G.R. No.
182574               September 28, Provincial Auditor ignored the directive of
2010
THE PROVINCE OF NEGROS OCCIDENTAL,
represented by its Governor ISIDRO P.
ZAYCO, Petitioner,
vs.
THE COMMISSIONERS, COMMISSION ON
AUDIT; THE DIRECTOR, CLUSTER IV-
VISAYAS; THE REGIONAL CLUSTER
DIRECTORS; and THE PROVINCIAL
AUDITOR, NEGROS
OCCIDENTAL, Respondents.
FACTS:
On 21 December 1994, the Sangguniang
Panlalawigan of Negros Occidental passed
Resolution No. 720-A4 allocating
₱4,000,000 of its retained earnings for the
hospitalization and health care insurance
benefits of 1,949 officials and employees
of the province. After a public bidding, the
Committee on Awards granted the
insurance coverage to Philam Care Health
System Incorporated (Philam Care).
After a post-audit investigation, the
Provincial Auditor issued Notice of
Suspension No. 97-001-1015 suspending
the premium payment because of lack of
approval from the Office of the President
(OP) as provided under Administrative
Order No. 1036 (AO 103) dated 14 January
1994. The Provincial Auditor explained
that the premium payment for health care
benefits violated Republic Act No. 6758
(RA 6758),7 otherwise known as the Salary
Standardization Law.
Petitioner complied with the
directive post-facto and sent a letter-
request dated 12 January 1999 to the OP.
In a Memorandum dated 26 January
1999,8 then President Joseph E. Estrada
directed the COA to lift the suspension
but only in the amount of ₱100,000. The
the President and instead issued Notice of
Disallowance No. 99-005-101(96)9 dated
10 September 1999 stating similar
grounds as mentioned in Notice of
Suspension No. 97-001-101.
The COA ruled that under AO 103, no
government entity, including a local
government unit, is exempt from
securing prior approval from the
President granting additional benefits to
its personnel. This is in conformity with
the policy of standardization of
compensation laid down in RA 6758. The
COA added that Section 468(a)(1)
(viii)11 of Republic Act No. 7160 (RA 7160)
or the Local Government Code of 1991
relied upon by petitioner does not stand
on its own but has to be harmonized with
Section 1212 of RA 6758.
Further, the COA stated that the
insurance benefits from Philam Care, a
private insurance company, was a
duplication of the benefits provided to
employees under the Medicare program
which is mandated by law. Being merely a
creation of a local legislative body, the
provincial health care program should
not contravene but instead be consistent
with national laws enacted by Congress
from where local legislative bodies draw
their authority.
Petitioner insists that the payment of the
insurance premium for the health benefits
of its officers and employees was not
unlawful and improper since it was paid
from an allocation of its retained earnings
pursuant to a valid appropriation
ordinance. Petitioner states that such
enactment was a clear exercise of its
express powers under the principle of
local fiscal autonomy which includes the
power of Local Government Units (LGUs)
to allocate their resources in accordance
with their own priorities. Petitioner adds
that while it is true that LGUs are only
agents of the national government and
local autonomy simply means
decentralization, it is equally true that an
LGU has fiscal control over its own
revenues derived solely from its own tax
base.
Respondents, on the other hand, maintain
that although LGUs are afforded local
fiscal autonomy, LGUs are still bound by
RA 6758 and their actions are subject to
the scrutiny of the Department of Budget
and Management (DBM) and applicable
auditing rules and regulations enforced by
the COA. Respondents add that the grant
of additional compensation, like the
hospitalization and health care insurance
benefits in the present case, must have
prior Presidential approval to conform
with the state policy on salary
standardization for government workers.
ISSUE:
The main issue is whether COA committed
grave abuse of discretion in affirming the
disallowance of ₱3,760,000 for premium
paid for the hospitalization and health
care insurance benefits granted by the
Province of Negros Occidental to its 1,949
officials and employees.
RULING:
We disagree with the COA. From a close
reading of the provisions of AO 103,
petitioner did not violate the rule of prior
approval from the President since Section
2 states that the prohibition applies only
to "government offices/agencies,
including government-owned and/or
controlled corporations, as well as their
respective governing boards." Nowhere is
it indicated in Section 2 that the
prohibition also applies to LGUs. The
requirement then of prior approval from
the President under AO 103 is applicable
only to departments, bureaus, offices and
government-owned and controlled
corporations under the Executive branch.
In other words, AO 103 must be observed
by government offices under the
President’s control as mandated by
Section 17, Article VII of the Constitution.
Section 17. The President shall have control of
all executive departments, bureaus and
offices. He shall ensure that the laws be
faithfully executed.
Being an LGU, petitioner is merely under the
President’s general supervision pursuant to
Section 4, Article X of the Constitution.
Sec. 4. The President of the Philippines shall
exercise general supervision over local
governments. Provinces with respect to
component cities and municipalities, and
cities and municipalities with respect to
component barangays shall ensure that the
acts of their component units are within the
scope of their prescribed powers and
functions.
The President’s power of general supervision
means the power of a superior officer to see
to it that subordinates perform their functions
according to law.14 This is distinguished from
the President’s power of control which is the
power to alter or modify or set aside what a
subordinate officer had done in the
performance of his duties and to substitute
the judgment of the President over that of the
subordinate officer.15 The power of control
gives the President the power to revise or
reverse the acts or decisions of a subordinate
officer involving the exercise of discretion.16
Since LGUs are subject only to the power of
general supervision of the President, the
President’s authority is limited to seeing to it
that rules are followed and laws are faithfully
executed.
 Exploration Permit (AEP) covering 5,281
hectares of the area covered by Golden
G.R. No. 175368               April 11, 2013 Falcon's Application for Financial and
Technical Assistance Agreement.
LEAGUE OF PROVINCES OF THE
On October 19, 2004, DENR-MGB Director
PHILIPPINES, Petitioner,
Horacio C. Ramos, in response to MGB R-III
vs.
Director Arnulfo V. Cabantog's memorandum
DEPARTMENT OF ENVIRONMENT and
query dated September 8, 2004, categorically
NATURAL RESOURCES and HON. ANGELO
stated that the MGB-Central Office's Order
T. REYES, in his capacity as Secretary of
dated July 16, 2004 became final on August
DENR, Respondents.
11, 2004, fifteen (15) days after Golden Falcon
received the said Order.
FACTS:
Through letters dated May 5 and May 10,
On March 28, 1996, Golden Falcon Mineral
2005, AMTC notified the PENRO of Bulacan
Exploration Corporation (Golden Falcon) filed
and the MGB R-III Director, respectively, that
with the DENR Mines and Geosciences Bureau
the subject Applications for Quarry Permit fell
Regional Office No. III (MGB R-III) an
within its (AMTC's) existing valid and prior
Application for Financial and Technical
Application for Exploration Permit, and the
Assistance Agreement (FTAA) covering an
the former area of Golden Falcon was open to
area of 61,136 hectares situated in the
mining location only on August 11, 2004 per
Municipalities of San Miguel, San Ildefonso,
the Memorandum dated October 19, 2004 of
Norzagaray and San Jose del Monte, Bulacan.
the MGB Director, Central Office.
On April 29, 1998, the MGB R-III issued an
On August 8, 2005, MGB R-III Director
Order denying Golden Falcon's Application for
Cabantog, who was the concurrent Chairman
Financial and Technical Assistance Agreement
of the PMRB, endorsed to the Provincial
for failure to secure area clearances from the
Governor of Bulacan, Governor Josefina M.
Forest Management Sector and Lands
dela Cruz, the aforesaid Applications for
Management Sector of the DENR Regional
Quarry Permit that had apparently been
Office No. III.
converted to Applications for Small-Scale
On November 11, 1998, Golden Falcon filed Mining Permit of Eduardo D. Mercado,
an appeal with the DENR MGB-Central Office. Benedicto S. Cruz, Gerardo R. Cruz and Lucila
On February 10, 2004, while Golden Falcon's S. Valdez. On August 10, 2005, Governor Dela
appeal was pending, Eduardo D. Mercado, Cruz issued the corresponding Small-Scale
Benedicto S. Cruz, Gerardo R. Cruz and Mining Permits in favor of Eduardo D.
Liberato Sembrano filed with the Provincial Mercado, Benedicto S. Cruz, Gerardo R. Cruz
Environment and Natural Resources Office and Lucila S. Valdez.
(PENRO) of Bulacan their respective
Subsequently, AMTC appealed to respondent
Applications for Quarry Permit (AQP), which
DENR Secretary the grant of the aforesaid
covered the same area subject of Golden
Small-Scale Mining Permits, arguing that: (1)
Falcon's Application for Financial and
The PMRB of Bulacan erred in giving due
Technical Assistance Agreement. On July 16,
course to the Applications for Small-Scale
2004, the MGB-Central Office issued an Order
Mining Permit without first resolving its
denying Golden Falcon's appeal.
formal protest; (2) The areas covered by the
On September 13, 2004, Atlantic Mines and Small-Scale Mining Permits fall within the area
Trading Corporation (AMTC) filed with the covered by AMTC's valid prior Application for
PENRO of Bulacan an Application for
Exploration Permit; (3) The Applications for
Quarry Permit were illegally converted to
Applications for Small-Scale Mining Permit; (4)
DENR-MGB Director Horacio C. Ramos' ruling
that the subject areas became open for
mining location only on August 11, 2004 was
controlling; (5) The Small-Scale Mining
Permits were null and void because they
covered areas that were never declared
People's Small-Scale Mining Program sites as
mandated by Section 4 of the People's Small-
Scale Mining Act of 1991; and (6) Iron ore is
not considered as one of the quarry
resources, as defined by Section 43 of the
Philippine Mining Act of 1995, which could be
subjects of an Application for Quarry Permit.
On August 8, 2006, respondent DENR
Secretary rendered a Decision14 in favor of
AMTC. The DENR Secretary agreed with MGB
Director Horacio C. Ramos that the area was
open to mining location only on August 11,
2004, fifteen (15) days after the receipt by
Golden Falcon on July 27, 2004 of a copy of
the MGB-Central Office's Order dated July 16,
2004, which Order denied Golden Falcon's
appeal. According to the DENR Secretary, the
filing by Golden Falcon of the letter-appeal
suspended the finality of the Order of denial
issued on April 29, 1998 by the Regional
Director until the resolution of the appeal on
July 16, 2004 by the MGB-Central Office. He
stated that the Applications for Quarry Permit
were filed on February 10, 2004 when the
area was still closed to mining location; hence,
the Small-Scale Mining Permits granted by the
PMRB and the Governor were null and void.
the DENR Secretary declared that AMTC filed
its Application for Exploration Permit when
the area was already open to other mining
applicants; thus, AMTC’s Application for
Exploration Permit was valid. Moreover, the
DENR Secretary held that the questioned
Small-Scale Mining Permits were issued in
violation of Section 4 of R.A. No. 7076 and
beyond the authority of the Provincial
Governor pursuant to Section 43 of R.A. No.
7942, because the area was never proclaimed
to be under the People's Small-Scale Mining
Program. Further, the DENR Secretary stated
that iron ore mineral is not considered among
the quarry resources.
Petitioner contends that the aforecited laws
and DENR Administrative Order No. 9640 (the
Implementing Rules and Regulations of the
Philippine Mining Act of 1995) did not
explicitly confer upon respondents DENR and
the DENR Secretary the power to reverse,
abrogate, nullify, void, or cancel the permits
issued by the Provincial Governor or small-
scale mining contracts entered into by the
PMRB. The statutes are also silent as to the
power of respondent DENR Secretary to
substitute his own judgment over that of the
Provincial Governor and the PMRB.
Moreover, petitioner contends that Section
17 (b)(3)(iii) of the Local Government Code of
1991 and Section 24 of R.A. No. 7076, which
confer upon respondents DENR and the DENR
Secretary the power of control are
unconstitutional, as the Constitution states
that the President (and Executive
Departments and her alter-egos) has the
power of supervision only, not control, over
acts of the local government units, and grants
the local government units autonomy.
ISSUE:
WON DENR’s act of nullifying the permits
amounts to executive control and not merely
supervision, and usurps the devolved powers
of all provinces.
RULING:
The petition lacks merit. Paragraph 1 of
Section 2, Article XII (National Economy and
Patrimony) of the Constitution31 provides
that "the exploration, development and
utilization of natural resources shall be under
the full control and supervision of the State."
Moreover, paragraph 3 of Section 2, Article XII
of the Constitution provides that "the
Congress may, by law, allow small-scale
utilization of natural resources by Filipino and the allocation of powers,
citizens x x x." responsibilities, and resources among the
Pursuant to Section 2, Article XII of the different local government units and local
Constitution, R.A. No. 7076 or the People's officials have been placed by the
Small-Scale Mining Act of 1991, was enacted, Constitution in the hands of Congress38
establishing under Section 4 thereof a under Section 3, Article X of the
People's Small-Scale Mining Program to be Constitution.
implemented by the DENR Secretary in
coordination with other concerned
government agencies.

It should be pointed out that the

Administrative Code of 198733 provides
that the DENR is, subject to law and
higher authority, in charge of carrying out
the State's constitutional mandate, under
Section 2, Article XII of the Constitution, to
control and supervise the exploration,
development, utilization and conservation
of the country's natural resources. Hence,
the enforcement of small-scale mining law
in the provinces is made subject to the
supervision, control and review of the
DENR under the Local Government Code
of 1991, while the People’s Small-Scale
Mining Act of 1991 provides that the
People’s Small-Scale Mining Program is to
be implemented by the DENR Secretary in
coordination with other concerned local
government agencies.
The Court has clarified that the
constitutional guarantee of local
autonomy in the Constitution Art. X, Sec. 2
refers to the administrative autonomy of
local government units or, cast in more
technical language, the decentralization of
government authority.35 It does not make
local governments sovereign within the
State.36 Administrative autonomy may
involve devolution of powers, but subject
to limitations like following national
policies or standards,37 and those
provided by the Local Government Code,
as the structuring of local governments