 1âwphi1
Petitioner Aquilino Pimentel, Jr., a former Senator, joined by Sergio
Tadeo, incumbent President of the Association of Barangay Captains of
Cabanatuan City, Nueva Ecija, and Nelson Alcantara, incumbent
Barangay Captain of Barangay Sta. Monica, Quezon City, challenges
before the Court the disbursement of public funds and the
implementation of the CCTP which are alleged to have encroached into
the local autonomy of the LGUs.
The Issue
THE P21 BILLION CCTP BUDGET ALLOCATION UNDER THE
DSWD IN THE GAA FY 2011 VIOLATES ART. II, SEC. 25 & ART.
X, SEC. 3 OF THE 1987 CONSTITUTION IN RELATION TO SEC.
17 OF THE LOCAL GOVERNMENT CODE OF 1991 BY
PROVIDING FOR THE RECENTRALIZATION OF THE NATIONAL
GOVERNMENT IN THE DELIVERY OF BASIC SERVICES
ALREADY DEVOLVED TO THE LGUS.
Petitioners admit that the wisdom of adopting the CCTP as a poverty
reduction strategy for the Philippines is with the legislature. They take
exception, however, to the manner by which it is being implemented,
that is, primarily through a national agency like DSWD instead of the
LGUs to which the responsibility and functions of delivering social
welfare, agriculture and health care services have been devolved
pursuant to Section 17 of Republic Act No. 7160, also known as the
Local Government Code of 1991, in relation to Section 25, Article II &
Section 3, Article X of the 1987 Constitution.
Petitioners assert that giving the DSWD full control over the
identification of beneficiaries and the manner by which services are to be
delivered or conditionalities are to be complied with, instead of
allocating the P21 Billion CCTP Budget directly to the LGUs that would
have enhanced its delivery of basic services, results in the
"recentralization" of basic government functions, which is contrary to
the precepts of local autonomy and the avowed policy of
decentralization.
Our Ruling
The Constitution declares it a policy of the State to ensure the autonomy
of local governments14 and even devotes a full article on the subject of
local governance15 which includes the following pertinent provisions:
Section 3. The Congress shall enact a local government code which shall
provide for a more responsive and accountable local government
structure instituted through a system of decentralization with effective
mechanisms of recall, initiative, and referendum, allocate among the
different local government units their powers, responsibilities, and
resources, and provide for the qualifications, election, appointment and
removal, term, salaries, powers and functions and duties of local
officials, and all other matters relating to the organization and operation
of the local units.
xxx
Section 14. The President shall provide for regional development
councils or other similar bodies composed of local government officials,
regional heads of departments and other government offices, and
representatives from non-governmental organizations within the regions
for purposes of administrative decentralization to strengthen the
autonomy of the units therein and to accelerate the economic and social
growth and development of the units in the region. (Underscoring
supplied)
In order to fully secure to the LGUs the genuine and meaningful
autonomy that would develop them into self-reliant communities and
effective partners in the attainment of national goals,16 Section 17 of the
Local Government Code vested upon the LGUs the duties and functions
pertaining to the delivery of basic services and facilities, as follows:
SECTION 17. Basic Services and Facilities. –
(a) Local government units shall endeavor to be self-reliant
and shall continue exercising the powers and discharging the
duties and functions currently vested upon them. They shall
also discharge the functions and responsibilities of national
agencies and offices devolved to them pursuant to this Code.
Local government units shall likewise exercise such other
powers and discharge such other functions and responsibilities
as are necessary, appropriate, or incidental to efficient and
effective provision of the basic services and facilities
enumerated herein.
(b) Such basic services and facilities include, but are not
limited to, x x x.
While the aforementioned provision charges the LGUs to take
on the functions and responsibilities that have already been
devolved upon them from the national agencies on the aspect
of providing for basic services and facilities in their respective
jurisdictions, paragraph (c) of the same provision provides a
categorical exception of cases involving nationally-funded
projects, facilities, programs and services, thus:
(c) Notwithstanding the provisions of subsection (b) hereof,
public works and infrastructure projects and other facilities,
 programs and services funded by the National Government
under the annual General Appropriations Act, other special
laws, pertinent executive orders, and those wholly or partially
funded from foreign sources, are not covered under this
Section, except in those cases where the local government unit
concerned is duly designated as the implementing agency for
such projects, facilities, programs and services. (Underscoring
supplied)
The essence of this express reservation of power by the national
government is that, unless an LGU is particularly designated as the
implementing agency, it has no power over a program for which funding
has been provided by the national government under the annual general
appropriations act, even if the program involves the delivery of basic
services within the jurisdiction of the LGU.
The Court held in Ganzon v. Court of Appeals17 that while it is through a
system of decentralization that the State shall promote a more responsive
and accountable local government structure, the concept of local
autonomy does not imply the conversion of local government units into
"mini-states."18 We explained that, with local autonomy, the Constitution
did nothing more than "to break up the monopoly of the national
government over the affairs of the local government" and, thus, did not
intend to sever "the relation of partnership and interdependence between
the central administration and local government units."19 In Pimentel v.
Aguirre,20 the Court defined the extent of the local government's
autonomy in terms of its partnership with the national government in the
pursuit of common national goals, referring to such key concepts as
integration and coordination. Thus:
Under the Philippine concept of local autonomy, the national
government has not completely relinquished all its powers over local
governments, including autonomous regions. Only administrative
powers over local affairs are delegated to political subdivisions. The
purpose of the delegation is to make governance more directly
responsive and effective at the local levels. In turn, economic, political
and social development at the smaller political units are expected to
propel social and economic growth and development. But to enable the
country to develop as a whole, the programs and policies effected locally
must be integrated and coordinated towards a common national goal.
Thus, policy-setting for the entire country still lies in the President and
Congress.
Certainly, to yield unreserved power of governance to the local
government unit as to preclude any and all involvement by the national
government in programs implemented in the local level would be to shift
the tide of monopolistic power to the other extreme, which would
amount to a decentralization of power explicated in Limbona v.
Mangelin21 as beyond our constitutional concept of autonomy, thus:
Now, autonomy is either decentralization of administration or
decentralization of power.1âwphi1 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.22
Indeed, a complete relinquishment of central government powers on the
matter of providing basic facilities and services cannot be implied as the
Local Government Code itself weighs against it. The national
government is, thus, not precluded from taking a direct hand in the
formulation and implementation of national development programs
especially where it is implemented locally in coordination with the
LGUs concerned.
Every law has in its favor the presumption of constitutionality, and to
justify its nullification, there must be a clear and unequivocal breach of
the Constitution, not a doubtful and argumentative one.23 Petitioners have
failed to discharge the burden of proving the invalidity of the provisions
under the GAA of 2011. The allocation of a P21 billion budget for an
intervention program formulated by the national government itself but
implemented in partnership with the local government units to achieve
the common national goal development and social progress can by no
means be an encroachment upon the autonomy of local governments.
WHEREFORE, premises considered, the petition is hereby
DISMISSED.
SO ORDERED.

G.R. No. 199439               April 22, 2014
CITY OF GENERAL SANTOS, represented by its Mayor, HON.
DARLENE MAGNOLIA R. ANTONINO-CUSTODIO Petitioner,
vs.
COMMISSION ON AUDIT, Respondent.
DECISION
LEONEN, J.:
In order to be able to deliver more effective and efficient services, the
law allows local government units the power to reorganize. In doing so,
they should be given leeway to entice their employees to avail of
severance benefits that the local government can afford. However, local
government units may not provide such when it amounts to a
supplementary retirement benefit scheme.
In this special civil action for certiorari,1 the city of General Santos asks
us to find grave abuse of discretion on the part of the Commission on
Audit (COA). On January 20, 2011, respondent Commission on Audit
affirmed the findings of its Legal Services Sector in its Opinion No.
2010-021 declaring Ordinance No. 08, series of 2009, as illegal. This
was reiterated in respondent Commission’s resolution denying the
motion for reconsideration dated October 17, 2011.2
Ordinance No. 08, series of 2009, was enacted by the city of General
Santos on August 13, 2009. It is entitled An Ordinance Establishing the
GenSan Scheme on Early Retirement for Valued Employees Security
(GenSan SERVES).3
It is important to view this ordinance in its proper context.
Then mayor of General Santos City, Pedro B. Acharon, Jr., issued
Executive Order No. 40, series of 2008, creating management teams
pursuant to its organization development program. This was patterned
after Executive Order No. 366 dated October 4, 2004 entitled Directing a
Strategic Review of the Operations and Organizations of the Executive
Branch and Providing Options and Incentives for Government
Employees who may be Affected by the Rationalization of the Functions
and Agencies of the Executive Branch and its implementing rules and
regulations.4
Mayor Pedro B. Acharon, Jr. declared the city’s byword of "Total
Quality Service" in his state of the city address in 2005. This was
followed by the conduct of a process and practice review for each
department, section, and unit of the local government. The product was
an organization development masterplan adopted as Executive Order No.
13, series of 2009.5
This was followed by Resolution No. 004, series of 2009, requesting for
the mayor’s support for GenSan SERVES, an early retirement program
to be proposed to the Sangguniang Panlungsod.
Consequently, Ordinance No. 08, series of 2009, was passed together
with its implementing rules and regulations, designed "to entice those
employees who were unproductive due to health reasons to avail of the
incentives being offered therein by way of early retirement package."6
This contextual background in the passing of Ordinance No. 08, series of
2009, was not contested by respondent Commission on Audit.
The ordinance, as amended, provides that qualified employees below
sixty (60) years of age but not less than fifty (50) years and sickly
employees below fifty (50) years of age but not less than forty (40) years
may avail of the incentives under the program.7 In other words, the
ordinance "provides for separation benefits for sickly employees who
have not yet reached retirement age."8 Section 5 of the ordinance states:
Section 5. GenSan SERVES Program Incentives On Top of Government
Service Insurance System (GSIS) and PAG-IBIG Benefits – Any
personnel qualified and approved to receive the incentives of this
program shall be entitled to whatever retirement benefits the GSIS or
PAG-IBIG is granting to a retiring government employee.
Moreover, an eligible employee shall receive an early retirement
incentive provided under this program at the rate of one and one-half (1
1/2) months of the employee’s latest basic salary for every year of
service in the City Government.9
Also, the ordinance provides:
Section 6. GenSan SERVES Post-Retirement Incentives – Upon
availment of early retirement, a qualified employee shall enjoy the
following in addition to the above incentives:
(a) Cash gift of Fifty Thousand Pesos (₱50,000.00) for the
sickly employees;
(b) Lifetime free medical consultation at General Santos City
Hospital;
(c) Annual aid in the maximum amount of Five Thousand
Pesos (₱5,000.00), if admitted at General Santos City Hospital;
and
(d) 14 karat gold ring as a token.10
As provided, payment would be made in two tranches: 50% paid in
January 2010 and the remainder in July 2010.11 Petitioner city alleged
that out of its 1,361 regular employees, 50 employees applied, from
which 39 employees qualified to avail of the incentives provided by the
ordinance.12 The first tranche of benefits was released in January 2010.13
In a letter dated February 10, 2010, the city’s audit team leader, through
its supervising auditor, sent a query on the legality of the ordinance to
respondent Commission on Audit’s director for Regional Office No. XII,
Cotabato City.14
In his second indorsement dated March 15, 2010, respondent
Commission’s regional director agreed that the grant lacked legal basis
and was contrary to the Government Service Insurance System (GSIS)
Act. He forwarded the matter to respondent Commission’s Office of
General Counsel, Legal Services Sector, for a more authoritative
opinion.15
The Office of General Counsel issued COA-LSS Opinion No. 2010-021
on March 25, 2010. The opinion explained that Ordinance No. 08, series
of 2009, partakes of a supplementary retirement benefit plan. In its view,
Section 28, paragraph (b) of Commonwealth Act No. 186, as amended,
prohibits government agencies from establishing supplementary
retirement or pension plans from the time the Government Service
Insurance System charter took effect while those plans already existing
when the charter was enacted were declared abolished.16
The opinion discussed that this prohibition was reiterated in Conte v.
Commission on Audit.17 Laraño v. Commission on Audit,18 on the other
hand, ruled that an early retirement program should be by virtue of a
valid reorganization pursuant to law in order to be valid. The opinion
concludes as follows:
In fine, since Ordinance No. 08 is in the nature of an ERP [Early
Retirement Program] of the City Government of General Santos, a law
authorizing the same is a requisite for its validity. In the absence,
however, of such law, the nullity of Ordinance No. 08 becomes a
necessary consequence.
It is hoped that the foregoing sufficiently answers the instant query.19
Petitioner city, through then mayor, Pedro B. Acharon, Jr., filed a letter-
reconsideration dated June 7, 2010. They followed through with two
letters addressed to respondent Commission’s chairman dated July 26,
2010 and October 6, 2010, respectively, for the reconsideration of COA-
LSS Opinion No. 2010-021.20
Respondent Commission on Audit treated these letters as an appeal. On
January 20, 2011, it rendered its decision denying the appeal and
affirming COA-LSS Opinion No. 2010-021.21 It also denied
reconsideration by resolution dated October 17, 2011.22 The dispositive
portion of its decision reads:
WHEREFORE, premises considered, the instant appeal is hereby
DENIED for lack of merit and COA-LSS Opinion No. 2010-021 dated
March 25, 2010 of the OGC, this Commission is hereby AFFIRMED.
Accordingly, the ATL of General Santos City is hereby directed to issue
a Notice of Disallowance on the illegal disbursements made under the
Gen[S]san SERVES.23
Respondent Commission on Audit agreed that Ordinance No. 08, series
of 2009, partakes of the nature of a supplementary retirement benefit
plan proscribed by Section 28, paragraph (b) of Commonwealth Act No.
186 as amended. It also cited Conte v. Commission on Audit24 and
Laraño v. Commission on Audit.25
In its opinion, respondent Commission on Audit observed that GenSan
SERVES was not based on a law passed by Congress but on ordinances
and resolutions passed and approved by the Sangguniang Panlungsod
and Executive Orders by the city mayor.26 Moreover, nowhere in Section
76 of Republic Act No. 7160, otherwise known as the Local Government
Code, does it provide a specific power for local government units to
establish an early retirement program.
Mayor Acharon, Jr. submitted that other local government units such as
Cebu in 2005 and 2008 have adopted their own early retirement
programs. The resolutions of the Sangguniang Panlungsod of Cebu
invoked Republic Act No. 6683 dated December 2, 1988, which
provided for early retirement and voluntary separation. The questioned
decision mentioned that respondent Commission on Audit would look
into this program supposedly adopted by Cebu.27 Assuming Cebu’s
invocation of Republic Act No. 6683 was proper, respondent
Commission on Audit explained that this has already been amended by
Republic Act No. 8291, otherwise known as the GSIS Act of 1997.
Moreover, Section 9 of Republic Act No. 668328 provides for limited
application.29
The present petition raises this sole issue:
WHETHER RESPONDENT COMMISSION ON AUDIT
COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT
CONSIDERED ORDINANCE NO. 08, SERIES OF 2009, IN THE
NATURE OF AN EARLY RETIREMENT PROGRAM REQUIRING
A LAW AUTHORIZING IT FOR ITS VALIDITY
I
This court has consistently held that findings of administrative agencies
are generally respected, unless found to have been tainted with
unfairness that amounted to grave abuse of discretion:
It is the general policy of the Court to sustain the decisions of
administrative authorities, especially one which is constitutionally-
created not only on the basis of the doctrine of separation of powers but
also for their presumed expertise in the laws they are entrusted to
enforce. Findings of administrative agencies are accorded not only
respect but also finality when the decision and order are not tainted with
unfairness or arbitrariness that would amount to grave abuse of
discretion. It is only when the COA has acted without or in excess of
jurisdiction, or with grave abuse of discretion amounting to lack or
excess of jurisdiction, that this Court entertains a petition questioning its
rulings. There is grave abuse of discretion when there is an evasion of a
positive duty or a virtual refusal to perform a duty enjoined by law or to
act in contemplation of law as when the judgment rendered is not based
on law and evidence but on caprice, whim and despotism.30 (Emphasis
supplied, citations omitted)
We have ruled that "not every error in the proceedings, or every
erroneous conclusion of law or fact, constitutes grave abuse of
discretion."31 Grave abuse of discretion has been defined as follows:
By grave abuse of discretion is meant such capricious and whimsical
exercise of judgment as is equivalent to lack of jurisdiction. Mere abuse
of discretion is not enough. It must be grave abuse of discretion as when
the power is exercised in an arbitrary or despotic manner by reason of
passion or personal hostility, and must be so patent and so gross as to
amount to an evasion of a positive duty or to a virtual refusal to perform
the duty enjoined or to act at all in contemplation of law. x x x.32
In Yap v. Commission on Audit,33 this court explained that the
Commission on Audit has the duty to make its own assessment of the
merits of the disallowance and need not be limited to a review of the
grounds relied upon by the auditor of the agency concerned:
x x x we rule that, in resolving cases brought before it on appeal,
respondent COA is not required to limit its review only to the grounds
relied upon by a government agency’s auditor with respect to
disallowing certain disbursements of public funds. In consonance with
its general audit power, respondent COA is not merely legally permitted,
but is also duty-bound to make its own assessment of the merits of the
disallowed disbursement and not simply restrict itself to reviewing the
validity of the ground relied upon by the auditor of the government
agency concerned. To hold otherwise would render COA’s vital
constitutional power unduly limited and thereby useless and
ineffective.34
Moreover, Article IX-A, Section 7 of the Constitution provides that
"unless otherwise provided by this Constitution or by law, any decision,
order, or ruling of each Commission may be brought to the Supreme
Court on certiorari by the aggrieved party within thirty days from receipt
of a copy thereof." Rule 64, Section 2 of the Revised Rules of Civil
Procedure also provides that "a judgment or final order or resolution of
the Commission on Elections and the Commission on Audit may be
brought by the aggrieved party to the Supreme Court on certiorari under
Rule 65, except as hereinafter provided."
Thus, we proceed to determine whether respondent Commission on
Audit acted with grave abuse of discretion in affirming the opinion of its
Legal Services Sector and finding that the entire Ordinance No. 08,
series of 2009, partakes of the nature of a proscribed supplementary
retirement benefit plan.
II
According to petitioner city, GenSan SERVES does not provide for
supplementary retirement benefits, and Conte does not apply.35
Petitioner city explains that unlike the facts in Conte, Ordinance No. 08,
series of 2009, was designed to entice employees who are unproductive
due to health reasons to avail of the incentives by way of an early
retirement package. In essence, the incentives are severance pay. Those
who have reached retirement age are disqualified.36
Petitioner city adds that GenSan SERVES is a one-time offer. It is
available only to qualified employees who applied within two months
from the ordinance’s effectivity. In fact, out of its 1,361 regular
employees, 50 employees applied. Out of all that applied, only 39
employees qualified to avail of the incentives provided by the
ordinance.37
These incentives are independent and distinct from the Government
Service Insurance System retirement package.38
Section 5 of Ordinance No. 08, series of 2009, was amended by
Ordinance No. 11, series of 2009, "to exclude those GSIS and PAG-
IBIG benefits the payment[s] of which are passed on [to] the
employer."39 This was to remove any doubt as to its coverage and
applicability and to ensure that no employee will be paid twice.40 The
amended provision reads:
Section 5. Gen[S]an SERVES Program Incentives On Top of
Government Service Insurance System (GSIS) and PAG-IBIG Benefits –
Any personnel qualified and approved to receive the incentives of this
program shall be entitled to whatever retirement benefits the GSIS or
PAG-IBIG is granting to a retiring government employee, except those
benefits the payment of which are passed on to the employer. In which
case, the benefits granted under this ordinance shall only be considered
as one of the options available to a retiring city employee.
Moreover, an eligible employee shall receive an early retirement
incentive provided under this program at the rate of one and one-half (1
1/2) months of the employee’s latest basic salary for every year of
service in the City Government. (Emphasis supplied)
According to petitioner city, GenSan SERVES is an initial step pursuant
to its organization development masterplan,41 which began with the city
mayor’s issuance of Executive Order No. 40, series of 2008, creating
change management teams.42
Petitioner city cites Sections 16 and 76 of the Local Government Code as
its authority to reorganize. It argues that these provisions necessarily
imply the authority of petitioner city to provide retirement benefits,
separation pay, and other incentives to those affected by the
reorganization.43
Petitioner city also cites Republic Act No. 6656, otherwise known as An
Act to Protect the Security of Tenure of Civil Service Officers and
Employees in the Implementation of Government
Reorganization.44 According to petitioner city, this not only requires
good faith in the implementation of reorganization but mandates the
payment of appropriate separation pay, retirement, and other benefits
under existing laws within 90 days from effectivity date of separation.45
Even President Gloria Macapagal-Arroyo issued Executive Order No.
184 entitled Directing the Reorganization and Streamlining of the
National Development Company on March 10, 2003. In Section 4, it
provides for a separation package anchored on Republic Act No.
6656.46 Petitioner city submits that if the President can reorganize in the
absence of any law authorizing her to do so and provide compensation
based on Republic Act No. 6656, with more reason that a local
government unit can reorganize as its power to reorganize is expressly
provided in the Local Government Code.47
Respondent Commission on Audit counters that it correctly found
Ordinance No. 08, series of 2009, as invalid in the absence of a law
passed by Congress specifically authorizing the enactment of an
ordinance granting an early retirement scheme.48
Respondent Commission on Audit contends that Sections 16 and 76 of
the Local Government Code do not confer authority upon any local
government unit to create a separate or supplementary retirement benefit
plan.49 As for Republic Act No. 6656, this contemplates situations where
a government position has been abolished, or rendered redundant, or a
need to merge, divide or consolidate positions for lawful causes allowed
by the Civil Service Law exists.50
According to respondent Commission on Audit, petitioner city failed to
demonstrate arbitrariness on its part as it merely observed the
proscription under Section 28, paragraph (b) of Commonwealth Act No.
186 when it found the ordinance a nullity.51
We agree with respondent Commission on Audit but only insofar as
Section 5 of the ordinance is concerned. We declare Section 6 on post-
retirement incentives as valid.
III
The constitutional mandate for local autonomy supports petitioner city’s
issuance of Executive Order No. 40, series of 2008, creating change
management teams52 as an initial step for its organization development
masterplan.
Local autonomy also grants local governments the power to streamline
and reorganize. This power is inferred from Section 76 of the Local
Government Code on organizational structure and staffing pattern, and
Section 16 otherwise known as the general welfare clause:
Section 76. Organizational Structure and Staffing Pattern. - Every local
government unit shall design and implement its own organizational
structure and staffing pattern taking into consideration its service
requirements and financial capability, subject to the minimum standards
and guidelines prescribed by the Civil Service Commission.
Section 16. General Welfare. - Every local government unit shall
exercise the powers expressly granted, those necessarily implied
therefrom, as well as powers necessary, appropriate, or incidental for its
efficient and effective governance, and those which are essential to the
promotion of the general welfare. Within their respective territorial
jurisdictions, local government units shall ensure and support, among
other things, the preservation and enrichment of culture, promote health
and safety, enhance the right of the people to a balanced ecology,
encourage and support the development of appropriate and self-reliant
scientific and technological capabilities, improve public morals, enhance
economic prosperity and social justice, promote full employment among
their residents, maintain peace and order, and preserve the comfort and
convenience of their inhabitants.
Section 5, paragraph (a) of the Local Government Code states that "any
provision on a power of a local government unit shall be liberally
interpreted in its favor, and in case of doubt, any question thereon shall
be resolved in favor or devolution of powers x x x."
Section 5, paragraph (c) also provides that "the general welfare
provisions in this Code shall be liberally interpreted to give more powers
to local government units in accelerating economic development and
upgrading the quality of life for the people in the community." These
rules of interpretation emphasize the policy of local autonomy and the
devolution of powers to the local government units.
Designing and implementing a local government unit’s own
"organizational structure and staffing pattern" also implies the power to
revise and reorganize. Without such power, local governments will lose
the ability to adjust to the needs of its constituents. Effective and
efficient governmental services especially at the local government level
require rational and deliberate changes planned and executed in good
faith from time to time.
This was implied in Province of Negros Occidental v. Commissioners,
Commission on Audit.53 In that case, this court declared as valid the
ordinance passed by the province granting and releasing hospitalization
and health care insurance benefits to its officials and employees. This
court held that Section 2 of Administrative Order No. 10354 requiring the
President’s prior approval before the grant of any allowance or benefit is
applicable only to offices under the executive branch.55 Section 2 does
not mention local government units, thus, the prohibition does not apply
to them.56 This court then referred to the policy of local autonomy as
follows:
Thus, consistent with the state policy of local autonomy as guaranteed by
the 1987 Constitution, under Section 25, Article II and Section 2, Article
X, and the Local Government Code of 1991, we declare that the grant
and release of the hospitalization and health care insurance benefits
given to petitioner’s officials and employees were validly enacted
through an ordinance passed by petitioner’s Sangguniang
Panlalawigan.57
Local autonomy allows an interpretation of Sections 76 and 16 as
granting petitioner city the authority to create its organization
development program.
Petitioner city’s vision in 2005 of "Total Quality Service" for "the
improvement of the quality of services delivered by the city to the
delight of its internal and external customers"58 is a matter within its
discretion. It then conducted a process and practice review for each and
every unit within the city, resulting in the formulation of an organization
development masterplan adopted as Executive Order No. 13, series of
2009.59
Resolution No. 004, series of 2009, was later passed requesting for the
mayor’s support for GenSan SERVES. The third preambular clause
states that in order "to transform the bureaucracy into [an] effective and
result[s]-oriented structure, redounding to improved governance, there is
a need to entice employees aged 50-59 years old, to retire earlier than
[age] 65 for them to enjoy their retirement while they are still
healthy."60 Consequently, Ordinance No. 08, series of 2009, was passed
creating the GenSan SERVES program.
In Betoy v. The Board of Directors, NAPOCOR,61 this court explained
that a streamlining of organization for a more efficient system must pass
the test of good faith in order to be valid:
A reorganization involves the reduction of personnel, consolidation of
offices, or abolition thereof by reason of economy or redundancy of
functions.62 It could result in the loss of one's position through removal
or abolition of an office. However, for a reorganization for the purpose
of economy or to make the bureaucracy more efficient to be valid, it
must pass the test of good faith; otherwise, it is void ab
initio.63 (Emphasis supplied)
There are indicia of bad faith, none of which are present in this case.
Republic Act No. 6656 invoked by petitioner city as authority for the
creation of GenSan SERVES, for example, enumerates situations
considered as bad faith when employees are removed as a result of any
reorganization:
SECTION 2. No officer or employee in the career service shall be
removed except for a valid cause and after due notice and hearing. A
valid cause for removal exists when, pursuant to a bona fide
reorganization, a position has been abolished or rendered redundant or
there is a need to merge, divide, or consolidate positions in order to meet
the exigencies of the service, or other lawful causes allowed by the Civil
Service Law. The existence of any or some of the following
circumstances may be considered as evidence of bad faith in the
removals made as a result of reorganization, giving rise to a claim for
reinstatement or reappointment by an aggrieved party:
a) Where there is a significant increase in the number of
positions in the new staffing pattern of the department or
agency concerned;
b) Where an office is abolished and another performing
substantially the same functions in created;
c) Where incumbents are replaced by those less qualified in
terms of status of appointment, performance and merit;
d) Where there is a reclassification of offices in the department
or agency concerned and the reclassified offices perform
substantially the same functions as the original offices; and
e) Where the removal violates the order of separation provided
in Section 3 hereof. (Emphasis supplied)
None of these badges of bad faith exist in this case.
Petitioner city followed the order of priority under Section 4 of its
ordinance.64 It required applicants to undergo medical examination with
the local hospital and considered the hospital chief’s recommendations.65
Unfortunately, these allegations showing good faith is not enough to
declare the program created by petitioner city as a reorganization that
justifies the creation of a retirement benefit plan.
Petitioner city alleged that the positions occupied by those who qualified
for GenSan SERVES remained vacant, and it would neither hire
replacements nor promote employees earlier than June 30, 2011.66 This
means the positions left by those who availed of the program will
eventually be filled up by others. Their positions were not abolished or
merged with other positions for streamlining in the service.
 IV
The assailed decision by respondent Commission on Audit was anchored
on Section 28, paragraph (b) of Commonwealth Act No. 186, otherwise
known as the Government Service Insurance Act,67 as amended by
Republic Act No. 4968.68 This proscribes all supplementary retirement or
pension plans for government employees:
(b) Hereafter no insurance or retirement plan for officers or employees
shall be created by any employer. All supplementary retirement or
pension plans heretofore in force in any government office, agency, or
instrumentality or corporation owned and controlled by the government,
are hereby declared inoperative or abolished: Provided, That the rights of
those who are already eligible to retire thereunder shall not be affected.
Jurisprudence has discussed the nature and purpose of retirement
benefits and pension plans as follows:
Retirement benefits are, after all, a form of reward for an employee’s
loyalty and service to the employer, and are intended to help the
employee enjoy the remaining years of his life, lessening the burden of
worrying about his financial support or upkeep. On the other hand, a
pension partakes of the nature of "retained wages" of the retiree for a
dual purpose: to entice competent people to enter the government
service, and to permit them to retire from the service with relative
security, not only for those who have retained their vigor, but more so
for those who have been incapacitated by illness or accident.69 (Emphasis
supplied)
70
In Conte v. Commission on Audit,  this court discussed the purpose
behind the proscription found in Section 28, paragraph (b), as amended.
It was to address the need to prevent the proliferation of inequitous
plans:
x x x Sec. 28 (b) as amended by RA 4968 in no uncertain terms bars the
creation of any insurance or retirement plan – other than the GSIS – for
government officers and employees, in order to prevent the undue and
inequitous proliferation of such plans. x x x. To ignore this and rule
otherwise would be tantamount to permitting every other government
office or agency to put up its own supplementary retirement benefit plan
under the guise of such "financial assistance.71
Section 2 of the ordinance, as amended, defined "applicants" as referring
to "qualified employees below sixty (60) years of age but not less than
fifty (50) years and sickly employees below fifty (50) years of age but
not less than forty (40) years old from the effectivity of this Ordinance
and shall have rendered service in the City government for at least 15
years."
This means that even employees other than those who are unproductive
due to health reasons may apply under the ordinance. Albeit last in
priority, they may still qualify to avail of the incentives pursuant to
Section 4, paragraph (d), as amended:
Section 4. Prioritization. – The following applicants shall be prioritized
in availing the program:
a) First – Employees below sixty (60) years of age but not less
than fifty (50) years who are determined by the Chief of
General Santos City Hospital to be qualified to avail of the
program;
b) Second – Employees below sixty (60) years of age but not
less than fifty (50) years who are under continuous medication
as determined by the Chief of General Santos City Hospital;
c) Third – Employees below fifty (50) years of age but not less
than forty (40) years who are determined by the Chief of
General Santos City Hospital to be physically or mentally
incapacitated to further continue rendering service with the
City Government and recommended to avail of the program;
and
d) Fourth – Employees below sixty (60) years of age but not
less than fifty (50) years who are desirous to avail of the
program.
Moreover, Section 3 of the ordinance, as amended, enumerates those
who are covered by the program and may thus apply under the
ordinance:
Section 3. Coverage. – GenSan SERVES program covers the following
employees of the City Government:
(a) personnel occupying permanent positions;
(b) those who are below sixty (60) years of age but not less
than fifty (50) years on the date of application;
(c) those who are below fifty (50) years of age but not less
than forty (40) years on the date of application but confirmed
by the Chief of General Santos City Hospital to be sickly and
recommended to avail early retirement; and
(d) those who must have served the City Government of
General Santos a minimum of fifteen (15) continuous years.
Under paragraph (d), employees should have served for a minimum of
15 years to qualify. This requirement is consistent with the definition of
a retirement plan as a form of reward for an employee’s loyalty and
service to the employer. Moreover, pension plans as defined permit
employees to retire with relative security, especially for those who have
been incapacitated by illness.72
Section 5 states that "an eligible employee shall receive an early
retirement incentive provided under this program at the rate of 1 1/2
months of the employee’s latest basic salary for every year of service in
the City Government." This may be more than the amount of annuity
provided in Section 11, paragraph (a) of Commonwealth Act No. 186 as
amended,73 considering that an applicant must have rendered at least 15
years of service in the city government to qualify.74
Section 5 refers to an "early retirement incentive," the amount of which
is pegged on the beneficiary’s years of service in the city government.
The ordinance provides that only those who have rendered service to the
city government for at least 15 years may apply.75 Consequently, this
provision falls under the definition of a retirement benefit. Applying the
definition in Conte, it is a form of reward for an employee’s loyalty and
service to the city government, and it is intended to help the employee
enjoy the remaining years of his or her life by lessening his or her
financial worries.
V
In any case, those who availed of the GenSan SERVES were separated
from the service. Those who are separated from the service, whether
compulsorily for lawful cause,76 or voluntarily when incentivized to
retire early for streamlining purposes,77 should consequently be entitled
to a form of separation or severance pay.
Petitioner city invoked Republic Act No. 6656, which provides that
employees separated from the service as a result of any reorganization
shall be entitled to separation pay, retirement, and other benefits:
Section 9. All officers and employees who are found by the Civil Service
Commission to have been separated in violation of the provisions of this
Act, shall be ordered reinstated or reappointed as the case may be
without loss of seniority and shall be entitled to full pay for the period of
separation. Unless also separated for cause, all officers and employees,
who have been separated pursuant to reorganization shall, if entitled
thereto, be paid the appropriate separation pay and retirement and other
benefits under existing laws within ninety (90) days from the date of the
effectivity of their separation or from the date of the receipt of the
resolution of their appeals as the case may be: Provided, That application
for clearance has been filed and no action thereon has been made by the
corresponding department or agency. Those who are not entitled to said
benefits shall be paid a separation gratuity in the amount equivalent to
one (1) month salary for every year of service. Such separation pay and
retirement benefits shall have priority of payment out of the savings of
the department or agency concerned. (Emphasis supplied)
Separation or severance pay has been defined as "an allowance usually
based on length of service that is payable to an employee on severance x
x x, or as compensation due an employee upon the severance of his
employment status with the employer."78
Section 6 of the ordinance on post-retirement incentives provides for
benefits that are not computed based on years of service. They are lump
sum amounts and healthcare benefits:
Section 6. GenSan SERVES Post-Retirement Incentives – Upon
availment of early retirement, a qualified employee shall enjoy the
following in addition to the above incentives:
(e) Cash gift of Fifty Thousand Pesos (₱50,000.00) for the
sickly employees;
(f) Lifetime free medical consultation at General Santos City
Hospital;
(g) Annual aid in the maximum amount of Five Thousand
Pesos (₱5,000.00), if admitted at General Santos City Hospital;
and
(h) 14 karat gold ring as token.
The text of the ordinance indicates its purpose of encouraging
employees, especially those who are unproductive due to health reasons,
to avail of the program even before they reach the compulsory retirement
age. Section 6 provides for a form of severance pay to those who availed
of GenSan SERVES, which was executed in good faith.
We should not be misled by the use of the term "retirement" in Section 6
in determining the nature of the benefits it provides. Labels are not
determinative of substantive content. It is the purpose behind these
incentives, as read from the text of the ordinance and as inferred from
the effect of the ordinance as applied, which must govern.
The purpose of Section 6 is also different from the benefits proscribed in
Conte v. Commission on Audit,79 and the nature of its benefits must be
taken in the context of its rationale. The benefits provided in Section 6
serve its purpose of inducing petitioner city’s employees, who are
unproductive due to health reasons, to retire early. Respondent
Commission on Audit’s observation that the benefit provided is broader
than that provided in Conte v Commission on Audit fails to take this
rationale into consideration. Furthermore, the benefits under GenSan
SERVES were only given to a select few—the sickly and unproductive
due to health reasons. Certainly, this negates the position that the
benefits provide for supplementary retirement benefits that augment
existing retirement laws.
In Conte v. Commission on Audit80 cited by respondent Commission on
Audit, this court held that the "financial assistance" option for the
difference of benefits under Republic Act No. 660 and Republic Act No.
1616 violated Section 28, paragraph (b) as amended. Social Security
System (SSS) Resolution No. 56 subject of that case provides in part:
NOW, THEREFORE, BE IT RESOLVED, That all the SSS employees
who are simultaneously qualified for compulsory retirement at age 65 or
for optional retirement at a lower age be encouraged to avail for
themselves the life annuity under R.A. 660, as amended; x x x.81
The fifth preambular clause of Resolution No. 56 also states that "it is
the policy of the Social Security Commission to promote and to protect
the interest of all SSS employees, with a view to providing for their well-
being during both their working and retirement years."82 The financial
assistance provides benefits to all Social Security System employees
who are retirable under existing laws and who are qualified to apply. It is
available to all present and future Social Security System employees
upon reaching retirement age.83
Without doubt, this financial assistance of Conte augments the
retirement benefits provided under existing laws, in violation of Section
28, paragraph (b), as amended.
On the other hand, Section 3 of Ordinance No. 08, series of 2009 limits
its coverage.1a\^/phi1 Only qualified employees below sixty (60) years
of age but not less than fifty (50) years and sickly employees below fifty
(50) years of age but not less than forty (40) years from the effectivity of
the ordinance, with at least 15 years of service, are considered. Out of
1,361 regular employees of petitioner city, only 50 employees applied,
from which only 39 employees qualified to avail of the ordinance
benefits.84 Petitioner city alleged that there was one more applicant who
was supposed to qualify, but she had died of acute renal failure
secondary to diabetes nephropathy before her application was acted
upon.85
Furthermore, unlike in Conte, Ordinance No. 08, series of 2009, was a
one-time limited offer.86 The availment period was only within two
months from the ordinance’s effectivity.87
In any case, petitioner city is authorized by the Local Government Code
to approve ordinances to provide for the care of the sick:
SECTION 458. – Powers, Duties, Functions and Compensation. – (a)
The Sangguniang Panlungsod, as the legislative body of the city, shall
enact ordinances, approve resolutions and appropriate funds for the
general welfare of the city and its inhabitants pursuant to section 16 of
this Code and in the proper exercise of the corporate powers of the city
as provided for under section 22 of this Code, and shall:
xxxx
(5) Approve ordinances which shall ensure the efficient and effective
delivery of the basic services and facilities as provided for under Section
17 of this Code, and in addition to said services and facilities, shall:
xxxx
(xiv) Provide for the care of disabled persons, paupers, the aged, the
sick, persons of unsound mind, abandoned minors, juvenile delinquents,
drug dependents, abused children and other needy and disadvantaged
persons, particularly children and youth below eighteen (18) years of
age; and, subject to availability of funds, establish and provide for the
operation of centers and facilities for said needy and disadvantaged
persons[.] (Emphasis supplied)
This is also consistent with the constitutional mandate for a
comprehensive approach to health development, with priority for the
needs of the sick:
ARTICLE XIII
Social Justice and Human Rights
HEALTH
Section 11. The State shall adopt an integrated and comprehensive
approach to health development which shall endeavor to make essential
goods, health and other social services available to all the people at
affordable cost. There shall be priority for the needs of the
underprivileged, sick, elderly, disabled, women, and children. The State
shall endeavor to provide free medical care to paupers.
Thus, the cash gift for the sickly employees, lifetime free medical
consultation in petitioner city's hospital, and other similar benefits under
Section 6 of the ordinance are valid. VITUG, J.:

The proscription under Section 28, paragraph (b) of Commonwealth Act

No. 186, as amended, does not apply to Section 6 of the The 1987 Constitution enunciates the policy that the territorial and
ordinance.1âwphi1 Consequently, the Commission on Audit acted with political subdivisions shall enjoy local autonomy. 1 In obedience to that,
grave abuse of discretion when it declared the entire ordinance void and mandate of the fundamental law, Republic Act ("R.A.") No.7160,
of no effect. otherwise known as the Local Government Code, 2 expresses that the
territorial and political subdivisions of the State shall enjoy genuine and
WHEREFORE, the petition is PARTIALLY GRANTED. The assailed meaningful local autonomy in order to enable them to attain their fullest
Commission on Audit decision dated January 20, 2011 and resolution development as self-reliant communities and make them more effective
dated October 17, 2011 are AFFIRMED with MODIFICATION insofar partners in the attainment of national goals, and that it is a basic aim of
as Section 6 of Ordinance No. 08, series of 2009, as amended by the State to provide for a more responsive and accountable local
Ordinance No. 11, series of 2009, is declared as VALID. government structure instituted through a system of decentralization
whereby local government units shall be given more powers, authority,
responsibilities and resources.chanrobles virtual lawlibrary
SO ORDERED.
While the Constitution seeks to strengthen local units and ensure their
viability, clearly, however, it has never been the intention of that organic
law to create an imperium in imperio and install an intra sovereign
political subdivision independent of a single sovereign state.

The Court is asked in this instance to resolve the issue of whether under
the present set up the power of the Land Registration Office ("LTO") to
register, tricycles in particular, as well as to issue licenses for the driving
thereof, has likewise devolved to local government units.

The Regional Trial Court (Branch 2) of Butuan City held: 3 that the
authority to register tricycles, the grant of the corresponding franchise,
the issuance of tricycle drivers’ license, and the collection of fees
therefor had all been vested in the Local Government Units ("LGUs").
Accordingly, it decreed the issuance of a permanent writ of injunction
against LTO, prohibiting and enjoining LTO, as well as its employees
and other persons acting in its behalf, from (a) registering tricycles and
(b) issuing licenses to drivers of tricycles. The Court of Appeals, on
appeal to it, sustained the trial court.

[G.R. No. 131512. January 20, 2000.]
LAND TRANSPORTATION OFFICE [LTO], represented by
Assistant Secretary Manuel F. Bruan, LTO Regional Office, Region
X represented by its Regional Director, Timoteo A. Garcia; and
LTO Butuan represented by Rosita G. Sadiaga, its
Registrar, Petitioners, v. CITY OF BUTUAN, represented in this
case by Democrito D. Plaza II, City Mayor, Respondents.
DECISION
The adverse rulings of both the court a quo and the appellate court
prompted the LTO to file the instant petition for review on certiorari to
annul and set aside the decision, 4 dated 17 November 1997, of the
Court of Appeals affirming the permanent injunctive writ order of the
Regional Trial Court (Branch 2) of Butuan City.
Respondent City of Butuan asserts that one of the salient provisions
introduced by the Local Government Code is in the area of local taxation
which allows LGUs to collect registration fees or charges along with, in
its view, the corresponding issuance of all kinds of licenses or permits
for the driving of tricycles.
The 1987 Constitution provides:jgc:chanrobles.com.ph
"Each local government unit shall have the power to create its own
sources of revenues and to levy taxes, fees, and charges subject to such
guidelines and limitations as the Congress may provide, consistent with
the basic policy of local autonomy. Such taxes, fees, and charges shall
accrue exclusively to the local governments." 5
Section 129 and Section 133 of the Local Government Code
read:jgc:chanrobles.com.ph
"SECTION 129. Power to Create Sources of Revenue. — Each local
government unit shall exercise its power to create its own sources of
revenue and to levy taxes, fees, and charges subject to the provisions
herein, consistent with the basic policy of local autonomy. Such taxes,
fees, and charges shall accrue exclusively to the local government
units."cralaw virtua1aw library
"SECTION 133. Common Limitations on the Taxing Powers of Local
Government Units. — Unless otherwise provided herein, the exercise of
the taxing powers of provinces, cities, municipalities, and barangays
shall not extend to the levy of the following:jgc:chanrobles.com.ph
"x       x       x.
"(I) Taxes, fees or charges for the registration of motor vehicles and for
the issuance of all kinds of licenses or permits for the driving thereof,
except tricycles."cralaw virtua1aw library
Relying on the foregoing provisions of the law, the Sangguniang
Panlungsod ("SP") of Butuan, on 16 August 1992, passed SP Ordinance
No.916-92 entitled "An Ordinance Regulating the Operation of
Tricycles-for-Hire, providing mechanism for the issuance of Franchise,
Registration and Permit, and Imposing Penalties for Violations thereof
and for other Purposes." The ordinance provided for, among other
things, the payment of franchise fees for the grant of the franchise of
tricycles-for-hire, fees for the registration of the vehicle, and fees for the
issuance of a permit for the driving thereof.
Petitioner LTO explains that one of the functions of the national
government that, indeed, has been transferred to local government units
is the franchising authority over tricycles-for-hire of the Land
Transportation Franchising and Regulatory Board ("LTFRB") but not, it
asseverates, the authority of LTO to register all motor vehicles and to
issue to qualified persons of licenses to drive such vehicles.
In order to settle the variant positions of the parties, the City of Butuan,
represented by its City Mayor Democrito D. Plaza, filed on 28 June 1994
with the trial court a petition for "prohibition, mandamus, injunction
with a prayer for preliminary restraining order ex-parte" seeking the
declaration of the validity of SP Ordinance No.962-93 and the
prohibition of the registration of tricycles-for-hire and the issuance of
licenses for the driving thereof by the LTO.
LTO opposed the prayer in the petition.
On 20 March 1995, the trial court rendered a resolution; the dispositive
portion read:chanroblesvirtuallawlibrary
"In view of the foregoing, let a permanent injunctive writ be issued
against the respondent Land Transportation Office and the other
respondents, prohibiting and enjoining them, their employees, officers,
attorney’s or other persons acting in their behalf from forcing or
compelling Tricycles to be registered with, and drivers to secure their
licenses from respondent LTO or secure franchise from LTFRB and
from collecting fees thereon. It should be understood that the
registration, franchise of tricycles and driver’s license/permit granted or
issued by the City of Butuan are valid only within the territorial limits of
Butuan City.
"No pronouncement as to costs." 6
Petitioners timely moved for a reconsideration of the above resolution
but it was to no avail. Petitioners then appealed to the Court of Appeals.
In its now assailed decision, the appellate court, on 17 November 1997,
sustained the trial court. It ruled:jgc:chanrobles.com.ph
"WHEREFORE, the petition is hereby DISMISSED and the questioned
permanent injunctive writ issued by the court a quo dated March 20,
1995 AFFIRMED." 7
Coming up to this Court, petitioners raise this sole assignment of error,
to wit:jgc:chanrobles.com.ph
"The Court of Appeals [has] erred in sustaining the validity of the writ of
injunction issued by the trial court which enjoined LTO from (1)
registering tricycles-for-hire and (2) issuing licenses for the driving
thereof since the Local Government Code devolved only the franchising
authority of the LTFRB. Functions of the LTO were not devolved to the
LGU’s." 8
The petition is impressed with merit.
The Department of Transportation and Communications 9 ("DOTC"),
through the LTO and the LTFRB, has since been tasked with
implementing laws pertaining to land transportation. The LTO is a line
agency under the DOTC whose powers and functions, pursuant to
Article III, Section 4 (d) (1), 10 of R.A. No.4136, otherwise known as
Land Transportation and Traffic Code, as amended, deal primarily with
the registration of all motor vehicles and the licensing of drivers thereof.
The LTFRB, upon the other hand, is the governing body tasked by E.O.
No. 202, dated 19 June 1987, to regulate the operation of public utility or
"for hire" vehicles and to grant franchises or certificates of public
convenience ("CPC"). 11 Finely put, registration and licensing functions
are vested in the LTO while franchising and regulatory responsibilities
had been vested in the LTFRB.
Under the Local Government Code, certain functions of the DOTC were
transferred to the LGUs, thusly:jgc:chanrobles.com.ph
"SECTION 458. Powers, Duties, Functions and Compensation. —
"x       x       x
"(3) Subject to the provisions of Book II of this Code, enact ordinances
granting franchises and authorizing the issuance of permits or licenses,
upon such conditions and for such purposes intended to promote the
general welfare of the inhabitants of the city and pursuant to this
legislative authority shall:jgc:chanrobles.com.ph
"x       x       x.
"(VI) Subject to the guidelines prescribed by the Department of
Transportation and Communications, regulate the operation of tricycles
and grant franchises for the operation thereof within the territorial
jurisdiction of the city." (Emphasis supplied)
LGUs indubitably now have the power to regulate the operation of
tricycles-for-hire and to grant franchises for the operation thereof. "To
regulate" means to fix, establish, or control; to adjust by rule, method, or
established mode; to direct by rule or restriction; or to subject to
governing principles or laws. 12 A franchise is defined to be a special
privilege to do certain things conferred by government on an individual
or corporation, and which does not belong to citizens generally of
common right. 13 On the other hand, "to register" means to record
formally and exactly, to enroll, or to enter precisely in a list or the like,
14 and a "driver’s license" is the certificate or license issued by the
government which authorizes a person to operate a motor vehicle. 15
The devolution of the functions of the DOTC, performed by the LTFRB,
to the LGUs, as so aptly observed by the Solicitor General, is aimed at
curbing the alarming increase of accidents in national highways
involving tricycles. It has been the perception that local governments are
in good position to achieve the end desired by the law-making body
because of their proximity to the situation that can enable them to
address that serious concern better than the national government.
It may not be amiss to state, nevertheless, that under Article 458 (a)[3-
VI] of the Local Government Code, the power of LGUs to regulate the
operation of tricycles and to grant franchises for the operation thereof is
still subject to the guidelines prescribed by the DOTC. In compliance
therewith, the Department of Transportation and Communications
("DOTC") issued "Guidelines to Implement the Devolution of LTFRBs
Franchising Authority over Tricycles-For-Hire to Local Government
units pursuant to the Local Government Code." Pertinent provisions of
the guidelines state:chanrobles.com : chanrobles.com.ph
"In lieu of the Land Transportation Franchising and Regulatory Board
(LTFRB) in the DOTC, the Sangguniang Bayan/Sangguniang
Panlungsod (SB/SP) shall perform the following:jgc:chanrobles.com.ph
"(a) Issue, amend, revise, renew, suspend, or cancel MTOP and prescribe
the appropriate terms and conditions therefor;
"x       x       x.
"Operating Conditions:jgc:chanrobles.com.ph
"1. For safety reasons, no tricycles should operate on national highways
utilized by 4 wheel vehicles greater than 4 tons and where normal speed
exceed 40 KPH. However, the SB/SP may provide exceptions if there is
no alternative routs.
"2. Zones must be within the boundaries of the municipality/city.
However, existing zones within more than one municipality/city shall be
maintained, provided that operators serving said zone shall secure
MTOP’s from each of the municipalities/cities having jurisdiction over
the areas covered by the zone.
"3. A common color for tricycles-for-hire operating in the same zone
may be imposed. Each unit shall be assigned and bear an identification
number, aside from its LTO license plate number.
"4. An operator wishing to stop service completely, or to suspend service
for more than one month, should report in writing such termination or
suspension to the SB/SP which originally granted the MTOP prior
thereto. Transfer to another zone may be permitted upon application.
"5. The MTOP shall be valid for three (3) years, renewable for the same
period. Transfer to another zone, change of ownership of unit or transfer
of MTOP shall be construed as an amendment to an MTOP and shall
require appropriate approval of the SB/SP.
"6. Operators shall employ only drivers duly licensed by LTO for
tricycles-for-hire.
"7. No tricycle-for-hire shall be allowed to carry more passengers and/or
goods than it is designed for.
"8. A tricycle-for-hire shall be allowed to operate like a taxi service, i.e.,
service is rendered upon demand and without a fixed route within a
zone." 16
Such as can be gleaned from the explicit language of the statute, as well
as the corresponding guidelines issued by DOTC, the newly delegated
powers pertain to the franchising and regulatory powers theretofore
exercised by the LTFRB and not to the functions of the LTO relative to
the registration of motor vehicles and issuance of licenses for the driving
thereof . Clearly unaffected by the Local Government Code are the
powers of LTO under R.A. No.4136 requiring the registration of all
kinds of motor vehicles "used or operated on or upon any public
highway" in the country. Thus —
"SECTION 5. All motor vehicles and other vehicles must be registered.
— (a) No motor vehicle shall be used or operated on or upon any public
highway of the Philippines unless the same is properly registered for the
current year in accordance with the provisions of this Act (Article 1,
Chapter II, R.A. No. 4136).
The Commissioner of Land Transportation and his deputies are
empowered at anytime to examine and inspect such motor vehicles to
determine whether said vehicles are registered, or are unsightly, unsafe,
improperly marked or equipped, or otherwise unfit to be operated on
because of possible excessive damage to highways, bridges and other
infrastructures. 17 The LTO is additionally charged with being the
central repository and custodian of all records of all motor vehicles. 18
The Court shares the apprehension of the Solicitor General if the above
functions were to likewise devolve to local government units; he
states:jgc:chanrobles.com.ph
"If the tricycle registration function of respondent LTO is decentralized,
the incidence of theft of tricycles will most certainly go up, and stolen
tricycles registered in one local government could be registered in
another with ease. The determination of ownership thereof will also
become very difficult.
"Fake driver’s licenses will likewise proliferate. This likely scenario
unfolds where a tricycle driver, not qualified by petitioner LTO’s testing,
could secure a license from one municipality, and when the same is
confiscated, could just go another municipality to secure another
license.chanrobles.com : virtuallawlibrary
"Devolution will entail the hiring of additional personnel charged with
inspecting tricycles for road worthiness, testing drivers, and
documentation. Revenues raised from tricycle registration may not be
enough to meet salaries of additional personnel and incidental costs for
tools and equipment." 19
The reliance made by respondents on the broad taxing power of local
government units, specifically under Section 133 of the Local
Government Code, is tangential. Police power and taxation, along with
eminent domain, are inherent powers of sovereignty which the State
might share with local government units by delegation given under a
constitutional or a statutory fiat. All these inherent powers are for a
public purpose and legislative in nature but the similarities just about end
there. The basic aim of police power is public good and welfare.
Taxation, in its case, focuses on the power of government to raise
revenue in order to support its existence and carry out its legitimate
objectives. Although correlative to each other in many respects, the grant
of one does not necessarily carry with it the grant of the other. The two
powers are, by tradition and jurisprudence, separate and distinct powers,
varying in their respective concepts, character, scopes and limitations.
To construe the tax provisions of Section 133(1) indistinctively would
result in the repeal to that extent of LTO’s regulatory power which
evidently has not been intended. If it were otherwise, the law could have
just said so in Section 447 and 458 of Book III of the Local Government
Code in the same manner that the specific devolution of LTFRB’s power
on franchising of tricycles has been provided. Repeal by implication is
not favored. 20 The power over tricycles granted under Section 458(a)
(3)(VI) of the Local Government Code to LGUs is the power to regulate
their operation and to grant franchises for the operation thereof. The
exclusionary clause contained in the tax provisions of Section 133(1) of
the Local Government Code must not be held to have had the effect of
withdrawing the express power of LTO to cause the registration of all
motor vehicles and the issuance of licenses for the driving thereof. These
functions of the LTO are essentially regulatory in nature, exercised
pursuant to the police power of the State, whose basic objectives are to
achieve road safety by insuring the road worthiness of these motor
vehicles and the competence of drivers prescribed by R. A. 4136. Not
insignificant is the rule that a statute must not be construed in isolation
but must be taken in harmony with the extant body of laws. 21
The Court cannot end this decision without expressing its own serious
concern over the seeming laxity in the grant of franchises for the
operation of tricycles-for-hire and in allowing the indiscriminate use by
such vehicles on public highways and principal thoroughfares. Senator
Aquilino C. Pimentel, Jr., the principal author, and sponsor of the bill
that eventually has become to be known as the Local Government Code,
has aptly remarked:jgc:chanrobles.com.ph
"Tricycles are a popular means of transportation, specially in the
countryside. They are, unfortunately, being allowed to drive along
highways and principal thoroughfares where they pose hazards to their
passengers arising from potential collisions with buses, cars and
jeepneys.
"The operation of tricycles within a municipality may be regulated by
the Sangguniang Bayan. In this connection, the Sangguniang concerned
would do well to consider prohibiting the operation of tricycles along or
across highways invite collisions with faster and bigger vehicles and
impede the flow of traffic." 22
The need for ensuring public safety and convenience to commuters and
pedestrians alike is paramount. It might be well, indeed, for public
officials concerned to pay heed to a number of provisions in our laws
that can warrant in appropriate cases an incurrence of criminal and civil
liabilities. Thus —
The Revised Penal Code —
"ARTICLE 208. Prosecution of offenses; negligence and tolerance. —
The penalty of prision correccional in its minimum period and
suspension shall be imposed upon any public officer, or officer of the
law, who, in dereliction of the duties of his office, shall maliciously
refrain from instituting prosecution for the punishment of violators of the
law, or shall tolerate the commission of offenses."cralaw virtua1aw
library
The Civil Code —
"ARTICLE 27. Any person suffering material or moral loss because a
public servant or employee refuses or neglects, without just cause, to
perform his official duty may file an action for damages and other relief
against the latter, without prejudice to any disciplinary administrative
action that may be taken."cralaw virtua1aw library
"ARTICLE 34. When a member of a city or municipal police force
refuses or fails to render aid or protection to any person in case of danger
to life or property, such peace officer shall be primarily liable for
damages, and the city or municipality shall be subsidiarily responsible
therefor. The civil action herein recognized shall be independent of any
criminal, proceedings, and a preponderance of evidence shall suffice to
support such action."cralaw virtua1aw library
"ARTICLE 2189. Provinces, cities and municipalities shall be liable for
damages for the death of, or injuries suffered by, any person by reason of
the defective condition of roads, streets, bridges, public buildings, and
other public works under their control or supervision."cralaw virtua1aw
library
The Local Government Code —
"SECTION 24. Liability for Damages. — Local government units and
their officials are not exempt from liability for death or injury to persons
or damage to property." chanroblesvirtuallawlibrary
WHEREFORE, the assailed decision which enjoins the Land
Transportation Office from requiring the due registration of tricycles and
a license for the driving thereof is REVERSED and SET ASIDE.
No pronouncements on costs.
Let copies of this decision be likewise furnished the Department of
Interior and Local Governments, the Department of Public Works and
Highways and the Department of Transportation and Communication.
SO ORDERED.
G.R. No. 210551, June 30, 2015
JOSE J. FERRER, JR., Petitioner, v. CITY MAYOR HERBERT
BAUTISTA, CITY COUNCIL OF QUEZON CITY, CITY
TREASURER OF QUEZON CITY, AND CITY ASSESSOR OF
QUEZON CITY, Respondents.
DECISION
PERALTA, J.:
Before this Court is a petition for certiorari under Rule 65 of the Rules
of Court with prayer for the issuance of a temporary restraining order
(TRO) seeking to declare unconstitutional and illegal Ordinance Nos.
SP-2095, S-2011 and SP-2235, S-2013 on the Socialized Housing Tax
and Garbage Fee, respectively, which are being imposed by the
respondents.
The Case
On October 17, 2011,1 respondent Quezon City Council
enacted Ordinance No. SP-2095, S-2011,2 or the Socialized Housing
Tax of Quezon City, Section 3 of which provides:
chanRoblesvirtualLawlibrary
SECTION 3. IMPOSITION. A special assessment equivalent to one-half
percent (0.5%) on the assessed value of land in excess of One Hundred
Thousand Pesos (Php100,000.00) shall be collected by the City
Treasurer which shall accrue to the Socialized Housing Programs of the
Quezon City Government. The special assessment shall accrue to the
General Fund under a special account to be established for the purpose.
chanroblesvirtuallawlibrary
Effective for five (5) years, the Socialized Housing Tax (SHT) shall be
utilized by the Quezon City Government for the following projects: (a)
land purchase/land banking; (b) improvement of current/existing
socialized housing facilities; (c) land development; (d) construction of
core houses, sanitary cores, medium-rise buildings and other similar
structures; and (e) financing of public-private partnership agreement of
the Quezon City Government and National Housing Authority (NHA)
with the private sector.3 Under certain conditions, a tax credit shall be
enjoyed by taxpayers regularly paying the special assessment:
chanRoblesvirtualLawlibrary
SECTION 7. TAX CREDIT. Taxpayers dutifully paying the special FLOOR AREA IMPOSABLE FEE the property owners who must pay the SHT and the garbage fee,
assessment tax as imposed by this ordinance shall enjoy a tax credit. The Less than 40 sq. m. PHP25.00 exacting from them funds for basic essential public services that they
tax credit may be availed of only after five (5) years of continue[d] should not be held liable. Even if a Rule 65 petition is improper,
41 sq. m. – 60 sq. m. PHP50.00
payment. Further, the taxpayer availing this tax credit must be a taxpayer petitioner still asserts that this Court, in a number of cases like
in good standing as certified by the City Treasurer and City Assessor. 61 sq. m. – 100 sq. m. PHP75.00 in Rosario v. Court of Appeals,13 has taken cognizance of an improper
101 sq. m. – 150 sq. m. PHP100.00 remedy in the interest of justice.
The tax credit to be granted shall be equivalent to the total amount of the 151 sq. m. – 200 sq. [m.] or more PHP200.00
special assessment paid by the property owner, which shall be given as On high-rise Condominium Units We agree that respondents neither acted in any judicial or quasi-judicial
follows: capacity nor arrogated unto themselves any judicial or quasi-judicial
chanRoblesvirtualLawlibrary a) High-rise Condominium – The Homeowners Association of high- prerogatives.
1.  6th year  -   20% rise condominiums shall pay the annual garbage fee on the total size A respondent is said to be exercising judicial function where he has the
of the entire condominium and socialized Housing Unit and an power to determine what the law is and what the legal rights of the
2.  7th year  -   20% additional garbage fee shall be collected based on area occupied for parties are, and then undertakes to determine these questions and
every unit already sold or being amortized. adjudicate upon the rights of the parties.
3.  8th year  -   20% b) High-rise apartment units – Owners of high-rise apartment units shall
pay the annual garbage fee on the total lot size of the entire Quasi-judicial function, on the other hand, is “a term which applies to
4.  9th year  -   20% apartment and an additional garbage fee based on the schedule the actions, discretion, etc., of public administrative officers or bodies …
prescribed herein for every unit occupied. required to investigate facts or ascertain the existence of facts, hold
5.  10th year  -   20% The collection of the garbage fee shall accrue on the first day of January hearings, and draw conclusions from them as a basis for their official
chanroblesvirtuallawlibrary and shall be paid simultaneously with the payment of the real property action and to exercise discretion of a judicial nature.”
Furthermore, only the registered owners may avail of the tax credit and tax, but not later than the first quarter installment.8 In case a household
owner refuses to pay, a penalty of 25% of the garbage fee due, plus an Before a tribunal, board, or officer may exercise judicial or quasi-judicial
may not be continued by the subsequent property owners even if they are
interest of 2% per month or a fraction thereof, shall be acts, it is necessary that there be a law that gives rise to some specific
buyers in good faith, heirs or possessor of a right in whatever legal
charged.9ChanRoblesVirtualawlibrary rights of persons or property under which adverse claims to such rights
capacity over the subject property.4
are made, and the controversy ensuing therefrom is brought before a
chanroblesvirtuallawlibrary
Petitioner alleges that he is a registered co-owner of a 371-square-meter tribunal, board, or officer clothed with power and authority to determine
On the other hand, Ordinance No. SP-2235, S-20135 was enacted on residential property in Quezon City which is covered by Transfer the law and adjudicate the respective rights of the contending parties.14
December 16, 2013 and took effect ten days after when it was approved Certificate of Title (TCT) No. 216288, and that, on January 7, 2014, he chanroblesvirtuallawlibrary
by respondent City Mayor.6 The proceeds collected from the garbage paid his realty tax which already included the garbage fee in the sum of For a writ of certiorari to issue, the following requisites must concur: (1)
fees on residential properties shall be deposited solely and exclusively in Php100.00.10ChanRoblesVirtualawlibrary it must be directed against a tribunal, board, or officer exercising judicial
an earmarked special account under the general fund to be utilized for
or quasi-judicial functions; (2) the tribunal, board, or officer must have
garbage collections.7 Section 1 of the Ordinance set forth the schedule The instant petition was filed on January 17, 2014. We issued a TRO on acted without or in excess of jurisdiction or with grave abuse of
and manner for the collection of garbage fees: February 5, 2014, which enjoined the enforcement of Ordinance Nos. discretion amounting to lack or excess of jurisdiction; and (3) there is no
chanRoblesvirtualLawlibrary SP-2095 and SP-2235 and required respondents to comment on the appeal or any plain, speedy, and adequate remedy in the ordinary course
SECTION 1. The City Government of Quezon City in conformity with petition without necessarily giving due course of law. The enactment by the Quezon City Council of the assailed
and in relation to Republic Act No. 7160, otherwise known as the Local thereto.11ChanRoblesVirtualawlibrary ordinances was done in the exercise of its legislative, not judicial or
Government Code of 1991 HEREBY IMPOSES THE FOLLOWING
quasi-judicial, function. Under Republic Act (R.A.) No. 7160, or
SCHEDULE AND MANNER FOR THE ANNUAL COLLECTION OF Respondents filed their Comment12 with urgent motion to dissolve the the Local Government Code of 1991 (LGC), local legislative power shall
GARBAGE FEES, AS FOLLOWS: TRO on February 17, 2014. Thereafter, petitioner filed a Reply and a be exercised by the Sangguniang Panlungsod for the city.15 Said law
Memorandum on March 3, 2014 and September 8, 2014, respectively. likewise is specific in providing that the power to impose a tax, fee, or
On all domestic households in Quezon City;
charge, or to generate revenue shall be exercised by the sanggunian of
LAND AREA IMPOSABLE FEE Procedural Matters the local government unit concerned through an appropriate
Less than 200 sq. m. PHP 100.00 ordinance.16ChanRoblesVirtualawlibrary
A.  Propriety of a Petition for Certiorari
201 sq. m. – 500 sq. m. PHP 200.00
Also, although the instant petition is styled as a petition for certiorari, it
501 sq. m. – 1,000 sq. m. PHP 300.00 Respondents are of the view that this petition for certiorari is improper essentially seeks to declare the unconstitutionality and illegality of the
1,001 sq. m. – 1,500 sq. m. PHP 400.00 since they are not tribunals, boards or officers exercising judicial or questioned ordinances. It, thus, partakes of the nature of a petition for
1,501 sq. m. – 2,000 sq. m. or more PHP 500.00 quasi-judicial functions. Petitioner, however, counters that in enacting declaratory relief over which this Court has only appellate, not original,
On all condominium unit and socialized housing projects/units in Ordinance Nos. SP-2095 and SP-2235, the Quezon City Council jurisdiction.17ChanRoblesVirtualawlibrary
Quezon City; exercised quasi-judicial function because the ordinances ruled against
Despite these, a petition for declaratory relief may be treated as one for
prohibition or mandamus, over which We exercise original jurisdiction,
in cases with far-reaching implications or one which raises
transcendental issues or questions that need to be resolved for the public
good.18 The judicial policy is that this Court will entertain direct resort to
it when the redress sought cannot be obtained in the proper courts or
when exceptional and compelling circumstances warrant availment of a
remedy within and calling for the exercise of Our primary
jurisdiction.19ChanRoblesVirtualawlibrary
Section 2, Rule 65 of the Rules of Court lay down under what
circumstances a petition for prohibition may be filed:
chanRoblesvirtualLawlibrary
SEC. 2. Petition for prohibition. - When the proceedings of any tribunal,
corporation, board, officer or person, whether exercising judicial, quasi-
judicial or ministerial functions, are without or in excess of its or his
jurisdiction, or with grave abuse of discretion amounting to lack or
excess of jurisdiction, and there is no appeal or any other plain, speedy,
and adequate remedy in the ordinary course of law, a person aggrieved
thereby may file a verified petition in the proper court, alleging the facts
with certainty and praying that judgment be rendered commanding the
respondent to desist from further proceeding in the action or matter
specified therein, or otherwise granting such incidental reliefs as law and
justice may require.
chanroblesvirtuallawlibrary
In a petition for prohibition against any tribunal, corporation, board, or
person – whether exercising judicial, quasi-judicial, or ministerial
functions – who has acted without or in excess of jurisdiction or with
grave abuse of discretion, the petitioner prays that judgment be rendered,
commanding the respondents to desist from further proceeding in the
action or matter specified in the petition. In this case, petitioner's primary
intention is to prevent respondents from implementing Ordinance Nos.
SP-2095 and SP-2235. Obviously, the writ being sought is in the nature
of a prohibition, commanding desistance.
We consider that respondents City Mayor, City Treasurer, and City
Assessor are performing ministerial functions. A ministerial function is
one that an officer or tribunal performs in the context of a given set of
facts, in a prescribed manner and without regard for the exercise of his or
its own judgment, upon the propriety or impropriety of the act
done.20 Respondent Mayor, as chief executive of the city government,
exercises such powers and performs such duties and functions as
provided for by the LGC and other laws.21 Particularly, he has the duty to
ensure that all taxes and other revenues of the city are collected, and that
city funds are applied to the payment of expenses and settlement of
obligations of the city, in accordance with law or ordinance.22 On the
other hand, under the LGC, all local taxes, fees, and charges shall be
collected by the provincial, city, municipal, or barangay treasurer, or
their duly-authorized deputies, while the assessor shall take charge,
among others, of ensuring that all laws and policies governing the
appraisal and assessment of real properties for taxation purposes are
properly executed.23 Anent the SHT, the Department of Finance (DOF)
Local Finance Circular No. 1-97, dated April 16, 1997, is more specific:
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6.3 The Assessor’s office of the Id.ntified LGU shall:
a. immediately undertake an inventory of lands within
its jurisdiction which shall be subject to the levy of
the Social Housing Tax (SHT) by the local
sanggunian concerned;
b. inform the affected registered owners of the
effectivity of the SHT; a list of the lands and
registered owners shall also be posted in 3
conspicuous places in the city/municipality;
c. furnish the Treasurer’s office and the local
sanggunian concerned of the list of lands affected;
6.4 The Treasurer’s office shall:
a. collect the Social Housing Tax on top of the Real
Property Tax, SEF Tax and other special
assessments;
b. report to the DOF, thru the Bureau of Local
Government Finance, and the Mayor’s office the
monthly collections on Social Housing Tax (SHT).
An annual report should likewise be submitted to the
HUDCC on the total revenues raised during the year
pursuant to Sec. 43, R.A. 7279 and the manner in
which the same was disbursed.
Petitioner has adduced special and important reasons as to why direct
recourse to Us should be allowed. Aside from presenting a novel
question of law, this case calls for immediate resolution since the
challenged ordinances adversely affect the property interests of all
paying constituents of Quezon City. As well, this petition serves as a test
case for the guidance of other local government units (LGUs). Indeed,
the petition at bar is of transcendental importance warranting a relaxation
of the doctrine of hierarchy of courts. In Social Justice Society (SJS)
Officers, et al. v. Lim,24 the Court cited the case of Senator Jaworski v.
Phil. Amusement & Gaming Corp.,25 where We ratiocinated:
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Granting arguendo that the present action cannot be properly treated as a
petition for prohibition, the transcendental importance of the issues
involved in this case warrants that we set aside the technical defects
and take primary jurisdiction over the petition at bar. x x x This is
in accordance with the well-entrenched principle that rules of
procedure are not inflexible tools designed to hinder or delay, but to
facilitate and promote the administration of justice. Their strict and
rigid application, which would result in technicalities that tend to
frustrate, rather than promote substantial justice, must always be
eschewed.26
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B.  Locus Standi of Petitioner
Respondents challenge petitioner’s legal standing to file this case on the
ground that, in relation to Section 3 of Ordinance No. SP-2095,
petitioner failed to allege his ownership of a property that has an
assessed value of more than Php100,000.00 and, with respect to
Ordinance No. SP-2335, by what standing or personality he filed the
case to nullify the same. According to respondents, the petition is not a
class suit, and that, for not having specifically alleged that petitioner
filed the case as a taxpayer, it could only be surmised whether he is a
party-in-interest who stands to be directly benefited or injured by the
judgment in this case.
It is a general rule that every action must be prosecuted or defended in
the name of the real party-in-interest, who stands to be benefited or
injured by the judgment in the suit, or the party entitled to the avails of
the suit.
Jurisprudence defines interest as "material interest, an interest in issue
and to be affected by the decree, as distinguished from mere interest in
the question involved, or a mere incidental interest. By real interest is
meant a present substantial interest, as distinguished from a mere
expectancy or a future, contingent, subordinate, or consequential
interest." "To qualify a person to be a real party-in-interest in whose
name an action must be prosecuted, he must appear to be the present real
owner of the right sought to be enforced."27
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“Legal standing” or locus standi calls for more than just a generalized
grievance.28 The concept has been defined as a personal and substantial
interest in the case such that the party has sustained or will sustain direct
injury as a result of the governmental act that is being challenged.29 The
gist of the question of standing is whether a party alleges such personal
stake in the outcome of the controversy as to assure that concrete
adverseness which sharpens the presentation of issues upon which the
court depends for illumination of difficult constitutional
questions.30ChanRoblesVirtualawlibrary
A party challenging the constitutionality of a law, act, or statute must
show “not only that the law is invalid, but also that he has sustained or is
in immediate, or 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 be shown that he 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 complained of.31ChanRoblesVirtualawlibrary
Tested by the foregoing, petitioner in this case clearly has legal standing
to file the petition. He is a real party-in-interest to assail the
constitutionality and legality of Ordinance Nos. SP-2095 and SP-2235
because respondents did not dispute that he is a registered co-owner of a
residential property in Quezon City and that he paid property tax which
already included the SHT and the garbage fee. He has substantial right to
seek a refund of the payments he made and to stop future imposition.
While he is a lone petitioner, his cause of action to declare the validity of
the subject ordinances is substantial and of paramount interest to
similarly situated property owners in Quezon City.
C.  Litis Pendentia
Respondents move for the dismissal of this petition on the ground of litis
pendentia. They claim that, as early as February 22, 2012, a case
entitled Alliance of Quezon City Homeowners, Inc., et al., v. Hon.
Herbert Bautista, et al., docketed as Civil Case No. Q-12-7-820, has
been pending in the Quezon City Regional Trial Court, Branch 104,
which assails the legality of Ordinance No. SP-2095. Relying on City of
Makati, et al. v. Municipality (now City) of Taguig, et al.,32 respondents
assert that there is substantial identity of parties between the two cases
because petitioner herein and plaintiffs in the civil case filed their
respective cases as taxpayers of Quezon City.
For petitioner, however, respondents’ contention is untenable since he is
not a party in Alliance and does not even have the remotest identity or
association with the plaintiffs in said civil case. Moreover, respondents’
arguments would deprive this Court of its jurisdiction to determine the
constitutionality of laws under Section 5, Article VIII of the 1987
Constitution.33ChanRoblesVirtualawlibrary
Litis pendentia is a Latin term which literally means “a pending suit” and
is variously referred to in some decisions as lis pendens and auter action
pendant.34 While it is normally connected with the control which the
court has on a property involved in a suit during the continuance
proceedings, it is more interposed as a ground for the dismissal of a civil
action pending in court.35 In Film Development Council of the
Philippines v. SM Prime Holdings, Inc.,36 We elucidated:
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Litis pendentia, as a ground for the dismissal of a civil action, refers to a
situation where two actions are pending between the same parties for the
same cause of action, so that one of them becomes unnecessary and
vexatious. It is based on the policy against multiplicity of suit and
authorizes a court to dismiss a case motu proprio.
xxxx
The requisites in order that an action may be dismissed on the ground
of litis pendentia are: (a) the identity of parties, or at least such as
representing the same interest in both actions; (b) the identity of rights
asserted and relief prayed for, the relief being founded on the same facts,
and (c) the identity of the two cases such that judgment in one,
regardless of which party is successful, would amount to res judicata in
the other.
xxxx
The underlying principle of litis pendentia is the theory that a party is
not allowed to vex another more than once regarding the same subject
matter and for the same cause of action. This theory is founded on the
public policy that the same subject matter should not be the subject of
controversy in courts more than once, in order that possible conflicting
judgments may be avoided for the sake of the stability of the rights and
status of persons, and also to avoid the costs and expenses incident to
numerous suits.
Among the several tests resorted to in ascertaining whether two suits
relate to a single or common cause of action are: (1) whether the same
evidence would support and sustain both the first and second causes of
action; and (2) whether the defenses in one case may be used to
substantiate the complaint in the other.
The determination of whether there is an identity of causes of action for
purposes of litis pendentia is inextricably linked with that of res
judicata, each constituting an element of the other. In either case, both
relate to the sound practice of including, in a single litigation, the
disposition of all issues relating to a cause of action that is before a
court.37
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There is substantial identity of the parties when there is a community of
interest between a party in the first case and a party in the second case
albeit the latter was not impleaded in the first case.38 Moreover, the fact
that the positions of the parties are reversed, i.e., the plaintiffs in the first
case are the defendants in the second case or vice-versa, does not negate
the identity of parties for purposes of determining whether the case is
dismissible on the ground of litis
pendentia.39ChanRoblesVirtualawlibrary
In this case, it is notable that respondents failed to attach any pleading
connected with the alleged civil case pending before the Quezon City
trial court. Granting that there is substantial identity of parties between
said case and this petition, dismissal on the ground of litis pendentia still
cannot be had in view of the absence of the second and third requisites.
There is no way for Us to determine whether both cases are based on the
same set of facts that require the presentation of the same evidence. Even
if founded on the same set of facts, the rights asserted and reliefs prayed
for could be different. Moreover, there is no basis to rule that the two
cases are intimately related and/or intertwined with one another such that
the judgment that may be rendered in one, regardless of which party
would be successful, would amount to res judicata in the other.
D. Failure to Exhaust Administrative Remedies
Respondents contend that petitioner failed to exhaust administrative
remedies for his non-compliance with Section 187 of the LGC, which
mandates:
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Section 187. Procedure for Approval and Effectivity of Tax Ordinances
and Revenue Measures; Mandatory Public Hearings. – The procedure
for approval of local tax ordinances and revenue measures shall be in
accordance with the provisions of this Code: Provided, That public
hearings shall be conducted for the purpose prior to the enactment
thereof: Provided, further, That any question on the constitutionality or
legality of tax ordinances or revenue measures may be raised on appeal
within thirty (30) days from the effectivity thereof to the Secretary of
Justice who shall render a decision within sixty (60) days from the date
of receipt of the appeal: Provided, however, That such appeal shall not
have the effect of suspending the effectivity of the ordinance and the
accrual and payment of the tax, fee, or charge levied therein: Provided,
finally, That within thirty (30) days after receipt of the decision or the
lapse of the sixty-day period without the Secretary of Justice acting upon
the appeal, the aggrieved party may file appropriate proceedings with a
court of competent jurisdiction.
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The provision, the constitutionality of which was sustained in Drilon v.
Lim,40 has been construed as mandatory41 considering that –
A municipal tax ordinance empowers a local government unit to impose
taxes. The power to tax is the most effective instrument to raise needed
revenues to finance and support the myriad activities of local
government units for the delivery of basic services essential to the
promotion of the general welfare and enhancement of peace, progress,
and prosperity of the people. Consequently, any delay in implementing
tax measures would be to the detriment of the public. It is for this reason
that protests over tax ordinances are required to be done within certain
time frames. x x x.42
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The obligatory nature of Section 187 was underscored in Hagonoy
Market Vendor Asso. v. Municipality of Hagonoy:43cralawlawlibrary
x x x [T]he timeframe fixed by law for parties to avail of their legal
remedies before competent courts is not a “mere technicality” that can be
easily brushed aside. The periods stated in Section 187 of the Local
Government Code are mandatory. x x x Being its lifeblood, collection of
revenues by the government is of paramount importance. The funds for
the operation of its agencies and provision of basic services to its
inhabitants are largely derived from its revenues and collections. Thus, it
is essential that the validity of revenue measures is not left uncertain for
a considerable length of time. Hence, the law provided a time limit for
an aggrieved party to assail the legality of revenue measures and tax
ordinances.”44
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Despite these cases, the Court, in Ongsuco, et al. v. Hon. Malones,45 held
that there was no need for petitioners therein to exhaust administrative
remedies before resorting to the courts, considering that there was only a
pure question of law, the parties did not dispute any factual matter on
which they had to present evidence. Likewise, in Cagayan Electric
Power and Light Co., Inc. v. City of Cagayan de Oro,46 We relaxed the
application of the rules in view of the more substantive matters. For the
same reasons, this petition is an exception to the general rule.
Substantive Issues
Petitioner asserts that the protection of real properties from informal
settlers and the collection of garbage are basic and essential duties and
functions of the Quezon City Government. By imposing the SHT and the
garbage fee, the latter has shown a penchant and pattern to collect taxes
to pay for public services that could be covered by its revenues from
taxes imposed on property, idle land, business, transfer, amusement, etc.,
as well as the Internal Revenue Allotment (IRA) from the National
Government. For petitioner, it is noteworthy that respondents did not
raise the issue that the Quezon City Government is in dire financial state
and desperately needs money to fund housing for informal settlers and to
pay for garbage collection. In fact, it has not denied that its revenue
collection in 2012 is in the sum of P13.69 billion.
Moreover, the imposition of the SHT and the garbage fee cannot be
justified by the Quezon City Government as an exercise of its power to
create sources of income under Section 5, Article X of the 1987
Constitution.47 According to petitioner, the constitutional provision is not
a carte blanche for the LGU to tax everything under its territorial and
political jurisdiction as the provision itself admits of guidelines and
limitations.
Petitioner further claims that the annual property tax is an ad
valorem tax, a percentage of the assessed value of the property, which is
subject to revision every three (3) years in order to reflect an increase in
the market value of the property. The SHT and the garbage fee are
actually increases in the property tax which are not based on the assessed
value of the property or its reassessment every three years; hence, in
violation of Sections 232 and 233 of the
LGC.48ChanRoblesVirtualawlibrary
For their part, respondents relied on the presumption in favor of the
constitutionality of Ordinance Nos. SP-2095 and SP-2235,
invoking Victorias Milling Co., Inc. v. Municipality of Victorias,
etc.,49People v. Siton, et al.,50 and Hon. Ermita v. Hon. Aldecoa-
Delorino.51 They argue that the burden of establishing the invalidity of
an ordinance rests heavily upon the party challenging its
constitutionality. They insist that the questioned ordinances are proper
exercises of police power similar to Telecom. & Broadcast Attys. of the
Phils., Inc. v. COMELEC52 and Social Justice Society (SJS), et al. v.
Hon. Atienza, Jr.53 and that their enactment finds basis in the social
justice principle enshrined in Section 9,54 Article II of the 1987
Constitution.
As to the issue of publication, respondents argue that where the law
provides for its own effectivity, publication in the Official Gazette is not
necessary so long as it is not punitive in character, citing Balbuna, et al.
v. Hon. Secretary of Education, et al.55 and Askay v. Cosalan.56 Thus,
Ordinance No. SP-2095 took effect after its publication, while Ordinance
No. SP-2235 became effective after its approval on December 26, 2013.
Additionally, the parties articulate the following positions:
On the Socialized Housing Tax
Respondents emphasize that the SHT is pursuant to the social justice
principle found in Sections 1 and 2, Article XIII57 of the 1987
Constitution and Sections 2 (a)58 and 4359 of R.A. No. 7279, or the
“Urban Development and Housing Act of 1992 (UDHA).
Relying on Manila Race Horse Trainers Assn., Inc. v. De La
Fuente,60 and Victorias Milling Co., Inc. v. Municipality of Victorias,
etc.,61 respondents assert that Ordinance No. SP-2095 applies equally to
all real property owners without discrimination. There is no way that the
ordinance could violate the equal protection clause because real property
owners and informal settlers do not belong to the same class.
Ordinance No. SP-2095 is also not oppressive since the tax rate being
imposed is consistent with the UDHA. While the law authorizes LGUs
to collect SHT on properties with an assessed value of more than
P50,000.00, the questioned ordinance only covers properties with an
assessed value exceeding P100,000.00. As well, the ordinance provides
for a tax credit equivalent to the total amount of the special assessment
paid by the property owner beginning in the sixth (6th) year of the
effectivity of the ordinance.
On the contrary, petitioner claims that the collection of the SHT is
tantamount to a penalty imposed on real property owners due to the
failure of respondent Quezon City Mayor and Council to perform their
duty to secure and protect real property owners from informal settlers,
thereby burdening them with the expenses to provide funds for housing.
For petitioner, the SHT cannot be viewed as a “charity” from real
property owners since it is forced, not voluntary.
Also, petitioner argues that the collection of the SHT is a kind of class
legislation that violates the right of property owners to equal protection
of the laws since it favors informal settlers who occupy property not
their own and pay no taxes over law-abiding real property owners who
pay income and realty taxes.
Petitioner further contends that respondents’ characterization of the SHT
as “nothing more than an advance payment on the real property tax” has
no statutory basis. Allegedly, property tax cannot be collected before it is
due because, under the LGC, chartered cities are authorized to impose
property tax based on the assessed value and the general revision of
assessment that is made every three (3) years.
As to the rationale of SHT stated in Ordinance No. SP-2095, which, in
turn, was based on Section 43 of the UDHA, petitioner asserts that there
is no specific provision in the 1987 Constitution stating that the
ownership and enjoyment of property bear a social function. And even if
there is, it is seriously doubtful and far-fetched that the principle means
that property owners should provide funds for the housing of informal
settlers and for home site development. Social justice and police power,
petitioner believes, does not mean imposing a tax on one, or that one has
to give up something, for the benefit of another. At best, the principle
that property ownership and enjoyment bear a social function is but a
reiteration of the Civil Law principle that property should not be enjoyed
and abused to the injury of other properties and the community, and that
the use of the property may be restricted by police power, the exercise of
which is not involved in this case.
Finally, petitioner alleges that 6 Bistekvilles will be constructed out of
the SHT collected. Bistek is the monicker of respondent City Mayor.
The Bistekvilles makes it clear, therefore, that politicians will take the
credit for the tax imposed on real property owners.
On the Garbage Fee
Respondents claim that Ordinance No. S-2235, which is an exercise of
police power, collects on the average from every household a garbage
fee in the meager amount of thirty-three (33) centavos per day compared
with the sum of P1,659.83 that the Quezon City Government annually
spends for every household for garbage collection and waste
management.62ChanRoblesVirtualawlibrary
In addition, there is no double taxation because the ordinance involves a
fee. Even assuming that the garbage fee is a tax, the same cannot be a
direct duplicate tax as it is imposed on a different subject matter and is of
a different kind or character. Based on Villanueva, et al. v. City of
Iloilo63 and Victorias Milling Co., Inc. v. Municipality of Victorias,
etc.,64 there is no “taxing twice” because the real property tax is imposed
on ownership based on its assessed value, while the garbage fee is
required on the domestic household. The only reference to the property
is the determination of the applicable rate and the facility of collection.
Petitioner argues, however, that Ordinance No. S-2235 cannot be
justified as an exercise of police power. The cases of Calalang v.
Williams,65Patalinghug v. Court of Appeals,66 and Social Justice Society
(SJS), et al. v. Hon. Atienza, Jr.,67 which were cited by respondents, are
inapplicable since the assailed ordinance is a revenue measure and does
not regulate the disposal or other aspect of garbage.
The subject ordinance, for petitioner, is discriminatory as it collects
garbage fee only from domestic households and not from restaurants,
food courts, fast food chains, and other commercial dining places that
spew garbage much more than residential property owners.
Petitioner likewise contends that the imposition of garbage fee is
tantamount to double taxation because garbage collection is a basic and
essential public service that should be paid out from property tax,
business tax, transfer tax, amusement tax, community tax certificate,
other taxes, and the IRA of the Quezon City Government. To bolster the
claim, he states that the revenue collection of the Quezon City
Government reached Php13.69 billion in 2012. A small portion of said
amount could be spent for garbage collection and other essential
services.
It is further noted that the Quezon City Government already collects
garbage fee under Section 4768 of R.A. No. 9003, or the Ecological Solid
Waste Management Act of 2000, which authorizes LGUs to impose fees
in amounts sufficient to pay the costs of preparing, adopting, and
implementing a solid waste management plan, and that LGUs have
access to the Solid Waste Management (SWM) Fund created under
Section 4669 of the same law. Also, according to petitioner, it is evident
that Ordinance No. S-2235 is inconsistent with R.A. No. 9003 for while
the law encourages segregation, composting, and recycling of waste, the
ordinance only emphasizes the collection and payment of garbage fee;
while the law calls for an active involvement of the barangay in the
collection, segregation, and recycling of garbage, the ordinance skips
such mandate.
Lastly, in challenging the ordinance, petitioner avers that the garbage fee
was collected even if the required publication of its approval had not yet
elapsed. He notes that on January 7, 2014, he paid his realty tax which
already included the garbage fee.
The Court’s Ruling
Respondents correctly argued that an ordinance, as in every law, is
presumed valid.
An ordinance carries with it the presumption of validity. The question of
reasonableness though is open to judicial inquiry. Much should be left
thus to the discretion of municipal authorities. Courts will go slow in
writing off an ordinance as unreasonable unless the amount is so
excessive as to be prohibitive, arbitrary, unreasonable, oppressive, or
confiscatory. A rule which has gained acceptance is that factors relevant
to such an inquiry are the municipal conditions as a whole and the nature
of the business made subject to imposition.70
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For an ordinance to be valid though, it must not only be within the
corporate powers of the LGU to enact and must be passed according to
the procedure prescribed by law, it should also conform to the following
requirements: (1) not contrary to the Constitution or any statute; (2) not
unfair or oppressive; (3) not partial or discriminatory; (4) not prohibit
but may regulate trade; (5) general and consistent with public policy; and
(6) not unreasonable.71 As jurisprudence indicates, the tests are divided
into the formal (i.e., whether the ordinance was enacted within the
corporate powers of the LGU and whether it was passed in accordance
with the procedure prescribed by law), and the substantive (i.e.,
involving inherent merit, like the conformity of the ordinance with the
limitations under the Constitution and the statutes, as well as with the
requirements of fairness and reason, and its consistency with public
policy).72ChanRoblesVirtualawlibrary
An ordinance must pass muster under the test of constitutionality and the
test of consistency with the prevailing laws.73 If not, it is
void.74 Ordinance should uphold the principle of the supremacy of the
Constitution.75 As to conformity with existing statutes, Batangas CATV,
Inc. v. Court of Appeals76 has this to say:
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It is a fundamental principle that municipal ordinances are inferior in
status and subordinate to the laws of the state. An ordinance in conflict
with a state law of general character and statewide application is
universally held to be invalid. The principle is frequently expressed in
the declaration that municipal authorities, under a general grant of
power, cannot adopt ordinances which infringe the spirit of a state law or
repugnant to the general policy of the state. In every power to pass
ordinances given to a municipality, there is an implied restriction that the
ordinances shall be consistent with the general law. In the language of
Justice Isagani Cruz (ret.), this Court, in Magtajas vs. Pryce Properties
Corp., Inc., ruled that:
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The rationale of the requirement that the ordinances should not
contravene a statute is obvious. Municipal governments are only agents
of the national government. Local councils exercise only delegated
legislative powers conferred on them by Congress as the national
lawmaking body. The delegate cannot be superior to the principal or
exercise powers higher than those of the latter. It is a heresy to suggest
that the local government units can undo the acts of Congress, from
which they have derived their power in the first place, and negate by
mere ordinance the mandate of the statute.
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Municipal corporations owe their origin to, and derive their powers and
rights wholly from the legislature. It breathes into them the breath of life,
without which they cannot exist. As it creates, so it may destroy. As it
may destroy, it may abridge and control. Unless there is some
constitutional limitation on the right, the legislature might, by a single
act, and if we can suppose it capable of so great a folly and so great a
wrong, sweep from existence all of the municipal corporations in the
State, and the corporation could not prevent it. We know of no limitation
on the right so far as to the corporation themselves are concerned. They
are, so to phrase it, the mere tenants at will of the legislature.
This basic relationship between the national legislature and the local
government units has not been enfeebled by the new provisions in the
Constitution strengthening the policy of local autonomy. Without
meaning to detract from that policy, we here confirm that Congress
retains control of the local government units although in significantly
reduced degree now than under our previous Constitutions. The power to
create still includes the power to destroy. The power to grant still
includes the power to withhold or recall. True, there are certain notable
innovations in the Constitution, like the direct conferment on the local
government units of the power to tax, which cannot now be withdrawn
by mere statute. By and large, however, the national legislature is still
the principal of the local government units, which cannot defy its will or
modify or violate it.77
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LGUs must be reminded that they merely form part of the whole; that
the policy of ensuring the autonomy of local governments was never
intended by the drafters of the 1987 Constitution to create an imperium
in imperio and install an intra-sovereign political subdivision
independent of a single sovereign state.78 “[M]unicipal corporations are
bodies politic and corporate, created not only as local units of local self-
government, but as governmental agencies of the state. The legislature,
by establishing a municipal corporation, does not divest the State of any
of its sovereignty; absolve itself from its right and duty to administer the
public affairs of the entire state; or divest itself of any power over the
inhabitants of the district which it possesses before the charter was
granted.”79ChanRoblesVirtualawlibrary
LGUs are able to legislate only by virtue of a valid delegation of
legislative power from the national legislature; they are mere agents
vested with what is called the power of subordinate
legislation.80 “Congress enacted the LGC as the implementing law for
the delegation to the various LGUs of the State’s great powers, namely:
the police power, the power of eminent domain, and the power of
taxation. The LGC was fashioned to delineate the specific parameters
and limitations to be complied with by each LGU in the exercise of these
delegated powers with the view of making each LGU a fully functioning
subdivision of the State subject to the constitutional and statutory
limitations.”81ChanRoblesVirtualawlibrary
Specifically, with regard to the power of taxation, it is indubitably the
most effective instrument to raise needed revenues in financing and
supporting myriad activities of the LGUs for the delivery of basic
services essential to the promotion of the general welfare and the
enhancement of peace, progress, and prosperity of the people.82 As this
Court opined in National Power Corp. v. City of
Cabanatuan:83cralawlawlibrary
In recent years, the increasing social challenges of the times expanded
the scope of state activity, and taxation has become a tool to realize
social justice and the equitable distribution of wealth, economic progress
and the protection of local industries as well as public welfare and
similar objectives. Taxation assumes even greater significance with the
ratification of the 1987 Constitution. Thenceforth, the power to tax is no
longer vested exclusively on Congress; local legislative bodies are now
given direct authority to levy taxes, fees and other charges pursuant to
Article X, Section 5 of the 1987 Constitution, viz:
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“Section 5. Each Local Government unit shall have the power to create
its own sources of revenue, to levy taxes, fees and charges subject to
such guidelines and limitations as the Congress may provide, consistent
with the basic policy of local autonomy. Such taxes, fees and charges
shall accrue exclusively to the local governments.”
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This paradigm shift results from the realization that genuine
development can be achieved only by strengthening local autonomy and
promoting decentralization of governance. For a long time, the country’s
highly centralized government structure has bred a culture of
dependence among local government leaders upon the national
leadership. It has also “dampened the spirit of initiative, innovation and
imaginative resilience in matters of local development on the part of
local government leaders.” The only way to shatter this culture of
dependence is to give the LGUs a wider role in the delivery of basic
services, and confer them sufficient powers to generate their own
sources for the purpose. To achieve this goal, Section 3 of Article X of
the 1987 Constitution mandates Congress to enact a local government
code that will, consistent with the basic policy of local autonomy, set the
guidelines and limitations to this grant of taxing powers x x x84
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Fairly recently, We also stated in Pelizloy Realty Corporation v.
Province of Benguet85 that:
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The rule governing the taxing power of provinces, cities, municipalities
and barangays is summarized in Icard v. City Council of Baguio:
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It is settled that a municipal corporation unlike a sovereign state is
clothed with no inherent power of taxation. The charter or statute must
plainly show an intent to confer that power or the municipality, cannot
assume it. And the power when granted is to be construed in strictissimi
juris. Any doubt or ambiguity arising out of the term used in granting
that power must be resolved against the municipality. Inferences,
implications, deductions – all these – have no place in the interpretation
of the taxing power of a municipal corporation. [Underscoring supplied] (b) Taxes, fees, charges and other impositions shall:
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xxxx (1) be equitable and based as far as practicable on the taxpayer’s ability
to pay;
Per Section 5, Article X of the 1987 Constitution, “the power to tax is no
longer vested exclusively on Congress; local legislative bodies are now (2) be levied and collected only for public purposes;
given direct authority to levy taxes, fees and other charges.”
Nevertheless, such authority is “subject to such guidelines and (3) not be unjust, excessive, oppressive, or confiscatory;
limitations as the Congress may provide.”
chanroblesvirtuallawlibrary (4) not be contrary to law, public policy, national economic policy, or in
restraint of trade;
In conformity with Section 3, Article X of the 1987 Constitution,
Congress enacted Republic Act No. 7160, otherwise known as the Local
(c) The collection of local taxes, fees, charges and other impositions
Government Code of 1991. Book II of the LGC governs local taxation
shall in no case be let to any private person;
and fiscal matters.86
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(d) The revenue collected pursuant to the provisions of this Code shall
Indeed, LGUs have no inherent power to tax except to the extent that inure solely to the benefit of, and be subject to the disposition by, the
such power might be delegated to them either by the basic law or by the local government unit levying the tax, fee, charge or other imposition
statute.87 “Under the now prevailing Constitution, where there is neither unless otherwise specifically provided herein; and,
a grant nor a prohibition by statute, the tax power must be deemed to
exist although Congress may provide statutory limitations and (e) Each local government unit shall, as far as practicable, evolve a
guidelines. The basic rationale for the current rule is to safeguard the progressive system of taxation.
viability and self-sufficiency of local government units by directly chanroblesvirtuallawlibrary
granting them general and broad tax powers. Nevertheless, the
SECTION 133. Common Limitations on the Taxing Powers of Local
fundamental law did not intend the delegation to be absolute and
Government Units. – Unless otherwise provided herein, the exercise of
unconditional; the constitutional objective obviously is to ensure that,
the taxing powers of provinces, cities, municipalities, and barangays
while the local government units are being strengthened and made more
shall not extend to the levy of the following:
autonomous, the legislature must still see to it that (a) the taxpayer will
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not be over-burdened or saddled with multiple and unreasonable
(a) Income tax, except when levied on banks and other financial
impositions; (b) each local government unit will have its fair share of
institutions;
available resources; (c) the resources of the national government will not
be unduly disturbed; and (d) local taxation will be fair, uniform, and
(b) Documentary stamp tax;
just.”88ChanRoblesVirtualawlibrary
(c) Taxes on estates, inheritance, gifts, legacies and other
Subject to the provisions of the LGC and consistent with the basic policy
acquisitions mortis causa, except as otherwise provided herein;
of local autonomy, every LGU is now empowered and authorized to
create its own sources of revenue and to levy taxes, fees, and charges
(d) Customs duties, registration fees of vessel and wharfage on wharves,
which shall accrue exclusively to the local government unit as well as to
tonnage dues, and all other kinds of customs fees, charges and dues
apply its resources and assets for productive, developmental, or welfare
except wharfage on wharves constructed and maintained by the local
purposes, in the exercise or furtherance of their governmental or
government unit concerned;
proprietary powers and functions.89 The relevant provisions of the LGC
which establish the parameters of the taxing power of the LGUs are as
(e) Taxes, fees, and charges and other impositions upon goods carried
follows:
into or out of, or passing through, the territorial jurisdictions of local
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government units in the guise of charges for wharfage, tolls for bridges
SECTION 130. Fundamental Principles. – The following fundamental
or otherwise, or other taxes, fees, or charges in any form whatsoever
principles shall govern the exercise of the taxing and other revenue-
upon such goods or merchandise;
raising powers of local government units:
(f) Taxes, fees or charges on agricultural and aquatic products when sold
(a) Taxation shall be uniform in each local government unit;
by marginal farmers or fishermen;
(g) Taxes on business enterprises certified to by the Board of
Investments as pioneer or non-pioneer for a period of six (6) and four (4)
years, respectively from the date of registration;
(h) Excise taxes on articles enumerated under the National Internal
Revenue Code, as amended, and taxes, fees or charges on petroleum
products;
(i) Percentage or value-added tax (VAT) on sales, barters or exchanges
or similar transactions on goods or services except as otherwise provided
herein;
(j) Taxes on the gross receipts of transportation contractors and persons
engaged in the transportation of passengers or freight by hire and
common carriers by air, land or water, except as provided in this Code;
(k) Taxes on premiums paid by way of reinsurance or retrocession;
(l) Taxes, fees or charges for the registration of motor vehicles and for
the issuance of all kinds of licenses or permits for the driving thereof,
except tricycles;
(m) Taxes, fees, or other charges on Philippine products actually
exported, except as otherwise provided herein;
(n) Taxes, fees, or charges, on Countryside and Barangay Business
Enterprises and cooperatives duly registered under R.A. No. 6810 and
Republic Act Numbered Sixty-nine hundred thirty-eight (R.A. No. 6938)
otherwise known as the “Cooperative Code of the Philippines”
respectively; and
(o) Taxes, fees or charges of any kind on the National Government, its
agencies and instrumentalities, and local government units.
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SECTION 151. Scope of Taxing Powers. – Except as otherwise provided
in this Code, the city, may levy the taxes, fees, and charges which the
province or municipality may impose: Provided, however, That the
taxes, fees and charges levied and collected by highly urbanized and
independent component cities shall accrue to them and distributed in
accordance with the provisions of this Code.
The rates of taxes that the city may levy may exceed the maximum rates
allowed for the province or municipality by not more than fifty percent
(50%) except the rates of professional and amusement taxes.
SECTION 186. Power To Levy Other Taxes, Fees or Charges. – Local
government units may exercise the power to levy taxes, fees or charges
on any base or subject not otherwise specifically enumerated herein or
taxed under the provisions of the National Internal Revenue Code, as
amended, or other applicable laws: Provided, That the taxes, fees, or
charges shall not be unjust, excessive, oppressive, confiscatory or
contrary to declared national policy: Provided, further, That the
ordinance levying such taxes, fees or charges shall not be enacted
without any prior public hearing conducted for the purpose.
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On the Socialized Housing Tax
Contrary to petitioner’s submission, the 1987 Constitution explicitly
espouses the view that the use of property bears a social function and
that all economic agents shall contribute to the common good.90 The
Court already recognized this in Social Justice Society (SJS), et al. v.
Hon. Atienza, Jr.:91cralawlawlibrary
Property has not only an individual function, insofar as it has to provide
for the needs of the owner, but also a social function insofar as it has to
provide for the needs of the other members of society. The principle is
this:
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Police power proceeds from the principle that every holder of property,
however absolute and unqualified may be his title, holds it under the
implied liability that his use of it shall not be injurious to the equal
enjoyment of others having an equal right to the enjoyment of their
property, nor injurious to the right of the community. Rights of property,
like all other social and conventional rights, are subject to reasonable
limitations in their enjoyment as shall prevent them from being injurious,
and to such reasonable restraints and regulations established by law as
the legislature, under the governing and controlling power vested in
them by the constitution, may think necessary and expedient.92
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Police power, which flows from the recognition that salus populi est
suprema lex (the welfare of the people is the supreme law), is the plenary
power vested in the legislature to make statutes and ordinances to
promote the health, morals, peace, education, good order or safety and
general welfare of the people.93 Property rights of individuals may be
subjected to restraints and burdens in order to fulfill the objectives of the
government in the exercise of police power. 94 In this jurisdiction, it is
well-entrenched that taxation may be made the implement of the state’s
police power.95ChanRoblesVirtualawlibrary
Ordinance No. SP-2095 imposes a Socialized Housing Tax equivalent to
0.5% on the assessed value of land in excess of Php100,000.00. This
special assessment is the same tax referred to in R.A. No. 7279 or the
UDHA.96 The SHT is one of the sources of funds for urban development
and housing program.97 Section 43 of the law provides:
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Sec. 43. Socialized Housing Tax. – Consistent with the constitutional
principle that the ownership and enjoyment of property bear a social
function and to raise funds for the Program, all local government units
are hereby authorized to impose an additional one-half percent (0.5%)
tax on the assessed value of all lands in urban areas in excess of Fifty
thousand pesos (P50,000.00).
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The rationale of the SHT is found in the preambular clauses of the
subject ordinance, to wit:
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WHEREAS, the imposition of additional tax is intended to provide the
City Government with sufficient funds to initiate, implement and
undertake Socialized Housing Projects and other related preliminary
activities;
WHEREAS, the imposition of 0.5% tax will benefit the Socialized
Housing Programs and Projects of the City Government, specifically the
marginalized sector through the acquisition of properties for human
settlements;
WHEREAS, the removal of the urban blight will definitely increase fair
market value of properties in the city[.]
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The above-quoted are consistent with the UDHA, which the LGUs are
charged to implement in their respective localities in coordination with
the Housing and Urban Development Coordinating Council, the national
housing agencies, the Presidential Commission for the Urban Poor, the
private sector, and other non-government organizations.98 It is the
declared policy of the State to undertake a comprehensive and
continuing urban development and housing program that shall, among
others, uplift the conditions of the underprivileged and homeless citizens
in urban areas and in resettlement areas, and provide for the rational use
and development of urban land in order to bring about, among others,
reduction in urban dysfunctions, particularly those that adversely affect
public health, safety and ecology, and access to land and housing by the
underprivileged and homeless citizens.99 Urban renewal and resettlement
shall include the rehabilitation and development of blighted and slum
areas100 and the resettlement of program beneficiaries in accordance with
the provisions of the UDHA.101ChanRoblesVirtualawlibrary
Under the UDHA, socialized housing102 shall be the primary strategy in
providing shelter for the underprivileged and homeless.103 The LGU or
the NHA, in cooperation with the private developers and concerned
agencies, shall provide socialized housing or resettlement areas with
basic services and facilities such as potable water, power and electricity,
and an adequate power distribution system, sewerage facilities, and an
efficient and adequate solid waste disposal system; and access to primary
roads and transportation facilities.104 The provisions for health,
education, communications, security, recreation, relief and welfare shall
also be planned and be given priority for implementation by the LGU
and concerned agencies in cooperation with the private sector and the
beneficiaries themselves.105ChanRoblesVirtualawlibrary
Moreover, within two years from the effectivity of the UDHA, the
LGUs, in coordination with the NHA, are directed to implement the
relocation and resettlement of persons living in danger areas such as
esteros, railroad tracks, garbage dumps, riverbanks, shorelines,
waterways, and other public places like sidewalks, roads, parks, and
playgrounds.106 In coordination with the NHA, the LGUs shall provide
relocation or resettlement sites with basic services and facilities and
access to employment and livelihood opportunities sufficient to meet the
basic needs of the affected families.107ChanRoblesVirtualawlibrary
Clearly, the SHT charged by the Quezon City Government is a tax which
is within its power to impose. Aside from the specific authority vested
by Section 43 of the UDHA, cities are allowed to exercise such other
powers and discharge such other functions and responsibilities as are
necessary, appropriate, or incidental to efficient and effective provision
of the basic services and facilities which include, among others,
programs and projects for low-cost housing and other mass
dwellings.108 The collections made accrue to its socialized housing
programs and projects. The tax is not a pure exercise of taxing power or
merely to raise revenue; it is levied with a regulatory purpose. The levy
is primarily in the exercise of the police power for the general welfare of
the entire city. It is greatly imbued with public interest. Removing slum
areas in Quezon City is not only beneficial to the underprivileged and
homeless constituents but advantageous to the real property owners as
well. The situation will improve the value of the their property
investments, fully enjoying the same in view of an orderly, secure, and
safe community, and will enhance the quality of life of the poor, making
them law-abiding constituents and better consumers of business
products.
Though broad and far-reaching, police power is subordinate to
constitutional limitations and is subject to the requirement that its
exercise must be reasonable and for the public good.109 In the words
of City of Manila v. Hon. Laguio, Jr.:110cralawlawlibrary
The police power granted to local government units must always be
exercised with utmost observance of the rights of the people to due
process and equal protection of the law. Such power cannot be exercised
whimsically, arbitrarily or despotically as its exercise is subject to a
qualification, limitation or restriction demanded by the respect and
regard due to the prescription of the fundamental law, particularly those
forming part of the Bill of Rights. Individual rights, it bears emphasis,
may be adversely affected only to the extent that may fairly be required
by the legitimate demands of public interest or public welfare. Due
process requires the intrinsic validity of the law in interfering with the
rights of the person to his life, liberty and property.
xxxx
To successfully invoke the exercise of police power as the rationale for
the enactment of the Ordinance, and to free it from the imputation of
constitutional infirmity, not only must it appear that the interests of the
public generally, as distinguished from those of a particular class, require For the purpose of undertaking a comprehensive and continuing urban
an interference with private rights, but the means adopted must be development and housing program, the disparities between a real
reasonably necessary for the accomplishment of the purpose and not property owner and an informal settler as two distinct classes are too
unduly oppressive upon individuals. It must be evident that no other obvious and need not be discussed at length. The differentiation
alternative for the accomplishment of the purpose less intrusive of conforms to the practical dictates of justice and equity and is not
private rights can work. A reasonable relation must exist between the discriminatory within the meaning of the Constitution. Notably, the
purposes of the police measure and the means employed for its public purpose of a tax may legally exist even if the motive which
accomplishment, for even under the guise of protecting the public impelled the legislature to impose the tax was to favor one over
interest, personal rights and those pertaining to private property will not another.118 It is inherent in the power to tax that a State is free to select
be permitted to be arbitrarily invaded. the subjects of taxation.119 Inequities which result from a singling out of
one particular class for taxation or exemption infringe no constitutional
Lacking a concurrence of these two requisites, the police measure shall limitation.120ChanRoblesVirtualawlibrary
be struck down as an arbitrary intrusion into private rights – a violation
of the due process clause.111 Further, the reasonableness of Ordinance No. SP-2095 cannot be
chanroblesvirtuallawlibrary disputed. It is not confiscatory or oppressive since the tax being imposed
therein is below what the UDHA actually allows. As pointed out by
As with the State, LGUs may be considered as having properly exercised
respondents, while the law authorizes LGUs to collect SHT on lands
their police power only if there is a lawful subject and a lawful method
with an assessed value of more than P50,000.00, the questioned
or, to be precise, if the following requisites are met: (1) the interests of
ordinance only covers lands with an assessed value exceeding
the public generally, as distinguished from those of a particular class,
P100,000.00. Even better, on certain conditions, the ordinance grants a
require its exercise and (2) the means employed are reasonably necessary
tax credit equivalent to the total amount of the special assessment paid
for the accomplishment of the purpose and not unduly oppressive upon
beginning in the sixth (6th) year of its effectivity. Far from being
individuals.112ChanRoblesVirtualawlibrary
obnoxious, the provisions of the subject ordinance are fair and just.
In this case, petitioner argues that the SHT is a penalty imposed on real
On the Garbage Fee
property owners because it burdens them with expenses to provide funds
for the housing of informal settlers, and that it is a class legislation since
In the United States of America, it has been held that the authority of a
it favors the latter who occupy properties which is not their own and pay
municipality to regulate garbage falls within its police power to protect
no taxes.
public health, safety, and welfare.121 As opined, the purposes and policy
underpinnings of the police power to regulate the collection and disposal
We disagree.
of solid waste are: (1) to preserve and protect the public health and
welfare as well as the environment by minimizing or eliminating a
Equal protection requires that all persons or things similarly situated
source of disease and preventing and abating nuisances; and (2) to defray
should be treated alike, both as to rights conferred and responsibilities
costs and ensure financial stability of the system for the benefit of the
imposed.113 The guarantee means that no person or class of persons shall
entire community, with the sum of all charges marshalled and designed
be denied the same protection of laws which is enjoyed by other persons
to pay for the expense of a systemic refuse disposal
or other classes in like circumstances.114 Similar subjects should not be
scheme.122ChanRoblesVirtualawlibrary
treated differently so as to give undue favor to some and unjustly
discriminate against others.115 The law may, therefore, treat and regulate
Ordinances regulating waste removal carry a strong presumption of
one class differently from another class provided there are real and
validity.123 Not surprisingly, the overwhelming majority of U.S. cases
substantial differences to distinguish one class from
addressing a city's authority to impose mandatory garbage service and
another.116ChanRoblesVirtualawlibrary
fees have upheld the ordinances against constitutional and statutory
challenges.124ChanRoblesVirtualawlibrary
An ordinance based on reasonable classification does not violate the
constitutional guaranty of the equal protection of the law. The
A municipality has an affirmative duty to supervise and control the
requirements for a valid and reasonable classification are: (1) it must rest
collection of garbage within its corporate limits.125 The LGC specifically
on substantial distinctions; (2) it must be germane to the purpose of the
assigns the responsibility of regulation and oversight of solid waste to
law; (3) it must not be limited to existing conditions only; and (4) it must
local governing bodies because the Legislature determined that such
apply equally to all members of the same
bodies were in the best position to develop efficient waste management
class.117ChanRoblesVirtualawlibrary
programs.126 To impose on local governments the responsibility to
regulate solid waste but not grant them the authority necessary to fulfill
the same would lead to an absurd result.”127 As held in one U.S. case:
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x x x When a municipality has general authority to regulate a particular
subject matter, the manner and means of exercising those powers, where
not specifically prescribed by the legislature, are left to the discretion of
the municipal authorities. x x x Leaving the manner of exercising
municipal powers to the discretion of municipal authorities "implies a
range of reasonableness within which a municipality's exercise of
discretion will not be interfered with or upset by the judiciary."128
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In this jurisdiction, pursuant to Section 16 of the LGC and in the proper
exercise of its corporate powers under Section 22 of the same,
the Sangguniang Panlungsod of Quezon City, like other local legislative
bodies, is empowered to enact ordinances, approve resolutions, and
appropriate funds for the general welfare of the city and its
inhabitants.129 Section 16 of the LGC provides:
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SECTION 16. General Welfare. – Every local government unit shall
exercise the powers expressly granted, those necessarily implied
therefrom, as well as powers necessary, appropriate, or incidental for its
efficient and effective governance, and those which are essential to the
promotion of the general welfare. Within their respective territorial
jurisdictions, local government units shall ensure and support, among
other things, the preservation and enrichment of culture, promote health
and safety, enhance the right of the people to a balanced ecology,
encourage and support the development of appropriate and self-reliant
scientific and technological capabilities, improve public morals, enhance
economic prosperity and social justice, promote full employment among
their residents, maintain peace and order, and preserve the comfort and
convenience of their inhabitants.
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The general welfare clause is the delegation in statutory form of the
police power of the State to LGUs.130 The provisions related thereto are
liberally interpreted to give more powers to LGUs in accelerating
economic development and upgrading the quality of life for the people in
the community.131 Wide discretion is vested on the legislative authority
to determine not only what the interests of the public require but also
what measures are necessary for the protection of such interests since
the Sanggunian is in the best position to determine the needs of its
constituents.132ChanRoblesVirtualawlibrary
One of the operative principles of decentralization is that, subject to the
provisions of the LGC and national policies, the LGUs shall share with
the national government the responsibility in the management and
maintenance of ecological balance within their territorial
jurisdiction.133 In this regard, cities are allowed to exercise such other
powers and discharge such other functions and responsibilities as are
necessary, appropriate, or incidental to efficient and effective provision
of the basic services and facilities which include, among others, solid
waste disposal system or environmental management system and
services or facilities related to general hygiene and sanitation.134 R.A.
No. 9003, or the Ecological Solid Waste Management Act of
2000,135 affirms this authority as it expresses that the LGUs shall be
primarily responsible for the implementation and enforcement of its
provisions within their respective jurisdictions while establishing a
cooperative effort among the national government, other local
government units, non-government organizations, and the private
sector.136ChanRoblesVirtualawlibrary
Necessarily, LGUs are statutorily sanctioned to impose and collect such
reasonable fees and charges for services rendered.137 “Charges” refer to
pecuniary liability, as rents or fees against persons or property, while
“Fee” means a charge fixed by law or ordinance for the regulation or
inspection of a business or activity.138ChanRoblesVirtualawlibrary
The fee imposed for garbage collections under Ordinance No. SP-2235
is a charge fixed for the regulation of an activity. The basis for this could
be discerned from the foreword of said Ordinance, to wit:
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WHEREAS, Quezon City being the largest and premiere city in the
Philippines in terms of population and urban geographical areas, apart
from being competent and efficient in the delivery of public service,
apparently requires a big budgetary allocation in order to address the
problems relative and connected to the prompt and efficient delivery of
basic services such as the effective system of waste management, public
information programs on proper garbage and proper waste disposal,
including the imposition of waste regulatory measures;
WHEREAS, to help augment the funds to be spent for the city’s waste
management system, the City Government through the Sangguniang
Panlungsod deems it necessary to impose a schedule of reasonable fees
or charges for the garbage collection services for residential (domestic
household) that it renders to the public.
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Certainly, as opposed to petitioner’s opinion, the garbage fee is not a tax.
In Smart Communications, Inc. v. Municipality of Malvar,
Batangas,139 the Court had the occasion to distinguish these two
concepts:
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In Progressive Development Corporation v. Quezon City, the Court
declared that “if the generating of revenue is the primary purpose and
regulation is merely incidental, the imposition is a tax; but if regulation
is the primary purpose, the fact that incidentally revenue is also obtained
does not make the imposition a tax.”
In Victorias Milling Co., Inc. v. Municipality of Victorias, the Court
reiterated that the purpose and effect of the imposition determine
whether it is a tax or a fee, and that the lack of any standards for such
imposition gives the presumption that the same is a tax.
We accordingly say that the designation given by the municipal
authorities does not decide whether the imposition is properly a license
tax or a license fee. The determining factors are the purpose and effect of
the imposition as may be apparent from the provisions of the ordinance.
Thus, “[w]hen no police inspection, supervision, or regulation is
provided, nor any standard set for the applicant to establish, or that he
agrees to attain or maintain, but any and all persons engaged in the
business designated, without qualification or hindrance, may come, and a
license on payment of the stipulated sum will issue, to do business,
subject to no prescribed rule of conduct and under no guardian eye, but
according to the unrestrained judgment or fancy of the applicant and
licensee, the presumption is strong that the power of taxation, and not
the police power, is being exercised.”
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In Georgia, U.S.A., assessments for garbage collection services have
been consistently treated as a fee and not a tax.140 In another U.S.
case,141 the garbage fee was considered as a "service charge" rather than
a tax as it was actually a fee for a service given by the city which had
previously been provided at no cost to its citizens.
Hence, not being a tax, the contention that the garbage fee under
Ordinance No. SP-2235 violates the rule on double taxation142 must
necessarily fail.
Nonetheless, although a special charge, tax, or assessment may be
imposed by a municipal corporation, it must be reasonably
commensurate to the cost of providing the garbage service.143 To pass
judicial scrutiny, a regulatory fee must not produce revenue in excess of
the cost of the regulation because such fee will be construed as an illegal
tax when the revenue generated by the regulation exceeds the cost of the
regulation.144ChanRoblesVirtualawlibrary
Petitioner argues that the Quezon City Government already collects
garbage fee under Section 47 of R.A. No. 9003, which authorizes LGUs
to impose fees in amounts sufficient to pay the costs of preparing,
adopting, and implementing a solid waste management plan, and that it
has access to the SWM Fund under Section 46 of the same law.
Moreover, Ordinance No. S-2235 is inconsistent with R.A. No. 9003,
because the ordinance emphasizes the collection and payment of garbage
fee with no concern for segregation, composting and recycling of wastes.
It also skips the mandate of the law calling for the active involvement of
the barangay in the collection, segregation, and recycling of garbage.
We now turn to the pertinent provisions of R.A. No. 9003.
Under R.A. No. 9003, it is the declared policy of the State to adopt a
systematic, comprehensive and ecological solid waste management
program which shall, among others, ensure the proper segregation,
collection, transport, storage, treatment and disposal of solid waste
through the formulation and adoption of the best environmental practices
in ecological waste management.145 The law provides that segregation
and collection of solid waste shall be conducted at the barangay level,
specifically for biodegradable, compostable and reusable wastes, while
the collection of non-recyclable materials and special wastes shall be the
responsibility of the municipality or city.146 Mandatory segregation of
solid wastes shall primarily be conducted at the source, to include
household, institutional, industrial, commercial and agricultural
sources.147Segregation at source refers to a solid waste management
practice of separating, at the point of origin, different materials found in
solid waste in order to promote recycling and re-use of resources and to
reduce the volume of waste for collection and disposal.148 Based on Rule
XVII of the Department of Environment and Natural Resources (DENR)
Administrative Order No. 2001-34, Series of 2001,149 which is the
Implementing Rules and Regulations (IRR) of R.A. No.
9003, barangays shall be responsible for the collection, segregation, and
recycling of biodegradable, recyclable, compostable and reusable
wastes.150 For the purpose, a Materials Recovery Facility (MRF), which
shall receive biodegradable wastes for composting and mixed non-
biodegradable wastes for final segregation, re-use and recycling, is to be
established in every barangay or cluster of
barangays.151ChanRoblesVirtualawlibrary
According to R.A. 9003, an LGU, through its local solid waste
management board, is mandated by law to prepare a 10-year solid waste
management plan consistent with the National Solid Waste Management
Framework.152 The plan shall be for the re-use, recycling and composting
of wastes generated in its jurisdiction; ensure the efficient management
of solid waste generated within its jurisdiction; and place primary
emphasis on implementation of all feasible re-use, recycling, and
composting programs while identifying the amount of landfill and
transformation capacity that will be needed for solid waste which cannot
be re-used, recycled, or composted.153 One of the components of the
solid waste management plan is source reduction:
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(e) Source reduction – The source reduction component shall include a
program and implementation schedule which shows the methods by
which the LGU will, in combination with the recycling and composting
components, reduce a sufficient amount of solid waste disposed of in
accordance with the diversion requirements of Section 20.
The source reduction component shall describe the following:
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(1) strategies in reducing the volume of solid waste generated at source;
(2) measures for implementing such strategies and the resources
necessary to carry out such activities;
(3) other appropriate waste reduction technologies that may also be
considered, provided that such technologies conform with the standards
set pursuant to this Act;
(4) the types of wastes to be reduced pursuant to Section 15 of this Act;
(5) the methods that the LGU will use to determine the categories of
solid wastes to be diverted from disposal at a disposal facility through re-
use, recycling and composting; and
(6) new facilities and of expansion of existing facilities which will be
needed to implement re-use, recycling and composting.
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The LGU source reduction component shall include the evaluation and
identification of rate structures and fees for the purpose of reducing the
amount of waste generated, and other source reduction strategies,
including but not limited to, programs and economic incentives provided
under Sec. 45 of this Act to reduce the use of non-recyclable materials,
replace disposable materials and products with reusable materials and
products, reduce packaging, and increase the efficiency of the use of
paper, cardboard, glass, metal, and other materials. The waste reduction
activities of the community shall also take into account, among others,
local capability, economic viability, technical requirements, social
concerns, disposition of residual waste and environmental impact:
Provided, That, projection of future facilities needed and estimated cost
shall be incorporated in the plan. x x x154
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The solid waste management plan shall also include an implementation
schedule for solid waste diversion:
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SEC. 20. Establishing Mandatory Solid Waste Diversion. – Each LGU
plan shall include an implementation schedule which shows that within
five (5) years after the effectivity of this Act, the LGU shall divert at
least 25% of all solid waste from waste disposal facilities through re-use,
recycling, and composting activities and other resource recovery
activities: Provided, That the waste diversion goals shall be increased
every three (3) years thereafter: Provided, further, That nothing in this
Section prohibits a local government unit from implementing re-use,
recycling, and composting activities designed to exceed the goal.
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The baseline for the twenty-five percent (25%) shall be derived from the
waste characterization result155 that each LGU is mandated to
undertake.156ChanRoblesVirtualawlibrary
In accordance with Section 46 of R.A. No. 9003, the LGUs are entitled
to avail of the SWM Fund on the basis of their approved solid waste
management plan. Aside from this, they may also impose SWM Fees
under Section 47 of the law, which states:
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SEC. 47. Authority to Collect Solid Waste Management Fees – The local
government unit shall impose fees in amounts sufficient to pay the costs
of preparing, adopting, and implementing a solid waste management
plan prepared pursuant to this Act. The fees shall be based on the
following minimum factors:
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(a) types of solid waste;
(b) amount/volume of waste; and
(c) distance of the transfer station to the waste management facility.
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The fees shall be used to pay the actual costs incurred by the LGU in
collecting the local fees. In determining the amounts of the fees, an LGU
shall include only those costs directly related to the adoption and
implementation of the plan and the setting and collection of the local
fees.
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Rule XVII of the IRR of R.A. No. 9003 sets forth the details:
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Section 1. Power to Collect Solid Waste Management Fees. – The Local
SWM Board/Local SWM Cluster Board shall impose fees on the SWM
services provided for by the LGU and/or any authorized organization or
unit. In determining the amounts of the fees, a Local SWM Board/Local
SWM Cluster Board shall include only those costs directly related to the
adoption and implementation of the SWM Plan and the setting and
collection of the local fees. This power to impose fees may be ceded to
the private sector and civil society groups which have been duly
accredited by the Local SWM Board/Local SWM Cluster Board;
provided, the SWM fees shall be covered by a Contract or Memorandum
of Agreement between the respective board and the private sector or
civil society group.
The fees shall pay for the costs of preparing, adopting and implementing
a SWM Plan prepared pursuant to the Act. Further, the fees shall also be
used to pay the actual costs incurred in collecting the local fees and for
project sustainability.
Section 2. Basis of SWM Service Fees
Reasonable SWM service fees shall be computed based on but not
limited to the following minimum factors:
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a) Types of solid waste to include special waste
b) amount/volume of waste
c) distance of the transfer station to the waste management facility
d) capacity or type of LGU constituency
e) cost of construction
f) cost of management
g) type of technology
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Section 3. Collection of Fees. – Fees may be collected corresponding to
the following levels:
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a) Barangay – The Barangay may impose fees for collection and
segregation of biodegradable, compostable and reusable wastes from
households, commerce, other sources of domestic wastes, and for the use
of Barangay MRFs. The computation of the fees shall be established by
the respective SWM boards. The manner of collection of the fees shall
be dependent on the style of administration of respective Barangay
Councils. However, all transactions shall follow the Commission on
Audit rules on collection of fees.
b) Municipality – The municipal and city councils may impose fees on
the barangay MRFs for the collection and transport of non-recyclable
and special wastes and for the disposal of these into the sanitary landfill.
The level and procedure for exacting fees shall be defined by the Local
SWM Board/Local SWM Cluster Board and supported by LGU
ordinances, however, payments shall be consistent with the accounting
system of government.
c) Private Sector/Civil Society Group – On the basis of the stipulations
of contract or Memorandum of Agreement, the private sector or civil
society group shall impose fees for collection, transport and tipping in
their SLFs. Receipts and invoices shall be issued to the paying public or
to the government.
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From the afore-quoted provisions, it is clear that the authority of a
municipality or city to impose fees is limited to the collection and
transport of non-recyclable and special wastes and for the disposal of
these into the sanitary landfill. Barangays, on the other hand, have the
authority to impose fees for the collection and segregation
of biodegradable, compostable and reusable wastes from households,
commerce, other sources of domestic wastes, and for the use of barangay
MRFs. This is but consistent with Section 10 of R.A. No. 9003 directing
that segregation and collection of biodegradable, compostable and
reusable wastes shall be conducted at the barangay level, while the
collection of non-recyclable materials and special wastes shall be the
responsibility of the municipality or city.
In this case, the alleged bases of Ordinance No. S-2235 in imposing the
garbage fee is the volume of waste currently generated by each person in
Quezon City, which purportedly stands at 0.66 kilogram per day, and the additional garbage fee shall be collected based on area occupied for
increasing trend of waste generation for the past three every unit already sold or being amortized.
years.157 Respondents did not elaborate any further. The figure presented b) High-rise apartment units – Owners of high-rise apartment units shall
does not reflect the specific types of wastes generated – whether pay the annual garbage fee on the total lot size of the entire
residential, market, commercial, industrial, construction/demolition, apartment and an additional garbage fee based on the schedule
street waste, agricultural, agro-industrial, institutional, etc. It is prescribed herein for every unit occupied.
reasonable, therefore, for the Court to presume that such amount pertains For the purpose of garbage collection, there is, in fact, no substantial
to the totality of wastes, without any distinction, generated by Quezon distinction between an occupant of a lot, on one hand, and an occupant
City constituents. To reiterate, however, the authority of a municipality of a unit in a condominium, socialized housing project or apartment, on
or city to impose fees extends only to those related to the collection and the other hand. Most likely, garbage output produced by these types of
transport of non-recyclable and special wastes. occupants is uniform and does not vary to a large degree; thus, a similar
schedule of fee is both just and equitable.159ChanRoblesVirtualawlibrary
Granting, for the sake of argument, that the 0.66 kilogram of solid waste
per day refers only to non-recyclable and special wastes, still, We cannot The rates being charged by the ordinance are unjust and inequitable: a
sustain the validity of Ordinance No. S-2235. It violates the equal resident of a 200 sq. m. unit in a condominium or socialized housing
protection clause of the Constitution and the provisions of the LGC that project has to pay twice the amount than a resident of a lot similar in
an ordinance must be equitable and based as far as practicable on the size; unlike unit occupants, all occupants of a lot with an area of 200 sq.
taxpayer’s ability to pay, and not unjust, excessive, oppressive, m. and less have to pay a fixed rate of Php100.00; and the same amount
confiscatory.158ChanRoblesVirtualawlibrary of garbage fee is imposed regardless of whether the resident is from a
condominium or from a socialized housing project.
In the subject ordinance, the rates of the imposable fee depend on land or
floor area and whether the payee is an occupant of a lot, condominium, Indeed, the classifications under Ordinance No. S-2235 are not germane
social housing project or apartment. For easy reference, the relevant to its declared purpose of “promoting shared responsibility with the
provision is again quoted below: residents to attack their common mindless attitude in over-consuming
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On all domestic households in Quezon City; simplistically categorizing the payee into land or floor occupant of a lot
or unit of a condominium, socialized housing project or apartment,
LAND AREA IMPOSABLE FEE respondent City Council should have considered factors that could truly
Less than 200 sq. m. PHP 100.00 measure the amount of wastes generated and the appropriate fee for its
201 sq. m. – 500 sq. m. PHP 200.00 collection. Factors include, among others, household age and size,
501 sq. m. – 1,000 sq. m. PHP 300.00 accessibility to waste collection, population density of the barangay or
1,001 sq. m. – 1,500 sq. m. PHP 400.00 district, capacity to pay, and actual occupancy of the property. R.A. No.
1,501 sq. m. – 2,000 sq. m. 9003 may also be looked into for guidance. Under said law, SWM
PHP 500.00
or more service fees may be computed based on minimum factors such as types
of solid waste to include special waste, amount/volume of waste,
On all condominium unit and socialized housing projects/units in
distance of the transfer station to the waste management facility,
Quezon City;
capacity or type of LGU constituency, cost of construction, cost of
FLOOR AREA IMPOSABLE FEE management, and type of technology. With respect to utility rates set by
Less than 40 sq. m. PHP25.00 municipalities, a municipality has the right to classify consumers under
reasonable classifications based upon factors such as the cost of service,
41 sq. m. – 60 sq. m. PHP50.00
the purpose for which the service or the product is received, the quantity
61 sq. m. – 100 sq. m. PHP75.00 or the amount received, the different character of the service furnished,
101 sq. m. – 150 sq. m. PHP100.00 the time of its use or any other matter which presents a substantial
151 sq. m. – 200 sq. [m.] or difference as a ground of distinction.161cralawlawlibrary
PHP200.00
more [A] lack of uniformity in the rate charged is not necessarily unlawful
On high-rise Condominium Units discrimination. The establishment of classifications and the charging of
different rates for the several classes is not unreasonable and does not
a) High-rise Condominium – The Homeowners Association of high rise violate the requirements of equality and uniformity. Discrimination to be
condominiums shall pay the annual garbage fee on the total size of unlawful must draw an unfair line or strike an unfair balance between
the entire condominium and socialized Housing Unit and an those in like circumstances having equal rights and privileges.
Discrimination with respect to rates charged does not vitiate unless it is
arbitrary and without a reasonable fact basis or justification.162
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On top of an unreasonable classification, the penalty clause of Ordinance
No. SP-2235, which states:
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SECTION 3. Penalty Clause – A penalty of 25% of the garbage fee due
plus an interest of 2% per month or a fraction thereof (interest) shall be
charged against a household owner who refuses to pay the garbage fee
herein imposed.
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lacks the limitation required by Section 168 of the LGC, which provides:
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SECTION 168. Surcharges and Penalties on Unpaid Taxes, Fees, or
Charges. – The sanggunian may impose a surcharge not exceeding
twenty-five (25%) of the amount of taxes, fees or charges not paid on
time and an interest at the rate not exceeding two percent (2%) per
month of the unpaid taxes, fees or charges including surcharges, until
such amount is fully paid but in no case shall the total interest on the
unpaid amount or portion thereof exceed thirty-six (36) months.
(Emphasis supplied)
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Finally, on the issue of publication of the two challenged ordinances.
Petitioner argues that the garbage fee was collected even if the required
publication of its approval had not yet elapsed. He notes that he paid his
realty tax on January 7, 2014 which already included the garbage fee.
Respondents counter that if the law provides for its own effectivity,
publication in the Official Gazette is not necessary so long as it is not
penal in nature. Allegedly, Ordinance No. SP-2095 took effect after its
publication while Ordinance No. SP-2235 became effective after its
approval on December 26, 2013.
The pertinent provisions of the LGC state:
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SECTION 59. Effectivity of Ordinances or Resolutions. – (a) Unless
otherwise stated in the ordinance or the resolution approving the local
development plan and public investment program, the same shall take
effect after ten (10) days from the date a copy thereof is posted in a
bulletin board at the entrance of the provincial capitol or city, municipal,
or barangay hall, as the case may be, and in at least two (2) other
conspicuous places in the local government unit concerned.
(b) The secretary to the sanggunian concerned shall cause the posting of
an ordinance or resolution in the bulletin board at the entrance of the
provincial capitol and the city, municipal, or barangay hall in at least two
(2) conspicuous places in the local government unit concerned not later
than five (5) days after approval thereof.
The text of the ordinance or resolution shall be disseminated and posted are DIRECTED to REFUND with reasonable dispatch the sums of
in Filipino or English and in the language or dialect understood by the money collected relative to its enforcement.
majority of the people in the local government unit concerned, and the
secretary to the sanggunian shall record such fact in a book kept for the The temporary restraining order issued by the Court on February 5, 2014
purpose, stating the dates of approval and posting. is LIFTED with respect to Ordinance No. SP-2095. In contrast,
respondents are PERMANENTLY ENJOINED from taking any
(c) The gist of all ordinances with penal sanctions shall be published in a further action to enforce Ordinance No. SP. 2235.
newspaper of general circulation within the province where the local
legislative body concerned belongs. In the absence of any newspaper of SO ORDERED.cralawlawlibrary
general circulation within the province, posting of such ordinances shall
be made in all municipalities and cities of the province where the
sanggunian of origin is situated.
(d) In the case of highly urbanized and independent component cities,
the main features of the ordinance or resolution duly enacted or adopted
shall, in addition to being posted, be published once in a local
newspaper of general circulation within the city: Provided, That in
the absence thereof the ordinance or resolution shall be published in
any newspaper of general circulation.
SECTION 188. Publication of Tax Ordinances and Revenue Measures.
– Within ten (10) days after their approval, certified true copies of all
provincial, city, and municipal tax ordinances or revenue measures shall
be published in full for three (3) consecutive days in a newspaper of
local circulation: Provided, however, That in provinces, cities and
municipalities where there are no newspapers of local circulation, the
same may be posted in at least two (2) conspicuous and publicly
accessible places. (Emphasis supplied)
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On October 17, 2011, respondent Quezon City Council enacted
Ordinance No. SP-2095, which provides that it would take effect after its
publication in a newspaper of general circulation.163 On the other hand,
Ordinance No. SP-2235, which was passed by the City Council on
December 16, 2013, provides that it would be effective upon its
approval.164 Ten (10) days after its enactment, or on December 26, 2013,
respondent City Mayor approved the
same.165ChanRoblesVirtualawlibrary
The case records are bereft of any evidence to prove petitioner’s
negative allegation that respondents did not comply with the posting and
publication requirements of the law. Thus, We are constrained not to
give credit to his unsupported claim.
WHEREFORE, the petition is PARTIALLY GRANTED. The
constitutionality and legality of Ordinance No. SP-2095, S-2011, or the
“Socialized Housing Tax of Quezon City,” is SUSTAINED for being
consistent with Section 43 of Republic Act No. 7279. On the other hand,
Ordinance No. SP-2235, S-2013, which collects an annual garbage fee
on all domestic households in Quezon City, is hereby declared
as UNCONSTITUTIONAL AND ILLEGAL. Respondents