G.R. No. 208566 November 19, 2013 BELGICA vs.

HONORABLE EXECUTIVE SECRETARY PAQUITO N.

OCHOA JR, et al, Respondents
G.R. No. 208566               November 19, 2013
GRECO ANTONIOUS BEDA B. BELGICA JOSE M. VILLEGAS JR. JOSE L. GONZALEZ REUBEN M.
ABANTE and QUINTIN PAREDES SAN DIEGO, Petitioners,
vs.
HONORABLE EXECUTIVE SECRETARY PAQUITO N. OCHOA JR, et al, Respondents
PERLAS-BERNABE, J.:

NATURE:
These are consolidated petitions taken under Rule 65 of the Rules of Court, all of which assail the
constitutionality of the Pork Barrel System.

FACTS:
The NBI Investigation was spawned by sworn affidavits of six (6) whistle-blowers who declared that JLN
Corporation (Janet Lim Napoles) had swindled billions of pesos from the public coffers for "ghost projects"
using dummy NGOs. Thus, Criminal complaints were filed before the Office of the Ombudsman, charging
five (5) lawmakers for Plunder, and three (3) other lawmakers for Malversation, Direct Bribery, and
Violation of the Anti-Graft and Corrupt Practices Act. Also recommended to be charged in the complaints
are some of the lawmakers’ chiefs -of-staff or representatives, the heads and other officials of three (3)
implementing agencies, and the several presidents of the NGOs set up by Napoles.
Whistle-blowers alleged that" at least P900 Million from royalties in the operation of the Malampaya gas
project off Palawan province intended for agrarian reform beneficiaries has gone into a dummy NGO.
Several petitions were lodged before the Court similarly seeking that the "Pork Barrel System" be
declared unconstitutional

G.R. No. 208493 – SJS filed a Petition for Prohibition seeking that the "Pork Barrel System" be declared
unconstitutional, and a writ of prohibition be issued permanently
G.R. No. 208566 - Belgica, et al filed an Urgent Petition For Certiorari and Prohibition With Prayer For
The Immediate Issuance of Temporary Restraining Order and/or Writ of Preliminary Injunction seeking
that the annual "Pork Barrel System," presently embodied in the provisions of the GAA of 2013 which
provided for the 2013 PDAF, and the Executive‘s lump-sum, discretionary funds, such as the Malampaya
Funds and the Presidential Social Fund, be declared unconstitutional and null and void for being acts
constituting grave abuse of discretion.  Also, they pray that the Court issue a TRO against respondents

UDK-14951 – A Petition filed seeking that the PDAF be declared unconstitutional, and a cease and desist
order be issued restraining President Benigno Simeon S. Aquino III (President Aquino) and Secretary
Abad from releasing such funds to Members of Congress

ISSUES:
1.       Whether or not the 2013 PDAF Article and all other Congressional Pork Barrel Laws similar thereto are
unconstitutional considering that they violate the principles of/constitutional provisions on (a) separation of
powers; (b) non-delegability of legislative power; (c) checks and balances; (d) accountability; (e) political
dynasties; and (f) local autonomy.
2.       Whether or not the phrases (a) "and for such other purposes as may be hereafter directed by the
President" under Section 8 of PD 910 relating to the Malampaya Funds, and (b) "to finance the priority
infrastructure development projects and to finance the restoration of damaged or destroyed facilities
due to calamities, as may be directed and authorized by the Office of the President of the
Philippines" under Section 12 of PD 1869, as amended by PD 1993, relating to the Presidential
Social Fund, are unconstitutional insofar as they constitute undue delegations of legislative power.

HELD:
1.       Yes, the PDAF article is unconstitutional. The post-enactment measures which govern the areas of
project identification, fund release and fund realignment are not related to functions of congressional
oversight and, hence, allow legislators to intervene and/or assume duties that properly belong to the
sphere of budget execution. This violates the principle of separation of powers. Congress‘role must be
confined to mere oversight that must be confined to:  (1) scrutiny and (2) investigation and monitoring of
the implementation of laws. Any action or step beyond that, will undermine the separation of powers
guaranteed by the constitution.

Thus, the court declares the 2013 pdaf article as well as all other provisions of law which similarly allow
legislators to wield any form of post-enactment authority in the implementation or enforcement of the
budget, unrelated to congressional oversight, as violative of the separation of powers principle and thus
unconstitutional.

(a) The separation of powers between the Executive and the Legislative Departments has
been violated.
 The post-enactment measures including project identification, fund release, and fund
realignment are not related to functions of congressional oversight and, hence, allow
 legislators to intervene and/or assume duties that properly belong to the sphere of budget
execution, which belongs to the executive department.
 Legislators have been, in one form or another, authorized to participate in the various
operational aspects of budgeting, including ―the evaluation of work and financial plans
for individual activities and the ― regulation and release of funds in violation of the
separation of powers principle.
 Any provision of law that empowers Congress or any of its members to play any role in
the implementation or enforcement of the law violates the principle of separation of
powers and is thus unconstitutional.
 That the said authority to identify projects is treated as merely recommendatory in nature
does not alter its unconstitutional tenor since the prohibition covers any role in the
implementation or enforcement of the law.
 Respondents also failed to prove that the role of the legislators is only recommendatory in
nature. They even admitted that the identification of the legislator constitutes a
mandatory requirement before the PDAF can be tapped as a funding source.
(b)The principle of non-delegability of legislative powers has been violated
 The 2013 PDAF Article, insofar as it confers post-enactment identification authority to
individual legislators, violates the principle of non-delegability since said legislators
are effectively allowed to individually exercise the power of appropriation, which – as
settled in Philconsa – is lodged in Congress.
 That the power to appropriate must be exercised only through legislation is clear from
Section 29(1), Article VI of the 1987 Constitution which states that: ― No money shall
be paid out of the Treasury except in pursuance of an appropriation made by law.
 The legislators are individually exercising the power of appropriation because each of
them determines (a) how much of their PDAF fund would go to and (b) a specific project
or beneficiary that they themselves also determine.
(c) Checks and balances
 Violates checks and balance
 Under the 2013 PDAF Article, the amount of P24.79 Billion only appears as a collective
allocation limit since the said amount would be further divided among individual
legislators who would then receive personal lump-sum allocations and could, after the
GAA is passed, effectively appropriate PDAF funds based on their own discretion.
 This kind of lump-sum/post-enactment legislative identification budgeting system fosters
the creation of a ―budget within a budget which subverts the prescribed procedure of
presentment and consequently impairs the President‘s power of item veto.
 It forces the President to decide between (a) accepting the entire PDAF allocation without
knowing the specific projects of the legislators, which may or may not be consistent with
his national agenda and (b) rejecting the whole PDAF to the detriment of all other
legislators with legitimate projects.
 In fact, even without its post-enactment legislative identification feature, the 2013 PDAF
Article would remain constitutionally flawed since it would then operate as a prohibited
form of lump-sum appropriation. This is because the appropriation law leaves the
actual amounts and purposes of the appropriation for further determination and,
therefore, does not readily indicate a discernible item which may be subject to the
President‘s power of item veto.
(d) The Congressional Pork Barrel partially prevents accountability as Congress is
incapable of checking itself or its members.
 The fact that individual legislators are given post-enactment roles in the implementation
of the budget makes it difficult for them to become disinterested observers when
scrutinizing, investigating or monitoring the implementation of the appropriation law.
 The conduct of oversight would be tainted as said legislators, who are vested with post-
enactment authority, would, in effect, be checking on activities in which they themselves
participate.
 The concept of post-enactment authorization violates Section 14, Article VI of the
1987 Constitution, which prohibits members of Congress to intervene in any matter
 before any office of the Government, because it renders them susceptible to taking undue
advantage of their own office.
 The Court, however, cannot completely agree that the same post-enactment authority
and/or the individual legislator‘s control of his PDAF per se would allow him to
perpetuate himself in office.
 The use of his PDAF for re-election purposes is a matter which must be analyzed
based on particular facts and on a case-to-case basis.
(e) The constitutional provision regarding political dynasties is not self-executing.
 Section 26, Article II of the 1987 Constitution, which provides that the state shall prohibit
political dynasties as may be defined by law, is not a self-executing provision.
 Since there appears to be no standing law which crystallizes the policy on political
dynasties for enforcement, the Court must defer from ruling on this issue.
(f) The Congressional Pork Barrel violates constitutional principles on local autonomy
 The Congressional Pork Barrel goes against the constitutional principles on local
autonomy since it allows district representatives, who are national officers, to substitute
their judgments in utilizing public funds for local development.
 The gauge of PDAF and CDF allocation/division is based solely on the fact of office,
without taking into account the specific interests and peculiarities of the district the
legislator represents.
 The allocation/division limits are clearly not based on genuine parameters of equality,
wherein economic or geographic indicators have been taken into consideration.
 This concept of legislator control underlying the CDF and PDAF conflicts with the
functions of the various Local Development Councils (“LDCs”) which are already
legally mandated to―assist the corresponding sanggunian in setting the direction of
economic and social development, and coordinating development efforts within its
territorial jurisdiction.
 Considering that LDCs are instrumentalities whose functions are essentially geared
towards managing local affairs, their programs, policies and resolutions should not be
overridden nor duplicated by individual legislators, who are national officers that have no
law-making authority except only when acting as a body.

2.       Yes. Sec 8 of PD 910- the phrase “and for such other purposes as may be hereafter directed by the
President” ‖ constitutes an undue delegation of legislative power insofar as it does not lay down a
sufficient standard to adequately determine the limits of the President‘s authority with respect to the
purpose for which the Malampaya Funds may be used. It gives the President wide latitude to use the
Malampaya Funds for any other purpose he may direct and, in effect, allows him to unilaterally
appropriate public funds beyond the purview of the law.”

Section 12 of PD 1869, as amended by PD 1993- the phrases:

(b) "to finance the priority infrastructure development projects” was declared constitutional . IT
INDICATED PURPOSE ADEQUATELY CURTAILS THE AUTHORITY OF THE PRESIDENT TO SPEND
THE PRESIDENTIAL SOCIAL FUND ONLY FOR RESTORATION PURPOSES WHICH ARISE FROM
CALAMITIES.

(b)” and to finance the restoration of damaged or destroyed facilities due to calamities, as may be
directed and authorized by the Office of the President of the Philippines” was declared
unconstitutional. IT GIVES THE PRESIDENT CARTE BLANCHE AUTHORITY TO USE THE SAME
FUND FOR ANY INFRASTRUCTURE PROJECT HE MAY SO DETERMINE AS A ―PRIORITY‖.
VERILY, THE LAW DOES NOT SUPPLY A DEFINITION OF ―PRIORITY INFRASTRUCTURE
DEVELOPMENT PROJECTS‖ AND HENCE, LEAVES THE PRESIDENT WITHOUT ANY GUIDELINE
TO CONSTRUE THE SAME.

(a) Section 8 of PD No. 910 and Section 12 of PD No. 1869 are valid appropriation laws.
 For an appropriation law to be valid under Section 29 (1), Article VI of the 1987
Constitution, which provides that “No money shall be paid out of the Treasury except in
pursuance of an appropriation made by law”, it is enough that (a) the provision of law
sets apart a determinate or determinable amount of money and (b) allocates the same for
a particular public purpose.
  Section 8 of PD 910 is a valid appropriation law because it set apart a determinable
amount: a Special Fund comprised of ― all fees, revenues, and receipts of the [Energy
Development] Board from any and all sources.
 It also specified a public purpose: energy resource development and exploitation
programs and projects of the government and for such other purposes as may be hereafter
directed by the President.
 Section 12 of PD No. 1869 is also a valid appropriation law because it set apart a
determinable amount: [a]fter deducting five (5%) percent as Franchise Tax, the Fifty
(50%) percent share of the Government in the aggregate gross earnings of [PAGCOR], or
60%[,] if the aggregate gross earnings be less than P150,000,000.00.
 It also specified a public purpose: priority infrastructure development projects and x x x
the restoration of damaged or destroyed facilities due to calamities, as may be directed
and authorized by the Office of the President of the Philippines.
(b) Section 8 of PD No. 910 and Section 12 of PD No. 1869 constitutes undue delegation of
legislation powers.
 The phrase “and for such other purposes as may be hereafter directed by the President”
under Section 8 of PD 910 constitutes an undue delegation of legislative power insofar as
it does not lay down a sufficient standard to adequately determine the limits of the
President‘s authority with respect to the purpose for which the Malampaya Funds may be
used.
 This phrase gives the President wide latitude to use the Malampaya Funds for any other
purpose he may direct and, in effect, allows him to unilaterally appropriate public funds
beyond the purview of the law.
 This notwithstanding, it must be underscored that the rest of Section 8, insofar as it
allows for the use of the Malampaya Funds ―to finance energy resource development
and exploitation programs and projects of the government, remains legally effective and
subsisting.
 Section 12 of PD No. 1869 constitutes an undue delegation of legislative powers because
it lies independently unfettered by any sufficient standard of the delegating law.
 The law does not supply a definition of “priority infrastructure development projects” and
hence, leaves the President without any guideline to construe the same.
 The delimitation of a project as one of “infrastructure” is too broad of a classification
since the said term could pertain to any kind of facility.
Maria Carolina Araullo vs Benigno Aquino III

G.R. No. 209287 – Political Law – Constitutional Law – Separation of Powers – Fund Realignment
– Constitutionality of the Disbursement Acceleration Program

Power of the Purse – Executive Impoundment

Facts

When President Benigno Aquino III took office, his administration noticed the sluggish
growth of the economy. The World Bank advised that the economy needed a stimulus plan.
Budget Secretary Florencio “Butch” Abad then came up with a program called the
Disbursement Acceleration Program (DAP).

The DAP was seen as a remedy to speed up the funding of government projects. DAP
enables the Executive to realign funds from slow moving projects to priority projects
instead of waiting for next year’s appropriation. So what happens under the DAP was that if
a certain government project is being undertaken slowly by a certain executive agency, the
funds allotted therefor will be withdrawn by the Executive. Once withdrawn, these funds
are declared as “savings” by the Executive and said funds will then be reallotted to other
priority projects. The DAP program did work to stimulate the economy as economic growth
was in fact reported and portion of such growth was attributed to the DAP (as noted by the
Supreme Court).

Other sources of the DAP include the unprogrammed funds from the General
Appropriations Act (GAA). Unprogrammed funds are standby appropriations made by
Congress in the GAA.

Meanwhile, in September 2013, Senator Jinggoy Estrada made an exposé claiming that he,
and other Senators, received Php50M from the President as an incentive for voting in favor
of the impeachment of then Chief Justice Renato Corona. Secretary Abad claimed that the
money was taken from the DAP but was disbursed upon the request of the Senators.

This apparently opened a can of worms as it turns out that the DAP does not only realign
funds within the Executive. It turns out that some non-Executive projects were also funded;
to name a few: Php1.5B for the CPLA (Cordillera People’s Liberation Army), Php1.8B for the
MNLF (Moro National Liberation Front), P700M for the Quezon Province, P50-P100M for
certain Senators each, P10B for Relocation Projects, etc.

This prompted Maria Carolina Araullo, Chairperson of the Bagong Alyansang Makabayan,

and several other concerned citizens to file various petitions with the Supreme Court
questioning the validity of the DAP. Among their contentions was:

DAP is unconstitutional because it violates the constitutional rule which provides that “no
money shall be paid out of the Treasury except in pursuance of an appropriation made by law“.

Secretary Abad argued that the DAP is based on certain laws particularly the GAA (savings
and augmentation provisions thereof), Sec. 25(5), Art. VI of the Constitution (power of the
President to augment), Secs. 38 and 49 of Executive Order 292 (power of the President to
suspend expenditures and authority to use savings, respectively).

Issues:
I. Whether or not the DAP violates the principle “no money shall be paid out of the Treasury
except in pursuance of an appropriation made by law” (Sec. 29(1), Art. VI, Constitution).

II. Whether or not the DAP realignments can be considered as impoundments by the
executive.

III. Whether or not the DAP realignments/transfers are constitutional.

IV. Whether or not the sourcing of unprogrammed funds to the DAP is constitutional.

V. Whether or not the Doctrine of Operative Fact is applicable.

B. Whether or not the DAP violates Sec. 29, Art. VI of the 1987 Constitution, which
provides: "No money shall be paid out of the Treasury except in pursuance of an
appropriation made by law."
Issue pertinent to Sec. 25

C. Whether or not the DAP, NBC No. 541, and all other executive issuances allegedly
implementing the DAP violate Sec. 25(5), Art. VI of the 1987 Constitution insofar as:
(a) They treat the unreleased appropriations and unobligated allotments withdrawn
from government agencies as "savings" as the term is used in Sec. 25(5), in relation
to the provisions of the GAAs of 2011, 2012 and 2013;
(b) They authorize the disbursement of funds for projects or programs not provided
in the GAAs for the Executive Department; and
(c) They "augment" discretionary lump sum appropriations in the GAAs
D. Whether or not the DAP violates: (1) the Equal Protection Clause, (2) the system of
checks and balances, and (3) the principle of public accountability enshrined in the
1987 Constitution considering that it authorizes the release of funds upon the
request of... legislators.
E. Whether or not factual and legal justification exists to issue a temporary
restraining order to restrain the implementation of the DAP, NBC No. 541, and all
other executive issuances allegedly implementing the DAP.
F. Whether or not the release of unprogrammed funds under the DAP was in accord
with the GAAs.

HELD:

I. No, the DAP did not violate Section 29(1), Art. VI of the Constitution. DAP was
merely a program by the Executive and is not a fund nor is it an appropriation. It is a
program for prioritizing government spending. As such, it did not violate the
Constitutional provision cited in Section 29(1), Art. VI of the Constitution. In DAP no
additional funds were withdrawn from the Treasury otherwise, an appropriation made by
law would have been required. Funds, which were already appropriated for by the GAA,
were merely being realigned via the DAP.

II. No, there is no executive impoundment in the DAP. Impoundment of funds refers

to the President’s power to refuse to spend appropriations or to retain or deduct
appropriations for whatever reason. Impoundment is actually prohibited by the GAA unless
there will be an unmanageable national government budget deficit (which did not happen).
Nevertheless, there’s no impoundment in the case at bar because what’s involved in the
DAP was the transfer of funds.
III. No, the transfers made through the DAP were unconstitutional. It is true that the
President (and even the heads of the other branches of the government) are allowed by
the Constitution to make realignment of funds, however, such transfer or realignment
should only be made “within their respective offices”. Thus, no cross-border
transfers/augmentations may be allowed. But under the DAP, this was violated because
funds appropriated by the GAA for the Executive were being transferred to the Legislative
and other non-Executive agencies.

Further, transfers “within their respective offices” also contemplate realignment of funds to
an existing project in the GAA. Under the DAP, even though some projects were within the
Executive, these projects are non-existent insofar as the GAA is concerned because no
funds were appropriated to them in the GAA. Although some of these projects may be
legitimate, they are still non-existent under the GAA because they were not provided for by
the GAA. As such, transfer to such projects is unconstitutional and is without legal basis.

On the issue of what are “savings”

These DAP transfers are not “savings” contrary to what was being declared by the
Executive. Under the definition of “savings” in the GAA, savings only occur, among other
instances, when there is an excess in the funding of a certain project once it is completed,
finally discontinued, or finally abandoned. The GAA does not refer to “savings” as funds
withdrawn from a slow moving project. Thus, since the statutory definition of savings was
not complied with under the DAP, there is no basis at all for the transfers. Further, savings
should only be declared at the end of the fiscal year. But under the DAP, funds are already
being withdrawn from certain projects in the middle of the year and then being declared as
“savings” by the Executive particularly by the DBM.

IV. No. Unprogrammed funds from the GAA cannot be used as money source for the
DAP because under the law, such funds may only be used if there is a certification from
the National Treasurer to the effect that the revenue collections have exceeded the
revenue targets. In this case, no such certification was secured before unprogrammed
funds were used.

V. Yes. The Doctrine of Operative Fact, which recognizes the legal effects of an act prior
to it being declared as unconstitutional by the Supreme Court, is applicable. The DAP has
definitely helped stimulate the economy. It has funded numerous projects. If the Executive
is ordered to reverse all actions under the DAP, then it may cause more harm than good.
The DAP effects can no longer be undone. The beneficiaries of the DAP cannot be asked to
return what they received especially so that they relied on the validity of the DAP. However,
the Doctrine of Operative Fact may not be applicable to the authors, implementers, and
proponents of the DAP if it is so found in the appropriate tribunals (civil, criminal, or
administrative) that they have not acted in good faith.

The Court Declares the Disbursement Acceleration Program, National Budget Circular No. 541 and
related executive issuances UNCONSTITUTIONAL for being in violation of Section 25(5), Article VI
of the 1987 Constitution and the doctrine of separation of powers, namely:

(a) The withdrawal of unobligated allotments from the implementing agencies, and the
declaration of the withdrawn unobligated allotments and unreleased appropriations as
savings prior to the end of the fiscal year and without complying with the statutory definition
of savings contained in the General Appropriations Acts;

(b) The cross-border transfers of the savings of the Executive to augment the appropriations
of other offices outside the Executive; and

(c) The funding of projects, activities and programs that were not covered by any
appropriation in the General Appropriations Act.
MADANAS-GARCIA VS EXECUTIVE SECRETARY 2018

Facts:

Mandanas et. al and Garcia both filed a case against Executive Secretary et. al challenging the manner in
which the just share in the national taxes of the local government units (LGUs) has been computed.

The 1987 Constitution continued to push towards decentralization of government and local autonomy.
Republic Act 7160 also known as the Local Government Code of 1991 further strengthened the local
autonomy and fiscal capability of Local Government Units (LGUs).

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 accordance with their own priorities. Such autonomy is as indispensable to the viability of
the policy of decentralization as the other.

The Internal Revenue Allotment (IRA) is the basis of the share of LGUs from the national taxes. 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).

G.R. No. 199802 (Mandanas, et al.)

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
– allege herein that certain collections of NIRTs by the Bureau of Customs (BOC) – specifically: excise
taxes, value added taxes (VATs) and documentary stamp taxes (DSTs) – have not been included 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 P60,750,000,000.00 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 P438,103,906,675.73.

G.R. No. 208488 (Congressman Enrique Garcia, Jr.)

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

– insists on a literal reading of Section 6, Article X of the 1987 Constitution.

– 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 VATs 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.

The cases were consolidated on October 22, 2013

ISSUES

General Issue: 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

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.

Held:
II. Section 6 of the Constitution mentions "national taxes" as the source of the just share of the LGUs
while Section 284 of the LGC ordains that the share of the LGUs be taken from "national internal
revenue taxes" instead. Congress thereby infringed the constitutional provision.

Although the power of Congress to make laws is plenary in nature, congressional lawmaking remains
subject to the limitations stated in the 1987 Constitution.

The phrase "national internal revenue taxes" in Section 284 is undoubtedly more restrictive than the
term "national taxes" written in Section 6 of the Constitution. 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).
Equally impermissible is that Congress has also thereby curtailed the guarantee of fiscal autonomy in
favor of the LGUs under the 1987 Constitution.

What the phrase "national internal revenue taxes" as used in Section 284 of the LGC included are all the
taxes enumerated in Section 21 of the National Internal Revenue Code (NIRC), as amended by R.A. No.
8424, namely: income tax, estate and donor's taxes, VAT, other percentage taxes, excise taxes,
documentary stamp taxes, and such other taxes as may be imposed and collected by the BIR.

In view of the foregoing enumeration of what are the national internal revenue taxes, Section 284 of
the LGC has effectively deprived the LGUs from deriving their just share from other national taxes, like
the customs duties.

Moving forward, the BIR and the Bureau Of Custom are directed certify all national tax collections. This
ruling, also known as the "Mandanas Ruling," is to be applied prospectively.

DECISION

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 of the LGC deviates from the plain language
of Section 6 of Article X of the 1987 Constitution

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.

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.

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.

3. DECLARES that:

(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 (1/2 of 1%) of national tax collections as the
auditing fee of the Commission on Audit is VALID;
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 378 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

6. COMMANDS the AUTOMATIC RELEASE WITHOUT NEED OF FURTHER ACTION

MADANAS-GARCIA VS EXECUTIVE SECRETARY 2019

The Office of the Solicitor General (OSG), representing all the respondents, has filed a motion for
reconsideration, specifying therein the following errors, to wit:

I.

THE HONORABLE COURT ERRED IN RULING THAT ARTICLE X, SECTION 6 OF THE

CONSTITUTION REQUIRES THAT ALL NATIONAL TAXES SHALL BE THE BASE IN
COMPUTING THE INTERNAL REVENUE ALLOTMENT (IRA) OF THE LOCAL GOVERNMENT
UNITS (LGUs).

II.

THE HONORABLE COURT ERRED IN DELETING THE PHRASE "INTERNAL REVENUE" IN

SECTIONS 284, 285, 287, AND 290 OF THE LOCAL GOVERNMENT CODE (LGC) AND IN
ARTICLES 378, 379, 380, 382, 409, 461 AND RELATED PROVISIONS OF THE IMPLEMENTING
RULES AND REGULATIONS OF THE LGC. THIS DELETION AMOUNTS TO AN
ENCROACHMENT ON THE EXCLUSIVE POWER OF CONGRESS TO DETERMINE THE LGUs'
JUST SHARE IN NATIONAL TAXES.

III.

THE HONORABLE COURT ERRED IN RULING THAT THE FOLLOWING TAXES SHOULD STILL
BE INCLUDED IN THE BASE USED IN THE COMPUTATION OF THE IRA: (A) TARRIFF AND
CUSTOMS DUTIES COLLECTED BY THE BUREAU OF CUSTOMS; (B) 50% OF VALUE-ADDED
TAXES COLLECTED IN THE AUTONOMOUS REGION IN MUSLIM MINDANAO(ARMM); (C) 30%
OF ALL OTHER NATIONAL TAXES COLLECTED IN THE ARMM; (D) 60% OF THE NATIONAL
TAXES COLLECTED FROM THE EXPLOITATION AND DEVELOPMENT OF NATIONAL
WEALTH; (E) FROM LOCALLY MANUFACTURED VIRGINIA AND OTHER TOBACCO
PRODUCTS; (F) THE ENTIRE 50% OF THE NATIONAL TAXES UNDER SECTIONS 106, 108,
AND 116 OF REPUBLIC ACT NO. 8424; AND (G) 5% OF THE 25% FRANCHISE TAXES GIVEN
THE NATIONAL GOVERNMENT UNDER SECTION 6 OF R.A. NO. 0631 AND SECTION 8 OF
R.A. NO. 6632.
IV.

IN THE EVENT THE HONORABLE COURT WILL MAINTAIN ITS DECISION, THE PROSPECTIVE
APPLICATION OF THE DECISION SHOULD BE CLARIFIED TO MEAN THAT THE LGUs WILL
BEGIN RECEIVING THE ADJUSTED IRA IN 2022.

The OSG premises its contention on the fact that the article "the" immediately precedes the phrase
"national taxes" in Section 6, thereby manifesting the intent to give Congress the discretion to
determine which national taxes the just share will be based on considering that the qualifier "the"
signals that the succeeding phrase "national taxes" is a specific class of taxes; that if it was the
intention of the framers to include all national taxes, the Constitution should have so stated; that the
phrase internal revenue should be restored in the affected provisions of the LGC considering that the
deletion of the phrase constitutes an undue encroachment on the power of Congress to determine
the LGUs' just share; that the effect of broadening the base for computing the just share is to modify
Congress' internal revenue allocations (IRA) in favor of the LGUs, which the Court cannot do
because imposing the new base was not intended by Congress; that it is more prudent for the Court
to nullify Section 284 of the LGC in its entirety and to allow Congress to make the necessary
adjustments; that, indeed, the Court, its awesome powers notwithstanding, cannot supplant
Congress' discretion to determine the amount of the just share the LGUs are entitled to; that certain
taxes (i.e., those under Republic Act No. 9054, Republic Act No. 6631, and Republic Act No. 6632)
that the Court has ordered to be included in the reckoning of the base amount of the fair share of the
LGUs should be excluded because including them will result to double sharing on the part of host
LGUs which are already given particular shares by virtue of the Court's directive to include in the
base the national government share; that the double sharing is not intended by Congress; that the
inclusion of the other taxes, particularly the taxes under Republic Act No. 7171 and Republic Act No.
8240, the national taxes on utilization and development of the national wealth under Section 289 of
the LGC, the value added tax (VAT) collections under Section 106, Section 108 and Section 116 of
the National Internal Revenue Code (NIRC) will deprive the National Government of much needed
funds for essential services; and that the collections of the Bureau of Customs should be excluded
from the base amount because of the nature of tariffs as being for the regulation of goods coming in
and going out of the country instead of being just for income generation.

The OSG interposes that should the Court nonetheless affirm the decision of July 3, 2018, it should
expressly declare the effects of the decision to be prospective following the operative fact doctrine,
resulting in the base amount decreed herein to start only in Fiscal Year 2022.

On his part, petitioner Garcia seeks partial reconsideration to pray that all the arrears from
1992 resulting from the new computation of the base amount of the fair share be given to the
LGUs. 2

Ruling of the Court

The Court denies both motions for their lack of merit.

National Tax

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 LGUs be taken from national internal revenue
taxes instead.

It is clear that the exclusion of other national taxes like customs duties from the base for determining
the just share of the LGUs contravened the express constitutional edict in Section 6, Article X the
1987 Constitution.

The Court sees no reason to exclude the national taxes mentioned in the July 3, 2018 decision.
Indeed, Section 6, Article X of the Constitution expressly states that national taxes shall constitute
the base amount from which the just share shall be computed. Without the Constitution itself
excluding such national taxes from the computation of the base amount, the rule will be that such
national taxes are to be included.
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.

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. 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. 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.

It becomes unavoidable to ask when the adjusted amounts will be granted in favor of LGUs. The
OSG suggests that the adjusted amounts be given to the LGUs starting with the 2022 budget cycle.

The suggestion of the OSG is well taken.

The adjusted amounts can be deemed effective only after this ruling has lapsed into finality, which is
procedurally to be reckoned only from the denial of the OSG's motion for reconsideration through
this resolution. From then onwards, and as ruled herein, the just share should be based on
all national taxes collected on "the third fiscal year preceding." In the absence of any amendment by
Congress, the rates fixed in Section 284 of the LGC, as herein modified, shall control.