[G.R. No. 132988.

July 19, 2000]

AQUILINO Q. PIMENTEL JR., petitioner, vs. Hon. ALEXANDER

AGUIRRE in his capacity as Executive Secretary, Hon. EMILIA
BONCODIN in her capacity as Secretary of the Department of
Budget and Management, respondents.
ROBERTO PAGDANGANAN, intervenor.

DECISION
PANGANIBAN, J.:

The Constitution vests the President with the power of supervision, not control, over
local government units (LGUs). Such power enables him to see to it that LGUs and their
officials execute their tasks in accordance with law. While he may issue advisories and
seek their cooperation in solving economic difficulties, he cannot prevent them from
performing their tasks and using available resources to achieve their goals. He may not
withhold or alter any authority or power given them by the law. Thus, the withholding of a
portion of internal revenue allotments legally due them cannot be directed by
administrative fiat.

The Case

Before us is an original Petition for Certiorari and Prohibition seeking (1) to annul
Section 1 of Administrative Order (AO) No. 372, insofar as it requires local government
units to reduce their expenditures by 25 percent of their authorized regular appropriations
for non-personal services; and (2) to enjoin respondents from implementing Section 4 of
the Order, which withholds a portion of their internal revenue allotments.
On November 17, 1998, Roberto Pagdanganan, through Counsel Alberto C. Agra,
filed a Motion for Intervention/Motion to Admit Petition for Intervention, [1] attaching thereto
his Petition in Intervention[2] joining petitioner in the reliefs sought. At the time, intervenor
was the provincial governor of Bulacan, national president of the League of Provinces of
the Philippines and chairman of the League of Leagues of Local Governments. In a
Resolution dated December 15, 1998, the Court noted said Motion and Petition.

The Facts and the Arguments

 On December 27, 1997, the President of the Philippines issued AO 372. Its full text,
with emphasis on the assailed provisions, is as follows:

"ADMINISTRATIVE ORDER NO. 372

ADOPTION OF ECONOMY MEASURES IN GOVERNMENT FOR FY 1998

WHEREAS, the current economic difficulties brought about by the peso

depreciation requires continued prudence in government fiscal management
to maintain economic stability and sustain the country's growth momentum;

WHEREAS, it is imperative that all government agencies adopt cash

management measures to match expenditures with available resources;

NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the

Philippines, by virtue of the powers vested in me by the Constitution, do
hereby order and direct:

SECTION 1. All government departments and agencies, including state

universities and colleges, government-owned and controlled
corporations and local governments units will identify and implement
measures in FY 1998 that will reduce total expenditures for the year by
at least 25% of authorized regular appropriations for non-personal
services items, along the following suggested areas:

1. Continued implementation of the streamlining policy on organization and staffing by

deferring action on the following:

a. Operationalization of new agencies;

b. Expansion of organizational units and/or creation of positions;

c. Filling of positions; and

d. Hiring of additional/new consultants, contractual and casual personnel,

regardless of funding source.

2. Suspension of the following activities:

a. Implementation of new capital/infrastructure projects, except those

which have already been contracted out;

b. Acquisition of new equipment and motor vehicles;

 c. All foreign travels of government personnel, except those associated
with scholarships and trainings funded by grants;

d. Attendance in conferences abroad where the cost is charged to the

government except those clearly essential to Philippine
commitments in the international field as may be determined by
the Cabinet;

e. Conduct of trainings/workshops/seminars, except those conducted

by government training institutions and agencies in the
performance of their regular functions and those that are funded
by grants;

f. Conduct of cultural and social celebrations and sports activities,

except those associated with the Philippine Centennial celebration
and those involving regular competitions/events;

g. Grant of honoraria, except in cases where it constitutes the only

source of compensation from government received by the person
concerned;

h. Publications, media advertisements and related items, except those

required by law or those already being undertaken on a regular
basis;

i. Grant of new/additional benefits to employees, except those

expressly and specifically authorized by law; and

j. Donations, contributions, grants and gifts, except those given by

institutions to victims of calamities.

3. Suspension of all tax expenditure subsidies to all GOCCs and LGUs

4. Reduction in the volume of consumption of fuel, water, office supplies, electricity and
other utilities
5. Deferment of projects that are encountering significant implementation problems
6. Suspension of all realignment of funds and the use of savings and reserves

SECTION 2. Agencies are given the flexibility to identify the specific sources
of cost-savings, provided the 25% minimum savings under Section 1 is
complied with.
SECTION 3. A report on the estimated savings generated from these
measures shall be submitted to the Office of the President, through the
Department of Budget and Management, on a quarterly basis using the
attached format.

SECTION 4. Pending the assessment and evaluation by the Development Budget

Coordinating Committee of the emerging fiscal situation, the amount equivalent
to 10% of the internal revenue allotment to local government units shall be
withheld.
SECTION 5. The Development Budget Coordination Committee shall conduct a monthly
review of the fiscal position of the National Government and if necessary, shall
recommend to the President the imposition of additional reserves or the lifting of
previously imposed reserves.
SECTION 6. This Administrative Order shall take effect January 1, 1998 and shall remain
valid for the entire year unless otherwise lifted.

DONE in the City of Manila, this 27th day of December, in the year of our Lord,
nineteen hundred and ninety-seven."

Subsequently, on December 10, 1998, President Joseph E. Estrada issued AO 43,

amending Section 4 of AO 372, by reducing to five percent (5%) the amount of internal
revenue allotment (IRA) to be withheld from the LGUs.
Petitioner contends that the President, in issuing AO 372, was in effect exercising the
power of control over LGUs. The Constitution vests in the President, however, only the
power of general supervision over LGUs, consistent with the principle of local
autonomy. Petitioner further argues that the directive to withhold ten percent (10%) of
their IRA is in contravention of Section 286 of the Local Government Code and of Section
6, Article X of the Constitution, providing for the automatic release to each of these units
its share in the national internal revenue.
The solicitor general, on behalf of the respondents, claims on the other hand that AO
372 was issued to alleviate the "economic difficulties brought about by the peso
devaluation" and constituted merely an exercise of the President's power of supervision
over LGUs. It allegedly does not violate local fiscal autonomy, because it
merely directs local governments to identify measures that will reduce their total
expenditures for non-personal services by at least 25 percent. Likewise, the withholding
of 10 percent of the LGUs IRA does not violate the statutory prohibition on the imposition
of any lien or holdback on their revenue shares, because such withholding is "temporary
in nature pending the assessment and evaluation by the Development Coordination
Committee of the emerging fiscal situation."

The Issues

The Petition[3] submits the following issues for the Court's resolution:
"A. Whether or not the president committed grave abuse of discretion [in]
ordering all LGUS to adopt a 25% cost reduction program in violation of the
LGU[']S fiscal autonomy

"B. Whether or not the president committed grave abuse of discretion in

ordering the withholding of 10% of the LGU[']S IRA"

In sum, the main issue is whether (a) Section 1 of AO 372, insofar as it "directs" LGUs
to reduce their expenditures by 25 percent; and (b) Section 4 of the same issuance, which
withholds 10 percent of their internal revenue allotments, are valid exercises of the
President's power of general supervision over local governments.
Additionally, the Court deliberated on the question whether petitioner had the locus
standi to bring this suit, despite respondents' failure to raise the issue. [4] However, the
intervention of Roberto Pagdanganan has rendered academic any further discussion on
this matter.

The Court's Ruling

The Petition is partly meritorious.

Main Issue:
Validity of AO 372
Insofar as LGUs Are Concerned

Before resolving the main issue, we deem it important and appropriate to define
certain crucial concepts: (1) the scope of the President's power of general supervision
over local governments and (2) the extent of the local governments' autonomy.

Scope of President's Power of Supervision Over LGUs

Section 4 of Article X of the Constitution confines the President's power over local
governments to one of general supervision. It reads as follows:

"Sec. 4. The President of the Philippines shall exercise general supervision

over local governments. x x x"

This provision has been interpreted to exclude the power of control. In Mondano v.
Silvosa,[5] the Court contrasted the President's power of supervision over local
government officials with that of his power of control over executive officials of the national
government. It was emphasized that the two terms -- supervision and control -- differed
in meaning and extent. The Court distinguished them as follows:
"x x x In administrative law, supervision means overseeing or the power or
authority of an officer to see that subordinate officers perform their duties. If
the latter fail or neglect to fulfill them, the former may take such action or step
as prescribed by law to make them perform their duties. Control, on the other
hand, means the power of an officer to alter or modify or nullify or set aside
what a subordinate officer ha[s] done in the performance of his duties and to
substitute the judgment of the former for that of the latter."[6]

In Taule v. Santos,[7] we further stated that the Chief Executive wielded no more
authority than that of checking whether local governments or their officials were
performing their duties as provided by the fundamental law and by statutes. He cannot
interfere with local governments, so long as they act within the scope of their
authority. "Supervisory power, when contrasted with control, is the power of mere
oversight over an inferior body; it does not include any restraining authority over such
body,"[8] we said.
In a more recent case, Drilon v. Lim,[9] the difference between control and supervision
was further delineated. Officers in control lay down the rules in the performance or
accomplishment of an act. If these rules are not followed, they may, in their discretion,
order the act undone or redone by their subordinates or even decide to do it
themselves. On the other hand, supervision does not cover such authority. Supervising
officials merely see to it that the rules are followed, but they themselves do not lay down
such rules, nor do they have the discretion to modify or replace them. If the rules are not
observed, they may order the work done or redone, but only to conform to such
rules. They may not prescribe their own manner of execution of the act. They have no
discretion on this matter except to see to it that the rules are followed.
Under our present system of government, executive power is vested in the
President.[10] The members of the Cabinet and other executive officials are merely alter
egos. As such, they are subject to the power of control of the President, at whose will and
behest they can be removed from office; or their actions and decisions changed,
suspended or reversed.[11] In contrast, the heads of political subdivisions are elected by
the people. Their sovereign powers emanate from the electorate, to whom they are
directly accountable. By constitutional fiat, they are subject to the Presidents supervision
only, not control, so long as their acts are exercised within the sphere of their legitimate
powers. By the same token, the President may not withhold or alter any authority or power
given them by the Constitution and the law.

Extent of Local Autonomy

Hand in hand with the constitutional restraint on the President's power over local
governments is the state policy of ensuring local autonomy.[12]
In Ganzon v. Court of Appeals,[13] we said that local autonomy signified "a more
responsive and accountable local government structure instituted through a system of
decentralization."The grant of autonomy is intended to "break up the monopoly of the
national government over the affairs of local governments, x x x not x x x to end the
relation of partnership and interdependence between the central administration and local
government units x x x." Paradoxically, local governments are still subject to regulation,
however limited, for the purpose of enhancing self-government.[14]
Decentralization simply means the devolution of national administration, not power,
to local governments. Local officials remain accountable to the central government as the
law may provide.[15] The difference between decentralization of administration and that of
power was explained in detail in Limbona v. Mangelin[16] as follows:

"Now, autonomy is either decentralization of administration or decentralization

of power. There is decentralization of administration when the central
government delegates administrative powers to political subdivisions in order
to broaden the base of government power and in the process to make local
governments 'more responsive and accountable,'[17] and 'ensure their fullest
development as self-reliant communities and make them more effective partners in the pursuit of national
development and social progress.'[18] 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'[19] over them, but only to 'ensure that local affairs are administered according to
law.'[20] He has no control over their acts in the sense that he can substitute their judgments with his
own.[21]

Decentralization of power, on the other hand, involves an abdication of

political power in the favor of local government units declared to be
autonomous. In that case, the autonomous government is free to chart its own
destiny and shape its future with minimum intervention from central
authorities. According to a constitutional author, decentralization of power
amounts to 'self-immolation,' since in that event, the autonomous government
becomes accountable not to the central authorities but to its constituency."[22]

Under the Philippine concept of local autonomy, the national government has not
completely relinquished all its powers over local governments, including autonomous
regions. Only administrative powers over local affairs are delegated to political
subdivisions. The purpose of the delegation is to make governance more directly
responsive and effective at the local levels. In turn, economic, political and social
development at the smaller political units are expected to propel social and economic
growth and development. But to enable the country to develop as a whole, the programs
and policies effected locally must be integrated and coordinated towards a common
national goal. Thus, policy-setting for the entire country still lies in the President and
Congress. As we stated in Magtajas v. Pryce Properties Corp., Inc., municipal
governments are still agents of the national government.[23]

The Nature of AO 372

 Consistent with the foregoing jurisprudential precepts, let us now look into the nature
of AO 372. As its preambular clauses declare, the Order was a "cash management
measure" adopted by the government "to match expenditures with available resources,"
which were presumably depleted at the time due to "economic difficulties brought about
by the peso depreciation." Because of a looming financial crisis, the President deemed it
necessary to "direct all government agencies, state universities and colleges,
government-owned and controlled corporations as well as local governments to reduce
their total expenditures by at least 25 percent along suggested areas mentioned in AO
372.
Under existing law, local government units, in addition to having administrative
autonomy in the exercise of their functions, enjoy fiscal autonomy as well. Fiscal
autonomy means that local governments have the power to create their own sources of
revenue in addition to their equitable share in the national taxes released by the national
government, as well as the power to allocate their resources in accordance with their own
priorities. It extends to the preparation of their budgets, and local officials in turn have to
work within the constraints thereof. They are not formulated at the national level and
imposed on local governments, whether they are relevant to local needs and resources
or not. Hence, the necessity of a balancing of viewpoints and the harmonization of
proposals from both local and national officials,[24] who in any case are partners in the
attainment of national goals.
Local fiscal autonomy does not however rule out any manner of national government
intervention by way of supervision, in order to ensure that local programs, fiscal and
otherwise, are consistent with national goals. Significantly, the President, by
constitutional fiat, is the head of the economic and planning agency of the
government,[25] primarily responsible for formulating and implementing continuing,
coordinated and integrated social and economic policies, plans and programs [26] for the
entire country. However, under the Constitution, the formulation and the implementation
of such policies and programs are subject to "consultations with the appropriate public
agencies, various private sectors, and local government units." The President cannot do
so unilaterally.
Consequently, the Local Government Code provides:[27]

"x x x [I]n the event the national government incurs an unmanaged public
sector deficit, the President of the Philippines is hereby authorized, upon the
recommendation of [the] Secretary of Finance, Secretary of the Interior and
Local Government and Secretary of Budget and Management, and subject to
consultation with the presiding officers of both Houses of Congress and the
presidents of the liga, to make the necessary adjustments in the internal
revenue allotment of local government units but in no case shall the allotment
be less than thirty percent (30%) of the collection of national internal revenue
taxes of the third fiscal year preceding the current fiscal year x x x."

There are therefore several requisites before the President may interfere in local fiscal
matters: (1) an unmanaged public sector deficit of the national government; (2)
consultations with the presiding officers of the Senate and the House of
Representatives and the presidents of the various local leagues; and (3) the
corresponding recommendation of the secretaries of the Department of Finance, Interior
and Local Government, and Budget and Management. Furthermore, any adjustment in
the allotment shall in no case be less than thirty percent (30%) of the collection of national
internal revenue taxes of the third fiscal year preceding the current one.
Petitioner points out that respondents failed to comply with these requisites before
the issuance and the implementation of AO 372. At the very least, they did not even try
to show that the national government was suffering from an unmanageable public sector
deficit. Neither did they claim having conducted consultations with the different leagues
of local governments.Without these requisites, the President has no authority to adjust,
much less to reduce, unilaterally the LGU's internal revenue allotment.
The solicitor general insists, however, that AO 372 is merely directory and has been
issued by the President consistent with his power of supervision over local
governments. It is intended only to advise all government agencies and instrumentalities
to undertake cost-reduction measures that will help maintain economic stability in the
country, which is facing economic difficulties. Besides, it does not contain any sanction in
case of noncompliance. Being merely an advisory, therefore, Section 1 of AO 372 is well
within the powers of the President. Since it is not a mandatory imposition, the directive
cannot be characterized as an exercise of the power of control.
While the wordings of Section 1 of AO 372 have a rather commanding tone, and while
we agree with petitioner that the requirements of Section 284 of the Local Government
Code have not been satisfied, we are prepared to accept the solicitor general's
assurance that the directive to "identify and implement measures x x x that will reduce
total expenditures x x x by at least 25% of authorized regular appropriation" is merely
advisory in character, and does not constitute a mandatory or binding order that interferes
with local autonomy. The language used, while authoritative, does not amount to a
command that emanates from a boss to a subaltern.
Rather, the provision is merely an advisory to prevail upon local executives to
recognize the need for fiscal restraint in a period of economic difficulty. Indeed, all
concerned would do well to heed the President's call to unity, solidarity and teamwork to
help alleviate the crisis. It is understood, however, that no legal sanction may be imposed
upon LGUs and their officials who do not follow such advice. It is in this light that we
sustain the solicitor general's contention in regard to Section 1.

Withholding a Part of LGUs' IRA

Section 4 of AO 372 cannot, however, be upheld. A basic feature of local fiscal

autonomy is the automatic release of the shares of LGUs in the national internal
revenue. This is mandated by no less than the Constitution.[28] The Local Government
Code[29] specifies further that the release shall be made directly to the LGU concerned
within five (5) days after every quarter of the year and "shall not be subject to any lien or
holdback that may be imposed by the national government for whatever purpose."[30] As
a rule, the term "shall" is a word of command that must be given a compulsory
meaning.[31] The provision is, therefore, imperative.
Section 4 of AO 372, however, orders the withholding, effective January 1, 1998, of
10 percent of the LGUs' IRA "pending the assessment and evaluation by the
Development Budget Coordinating Committee of the emerging fiscal situation" in the
country. Such withholding clearly contravenes the Constitution and the law. Although
temporary, it is equivalent to a holdback, which means "something held back or withheld,
often temporarily."[32] Hence, the "temporary" nature of the retention by the national
government does not matter. Any retention is prohibited.
In sum, while Section 1 of AO 372 may be upheld as an advisory effected in times of
national crisis, Section 4 thereof has no color of validity at all. The latter provision
effectively encroaches on the fiscal autonomy of local governments. Concededly, the
President was well-intentioned in issuing his Order to withhold the LGUs IRA, but the rule
of law requires that even the best intentions must be carried out within the parameters of
the Constitution and the law. Verily, laudable purposes must be carried out by legal
methods.

Refutation of Justice Kapunan's Dissent

Mr. Justice Santiago M. Kapunan dissents from our Decision on the grounds that,
allegedly, (1) the Petition is premature; (2) AO 372 falls within the powers of the President
as chief fiscal officer; and (3) the withholding of the LGUs IRA is implied in the President's
authority to adjust it in case of an unmanageable public sector deficit.
First, on prematurity. According to the Dissent, when "the conduct has not yet
occurred and the challenged construction has not yet been adopted by the agency
charged with administering the administrative order, the determination of the scope and
constitutionality of the executive action in advance of its immediate adverse effect
involves too remote and abstract an inquiry for the proper exercise of judicial function."
This is a rather novel theory -- that people should await the implementing evil to befall
on them before they can question acts that are illegal or unconstitutional. Be it
remembered that the real issue here is whether the Constitution and the law are
contravened by Section 4 of AO 372, not whether they are violated by the acts
implementing it. In the unanimous en banc case Taada v. Angara, [33] this Court held that
when an act of the legislative department is seriously alleged to have infringed the
Constitution, settling the controversy becomes the duty of this Court. By the mere
enactment of the questioned law or the approval of the challenged action, the dispute is
said to have ripened into a judicial controversy even without any other overt act. Indeed,
even a singular violation of the Constitution and/or the law is enough to awaken judicial
duty. Said the Court:

"In seeking to nullify an act of the Philippine Senate on the ground that it
contravenes the Constitution, the petition no doubt raises a justiciable
controversy. Where an action of the legislative branch is seriously alleged to
have infringed the Constitution, it becomes not only the right but in fact the
duty of the judiciary to settle the dispute. 'The question thus posed is judicial
rather than political. The duty (to adjudicate) remains to assure that the
supremacy of the Constitution is upheld.'[34] Once a 'controversy as to the application or
interpretation of a constitutional provision is raised before this Court x x x , it becomes a legal issue which
the Court is bound by constitutional mandate to decide.'[35]

xxxxxxxxx

"As this Court has repeatedly and firmly emphasized in many cases,[36] it will not
shirk, digress from or abandon its sacred duty and authority to uphold the Constitution in matters that
involve grave abuse of discretion brought before it in appropriate cases, committed by any officer,
agency, instrumentality or department of the government."

In the same vein, the Court also held in Tatad v. Secretary of the Department of
Energy:[37]

"x x x Judicial power includes not only the duty of the courts to settle actual
controversies involving rights which are legally demandable and enforceable,
but also the duty to determine whether or not there has been grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of any branch
or instrumentality of government. The courts, as guardians of the Constitution,
have the inherent authority to determine whether a statute enacted by the
legislature transcends the limit imposed by the fundamental law. Where the
statute violates the Constitution, it is not only the right but the duty of the
judiciary to declare such act unconstitutional and void."

By the same token, when an act of the President, who in our constitutional scheme
is a coequal of Congress, is seriously alleged to have infringed the Constitution and the
laws, as in the present case, settling the dispute becomes the duty and the responsibility
of the courts.
Besides, the issue that the Petition is premature has not been raised by the parties;
hence it is deemed waived. Considerations of due process really prevents its use against
a party that has not been given sufficient notice of its presentation, and thus has not been
given the opportunity to refute it.[38]
Second, on the President's power as chief fiscal officer of the country. Justice
Kapunan posits that Section 4 of AO 372 conforms with the President's role as chief fiscal
officer, who allegedly "is clothed by law with certain powers to ensure the observance of
safeguards and auditing requirements, as well as the legal prerequisites in the release
and use of IRAs, taking into account the constitutional and statutory mandates." [39] He
cites instances when the President may lawfully intervene in the fiscal affairs of LGUs.
Precisely, such powers referred to in the Dissent have specifically been authorized
by law and have not been challenged as violative of the Constitution. On the other hand,
Section 4 of AO 372, as explained earlier, contravenes explicit provisions of the Local
Government Code (LGC) and the Constitution. In other words, the acts alluded to in the
Dissent are indeed authorized by law; but, quite the opposite, Section 4 of AO 372 is
bereft of any legal or constitutional basis.
Third, on the President's authority to adjust the IRA of LGUs in case of an
unmanageable public sector deficit. It must be emphasized that in striking down Section
4 of AO 372, this Court is not ruling out any form of reduction in the IRAs of LGUs. Indeed,
as the President may make necessary adjustments in case of an unmanageable public
sector deficit, as stated in the main part of this Decision, and in line with Section 284 of
the LGC, which Justice Kapunan cites. He, however, merely glances over a specific
requirement in the same provision -- that such reduction is subject to consultation with
the presiding officers of both Houses of Congress and, more importantly, with the
presidents of the leagues of local governments.
Notably, Justice Kapunan recognizes the need for "interaction between the national
government and the LGUs at the planning level," in order to ensure that "local
development plans x x x hew to national policies and standards." The problem is that no
such interaction or consultation was ever held prior to the issuance of AO 372. This is
why the petitioner and the intervenor (who was a provincial governor and at the same
time president of the League of Provinces of the Philippines and chairman of the League
of Leagues of Local Governments) have protested and instituted this action. Significantly,
respondents do not deny the lack of consultation.
In addition, Justice Kapunan cites Section 287[40] of the LGC as impliedly authorizing
the President to withhold the IRA of an LGU, pending its compliance with certain
requirements.Even a cursory reading of the provision reveals that it is totally inapplicable
to the issue at bar. It directs LGUs to appropriate in their annual budgets 20 percent of
their respective IRAs for development projects. It speaks of no positive power granted the
President to priorly withhold any amount. Not at all.
WHEREFORE, the Petition is GRANTED. Respondents and their successors are
hereby permanently PROHIBITED from implementing Administrative Order Nos. 372 and
43, respectively dated December 27, 1997 and December 10, 1998, insofar as local
government units are concerned.
SO ORDERED.
Davide, Jr., C.J., Bellosillo, Melo, Puno, Vitug, Mendoza, Quisumbing, Pardo, Buena,
Gonzaga-Reyes, and De Leon, Jr., JJ., concur.
Kapunan, J., see dissenting opinion.
Purisima, and Ynares-Santiago, JJ., join J. Kapunan in his dissenting opinion.

DISSENTING OPINION

KAPUNAN, J.:
 In striking down as unconstitutional and illegal Section 4 of Administrative Order No.
372 ("AO No. 372"), the majority opinion posits that the President exercised power of
control over the local government units ("LGU), which he does not have, and violated the
provisions of Section 6, Article X of the Constitution, which states:

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

and Section 286(a) of the Local Government Code, which provides:

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

The share of the LGUs in the national internal revenue taxes is defined in Section
284 of the same Local Government Code, to wit:

SEC. 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 (35%) percent; 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.

xxx
The majority opinion takes the view that the withholding of ten percent (10%) of the
internal revenue allotment ("IRA") to the LGUs pending the assessment and evaluation
by the Development Budget Coordinating Committee of the emerging fiscal situation as
called for in Section 4 of AO No. 372 transgresses against the above-quoted provisions
which mandate the "automatic" release of the shares of the LGUs in the national internal
revenue in consonance with local fiscal autonomy. The pertinent portions of AO No. 372
are reproduced hereunder:

ADMINISTRATIVE ORDER NO. 372

ADOPTION OF ECONOMY MEASURES IN GOVERNMENT FOR FY 1998

WHEREAS, the current economic difficulties brought about by the peso

depreciation requires continued prudence in government fiscal management
to maintain economic stability and sustain the countrys growth momentum;

WHEREAS, it is imperative that all government agencies adopt cash

management measures to match expenditures with available resources; NOW
THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the
Philippines, by virtue of the powers vested in me by the Constitution, do
hereby order and direct:

SECTION 1. All government departments and agencies, including x x x local

government units will identify and implement measures in FY 1998 that will
reduce total appropriations for non-personal services items, along the
following suggested areas:

xxx

SECTION 4. Pending the assessment and evaluation by the Development

Budget Coordinating Committee of the emerging fiscal situation the amount
equivalent to 10% of the internal revenue allotment to local government units
shall be withheld.

xxx
 Subsequently, on December 10, 1998, President Joseph E. Estrada issued
Administrative Order No. 43 (AO No. 43), amending Section 4 of AO No. 372, by reducing
to five percent (5%) the IRA to be withheld from the LGUs, thus:

ADMINISTRATIVE ORDER NO. 43

AMENDING ADMINISTRATIVE ORDER NO. 372 DATED 27 DECEMBER

1997 ENTITLED "ADOPTION OF ECONOMY MEASURES IN
GOVERNMENT FOR FY 1998"

WHEREAS, Administrative Order No. 372 dated 27 December 1997 entitled

"Adoption of Economy Measures in Government for FY 1998" was issued to
address the economic difficulties brought about by the peso devaluation in
1997;

WHEREAS, Section 4 of Administrative Order No. 372 provided that the

amount equivalent to 10% of the internal revenue allotment to local
government units shall be withheld; and,

WHEREAS, there is a need to release additional funds to local government

units for vital projects and expenditures.

NOW, THEREFORE, I, JOSEPH EJERCITO ESTRADA, President of the

Republic of the Philippines, by virtue of the powers vested in me by law, do
hereby order the reduction of the withheld Internal Revenue Allotment (IRA) of
local government units from ten percent to five percent.

The five percent reduction in the IRA withheld for 1998 shall be released
before 25 December 1998.

DONE in the City of Manila, this 10th day of December, in the year of our
Lord, nineteen hundred and ninety eight.

With all due respect, I beg to disagree with the majority opinion.
Section 4 of AO No. 372 does not present a case ripe for adjudication. The language
of Section 4 does not conclusively show that, on its face, the constitutional provision on
the automatic release of the IRA shares of the LGUs has been violated. Section 4, as
worded, expresses the idea that the withholding is merely temporary which fact alone
would not merit an outright conclusion of its unconstitutionality, especially in light of the
reasonable presumption that administrative agencies act in conformity with the law and
the Constitution. Where the conduct has not yet occurred and the challenged construction
has not yet been adopted by the agency charged with administering the administrative
order, the determination of the scope and constitutionality of the executive action in
advance of its immediate adverse effect involves too remote and abstract an inquiry for
the proper exercise of judicial function. Petitioners have not shown that the alleged 5%
IRA share of LGUs that was temporarily withheld has not yet been released, or that the
Department of Budget and Management (DBM) has refused and continues to refuse its
release. In view thereof, the Court should not decide as this case suggests an abstract
proposition on constitutional issues.
The President is the chief fiscal officer of the country. He is ultimately responsible for
the collection and distribution of public money:

SECTION 3. Powers and Functions. - The Department of Budget and Management

shall assist the President in the preparation of a national resources and expenditures
budget, preparation, execution and control of the National Budget, preparation and
maintenance of accounting systems essential to the budgetary process, achievement of
more economy and efficiency in the management of government operations,
administration of compensation and position classification systems, assessment of
organizational effectiveness and review and evaluation of legislative proposals having
budgetary or organizational implications.1

In a larger context, his role as chief fiscal officer is directed towards "the nation's efforts
at economic and social upliftment"2 for which more specific economic powers are
delegated. Within statutory limits, the President can, thus, fix "tariff rates, import and
export quotas, tonnage and wharfage dues, and other duties or imposts within the
framework of the national development program of the government,3 as he is also
responsible for enlisting the country in international economic agreements. 4 More than
this, to achieve "economy and efficiency in the management of government operations,"
the President is empowered to create appropriation reserves, 5 suspend expenditure
appropriations,6 and institute cost reduction schemes.7
As chief fiscal officer of the country, the President supervises fiscal development in
the local government units and ensures that laws are faithfully executed. 8 For this reason,
he can set aside tax ordinances if he finds them contrary to the Local Government
Code.9 Ordinances cannot contravene statutes and public policy as declared by the
national govemment.10 The goal of local economy is not to "end the relation of partnership
and inter-dependence between the central administration and local government
units,"11 but to make local governments "more responsive and accountable" [to] "ensure
their fullest development as self-reliant communities and make them more effective
partners in the pursuit of national development and social progress." 12
The interaction between the national government and the local government units is
mandatory at the planning level. Local development plans must thus hew to "national
policies and standards13 as these are integrated into the regional development plans for
submission to the National Economic Development Authority. " 14 Local budget plans and
goals must also be harmonized, as far as practicable, with "national development goals
and strategies in order to optimize the utilization of resources and to avoid duplication in
the use of fiscal and physical resources."15
 Section 4 of AO No. 372 was issued in the exercise by the President not only of his
power of general supervision, but also in conformity with his role as chief fiscal officer of
the country in the discharge of which he is clothed by law with certain powers to ensure
the observance of safeguards and auditing requirements, as well as the legal
prerequisites in the release and use of IRAs, taking into account the constitutional 16 and
statutory17 mandates.
However, the phrase "automatic release" of the LGUs' shares does not mean that the
release of the funds is mechanical, spontaneous, self-operating or reflex. IRAs must first
be determined, and the money for their payment collected.18 In this regard, administrative
documentations are also undertaken to ascertain their availability, limits and extent. The
phrase, thus, should be used in the context of the whole budgetary process and in relation
to pertinent laws relating to audit and accounting requirements. In the workings of the
budget for the fiscal year, appropriations for expenditures are supported by existing funds
in the national coffers and by proposals for revenue raising. The money, therefore,
available for IRA release may not be existing but merely inchoate, or a mere expectation.
It is not infrequent that the Executive Department's proposals for raising revenue in the
form of proposed legislation may not be passed by the legislature. As such, the release
of IRA should not mean release of absolute amounts based merely on mathematical
computations. There must be a prior determination of what exact amount the local
government units are actually entitled in light of the economic factors which affect the
fiscal situation in the country. Foremost of these is where, due to an unmanageable public
sector deficit, the President may make the necessary adjustments in the IRA of LGUs.
Thus, as expressly provided in Article 284 of the Local Government Code:
x x x (I)n 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.
x x x.
Under the aforecited provision, if facts reveal that the economy has sustained or will
likely sustain such "unmanageable public sector deficit," then the LGUs cannot assert
absolute right of entitlement to the full amount of forty percent (40%) share in the IRA,
because the President is authorized to make an adjustment and to reduce the amount to
not less than thirty percent (30%). It is, therefore, impractical to immediately release the
full amount of the IRAs and subsequently require the local government units to return at
most ten percent (10%) once the President has ascertained that there exists an
unmanageable public sector deficit.
 By necessary implication, the power to make necessary adjustments (including
reduction) in the IRA in case of an unmanageable public sector deficit, includes the
discretion to withhold the IRAs temporarily until such time that the determination of the
actual fiscal situation is made. The test in determining whether one power is necessarily
included in a stated authority is: "The exercise of a more absolute power necessarily
includes the lesser power especially where it is needed to make the first power
effective."19 If the discretion to suspend temporarily the release of the IRA pending such
examination is withheld from the President, his authority to make the necessary IRA
adjustments brought about by the unmanageable public sector deficit would be
emasculated in the midst of serious economic crisis. In the situation conjured by the
majority opinion, the money would already have been gone even before it is determined
that fiscal crisis is indeed happening.
The majority opinion overstates the requirement in Section 286 of the Local
Government Code that the IRAs "shall not be subject to any lien or holdback that may be
imposed by the national government for whatever purpose" as proof that no withholding
of the release of the IRAs is allowed albeit temporary in nature.
It is worthy to note that this provision does not appear in the Constitution. Section 6,
Art X of the Constitution merely directs that LGUs "shall have a just share" in the national
taxes "as determined by law" and which share shall be automatically released to
them. This means that before the LGUs share is released, there should be first a
determination, which requires a process, of what is the correct amount as dictated by
existing laws. For one, the Implementing Rules of the Local Government Code allows
deductions from the IRAs, to wit:

Article 384. Automatic Release of IRA Shares of LGUs:

xxx

(c) The IRA share of LGUs shall not be subject to any lien or hold back
that may be imposed by the National Government for whatever purpose
unless otherwise provided in the Code or other applicable laws and loan
contract on project agreements arising from foreign loans and international
commitments, such as premium contributions of LGUs to the Government
Service Insurance System and loans contracted by LGUs under foreign-
assisted projects.

Apart from the above, other mandatory deductions are made from the IRAs prior to
their release, such as: (1) total actual cost of devolution and the cost of city-funded
hospitals;20 and (2) compulsory contributions21 and other remittances.22 It follows,
therefore, that the President can withhold portions of IRAs in order to set-off or
compensate legitimately incurred obligations and remittances of LGUs.
Significantly, Section 286 of the Local Government Code does not make mention of
the exact amount that should be automatically released to the LGUs. The provision does
not mandate that the entire 40% share mentioned in Section 284 shall be released. It
merely provides that the "share" of each LGU shall be released and which "shall not be
subject to any lien or holdback that may be imposed by the national government for
whatever purpose." The provision on automatic release of IRA share should, thus, be
read together with Section 284, including the proviso on adjustment or reduction of IRAs,
as well as other relevant laws. It may happen that the share of the LGUs may amount to
the full forty percent (40%) or the reduced amount of thirty percent (30%) as adjusted
without any law being violated. In other words, all that Section 286 requires is the
automatic release of the amount that the LGUs are rightfully and legally entitled
to, which, as the same section provides, should not be less than thirty percent (30%) of
the collection of the national revenue taxes. So that even if five percent (5%) or ten
percent (10%) is either temporarily or permanently withheld, but the minimum of thirty
percent (30%) allotment for the LGUs is released pursuant to the President's authority to
make the necessary adjustment in the LGUS' share, there is still full compliance with the
requirements of the automatic release of the LGUs' share.
Finally, the majority insists that the withholding of ten percent (10%) or five percent
(5%) of the IRAs could not have been done pursuant to the power of the President to
adjust or reduce such shares under Section 284 of the Local Government Code because
there was no showing of an unmanageable public sector deficit by the national
government, nor was there evidence that consultations with the presiding officers of both
Houses of Congress and the presidents of the various leagues had taken place and the
corresponding recommendations of the Secretary of Finance, Secretary of Interior and
Local Government and the Budget Secretary were made.
I beg to differ. The power to determine whether there is an unmanageable public
sector deficit is lodged in the President. The President's determination, as fiscal manager
of the country, of the existence of economic difficulties which could amount to
"unmanageable public sector deficit" should be accorded respect. In fact, the withholding
of the ten percent (10%) of the LGUs' share was further justified by the current economic
difficulties brought about by the peso depreciation as shown by one of
the "WHEREASES" of AO No. 372.23 In the absence of any showing to the contrary, it is
presumed that the President had made prior consultations with the officials thus
mentioned and had acted upon the recommendations of the Secretaries of Finance,
Interior and Local Government and Budget.24
Therefore, even assuming hypothetically that there was effectively a deduction of five
percent (5%) of the LGUs' share, which was in accordance with the President's
prerogative in view of the pronouncement of the existence of an unmanageable public
sector deficit, the deduction would still be valid in the absence of any proof that the LGUs'
allotment was less than the thirty percent (30%) limit provided for in Section 284 of the
Local Government Code.
In resume, the withholding of the amount equivalent to five percent (5%) of the IRA
to the LGUs was temporary pending determination by the Executive of the actual share
which the LGUs are rightfully entitled to on the basis of the applicable laws, particularly
Section 284 of the Local Government Code, authorizing the President to make the
necessary adjustments in the IRA of LGUs in the event of an unmanageable public sector
deficit. And assuming that the said five percent (5%) of the IRA pertaining to the 1998
Fiscal Year has been permanently withheld, there is no showing that the amount actually
released to the LGUs that same year was less than thirty percent (30%) of the national
internal revenue taxes collected, without even considering the proper deductions allowed
by law.
WHEREFORE, I vote to DISMISS the petition.
 [G.R. No. 125350. December 3, 2002]

HON. RTC JUDGES MERCEDES G. DADOLE (Executive Judge, Branch

28), ULRIC R. CAETE (Presiding Judge, Branch 25), AGUSTINE R.
VESTIL (Presiding Judge, Branch 56), HON. MTC JUDGES
TEMISTOCLES M. BOHOLST (Presiding Judge, Branch 1),
VICENTE C. FANILAG (Judge Designate, Branch 2), and
WILFREDO A. DAGATAN (Presiding Judge, Branch 3), all of
Mandaue City, petitioners, vs. COMMISSION ON
AUDIT, respondent.

DECISION
CORONA, J.:

Before us is a petition for certiorari under Rule 64 to annul the decision and
[1]

resolution , dated September 21, 1995 and May 28, 1996, respectively, of the
[2]

respondent Commission on Audit (COA) affirming the notices of the Mandaue

City Auditor which diminished the monthly additional allowances received by
the petitioner judges of the Regional Trial Court (RTC) and Municipal Trial Court
(MTC) stationed in Mandaue City.
The undisputed facts are as follows:
In 1986, the RTC and MTC judges of Mandaue City started receiving
monthly allowances of P1,260 each through the yearly appropriation ordinance
enacted by the Sangguniang Panlungsod of the said city. In 1991, Mandaue
City increased the amount to P1,500 for each judge.
On March 15, 1994, the Department of Budget and Management (DBM)
issued the disputed Local Budget Circular No. 55 (LBC 55) which provided that:

xxx xxx xxx

2.3.2. In the light of the authority granted to the local government units under the
Local Government Code to provide for additional allowances and other benefits to
national government officials and employees assigned in their locality, such
additional allowances in the form of honorarium at rates not exceeding P1,000.00 in
provinces and cities and P700.00 in municipalities may be granted subject to the
following conditions:

a) That the grant is not mandatory on the part of the LGUs;

b) That all contractual and statutory obligations of the LGU including the
implementation of R.A. 6758 shall have been fully provided in the budget;

c) That the budgetary requirements/limitations under Section 324 and 325 of R.A.
7160 should be satisfied and/or complied with; and

d) That the LGU has fully implemented the devolution of functions/personnel in

accordance with R.A. 7160. (italics supplied)
[3]

xxx xxx xxx

The said circular likewise provided for its immediate effectivity without need
of publication:

5.0 EFFECTIVITY

This Circular shall take effect immediately.

Acting on the DBM directive, the Mandaue City Auditor issued notices of
disallowance to herein petitioners, namely, Honorable RTC Judges Mercedes
G. Dadole, Ulric R. Caete, Agustin R. Vestil, Honorable MTC Judges
Temistocles M. Boholst, Vicente C. Fanilag and Wilfredo A. Dagatan, in excess
of the amount authorized by LBC 55. Beginning October, 1994, the additional
monthly allowances of the petitioner judges were reduced to P1,000 each. They
were also asked to reimburse the amount they received in excess of P1,000
from April to September, 1994.
The petitioner judges filed with the Office of the City Auditor a protest against
the notices of disallowance. But the City Auditor treated the protest as a motion
for reconsideration and indorsed the same to the COA Regional Office No. 7.
In turn, the COA Regional Office referred the motion to the head office with a
recommendation that the same be denied.
On September 21, 1995, respondent COA rendered a decision denying
petitioners motion for reconsideration. The COA held that:

The issue to be resolved in the instant appeal is whether or not the City Ordinance of
Mandaue which provides a higher rate of allowances to the appellant judges may
prevail over that fixed by the DBM under Local Budget Circular No. 55 dated March
15, 1994.

xxx xxx xxx

Applying the foregoing doctrine, appropriation ordinance of local government units is
subject to the organizational, budgetary and compensation policies of budgetary
authorities (COA 5th Ind., dated March 17, 1994 re: Province of Antique; COA letter
dated May 17, 1994 re: Request of Hon. Renato Leviste, Cong. 1st Dist. Oriental
Mindoro). In this regard, attention is invited to Administrative Order No. 42 issued on
March 3, 1993 by the President of the Philippines clarifying the role of DBM in the
compensation and classification of local government positions under RA No. 7160
vis-avis the provisions of RA No. 6758 in view of the abolition of the JCLGPA.
Section 1 of said Administrative Order provides that:

Section 1. The Department of Budget and Management as the lead administrator of

RA No. 6758 shall, through its Compensation and Position Classification Bureau,
continue to have the following responsibilities in connection with the implementation
of the Local Government Code of 1991:

a) Provide guidelines on the classification of local government

positions and on the specific rates of pay therefore;

b) Provide criteria and guidelines for the grant of

all allowances and additional forms of compensation to local
government employees; xxx. (underscoring supplied)

To operationalize the aforecited presidential directive, DBM issued LBC No. 55,
dated March 15, 1994, whose effectivity clause provides that:

xxx xxx xxx

5.0 EFFECTIVITY

This Circular shall take effect immediately.

It is a well-settled rule that implementing rules and regulations promulgated by

administrative or executive officer in accordance with, and as authorized by law, has
the force and effect of law or partake the nature of a statute (Victorias Milling Co.,
Inc., vs. Social Security Commission, 114 Phil. 555, cited in Agpalos Statutory
Construction, 2nd Ed. P. 16; Justice Cruzs Phil. Political Law, 1984 Ed., p. 103;
Espanol vs. Phil Veterans Administration, 137 SCRA 314; Antique Sawmills Inc. vs.
Tayco, 17 SCRA 316).

xxx xxx xxx

There being no statutory basis to grant additional allowance to judges in excess of
P1,000.00 chargeable against the local government units where they are stationed, this
Commission finds no substantial grounds or cogent reason to disturb the decision of
the City Auditor, Mandaue City, disallowing in audit the allowances in question.
Accordingly, the above-captioned appeal of the MTC and RTC Judges of Mandaue
City, insofar as the same is not covered by Circular Letter No. 91-7, is hereby
dismissed for lack of merit.

xxx xxx xxx [4]

On November 27, 1995, Executive Judge Mercedes Gozo-Dadole, for and

in behalf of the petitioner judges, filed a motion for reconsideration of the
decision of the COA. In a resolution dated May 28, 1996, the COA denied the
motion.
Hence, this petition for certiorari by the petitioner judges, submitting the
following questions for resolution:
I

HAS THE CITY OF MANDAUE STATUTORY AND CONSTITUTIONAL BASIS

TO PROVIDE ADDITIONAL ALLOWANCES AND OTHER BENEFITS TO
JUDGES STATIONED IN AND ASSIGNED TO THE CITY?

II

CAN AN ADMINISTRATIVE CIRCULAR OR GUIDELINE SUCH AS LOCAL

BUDGET CIRCULAR NO. 55 RENDER INOPERATIVE THE POWER OF THE
LEGISLATIVE BODY OF A CITY BY SETTING A LIMIT TO THE EXTENT OF
THE EXERCISE OF SUCH POWER?

III

HAS THE COMMISSION ON AUDIT CORRECTLY INTERPRETED LOCAL

BUDGET CIRCULAR NO. 55 TO INCLUDE MEMBERS OF THE JUDICIARY IN
FIXING THE CEILING OF ADDITIONAL ALLOWANCES AND BENEFITS TO
BE PROVIDED TO JUDGES STATIONED IN AND ASSIGNED TO MANDAUE
CITY BY THE CITY GOVERNMENT AT P1,000.00 PER MONTH
NOTWITHSTANDING THAT THEY HAVE BEEN RECEIVING ALLOWANCES
OF P1,500.00 MONTHLY FOR THE PAST FIVE YEARS?

IV
IS LOCAL BUDGET CIRCULAR NO. 55 DATED MARCH 15, 1994 ISSUED BY
THE DEPARTMENT OF BUDGET AND MANAGEMENT VALID AND
ENFORCEABLE CONSIDERING THAT IT WAS NOT DULY PUBLISHED IN
ACCODANCE WITH LAW? [5]

Petitioner judges argue that LBC 55 is void for infringing on the local
autonomy of Mandaue City by dictating a uniform amount that a local
government unit can disburse as additional allowances to judges stationed
therein. They maintain that said circular is not supported by any law and
therefore goes beyond the supervisory powers of the President. They further
allege that said circular is void for lack of publication.
On the other hand, the yearly appropriation ordinance providing for
additional allowances to judges is allowed by Section 458, par. (a)(1)[xi], of RA
7160, otherwise known as the Local Government Code of 1991, which provides
that:

Sec. 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:

(1) Approve ordinances and pass resolutions necessary for an efficient and effective
city government, and in this connection, shall:

xxx xxx xxx

(xi) When the finances of the city government allow, provide for additional
allowances and other benefits to judges, prosecutors, public elementary and high
school teachers, and other national government officials stationed in or assigned to
the city; (italics supplied)

Instead of filing a comment on behalf of respondent COA, the Solicitor

General filed a manifestation supporting the position of the petitioner judges.
The Solicitor General argues that (1) DBM only enjoys the power to review and
determine whether the disbursements of funds were made in accordance with
the ordinance passed by a local government unit while (2) the COA has no more
than auditorial visitation powers over local government units pursuant to Section
348 of RA 7160 which provides for the power to inspect at any time the financial
accounts of local government units.
 Moreover, the Solicitor General opines that the DBM and the respondent
are only authorized under RA 7160 to promulgate a Budget Operations Manual
for local government units, to improve and systematize methods, techniques
and procedures employed in budget preparation, authorization, execution and
accountability pursuant to Section 354 of RA 7160. The Solicitor General points
out that LBC 55 was not exercised under any of the aforementioned provisions.
Respondent COA, on the other hand, insists that the constitutional and
statutory authority of a city government to provide allowances to judges
stationed therein is not absolute. Congress may set limitations on the exercise
of autonomy. It is for the President, through the DBM, to check whether these
legislative limitations are being followed by the local government units.
One such law imposing a limitation on a local government units autonomy
is Section 458, par. (a) (1) [xi], of RA 7160, which authorizes the disbursement
of additional allowances and other benefits to judges subject to the condition
that the finances of the city government should allow the same. Thus, DBM is
merely enforcing the condition of the law when it sets a uniform maximum
amount for the additional allowances that a city government can release to
judges stationed therein.
Assuming arguendo that LBC 55 is void, respondent COA maintains that
the provisions of the yearly approved ordinance granting additional allowances
to judges are still prohibited by the appropriation laws passed by Congress
every year. COA argues that Mandaue City gets the funds for the said additional
allowances of judges from the Internal Revenue Allotment (IRA). But the
General Appropriations Acts of 1994 and 1995 do not mention the disbursement
of additional allowances to judges as one of the allowable uses of the IRA.
Hence, the provisions of said ordinance granting additional allowances, taken
from the IRA, to herein petitioner judges are void for being contrary to law.
To resolve the instant petition, there are two issues that we must address:
(1) whether LBC 55 of the DBM is void for going beyond the supervisory powers
of the President and for not having been published and (2) whether the yearly
appropriation ordinance enacted by the City of Mandaue that provides for
additional allowances to judges contravenes the annual appropriation laws
enacted by Congress.
We rule in favor of the petitioner judges.
On the first issue, we declare LBC 55 to be null and void.
We recognize that, although our Constitution guarantees autonomy to local
[6]

government units, the exercise of local autonomy remains subject to the power
of control by Congress and the power of supervision by the President. Section
4 of Article X of the 1987 Philippine Constitution provides that:

Sec. 4. The President of the Philippines shall exercise general supervision over local
governments. x x x

In Pimentel vs. Aguirre , we defined the supervisory power of the President

[7]

and distinguished it from the power of control exercised by Congress. Thus:

This provision (Section 4 of Article X of the 1987 Philippine Constitution) has been
interpreted to exclude the power of control. In Mondano v. Silvosa,[i][5] the Court
contrasted the President's power of supervision over local government officials with
that of his power of control over executive officials of the national government. It was
emphasized that the two terms -- supervision and control -- differed in meaning and
extent. The Court distinguished them as follows:

"x x x In administrative law, supervision means overseeing or the power or authority

of an officer to see that subordinate officers perform their duties. If the latter fail or
neglect to fulfill them, the former may take such action or step as prescribed by law to
make them perform their duties. Control, on the other hand, means the power of an
officer to alter or modify or nullify or set aside what a subordinate officer ha[s] done
in the performance of his duties and to substitute the judgment of the former for that
of the latter."[ii][6]

In Taule v. Santos,[iii][7] we further stated that the Chief Executive wielded no more
authority than that of checking whether local governments or their officials were
performing their duties as provided by the fundamental law and by statutes. He cannot
interfere with local governments, so long as they act within the scope of their
authority. "Supervisory power, when contrasted with control, is the power of mere
oversight over an inferior body; it does not include any restraining authority over such
body,"[iv][8] we said.

In a more recent case, Drilon v. Lim,[v][9] the difference between control and
supervision was further delineated. Officers in control lay down the rules in the
performance or accomplishment of an act. If these rules are not followed, they may, in
their discretion, order the act undone or redone by their subordinates or even decide to
do it themselves. On the other hand, supervision does not cover such
authority.Supervising officials merely see to it that the rules are followed, but they
themselves do not lay down such rules, nor do they have the discretion to modify or
replace them. If the rules are not observed, they may order the work done or redone,
but only to conform to such rules. They may not prescribe their own manner of
execution of the act. They have no discretion on this matter except to see to it that the
rules are followed.

Under our present system of government, executive power is vested in the

President.[vi][10] The members of the Cabinet and other executive officials are merely
alter egos. As such, they are subject to the power of control of the President, at whose
will and behest they can be removed from office; or their actions and decisions
changed, suspended or reversed.[vii][11] In contrast, the heads of political subdivisions
are elected by the people. Their sovereign powers emanate from the electorate, to
whom they are directly accountable. By constitutional fiat, they are subject to the
Presidents supervision only, not control, so long as their acts are exercised within the
sphere of their legitimate powers. By the same token, the President may not withhold
or alter any authority or power given them by the Constitution and the law.

Clearly then, the President can only interfere in the affairs and activities of
a local government unit if he or she finds that the latter has acted contrary to
law. This is the scope of the Presidents supervisory powers over local
government units. Hence, the President or any of his or her alter egos cannot
interfere in local affairs as long as the concerned local government unit acts
within the parameters of the law and the Constitution. Any directive therefore
by the President or any of his or her alter egos seeking to alter the wisdom of a
law-conforming judgment on local affairs of a local government unit is a patent
nullity because it violates the principle of local autonomy and separation of
powers of the executive and legislative departments in governing municipal
corporations.
Does LBC 55 go beyond the law it seeks to implement? Yes.
LBC 55 provides that the additional monthly allowances to be given by a
local government unit should not exceed P1,000 in provinces and cities
and P700 in municipalities. Section 458, par. (a)(1)(xi), of RA 7160, the law that
supposedly serves as the legal basis of LBC 55, allows the grant of additional
allowances to judges when the finances of the city government allow. The said
provision does not authorize setting a definite maximum limit to the additional
allowances granted to judges. Thus, we need not belabor the point that the
finances of a city government may allow the grant of additional allowances
higher than P1,000 if the revenues of the said city government exceed its
annual expenditures. Thus, to illustrate, a city government with locally
generated annual revenues of P40 million and expenditures of P35 million can
afford to grant additional allowances of more than P1,000 each to, say, ten
judges inasmuch as the finances of the city can afford it.
 Setting a uniform amount for the grant of additional allowances is an
inappropriate way of enforcing the criterion found in Section 458, par. (a)(1)(xi),
of RA 7160. The DBM over-stepped its power of supervision over local
government units by imposing a prohibition that did not correspond with the law
it sought to implement. In other words, the prohibitory nature of the circular had
no legal basis.
Furthermore, LBC 55 is void on account of its lack of publication, in violation
of our ruling in Taada vs. Tuvera where we held that:
[8]

xxx. Administrative rules and regulations must also be published if their purpose is to
enforce or implement existing law pursuant to a valid delegation.

Interpretative regulations and those merely internal in nature, that is, regulating only
the personnel of an administrative agency and the public, need not be published.
Neither is publication required of the so-called letters of instruction issued by
administrative superiors concerning the rules or guidelines to be followed by their
subordinates in the performance of their duties.

Respondent COA claims that publication is not required for LBC 55

inasmuch as it is merely an interpretative regulation applicable to the personnel
of an LGU. We disagree. In De Jesus vs. Commission on Audit where we dealt
[9]

with the same issue, this Court declared void, for lack of publication, a DBM
circular that disallowed payment of allowances and other additional
compensation to government officials and employees. In refuting respondent
COAs argument that said circular was merely an internal regulation, we ruled
that:

On the need for publication of subject DBM-CCC No. 10, we rule in the affirmative.
Following the doctrine enunciated in Taada v. Tuvera, publication in the Official
Gazette or in a newspaper of general circulation in the Philippines is required
since DBM-CCC No. 10 is in the nature of an administrative circular the purpose
of which is to enforce or implement an existing law. Stated differently, to be
effective and enforceable, DBM-CCC No. 10 must go through the requisite
publication in the Official Gazette or in a newspaper of general circulation in the
Philippines.

In the present case under scrutiny, it is decisively clear that DBM-CCC No. 10, which
completely disallows payment of allowances and other additional compensation to
government officials and employees, starting November 1, 1989, is not a mere
interpretative or internal regulation. It is something more than that. And why not,
when it tends to deprive government workers of their allowance and additional
compensation sorely needed to keep body and soul together. At the very least, before
the said circular under attack may be permitted to substantially reduce their
income, the government officials and employees concerned should be apprised
and alerted by the publication of subject circular in the Official Gazette or in a
newspaper of general circulation in the Philippines to the end that they be given
amplest opportunity to voice out whatever opposition they may have, and to
ventilate their stance on the matter. This approach is more in keeping with
democratic precepts and rudiments of fairness and transparency. (emphasis
supplied)

In Philippine International Trading Corporation vs. Commission on Audit , [10]

we again declared the same circular as void, for lack of publication, despite the
fact that it was re-issued and then submitted for publication. Emphasizing the
importance of publication to the effectivity of a regulation, we therein held that:

It has come to our knowledge that DBM-CCC No. 10 has been re-issued in its entirety
and submitted for publication in the Official Gazette per letter to the National Printing
Office dated March 9, 1999. Would the subsequent publication thereof cure the defect
and retroact to the time that the above-mentioned items were disallowed in audit?

The answer is in the negative, precisely for the reason that publication is required as
a condition precedent to the effectivity of a law to inform the public of the contents of
the law or rules and regulations before their rights and interests are affected by the
same. From the time the COA disallowed the expenses in audit up to the filing of
herein petition the subject circular remained in legal limbo due to its non-publication.
As was stated in Taada v. Tuvera, prior publication of laws before they become
effective cannot be dispensed with, for the reason that it would deny the public
knowledge of the laws that are supposed to govern it. [11]

We now resolve the second issue of whether the yearly appropriation

ordinance enacted by Mandaue City providing for fixed allowances for judges
contravenes any law and should therefore be struck down as null and void.
According to respondent COA, even if LBC 55 were void, the ordinances
enacted by Mandaue City granting additional allowances to the petitioner
judges would still (be) bereft of legal basis for want of a lawful source of funds
considering that the IRA cannot be used for such purposes. Respondent COA
showed that Mandaue Citys funds consisted of locally generated revenues and
the IRA. From 1989 to 1995, Mandaue Citys yearly expenditures exceeded its
locally generated revenues, thus resulting in a deficit. During all those years, it
was the IRA that enabled Mandaue City to incur a surplus. Respondent avers
that Mandaue City used its IRA to pay for said additional allowances and this
violated paragraph 2 of the Special Provisions, page 1060, of RA 7845 (The
General Appropriations Act of 1995) and paragraph 3 of the Special Provision,
[12]

page 1225, of RA 7663 (The General Appropriations Act of 1994) which [13]

specifically identified the objects of expenditure of the IRA. Nowhere in said

provisions of the two budgetary laws does it say that the IRA can be used for
additional allowances of judges. Respondent COA thus argues that the
provisions in the ordinance providing for such disbursement are against the law,
considering that the grant of the subject allowances is not within the specified
use allowed by the aforesaid yearly appropriations acts.
We disagree.
Respondent COA failed to prove that Mandaue City used the IRA to spend
for the additional allowances of the judges. There was no evidence submitted
by COA showing the breakdown of the expenses of the city government and
the funds used for said expenses. All the COA presented were the amounts
expended, the locally generated revenues, the deficit, the surplus and the IRA
received each year. Aside from these items, no data or figures were presented
to show that Mandaue City deducted the subject allowances from the IRA. In
other words, just because Mandaue Citys locally generated revenues were not
enough to cover its expenditures, this did not mean that the additional
allowances of petitioner judges were taken from the IRA and not from the citys
own revenues.
Moreover, the DBM neither conducted a formal review nor ordered a
disapproval of Mandaue Citys appropriation ordinances, in accordance with the
procedure outlined by Sections 326 and 327 of RA 7160 which provide that:

Section 326. Review of Appropriation Ordinances of Provinces, Highly Urbanized

Cities, Independent Component Cities, and Municipalities within the Metropolitan
Manila Area. The Department of Budget and Management shall review ordinances
authorizing the annual or supplemental appropriations of provinces, highly-urbanized
cities, independent component cities, and municipalities within the Metropolitan
Manila Area in accordance with the immediately succeeding Section.

Section 327. Review of Appropriation Ordinances of Component Cities and

Municipalities.- The sangguninang panlalawigan shall review the ordinance
authorizing annual or supplemental appropriations of component cities and
municipalities in the same manner and within the same period prescribed for the
review of other ordinances.

If within ninety (90) days from receipt of copies of such ordinance, the
sangguniang panlalawigan takes no action thereon, the same shall be deemed to
have been reviewed in accordance with law and shall continue to be in full force
and effect. (emphasis supplied)

Within 90 days from receipt of the copies of the appropriation ordinance, the
DBM should have taken positive action. Otherwise, such ordinance was
deemed to have been properly reviewed and deemed to have taken effect.
Inasmuch as, in the instant case, the DBM did not follow the appropriate
procedure for reviewing the subject ordinance of Mandaue City and allowed the
90-day period to lapse, it can no longer question the legality of the provisions in
the said ordinance granting additional allowances to judges stationed in the said
city.
WHEREFORE, the petition is hereby GRANTED, and the assailed decision
and resolution, dated September 21, 1995 and May 28, 1996, respectively, of
the Commission on Audit are hereby set aside.
No costs.
SO ORDERED.
 [G.R. No. 130775. September 27, 2004]

THE NATIONAL LIGA NG MGA BARANGAY, represented by ALEX L.

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

[G.R. No. 131939. September 27, 2004]

LEANDRO YANGOT, BONIFACIO LACWASAN and BONY

TACIO, petitioners, vs. DILG Secretary ROBERT Z. BARBERS and
DILG Undersecretary MANUEL SANCHEZ, respondents.

DECISION
Tinga, J.:

At bottom, the present petition inquires into the essential nature of the Liga
ng mga Barangay and questions the extent of the power of Secretary of the
Department of Interior and Local Government (DILG), as alter ego of the
President. More immediately, the petition disputes the validity of the
appointment of the DILG as the interim caretaker of the Liga ng mga Barangay.
On 11 June 1997, private respondent Manuel A. Rayos [as petitioner
therein], Punong Barangay of Barangay 52, District II, Zone 5, District II,
Caloocan City, filed a petition for prohibition and mandamus, with prayer for a
writ of preliminary injunction and/or temporary restraining order and damages
before the Regional Trial Court (RTC) of Caloocan, alleging that respondent
[1]

therein Alex L. David [now petitioner], Punong Barangay of Barangay 77, Zone
7, Caloocan City and then president of the Liga Chapter of Caloocan City and
of the Liga ng mga Barangay National Chapter, committed certain irregularities
in the notice, venue and conduct of the proposed synchronized Liga ng mga
Barangay elections in 1997. According to the petition, the irregularities
consisted of the following: (1) the publication of the notice in the Manila
Bulletin but without notifying in writing the individual punong barangays of
Caloocan City; (2) the Notice of Meeting dated 08 June 1997 for the Liga
[2]

Chapter of Caloocan City did not specify whether the meeting scheduled on 14
June 1997 was to be held at 8:00 a.m. or 8:00 p.m., and worse, the meeting
was to be held in Lingayen, Pangasinan; and (3) the deadline for the filing of
[3]

the Certificates of Candidacy having been set at 5:00 p.m. of the third day prior
to the above election day, or on 11 June 1997, Rayos failed to meet said
[4]

deadline since he was not able to obtain a certified true copy of the COMELEC
Certificate of Canvas and Proclamation of Winning Candidate, which were
needed to be a delegate, to vote and be voted for in the Liga election. On 13
June 1997, the Executive Judge issued a temporary restraining order (TRO),
effective for seventy-two (72) hours, enjoining the holding of the general
membership and election meeting of Liga Chapter of Caloocan City on 14 June
1975.[5]

However, the TRO was allegedly not properly served on herein petitioner
David, and so the election for the officers of the Liga-Caloocan was held as
scheduled. Petitioner David was proclaimed President of the Liga-Caloocan,
[6]

and thereafter took his oath and assumed the position of ex-officio member of
the Sangguniang Panlungsod of Caloocan.
On 17 July 1997, respondent Rayos filed a second petition, this time for quo
warranto, mandamus and prohibition, with prayer for a writ of preliminary
injunction and/or temporary restraining order and damages, against David,
Nancy Quimpo, Presiding Officer of the Sangguniang
Panlungsod of Caloocan City, and Secretary Barbers. Rayos alleged that he
[7]

was elected President of the Liga Caloocan Chapter in the elections held on 14
June 1997 by the members of the Caloocan Chapter pursuant to their
Resolution/Petition No. 001-97. On 18 July 1997, the presiding judge granted
[8]

the TRO, enjoining therein respondents David, Quimpo and Secretary Barbers
from proceeding with the synchronized elections for the Provincial and
Metropolitan Chapters of the Liga scheduled on 19 July 1997, but only for the
purpose of maintaining the status quo and effective for a period not exceeding
seventy-two (72) hours. [9]

Eventually, on 18 July 1997, at petitioner Davids instance, Special Civil

Action (SCA) No. C-512 pending before Branch 126 was consolidated with SCA
No. C-508 pending before Branch 124. [10]

Before the consolidation of the cases, on 25 July 1997, the DILG through
respondent Secretary Barbers, filed in SCA No. C-512 an Urgent
Motion, invoking the Presidents power of general supervision over all local
[11]

government units and seeking the following reliefs:

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

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

The prayer for injunctive reliefs was anchored on the following grounds: (1)
the DILG Secretary exercises the power of general supervision over all
government units by virtue of Administrative Order No. 267 dated 18 February
1992; (2) the Liga ng mga Barangay is a government organization; (3) undue
interference by some local elective officials during the Municipal and City
Chapter elections of the Liga ng mga Barangay; (4) improper issuance of
confirmations of the elected Liga Chapter officers by petitioner David and the
National LigaBoard; (5) the need for the DILG to provide remedies measured in
view of the confusion and chaos sweeping the Liga ng mga Barangay and the
incapacity of the National Liga Board to address the problems properly.
On 31 July 1997, petitioner David opposed the DILGs Urgent Motion,
claiming that the DILG, being a respondent in the case, is not allowed to seek
any sanction against a co-respondent like David, such as by filing a cross-claim,
without first seeking leave of court. He also alleged that the DILGs request to
[13]

be appointed interim caretaker constitutes undue interference in the internal

affairs of the Liga, since the Liga is not subject to DILG control and
supervision. [14]

Three (3) days after filing its Urgent Motion, on 28 July 1997, and before it
was acted upon by the lower court, the DILG through then Undersecretary
Manuel Sanchez, issued Memorandum Circular No. 97-176. It cited the [15]

reported violations of the Liga ng mga Barangay Constitution and By-Laws by

David and widespread chaos and confusion among local government officials
as to who were the qualified ex-officio Liga members in their
respective sangunians. Pending the appointment of the DILG as the Interim
[16]

Caretaker of the Liga ng mga Barangay by the court and until the officers and
board members of the national Liga Chapter have been elected and have
assumed office, the Memorandum Circular directed all provincial governors,
vice governors, city mayors, city vice mayors, members of the sangguniang
panlalawigan and panlungsod, DILG regional directors and other concerned
officers, as follows:
1. All concerned are directed not to recognize and/or honor any Liga Presidents of the
Provincial and Metropolitan Chapters as ex-officio members of the sanggunian
concerned until further notice from the Courts or this Department;

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

On 04 August 1997, public respondent Judge Victoria Isabel A. Paredes

issued the assailed order, the pertinent portions of which read, thus:
[18]

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

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

xxx

WHEREFORE, premises considered, the Urgent Motion of the DILG for appointment
as interim caretaker, until such time that the regularly elected National Liga Board of
Directors shall have qualified and assumed office, to manage and administer the
affairs of the National Liga Board, is hereby GRANTED. [21]
 On 11 August 1997, petitioner David filed an urgent motion for the
reconsideration of the assailed order and to declare respondent Secretary
Barbers in contempt of Court. David claimed that the 04 August 1997 order
[22]

divested the duly elected members of the Board of Directors of

the Liga National Directorate of their positions without due process of law. He
also wanted Secretary Barbers declared in contempt for having issued, through
his Undersecretary, Memorandum Circular No. 97-176, even before respondent
judge issued the questioned order, in mockery of the justice system. He implied
that Secretary Barbers knew about respondent judges questioned order even
before it was promulgated.[23]

On 11 August 1997, the DILG issued Memorandum Circular No. 97-

193, providing supplemental guidelines for the 1997 synchronized elections of
[24]

the provincial and metropolitan chapters and for the election of the national
chapter of the Liga ng mga Barangay. The Memorandum Circular set the
synchronized elections for the provincial and metropolitan chapters on 23
August 1997 and for the national chapter on 06 September 1997.
On 12 August 1997, the DILG issued a Certificate of Appointment in favor
[25]

of respondent Rayos as president of the Liga ng mga

Barangay of Caloocan City. The appointment purportedly served as Rayoss
legal basis for ex-officio membership in the Sangguniang
Panlungsod of Caloocan City and to qualify and participate in the forthcoming
National Chapter Election of the Liga ng mga Barangay. [26]

On 23 August 1997, the DILG conducted the synchronized elections of

Provincial and Metropolitan Liga Chapters. Thereafter, on 06 September 1997,
the National Liga Chapter held its election of officers and board of directors,
wherein James Marty L. Lim was elected as President of the National Liga. [27]

On 01 October 1997, public respondent judge denied Davids motion for

reconsideration, ruling that there was no factual or legal basis to reconsider
[28]

the appointment of the DILG as interim caretaker of the National Liga Board
and to cite Secretary Barbers in contempt of court.
[29]

On 10 October 1997, petitioners filed the instant Petition for

Certiorari under Rule 65 of the Rules of Court, seeking to annul public
[30]

respondent judges orders of 04 August 1997 and 01 October 1997. They

dispute the latters opinion on the power of supervision of the President under
the Constitution, through the DILG over local governments, which is the same
as that of the DILGs as shown by its application of the power on the Liga ng
mga Barangay. Specifically, they claim that the public respondent
judges designation of the DILG as interim caretaker and the acts which the
DILG sought to implement pursuant to its designation as such are beyond the
scope of the Chief Executives power of supervision.
To support the petition, petitioners argue that under Administrative Order
No. 267, Series of 1992, the power of general supervision of the President over
local government units does not apply to the Liga and its various chapters
precisely because the Liga is not a local government unit, contrary to the stance
of the respondents. [31]

Section 507 of the Local Government Code (Republic Act No.

7160) provides that the Liga shall be governed by its own Constitution and By-
[32]

laws. Petitioners posit that the duly elected officers and directors of the
National Liga elected in 1994 had a vested right to their positions and could only
be removed therefrom for cause by affirmative vote of two-thirds (2/3) of the
entire membership pursuant to the Liga Constitution and By-Laws, and not by
mere issuances of the DILG, even if bolstered by the dubious authorization of
respondent judge. Thus, petitioners claim that the questioned order divested
[33]

the then incumbent officers and directors of the Liga of their right to their
respective offices without due process of law.
Assuming the Liga could be subsumed under the term local governments,
over which the President, through the DILG Secretary, has the power of
supervision, petitioners point out that still there is no legal or constitutional
[34]

basis for the appointment of the DILG as interim caretaker. They stress that
[35]

the actions contemplated by the DILG as interim caretaker go beyond

supervision, as what it had sought and obtained was authority to alter, modify,
nullify or set aside the actions of the Liga Board of Directors and even to
substitute its judgment over that of the latter which are all clearly one of
control. Petitioners question the appointment of Rayos as Liga-Caloocan
[36]

President since at that time petitioner David was occupying that position which
was still the subject of the quo warranto proceedings Rayos himself had
instituted. Petitioners likewise claim that DILG Memorandum Circular No. 97-
[37]

193, providing supplemental guidelines for the synchronized elections of

the Liga, replaced the implementing rules adopted by the Liga pursuant to its
Constitution and By-laws. In fact, even before its appointment as interim
[38]

caretaker, DILG specifically enjoined all heads of government units from

recognizing petitioner David and/or honoring any of his pronouncements
relating to the Liga. [39]

Petitioners rely on decision in Taule v. Santos, which, they claim, already

[40]

passed upon the extent of authority of the then Secretary of Local Government
over the katipunan ng mga barangay or the barangay councils, as it specifically
ruled that the Secretary [of Local Government] has no authority to pass upon
the validity or regularity of the election of officers of the katipunan. [41]

For his part, respondent Rayos avers that since the Secretary of the DILG
supervises the acts of local officials by ensuring that they act within the scope
of their prescribed powers and functions and since members of the various
leagues, such as the Liga in this case, are themselves officials of local
government units, it follows that the Liga members are subject to the power of
supervision of the DILG. He adds that as the DILGs management and
[42]

administration of the Liga affairs was limited only to the conduct of the elections,
its actions were consistent with its rule-making power and power of supervision
under existing laws. He asserts that in assailing the appointment of the DILG
[43]

as interim caretaker, petitioners failed to cite any provision of positive law in

support of their stance. Thus, he adds, if a law is silent, obscure or insufficient,
a judge may apply a rule he sees fit to resolve the issue, as long as the rule
chosen is in harmony with general interest, order, morals and public policy, in [44]

consonance with Article 9 of the Civil Code. [45]

On the other hand, it is quite significant that the Solicitor General has shared
petitioners position. He states that the DILGs act of managing and
administering the affairs of the National Liga Board are not merely acts of
supervision but plain manifestations of control and direct takeover of the
functions of the National Liga Board, going beyond the limits of the power of
[46]

general supervision of the President over local governments. Moreover, while

[47]

the Liga may be deemed a government organization, it is not strictly a local

government unit over which the DILG has supervisory power. [48]

Meanwhile, on 24 September 1998, James Marty L. Lim, the newly elected

President of the National Liga, filed a Motion for Leave to File Comment in
Intervention, with his Comment in Intervention attached, invoking the validity
[49] [50]

of the DILGs actions relative to the conduct of the Liga elections. In addition,
[51]

he sought the dismissal of the instant petition on the following grounds: (1) the
issue of validity or invalidity of the questioned order has been rendered moot
and academic by the election of Liga officers; (2) the turn-over of the
administration and management of Liga affairs to the Liga officers; and (3) the
recognition and acceptance by the members of the Liga nationwide. [52]

In the interim, another petition, this time for Prohibition with Prayer for a
Temporary Restraining Order, was filed by several presidents
[53]

of Liga Chapters, praying that this Court declare the DILG Secretary and
Undersecretary are not vested with any constitutional or legal power to exercise
control or even supervision over the National Liga ng mga Barangay, nor to take
over the functions of its officers or suspend its constitution; and declare void
any and all acts committed by respondents therein in connection with their
caretakership of the Liga. The petition was consolidated with G.R. No.
[54]

130775, but it was eventually dismissed because the petitioners failed to submit
an affidavit of service and proof of service of the petition. [55]

Meanwhile, on 01 December 1998, petitioner David died and was

substituted by his legal representatives. [56]

Petitioners have raised a number of issues. Integrated and simplified,

[57]

these issues boil down to the question of whether or not respondent Judge
acted with grave abuse of discretion in appointing the DILG as interim caretaker
to administer and manage the affairs of the National Liga Board, per its order
dated 04 August 1997. In turn, the resolution of the question of grave abuse
[58]

of discretion entails a couple of definitive issues, namely: (1) whether the Liga
ng mga Barangay is a government organization that is subject to the DILG
Secretarys power of supervision over local governments as the alter ego of the
President, and (2) whether the respondent Judges designation of the DILG as
interim caretaker of the Liga has invested the DILG with control over
the Liga and whether DILG Memorandum Circular No. 97-176, issued before it
was designated as such interim caretaker, and DILG Memorandum Circular
No. 97-193 and other acts which the DILG made in its capacity as
interim caretaker of the Liga, involve supervision or control of the Liga.
However, the Court should first address the question of mootness which
intervenor Lim raised because, according to him, during the pendency of the
present petition a general election was held; the new set of officers and
directors had assumed their positions; and that supervening events the DILG
had turned-over the management and administration of the Liga to
new Liga officers and directors. Respondent Rayos has joined him in this
[59]

regard. Forthwith, the Court declares that these supervening events have not
[60]

rendered the instant petition moot, nor removed it from the jurisdiction of this
Court.
This case transcends the elections ordered and conducted by the DILG as
interim caretaker of the Liga and the Liga officers and directors who were
elected to replace petitioner David and the former officers. At the core of the
petition is the validity of the DILGs caretakership of the Liga and the official acts
of the DILG as such caretaker which exceeded the bounds of supervision and
were exercise of control. At stake in this case is the realization of the
constitutionally ensconced principle of local government autonomy; the [61]

statutory objective to enhance the capabilities of barangays and municipalities

by providing them opportunities to participate actively in the implementation of
national programs and projects; and the promotion of the avowed aim to
[62]
ensure the independence and non-partisanship of the Liga ng mga
Barangay. The mantle of local autonomy would be eviscerated and remain an
empty buzzword if unconstitutional, illegal and unwarranted intrusions in the
affairs of the local governments are tolerated and left unchecked.
Indeed, it is the declared policy of the State that its territorial and political
subdivisions should enjoy genuine meaningful local autonomy to enable them
to attain their fullest development as self-reliant communities and make them
more effective partners in the attainment of national goals. In the case of De
[63]

Leon v. Esguerra, the Court ruled that even barangays are meant to possess
[64]

genuine and meaningful local autonomy so that they may develop fully as self-
reliant communities. [65]

Furthermore, well-entrenched is the rule that courts will decide a question

otherwise moot and academic if it is capable of repetition, yet evading
review. For the question of whether the DILG may validly be appointed as
[66]

interim caretaker, or assume a similar position and perform acts pursuant

thereto, is likely to resurrect again, and yet the question may not be decided
before the actual assumption, or the termination of said assumption even.
So too, dismissing the petition on the ground of mootness could lead to the
wrong impression that the challenged order and issuances are valid. Verily, that
does not appear to be the correct conclusion to make since by applying
opposite precedents to the issues the outcome points to invalidating the
assailed order and memorandum circulars.
The resolution of the issues of whether the Liga ng mga Barangay is subject
to DILG supervision, and whether the questioned caretakership order of the
respondent judge and the challenged issuances and acts of the DILG constitute
control in derogation of the Constitution, necessitates a brief overview of
the barangay, as the lowest LGU, and the Liga, as a vehicle of governance and
coordination.
As the basic political unit, the barangay serves as the primary planning and
implementing unit of government policies, plans, programs, projects and
activities in the community, and as a forum wherein the collective views of the
people may be expressed, crystallized and considered, and where disputes
may be amicably settled. [67]

On the other hand, the Liga ng mga Barangay is the organization of

[68]

all barangays, the primary purpose of which is the determination of the

representation of the Liga in the sanggunians, and the ventilation, articulation,
and crystallization of issues affecting barangay government administration and
securing solutions thereto, through proper and legal means. The Liga ng mga
[69]
Barangay shall have chapters at the municipal, city and provincial and
metropolitan political subdivision levels. The municipal and city chapters of
[70]

the Liga are composed of the barangay representatives from the municipality
or city concerned. The presidents of the municipal and city chapters of
the Liga form the provincial or metropolitan political subdivision chapters of
the Liga. The presidents of the chapters of the Liga in highly urbanized cities,
provinces and the Metro Manila area and other metropolitan political
subdivisions constitute the National Liga ng mga Barangay. [71]

As conceptualized in the Local Government Code, the barangay is

positioned to influence and direct the development of the entire country. This
was heralded by the adoption of the bottom-to-top approach process of
development which requires the development plans of the barangay to be
considered in the development plans of the municipality, city or
province, whose plans in turn are to be taken into account by the central
[72]

government in its plans for the development of the entire country. The Liga is
[73] [74]

the vehicle assigned to make this new development approach materialize and
produce results.
The presidents of the Liga at the municipal, city and provincial levels,
automatically become ex-officio members of the Sangguniang Bayan,
Sangguniang Panlungsod and Sangguniang Panlalawigan, respectively. They
shall serve as such only during their term of office as presidents of
the Liga chapters, which in no case shall be beyond the term of office of
the sanggunianconcerned. [75]

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

duties:
a) Give priority to programs designed for the total development of the barangays and in
consonance with the policies, programs and projects of the national government;
b) Assist in the education of barangay residents for peoples participation in local
government administration in order to promote untied and concerted action to achieve
country-wide development goals;
c) Supplement the efforts of government in creating gainful employment within the
barangay;
d) Adopt measures to promote the welfare of barangay officials;
e) Serve as forum of the barangays in order to forge linkages with government and non-
governmental organizations and thereby promote the social, economic and political
well-being of the barangays; and
 f) Exercise such other powers and perform such other duties and functions which will
bring about stronger ties between barangays and promote the welfare of the barangay
inhabitants.[77]
The Ligas are primarily governed by the provisions of the Local Government
Code. However, they are empowered to make their own constitution and by-
laws to govern their operations. Sec. 507 of the Code provides:

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

Pursuant to the Local Government Code, the Liga ng mga

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

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

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

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

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

The National Liga Board of Directors promulgated the rules for the conduct
of its Ligas general elections. And, as early as 28 April 1997, the Liga National
[79]

Chapter had already scheduled its general elections on 14 June 1997. [80]

The controlling provision on the issues at hand is Section 4, Article X of the

Constitution, which reads in part:

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

The 1935, 1973 and 1987 Constitutions uniformly differentiate the

Presidents power of supervision over local governments and his power of
control of the executive departments bureaus and offices. Similar to the [81]
counterpart provisions in the earlier Constitutions, the provision in the 1987
Constitution provision has been interpreted to exclude the power of control. [82]

In the early case of Mondano v. Silvosa, et al., this Court defined

[83]

supervision as overseeing, or the power or authority of an officer to see that

subordinate officers perform their duties, and to take such action as prescribed
by law to compel his subordinates to perform their duties. Control, on the other
hand, means the power of an officer to alter or modify or nullify or set aside
what a subordinate officer had done in the performance of his duties and to
substitute the judgment of the former for that of the latter. In Taule v. [84]

Santos, the Court held that the Constitution permits the President to wield no
[85]

more authority than that of checking whether a local government or its officers
perform their duties as provided by statutory enactments. Supervisory power,
[86]

when contrasted with control, is the power of mere oversight over an inferior
body; it does not include any restraining authority over such body. [87]

The case of Drilon v. Lim clearly defined the extent of supervisory power,
[88]

thus:

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

In Section 4, Article X of the Constitution applicable to the Liga ng mga

Barangay? Otherwise put, is the Liga legally susceptible to DILG suspension?
This question was resolved in Bito-Onon v. Fernandez, where the Court
[90]

ruled that the Presidents power of the general supervision, as exercised therein
by the DILG Secretary as his alter ego, extends to the Liga ng mga Barangay.

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

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

The rationale for making the Liga subject to DILG supervision is quite
evident, whether from the perspectives of logic or of practicality. The Liga is an
aggroupment of barangays which are in turn represented therein by their
respective punong barangays. The representatives of the Liga sit in an ex
officio capacity at the municipal, city and provincial sanggunians. As such, they
enjoy all the powers and discharge all the functions of regular municipal
councilors, city councilors or provincial board members, as the case may
be. Thus, the Liga is the vehicle through which the barangay participates in the
enactment of ordinances and formulation of policies at all the legislative local
levels higher than the sangguniang barangay, at the same time serving as the
mechanism for the bottom-to-top approach of development.
In the case at bar, even before the respondent Judge designated the DILG
as interim caretaker of the Liga, on 28 July 1997, it issued Memorandum
Circular No. 97-176, directing local government officials not to recognize David
as the National Liga President and his pronouncements relating to the affairs of
the Liga. Not only was the action premature, it even smacked of
superciliousness and injudiciousness. The DILG is the topmost government
agency which maintains coordination with, and exercises supervision over local
government units and its multi-level leagues. As such, it should be forthright,
circumspect and supportive in its dealings with the Ligas especially the Liga ng
mga Barangay. The indispensable role played by the latter in the development
of the barangays and the promotion of the welfare of the inhabitants thereof
deserve no less than the full support and respect of the other agencies of
government. As the Court held in the case of San Juan v. Civil Service
Commission, our national officials should not only comply with the
[92]

constitutional provisions on local autonomy but should also appreciate the spirit
of liberty upon which these provisions are based. [93]

When the respondent judge eventually appointed the DILG as interim

caretaker to manage and administer the affairs of the Liga, she effectively
removed the management from the National Liga Board and vested control of
the Liga on the DILG. Even a cursory glance at the DILGs prayer for
appointment as interim caretaker of the Liga to manage and administer the
affairs of the Liga, until such time that the new set of National Liga officers
shall have been duly elected and assumed office reveals that what the DILG
wanted was to take control over the Liga. Even if said caretakership was
contemplated to last for a limited time, or only until a new set of officers assume
office, the fact remains that it was a conferment of control in derogation of the
Constitution.
With his Department already appointed as interim caretaker of the Liga,
Secretary Barbers nullified the results of the Liga elections and promulgated
DILG Memorandum Circular No. 97-193 dated 11 August 1997, where he laid
down the supplemental guidelines for the 1997 synchronized elections of the
provincial and metropolitan chapters and for the election of the national chapter
of the Liga ng mga Barangay; scheduled dates for the new provincial,
metropolitan and national chapter elections; and appointed respondent Rayos
as president of Liga-Caloocan Chapter.
These acts of the DILG went beyond the sphere of general supervision and
constituted direct interference with the political affairs, not only of the Liga, but
more importantly, of the barangay as an institution. The election of Liga officers
is part of the Ligas internal organization, for which the latter has already
provided guidelines. In succession, the DILG assumed stewardship and
jurisdiction over the Liga affairs, issued supplemental guidelines for the
election, and nullified the effects of the Liga-conducted elections. Clearly, what
the DILG wielded was the power of control which even the President does not
have.
Furthermore, the DILG assumed control when it appointed respondent
Rayos as president of the Liga-Caloocan Chapter prior to the newly scheduled
general Liga elections, although petitioner Davids term had not yet expired. The
DILG substituted its choice, who was Rayos, over the choice of majority of
the punong barangay of Caloocan, who was the incumbent President,
petitioner David. The latter was elected and had in fact been sitting as an ex-
officio member of the sangguniang panlungsod in accordance with
the Liga Constitution and By-Laws. Yet, the DILG extended the appointment to
respondent Rayos although it was aware that the position was the subject of
a quo warranto proceeding instituted by Rayos himself, thereby preempting the
outcome of that case. It was bad enough that the DILG assumed the power of
control, it was worse when it made use of the power with evident bias and
partiality.
As the entity exercising supervision over the Liga ng mga Barangay, the
DILGs authority over the Liga is limited to seeing to it that the rules are followed,
but it cannot lay down such rules itself, nor does it have the discretion to modify
or replace them. In this particular case, the most that the DILG could do was
review the acts of the incumbent officers of the Liga in the conduct of the
elections to determine if they committed any violation of the Ligas Constitution
and By-laws and its implementing rules. If the National Liga Board and its
officers had violated Liga rules, the DILG should have ordered the Liga to
conduct another election in accordance with the Ligas own rules, but not in
obeisance to DILG-dictated guidelines. Neither had the DILG the authority to
remove the incumbent officers of the Liga and replace them, even temporarily,
with unelected Liga officers.
Like the local government units, the Liga ng mga Barangay is not subject to
control by the Chief Executive or his alter ego.
In the Bito-Onon case, this Court held that DILG Memorandum Circular
[94]

No. 97-193, insofar as it authorized the filing of a petition for review of the
decision of the Board of Election Supervisors (BES) with the regular courts in a
post-proclamation electoral protest, involved the exercise of control as it in
effect amended the guidelines already promulgated by the Liga.The decision
reads in part:

xxx. Officers in control, lay down the rules in the doing of an act. If they are not
followed, it is discretionary on his part to order the act undone or redone by his
subordinate or he may even decide to do it himself. Supervision does not cover such
authority. Supervising officers merely see to it that the rules are followed, but he
himself does not lay down such rules, nor does he have the discretion to modify or
replace them. If the rules are not observed, he may order the work done or re-done to
conform for to the prescribed rules. He cannot prescribe his own manner the doing of
the act.

xxx

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

In Taule, the Court ruled that the Secretary of Local Government had no
[96]

authority to pass upon the validity or regularity of the election of officers

of katipunan ng mga barangay or barangay councils. In that case, a protest was
lodged before the Secretary of Local Government regarding several
irregularities in, and seeking the nullification of, the election of officers of the
Federation of Associations of Barangay Councils (FABC) of Catanduanes.
Then Local Government Secretary Luis Santos issued a resolution nullifying the
election of officers and ordered a new one to be conducted. The Court ruled:

Construing the constitutional limitation on the power of general supervision of the

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

All given, the Court is convinced that the assailed order was issued with
grave abuse of discretion while the acts of the respondent Secretary, including
DILG Memorandum Circulars No. 97-176 and No. 97-193, are unconstitutional
and ultra vires, as they all entailed the conferment or exercise of control a power
which is denied by the Constitution even to the President.
WHEREFORE, the Petition is GRANTED. The Order of the Regional Trial
Court dated 04 August 1997 is SET ASIDE for having been issued with grave
abuse of discretion amounting to lack or excess of jurisdiction. DILG
Memorandum Circulars No. 97-176 and No. 97-193, are declared VOID for
being unconstitutional and ultra vires.
No pronouncements as to costs.
SO ORDERED.
 [G.R. No. 141386. November 29, 2001]

THE COMMISSION ON AUDIT OF THE PROVINCE OF CEBU,

Represented by Provincial Auditor ROY L. URSAL, petitioner, vs.
PROVINCE OF CEBU, Represented by Governor PABLO P.
GARCIA, respondent.

DECISION
YNARES-SANTIAGO, J.:

May the salaries and personnel-related benefits of public school teachers appointed by local
chief executives in connection with the establishment and maintenance of extension classes; as
well as the expenses for college scholarship grants, be charged to the Special Education Fund
(SEF) of the local government unit concerned?
The instant petition for review, which raises a pure question of law, seeks to annul and set
aside the decision[1] of the Regional Trial Court of Cebu, Branch 20, in a petition for declaratory
relief, docketed as Civil Case No. CEB-24422.
The provincial governor of the province of Cebu, as chairman of the local school board, under
Section 98 of the Local Government Code, appointed classroom teachers who have no items in the
DECS plantilla to handle extension classes that would accommodate students in the public schools.
In the audit of accounts conducted by the Commission on Audit (COA) of the Province of
Cebu, for the period January to June 1998, it appeared that the salaries and personnel-related
benefits of the teachers appointed by the province for the extension classes were charged against
the provincial SEF. Likewise charged to the SEF were the college scholarship grants of the
province. Consequently, the COA issued Notices of Suspension to the province of Cebu,[2] saying
that disbursements for the salaries of teachers and scholarship grants are not chargeable to the
provincial SEF.
Faced with the Notices of Suspension issued by the COA, the province of Cebu, represented
by its governor, filed a petition for declaratory relief with the trial court.
On December 13, 1999, the court a quo rendered a decision declaring the questioned expenses
as authorized expenditures of the SEF. The dispositive portion thereof reads:

WHEREFORE, in view of all the foregoing premises considered, judgment is hereby

rendered giving due course to this instant petition for declaratory relief declaring and
confirming that petitioner is vested with the authority to disburse the proceeds from
the Special Educational Fund [SEF] for the payment of salaries, allowances or
honoraria for teachers and non-teaching personnel in the public schools in the
Province of Cebu and its component cities, and, municipalities, as well as the
expenses for scholarship grants of petitioners specially to poor but deserving students
therein.

Declaring, further, respondent's audit findings on pages 36 and 37 in the Annual Audit
Report on the Province of Cebu for the year ending December 31, 1999 as null and
void.[3]

Hence, the instant petition by the Commission on Audit.

The Special Education Fund was created by virtue of R. A. No. 5447, which is An act creating
a special education fund to be constituted from the proceeds of an additional real property tax and
a certain portion of the taxes on Virginia-type cigarettes and duties on imported leaf tobacco,
defining the activities to be financed, creating school boards for the purpose, and appropriating
funds therefrom, which took effect on January 1, 1969. Pursuant thereto, P.D. No. 464, also known
as the Real Property Tax Code of the Philippines, imposed an annual tax of 1% on real property
which shall accrue to the SEF.[4]
Under R. A. No. 5447, the SEF may be expended exclusively for the following activities of
the DECS -
(a) the organization and operation of such number of extension classes as may be needed to
accommodate all children of school age desiring to enter Grade I, including the creation
of positions of classroom teachers, head teachers and principals for such extension
classes x x x;
(b) the programming of the construction and repair of elementary school buildings, acquisition of
sites, and the construction and repair of workshops and similar buildings and accessories
thereof to house laboratory, technical and similar equipment and apparatus needed by public
schools offering practical arts, home economics and vocational courses, giving priority to
elementary schools on the basis of the actual needs and total requirements of the country x x
x;
(c) the payment and adjustment of salaries of public school teachers under and by virtue of
Republic Act Numbered Five Thousand One Hundred Sixty-Eight and all the benefits in
favor of public school teachers provided under Republic Act Numbered Four Thousand
Six Hundred Seventy;
(d) preparation, printing and/or purchase of textbooks, teacher's guides, forms and pamphlets x x
x;
(e) the purchase and/or improvement, repair and refurbishing of machinery, laboratory, technical
and similar equipment and apparatus, including spare parts needed by the Bureau of
Vocational Education and secondary schools offering vocational courses;
(f) the establishment of printing plant to be used exclusively for the printing needs of the
Department of Education and the improvement of regional printing plants in the vocational
schools;
(g) the purchase of teaching materials such as work books, atlases, flip charts, science and
mathematics teaching aids, and simple laboratory devices for elementary and secondary
classes;
 (h) the implementation of the existing program for citizenship development in barrio high
schools, folk schools and adult education classes;
(i) the undertaking of education research, including that of the Board of National Education;
(j) the granting of government scholarships to poor but deserving students under Republic
Act Numbered Four Thousand Ninety; and
(k) the promotion of physical education, such as athletic meets. (Emphasis supplied)
With the effectivity of the Local Government Code of 1991, petitioner contends that R.A. No.
5447 was repealed, leaving Sections 235, 272 and 100 (c) of the Code to govern the disposition of
the SEF, to wit:

SEC. 235. Additional Levy on Real Property for the Special Education Fund
(SEF). A province or city or a municipality within the Metropolitan Manila Area, may
levy and collect an annual tax of one percent (1%) on the assessed value of real
property which shall be in addition to the basic real property tax. The proceeds thereof
shall exclusively accrue to the Special Education Fund (SEF).

SEC. 272. Application of Proceeds of the Additional One Percent SEF Tax. The
proceeds from the additional one percent (1%) tax on real property accruing to the
SEF shall be automatically released to the local school boards: Provided, That, in case
of provinces, the proceeds shall be divided equally between the provincial and
municipal school boards: Provided, however, That the proceeds shall be allocated
for the operation and maintenance of public schools, construction and repair of
school buildings, facilities and equipment, educational research, purchase of
books and periodicals, and sports development as determined and approved by
the local school board. (Emphasis supplied)

SEC. 100. Meeting and Quorum; Budget

xxxxxxxxx

(c) The annual school board budget shall give priority to the following:

(1) Construction, repair, and maintenance of school buildings and other facilities
of public elementary and secondary schools;

(2) Establishment and maintenance of extension classes where necessary; and

(3) Sports activities at the division, district, municipal, and barangay levels.
(Emphasis supplied)

Invoking the legal maxim expressio unius es exclusio alterius, petitioner alleges that since
salaries, personnel-related benefits and scholarship grants are not among those authorized as lawful
expenditures of the SEF under the Local Government Code, they should be deemed excluded
therefrom.
Moreover, petitioner claims that since what is allowed for local school boards to determine
under Section 99[5] of the Local Government Code is only the annual supplementary budgetary
needs for the operation and maintenance of public schools, as well as the supplementary local
cost to meet such needs, the budget of the local school boards for the establishment and
maintenance of extension classes should be construed to refer only to the upkeep and maintenance
of public school buildings, facilities and similar expenses other than personnel-related
benefits. This is because, petitioner argued, the maintenance and operation of public schools
pertain principally to the DECS.
The contentions are without merit. It is a basic precept in statutory construction that the intent
of the legislature is the controlling factor in the interpretation of a statute.[6] In this connection, the
following portions of the deliberations of the Senate on the second reading of the Local
Government Code on July 30, 1990 are significant:

Senator Guingona. Mr. President.

The President. Senator Guingona is recognized.

Senator Guingona. Just for clarification, Mr. President. In this transfer, will it include
everything eventually -- lock, stock and barrel, including curriculum?

Senator Pimentel. Mr. President, our stand in the Committee is to respect the decision
of the National Government in terms of curriculum.

Senator Guingona. But, supposing the Local Education Board wishes to adopt a
certain curriculum for that particular region?

Senator Pimentel. Mr. President, pursuant to the wording of the proposed transfer of
this elementary school system to local government units, what are specifically covered
here are merely the construction, repair, and maintenance of elementary school
buildings and other structures connected with public elementary school
education, payment of salaries, emoluments, allowances et cetera, procurement of
books, other teaching materials and equipment needed for the proper implementation
of the program. There is nothing here that will indicate that the local government will
have any right to alter the curriculum. (Emphasis supplied)

Senator Guingona. Thank you, Mr. President.

Similarly instructive are the foregoing deliberations in the House of Representatives on

August 16, 1990:

INTERPELLATION OF MS. RAYMUNDO

(Continuation)

Continuing her interpellation, Ms. Raymundo then adverted to subsection 4 of Section

101 [now Section 100, paragraph (c)] and asked if the budget is limited only to the
three priority areas mentioned. She also asked what is meant by the phrase
maintenance of extension classes.

In response, Mr. De Pedro clarified that the provision is not limited to the three
activities, to which may be added other sets of priorities at the proper time. As to
extension classes, he pointed out that the school boards may provide out of its
own funds, for additional teachers or other requirements if the national
government cannot provide funding therefor. Upon Ms. Raymundos query, Mr. de
Pedro further explained that support for teacher tools could fall under the priorities
cited and is covered by certain circulars.

Undoubtedly, the aforecited exchange of views clearly demonstrates that the legislature
intended the SEF to answer for the compensation of teachers handling extension classes.
Furthermore, the pertinent portion of the repealing clause of the Local Government Code,
provides:

SEC. 534. Repealing Clause. - x x x

(c) The provisions of . . . Sections 3, a (3) and b (2) of Republic Act No. 5447,
regarding the Special Education Fund are hereby repealed and rendered of no force
and effect.

Evidently, what was expressly repealed by the Local Government Code was only Section 3,
of R.A. No. 5447, which deals with the Allocation of taxes on Virginia type cigarettes and duties
on imported leaf tobacco. The legislature is presumed to know the existing laws, such that
whenever it intends to repeal a particular or specific provision of law, it does so expressly. The
failure to add a specific repealing clause particularly mentioning the statute to be repealed indicates
that the intent was not to repeal any existing law on the matter, unless an irreconcilable
inconsistency and repugnancy exists in the terms of the new and the old laws.[7] Hence, the
provisions allocating funds for the salaries of teachers under Section 1, of R.A. No. 5447, which
are not inconsistent with Sections 272 and 100 (c) of the Local Government Code, remain in force
and effect.
Even under the doctrine of necessary implication, the allocation of the SEF for the
establishment and maintenance of extension classes logically implies the hiring of teachers who
should, as a matter of course be compensated for their services. Every statute is understood, by
implication, to contain all such provisions as may be necessary to effectuate its object and purpose,
or to make effective rights, powers, privileges or jurisdiction which it grants, including all such
collateral and subsidiary consequences as may be fairly and logically inferred from its terms. Ex
necessitate legis.[8] Verily, the services and the corresponding compensation of these teachers are
necessary and indispensable to the establishment and maintenance of extension classes.
Indeed, the operation and maintenance of public schools is lodged principally with the
DECS. This is the reason why only salaries of public school teachers appointed in connection with
the establishment and maintenance of extension classes, inter alia, pertain to the supplementary
budget of the local school boards. Thus, it should be made clear that not every kind of personnel-
related benefits of public school teachers may be charged to the SEF. The SEF may be expended
only for the salaries and personnel-related benefits of teachers appointed by the local school boards
in connection with the establishment and maintenance of extension classes. Extension classes as
referred to mean additional classes needed to accommodate all children of school age desiring to
enter in public schools to acquire basic education.[9]
With respect, however, to college scholarship grants, a reading of the pertinent laws of the
Local Government Code reveals that said grants are not among the projects for which the proceeds
of the SEF may be appropriated. It should be noted that Sections 100 (c) and 272 of the Local
Government Code substantially reproduced Section 1, of R.A. No. 5447. But, unlike payment of
salaries of teachers which falls within the ambit of establishment and maintenance of extension
classes and operation and maintenance of public schools, the granting of government scholarship
to poor but deserving students was omitted in Sections 100 (c) and 272 of the Local Government
Code. Casus omissus pro omisso habendus est. A person, object, or thing omitted from an
enumeration in a statute must be held to have been omitted intentionally. It is not for this Court to
supply such grant of scholarship where the legislature has omitted it.[10]
In the same vein, however noble the intention of the province in extending said scholarship to
deserving students, we cannot apply the doctrine of necessary implication inasmuch as the grant
of scholarship is neither necessary nor indispensable to the operation and maintenance of public
schools. Instead, such scholarship grants may be charged to the General Funds of the province.
Pursuant to Section 1, Rule 63[11] of the 1997 Rules of Civil Procedure, a petition for
declaratory relief may be filed before there is a breach or violation. The Solicitor General claims
that the Notices of Suspension issued by the COA to the respondent province amounted to a breach
or violation, and therefore, the petition for declaratory relief should have been denied by the trial
court.
We are not convinced. As held in Shell Company of the Philippines, Ltd. v. Municipality of
Sipocot,[12] any breach of the statute subject of the controversy will not affect the case; the action
for declaratory relief will prosper because the applicability of the statute in question to future
transactions still remains to be resolved. Absent a definite ruling in the instant case for declaratory
relief, doubts as to the disposition of the SEF will persist. Hence, the trial court did not err in giving
due course to the petition for declaratory relief filed by the province of Cebu.
WHEREFORE, in view of all the foregoing, the Decision of the Regional Trial Court of
Cebu City, Branch 20, in Civil Case No. CEB-24422, is AFFIRMED with MODIFICATION. The
salaries and personnel-related benefits of the teachers appointed by the provincial school board of
Cebu in connection with the establishment and maintenance of extension classes, are declared
chargeable against the Special Education Fund of the province. However, the expenses incurred
by the provincial government for the college scholarship grants should not be charged against the
Special Education Fund, but against the General Funds of the province of Cebu.
SO ORDERED.