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
Intervention2 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 Petition3 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 President’s 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. Mangelin16 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 Code29 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." 32Hence, 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 Tañada 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

xxx xxx xxx

"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 PROHIBITEDfrom 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.

G.R. No. 164282 October 12, 2005

TERESITA M. YUJUICO, Petitioner

vs.
HON. JOSE L. ATIENZA, Chairman, City School, Board of Manila, DR. MA. LUISA S. QUIÑONES, Co-
Chairman, City School Board, and Schools Division Superintendent, ROGER GERNALE, Member, City
School Board of Manila, HON. MANUEL M. ZARCAL, (in substitution of ARLENE ORTIZ), Member, City
School Board of Manila, BENJAMIN VALBUENA (In substitution of MILES ROCES), Member, City School
Board of Manila, LIBERTY TOLEDO, Member, City School Board of Manila, HON. FRANCESCA GERNALE
(In substitution of PERCIVAL FLORIENDO), Member, City School Board of Manila, ISABELITA SANTOS,
Secretary, City School Board of Manila, VICENTE MACARUBBO (In substitution of Isabelita Ching),
Assistant Secretary, City School Board of Manila, CITY SCHOOL BOARD OF MANILA and JUDGE
MERCEDES POSADA-LACAP, in her capacity as PRESIDING JUDGE OF THE REGIONAL TRIAL COURT OF
MANILA, BRANCH 15, Respondents.

DECISION

Tinga, J.:

This is a Petition for Review on Certiorari instituted by Teresita M. Yujuico, petitioner in the case for
mandamus docketed as Civil Case No. 02-103748 before the Regional Trial Court (RTC) of Manila, Branch
15. Petitioner is questioning the propriety of the Order1 dated 25 June 2004, granting
respondents’ Petition for Relief from Judgmentunder Section 2, Rule 38 of the 1997 Rules of Civil
Procedure.

The operative facts are not disputed.

On 8 December 1995, the City Council of Manila enacted an Ordinance2 authorizing the City Mayor to
acquire by negotiation or expropriation certain parcels of land for utilization as a site for the Francisco
Benitez Elementary School.3 The property chosen is located along Solis St. near Juan Luna St. in the
Second District of Manila and contains an approximate area of 3,979.10 square meters. It is covered by
Transfer Certificates of Title Nos. 71541, 71548, 24423, 71544 and 71546, all in the name of petitioner.
The Ordinance provides that an amount not to exceed the fair market value of the land then prevailing in
the area will be allocated out of the Special Education Fund (SEF) of the City of Manila (City) to defray
the cost of the property’s acquisition. 4

Failing to acquire the land by negotiation, the City filed a case for eminent domain against petitioner as
owner of the property. Filed on 22 August 1996, the case was raffled to Branch 15, RTC of Manila and
docketed as Civil Case No. 96-79699.5

On 30 June 2000, the RTC rendered a Decision6 in the expropriation case in favor of the City. The
dispositive portion reads:

WHEREFORE, judgment is hereby rendered as follows:

1.) The lots including the improvements therein of defendant Teresita M. Yujuico, as described in the
complaint, are declared expropriated for public use;

2.) The fair market value of the lots of defendant is fixed at ₱18,164.80 per square meter. The fair market
value of the improvements of lots subject of this action is fixed at ₱ 978,000.00;

3.) The plaintiff must pay defendant the sum of ₱72,279,555.68 (3,979.10 sq. m. x ₱18,164.80)
representing the value of the subject lots plus ₱978,000.00 representing the value of the improvements
or the total amount of ₱73,257,555.00 as just compensation for the whole property (including the
improvements) minus the sum of ₱5,363,289.00 that plaintiff deposited in Court per Order dated April
30, 1997, hence the balance of ₱67,894,266.00 with interest at the rate of 6% per annum from July 15,
1997 (date of possession of subject property for the purpose of this proceedings) until the day full
payment is made to defendant or deposited in Court. 7

The judgment became final and executory, no appeal having been interposed by either party. 8

On 6 April 2001, petitioner filed a Motion for Execution of Judgment9 which the trial court granted.
Pursuant to a Writ of Execution10 dated 28 June 2001, the branch sheriff served a Notice
of Garnishment on the funds of the City deposited with the Land Bank of the Philippines, YMCA Branch,
Manila (Land Bank) to satisfy the judgment amount of ₱67,894,226.00, with interest at 6% per annum. 11

Invoking jurisprudence holding that public funds cannot be made subject to garnishment, the City filed a
motion to quash the Notice of Garnishment.12 Acting on the motion, the trial court issued an Order dated
2 August 2001.
In the Order, the lower court recalled that during the hearing on the motion, the counsel for the City
manifested that the amount of ₱36,403,170.00 had been appropriated by the City School Board (CSB)
under CSB Resolutions Nos. 613 and 623, of which ₱31,039,881.00 was available for release. The amount
of ₱5,363,269.00, representing fifteen percent (15%) of the assessed value of the property, had been
deposited in court at the start of the expropriation proceedings and subsequently received by petitioner.
In line with the manifestation made by the counsel for the City, the trial court ordered the release to
petitioner of the amount of ₱31,039,881.00 deposited with the Land Bank, in partial payment of the just
compensation adjudged in favor of petitioner. 13

The trial court further stated in the Order:

Considering that this case is on all fours with the case of the Municipality of Makati vs. Court of Appeals
(190 SCRA 206), wherein it was ruled that "x x x Public funds are not subject to levy and execution," the
Court therefore grants plaintiff’s Motion to Quash the Notice of Garnishment and the Notice of
Garnishment to the Landbank of the Philippines issued by the Branch Sheriff of this Court is hereby
ordered lifted.

There being no opposition for the release of the Thirty One Million Thirty Nine Thousand Eight Hundred
Eighty One Pesos (₱31,039,881.00) deposited with the Land Bank, YMCA Branch as Special Education
Fund, the Manager of the Landbank of the Philippines, YMCA, Manila is hereby directed to release the
said amount to defendant Teresita M. Yujuico in partial payment of the just compensation adjudged by
this Court in its Decision dated June 30, 2000.

Upon manifestation of the counsel for the plaintiff that it is the City School Board which has the
authority to pass a resolution allocating funds for the full satisfaction of the just compensation fixed, the
said body is hereby given thirty (30) days from receipt of this Order to pass the necessary resolution for
the payments of the remaining balance due to defendant Teresita M. Yujuico. 14

A copy of the Order dated 2 August 2001 was served on the CSB on 3 August 2001. 15

On 30 August 2001, petitioner submitted a manifestation before the trial court requesting that she be
informed by both the City and the CSB if a resolution had already been passed by the latter in
compliance with the Order.16Earlier, petitioner sent a letter to the Superintendent of City Schools of
Manila to verify the CSB’s compliance with the Order.17

Not having been favored with a reply to her queries even after the lapse of the thirty (30)-day
compliance period, petitioner sent a letter to the CSB dated 10 September 2001, demanding compliance
with the Order.18

As there was no action from the CSB, on 1 February 2002, petitioner filed a petition for contempt of
court against respondents Hon. Jose L. Atienza, Jr., Dr. Ma. Luisa S. Quiñoňes, Roger Gernale, Arlene
Ortiz, Miles Roces, Percival Floriendo, Liberty Toledo, Isabelita Santos and Isabelita Ching in their
capacities as officers and members of the CSB. 19 The case was docketed as Civil Case No. 02-102837 of
the Manila RTC.20

Countering the petition for contempt, respondents filed a Motion to Dismiss,21 wherein they
alleged inter alia that they never disregarded the Order as the matter had in fact been calendared and
deliberated upon during the meetings of the CSB. 22 In their subsequent Omnibus Reply,23 respondents
argued that petitioner’s failure to avail of the proper recourse to enforce the final and executory
judgment24 should not be a ground to hold them in contempt of court. Citing the case of Municipality of
Makati v. Court of Appeals,25 respondents asserted that petitioner should have filed a petition for
mandamus to force the CSB to pass the necessary resolution for immediate payment of the balance of
the just compensation awarded in her favor. 26

According to respondents, petitioner took the Order as a writ of mandamus when in fact it was a mere
order in furtherance of the Writ of Execution.27 This interpretation, respondents insisted, should never be
allowed since petitioner merely wanted to escape the payment of docket fees in the filing of the petition
for mandamus.28

In an Order29 dated 17 May 2002, the trial court denied the petition for contempt of court.

On 6 June 2002, petitioner filed a Petition for Mandamus30 against the members of the CSB, the same
respondents in the petition for contempt of court, seeking to compel them to pass a resolution
appropriating the amount necessary to pay the balance of the just compensation awarded to petitioner
in the expropriation case, Civil Case No. 96-79699. The petition was docketed as Spl. Civil Action No. 02-
103748 and raffled to Branch 51 of the RTC of Manila. 31

Upon petitioner’s motion,32 Branch 51 of the Manila RTC before which the mandamus case was pending,
in an Order33 dated 23 August 2002, directed its consolidation with the expropriation case before Branch
15.34

In a Decision35 dated 9 October 2002, the lower court (Branch 15) granted the petition for mandamus.
Specifically, it ordered respondents to immediately pass a resolution appropriating the necessary
amount and the corresponding disbursement thereof for the full and complete payment of the balance
of the court-adjudged compensation still due petitioner, ratiocinating as follows: 36

This case is on all fours with the case of Municipality of Makati v. Court of Appeals (190 SCRA 206).

....

The State’s power of eminent domain should be exercised within the bounds of fair play and justice. In
the case at bar, considering that valuable property has been taken, the compensation to be paid fixed
and the municipality is in full possession and utilizing the property for the public purpose, for three (3)
years, the Court finds that the municipality has had more than reasonable time to pay full compensation.

The arguments of the herein respondents that passing the ordinance or the act of appropriating special
educational fund is a discretionary act that could not be compelled by mandamus should be thrown
overboard. It must be stressed that what we have here is a final and executory judgment, establishing a
legal right for the petitioner to demand fulfillment which on the other hand became an imperative duty
on the part of the respondent to perform the act required.

WHEREFORE, premises considered, the petition is GRANTED, and the respondents are hereby ordered to
immediately pass a resolution appropriating the necessary amount; and the corresponding disbursement
thereof, for the full and complete payment of the remaining balance of the court-adjudged
compensation due and owing to petitioner Teresita M. Yujuico.

SO ORDERED.37
Respondents filed a motion for reconsideration, which the trial court denied in an Order38 dated 13
December 2002.

With respondents not interposing an appeal, the Decision became final and executory on 2 January
200339 and eventually, the corresponding Entry of Judgment was issued on 15 January 2003.40 The court
granted petitioner’s Motion for Execution41 in an Order42 dated 12 March 2003.

However, on 14 March 2003, respondents filed a Petition for Relief from Judgment,43 wherein they also
prayed for a temporary restraining order (TRO) and a writ of preliminary injunction. Respondents
invoked excusable negligence as a ground for their failure to seasonably file an appeal. 44 While it denied
the application for TRO in view of its prior order granting petitioner’s Motion for Execution, the court
granted the Petition for Relief from Judgment in an Order45 dated 25 June 2004. This had the effect of
giving due course to respondents’ appeal despite the fact that the decision of the trial court had already
attained finality.

Finding the Order unacceptable, petitioner elevated it to this Court by way of a petition for certiorari
under Rule 45. In her petition, petitioner asks that the order of the lower court giving due course to
respondents’ appeal be reversed and set aside on a pure question of law. 46

Before resolving the substantive issues raised by the parties, the Court will first address the procedural
infirmities ascribed by respondents to the petition at bar.

Respondents assail the correctness and propriety of the mode of appeal resorted to by
petitioner.47 According to them, the order granting the petition for relief from judgment is an
interlocutory order which cannot be made the subject of an appeal. 48 Respondents likewise argue that
petitioner failed to respect the rule on hierarchy of courts. This Court, they aver, had consistently held
that its original jurisdiction to issue a writ of certiorari is not exclusive but is concurrent with that of the
RTC and the Court of Appeals in certain cases. 49

Respondents have correctly pointed out that an interlocutory order cannot be made subject to an
appeal. However, when viewed in context, the recitals of the petition clearly disclose and the Court is
convinced that the lower court committed grave abuse of discretion amounting to lack or excess of
jurisdiction when it granted respondents’ petition for relief from judgment. While this case should have
been elevated to this Court not by way of a petition for review under Rule 45 but through a special civil
action for certiorari under Rule 65, in the exercise of our sound discretion and in order to write finis to
this case which has needlessly dragged on for so long, we shall treat the petition as a special civil action
for certiorari. After all, it was filed within the reglementary period for the filing of a Rule 65 petition. As
we held in Salinas v. NLRC,50 in the interest of justice, this Court has often judiciously treated petitions
erroneously captioned as petitions for review on certiorari as special civil actions for certiorari. This is in
line with the principle that the strict application of procedural technicalities should not hinder the
speedy disposition of the case on the merits. 51

Accordingly, facial allegations of reversible error in the petition will be treated, as they should be, as
contextual averments of grave abuse of discretion on the part of the court a quo. Appropriately,
petitioner impleaded the RTC Presiding Judge as party-respondent in the instant petition.

Anent the alleged breach of the rule on hierarchy of courts, the doctrine is not an iron-clad dictum. 52 The
rule may be relaxed when exceptional and compelling circumstances warrant the exercise of this Court’s
primary jurisdiction.53 In this case, the judgment sought to be satisfied has long attained finality and the
expropriated property has been utilized as a school site for five (5) years now; yet, the awarded just
compensation has not been fully paid. These circumstances, in the Court’s estimation, merit the
relaxation of the technical rules of procedure to ensure that substantial justice will be served.

Concerning petitioner’s alleged failure to implead the CSB or its new members before the trial
court,54 respondents argue that since there are five (5) new members in the CSB any decision in the case
requiring the CSB to act as a body would prove to be legally impossible. The former members of the CSB
could no longer be compelled to act according to the orders of the Court since they no longer have the
capacity to do so. On the other hand, respondents continue, the new members cannot be directed to
comply with the Court’s judgment either; they have never been impleaded in the case; thus, the Court
never acquired jurisdiction over their persons. 55

The arguments were effectively neutered in our Resolution dated 8 August 2005. There, we declared:

Considering the arguments posited by both parties, this Court is of the view that a substitution of the
original respondents by the members of the CSB who replaced them is warranted. The phrase "or such
time as may be granted by the Court" in Sec. 17, Rule 3 of the 1997 Rules of Civil Procedure denotes that
the Court before whom the motion for substitution is filed may grant a period longer than thirty (30)
days for the purpose. In any event, technical rules on substitution of a party should not be so narrowly
construed as to prevent this Court from taking cognizance of a case and deciding it on the merits.
Moreover, petitioner did make an attempt to implead the new members of the CSB by making the CSB
itself a respondent before this Court. There is also no showing that the new members of the CSB have
deviated from the stand of their predecessors-in-interest; hence, there is a substantial need for
continuing or maintaining petitioner’s action against them. 56

In the same Resolution, the Court ordered the impleading of the new CSB members Roger Gernale,
Manuel M. Zarcal, Benjamin Valbuena and Francesca Gernale as party respondents—the last three in
substitution of Arlene Ortiz, Percival Floriendo, Miles Roces—and the new CSB Assistant Secretary
Vicente Macarubbo in substitution of Isabelita Ching. 57 Only Manuel Zarcal filed a Comment58 dated 30
August 2005 through a new counsel, adopting in toto the comment of his co-respondents. Hence, the
other four newly impleaded party respondents are deemed to have retained the Office of the City Legal
Officer (OCLO) as their counsel and to have adopted the Commentalready filed by the OCLO in behalf of
their co-respondents.

Thus, the proper substitutions of some party respondents have already taken place in this case.

The last procedural hurdle thrown petitioner’s way by respondents refers to the supposed failure of the
petition to comply with the requirements of Section 4, Rule 7 and Section 4, Rule 45 of the 1997 Rules of
Civil Procedure59 as amended by Supreme Court Circular A.M. No. 00-2-10-SC. 60 Respondents claim that
there was failure to include a verified statement indicating the material dates relative to the receipt of
the judgments and the filing of the pleadings. The verification, moreover, allegedly failed to state that
petitioner has read the petition61 and that the copies attached thereto are based on authentic
records.62 The defects of the verification allegedly render the petition without legal effect and constitute
grounds for its dismissal.

The purpose of requiring a verification is to secure an assurance that the allegations of the petition have
been made in good faith; or are true and correct, not merely speculative. 63 This requirement is simply a
condition affecting the form of pleadings and non-compliance therewith does not necessarily render it
fatally defective.64 Perusal of the verification in question shows that there was sufficient compliance with
the requirements of the Rules and the alleged defects are not so material as to justify the dismissal of
the petition.

Now, the substantial issues.

Up for determination is the tenability of the RTC’s favorable action on respondents’ petition for relief
from judgment. This engenders a look at the grounds and defenses relied upon by respondents in
support of their petition. Sections 2 and 3, Rule 38 of the 1997 Rules of Civil Procedure provide that a
petition for relief may be granted upon a showing that (1) through fraud, accident, mistake or excusable
negligence, a party has been prevented from taking an appeal, and (2) the party has a good and
substantial cause of action or defense.

The above requisites notwithstanding, it bears stressing that relief from judgment is premised on equity.
It is an act of grace which is allowed only in exceptional cases. 65

In this case, according to respondents they were unable to seasonably file a notice of appeal due to
"excusable negligence."66 One Ronald Silva (Silva), an employee of the OCLO, allegedly failed to forward
the Order denying respondents’ motion for reconsideration in Civil Case No. 02-103748 to the handling
lawyers. When the order was delivered to the OCLO on 17 December 2002, 67 Silva was the one who
received it because the employee designated to do so was out on official business. 68 Since the employees
were busy preparing for the office Christmas party that day, 69 Silva forgot all about the order. He only
remembered it when the order for entry of judgment in the case was received on 29 January 2003. By
that time, however, the order dated 17 December 2002 had already been misplaced. 70

Clearly, the situation does not present a case of excusable negligence which would warrant relief under
Rule 38. Time and again, this Court has ruled that the inability to perfect an appeal in due time by reason
of failure of a counsel’s clerk to notify the handling lawyer is not a pardonable oversight. 71 As held in one
case:

. . . The excuse offered by respondent . . . as reason for his failure to perfect in due time his appeal from
the judgment of the Municipal Court, that counsel’s clerk forgot to hand him the court notice, is the
most hackneyed and habitual subterfuge employed by litigants who fail to observe the procedural
requirements prescribed by the Rules of Court. The uncritical acceptance of this kind of common-place
excuses, in the face of the Supreme Court’s repeated rulings that they are neither credible nor
constitutive of excusable negligence (Gaerlan v. Bernal, L-4039, 29 January 1952; Mercado v. Judge
Domingo, L-19457, 17 December 1966) is certainly such whimsical exercise of judgment as to be a grave
abuse of discretion.

....

In the face of all these facts and circumstances, . . . the respondent judge revealed a simple-minded
willingness to swallow a story patently concocted to delay as much as possible the satisfaction of a
judgment against respondent . . . .This indiscriminating credulity does not conform to what is to be
expected of a judicial mind.72

Reiterated in numerous cases is the rule that the clerks’ faults are attributable to the handling
lawyers.73 Thus, excuses offered based on the former’s negligence are not deemed excusable. That the
admonitions issued out by this Court were mostly directed against lawyers in law firms does not exempt
respondents herein from the same treatment. For all intents and purposes, the set-up at the OCLO is
akin to that of a law firm, the only difference being that the former serves a public entity while the latter
caters to private clients. The following pronouncement in Negros Stevedoring Co., Inc. v. Court of
Appeals74 is apropos:

The negligence committed in the case at bar cannot be considered excusable, nor is it unavoidable. Time
and again, the Court has admonished law firms to adopt a system of distributing pleadings and notices,
whereby lawyers working therein receive promptly notices and pleadings intended for them, so that
they will always be informed of the status of their cases. The Court has also often repeated that the
negligence of clerks which adversely affect the cases handled by lawyers is binding upon the latter. 75

Without doubt, it was grave abuse of discretion for the lower court to have given due course to
respondents’ appeal through the grant of their petition for relief from judgment based on the flimsy
ground they proferred.

Even assuming that the negligence invoked by respondents could be considered excusable, still the
petition should not have been granted. It must be borne in mind that two requisites must be satisfied
before a petition under Rule 38 may be granted, the other being the existence of a good and substantial
cause of action or defense.

Respondents’ defense consisted of their claim that the CSB has a personality separate and distinct from
the City such that it should not be made to pay for the City’s obligations. 76 However, the argument is
undercut by the particular circumstances of this case.

It is worthy of note that the records of this case clearly show that the same counsel, the OCLO,
represented the City in the expropriation case and now, all except one of the individual respondents in
the case at bar. Worthy of note are the following manifestations relied upon by the lower court in issuing
the order on the motion to quash the Notice of Garnishment over the funds of the City, to wit:

The Motion to Quash Notice of Garnishment was heard by this court this morning and Atty. Joseph
Aquino appeared for the plaintiff (City of Manila) and Atty. Federico Alday, for the defendant. Atty.
Aquino manifested that the amount of Thirty Six Million Four Hundred Three Thousand One Hundred
Seventy Pesos (₱36,403,170.00) had been appropriated by the City School Board (CSB) under CSB
Resolution Nos. 613 and 623 for this purpose.

....

Upon manifestation of the counsel for the plaintiff that it is the City School Board which has the
authority to pass a resolution allocating funds for the full satisfaction of the just compensation fixed,
the said body is hereby given thirty (30) days from receipt of this Order to pass the necessary resolution
for the payments of the remaining balance due to defendant Teresita M. Yujuico. (Emphasis supplied.) 77

The manifestation was made by the same counsel now claiming that it is actually the City which should
be made liable for the payment of its own obligations. This, after it trotted out the CSB as the entity with
authority to pass a resolution that would satisfy the obligation it had vigorously pursued.

The above circumstances, coupled with the rule that an act performed by counsel within the scope of a
"general or implied authority" is regarded as an act of the client, 78 render the City and, through it,
respondents in estoppel. By estoppel is meant that an admission or representation is rendered conclusive
upon the person making it and cannot be denied or disproved as against the person relying
thereon.79 Petitioner and the courts acted in accordance with the City’s own manifestations by running
after the CSB. At this point, respondents and the OCLO can no longer turn around and toss the obligation
back to the City. After all, it was the legal counsel of both the City and respondents who made a big
production out of showing that the liability incurred by the City will be borne by the CSB.

Contrary to respondents’ claim, the law does not make the CSB an entity independent from the City of
Manila. This is evident from the provisions of the Local Government Code of 1991, the law providing for
the creation of school boards. It states:

TITLE IV.- LOCAL SCHOOL BOARDS

Section 98. Creation, Composition and Compensation.-

(a) There shall be established in every province, city or municipality a provincial, city, or municipal school
board, respectively.

(b) The composition of local school boards shall be as follows:

...

(2) The city school board shall be composed of the city mayor and the city superintendent of schools as
co-chairmen; the chairman of the education committee of the sangguniang panlungsod, the city
treasurer, the representative of the "pederasyon ng mga sangguniang kabataan" in the sangguniang
panlungsod, the duly elected president of the city federation of parents-teachers associations, the duly
elected representative of the non-academic personnel of public schools in the city, as members;

...

Section 101. Compensation and Remuneration.-

The co-chairmen and members of the provincial, city or municipal school board shall perform their
duties as such without compensation or remuneration. Members thereof who are not government
officials or employees shall be entitled to traveling expenses and allowances chargeable against the
funds of the local school board concerned, subject to existing accounting and auditing rules and
regulations.80

The fact that the highest ranking official of a local government unit (LGU) is designated as co-chairman of
the school board negates the claim in this case that the CSB has a personality separate and distinct from
the City. The other fact that government officials in the school board do not receive any compensation or
remuneration while NGO representatives merely receive allowances underscores the absurdity of
respondents’ argument all the more. Indeed, such would not be the situation if the school board has a
personality separate and distinct from the LGU.

Respondents also argue that the members of the CSB cannot be directed to decide a discretionary
function in the specific manner the court desires.81 The question of whether the enactment of an
ordinance to satisfy the appropriation of a final money judgment rendered against an LGU may be
compelled by mandamus has already been settled in Municipality of Makati v. Court of Appeals.82
Nevertheless, this is not to say that private respondent and PSB are left with no legal recourse. Where a
municipality fails or refuses, without justifiable reason, to effect payment of a final money judgment
rendered against it, the claimant may avail of the remedy of mandamus in order to compel the
enactment and approval of the necessary appropriation ordinance, and the corresponding disbursement
of municipal funds therefore [See Viuda De Tan Toco v. The Municipal Council of Iloilo, supra, Baldivia v.
Lota, 107 Phil 1099 (1960); Yuviengco v. Gonzales, 108 Phil 247 (1960)]. 83

Clearly, mandamus is a remedy available to a property owner when a money judgment is rendered in its
favor and against a municipality or city, as in this case.

Moreover, the very ordinance authorizing the expropriation of petitioner’s property categorically states
that the payment of the expropriated property will be defrayed from the SEF. To quote:

An amount not to exceed the current fair market value, prevailing in the area appraised in accordance
with the requirements of existing laws, rules and regulations, of the property to be acquired or so much
thereof as may be necessary for the purpose shall be allocated out of the Special Education Fund of the
City to defray the cost of acquisition of the above-mentioned parcels of land. 84

The legality of the above-quoted provision is presumed. The source of the amount necessary to acquire
petitioner’s property having in fact been specified by the City Council of Manila, the passage of the
resolution for the allocation and disbursement thereof is indeed a ministerial duty of the CSB.

Furthermore, respondents had argued in the petition for contempt filed against them by petitioner that
the latter’s failure to invoke the proper remedy of mandamus should not be a ground to penalize them
with contempt. In their haste to have the contempt petition dismissed, respondents consistently
contended that what petitioner should have filed was a case for mandamus to compel passage of the
corresponding resolution of the CSB if she wanted immediate payment. 85 Having relied on these
representations of respondents and having filed the action they adverted to, petitioner cannot now be
sent by respondents on another wild goose chase to obtain ultimate recovery of what she is legally
entitled to.

While this Court recognizes the power of LGU to expropriate private property for public use, it will not
stand idly by while the expropriating authority maneuvers to evade the payment of just compensation of
property already in its possession.

The notion of expropriation is hard enough to take for a private owner. He is compelled to give up his
property for the common weal. But to give it up and wait in vain for the just compensation decreed by
the courts is too much to bear. In cases like these, courts will not hesitate to step in to ensure that justice
and fair play are served. As we have already ruled:

. . . This Court will not condone petitioner’s blatant refusal to settle its legal obligation arising from
expropriation proceedings it had in fact initiated. It cannot be over-emphasized that within the context
of the State’s inherent power of eminent domain,

. . . (j)ust compensation means not only the correct determination of the amount to be paid to the
owner of the land but also the payment of the land within a reasonable time from its taking. Without
prompt payment, compensation cannot be considered ‘just’ for the property owner is made to suffer the
consequence of being immediately deprived of his land while being made to wait for a decade or more
before actually receiving the amount necessary to cope with his loss (Consculluela v. The Honorable
Court of Appeals, G.R. No. 77765, August 15, 1988, 164 SCRA 393, 400. See also Provincial Government
of Sorsogon v. Vda. De Villaroya, G.R. No. 64037, August 27, 1987, 153 SCRA 291). 86

The decision rendering just compensation in petitioner’s favor was promulgated way back in the year
2000.87 Five years have passed, yet the award still has not been fully satisfied. Recently, in Republic v.
Lim,88 this Court made the following pronouncement:

. . . while the prevailing doctrine is that the non-payment of just compensation does not entitle the
private landowner to recover possession of the expropriated lots, however, in cases where the
government failed to pay just compensation within five (5) years from the finality of judgment in the
expropriation proceedings, the owners concerned shall have the right to recover possession of their
property. This is in consonance with the principle that ‘the government cannot keep the property and
dishonor the judgment.’ To be sure, the five-year period limitation will encourage the government to pay
just compensation punctually. This is in keeping with justice and equity. After all, it is the duty of the
government, whenever it takes property from private persons against their will, to facilitate the payment
of just compensation.89 (Citations omitted)

Given the above ruling, the reversion of the expropriated property to the petitioner would prove not to
be a remote prospect should respondents and the City they represent insist on trudging on their
intransigent course.

One final note. Respondents’ appeal from the Decision dated 9 October 2002 of the lower court, made
possible by its grant of their petition for relief, is before the Court of Appeals where it is docketed as CA-
G.R. No. 86692.90 The court’s Decision in this case would have obvious consequences on said appeal;
hence, referral of this Decision to the Court of Appeals is in order.

WHEREFORE, the petition is GRANTED. The Order of the trial court dated 25 June 2004, granting
respondents’ Petition for Relief from Judgment is REVERSED and set aside and its Decision dated 9
October 2002, ordering respondents to immediately pass a resolution for the payment of the balance of
the court-adjudged compensation due petitioner, is reinstated.

Let a copy of this Decision be furnished the Court of Appeals for its information and guidance in relation
to CA-G.R. No. 86692 entitled "Teresita M. Yujuico v. Hon. Jose L. Atienza, Jr., et al."

SO ORDERED.

DANTE O. TINGA

Associate Justice

G.R. No. 148357 June 30, 2006

ANIANO A. ALBON, Petitioner,

vs.
BAYANI F. FERNANDO, City Mayor of Marikina, ENGR. ALFONSO ESPIRITO, City Engineer of Marikina,
ENGR. ANAKI MADERAL, Assistant City Engineer of Marikina, and NATIVIDAD CABALQUINTO, City
Treasurer of Marikina, Respondents.
RESOLUTION

CORONA, J.:

May a local government unit (LGU) validly use public funds to undertake the widening, repair and
improvement of the sidewalks of a privately-owned subdivision?

This is the issue presented for the Court’s resolution in

this petition for review on certiorari 1 which assails the December 22, 2000 decision 2 and May 30, 2001
resolution of the Court of Appeals in CA-G.R. SP No. 56767.

In May 1999, the City of Marikina undertook a public works project to widen, clear and repair the
existing sidewalks of Marikina Greenheights Subdivision. It was undertaken by the city government
pursuant to Ordinance No. 59, s. 1993 3 like other infrastructure projects relating to roads, streets and
sidewalks previously undertaken by the city.

On June 14, 1999, petitioner Aniano A. Albon filed with the Regional Trial Court of Marikina, Branch 73, a
taxpayer’s suit for certiorari, prohibition and injunction with damages against respondents (who were at
that time officials of Marikina), namely, City Mayor Bayani F. Fernando, City Engineer Alfonso Espirito,
Assistant City Engineer Anaki Maderal and City Treasurer Natividad Cabalquinto. It was docketed as SCA
Case No. 99-331-MK.

Petitioner claimed that it was unconstitutional and unlawful for respondents to use government
equipment and property, and to disburse public funds, of the City of Marikina for the grading,
widening, clearing, repair and maintenance of the existing sidewalks of Marikina Greenheights
Subdivision. He alleged that the sidewalks were private property because Marikina Greenheights
Subdivision was owned by V.V. Soliven, Inc. Hence, the city government could not use public resources
on them. In undertaking the project, therefore, respondents allegedly violated the constitutional
proscription against the use of public funds for private purposes4 as well as Sections 335 and 336 of RA
71605 and the Anti-Graft and Corrupt Practices Act. Petitioner further alleged that there was no
appropriation for the project.

On June 22, 1999, the trial court denied petitioner’s application for a temporary restraining order (TRO)
and writ of preliminary injunction. The trial court reasoned that the questioned undertaking was covered
by PD 1818 and Supreme Court Circular No. 68-94 which prohibited courts from issuing a TRO or
injunction in any case, dispute or controversy involving an infrastructure project of the government.

On November 15, 1999, the trial court rendered its decision 6 dismissing the petition. It ruled that the
City of Marikina was authorized to carry out the contested undertaking pursuant to its inherent police
power. Invoking this Court’s 1991 decision in White Plains Association v. Legaspi,7 the roads and
sidewalks inside the Marikina Greenheights Subdivision were deemed public property.

Petitioner sought a reconsideration of the trial court’s decision but it was denied.

Thereafter, petitioner elevated the case to the Court of Appeals via a petition for certiorari, prohibition,
injunction and damages. On December 22, 2000, the appellate court sustained the ruling of the trial
court and held that Ordinance No. 59, s. 1993, was a valid enactment. The sidewalks of Marikina
Greenheights Subdivision were public in nature and ownership thereof belonged to the City of Marikina
or the Republic of the Philippines following the 1991 White Plains Association decision. Thus, the
improvement and widening of the sidewalks pursuant to Ordinance No. 59, s. 1993 was well within the
LGU’s powers. On these grounds, the petition was dismissed.

Petitioner moved for reconsideration of the appellate court’s decision but it was denied. Undaunted, he
instituted this petition.

Like all LGUs, the City of Marikina is empowered to enact ordinances for the purposes set forth in the
Local Government Code (RA 7160). It is expressly vested with police powers delegated to LGUs under the
general welfare clause of RA 7160.8 With this power, LGUs may prescribe reasonable regulations to
protect the lives, health, and property of their constituents and maintain peace and order within their
respective territorial jurisdictions.9

Cities and municipalities also have the power to exercise such powers and discharge such functions and
responsibilities as may be necessary, appropriate or incidental to efficient and effective provisions of the
basic services and facilities, including infrastructure facilities intended primarily to service the needs of
their residents and which are financed by their own funds. 10 These infrastructure facilities include
municipal or city roads and bridges and similar facilities. 11

There is no question about the public nature and use of the sidewalks in the Marikina Greenheights
Subdivision. One of the "whereas clauses" of PD 1216 12 (which amended PD 95713) declares that open
spaces,14 roads, alleys and sidewalks in a residential subdivision are for public use and beyond the
commerce of man. In conjunction herewith, PD 957, as amended by PD 1216, mandates subdivision
owners to set aside open spaces which shall be devoted exclusively for the use of the general public.

Thus, the trial and appellate courts were correct in upholding the validity of Ordinance No. 59, s. 1993. It
was enacted in the exercise of the City of Marikina’s police powers to regulate the use of sidewalks.
However, both the trial and appellate courts erred when they invoked our 1991 decision in White Plains
Association and automatically applied it in this case.

This Court has already resolved three interrelated White Plains Association cases:15 (1) G.R. No.
5568516 resolved in 1985; (2) G.R. No. 9552217 decided in 1991 and (3) G.R. No. 128131 18 decided in
1998.

The ruling in the 1991 White Plains Association decision relied on by both the trial and appellate courts
was modified by this Court in 1998 in White Plains Association v. Court of Appeals.19 Citing Young v. City
of Manila,20this Court held in its 1998 decision that subdivision streets belonged to the owner until
donated to the government or until expropriated upon payment of just compensation.

The word "street," in its correct and ordinary usage, includes not only the roadway used for carriages
and vehicular traffic generally but also the portion used for pedestrian travel. 21 The part of the street set
aside for the use of pedestrians is known as a sidewalk.22

Moreover, under subdivision laws,23 lots allotted by subdivision developers as road lots include
roads, sidewalks, alleys and planting strips.24 Thus, what is true for subdivision roads or streets applies to
subdivision sidewalks as well. Ownership of the sidewalks in a private subdivision belongs to the
subdivision owner/developer until it is either transferred to the government by way of donation or
acquired by the government through expropriation.
Section 335 of RA 7160 is clear and specific that no public money or property shall be appropriated or
applied for private purposes. This is in consonance with the fundamental principle in local fiscal
administration that local government funds and monies shall be spent solely for public purposes.25

In Pascual v. Secretary of Public Works,26 the Court laid down the test of validity of a public expenditure:
it is the essential character of the direct object of the expenditure which must determine its validity and
not the magnitude of the interests to be affected nor the degree to which the general advantage of the
community, and thus the public welfare, may be ultimately benefited by their promotion. 27 Incidental
advantage to the public or to the State resulting from the promotion of private interests and the
prosperity of private enterprises or business does not justify their aid by the use of public money. 28

In Pascual, the validity of RA 920 ("An Act Appropriating Funds for Public Works") which
appropriated P85,000 for the construction, repair, extension and improvement of feeder roads within a
privately-owned subdivision was questioned. The Court held that where the land on which the projected
feeder roads were to be constructed belonged to a private person, an appropriation made by Congress
for that purpose was null and void. 29

In Young v. City of Manila,30 the City of Manila undertook the filling of low-lying streets of the Antipolo
Subdivision, a privately-owned subdivision. The Court ruled that as long as the private owner retained
title and ownership of the subdivision, he was under the obligation to reimburse to the city government
the expenses incurred in land-filling the streets.

Moreover, the implementing rules of PD 957, as amended by PD 1216, provide that it is the registered
owner or developer of a subdivision who has the responsibility for the maintenance, repair and
improvement of road lots and open spaces of the subdivision prior to their donation to the concerned
LGU. The owner or developer shall be deemed relieved of the responsibility of maintaining the road lots
and open space only upon securing a certificate of completion and executing a deed of donation of these
road lots and open spaces to the LGU.31

Therefore, the use of LGU funds for the widening and improvement of privately-owned sidewalks is
unlawful as it directly contravenes Section 335 of RA 7160. This conclusion finds further support from
the language of Section 17 of RA 7160 which mandates LGUs to efficiently and effectively provide basic
services and facilities. The law speaks of infrastructure facilities intended primarily to service the needs
of the residents of the LGU and "which are funded out of municipal funds."32 It particularly refers to
"municipal roads and bridges" and "similar facilities." 33

Applying the rules of ejusdem generis, the phrase "similar facilities" refers to or includes infrastructure
facilities like sidewalks owned by the LGU. Thus, RA 7160 contemplates that only the construction,
improvement, repair and maintenance of infrastructure facilities owned by the LGU may be bankrolled
with local government funds.

Clearly, the question of ownership of the open spaces (including the sidewalks) in Marikina Greenheights
Subdivision is material to the determination of the validity of the challenged appropriation and
disbursement made by the City of Marikina. Similarly significant is the character of the direct object of
the expenditure, that is, the sidewalks.

Whether V.V. Soliven, Inc. has retained ownership of the open spaces and sidewalks or has already
donated them to the City of Marikina, and whether the public has full and unimpeded access to the
roads and sidewalks of Marikina Greenheights Subdivision, are factual matters. There is a need for the
prior resolution of these issues before the validity of the challenged appropriation and expenditure can
be determined.

WHEREFORE, this case is hereby ordered REMANDED to the Regional Trial Court of Marikina City for the
reception of evidence to determine (1) whether V.V. Soliven, Inc. has retained ownership of the open
spaces and sidewalks of Marikina Greenheights Subdivision or has donated them to the City of Marikina
and (2) whether the public has full and unimpeded access to, and use of, the roads and sidewalks of the
subdivision. The Marikina City Regional Trial Court is directed to decide the case with dispatch.

SO ORDERED.

RENATO C. CORONA
Associate Justice

G.R. No. 146195 November 18, 2004

AVELINA ZAMORA, EMERITA ZAMORA-NICOL, SONNY NICOL, TERESA ZAMORA-UMALI, CLARENCE

UMALI, ROBERTO ZAMORA, ROLANDO ZAMORA, MARY ANN ZAMORA, MICHELLE ZAMORA and
RODRIGO ZAMORA, petitioners,
vs.
HEIRS of CARMEN IZQUIERDO, represented by their attorney-in-fact, ANITA F.
PUNZALAN, respondents.

DECISION

SANDOVAL-GUTIERREZ, J.:

Before us is a petition for review on certiorari 1 assailing the Decision2 of the Court of Appeals dated
September 12, 2000 and its Resolution dated December 1, 2000 in CA-G.R. SP No. 54541, entitled
"Avelina Zamora, et al., petitioners, versus Heirs of Carmen Izquierdo, represented by the executrix,
Anita F. Punzalan, respondents."

The records show that sometime in 1973, Carmen Izquierdo and Pablo Zamora entered into a verbal
stipulation whereby the former leased to the latter one of her apartment units located at 117-B General
Luna Street, Caloocan City. They agreed on the following: the rental is P3,000.00 per month; the leased
premises is only for residence; and only a single family is allowed to occupy it.

After the death of Carmen (lessor) in 1996 her attorney-in-fact, Anita Punzalan, representing the heirs,
herein respondents, prepared a new contract of lease wherein the rental was increased from P3,000.00
to P3,600.00 per month.3 However, petitioners refused to sign it.
In January 1997, Pablo (lessee) died. His wife, Avelina Zamora, and their children (two of whom have
their own families), herein petitioners, continued to reside in the apartment unit. However, they
refused to pay the increased rental and persisted in operating a photocopying business in the same
apartment.

Meanwhile, petitioner Avelina Zamora applied with the Metropolitan Waterworks & Sewerage System
(MWSS) for a water line installation in the premises. Since a written consent from the owner is required
for such installation, she requested respondents' attorney-in-fact to issue it. However, the latter declined
because petitioners refused to pay the new rental rate and violated the restrictions on the use of the
premises by using a portion thereof for photocopying business and allowing three families to reside
therein.

This prompted petitioner Avelina Zamora to file with the Office of the Punong Barangay of Barangay 16,
Sona 2, District I, Lungsod ng Caloocan, a complaint against Anita Punzalan (respondents' attorney-in-
fact), docketed as "Usaping Bgy. Blg. 1-27-97, Ukol sa: Hindi Pagbibigay ng Pahintulot sa Pagpapakabit ng
Tubig."

On August 24, 1997, during the barangay conciliation proceedings, petitioner Avelina Zamora declared
that she refused to sign the new lease contract because she is not agreeable with the conditions
specified therein.

The following day, Anita Punzalan sent Avelina a letter4 informing her that the lease is being terminated
and demanding that petitioners vacate the premises within 30 days from notice.

Despite several barangay conciliation sessions, the parties failed to settle their dispute amicably. Hence,
the Barangay Chairman issued a Certification to File Action dated September 14, 1997. 5

Consequently, on October 2, 1997, respondents, represented by Anita Punzalan, filed with the
Metropolitan Trial Court (MTC), Branch 49, Caloocan City, a complaint for unlawful detainer and
damages against petitioners, docketed as Civil Case No. 23702.6 Forthwith, petitioners filed a motion to
dismiss7 the complaint on the ground that the controversy was not referred to the barangay for
conciliation. First, they alleged that the barangay Certification to File Action "is fatally defective" because
it pertains to another dispute, i.e., the refusal by respondents' attorney-in-fact to give her written
consent to petitioners' request for installation of water facilities in the premises. And, second, when the
parties failed to reach an amicable settlement before the Lupong Tagapamayapa, the Punong Barangay
(as Lupon Chairman), did not constitute the Pangkat ng Tagapagkasundo before whom mediation or
arbitration proceedings should have been conducted, in violation of Section 410(b), Chapter 7
(Katarungang Pambarangay), Title One, Book III of Republic Act No. 7160 8 (otherwise known as the Local
Government Code of 1991), which reads:

"SECTION 410. Procedure for Amicable Settlement.–

(a) x x x

(b) Mediation by lupon chairman – Upon receipt of the complaint, the lupon chairman 9 shall, within the
next working day, summon the respondent(s), with notice to the complainant(s) for them and their
witnesses to appear before him for a mediation of their conflicting interests. If he fails in his mediation
effort within fifteen (15) days from the first meeting of the parties before him, he shall forthwith set a
date for the constitution of the pangkat in accordance with the provisions of this Chapter." (Underscoring
supplied)

Respondents opposed the motion to dismiss, 10 the same being prohibited under Section 19 of the 1991
Revised Rule on Summary Procedure. They prayed that judgment be rendered as may be warranted by
the facts alleged in the complaint, pursuant to Section 6 11 of the same Rule.

On July 9, 1998, the MTC issued an Order12 denying petitioners' motion to dismiss and considering the
case submitted for decision in view of their failure to file their answer to the complaint.

Petitioners filed a motion for reconsideration, 13 contending that a motion to dismiss the complaint on the
ground of failure to refer the complaint to the Lupon for conciliation is allowed under Section 19 of the
1991 Revised Rule on Summary Procedure, which partly provides:

"SEC. 19. Prohibited pleadings and motions. – The following pleadings, motions, or petitions shall not be
allowed in the cases covered by this Rule:

(a) Motion to dismiss the complaint or to quash the complaint or information except on the ground of
lack of jurisdiction over the subject matter, or failure to comply with the preceding section [referring to
Section 18 on referral of the complaint to the Lupon for conciliation];

x x x."

On August 26, 1998, the MTC rendered a Judgment 14 in favor of respondents and against petitioners, the
dispositive portion of which reads:

"WHEREFORE, Judgment is hereby rendered in favor of the plaintiff and against the defendants, ordering
defendants and all persons claiming right under them:

1) To vacate the leased premises located at No. 117-B General Luna Street, Caloocan City and to
surrender possession thereof to the plaintiff;

2) To pay the amount of three thousand six hundred (P3,600.00) pesos per month starting January, 1997
until the premises being occupied by them is finally vacated and possession thereof is restored to the
plaintiff;

3) To pay plaintiff the sum of five thousand (P5,000.00) pesos as and for attorney's fees; and

4) To pay the costs of this suit.

SO ORDERED."

On appeal, the Regional Trial Court (RTC), Branch 125, Caloocan City, rendered its Decision 15 dated
February 15, 1999 affirming the MTC Judgment. Subsequently, it denied petitioners' motion for
reconsideration.16

Petitioners then filed with the Court of Appeals a petition for review, docketed as CA-G.R. SP No. 54541.
On September 12, 2000, it rendered a Decision 17 affirming the RTC Decision.

Thereafter, petitioners filed a motion for reconsideration but was denied by the Appellate Court in its
Resolution dated December 1, 2000.18
Hence, the instant petition.

The primordial objective of Presidential Decree No. 1508 (the Katarungang Pambarangay Law), now
included under R.A. No. 7160 (the Local Government Code of 1991), is to reduce the number of court
litigations and prevent the deterioration of the quality of justice which has been brought about by the
indiscriminate filing of cases in the courts. 19 To attain this objective, Section 412(a) of R.A. No. 7160
requires the parties to undergo a conciliation process before the Lupon Chairman or the Pangkat as a
precondition to filing a complaint in court, thus:

"SECTION 412. Conciliation. – (a) Pre-condition to Filing of Complaint in Court.– No complaint, petition,
action, or proceeding involving any matter within the authority of the lupon shall be filed or instituted
directly in court or any other government office for adjudication, unless there has been a confrontation
between the parties before the lupon chairman or the pangkat, and that no conciliation or settlement
has been reached as certified by the lupon or pangkat secretary and attested to by the lupon or pangkat
chairman x x x." (Underscoring supplied)

In the case at bar, the Punong Barangay, as Chairman of the Lupong Tagapamayapa, conducted
conciliation proceedings to resolve the dispute between the parties herein. Contrary to petitioners'
contention, the complaint does not only allege, as a cause of action, the refusal of respondents'
attorney-in-fact to give her consent to the installation of water facilities in the premises, but also
petitioners' violation of the terms of the lease, specifically their use of a portion therein for their
photocopying business and their failure to pay the increased rental. As correctly found by the RTC:

"The records show that confrontations before the barangay chairman were held on January 26, 1997,
February 9, 1997, February 23, 1997, February 28, 1997, July 27, 1997, August 3, 1997, August 10, 1997,
August 17, 1997 and August 24, 1997 wherein not only the issue of water installation was discussed but
also the terms of the lease and the proposed execution of a written contract relative thereto. It appears,
however, that no settlement was reached despite a total of nine meetings at the barangay level.

It is of no moment that the complaint was initially made by defendant-appellant Avelina Zamora because
herein plaintiff-appellee was given by the Sangguniang Barangay the authority to bring her grievance to
the Court for resolution. While it is true that the Sertifikasyon dated September 14, 1997 is entitled 'Ukol
Sa Hindi Pagbibigay Ng Pahintulot Sa Pagpapakabit Ng Tubig', this title must not prevail over the actual
issues discussed in the proceedings.

Hence, to require another confrontation at the barangay level as a sine qua non for the filing of the
instant case would not serve any useful purpose anymore since no new issues would be raised therein
and the parties have proven so many times in the past that they cannot get to settle their differences
amicably."20

We cannot sustain petitioners' contention that the Lupon conciliation alone, without the proceeding
before the Pangkat ng Tagapagkasundo, contravenes the law on Katarungang Pambarangay. Section
412(a) of R.A. No. 7160, quoted earlier, clearly provides that, as a precondition to filing a complaint in
court, the parties shall go through the conciliation process either before the Lupon Chairman (as what
happened in the present case), or the Pangkat.
Moreover, in Diu vs. Court of Appeals,21 we held that "notwithstanding the mandate in Section 410(b) of
R.A. No. 7160 that the Barangay Chairman shall constitute a Pangkat if he fails in his mediation efforts,"
the same "Section 410(b) should be construed together with Section 412(a) of the same law (quoted
earlier), as well as the circumstances obtaining in and peculiar to the case." Here, while the Pangkat was
not constituted, however, the parties met nine (9) times at the Office of the Barangay Chairman for
conciliation wherein not only the issue of water installation was discussed but also petitioners' violation
of the lease contract. It is thus manifest that there was substantial compliance with the law which does
not require strict adherence thereto. 22

II

We hold that petitioners' motion to dismiss the complaint for unlawful detainer is proscribed by Section
19(a) of the 1991 Revised Rule on Summary Procedure, quoted earlier. Section 19(a) permits the filing of
such pleading only when the ground for dismissal of the complaint is anchored on lack of jurisdiction
over the subject matter, or failure by the complainant to refer the subject matter of his/her complaint
"to the Lupon for conciliation" prior to its filing with the court. This is clear from the provisions of Section
18 of the same Rule, which reads:

"SEC. 18. Referral to Lupon. – Cases requiring referral to the Lupon for conciliation under the provisions
of Presidential Decree No. 1508 where there is no showing of compliance with such requirement, shall
be dismissed without prejudice, and may be revived only after such requirement shall have been
complied with. This provision shall not apply to criminal cases where the accused was arrested without a
warrant." (Underscoring supplied)

As discussed earlier, the case was referred to the Lupon Chairman for conciliation. Obviously, petitioners'
motion to dismiss, even if allowed, is bereft of merit.

WHEREFORE, the petition is DENIED. The assailed Decision and Resolution of the Court of Appeals in CA-
G.R. SP No. 54541 sustaining the Decision of the RTC which upheld the MTC Judgment is AFFIRMED.

Costs against petitioners.

SO ORDERED.

Panganiban, (Chairman), Carpio-Morales, and Garcia, JJ., concur.

Corona, J., on leave.

G.R. No. L-23825 December 24, 1965

EMMANUEL PELAEZ, petitioner,

vs.
THE AUDITOR GENERAL, respondent.

Zulueta, Gonzales, Paculdo and Associates for petitioner.

Office of the Solicitor General for respondent.
CONCEPCION, J.:

During the period from September 4 to October 29, 1964 the President of the Philippines, purporting to
act pursuant to Section 68 of the Revised Administrative Code, issued Executive Orders Nos. 93 to 121,
124 and 126 to 129; creating thirty-three (33) municipalities enumerated in the margin. 1 Soon after the
date last mentioned, or on November 10, 1964 petitioner Emmanuel Pelaez, as Vice President of the
Philippines and as taxpayer, instituted the present special civil action, for a writ of prohibition with
preliminary injunction, against the Auditor General, to restrain him, as well as his representatives and
agents, from passing in audit any expenditure of public funds in implementation of said executive orders
and/or any disbursement by said municipalities.

Petitioner alleges that said executive orders are null and void, upon the ground that said Section 68 has
been impliedly repealed by Republic Act No. 2370 and constitutes an undue delegation of legislative
power. Respondent maintains the contrary view and avers that the present action is premature and that
not all proper parties — referring to the officials of the new political subdivisions in question — have
been impleaded. Subsequently, the mayors of several municipalities adversely affected by the
aforementioned executive orders — because the latter have taken away from the former the barrios
composing the new political subdivisions — intervened in the case. Moreover, Attorneys Enrique M.
Fernando and Emma Quisumbing-Fernando were allowed to and did appear as amici curiae.

The third paragraph of Section 3 of Republic Act No. 2370, reads:

Barrios shall not be created or their boundaries altered nor their names changed except under the
provisions of this Act or by Act of Congress.

Pursuant to the first two (2) paragraphs of the same Section 3:

All barrios existing at the time of the passage of this Act shall come under the provisions hereof.

Upon petition of a majority of the voters in the areas affected, a new barrio may be created or the name
of an existing one may be changed by the provincial board of the province, upon recommendation of the
council of the municipality or municipalities in which the proposed barrio is stipulated. The
recommendation of the municipal council shall be embodied in a resolution approved by at least two-
thirds of the entire membership of the said council: Provided, however, That no new barrio may be
created if its population is less than five hundred persons.

Hence, since January 1, 1960, when Republic Act No. 2370 became effective, barrios may "not be
created or their boundaries altered nor their names changed" except by Act of Congress or of the
corresponding provincial board "upon petition of a majority of the voters in the areas affected" and the
"recommendation of the council of the municipality or municipalities in which the proposed barrio is
situated." Petitioner argues, accordingly: "If the President, under this new law, cannot even create a
barrio, can he create a municipality which is composed of several barrios, since barrios are units of
municipalities?"

Respondent answers in the affirmative, upon the theory that a new municipality can be created without
creating new barrios, such as, by placing old barrios under the jurisdiction of the new municipality. This
theory overlooks, however, the main import of the petitioner's argument, which is that the statutory
denial of the presidential authority to create a new barrio implies a negation of the bigger power to
create municipalities, each of which consists of several barrios. The cogency and force of this argument
is too obvious to be denied or even questioned. Founded upon logic and experience, it cannot be offset
except by a clear manifestation of the intent of Congress to the contrary, and no such manifestation,
subsequent to the passage of Republic Act No. 2379, has been brought to our attention.

Moreover, section 68 of the Revised Administrative Code, upon which the disputed executive orders are
based, provides:

The (Governor-General) President of the Philippines may by executive order define the boundary, or
boundaries, of any province, subprovince, municipality, [township] municipal district, or other political
subdivision, and increase or diminish the territory comprised therein, may divide any province into one
or more subprovinces, separate any political division other than a province, into such portions as may be
required, merge any of such subdivisions or portions with another, name any new subdivision so created,
and may change the seat of government within any subdivision to such place therein as the public
welfare may require: Provided, That the authorization of the (Philippine Legislature) Congress of the
Philippines shall first be obtained whenever the boundary of any province or subprovince is to be
defined or any province is to be divided into one or more subprovinces. When action by the (Governor-
General) President of the Philippines in accordance herewith makes necessary a change of the territory
under the jurisdiction of any administrative officer or any judicial officer, the (Governor-General)
President of the Philippines, with the recommendation and advice of the head of the Department having
executive control of such officer, shall redistrict the territory of the several officers affected and assign
such officers to the new districts so formed.

Upon the changing of the limits of political divisions in pursuance of the foregoing authority, an
equitable distribution of the funds and obligations of the divisions thereby affected shall be made in such
manner as may be recommended by the (Insular Auditor) Auditor General and approved by the
(Governor-General) President of the Philippines.

Respondent alleges that the power of the President to create municipalities under this section does not
amount to an undue delegation of legislative power, relying upon Municipality of Cardona vs.
Municipality of Binañgonan (36 Phil. 547), which, he claims, has settled it. Such claim is untenable, for
said case involved, not the creation of a new municipality, but a mere transfer of territory — from
an already existing municipality (Cardona) to another municipality (Binañgonan), likewise, existing at the
time of and prior to said transfer (See Gov't of the P.I. ex rel. Municipality of Cardona vs. Municipality, of
Binañgonan [34 Phil. 518, 519-5201) — in consequence of the fixing and definition, pursuant to Act No.
1748, of the common boundaries of two municipalities.

It is obvious, however, that, whereas the power to fix such common boundary, in order to avoid or settle
conflicts of jurisdiction between adjoining municipalities, may partake of an administrative nature —
involving, as it does, the adoption of means and ways to carry into effect the law creating said
municipalities — the authority to create municipal corporations is essentially legislative in nature. In the
language of other courts, it is "strictly a legislative function" (State ex rel. Higgins vs. Aicklen, 119 S. 425,
January 2, 1959) or "solely and exclusively the exercise of legislative power" (Udall vs. Severn, May 29,
1938, 79 P. 2d 347-349). As the Supreme Court of Washington has put it (Territory ex rel. Kelly vs.
Stewart, February 13, 1890, 23 Pac. 405, 409), "municipal corporations are purely the creatures of
statutes."
Although1a Congress may delegate to another branch of the Government the power to fill in the details in
the execution, enforcement or administration of a law, it is essential, to forestall a violation of the
principle of separation of powers, that said law: (a) be complete in itself — it must set forth therein the
policy to be executed, carried out or implemented by the delegate 2 — and (b) fix a standard — the limits
of which are sufficiently determinate or determinable — to which the delegate must conform in the
performance of his functions.2a Indeed, without a statutory declaration of policy, the delegate would in
effect, make or formulate such policy, which is the essence of every law; and, without the
aforementioned standard, there would be no means to determine, with reasonable certainty, whether
the delegate has acted within or beyond the scope of his authority. 2b Hence, he could thereby arrogate
upon himself the power, not only to make the law, but, also — and this is worse — to unmake it, by
adopting measures inconsistent with the end sought to be attained by the Act of Congress, thus
nullifying the principle of separation of powers and the system of checks and balances, and,
consequently, undermining the very foundation of our Republican system.

Section 68 of the Revised Administrative Code does not meet these well settled requirements for a
valid delegation of the power to fix the details in the enforcement of a law. It does not enunciate any
policy to be carried out or implemented by the President. Neither does it give a standard sufficiently
precise to avoid the evil effects above referred to. In this connection, we do not overlook the fact that,
under the last clause of the first sentence of Section 68, the President:

... may change the seat of the government within any subdivision to such place therein as the public
welfare may require.

It is apparent, however, from the language of this clause, that the phrase "as the public welfare may
require" qualified, not the clauses preceding the one just quoted, but only the place to which the seat of
the government may be transferred. This fact becomes more apparent when we consider that said
Section 68 was originally Section 1 of Act No. 1748,3 which provided that, "whenever in the judgment of
the Governor-General the public welfare requires, he may, by executive order," effect the changes
enumerated therein (as in said section 68), including the change of the seat of the government "to
such place ... as the public interest requires." The opening statement of said Section 1 of Act No. 1748 —
which was not included in Section 68 of the Revised Administrative Code — governed the time at which,
or the conditions under which, the powers therein conferred could be exercised; whereas the last part of
the first sentence of said section referred exclusively to the place to which the seat of the government
was to be transferred.

At any rate, the conclusion would be the same, insofar as the case at bar is concerned, even if we
assumed that the phrase "as the public welfare may require," in said Section 68, qualifies all other
clauses thereof. It is true that in Calalang vs. Williams (70 Phil. 726) and People vs. Rosenthal (68 Phil.
328), this Court had upheld "public welfare" and "public interest," respectively, as sufficient standards for
a valid delegation of the authority to execute the law. But, the doctrine laid down in these cases — as all
judicial pronouncements — must be construed in relation to the specific facts and issues involved
therein, outside of which they do not constitute precedents and have no binding effect. 4 The law
construed in the Calalang case conferred upon the Director of Public Works, with the approval of the
Secretary of Public Works and Communications, the power to issue rules and regulations to promote
safe transitupon national roads and streets. Upon the other hand, the Rosenthal case referred to the
authority of the Insular Treasurer, under Act No. 2581, to issue and cancel certificates or permits for the
sale of speculative securities. Both cases involved grants to administrative officers of powers related to
the exercise of their administrative functions, calling for the determination of questions of fact.

Such is not the nature of the powers dealt with in section 68. As above indicated, the creation of
municipalities, is not an administrative function, but one which is essentially and eminently legislative in
character. The question of whether or not "public interest" demands the exercise of such power
is not one of fact. it is "purely a legislativequestion "(Carolina-Virginia Coastal Highway vs. Coastal
Turnpike Authority, 74 S.E. 2d. 310-313, 315-318), or a political question (Udall vs. Severn, 79 P. 2d. 347-
349). As the Supreme Court of Wisconsin has aptly characterized it, "the question as to whether
incorporation is for the best interest of the community in any case is emphatically a question of public
policy and statecraf" (In re Village of North Milwaukee, 67 N.W. 1033, 1035-1037).

For this reason, courts of justice have annulled, as constituting undue delegation of legislative powers,
state laws granting the judicial department, the power to determine whether certain territories should
be annexed to a particular municipality (Udall vs. Severn, supra, 258-359); or vesting in a Commission
the right to determine the plan and frame of government of proposed villages and what functions shall
be exercised by the same, although the powers and functions of the village are specifically limited by
statute (In re Municipal Charters, 86 Atl. 307-308); or conferring upon courts the authority to declare a
given town or village incorporated, and designate its metes and bounds, upon petition of a majority of
the taxable inhabitants thereof, setting forth the area desired to be included in such village (Territory ex
rel Kelly vs. Stewart, 23 Pac. 405-409); or authorizing the territory of a town, containing a given area and
population, to be incorporated as a town, on certain steps being taken by the inhabitants thereof and on
certain determination by a court and subsequent vote of the inhabitants in favor thereof, insofar as the
court is allowed to determine whether the lands embraced in the petition "ought justly" to be included
in the village, and whether the interest of the inhabitants will be promoted by such incorporation, and to
enlarge and diminish the boundaries of the proposed village "as justice may require" (In re Villages of
North Milwaukee, 67 N.W. 1035-1037); or creating a Municipal Board of Control which shall determine
whether or not the laying out, construction or operation of a toll road is in the "public interest" and
whether the requirements of the law had been complied with, in which case the board shall enter an
order creating a municipal corporation and fixing the name of the same (Carolina-Virginia Coastal
Highway vs. Coastal Turnpike Authority, 74 S.E. 2d. 310).

Insofar as the validity of a delegation of power by Congress to the President is concerned, the case
of Schechter Poultry Corporation vs. U.S. (79 L. Ed. 1570) is quite relevant to the one at bar. The
Schechter case involved the constitutionality of Section 3 of the National Industrial Recovery Act
authorizing the President of the United States to approve "codes of fair competition" submitted to him
by one or more trade or industrial associations or corporations which "impose no inequitable restrictions
on admission to membership therein and are truly representative," provided that such codes are not
designed "to promote monopolies or to eliminate or oppress small enterprises and will not operate to
discriminate against them, and will tend to effectuate the policy" of said Act. The Federal Supreme Court
held:

To summarize and conclude upon this point: Sec. 3 of the Recovery Act is without precedent. It supplies
no standards for any trade, industry or activity. It does not undertake to prescribe rules of conduct to be
applied to particular states of fact determined by appropriate administrative procedure. Instead of
prescribing rules of conduct, it authorizes the making of codes to prescribe them. For that legislative
undertaking, Sec. 3 sets up no standards, aside from the statement of the general aims of rehabilitation,
correction and expansion described in Sec. 1. In view of the scope of that broad declaration, and of the
nature of the few restrictions that are imposed, the discretion of the President in approving or
prescribing codes, and thus enacting laws for the government of trade and industry throughout the
country, is virtually unfettered. We think that the code making authority thus conferred is an
unconstitutional delegation of legislative power.

If the term "unfair competition" is so broad as to vest in the President a discretion that is "virtually
unfettered." and, consequently, tantamount to a delegation of legislative power, it is obvious that "public
welfare," which has even a broader connotation, leads to the same result. In fact, if the validity of the
delegation of powers made in Section 68 were upheld, there would no longer be any legal impediment
to a statutory grant of authority to the President to do anything which, in his opinion, may be required
by public welfare or public interest. Such grant of authority would be a virtual abdication of the powers
of Congress in favor of the Executive, and would bring about a total collapse of the democratic system
established by our Constitution, which it is the special duty and privilege of this Court to uphold.

It may not be amiss to note that the executive orders in question were issued afer the legislative bills for
the creation of the municipalities involved in this case had failed to pass Congress. A better proof of the
fact that the issuance of said executive orders entails the exercise of purely legislative functions can
hardly be given.

Again, Section 10 (1) of Article VII of our fundamental law ordains:

The President shall have control of all the executive departments, bureaus, or offices, exercise general
supervision over all local governments as may be provided by law, and take care that the laws be
faithfully executed.

The power of control under this provision implies the right of the President to interfere in the exercise of
such discretion as may be vested by law in the officers of the executive departments, bureaus, or offices
of the national government, as well as to act in lieu of such officers. This power is denied by the
Constitution to the Executive, insofar as local governments are concerned. With respect to the latter, the
fundamental law permits him to wield no more authority than that of checking whether said local
governments or the officers thereof perform their duties as provided by statutory enactments. Hence,
the President cannot interfere with local governments, so long as the same or its officers act Within the
scope of their authority. He may not enact an ordinance which the municipal council has failed or
refused to pass, even if it had thereby violated a duty imposed thereto by law, although he may see to it
that the corresponding provincial officials take appropriate disciplinary action therefor. Neither may he
vote, set aside or annul an ordinance passed by said council within the scope of its jurisdiction, no
matter how patently unwise it may be. He may not even suspend an elective official of a regular
municipality or take any disciplinary action against him, except on appeal from a decision of the
corresponding provincial board.5

Upon the other hand if the President could create a municipality, he could, in effect, remove any of its
officials, by creating a new municipality and including therein the barrio in which the official concerned
resides, for his office would thereby become vacant. 6 Thus, by merely brandishing the power to create a
new municipality (if he had it), without actually creating it, he could compel local officials to submit to
his dictation, thereby, in effect, exercising over them the power of control denied to him by the
Constitution.

Then, also, the power of control of the President over executive departments, bureaus or offices
implies no more than the authority to assume directly the functions thereof or to interfere in the
exercise of discretion by its officials. Manifestly, such control does not include the authority either to
abolish an executive department or bureau, or to create a new one. As a consequence, the alleged power
of the President to create municipal corporations would necessarily connote the exercise by him of an
authority even greater than that of control which he has over the executive departments, bureaus or
offices. In other words, Section 68 of the Revised Administrative Code does not merely fail to comply
with the constitutional mandate above quoted. Instead of giving the President less power over local
governments than that vested in him over the executive departments, bureaus or offices, it reverses the
process and does the exact opposite, by conferring upon him more power over municipal corporations
than that which he has over said executive departments, bureaus or offices.

In short, even if it did entail an undue delegation of legislative powers, as it certainly does, said Section
68, as part of the Revised Administrative Code, approved on March 10, 1917, must be deemed repealed
by the subsequent adoption of the Constitution, in 1935, which is utterly incompatible and inconsistent
with said statutory enactment.7

There are only two (2) other points left for consideration, namely, respondent's claim (a) that "not all the
proper parties" — referring to the officers of the newly created municipalities — "have been impleaded
in this case," and (b) that "the present petition is premature."

As regards the first point, suffice it to say that the records do not show, and the parties do not claim, that
the officers of any of said municipalities have been appointed or elected and assumed office. At any rate,
the Solicitor General, who has appeared on behalf of respondent Auditor General, is the officer
authorized by law "to act and represent the Government of the Philippines, its offices and agents, in any
official investigation, proceeding or matter requiring the services of a lawyer" (Section 1661, Revised
Administrative Code), and, in connection with the creation of the aforementioned municipalities, which
involves a political, not proprietary, function, said local officials, if any, are mere agents or
representatives of the national government. Their interest in the case at bar has, accordingly, been, in
effect, duly represented.8

With respect to the second point, respondent alleges that he has not as yet acted on any of the
executive order & in question and has not intimated how he would act in connection therewith. It is,
however, a matter of common, public knowledge, subject to judicial cognizance, that the President has,
for many years, issued executive orders creating municipal corporations and that the same have been
organized and in actual operation, thus indicating, without peradventure of doubt, that the expenditures
incidental thereto have been sanctioned, approved or passed in audit by the General Auditing Office and
its officials. There is no reason to believe, therefore, that respondent would adopt a different policy as
regards the new municipalities involved in this case, in the absence of an allegation to such effect, and
none has been made by him.

WHEREFORE, the Executive Orders in question are hereby declared null and void ab initio and the
respondent permanently restrained from passing in audit any expenditure of public funds in
implementation of said Executive Orders or any disbursement by the municipalities above referred to. It
is so ordered.

Bengzon, C.J., Bautista Angelo, Reyes, J.B.L., Barrera and Dizon, JJ., concur.

Zaldivar, J., took no part.